e10vk
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Fiscal Year Ended December 31,
2009
Commission File Number
000-29472
Amkor Technology,
Inc.
(Exact name of registrant as
specified in its charter)
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Delaware
(State of
incorporation)
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23-1722724
(I.R.S. Employer
Identification Number)
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1900 South Price Road
Chandler, AZ 85286
(480) 821-5000
(Address of principal executive
offices and zip code)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $0.001 par value
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The NASDAQ Global Select Market
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large
accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in Rule
12b-2 of the
Exchange
Act). Yes o No þ
The aggregate market value of the voting and non-voting common
equity held by non-affiliates of the registrant as of
June 30, 2009, based upon the closing price of the common
stock as reported by the NASDAQ Global Select Market on that
date, was approximately $511.2 million.
The number of shares outstanding of each of the issuers
classes of common equity, as of January 29, 2010, was as
follows: 183,230,953 shares of Common Stock,
$0.001 par value.
DOCUMENTS
INCORPORATED BY REFERENCE:
Portions of the registrants Proxy Statement relating to
its 2010 Annual Meeting of Stockholders, to be filed
subsequently, are incorporated by reference into Part III
of this Report where indicated.
TABLE OF
CONTENTS
All references in this Annual Report to Amkor,
we, us, our or the
company are to Amkor Technology, Inc. and its
subsidiaries. We refer to the Republic of Korea, which is also
commonly known as South Korea, as Korea.
Amkor®,
Amkor
Technology®,
ChipArray®,
FlipStacktm,
FusionQuad®,
MicroLeadFrame®,
TMVtm,
and
Unitive®
are either trademarks or registered trademarks of Amkor
Technology, Inc. All other trademarks appearing herein are held
by their respective owners. Subsequent use of the above
trademarks in this report may occur without the respective
superscript symbols (TM or
®)
in order to facilitate the readability of the report and are not
a waiver of any rights that may be associated with the relevant
trademarks.
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PART I
DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
This business section contains forward-looking statements. In
some cases, you can identify forward-looking statements by
terminology such as may, will,
should, expects, plans,
anticipates, believes,
estimates, predicts,
potential, continue, intend
or the negative of these terms or other comparable terminology.
Because such statements include risks and uncertainties, actual
results may differ materially from those anticipated in such
forward-looking statements. In evaluating these statements, you
should specifically consider various factors, including the
risks outlined under Risk Factors in Item 1A of
this Annual Report. These factors may cause our actual results
to differ materially from any forward-looking statement.
OVERVIEW
Amkor is one of the worlds leading subcontractors of
semiconductor packaging (sometimes referred to as assembly) and
test services. Amkor pioneered the outsourcing of semiconductor
packaging and test services through a predecessor corporation in
1968 and over the years we have built a leading position by:
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Designing and developing new package and test technologies;
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Offering a broad portfolio of packaging and test technologies
and services;
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Cultivating long-standing relationships with our customers,
which include many of the worlds leading semiconductor
companies and collaborating with original equipment manufactures
(OEMs);
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Developing expertise in high-volume manufacturing
processes; and
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Having a diversified operational scope, with production
capabilities in China, Japan, Korea, the Philippines, Singapore,
Taiwan and the United States (U.S.).
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Packaging and test are integral steps in the process of
manufacturing semiconductor devices. The manufacturing process
begins with silicon wafers and involves the fabrication of
electronic circuitry into complex patterns, thus creating large
numbers of individual chips on the wafers. The fabricated wafers
are then probe tested to ensure the individual devices meet
electrical specifications. The packaging process creates an
electrical interconnect between the semiconductor chip and the
system board. In packaging, fabricated semiconductor wafers are
separated into individual chips. These chips are typically
attached through wire bond or wafer bump technologies to a
substrate or leadframe and then encased in a protective
material. In the case of an advanced wafer level package, the
package is assembled on the surface of a wafer.
Our packages are designed for application specific body size and
electrical connection requirements to provide optimal electrical
connectivity and thermal performance. The packaged chips are
then tested using sophisticated equipment to ensure that each
packaged chip meets its design and performance specifications.
Increasingly, packages are custom designed for specific chips
and specific end-market applications. We are able to provide
turnkey packaging and test solutions including semiconductor
wafer bump, wafer probe, wafer backgrind, package design,
assembly, test and drop shipment services.
Our customers include, among others: Altera Corporation; Atmel
Corporation; Broadcom Corporation; Infineon Technologies AG;
International Business Machines Corporation (IBM);
LSI Corporation; Qualcomm Incorporated; ST Microelectronics,
Pte.; Texas Instruments, Inc. and Toshiba Corporation. The
outsourced semiconductor packaging and test market is very
competitive. We also compete with the internal semiconductor
packaging and test capabilities of many of our customers.
AVAILABLE
INFORMATION
Amkor files annual, quarterly and current reports, proxy
statements and other information with the U.S. Securities
and Exchange Commission (the SEC). You may read and
copy any document we file at the SECs Public Reference
Room, 100 F Street, NE, Washington, D.C. 20549.
Please call the SEC at
1-800-SEC-0330
for
3
information on the Public Reference Room. The SEC maintains a
web site that contains annual, quarterly and current reports,
proxy statements and other information that issuers (including
Amkor) file electronically with the SEC. The SECs web site
is
http://www.sec.gov.
Amkors web site is
http://www.amkor.com.
Amkor makes available free of charge through its web site,
our annual reports on
Form 10-K;
quarterly reports on
Form 10-Q;
current reports on
Form 8-K;
Forms 3, 4 and 5 filed on behalf of directors and executive
officers; and any amendments to those reports filed or furnished
pursuant to the Securities Exchange Act of 1934 as soon as
reasonably practicable after such material is electronically
filed with, or furnished to, the SEC. We also make available,
free of charge, through our web site, our Corporate Governance
Guidelines, the charters of the Audit Committee, Nominating and
Governance Committee and Compensation Committee of our Board of
Directors, our Code of Business Conduct and Ethical Guidelines,
our Code of Ethics for Directors and other information and
materials. The information on Amkors web site is not
incorporated by reference into this report.
INDUSTRY
BACKGROUND
Semiconductor devices are the essential building blocks used in
most electronic products. As semiconductor devices have evolved,
there have been several important consequences, including:
(1) an increase in demand for mobile phones, consumer
electronics, computers and networking equipment; (2) the
proliferation of semiconductor devices into diverse end products
such as automotive systems; and (3) an increase in the
semiconductor content within electronic products in order to
provide greater functionality and higher levels of performance.
These consequences have fueled the growth of the overall
semiconductor industry, as well as the market for outsourced
semiconductor packaging and test services.
Historical trends indicate that semiconductor industry demand
appears to be increasingly driven by global consumer spending.
There has been a strong correlation between world-wide gross
domestic product and semiconductor industry cycles. The recent
financial crisis and global recession resulted in a downturn in
the semiconductor industry. Reduced economic activity and
decreased consumer spending during the first half of 2009 caused
significant decreases in demand for our services. During the
second half of 2009, the semiconductor industry showed signs of
improvement from this downturn resulting in recent increases in
demand for our services and improved utilization of our capacity.
Semiconductor companies outsource their packaging and test
services to subcontract providers, such as Amkor, for the
following reasons:
Subcontract
providers have developed expertise in advanced packaging and
test technologies.
Semiconductor companies face increasing demands for
miniaturization, increased functionality and improved thermal
and electrical performance in semiconductor devices. This trend,
along with greater complexity in the design of semiconductor
devices and the increased customization of interconnect
packages, has led many semiconductor companies to view packaging
and test as an enabling technology requiring sophisticated
expertise and technological innovation. As packaging and test
technology becomes more advanced, many semiconductor companies
are relying on subcontract providers of packaging and test
services as a key source of new package design, thereby enabling
them to reduce their internal research and development costs.
Subcontract
providers offer a cost effective solution in a highly cyclical,
capital intensive industry.
Semiconductor packaging is a complex process requiring
substantial investment in specialized equipment, factories and
human resources. As a result of the large investments required,
manufacturing facilities must operate at a high capacity level
for an extended period of time to be cost effective. Shorter
product life cycles, coupled with the need to update or replace
packaging equipment to accommodate new package types, makes it
more difficult for semiconductor companies to maintain cost
effective utilization of their packaging and test assets
throughout semiconductor industry cycles. Subcontract providers
of packaging and test services, on the other hand, can typically
use their assets to support a broad range of customers,
potentially generating more efficient use of their production
assets and a more cost effective solution.
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Subcontract
providers can facilitate a more efficient supply chain and thus
help shorten
time-to-market
for new products.
We believe that semiconductor companies, together with their
customers, are seeking to shorten the
time-to-market
for their new products, and that having an effective supply
chain is a critical factor in facilitating timely and successful
product introductions. Semiconductor companies frequently do not
have sufficient time to develop their packaging and test
capabilities or deploy the equipment and expertise to implement
new packaging technology in volume. For this reason,
semiconductor companies are leveraging the resources and
capabilities of subcontract packaging and test companies to
deliver their new products to market more quickly.
The availability of high quality packaging and test
services from subcontractors allows semiconductor manufacturers
to focus their resources on semiconductor design and wafer
fabrication.
As semiconductor process technology migrates to larger wafers
and smaller feature size, the cost of building a
state-of-the-art
wafer fabrication factory has risen significantly, and can be
several billions of dollars. The high cost of investing in next
generation silicon technology and equipment is causing many
semiconductor companies to adopt a fabless or
fab-lite strategy in which they reduce or eliminate
their investment in wafer fabrication and associated packaging
and test assets, thus increasing the reliance on outsourced
providers of semiconductor manufacturing services, including
packaging and test. Fabless semiconductor companies
do not have factories and focus exclusively on the semiconductor
design process and outsource virtually every step of the
manufacturing process.
COMPETITIVE
STRENGTHS AND STRATEGY
We believe we are well-positioned in the outsourced packaging
and test market. To build upon our industry position and to
remain one of the preferred subcontractors of semiconductor
packaging and test services, we are pursuing the following
strategies:
Leading
Technology Innovator
We are a leader in developing advanced semiconductor packaging
and test solutions. We have designed and developed several
state-of-the-art
package formats and technologies including our
Package-on-Package
with TMV (Through Mold Via), FusionQuad, fcBGA (Flip Chip Ball
Grid Array), conformal shielding and copper pillar bumping and
packaging technologies. In addition, we believe that as
semiconductor technology continues to achieve smaller device
geometries with higher levels of speed and performance, packages
will increasingly require flip chip and wafer bump-based
interconnect solutions. We have been investing in our technology
leadership in electroplated and other wafer bump and wafer level
processing. We have also been a leader in developing
environmentally friendly (Green) integrated circuit
packaging, which involves the elimination of lead and certain
other materials.
We provide a complete range of test engineering services for
radio frequency mixed signal, logic and memory devices, from
test program development to full product characterization. Amkor
is a major provider of radio frequency test services and a
leader in strip test, an innovative parallel test solution that
offers customers low cost, faster index time and improved yields.
We have approximately 400 employees engaged in research and
development focusing on the design and development of new
semiconductor packaging and test technologies.
Long-Standing
Relationships and Collaboration with Prominent Semiconductor
Companies
Our customers include most of the worlds largest
semiconductor companies and over the last four decades, Amkor
has developed long-standing relationships with many of these
companies. We believe that our production excellence has been a
key factor in our success in attracting and retaining customers.
We work with our customers and our suppliers to develop
proprietary process technologies to enhance our existing
capabilities, reduce
time-to-market,
increase quality and lower our costs.
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We believe that our focus on research and product development
will enable us to enter new markets early, capture market share
and promote the adoption of our new package designs as industry
standards. We collaborate with customers and leading OEMs to
develop comprehensive package solutions that make it easier for
next-generation semiconductors to be designed into
next-generation end products. By collaborating with leading
semiconductor companies and OEM electronic companies, we gain
access to technology roadmaps for next generation semiconductor
designs and obtain the opportunity to develop new packages that
satisfy their future requirements.
Broad
Offering of Package Design, Packaging and Test
Services
Creating successful interconnect solutions for advanced
semiconductor devices often poses unique thermal electrical and
other design challenges, and Amkor employs a large number of
package design engineers to solve these challenges. Amkor
produces hundreds of package types which encompass more than
1,000 unique products, representing one of the broadest package
offerings in the semiconductor industry. These package solutions
are driven by the needs of our customers for more electrical
connections, enhanced electrical or thermal performance, smaller
package size and lower cost.
We provide customers with a wide array of packaging solutions
including leadframe and laminate packages, using gold and copper
wire bond and flip chip formats. We are a leading subcontract
provider of:
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Flip chip and wafer level packages, in which the semiconductor
die is connected directly to the package substrate or system
board, which deliver improved electrical performance used in
high-power and high-speed applications such as graphics
processors and microprocessors;
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Three dimensional (3D) such as
package-on-package
and stacked chip scale packages, in which the individual chips
or individual packages are stacked vertically to provide
integration of logic and memory, while preserving space on the
system board;
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Stacked chip scale packages which include high density memory
die stacks, typically with wire bond connections and flip chip
plus wire bond stacks called FlipStack that integrate a wire
bond die on top of a flip chip die;
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Advanced leadframe packages such as MicroLeadFrame and
FusionQuad which are thinner and smaller packages and have the
ability to accommodate more leads and have better thermal and
electrical characteristics than traditional leadframe packages;
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Multi-chip or
system-in-package
(SiP) modules used in mobile phones and other
handheld end-products; and
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Packages for micro-electromechanical system devices, which are
used in a variety of end markets including automotive,
industrial and consumer electronics.
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We are expanding our copper wire capabilities in support of both
advanced and commodity packages, as some customers are migrating
to copper wire bond to mitigate their exposure to gold prices.
We also offer an extensive line of advanced probe and final test
services for analog, digital, logic, mixed signal and radio
frequency semiconductor devices. We believe that the breadth of
our design, packaging and test services is important to
customers seeking to limit the number of their suppliers.
Geographically
Diversified Operational Base
We have a broad geographical base of more than five million
square feet of manufacturing space strategically located in
seven countries in many of the worlds important
electronics manufacturing regions.
Our customers benefit from one of the industrys most
extensive operational footprints. We believe that our scale and
scope allow us to provide cost effective solutions to our
customers by offering:
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Capacity to absorb large orders and accommodate quick
turn-around times;
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Favorable pricing on materials and equipment, where possible, by
using our purchasing power and industry position;
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Dual site qualifications and capabilities and solutions for
specific loading requirements and risk mitigation; and
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Broad range of packaging and test services so that we can
provide multiple or turnkey solutions for many packaging needs,
including semiconductor wafer bump, wafer probe, wafer
backgrind, package design, assembly, strip test, singulated test
and drop shipment services to name a few.
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Competitive Cost Structure
We believe that a competitive cost structure and disciplined
capital investment decisions are key factors for achieving
profitability and generating free cash flow. There has been a
continuous push throughout the entire semiconductor supply chain
for lower cost solutions. Some of our cost control efforts have
included: (1) increasing strip densities to drive higher
throughput on a single substrate strip; (2) developing
smaller gold wire diameter solutions; and (3) increasing
labor productivity.
We operate in a cyclical industry. During an industry downturn,
similar to the downturn in the second half of 2008 and the first
half of 2009, we take actions to reduce our costs to focus on
generating cash flow and driving greater factory and
administrative efficiencies. Cost control efforts can include
reducing labor costs by temporarily lowering compensation,
reducing employee and contractor headcount, shortening work
weeks and obtaining labor-related foreign government subsidies.
We may also limit our capital additions as we did in 2009.
PACKAGING
AND TEST SERVICES
The following table sets forth, for the periods indicated, the
amount of packaging and test net sales in millions of dollars
and the percentage of such net sales:
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Year Ended December 31,
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2009
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2008
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2007
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Packaging services
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Chip scale package
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$
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695
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31.9
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%
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$
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697
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26.2
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%
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$
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647
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23.6
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%
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Ball grid array
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500
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23.0
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%
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751
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28.3
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%
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722
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26.4
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%
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Leadframe
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587
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26.9
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%
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753
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28.3
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%
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893
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32.6
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%
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Other packaging
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152
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7.0
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%
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144
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5.4
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%
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168
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6.1
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%
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Total packaging services
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1,934
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88.8
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%
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2,345
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88.2
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%
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2,430
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88.7
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%
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Test services
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245
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11.2
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%
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314
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11.8
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%
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309
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11.3
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%
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Total net sales
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$
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2,179
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100.0
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%
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$
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2,659
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100.0
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%
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$
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2,739
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100.0
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%
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Packaging
Services
We offer a broad range of package formats and services designed
to provide our customers with a full array of packaging
solutions. Our package services are divided into families: chip
scale package, ball grid array, leadframe and other packaging
services.
In response to the increasing demands of todays
high-performance electronic products, semiconductor packages
have evolved and are designed based on application specific
requirements. The differentiating characteristics of package
formats can include: (1) size, (2) number of
electrical connections, (3) thermal and electrical
characteristics, (4) number of semiconductor devices
incorporated and (5) integration of active and passive
components.
Evolving semiconductor process technology and computer aided
simulation toolsets have allowed integrated circuit designers to
optimize the level of performance and functionality in
electronic systems. The resultant integrated circuits, commonly
referred to as
system-on-chip
solutions, often drive a higher number of electrical
connections. The high number of electrical connections can be
accommodated using a number of interconnect
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technologies, including flip chip and wire bond interconnect or
a combination of both, commonly referred to as a hybrid
interconnect. Flip chip packages provide a higher density
interconnection capability than wire bond, as wire bond
interconnect is limited to the perimeter of the semiconductor
device, whereas flip chip can use the entire surface area of the
semiconductor device.
Flip chip assembly is the direct electrical connection of a
face-down semiconductor device (or flipped) onto a substrate.
The connection is made through a conductive medium (or bump) on
the semiconductor device, then subsequently joined to the
surface of the substrate. Advantages of flip chip technology
include enhanced thermal-electrical performance as well as
thinner and smaller form factors.
Chip
Scale Packages
We have designed a variety of chip scale packages where the
package size is not much larger than the chip itself. The size
advantage provided by a chip scale package has made this the
package of choice for a number of end applications in the
consumer electronics market that have very small form factors,
such as smart phones, MP3 players and mobile internet devices.
Some of our chip scale packages include ChipArray, wafer level
chip scale package and flip chip chip scale package. In wafer
level chip scale packaging, the semiconductor device becomes the
package as the interconnect is constructed using various wafer
bumping technologies. The bumped wafer is subsequently
singulated (or diced) creating individually bumped semiconductor
devices, which are then put into tape and reel for future
printed circuit board assembly.
Advances in packaging technology now allow the placement of two
or more semiconductor devices on top of each other within an
individual package. This concept, known as 3D packaging, permits
a higher level of semiconductor density and greater
functionality. Some of our 3D packages include:
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Stacked chip scale package (SCSP), which contains
two or more chips placed on top of each other. SCSP structures
can include up to eight or more stacked semiconductor devices,
which are ideal for solid state memory applications supporting
mobile phones, MP3 players and other data storage consumer
electronic systems.
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Package-on-package,
which is an extremely thin chip scale package that can be
stacked on top of each other, enabling the integration of logic
and memory in a single footprint, supporting smart phones,
digital camera or other handheld applications.
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Our chip scale package family also includes
system-in-package
modules.
System-in-package
modules integrate various system elements into a single-function
block, thus enabling space and power efficiency, high
performance and lower production costs. Our
system-in-package
technology is being used in a variety of devices including:
power amplifiers for mobile phones and other portable
communication devices; wireless local area network modules for
networking applications; and sensors, such as fingerprint
recognition devices and micro-electromechanical system based
microphones.
Ball Grid
Array Packages
The ball grid array format was developed to facilitate the
higher number of interconnections required by many advanced
semiconductor devices. The close proximity of an increasing
number of leads resulted in higher incidence of shorting and
other electrical challenges. Higher lead counts also drove the
development of more sophisticated and costly circuit boards to
accommodate the high number of leads. Ball grid array solves
these problems by effectively creating interconnects on the
bottom of the package in the form of small bumps or balls that
can be evenly distributed across the entire bottom surface of
the package, allowing greater distance between the individual
electrical connections. Examples of ball grid array package
families are:
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Flip chip BGA (fcBGA) incorporates a face down chip
onto a substrate using a ball grid array format and is
increasingly being used in advanced silicon nodes enabling our
customers to implement more powerful new applications and
smaller devices. The fcBGA package is used for networking and
storage, gaming and computer applications; and
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Plastic ball grid array (PBGA) packages use wire
bond technology in applications requiring higher electrical
interconnect counts or higher thermal performance. PBGA packages
are typically used in an application residing between smaller
body chip scale packages, such as handheld mobile applications,
and the very high pin-count or large body size fcBGA packages
are typically used in high-end networking and gaming
applications. Common PBGA applications include laptop computers,
video cameras, gaming systems and digital televisions.
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Leadframe
Packages
Leadframe-based packages are the most widely used package family
in the semiconductor industry. These are typically characterized
by a chip encapsulated in a plastic mold compound with copper
metal leads on the perimeter.
Traditional leadframe-based packages support a wide variety of
device types and applications. Two of our most popular
traditional leadframe package types are small outline integrated
circuit and quad flat package, commonly known as
dual or quad products, respectively,
based upon the number of sides from which the leads extend. The
traditional leadframe package family has evolved from
through hole design, where the leads are plugged
into holes on the circuit board to surface mount
design, where the leads are soldered to the surface of the
circuit board. We offer a wide range of lead counts and body
sizes to satisfy variations in the size of customers
semiconductor devices.
Through a process of continuous engineering and customization,
we have designed several advanced leadframe package types that
are thinner and smaller than traditional leadframe packages,
with the ability to accommodate more leads on the perimeter of
the package. These advanced leadframe packages typically have
superior thermal and electrical characteristics, which allow
them to dissipate heat generated by high-powered semiconductor
devices while providing enhanced electrical connectivity. We
plan to continue to develop increasingly smaller versions of
these packages to keep pace with continually shrinking
semiconductor device sizes and demand for miniaturization of
portable electronic products. Two of these advanced leadframe
packages are described as follows:
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One of our most successful advanced leadframe package offerings
is the MicroLeadFrame family of QFN, or quad flat no lead
packages. This package family is particularly well suited for
radio frequency and wireless applications.
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FusionQuad integrates both bottom leads and peripheral leads,
which significantly reduce the package size. The package targets
applications for mobile hard disk drives, notebook computers and
consumer electronics such as digital televisions and set top
boxes.
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Other
Packaging Services
The other category of packaging services is largely comprised of
wafer bumping services that support chip scale packaging and
ball grid array product offerings. With wafer bumping,
inter-connections are formed on an entire wafer prior to dicing,
rather than the traditional method of forming the
interconnections on a separated die. Wafer bumping has technical
and economic advantages over traditional wire bonding. Wafer
bumping consists of preparing the wafer for bumping and forming
or placing the bumps. Preparation may include cleaning, removing
insulating oxides, and providing a pad metallurgy that will
protect the interconnections while making a good mechanical and
electrical connection between the bump and the board. Bumps may
be formed or placed on the wafer in many ways, including
sputtering, electroplating, stud bumping and direct placement.
Wafer bumping is a precursor to flip chip assembly. In certain
instances, packages are created on the surface of a wafer, for
example wafer level chip scale packages, which are used for
space constrained applications with low power and low lead count
requirements.
Test
Services
We are a leading subcontract provider of a broad range of
semiconductor integrated circuit test services including wafer
probe, final test, strip test, system level test and other
test-related services. Our test development centers provide
complete test engineering services from test program development
to full product functionality. The
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integrated circuit devices we test encompass nearly all
technologies produced in the semiconductor industry today
including digital, linear, mixed signal, memory, radio frequency
and integrated combinations of these technologies. In 2009, we
tested 3.7 billion units. We tested 48%, 49% and 48% of the
units that we packaged in 2009, 2008 and 2007, respectively. Our
test operations complement traditional wire bond as well as
wafer level chip scale packages, multi-chip SiP modules and flip
chip packaging technologies.
We invest in advanced test equipment to continue to provide
leading edge test capability. Our test facilities are often
co-located with wafer bump and packaging services for fast
feedback, lower costs, streamlined logistics and faster cycle
time. We have test facilities in China, Japan, Korea, the
Philippines, Singapore, Taiwan and the United States. Our
testing services include:
Wafer
Probe
Our wafer probe testing services provide for the visual
inspection and electrical testing of the wafer for defects prior
to packaging. Wafer probe includes wafer mapping, a method to
identify the location and characteristics of each die on the
wafer. We offer thermal controlled probe, bumped wafer probe,
single and double pass probe and multi-site probe among others.
Test
Development and Engineering
We assist our customers with the development of required testing
for their products. Our engineering services include software
and hardware conversion of single-site (one device at a time) to
multi-site (multiple devices in parallel), test program
development, test hardware development and test program
conversion to lower cost test systems. We have test development
centers in Korea, the Philippines and the United States, as well
as teams of highly skilled engineers in each test facility.
Strip
Test
Using our strip test process, electronically isolated packaged
units are tested in parallel while still in a leadframe strip
form prior to separation. This process results in faster handler
times and higher throughput rates, thus reducing test cost and
increasing test yield.
Final
Test
Final test is the process of testing each device after it has
been packaged. Final test analyzes the attributes of each device
and determines if it meets criteria specified by the customer.
We offer test services for many devices including simple digital
logic, complex application specific integrated circuits, high
speed digital, memory, mixed signal and RF and wireless devices.
For packaging and test segment information, see Note 18 to
our Consolidated Financial Statements in Part II,
Item 8 of this Annual Report.
RESEARCH
AND DEVELOPMENT
Our research efforts focus on developing new package solutions,
test services and improving the efficiency and capabilities of
our existing production processes. We believe that technology
development is one of the key success differentiators in the
semiconductor packaging and test markets. By concentrating our
research and development on our customers needs for
innovative packages, increased performance and lower cost, we
gain opportunities to enter markets early, capture market share
and promote our new package offerings as industry standards. In
addition, we leverage our research and development by licensing
our leading edge technology, such as MicroLeadFrame, Fine
Pitch Copper Pillar, Through Mold Via, Lead Free Bumping and
FusionQuad.
Our key areas for research and development are:
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3D packaging;
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Advanced flip chip packaging;
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Advanced micro-electromechanical system packaging;
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Copper Pillar bumping and packaging;
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Copper wire interconnects;
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Engineering and characterization tools;
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Laminate and leadframe packaging;
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Manufacturing cost reduction;
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Through Mold Via technology;
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Through Silicon Via technology;
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Wafer Level Fan Out technology; and
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Wafer level processing.
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We have key development partners within our customer and
supplier base. We work with our partners and allocate our
resources to develop applications that have promising potential
for a profitable return on investment.
As of December 31, 2009, we had approximately
400 employees engaged in research and development
activities. In 2009, 2008 and 2007, we spent $44.5 million,
$56.2 million and $41.7 million, respectively, on
research and development.
MARKETING
AND SALES
Our marketing and sales offices are located throughout the
world. Our support personnel manage and promote our packaging
and test services and provide key customer and technical support.
To provide comprehensive sales and customer service, we
typically assign our customers a direct support team consisting
of an account manager, technical program manager, test program
manager and both field and factory customer support
representatives. We also support our largest multinational
customers from multiple office locations to ensure that we are
aligned with their global operational and business requirements.
Our direct support teams are further supported by an extended
staff of product, process, quality and reliability engineers, as
well as marketing and advertising specialists, information
systems technicians and factory personnel. Together, these
direct and extended support teams deliver an array of services
to our customers. These services include:
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Managing and coordinating ongoing manufacturing activity;
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Providing information and expert advice on our portfolio of
packaging and test solutions and related trends;
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Managing the
start-up of
specific packaging and test programs to improve our
customers
time-to-market;
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Providing a continuous flow of information to our customers
regarding products and programs in process;
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Partnering with customers on design solutions;
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Researching and assisting in the resolution of technical and
logistical issues;
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Aligning our technologies and research and development
activities with the needs of our customers and OEMs;
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Providing guidance and solutions to customers in managing their
supply chains;
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Driving industry standards;
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Providing design and simulation services to ensure package
reliability; and
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Collaborating with our customers on continuous quality
improvement initiatives.
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Further, we implement direct electronic links with our customers
to:
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Achieve near real time and automated communications of order
fulfillment information, such as inventory control, production
schedules and engineering data, including production yields,
device specifications and quality indices; and
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Connect our customers to our sales and marketing personnel
world-wide and to our factories.
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SEASONALITY
Our sales have generally been higher in the second half of the
year than in the first half due to the effect of consumer buying
patterns in the U.S., Europe and Asia. In addition,
semiconductor companies in the U.S. generally reduce their
production during the holidays at the end of December which
results in a decrease in units for packaging and test services
during the first quarter. Our business is tied to market
conditions in the semiconductor industry which is highly
cyclical. The semiconductor industry has experienced significant
and sometimes prolonged cyclical downturns in the past. We can
not predict the timing, strength or duration of any economic
slowdown or subsequent economic recovery.
CUSTOMERS
As of December 31, 2009, we had approximately 250
customers, including many of the largest semiconductor companies
in the world. The table below lists our top 25 customers in 2009
based on net sales:
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Altera Corporation
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Micron Technology, Inc.
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Analog Devices, Inc.
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NEC Corporation
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Atheros Communication, Inc.
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NXP Semiconductors
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Atmel Corporation
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ON Semiconductor Corp.
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Avago Technologies Limited
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Qualcomm Incorporated
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Broadcom Corporation
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Shanghai Hong Ri International Electronics Co., Ltd.
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Conexant Systems, Inc.
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PMC Sierra, Inc.
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Entropic Communications Limited
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Sony Electronics Inc.
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Global Unichip Corp.
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ST Microelectronics, Pte
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Infineon Technologies AG
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Texas Instruments Inc.
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Intel Corporation
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Toshiba Corporation
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International Business Machines Corporation (IBM)
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Xilinx, Inc.
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LSI Corporation
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Our top 25 customers accounted for 76.0% of our net sales in
2009, and our ten largest customers accounted for approximately
53.4%, 49.8% and 47.0% of our net sales for the years ended
December 31, 2009, 2008 and 2007, respectively. Qualcomm
Incorporated accounted for more than 10% of our consolidated net
sales in 2009. No customer accounted for more than 10% of our
consolidated net sales in 2008 or 2007.
For segment information, see Note 18 to our Consolidated
Financial Statements in Part II, Item 8 of this Annual
Report.
MATERIALS
AND EQUIPMENT
Materials
Our materials are used primarily for packaging activities. Our
packaging operations depend upon obtaining adequate supplies of
materials on a timely basis. The principal materials used in our
packaging process are leadframes, laminate substrates, gold and
copper wire, mold compound, epoxy, tubes and trays. The silicon
wafer is generally consigned from the customer. We do not take
ownership of the customer consigned wafer and title and risk of
loss remains with the customer for these materials. Test
materials constitute a very small portion of our total test
cost. We purchase materials based on customer forecasts and our
customers are generally responsible for any unused materials
which we purchased based on such forecasts.
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We work closely with our primary material suppliers to ensure
that materials are available and delivered on time. Moreover,
utilizing commodity managers to globally manage specific
commodities, we also negotiate world-wide pricing agreements
with our major suppliers to take advantage of the scale of our
operations. We are not dependent on any one supplier for a
substantial portion of our material requirements.
Equipment
Our ability to meet the changing demand for our customers for
manufacturing capacity requirements depends upon obtaining
packaging and test equipment in a timely manner. We work closely
with our main equipment suppliers to coordinate the ordering and
delivery of equipment to meet our expected capacity needs.
Packaging
Equipment
The primary equipment used in the packaging of products is wire
bonders and die bonders. In addition, we maintain a variety of
other packaging equipment, including mold, singulation, die
attach, ball attach, and wafer backgrind along with numerous
other types of manufacturing equipment. A substantial portion of
our packaging equipment base can generally be used and adapted
to support the manufacture of many of our package families
through the use of relatively low cost tooling.
We purchase wafer bumping equipment to facilitate the
manufacture of our flip chip and wafer level packaging lines.
Wafer bump equipment includes sputter and spin coaters,
electroplating equipment and reflow ovens and tends to have
longer lead times for order and installation than other
packaging equipment and is sold in relatively larger increments
of capacity.
Test
Equipment
The primary equipment used in the testing process includes
tester, handler and probe equipment. Handlers are used to
transfer individual or small groups of packaged integrated
circuits to a tester. Testers are generally a more capital
intensive portion of the process and tend to have longer
delivery lead times than most other types of packaging
equipment. We focus our capital additions on standardized tester
platforms in order to maximize test equipment utilization.
ENVIRONMENTAL
MATTERS
The semiconductor packaging process uses chemicals, materials
and gases and generates byproducts that are subject to extensive
governmental regulations. For example, we produce liquid waste
when semiconductor wafers are diced into chips with the aid of
diamond saws, then cooled with running water. In addition,
semiconductor packages have historically utilized metallic
alloys containing lead (Pb) within the interconnect terminals
typically referred to as leads, pins or balls. The usage of lead
(Pb) has decreased over the past few years, as we have ramped
volume production of alternative lead (Pb)-free processes.
Federal, state and local regulations in the U.S., as well as
environmental regulations internationally, impose various
controls on the storage, handling, discharge and disposal of
chemicals and materials used in our manufacturing processes and
in the factories we occupy.
We are engaged in a continuing program to assure compliance with
federal, state and local environmental laws and regulations. We
currently do not expect that capital expenditures or other costs
attributable to compliance with environmental laws and
regulations will have a material adverse effect on our business,
liquidity, results of operations, financial condition or cash
flows.
COMPETITION
The subcontracted semiconductor packaging and test market is
very competitive. We face substantial competition from
established packaging and test service providers primarily
located in Asia, including companies with significant
manufacturing capacity, financial resources, research and
development operations, marketing and other capabilities. These
companies include:
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Advanced Semiconductor Engineering, Inc.,
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Siliconware Precision Industries Co., Ltd. and
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STATS ChipPAC Ltd.
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Such companies also have developed relationships with most of
the worlds largest semiconductor companies, including
current or potential customers of Amkor. We also compete with
the internal semiconductor packaging and test capabilities of
many of our customers. Our integrated device manufacturer
customers continually evaluate the outsourced services against
their own in-house package and test services and at times decide
to shift some or all of their outsourced packaging and test
services to internally sourced capacity.
The principal elements of competition in the subcontracted
semiconductor packaging market include:
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technical competence;
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quality;
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price;
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breadth of package offering;
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new package design and implementation;
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cycle times;
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customer service; and
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available capacity.
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We believe that we generally compete favorably with respect to
each of these elements.
INTELLECTUAL
PROPERTY
We maintain an active program to protect and derive value from
our investment in technology and the associated intellectual
property rights. Intellectual property rights that apply to our
various products and services include patents, copyrights, trade
secrets and trademarks. We have filed and obtained a number of
patents in the U.S. and abroad the duration of which varies
depending on the jurisdiction in which the patent is filed.
While our patents are an important element of our intellectual
property strategy, as a whole, we are not materially dependent
on any one patent or any one technology. We expect to continue
to file patent applications when appropriate to protect our
proprietary technologies, but we cannot assure you that we will
receive patents from pending or future applications. In
addition, any patents we obtain may be challenged, invalidated
or circumvented and may not provide meaningful protection or
other commercial advantage to us.
We also protect certain details about our processes, products
and strategies as trade secrets, maintaining the confidentiality
of the information we believe provides us with a competitive
advantage. We have ongoing programs designed to maintain the
confidentiality of such information. Further, to distinguish our
products from our competitors products, we have obtained
certain trademarks and service marks. We have promoted and will
continue to promote our particular brands through advertising
and other marketing techniques.
EMPLOYEES
As of December 31, 2009, we had 18,200 full-time
employees. Of the total employee population, 13,200 were engaged
in manufacturing services, 3,000 were engaged in manufacturing
support, 400 were engaged in research and development, 200 were
engaged in marketing and sales and 1,400 were engaged in
administration, business management and finance. We believe that
our relations with our employees are good, and we have never
experienced a work stoppage in any of our factories. Our
employees in China, France, the Philippines, Taiwan and the
U.S. are not represented by any union. Certain members of
our factories in Japan and Korea are members of a union, and
those that are members of a union are subject to collective
bargaining agreements.
14
The factors discussed below are cautionary statements that
identify important factors and risks that could cause actual
results to differ materially from those anticipated by the
forward-looking statements contained in this report. For more
information regarding the forward-looking statements contained
in this report, see the introductory paragraph to Part II,
Item 7 of this Annual Report. You should carefully consider
the risks and uncertainties described below, together with all
of the other information included in this report, in considering
our business and prospects. The risks and uncertainties
described below are not the only ones facing Amkor. Additional
risks and uncertainties not presently known to us also may
impair our business operations. The occurrence of any of the
following risks could affect our business, liquidity, results of
operations, financial condition or cash flows.
Dependence
on the Highly Cyclical Semiconductor and Electronic Products
Industries We Operate in Volatile Industries and
Industry Downturns and Declines in Global Economic and Financial
Conditions Could Harm Our Performance.
Our business reflects the market conditions in the semiconductor
industry, which is cyclical by nature. The semiconductor
industry has experienced significant and sometimes prolonged
downturns in the past. For example, the recent financial crisis
and global recession resulted in a downturn in the semiconductor
industry that adversely affected our business and results of
operations in late 2008 and in 2009.
Since our business is, and will continue to be, dependent on the
requirements of semiconductor companies for subcontracted
packaging and test services, any downturn in the semiconductor
industry or any other industry that uses a significant number of
semiconductor devices, such as consumer electronic products,
telecommunication devices, or computing devices, could have a
material adverse effect on our business and operating results.
It is difficult to predict the timing, strength or duration of
any economic slowdown or subsequent economic recovery, and if
industry conditions deteriorate, we could suffer significant
losses, as we have in the past, which could materially impact
our business, liquidity, results of operations, financial
condition and cash flows.
Fluctuations
in Operating Results and Cash Flows Our Operating
Results and Cash Flows Have Varied and May Vary Significantly as
a Result of Factors That We Cannot Control.
Many factors, including the impact of adverse economic
conditions, could materially and adversely affect our net sales,
gross profit, operating results and cash flows, or lead to
significant variability of quarterly or annual operating
results. Our profitability and ability to generate cash from
operations is principally dependent upon demand for
semiconductors, the utilization of our capacity, semiconductor
package mix, the average selling price of our services, our
ability to manage our capital expenditures in response to market
conditions and our ability to control our costs including labor,
material, overhead and financing costs. The recent downturn in
demand for semiconductors resulted in significant declines in
our operating results and cash flows as capacity utilization
declined.
Our operating results and cash flows have varied significantly
from period to period. Our net sales, gross margins, operating
income and cash flows have historically fluctuated significantly
as a result of many of the following factors, over which we have
little or no control and which we expect to continue to impact
our business:
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fluctuation in demand for semiconductors and conditions in the
semiconductor industry;
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changes in our capacity utilization rates;
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changes in average selling prices;
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changes in the mix of semiconductor packages;
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evolving package and test technology;
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absence of backlog and the short-term nature of our
customers commitments and the impact of these factors on
the timing and volume of orders relative to our production
capacity;
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changes in costs, availability and delivery times of raw
materials and components;
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changes in labor costs to perform our services;
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wage and commodity price inflation, including precious metals;
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the timing of expenditures in anticipation of future orders;
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changes in effective tax rates;
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the availability and cost of financing;
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intellectual property transactions and disputes;
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high leverage and restrictive covenants;
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warranty and product liability claims and the impact of quality
excursions and customer disputes and returns;
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costs associated with litigation judgments, indemnification
claims and settlements;
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international events, political instability, civil disturbances
or environmental or natural events, such as earthquakes, that
impact our operations;
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pandemic illnesses that may impact our labor force and our
ability to travel;
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difficulties integrating acquisitions;
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our ability to attract and retain qualified employees to support
our global operations;
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loss of key personnel or the shortage of available skilled
workers;
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fluctuations in foreign exchange rates;
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delay, rescheduling and cancellation of large orders; and
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fluctuations in our manufacturing yields.
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It is often difficult to predict the impact of these factors
upon our results for a particular period. The downturn in the
global economy and the semiconductor industry increased the
risks associated with the foregoing factors as customer
forecasts became more volatile, and there was less visibility
regarding future demand and significantly increased uncertainty
regarding the economy, credit markets, and consumer demand.
These factors may materially and adversely affect our business,
liquidity, results of operations, financial condition and cash
flows, or lead to significant variability of quarterly or annual
operating results. In addition, these factors may adversely
affect our credit ratings which could make it more difficult and
expensive for us to raise capital and could adversely affect the
price of our securities.
High
Fixed Costs Due to Our High Percentage of Fixed
Costs, We Will Be Unable to Maintain Our Gross Margin at Past
Levels if We Are Unable to Achieve Relatively High Capacity
Utilization Rates.
Our operations are characterized by relatively high fixed costs.
Our profitability depends in part not only on pricing levels for
our packaging and test services, but also on the utilization of
our human resources and packaging and test equipment. In
particular, increases or decreases in our capacity utilization
can significantly affect gross margins since the unit cost of
packaging and test services generally decreases as fixed costs
are allocated over a larger number of units. In periods of low
demand, we experience relatively low capacity utilization in our
operations, which lead to reduced margins during that period.
For example, we experienced lower than optimum utilization in
the three months ended December 31, 2008 and the first half
of 2009 due to a decline in world-wide demand for our packaging
and test services which impacted our gross margin. Although our
capacity utilization at times have been strong, we cannot assure
you that we will be able to achieve consistently high capacity
utilization, and if we fail to do so, our gross margins may
decrease. If our gross margins decrease, our business,
liquidity, results of operations, financial condition and cash
flows could be materially and adversely affected.
In addition, our fixed operating costs have increased in recent
years in part as a result of our efforts to expand our capacity
through significant capital additions. Forecasted customer
demand for which we have made capital
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investments may not materialize. As a result, our sales may not
adequately cover our substantial fixed costs resulting in
reduced profit levels or causing significant losses, both of
which may adversely impact our liquidity, results of operations,
financial condition and cash flows. Additionally, we could
suffer significant losses if current industry conditions
deteriorate, which could materially impact our business,
liquidity, results of operations, financial position and cash
flows.
Guidance
Our Failure to Meet Our Guidance or Analyst Projections Could
Adversely Impact the Trading Prices of Our
Securities.
We periodically provide guidance to investors with respect to
certain financial information for future periods. Securities
analysts also periodically publish their own projections with
respect to our future operating results. As discussed above
under Fluctuations in Operating Results and Cash
Flows Our Operating Results and Cash Flows Have
Varied and May Vary Significantly as a Result of Factors That We
Cannot Control, our operating results and cash flows vary
significantly and are difficult to accurately predict.
Volatility in customer forecasts and reduced visibility caused
by economic uncertainty and fluctuations in global consumer
demand make it particularly difficult to predict future results.
To the extent we fail to meet or exceed our own guidance or the
analyst projections for any reason, the trading prices of our
securities may be adversely impacted. Moreover, even if we do
meet or exceed that guidance or those projections, the analysts
and investors may not react favorably, and the trading prices of
our securities may be adversely impacted.
Declining
Average Selling Prices The Semiconductor Industry
Places Downward Pressure on the Prices of Our Packaging and Test
Services.
Prices for packaging and test services have generally declined
over time. Historically, we have been able to partially offset
the effect of price declines by successfully developing and
marketing new packages with higher prices, such as advanced
leadframe and laminate packages, by negotiating lower prices
with our material vendors, recovering material cost increases
from our customers, and by driving engineering and technological
changes in our packaging and test processes which resulted in
reduced manufacturing costs. We expect general downward pressure
on average selling prices for our packaging and test services in
the future. If we are unable to offset a decline in average
selling prices, including developing and marketing new packages
with higher prices, reducing our purchasing costs, recovering
more of our material cost increases from our customers and
reducing our manufacturing costs, our business, liquidity,
results of operations, financial condition and cash flows could
be materially adversely affected.
Decisions
by Our Integrated Device Manufacturer Customers to Curtail
Outsourcing May Adversely Affect Our Business.
Historically, we have been dependent on the trend in outsourcing
of packaging and test services by integrated device
manufacturers (IDMs). Our IDM customers continually
evaluate the outsourced services against their own in-house
packaging and test services. As a result, at any time and for a
variety of reasons, IDMs may decide to shift some or all of
their outsourced packaging and test services to internally
sourced capacity.
The reasons IDMs may shift their internal capacity include:
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their desire to realize higher utilization of their existing
test and packaging capacity, especially during downturns in the
semiconductor industry;
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their unwillingness to disclose proprietary technology;
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their possession of more advanced packaging and test
technologies; and
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the guaranteed availability of their own packaging and test
capacity.
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Furthermore, to the extent we limit capacity commitments for
certain customers, these customers may begin to increase their
level of in-house packaging and test capabilities, which could
adversely impact our sales and profitability and make it more
difficult for us to regain their business when we have available
capacity. Any shift or a
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slowdown in this trend of outsourcing packaging and test
services is likely to adversely affect our business, liquidity,
results of operations, financial condition and cash flows.
In a downturn in the semiconductor industry, IDMs could respond
by shifting some outsourced packaging and test services to
internally serviced capacity on a short term basis. If we
experience a significant loss of IDM business, it could have a
material adverse effect on our business, liquidity, results of
operations, financial condition and cash flows especially during
a prolonged industry downturn.
Our
Substantial Indebtedness Could Adversely Affect Our Financial
Condition and Prevent Us from Fulfilling Our
Obligations.
We have a significant amount of indebtedness. As of
December 31, 2009, our total debt balance was
$1,434.2 million, of which $88.9 million was
classified as a current liability. In addition, despite current
debt levels, the terms of the indentures governing our
indebtedness allow us or our subsidiaries to incur more debt,
subject to certain limitations. If new debt is added to our
consolidated debt level, the related risks that we now face
could intensify.
Our substantial indebtedness could:
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make it more difficult for us to satisfy our obligations with
respect to our indebtedness, including our obligations under our
indentures to purchase notes tendered as a result of a change in
control of Amkor;
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increase our vulnerability to general adverse economic and
industry conditions;
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limit our ability to fund future working capital, capital
expenditures, research and development and other general
corporate requirements;
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require us to dedicate a substantial portion of our cash flow
from operations to service payments on our debt;
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increase the volatility of the price of our common stock;
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limit our flexibility to react to changes in our business and
the industry in which we operate;
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place us at a competitive disadvantage to any of our competitors
that have less debt; and
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limit, along with the financial and other restrictive covenants
in our indebtedness, among other things, our ability to borrow
additional funds.
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Ability
to Fund Liquidity Needs.
We operate in a capital intensive industry. Servicing our
current and future customers requires that we incur significant
operating expenses and continue to make significant capital
expenditures, which are generally made in advance of the related
revenues and without any firm customer commitments. During 2009,
we had capital additions of $197.7 million and in 2010, we
expect to make capital additions of approximately 14% of net
sales.
In addition, we have a significant level of debt, with
$1,434.2 million outstanding at December 31, 2009,
$88.9 million of which is current. The terms of such debt
require significant scheduled principal payments in the coming
years, including $88.9 million due in 2010,
$139.6 million due in 2011, $43.1 million due in 2012,
$501.2 million due in 2013, $271.4 million due in 2014
and $390.0 million due thereafter. The interest payments
required on our debt are also substantial. For example, in the
year ended December 31, 2009, we paid $116.2 million
of interest. The source of funds to fund our operations,
including making capital expenditures and servicing principal
and interest obligations with respect to our debt, are cash
flows from our operations, current cash and cash equivalents,
borrowings under available debt facilities, or proceeds from any
additional debt or equity financing. As of December 31,
2009, we had cash and cash equivalents of $395.4 million
and $96.5 million available under our senior secured
revolving credit facility which matures in April 2013.
We assess our liquidity based on our current expectations
regarding sales, operating expenses, capital spending and debt
service requirements. Based on this assessment, we believe that
our cash flow from operating activities together with existing
cash and cash equivalents will be sufficient to fund our working
capital, capital expenditure and debt service requirements for
at least the next twelve months. Thereafter, our liquidity will
continue to be
18
affected by, among other things, the performance of our
business, our capital expenditure levels and our ability to
repay debt out of our operating cash flow or refinance the debt
with the proceeds of debt or equity offerings at or prior to
maturity. Moreover, the health of the worldwide banking system
and financial markets affects the liquidity in the global
economic environment. Volatility in fixed income, credit and
equity markets could make it difficult for us to maintain our
existing credit facilities or refinance our debt. If our
performance or access to the capital markets differs materially
from our expectations, our liquidity may be adversely impacted.
In addition, if we fail to generate the necessary net income or
operating cash flows to meet the funding needs of our business
beyond the next twelve months due to a variety of factors,
including the cyclical nature of the semiconductor industry and
the other factors discussed in this Risk Factors
section, our liquidity would be adversely affected.
Our
Ability To Draw On Our Current Loan Facilities May Be Adversely
Affected by Conditions in the U.S. and International Capital
Markets.
If financial institutions that have extended credit commitments
to us are adversely affected by the conditions of the
U.S. and international capital and credit markets, they may
be unable to fund borrowings under their credit commitments to
us. For example, we currently have a $100.0 million
revolving credit facility with three banks in the U.S. If
any of these banks are adversely affected by capital and credit
market conditions and are unable to make loans to us when
requested, there could be a corresponding adverse impact on our
financial condition and our ability to borrow additional funds,
if needed, for working capital, capital expenditures,
acquisitions, research and development and other corporate
purposes.
Restrictive
Covenants in the Indentures and Agreements Governing Our Current
and Future Indebtedness Could Restrict Our Operating
Flexibility.
The indentures and agreements governing our existing debt, and
debt we may incur in the future, contain, or may contain,
affirmative and negative covenants that materially limit our
ability to take certain actions, including our ability to incur
debt, pay dividends and repurchase stock, make certain
investments and other payments, enter into certain mergers and
consolidations, engage in sale leaseback transactions and
encumber and dispose of assets. The $671.1 million
write-off of our goodwill at December 31, 2008
significantly reduced our ability to pay dividends and
repurchase stock and subordinated securities, including our
convertible notes, due to defined calculations which include net
income. In addition, our future debt agreements may contain
financial covenants and ratios.
The breach of any of these covenants by us or the failure by us
to meet any of these ratios or conditions could result in a
default under any or all of such indebtedness. If a default
occurs under any such indebtedness, all of the outstanding
obligations thereunder could become immediately due and payable,
which could result in a default under our other outstanding debt
and could lead to an acceleration of obligations related to
other outstanding debt. The existence of such a default or event
of default could also preclude us from borrowing funds under our
revolving credit facilities. Our ability to comply with the
provisions of the indentures, credit facilities and other
agreements governing our outstanding debt and indebtedness we
may incur in the future can be affected by events beyond our
control and a default under any debt instrument, if not cured or
waived, could have a material adverse effect on us.
We
Have Significant Severance Plan Obligations Associated With Our
Manufacturing Operations in Korea Which Could Reduce Our Cash
Flow and Negatively Impact Our Financial
Condition.
We sponsor an accrued severance plan for our Korean subsidiary.
Under the Korean plan, eligible employees are entitled to
receive a lump sum payment upon termination of their employment
based on their length of service, seniority and rate of pay at
the time of termination. Since our severance plan obligation is
significant, in the event of a significant layoff or other
reduction in our labor force in Korea, payments under the plan
could have a material adverse effect on our liquidity, financial
condition and cash flows. In addition, existing tax laws in
Korea limit our ability to currently deduct severance expenses
associated with the current plan. These limitations are designed
to encourage companies to migrate to a defined contribution or
defined benefit plan. If we adopt a new plan retrospectively, we
would be required to significantly fund the existing liability,
which could have a material
19
adverse effect on our liquidity, financial condition and cash
flows. If we do not adopt a new plan, we will have to pay higher
taxes which could adversely affect our liquidity, financial
condition and cash flows. See Note 13 to our Consolidated
Financial Statements included in this Annual Report.
If We
Fail to Maintain an Effective System of Internal Controls, We
May Not be Able to Accurately Report Financial Results or
Prevent Fraud.
Effective internal controls are necessary to provide reliable
financial reports and to assist in the effective prevention of
fraud. Any inability to provide reliable financial reports or
prevent fraud could harm our business. We must annually evaluate
our internal procedures to satisfy the requirements of
Section 404 of the Sarbanes-Oxley Act of 2002, which
requires management and our independent registered public
accounting firm to assess the effectiveness of internal control
over financial reporting. If we fail to remedy or maintain the
adequacy of our internal controls, as such standards are
modified, supplemented or amended from time to time, we could be
subject to regulatory scrutiny, civil or criminal penalties or
shareholder litigation.
In addition, failure to maintain adequate internal controls
could result in financial statements that do not accurately
reflect our operating results or financial condition.
We
Face Product Return and Liability Risks, the Risk of Economic
Damage Claims and the Risk of Negative Publicity if Our Packages
Fail.
Our packages are incorporated into a number of end products, and
our business is exposed to product return and liability risks,
the risk of economic damage claims and the risk of negative
publicity if our packages fail.
In addition, we are exposed to the product and economic
liability risks and the risk of negative publicity affecting our
customers. Our sales may decline if any of our customers are
sued on a product liability claim. We also may suffer a decline
in sales from the negative publicity associated with such a
lawsuit or with adverse public perceptions in general regarding
our customers products. Further, if our packages are
delivered with impurities or defects, we could incur additional
development, repair or replacement costs, suffer other economic
losses and our credibility and the markets acceptance of
our packages could be harmed.
Absence
of Backlog The Lack of Contractually Committed
Customer Demand May Adversely Affect Our Sales.
Our packaging and test business does not typically operate with
any material backlog. Our quarterly net sales from packaging and
test services are substantially dependent upon our
customers demand in that quarter. None of our customers
have committed to purchase any significant amount of packaging
or test services or to provide us with binding forecasts of
demand for packaging and test services for any future period, in
any material amount. In addition, our customers often reduce,
cancel or delay their purchases of packaging and test services
for a variety of reasons including industry-wide,
customer-specific and Amkor-related reasons. Since a large
portion of our costs is fixed and our expense levels are based
in part on our expectations of future revenues, we may not be
able to adjust costs in a timely manner to compensate for any
sales shortfall. If we are unable to do so, it would adversely
affect our margins, operating results, financial condition and
cash flows. If the decline in customer demand continues, our
business, liquidity, results of operations, financial condition
and cash flows will be materially and adversely affected.
Risks
Associated With International Operations We Depend
on Our Factories and Operations in China, Japan, Korea, the
Philippines, Singapore and Taiwan. Many of Our Customers
and Vendors Operations Are Also Located Outside of the
U.S.
We provide packaging and test services through our factories and
other operations located in China, Japan, Korea, the
Philippines, Singapore and Taiwan. Although we do not derive any
revenue from, nor sell any packages in North Korea, any future
increase in tensions between South Korea and North Korea which
may occur, for example, an outbreak of military hostilities,
could adversely affect our business, liquidity, results of
operations,
20
financial condition and cash flows. Moreover, many of our
customers and vendors operations are located outside
the U.S. The following are some of the risks inherent in
doing business internationally:
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changes in consumer demand resulting from deteriorating
conditions in local economies;
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regulatory limitations imposed by foreign governments, including
limitations or taxes imposed on the payment of dividends and
other payments by
non-U.S. subsidiaries;
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fluctuations in currency exchange rates;
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political, military, civil unrest and terrorist risks;
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disruptions or delays in shipments caused by customs brokers or
government agencies;
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changes in regulatory requirements, tariffs, customs, duties and
other restrictive trade barriers or policies;
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difficulties in staffing and managing foreign
operations; and
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potentially adverse tax consequences resulting from changes in
tax laws.
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Changes
in the U.S. Tax Law Regarding Earnings Of Our Subsidiaries
Located Outside the U.S. Could Materially Affect Our Future
Results.
There have been proposals to change U.S. tax laws that
would significantly impact how U.S. corporations are taxed
on foreign earnings. We earn a substantial portion of our income
in foreign countries. Although we cannot predict whether or in
what form this proposed legislation will pass, if enacted it
could have a material adverse impact on our liquidity, results
of operations, financial condition and cash flows.
Our
Management Information Systems May Prove Inadequate
We Face Risks in Connection With Our Current Project to Install
a New Enterprise Resource Planning System For Our
Business.
We depend on our management information systems for many aspects
of our business. Some of our key software has been developed by
our own programmers, and this software may not be easily
integrated with other software and systems. We are making a
significant investment to implement a new enterprise resource
planning system to replace many of our existing systems. We face
risks in connection with our current project to install a new
enterprise resource system for our business. These risks include:
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we may face delays in the design and implementation of the
system;
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the cost of the system may exceed our plans and
expectations; and
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disruptions resulting from the implementation of the system may
impact our ability to process transactions and delay shipments
to customers, impact our results of operations or financial
condition, or harm our control environment.
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Our business could be materially and adversely affected if our
management information systems are disrupted or if we are unable
to improve, upgrade, integrate or expand upon our systems,
particularly in light of our intention to continue to implement
a new enterprise resource planning system over a multi-year
program on a company-wide basis.
We
Face Risks Trying to Attract and Retain Qualified Employees to
Support Our Operations.
Our success depends to a significant extent upon the continued
service of our key senior management and technical personnel,
any of whom may be difficult to replace. Competition for
qualified employees is intense, and our business could be
adversely affected by the loss of the services of any of our
existing key personnel, including senior management, as a result
of competition or for any other reason. We evaluate our
management team and engage in long-term succession planning in
order to ensure orderly replacement of key personnel. We do not
have employment agreements with our key employees, including
senior management or other contracts that would prevent our key
employees from working for our competitors in the event they
cease working for us. We cannot assure you that we will be
successful in these efforts or in hiring and properly training
sufficient numbers of
21
qualified personnel and in effectively managing our growth. Our
inability to attract, retain, motivate and train qualified new
personnel could have a material adverse effect on our business.
Difficulties
Consolidating and Evolving Our Operational
Capabilities We Face Challenges as We Integrate
Diverse Operations.
We have experienced, and expect to continue to experience,
change in the scope and complexity of our operations primarily
through facility consolidations, strategic acquisitions, joint
ventures and other partnering arrangements and may continue to
engage in such transactions in the future. For example, each
business we have acquired had, at the time of acquisition,
multiple systems for managing its own production, sales,
inventory and other operations. Migrating these businesses to
our systems typically is a slow, expensive process requiring us
to divert significant amounts of resources from multiple aspects
of our operations. These changes have strained our managerial,
financial, plant operations and other resources. Future
consolidations and expansions may result in inefficiencies as we
integrate operations and manage geographically diverse
operations.
Dependence
on Materials and Equipment Suppliers Our Business
May Suffer If the Cost, Quality or Supply of Materials or
Equipment Changes Adversely.
We obtain from various vendors the materials and equipment
required for the packaging and test services performed by our
factories. We source most of our materials, including critical
materials such as leadframes, laminate substrates and gold wire,
from a limited group of suppliers. Furthermore, we purchase the
majority of our materials on a purchase order basis. From time
to time, we enter into supply agreements, generally up to one
year in duration, to guarantee supply to meet projected demand.
Our business may be harmed if we cannot obtain materials and
other supplies from our vendors in a timely manner, in
sufficient quantities, in acceptable quality or at competitive
prices.
We purchase new packaging and test equipment to maintain and
expand our operations. From time to time, increased demand for
new equipment may cause lead times to extend beyond those
normally required by equipment vendors. For example, in the
past, increased demand for equipment caused some equipment
suppliers to only partially satisfy our equipment orders in the
normal time frame or to increase prices during market upturns
for the semiconductor industry. The unavailability of equipment
or failures to deliver equipment could delay or impair our
ability to meet customer orders. If we are unable to meet
customer orders, we could lose potential and existing customers.
Generally, we do not enter into binding, long-term equipment
purchase agreements and we acquire our equipment on a purchase
order basis, which exposes us to substantial risks. For example,
changes in foreign currency exchange rates could result in
increased prices for equipment purchased by us, which could have
a material adverse effect on our results of operations.
We are a large buyer of gold and other commodity materials
including substrates and copper. The prices of gold and other
commodities used in our business fluctuate. Historically, we
have been able to partially offset the effect of commodity price
increases through price adjustments to some customers and
changes in our product designs, such as shorter, thinner, gold
wire and migration to copper wire. Significant price increases
may adversely impact our gross margin in future quarters to the
extent we are unable to pass along past or future commodity
price increases to our customers.
Loss
of Customers The Loss of Certain Customers May Have
a Significant Adverse Effect on Our Operations and Financial
Results.
The loss of a large customer or disruption of our strategic
partnerships or other commercial arrangements may result in a
decline in our sales and profitability. Although we have
approximately 250 customers, we have derived and expect to
continue to derive a large portion of our revenues from a small
group of customers during any particular period due in part to
the concentration of market share in the semiconductor industry.
Our ten largest customers together accounted for approximately
53.4%, 49.8% and 47.0% of our net sales in the years ended
December 31, 2009, 2008 and 2007, respectively. In
addition, a single customer accounted for greater than 10% of
our net sales during 2009. No customer accounted for more than
10% of our net sales during 2008 or 2007.
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The demand for our services from each customer is directly
dependent upon that customers level of business activity,
which could vary significantly from year to year. The loss of a
large customer may adversely affect our sales and profitability.
Our key customers typically operate in the cyclical
semiconductor business and, in the past, order levels have
varied significantly from period to period based on a number of
factors. Our business is likely to remain subject to this
variability in order levels, and we cannot assure you that these
key customers or any other customers will continue to place
orders with us in the future at the same levels as in past
periods.
The loss of one or more of our significant customers, or reduced
orders by any one of them and our inability to replace these
customers or make up for such orders could reduce our
profitability. For example, our facility in Iwate, Japan, is
primarily dedicated to a single customer, Toshiba Corporation.
We have also invested in an unconsolidated affiliate, J-Devices
Corporation, for which Toshiba is the primary customer. If we
were to lose Toshiba as a customer or if it were to materially
reduce its business with us, it could be difficult for us to
find one or more new customers to utilize the capacity, which
could have a material adverse effect on our operations and
financial results. In addition, we have a long term supply
agreement that expires in December 2010 with IBM. If we were to
lose IBM as a customer, this could have a material adverse
effect on our business, liquidity, results of operations,
financial condition and cash flows.
Capital
Additions We Make Substantial Capital Additions To
Support the Demand Of Our Customers, Which May Adversely Affect
Our Business If the Demand Of Our Customers Does Not Develop As
We Expect or Is Adversely Affected.
We make significant capital additions in order to service the
demand of our customers. The amount of capital additions will
depend on several factors, including the performance of our
business, our assessment of future industry and customer demand,
our capacity utilization levels and availability, our liquidity
position and the availability of financing. Our ongoing capital
addition requirements may strain our cash and short-term asset
balances, and, in periods when we are expanding our capital
base, we expect that depreciation expense and factory operating
expenses associated with our capital additions to increase
production capacity will put downward pressure on our gross
margin, at least over the near term.
Furthermore, if we cannot generate or raise additional funds to
pay for capital additions, particularly in some of the advanced
packaging and bumping areas, as well as research and development
activities, our growth prospects and future profitability may be
adversely affected. Our ability to obtain external financing in
the future is subject to a variety of uncertainties, including:
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our future financial condition, results of operations and cash
flows;
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general market conditions for financing activities by
semiconductor companies;
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volatility in fixed income, credit and equity markets; and
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economic, political and other global conditions.
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The lead time needed to order, install and put into service
various capital additions is often significant, and, as a
result, we often need to commit to capital additions in advance
of our receipt of firm orders or advance deposits based on our
view of anticipated future demand with only very limited
visibility. Although we seek to limit our exposure in this
regard, in the past we have from time to time expended
significant capital for additions for which the anticipated
demand did not materialize for a variety of reasons, many of
which were outside of our control. To the extent this occurs in
the future, our business, liquidity, results of operations,
financial condition and cash flows could be materially and
adversely affected.
In addition, during periods where customer demand exceeds our
capacity, customers may transfer some or all of their business
to other suppliers who are able to support their needs. To the
extent this occurs, our business, liquidity, results of
operations, financial condition and cash flows could be
materially and adversely affected.
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Impairment
Charges Any Impairment Charges Required Under U.S.
GAAP May Have a Material Adverse Effect on Our Net
Income.
Under U.S. generally accepted accounting principles
(U.S. GAAP), we review our long-lived assets
for impairment when events or changes in circumstances indicate
the carrying value may not be recoverable. Factors we consider
include significant under-performance relative to expected
historical or projected future operating results, significant
negative industry or economic trends and our market
capitalization relative to net book value. We may be required in
the future to record a significant charge to earnings in our
financial statements during the period in which any impairment
of our long-lived assets is determined. Such charges have had
and could have a significant adverse impact on our results of
operations.
Litigation
Incident to Our Business Could Adversely Affect
Us.
We have been a party to various legal proceedings, including
those described in Note 16 to the Consolidated Financial
Statements included in this Annual Report, and may be a party to
litigation in the future. If an unfavorable ruling or outcome
were to occur in this or future litigation, there could be a
material adverse impact on our business, liquidity, results of
operations, financial condition, cash flows and the trading
price of our securities.
We
Could Suffer Adverse Tax and Other Financial Consequences if
Taxing Authorities Do Not Agree with Our Interpretation of
Applicable Tax Laws.
Our corporate structure and operations are based, in part, on
interpretations of various tax laws, including withholding tax,
compliance with tax holiday requirements, application of changes
in tax law to our operations and other relevant laws of
applicable taxing jurisdictions. From time to time, the taxing
authorities of the relevant jurisdictions may conduct
examinations of our income tax returns and other regulatory
filings. We cannot assure you that the taxing authorities will
agree with our interpretations. To the extent they do not agree,
we may seek to enter into settlements with the taxing
authorities which require significant payments or otherwise
adversely affect our results of operations or financial
condition. We may also appeal the taxing authorities
determinations to the appropriate governmental authorities, but
we can not be sure we will prevail. If we do not prevail, we may
have to make significant payments or otherwise record charges
(or reduce tax assets) that adversely affect our results of
operations, financial condition and cash flows.
Rapid
Technological Change Our Business Will Suffer If We
Cannot Keep Up With Technological Advances in Our
Industry.
The complexity and breadth of semiconductor packaging and test
services are rapidly increasing. As a result, we expect that we
will need to offer more advanced package designs in order to
respond to competitive industry conditions and customer
requirements. Our success depends upon our ability to acquire,
develop and implement new manufacturing processes and package
design technologies and tools. The need to develop and maintain
advanced packaging capabilities and equipment could require
significant research and development and capital expenditures
and acquisitions in future years. In addition, converting to new
package designs or process methodologies could result in delays
in producing new package types, which could adversely affect our
ability to meet customer orders and adversely impact our
business.
Technological advances also typically lead to rapid and
significant price erosion and may make our existing packages
less competitive or our existing inventories obsolete. If we
cannot achieve advances in package design or obtain access to
advanced package designs developed by others, our business could
suffer.
Packaging
and Test Packaging and Test Processes Are Complex
and Our Production Yields and Customer Relationships May Suffer
from Defects in the Services We Provide.
Semiconductor packaging and test services are complex processes
that require significant technological and process expertise.
The packaging process is complex and involves a number of
precise steps. Defective packages primarily result from:
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contaminants in the manufacturing environment;
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human error;
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equipment malfunction;
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changing processes to address environmental requirements;
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defective raw materials; or
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defective plating services.
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Testing is also complex and involves sophisticated equipment and
software. Similar to most software programs, these software
programs are complex and may contain programming errors or
bugs. The testing equipment is also subject to
malfunction. In addition, the testing process is subject to
operator error.
These and other factors have, from time to time, contributed to
lower production yields. They may also do so in the future,
particularly as we adjust our capacity or change our processing
steps. In addition, we must continue to expand our offering of
packages to be competitive. Our production yields on new
packages typically are significantly lower than our production
yields on our more established packages.
Our failure to maintain high standards or acceptable production
yields, if significant and prolonged, could result in loss of
customers, increased costs of production, delays, substantial
amounts of returned goods and claims by customers relating
thereto. Any of these problems could have a material adverse
effect on our business, liquidity, results of operations,
financial condition and cash flows.
In addition, in line with industry practice, new customers
usually require us to pass a lengthy and rigorous qualification
process that may take several months. If we fail to qualify
packages with potential customers or customers, our business,
results of operations, financial condition and cash flows could
be adversely affected.
Competition
We Compete Against Established Competitors in the Packaging and
Test Business as Well as Internal Customer
Capabilities.
The subcontracted semiconductor packaging and test market is
very competitive. We face substantial competition from
established packaging and test service providers primarily
located in Asia, including companies with significant processing
capacity, financial resources, research and development
operations, marketing and other capabilities. These companies
also have established relationships with many large
semiconductor companies that are our current or potential
customers. We also face competition from the internal
capabilities and capacity of many of our current and potential
IDM customers. In addition, we may in the future have to compete
with companies (including semiconductor foundries) that may
enter the market or offer new or emerging technologies that
compete with our packages and services.
We cannot assure you that we will be able to compete
successfully in the future against our existing or potential
competitors or that our customers will not rely on internal
sources for packaging and test services, or that our business,
liquidity, results of operations, financial condition and cash
flows will not be adversely affected by such increased
competition.
Environmental
Regulations Future Environmental Regulations Could
Place Additional Burdens on Our Manufacturing
Operations.
The semiconductor packaging process uses chemicals, materials
and gases and generates byproducts that are subject to extensive
governmental regulations. For example, at our foreign facilities
we produce liquid waste when semiconductor wafers are diced into
chips with the aid of diamond saws, then cooled with running
water. In addition, semiconductor packages have historically
utilized metallic alloys containing lead (Pb) within the
interconnect terminals typically referred to as leads, pins or
balls. Federal, state and local regulations in the U.S., as well
as international environmental regulations, impose various
controls on the storage, handling, discharge and disposal of
chemicals used in our production processes and on the factories
we occupy and are increasingly imposing restrictions on the
materials contained in semiconductor products. We may become
liable under environmental laws for the cost of clean up of any
disposal or release of hazardous materials arising out of our
former or current operations, or otherwise as a result of the
existence of hazardous materials on our properties. In such an
event, we could be held liable for damages, including fines,
penalties and the cost of remedial actions, and could also be
subject to revocation of permits negatively affecting our
operations.
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Public attention has focused on the environmental impact of
semiconductor operations and the risk to neighbors of chemical
releases from such operations and to the materials contained in
semiconductor products. For example, the European Unions
Restriction of Use of Certain Hazardous Substances Directive
imposes strict restrictions on the use of lead and other
hazardous substances in electrical and electronic equipment. In
response to this directive, and similar laws and developing
legislation in countries like China, Japan and Korea, we have
implemented changes in a number of our manufacturing processes
in an effort to achieve compliance across all of our package
types. Complying with existing and possible future environmental
laws and regulations, including laws and regulations relating to
climate change, may impose upon us the need for additional
capital equipment or other process requirements, restrict our
ability to expand our operations, disrupt our operations,
increase costs, subject us to liability or cause us to curtail
our operations.
Intellectual
Property We May Become Involved in Intellectual
Property Litigation.
We maintain an active program to protect and derive value from
our investment in technology and the associated intellectual
property rights. Intellectual property rights that apply to our
various packages and services include patents, copyrights, trade
secrets and trademarks. We have filed and obtained a number of
patents in the U.S. and abroad the duration of which varies
depending on the jurisdiction in which the patent is filed.
While our patents are an important element of our intellectual
property strategy, as a whole, we are not materially dependent
on any one patent or any one technology. The process of seeking
patent protection takes a long time and is expensive. There can
be no assurance that patents will issue from pending or future
applications or that, if patents are issued, the rights granted
under the patents will provide us with meaningful protection or
any commercial advantage. Any patents we do obtain may be
challenged, invalidated or circumvented and may not provide
meaningful protection or other commercial advantage to us.
The semiconductor industry is characterized by frequent claims
regarding patent and other intellectual property rights. If any
third party makes an enforceable infringement claim against us
or our customers, we could be required to:
|
|
|
|
|
discontinue the use of certain processes;
|
|
|
|
cease to provide the services at issue;
|
|
|
|
pay substantial damages;
|
|
|
|
develop non-infringing technologies; or
|
|
|
|
acquire licenses to the technology we had allegedly infringed.
|
Some of our technologies are not covered by any patent or patent
application. The confidentiality agreements on which we rely to
protect these technologies may be breached and may not be
adequate to protect our proprietary technologies. There can be
no assurance that other countries in which we market our
services will protect our intellectual property rights to the
same extent as the U.S.
Our competitors may develop, patent or gain access to know-how
and technology similar to our own. In addition, many of our
patents are subject to cross licenses, several of which are with
our competitors.
We may need to enforce our patents or other intellectual
property rights, including our rights under patent and
intellectual property licenses with third parties, or defend
ourselves against claimed infringement of the rights of others
through litigation, which could result in substantial cost and
diversion of our resources. Furthermore, if we fail to obtain
necessary licenses, our business could suffer. We have been
involved in legal proceedings involving the acquisition and
license of intellectual property rights, the enforcement of our
existing intellectual property rights or the enforcement of the
intellectual property rights of others, including the
arbitration proceeding filed against Tessera, Inc., which is
described in more detail in Note 16 to the Consolidated
Financial Statements. Unfavorable outcomes in any litigation
matters involving intellectual property could result in
significant liabilities and could have a material adverse effect
on our business, liquidity, results of operations, financial
condition and cash flows. The potential impact from the legal
proceedings referred to in this report on our results of
operations, financial condition and cash flows could change in
the future.
26
Fire,
Flood or Other Calamity With Our Operations
Conducted in a Limited Number of Facilities, a Fire, Flood or
Other Calamity at one of Our Facilities Could Adversely Affect
Us.
We conduct our packaging and test operations at a limited number
of facilities. Significant damage or other impediments to any of
these facilities, whether as a result of fire, weather, the
outbreak of infectious diseases (such as SARs or flu), civil
strife, industrial strikes, breakdowns of equipment,
difficulties or delays in obtaining materials and equipment,
natural disasters, terrorist incidents, industrial accidents or
other causes could temporarily disrupt or even shut down our
operations, which would have a material adverse effect on our
business, financial condition and results of operations. In the
event of such a disruption or shutdown, we may be unable to
reallocate production to other facilities in a timely or
cost-effective manner (if at all) and may not have sufficient
capacity to service customer demands in our other facilities.
For example, our operations in Asia are vulnerable to regional
typhoons that can bring with them destructive winds and
torrential rains, which could in turn cause plant closures and
transportation interruptions. In addition, some of the processes
that we utilize in our operations place us at risk of fire and
other damage. For example, highly flammable gases are used in
the preparation of wafers holding semiconductor devices for flip
chip packaging. While we maintain insurance policies for various
types of property, casualty and other risks, we do not carry
insurance for all the above referred risks and with regard to
the insurance we do maintain, we cannot assure you that it would
be sufficient to cover all of our potential losses.
Continued
Control By Existing Stockholders Mr. James J.
Kim and Members of His Family Can Substantially Control The
Outcome of All Matters Requiring Stockholder
Approval.
As of December 31, 2009, Mr. James J. Kim, our
Executive Chairman of the Board of Directors, members of
Mr. Kims immediate family and affiliates beneficially
owned approximately 56% of our outstanding common stock. This
percentage includes beneficial ownership of the securities
underlying $100 million of our 6.25% convertible
subordinated notes due 2013 and $150 million of our 6.0%
convertible senior subordinated notes due 2014. Subject to
certain requirements imposed by voting agreements that the Kim
family vote in a neutral manner any shares issued upon
conversion of their convertible notes, Mr. James J. Kim and
his family and affiliates, acting together, have the ability to
effectively determine matters (other than interested party
transactions) submitted for approval by our stockholders by
voting their shares, including the election of all of the
members of our Board of Directors. There is also the potential,
through the election of members of our Board of Directors, that
Mr. Kims family could substantially influence matters
decided upon by the Board of Directors. This concentration of
ownership may also have the effect of impeding a merger,
consolidation, takeover or other business consolidation
involving us, or discouraging a potential acquirer from making a
tender offer for our shares, and could also negatively affect
our stocks market price or decrease any premium over
market price that an acquirer might otherwise pay.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
None.
27
We provide packaging and test services through our factories in
China, Japan, Korea, the Philippines, Singapore, Taiwan and the
U.S. The size, location and manufacturing services provided
by each of our factories are set forth in the table below.
|
|
|
|
|
|
|
|
|
Approximate
|
|
|
|
|
|
Factory Size
|
|
|
|
Location
|
|
(Square Feet)
|
|
|
Services
|
|
Korea
|
|
|
|
|
|
|
Seoul, Korea(1)
|
|
|
698,000
|
|
|
Packaging services; package and process development
|
Pupyong, Korea(1)
|
|
|
404,000
|
|
|
Packaging and test services
|
Kwangju, Korea(1)
|
|
|
907,000
|
|
|
Packaging and test services
|
Philippines
|
|
|
|
|
|
|
Muntinlupa, Philippines(2)
|
|
|
749,000
|
|
|
Packaging and test services; package and process development
|
Province of Laguna, Philippines(2)
|
|
|
625,000
|
|
|
Packaging and test services
|
Taiwan
|
|
|
|
|
|
|
Lung Tan, Taiwan(1)
|
|
|
417,500
|
|
|
Packaging and test services
|
Hsinchu, Taiwan(1)
|
|
|
426,000
|
|
|
Packaging and test services; wafer bump services
|
China
|
|
|
|
|
|
|
Shanghai, China(3)
|
|
|
1,123,000
|
|
|
Packaging and test services
|
Japan
|
|
|
|
|
|
|
Kitakami, Japan(4)
|
|
|
211,000
|
|
|
Packaging and test services
|
Singapore
|
|
|
|
|
|
|
Science Park, Singapore(5)
|
|
|
165,000
|
|
|
Test services
|
United States
|
|
|
|
|
|
|
Chandler, AZ(1)
|
|
|
2,000
|
|
|
Test process development
|
|
|
|
(1) |
|
Owned facility and land. |
|
(2) |
|
As a result of foreign ownership restrictions in the
Philippines, the land associated with our Philippine factories
is leased from realty companies in which we own a 40% interest.
We own buildings comprising 1,223,000 square feet and lease
the remaining 151,000 square feet from one of the
aforementioned realty companies. |
|
(3) |
|
We own buildings comprising 953,000 square feet, of which
approximately 450,000 square feet were facilitized with a
clean room manufacturing environment and equipment as of
December 31, 2009. The remaining 170,000 square feet
and all land is leased. |
|
(4) |
|
Leased facility. |
|
(5) |
|
Owned facility. Land is leased. The Singapore bump and test
services are being consolidated into our other facilities
through 2010. See Note 20 to our Consolidated Financial
Statements included in this Annual Report. |
We believe that our existing properties are in good condition
and suitable for the conduct of our business.
Our principal executive office and operational headquarters is
located in Chandler, Arizona. In addition to executive staff,
the Chandler, Arizona campus houses sales and customer service
for the southwest region, product management, finance,
information systems, planning and marketing. Our marketing and
sales office locations include sites in the U.S. (Chandler,
Arizona; Irvine, San Diego and Santa Clara,
California; Boston, Massachusetts; Greensboro, North Carolina;
and Dallas, Texas), China, France, Japan, Korea, the
Philippines, Singapore and Taiwan. We also perform research and
development activities in Raleigh-Durham, North Carolina.
|
|
Item 3.
|
Legal
Proceedings
|
For a discussion of Legal Proceedings, see
Note 16 Commitments and Contingencies to our
Consolidated Financial Statements in Part II, Item 8
of this Annual Report.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
None.
28
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
LISTING
ON THE NASDAQ GLOBAL SELECT MARKET
Our common stock is traded on the NASDAQ Global Select Market
under the symbol AMKR. The following table sets
forth, for the periods indicated, the high and low closing price
per share of our common stock as quoted on the NASDAQ Global
Select Market.
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
Low
|
|
|
2009
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
3.11
|
|
|
$
|
1.60
|
|
Second Quarter
|
|
|
4.97
|
|
|
|
2.82
|
|
Third Quarter
|
|
|
7.47
|
|
|
|
4.27
|
|
Fourth Quarter
|
|
|
7.62
|
|
|
|
5.48
|
|
2008
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
12.38
|
|
|
$
|
6.55
|
|
Second Quarter
|
|
|
12.36
|
|
|
|
8.68
|
|
Third Quarter
|
|
|
10.66
|
|
|
|
6.31
|
|
Fourth Quarter
|
|
|
6.22
|
|
|
|
1.55
|
|
There were approximately 173 holders of record of our common
stock as of January 29, 2010.
DIVIDEND
POLICY
Since our public offering in 1998, we have never paid a dividend
to our stockholders and we do not have any present plans for
doing so. In addition, our secured bank debt agreements and the
indentures governing our senior and senior subordinated notes
restrict our ability to pay dividends. Refer to the Liquidity
and Capital Resources Section in Item 7
Managements Discussion and Analysis.
RECENT
SALES OF UNREGISTERED SECURITIES
None.
EQUITY
COMPENSATION PLANS
The information required by this item regarding equity
compensation plans is set forth in Item 12 Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters of this Annual Report on
Form 10-K.
PURCHASES
OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS
None.
29
PERFORMANCE
GRAPH(1)
COMPARISON
OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among
Amkor Technology, Inc., The S&P 500 Index
And The PHLX Semiconductor Index
* $100 invested on
12/31/04 in
stock or index, including reinvestment of dividends. Fiscal year
ending December 31.
Copyright
©
2010 S&P, a division of The McGraw-Hill Companies Inc. All
rights reserved.
Copyright©
2010 Dow Jones & Co. All rights reserved.
|
|
|
(1) |
|
The preceding Stock Performance Graph is not deemed filed with
the Securities and Exchange Commission and shall not be
incorporated by reference in any of our filings under the
Securities Act of 1933 or the Securities Exchange Act of 1934,
whether made before or after the date hereof and irrespective of
any general incorporation language in any such filing. |
30
|
|
Item
6.
|
Selected
Consolidated Financial Data
|
The following selected consolidated financial data as of
December 31, 2009 and 2008 and for the years ended
December 31, 2009, 2008 and 2007 have been derived from our
audited Consolidated Financial Statements included in this
Annual Report. The following selected consolidated financial
data for the years ended December, 31, 2006 and 2005, and as of
December 31, 2007, 2006 and 2005, have been derived from
audited financial statements not included herein and, where
applicable, such data was recast for the retrospective
application of new accounting guidance for noncontrolling
interests in a consolidated subsidiary, which we became subject
to beginning January 1, 2009. You should read the selected
consolidated financial data in conjunction with
Managements Discussion and Analysis of Financial Condition
and Results of Operations and our Consolidated Financial
Statements, both of which are included in this Annual Report.
The summary consolidated financial data below reflects on a
historical basis our 2006 acquisition of substantially all of
the remaining 40% interest in Unitive Semiconductor Taiwan
(UST) that we did not previously own.
SELECTED
HISTORICAL CONSOLIDATED FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands, except per share data)
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
2,179,109
|
|
|
$
|
2,658,602
|
|
|
$
|
2,739,445
|
|
|
$
|
2,728,560
|
|
|
$
|
2,099,949
|
|
Cost of sales(a)
|
|
|
1,698,713
|
|
|
|
2,096,864
|
|
|
|
2,057,572
|
|
|
|
2,053,600
|
|
|
|
1,744,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
480,396
|
|
|
|
561,738
|
|
|
|
681,873
|
|
|
|
674,960
|
|
|
|
355,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative(b)
|
|
|
210,907
|
|
|
|
251,756
|
|
|
|
254,365
|
|
|
|
251,142
|
|
|
|
293,319
|
|
Research and development
|
|
|
44,453
|
|
|
|
56,227
|
|
|
|
41,650
|
|
|
|
38,735
|
|
|
|
37,347
|
|
Goodwill impairment(c)
|
|
|
|
|
|
|
671,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of real estate and specialty test operations(d)
|
|
|
(281
|
)
|
|
|
(9,856
|
)
|
|
|
(4,833
|
)
|
|
|
|
|
|
|
(4,408
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
255,079
|
|
|
|
969,244
|
|
|
|
291,182
|
|
|
|
289,877
|
|
|
|
326,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
225,317
|
|
|
|
(407,506
|
)
|
|
|
390,691
|
|
|
|
385,083
|
|
|
|
29,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
102,396
|
|
|
|
118,729
|
|
|
|
133,896
|
|
|
|
161,682
|
|
|
|
170,608
|
|
Interest expense, related party
|
|
|
13,000
|
|
|
|
6,250
|
|
|
|
6,250
|
|
|
|
6,477
|
|
|
|
521
|
|
Interest income
|
|
|
(2,367
|
)
|
|
|
(8,749
|
)
|
|
|
(9,797
|
)
|
|
|
(6,875
|
)
|
|
|
(5,257
|
)
|
Foreign currency loss (gain)(e)
|
|
|
3,339
|
|
|
|
(61,057
|
)
|
|
|
8,961
|
|
|
|
13,255
|
|
|
|
9,318
|
|
(Gain) loss on debt retirement, net(f)
|
|
|
(15,088
|
)
|
|
|
(35,987
|
)
|
|
|
15,876
|
|
|
|
27,389
|
|
|
|
(253
|
)
|
Equity in (earnings) losses of unconsolidated affiliates(g)
|
|
|
(2,373
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55
|
|
Other (income) expense, net
|
|
|
(113
|
)
|
|
|
(1,004
|
)
|
|
|
668
|
|
|
|
661
|
|
|
|
(191
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense, net
|
|
|
98,794
|
|
|
|
18,182
|
|
|
|
155,854
|
|
|
|
202,589
|
|
|
|
174,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
126,523
|
|
|
|
(425,688
|
)
|
|
|
234,837
|
|
|
|
182,494
|
|
|
|
(145,288
|
)
|
Income tax (benefit) expense(h)
|
|
|
(29,760
|
)
|
|
|
31,788
|
|
|
|
12,597
|
|
|
|
11,208
|
|
|
|
(5,551
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
156,283
|
|
|
|
(457,476
|
)
|
|
|
222,240
|
|
|
|
171,286
|
|
|
|
(139,737
|
)
|
Net (income) loss attributable to noncontrolling interests
|
|
|
(303
|
)
|
|
|
781
|
|
|
|
(2,376
|
)
|
|
|
(1,202
|
)
|
|
|
2,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Amkor
|
|
$
|
155,980
|
|
|
$
|
(456,695
|
)
|
|
$
|
219,864
|
|
|
$
|
170,084
|
|
|
$
|
(137,235
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Amkor per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.85
|
|
|
$
|
(2.50
|
)
|
|
$
|
1.22
|
|
|
$
|
0.96
|
|
|
$
|
(0.78
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.67
|
|
|
$
|
(2.50
|
)
|
|
$
|
1.11
|
|
|
$
|
0.90
|
|
|
$
|
(0.78
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing per common share amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
183,067
|
|
|
|
182,734
|
|
|
|
180,597
|
|
|
|
177,682
|
|
|
|
176,385
|
|
Diluted
|
|
|
263,379
|
|
|
|
182,734
|
|
|
|
208,767
|
|
|
|
199,556
|
|
|
|
176,385
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands, except per share data)
|
|
|
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
305,510
|
|
|
$
|
309,920
|
|
|
$
|
283,267
|
|
|
$
|
273,845
|
|
|
$
|
248,637
|
|
Purchases of property, plant and equipment
|
|
|
173,496
|
|
|
|
386,239
|
|
|
|
236,240
|
|
|
|
315,873
|
|
|
|
295,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
395,406
|
|
|
$
|
424,316
|
|
|
$
|
410,070
|
|
|
$
|
244,694
|
|
|
$
|
206,575
|
|
Working capital
|
|
|
327,088
|
|
|
|
306,174
|
|
|
|
310,341
|
|
|
|
215,095
|
|
|
|
131,362
|
|
Total assets
|
|
|
2,432,909
|
|
|
|
2,383,993
|
|
|
|
3,192,606
|
|
|
|
3,041,264
|
|
|
|
2,955,091
|
|
Total long-term debt
|
|
|
1,345,241
|
|
|
|
1,438,751
|
|
|
|
1,611,570
|
|
|
|
1,819,901
|
|
|
|
1,956,247
|
|
Total debt, including short-term borrowings and current portion
of long-term debt
|
|
|
1,434,185
|
|
|
|
1,493,360
|
|
|
|
1,764,059
|
|
|
|
2,005,315
|
|
|
|
2,140,636
|
|
Additional paid-in capital
|
|
|
1,500,246
|
|
|
|
1,496,976
|
|
|
|
1,482,186
|
|
|
|
1,441,194
|
|
|
|
1,431,543
|
|
Accumulated deficit
|
|
|
(1,122,241
|
)
|
|
|
(1,278,221
|
)
|
|
|
(821,526
|
)
|
|
|
(1,041,390
|
)
|
|
|
(1,211,474
|
)
|
Total Amkor stockholders equity
|
|
|
383,209
|
|
|
|
237,139
|
|
|
|
654,619
|
|
|
|
393,920
|
|
|
|
223,905
|
|
|
|
|
(a) |
|
During 2008, we recorded a charge of $61.4 million for
unpaid royalties relating to the resolution of a patent license
dispute, of which $49.0 million related to royalties for
periods prior to 2008. |
|
(b) |
|
During 2006 and 2005, we recorded $1.0 million and
$50.0 million respectively, related to epoxy mold compound
litigation. |
|
(c) |
|
At December 31, 2008, we recorded a non-cash charge of
$671.1 million to write off our remaining goodwill. |
|
(d) |
|
During 2009, we sold land and dormitory buildings in Korea and
recorded a gain of $0.3 million. During 2008, we sold land
and a warehouse in Korea and recorded a gain of
$9.9 million. In 2007, we recorded a gain of
$3.1 million in connection with the sale of real property
in Korea used for administrative purposes. During 2005, we
recognized a gain of $4.4 million on the sale of our
Wichita, Kansas specialty test operation and in 2007, we
recognized an additional $1.7 million gain related to an
earn-out provision. |
|
(e) |
|
We recognize foreign currency (gains) losses due to the
remeasurement of certain of our foreign currency denominated
monetary assets and liabilities. During 2008, the net foreign
currency gain of $61.1 million is primarily attributable to
the significant depreciation of the Korean won and the impact on
the remeasurement of our Korean severance obligation. |
|
(f) |
|
During 2009, we recorded a net gain of $15.1 million
related to the repurchase of an aggregate $289.3 million
principal amount of our 7.125% Senior Notes and
2.5% Convertible Senior Subordinated Notes due in 2011 and
our 7.75% Senior Notes due in 2013. During 2008, we
recorded a gain of $36.0 million related to the repurchase
of an aggregate $118.3 million principal amount of our
7.125% senior notes and 2.5% convertible senior
subordinated notes due 2011. In 2007, we recorded a loss of
$15.9 million related to the refinancing of a second lien
term loan. During 2006, we recorded a loss of $27.4 million
related to the tender offer to purchase $352.3 million
principal amount of our 9.25% senior notes due February
2008 and the repurchase of $178.1 million of our
10.5% senior subordinated notes due May 2009. |
|
(g) |
|
During 2009, we made a 30% equity investment in J-Devices, which
is accounted for using the equity method, and recognized equity
in earnings of $2.4 million. |
|
(h) |
|
Generally, our effective tax rate is substantially below the
U.S. federal tax rate of 35% because we have experienced
taxable losses in the U.S. and our income is taxed in foreign
jurisdictions where we benefit from tax holidays or tax rates
lower than the U.S. statutory rate. In 2009, a
$25.6 million benefit for the release of a valuation
allowance in Korea is included in the income tax benefit. In
2008, the $671.1 million goodwill impairment charge did not
have a significant income tax benefit. Also, the 2008 income tax
provision included a charge of $8.3 million for the
establishment of a valuation allowance in Japan. |
32
Item 7. Managements
Discussion and Analysis of Financial Condition and Results of
Operations
This report contains forward-looking statements within the
meaning of the federal securities laws, including but not
limited to statements regarding: (1) the amount and timing
of our expected capital investments and focus on customer
requirements, investments in technology advancements and cost
reduction programs, (2) expectations regarding increased
labor and other manufacturing costs in support of higher
customer demand, (3) our ability to fund our operating
activities for the next twelve months, (4) the effect of
capacity utilization rates on our costs and gross margin,
(5) the expiration of tax holidays in foreign jurisdictions
in which we operate and expectations regarding our effective tax
rate, (6) the release of valuation allowances related to
taxes in the future, (7) the expected use of future cash
flows, if any, for the expansion of our business, capital
expenditures and the repayment of debt, (8) expected
workforce reductions and related severance charges in connection
with our plan to exit manufacturing operations in Singapore,
(9) our repurchase of outstanding debt in the future,
(10) payment of dividends, (11) compliance with our
covenants, (12) expected contributions to defined benefit
pension plans, (13) liability for unrecognized tax
benefits, (14) sufficiency of accruals for potential
additional taxes or related interest in connection with
examination by tax authorities, (15) the effect of changes
in the mix of income from foreign sales, expiration of tax
holidays and changes in tax laws on future tax rates,
(16) the effect of foreign currency exchange rate exposure
on our financial results, and (17) other statements that
are not historical facts. In some cases, you can identify
forward-looking statements by terminology such as
may, will, should,
expects, plans, anticipates,
believes, estimates,
predicts, potential,
continue, intend or the negative of
these terms or other comparable terminology. Because such
statements include risks and uncertainties, actual results may
differ materially from those anticipated in such forward-looking
statements as a result of certain factors, including those set
forth in the following discussion as well as in Item 1A
Risk Factors of this Annual Report. The following
discussion provides information and analysis of our results of
operations for the three years ended December 31, 2009 and
our liquidity and capital resources. You should read the
following discussion in conjunction with Item 1,
Business, Item 6 Selected Consolidated
Financial Data and Item 8 Financial Statements
and Supplemental Data in this Annual Report as well as
other reports we file with the SEC.
Overview
Amkor is one of the worlds leading subcontractors of
semiconductor packaging and test services. Packaging and test
are integral steps in the process of manufacturing semiconductor
devices. The manufacturing process begins with silicon wafers
and involves the fabrication of electronic circuitry into
complex patterns, thus creating large numbers of individual
chips on the wafers. The fabricated wafers are then probe tested
to ensure the individual devices meet electrical specifications.
The packaging process creates an electrical interconnect between
the semiconductor chip and the system board. In packaging,
fabricated semiconductor wafers are separated into individual
chips. These chips are typically attached through wire bond or
wafer bump technologies to a substrate or leadframe and then
encased in a protective material. In the case of an advanced
wafer level package, the package is assembled on the surface of
a wafer.
Our packages are designed for application specific body size and
electrical connection requirements to provide optimal electrical
connectivity and thermal performance. The packaged chips are
then tested using sophisticated equipment to ensure that each
packaged chip meets its design and performance specifications.
Increasingly, packages are custom designed for specific chips
and specific end-market applications. We are able to provide
turnkey assembly and test solutions including semiconductor
wafer bump, wafer probe, wafer backgrind, package design,
assembly, test and drop shipment services.
The financial crisis and global recession that began in 2008
caused a significant decrease in demand for our services during
the first half of 2009. During the second half of 2009, the
semiconductor industry began to recover from the recent cyclical
downturn. Our unit demand increased to 2.4 billion units
during the three months ended December 31, 2009 compared to
2.3 billion units during the three months ended
September 30, 2009 and 1.7 billion units during the
three months ended December 31, 2008 principally driven by
strength of leadframe wire bond packaging services.
33
Our annual net sales decreased $479.5 million or 18.0% to
$2,179.1 million in 2009 from $2,658.6 million in
2008, primarily due to the general decline in demand for our
services and inventory management efforts by our customers as a
result of the global economic recession and weakness in consumer
spending.
Gross margin for 2009 of 22.0% was up from 21.1% in 2008.
Included in our cost of sales for 2008 was a charge of
$61.4 million for royalties relating to a resolution of a
patent license dispute which reduced our gross margin by two
percentage points for 2008. In addition, during 2009 we recorded
a charge of $16.9 million relating to workforce reduction
programs compared to $12.2 million during 2008.
Net income for 2009 was $156.0 million, or $0.67 per
diluted share, compared with a net loss in 2008 of
$456.7 million, or $2.50 per share. Included in the
2008 net loss was the charge of $671.1 million, or
$3.67 per share, for goodwill impairment as well as a
$64.7 million charge relating to the accrued and unpaid
royalties and interest for the resolution of a patent license
dispute. The net loss for 2008 includes $61.1 million net
foreign currency gain from the remeasurement of certain
subsidiaries balance sheet items compared to a net foreign
currency loss of $3.3 million for 2009. The income tax
benefit of $29.8 million for 2009 is primarily attributable
to the release of a tax valuation allowance at our subsidiary in
Korea compared to income tax expense of $31.8 million in
2008 attributable to profits in our taxable foreign
jurisdictions as well as the establishment of a valuation
allowance against certain deferred tax assets in Japan.
In 2009, our capital additions totaled $197.7 million or 9%
of net sales. Our 2009 capital additions are lower than our 2008
capital additions of $341.7 million as a result of the
decline in sales due to the recession. We expect our 2010
capital additions to be approximately 14% of net sales. Capital
additions are generally focused on specific customer
requirements, technology advancements and cost reduction
programs and in 2010 we are planning to expand our capacity in
support of customer demand for a number of advanced packaging
and test areas, including flip chip and wire bond chip scale
packaging and wafer bumping.
As part of our focus on generating cash flow and driving greater
factory and administrative efficiencies, beginning in 2008 and
continuing into 2009, we implemented cost reduction measures
that included lowering executive and other employee
compensation, reducing employee and contractor headcount, and
shortening work weeks. Some costs previously reduced through
cost reduction measures, such as labor and other manufacturing
costs, have increased in the three months ended
December 31, 2009 and are expected to increase in support
of higher levels of customer demand.
We generated $88.2 million of free cash flow in the year
ended December 31, 2009, decreasing $131.4 million
from the prior year. Cash provided by operating activities was
$261.7 million for the year ended December 31, 2009,
as compared with $605.8 million for the year ended
December 31, 2008. The decrease in 2009 is primarily due to
reduced business levels due to the recession and approximately
$160.8 million of payments made relating to the resolution
of a patent license dispute and employee benefit and separation
payments. This decrease in cash provided by operating activities
is partially offset by decreased capital additions. We define
free cash flow as net cash provided by operating activities less
investing activities related to the acquisition of property,
plant and equipment. Free cash flow is not defined by
U.S. generally accepted accounting principles
(U.S. GAAP) and a reconciliation of free cash
flow to net cash provided by operating activities is set forth
under the caption Cash Flows below. Please see
Liquidity and Capital Resources and Cash
Flows below for a further analysis of the change in our
balance sheet and cash flows during the year ended
December 31, 2009.
We believe our financial position and liquidity are sufficient
to fund our operating activities for at least the next twelve
months. In April 2009, we amended our $100.0 million first
lien revolving credit facility which, among other things,
extended the maturity date from November 2009 to April 2013.
Also in April 2009, we issued $250.0 million of our 6.0%
convertible senior subordinated notes due April 2014 (the
2014 Notes). In the year ended December 31,
2009, we repurchased in open market transactions
$156.6 million in aggregate principal amount of our
7.125% senior notes due March 2011, $69.0 million in
aggregate principal amount of our 2.5% convertible senior
subordinated notes due May 2011, and $63.7 million in
aggregate principal amount of our 7.75% senior notes due
May 2013 using $244.5 million of net proceeds from issuance
of the 2014 Notes and $27.4 million of cash on hand. At
December 31, 2009, our cash and cash equivalents totaled
approximately $395.4 million with an aggregate of
$88.9 million of debt due through the end of 2010. In 2011,
the remaining $96.1 million aggregate principal amount of
our 2.5% convertible senior subordinated notes and
7.125% senior notes mature.
34
Results
of Operations
The following table sets forth certain operating data as a
percentage of net sales for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Gross profit
|
|
|
22.0
|
%
|
|
|
21.1
|
%
|
|
|
24.9
|
%
|
Depreciation and amortization
|
|
|
14.0
|
%
|
|
|
11.7
|
%
|
|
|
10.3
|
%
|
Operating income (loss)
|
|
|
10.3
|
%
|
|
|
(15.3
|
)%
|
|
|
14.3
|
%
|
Income (loss) before income taxes
|
|
|
5.8
|
%
|
|
|
(16.0
|
)%
|
|
|
8.6
|
%
|
Net income (loss) attributable to Amkor
|
|
|
7.2
|
%
|
|
|
(17.2
|
)%
|
|
|
8.0
|
%
|
Year
Ended December 31, 2009 Compared to Year Ended
December 31, 2008
Net Sales. Net sales decreased
$479.5 million, or 18.0%, to $2,179.1 million in 2009
from $2,658.6 million in 2008. This decline in net sales
was due to the general decline in demand and inventory
management efforts by our customers as a result of the global
economic recession and weakness in consumer spending. As a
result, we experienced a broad-based decline in demand across
our packaging and test business.
Packaging Net Sales. Packaging net sales
decreased $409.9 million, or 17.5%, to
$1,933.6 million for 2009 from $2,343.5 million in
2008 because of the broad-based decline in demand across our
package offerings. Packaging unit volume decreased in 2009 to
7.7 billion units compared to 8.6 billion units in
2008 due to the same broad-based decline in demand.
Test Net Sales. Test net sales decreased
$69.1 million, or 22.0%, to $245.2 million in 2009
from $314.3 million in 2008 due to the overall decline in
demand due to the global economic recession.
Cost of Sales. Our cost of sales consists
principally of materials, labor, depreciation and manufacturing
overhead. Since a substantial portion of the costs at our
factories is fixed, relatively modest increases or decreases in
capacity utilization rates can have a significant effect on our
gross margin.
Material costs as a percentage of net sales increased to 39.7%
in 2009 from 38.0% in 2008 due to change in mix to packages with
higher material content as a percentage of net sales.
As a percentage of net sales, labor costs decreased to 13.5% in
2009 from 15.3% in 2008. The decrease in labor costs was due
primarily to savings from our workforce reduction activities and
other cost savings initiatives implemented during 2008 and 2009.
We had a favorable foreign currency effect on labor costs
resulting from the depreciation of the Korean won and other
currencies against the U.S. dollar as substantially all of
our manufacturing operation workforce is paid in local
currencies. In addition, labor costs in 2009 included a charge
of $10.1 million related to workforce reduction programs
and the wind-down and exit of manufacturing operations in
Singapore compared to $12.2 million in 2008 for workforce
reduction programs.
As a percentage of net sales, other manufacturing costs
decreased to 24.7% in 2009 from 25.6% in 2008. In 2009, we had
reductions in other manufacturing costs due to cost savings
initiatives and lower volumes such as a decrease in factory
supplies and repair and maintenance expenses. Included in other
manufacturing costs for 2008 is a charge of $61.4 million
for royalties related to the resolution of a patent license
dispute. Asset impairment charges included in 2009 were
$6.0 million compared to $12.1 million in 2008. In
2009, other manufacturing costs also includes a charge of $6.8
million related to the wind-down and exit of manufacturing
operations in Singapore.
Gross Profit. Gross profit decreased
$81.3 million to $480.4 million in 2009 from
$561.7 million in 2008. Gross profit as a percentage of net
sales increased to 22.0% in 2009 from 21.1% in 2008. Included in
cost of sales for 2008 are $61.4 million for royalties
related to the resolution of a patent license dispute. Gross
profit in 2009 included $16.9 million related to workforce
reduction programs and the wind-down and exit of manufacturing
operations in Singapore compared to $12.2 million in 2008
for workforce reduction programs. The decrease in gross profit
due to lower volumes was partially mitigated by cost control and
the favorable foreign currency effect on labor costs due to the
depreciation of the Korean won.
35
Packaging Gross Profit. Gross profit for
packaging decreased $43.7 million to $429.3 million in
2009 from $473.0 million in 2008. Packaging gross profit as
a percentage of packaging net sales increased to 22.2% in 2009
from 20.2% in 2008. Included in cost of sales for 2008 are
$61.4 million for royalties related to the resolution of a
patent license dispute. The packaging gross profit decrease was
due to the broad-based decline in product demand across our
package offerings partially offset by cost control and a
favorable foreign currency effect on labor costs due to the
depreciation of the Korean won.
Test Gross Profit. Gross profit for test
decreased $30.9 million to $57.7 million, or 23.5% of
test net sales in 2009 from $88.6 million, or 28.2% of test
net sales, in 2008. The decrease in gross margin is due to lower
net sales due to reduced demand partially offset by labor
savings from our workforce reduction activities and cost control
initiatives.
Selling, General and Administrative
Expenses. Selling, general and administrative
expenses decreased $40.8 million, or 16.2%, to
$210.9 million in 2009, from $251.8 million in 2008.
The decrease was primarily caused by lower salaries and benefits
in both our factories and corporate offices and other cost
reduction initiatives.
Research and Development. Despite the global
economic recession, during 2009 we continued to invest in
research and development activities which are focused on
advanced laminate, flip chip and wafer level packaging services.
Research and development expenses decreased $11.8 million
to $44.5 million, or 2.0% of net sales in 2009 from
$56.2 million, or 2.1% of net sales in 2008. The decrease
was primarily due to lower salaries and benefits partially
offset by a $2.6 million impairment charge in 2009 related
to certain research and development equipment.
Goodwill Impairment. We recorded a goodwill
impairment charge in the amount of $671.1 million in 2008
to write off the entire carrying value of our goodwill. This
non-cash charge had no impact on liquidity or cash flows from
operations.
Gain on Sale of Real Estate and Specialty Test
Operations. During 2009, we sold land and
dormitory buildings in Korea for $0.8 million in proceeds
and reported a gain of $0.3 million, with no net tax
effect. During 2008, we sold land and a warehouse in Korea for
$14.3 million in cash and recorded a gain of
$9.9 million, with no net tax effect.
Other (Income) Expense. Other expense, net
increased $80.6 million to $98.8 million, or 4.5% of
net sales in 2009 from $18.2 million, or 0.7% of net sales
in 2008. This increase was primarily the result of a
$3.3 million foreign currency loss recorded in 2009 from
the remeasurement of certain subsidiaries balance sheet
items compared to a $61.1 million foreign currency gain
recorded in 2008. In addition, in 2009, we recognized a gain of
$15.1 million related to the repurchase of an aggregate
$289.3 million principal amount of our 7.125% Senior
Notes due in 2011, our 2.5% Convertible Senior Subordinated
Notes due in 2011 and our 7.75% Senior Notes due in 2013,
compared to a gain of $36.0 million on debt repurchases in
2008. The $9.6 million reduction in interest expense in
2009, including related party interest expense, is due to
reduced debt and the refinancing of certain debt with lower rate
instruments. Interest expense in 2008 also included
$3.3 million of interest related to the resolution of a
patent license dispute that did not recur in 2009.
Income Tax Benefit. Generally, our effective
tax rate is substantially below the U.S. federal tax rate
of 35% because we have experienced taxable losses in the
U.S. and our income is taxed in foreign jurisdictions where
we benefit from tax holidays or tax rates lower than the
U.S. statutory rate. We recorded an income tax benefit of
$29.8 million in 2009 as compared to an income tax expense
of $31.8 million in 2008. The income tax benefit for 2009
included a $25.6 million income tax benefit for the release
of a valuation allowance on the net deferred tax assets of our
Korean subsidiary, $9.4 million of income tax credits, and
an income tax benefit of $3.0 million related to changes in
estimates of our uncertain tax positions. These benefits were
partially offset by $6.2 million of income tax expense
attributable to income taxes in certain profitable foreign
jurisdictions, foreign withholding taxes and minimum taxes.
Income tax expense in 2008 is attributable to profits in certain
of our taxable foreign jurisdictions and changes in estimates of
our uncertain tax positions, as well as the establishment of a
valuation allowance related to certain deferred tax assets in
Japan.
During 2009, our subsidiaries in China, Korea, the Philippines,
Singapore and Taiwan operate under the tax holidays which will
expire in whole or in part at various dates through 2015. We
expect our effective tax rate to
36
increase as the tax holidays expire and income from these
jurisdictions is subject to the higher statutory income tax
rates. See Note 4 to our Consolidated Financial Statements
for a further discussion of income tax holidays.
At December 31, 2009, we had U.S. net operating loss
carryforwards totaling $365.5 million which expire at
various times through 2029. Additionally, at December 31,
2009, we had $53.1 million of
non-U.S. net
operating loss carryforwards, which expire at various times
through 2017. We maintain a valuation allowance on all of our
U.S. net deferred tax assets, including our net operating
loss carryforwards, and on deferred tax assets in certain
foreign jurisdictions. We will release such valuation allowances
as the related tax benefits are realized on our tax returns or
when sufficient positive evidence exists to conclude that it is
more likely than not that the deferred tax assets will be
realized.
Year
Ended December 31, 2008 Compared to Year Ended
December 31, 2007
Net Sales. Net sales decreased
$80.8 million, or 3.0%, to $2,658.6 million in 2008
from $2,739.4 million in 2007. For the first nine months of
2008, we had an increase of 5.9% in net sales compared to the
prior year comparable period, due to the growth of our advanced
packaging solutions and the benefit of our investments in 3D
packaging, flip chip and wafer level packaging as well as test
services. During the three months ended December 31, 2008,
we had a decrease in net sales of 26.5% from the prior year
comparable period. This decline in net sales was due to the
general decline in demand and inventory management efforts by
our customers as a result of the global economic downturn and
weakness in consumer spending experienced during the three
months ended December 31, 2008.
Packaging Net Sales. Packaging net sales
decreased $86.9 million, or 3.6%, to $2,343.5 million
for 2008 from $2,430.4 million in 2007. For the first nine
months of 2008, we had an increase of 4.7% in packaging net
sales compared to the prior year comparable period, due to the
growth of our advanced packaging solutions and the benefit of
our investments in 3D packaging, flip chip and wafer level
packaging. During the three months ended December 31, 2008,
we had a decrease due to the general decline in demand and
inventory management efforts by our customers as a result of the
global economic downturn and weakness in consumer spending
experienced during the three months ended December 31,
2008. Packaging unit volume decreased in 2008 to
8.6 billion units compared to 8.7 billion units in
2007.
Test Net Sales. Despite the overall decline in
demand due to the global economic downturn, test net sales
increased $4.7 million, or 1.5%, to $314.3 million in
2008 from $309.6 million in 2007 principally due to an
increase in wafer probe services which have a higher average
selling price.
Cost of Sales. Our cost of sales consists
principally of materials, labor, depreciation and manufacturing
overhead. Since a substantial portion of the costs at our
factories is fixed, relatively modest increases or decreases in
capacity utilization rates can have a significant effect on our
gross margin.
Material costs as a percentage of net sales increased from 37.7%
for the year ended December 31, 2007 to 38.0% for the year
ended December 31, 2008 due to change in mix to packages
with higher material content as a percentage of net sales.
As a percentage of net sales, labor costs decreased to 15.3% in
2008 compared to 16.0% in 2007. The decrease in labor costs is
due primarily to a favorable foreign currency effect on labor
costs resulting from the depreciation of the Korean won and
other currencies against the U.S. dollar as substantially
all of our manufacturing operation workforce is paid in local
currencies. In addition, we began to realize savings from our
workforce reduction activities and other cost savings
initiatives implemented during 2008. These benefits from foreign
currency changes and labor cost reduction efforts were partially
offset by the severance costs and other charges incurred in
connection with workforce reductions in 2008.
As a percentage of net sales, other manufacturing costs
increased to 25.6% for the year ended December 31, 2008
from 21.4% for the year ended December 31, 2007. Included
in other manufacturing costs for 2008 is a charge of
$61.4 million for royalties related to the resolution of a
patent license dispute. Other manufacturing costs also increased
due to higher depreciation costs as a result of our capital
expenditures, which are focused on increasing our wafer bump and
flip chip packaging capacity, advanced laminate packaging
services and test services.
37
Stock-based compensation included in cost of sales was
$0.8 million for the year ended December 31, 2008
compared to $1.3 million for the year ended
December 31, 2007.
Gross Profit. Gross profit decreased
$120.1 million to $561.7 million, or 21.1% of net
sales in 2008 from $681.9 million, or 24.9% of net sales,
in 2007. Included in cost of sales for 2008 are
$61.4 million for royalties related to the resolution of a
patent license dispute and $11.5 million of charges for
workforce reduction programs. The decrease in gross profit and
gross margin was partially offset by improved factory
performance and the favorable foreign currency effect on labor
costs due to the depreciation of the Korean won.
Packaging Gross Profit. Gross profit for
packaging decreased $104.8 million to $473.0 million,
or 20.2% of packaging net sales, in 2008 from
$577.8 million, or 23.8% of packaging net sales, in 2007.
Included in cost of sales for 2008 are $61.4 million for
royalties related to the resolution of a patent license dispute
and charges for workforce reduction programs. The packaging
gross profit decrease was partially offset by improved product
mix, consisting of an increase in our advanced package
technologies including flip chip and 3D packages and a decrease
in our traditional, lower margin leadframe packages. The
decrease was also partially offset by a favorable foreign
currency effect on labor costs due to the depreciation of the
Korean won.
Test Gross Profit. Gross profit for test in
2008 decreased $14.8 million to $88.6 million, or
28.2% of test net sales from $103.4 million, or 33.4% of
test net sales, in 2007. The decrease in gross margin is due to
higher depreciation costs as a result of our capital
investments, charges incurred for termination benefits and a net
pension curtailment loss from our workforce reduction programs
attributable to our test business.
Selling, General and Administrative
Expenses. Selling, general and administrative
expenses decreased $2.6 million, or 1.0%, to
$251.8 million for 2008, from $254.4 million for 2007.
The decrease was primarily caused by lower legal costs,
partially offset by an increase in salaries and benefits in our
corporate and sales offices.
Research and Development. Research and
development activities are focused on advanced laminate, flip
chip and wafer level packaging services. Research and
development expenses increased $14.6 million to
$56.2 million, or 2.1% of net sales for 2008 from
$41.7 million, or 1.5% of net sales in 2007. The increase
in our research and development expenses was primarily due to
the development of our North Carolina facility as a research and
development center, new research and development projects for
advanced packaging technologies and investments in information
technology to support our technology development efforts.
Goodwill Impairment. We recorded a goodwill
impairment charge in the amount of $671.1 million at
December 31, 2008 to write off the entire carrying value of
our goodwill. No goodwill impairment was incurred in 2007. This
non-cash charge had no impact on liquidity or cash flows from
operations.
Gain on Sale of Real Estate and Specialty Test
Operations. During 2008, we sold land and a
warehouse in Korea for $14.3 million in cash and recorded a
gain of $9.9 million, with no net tax effect. In 2007, we
recognized a gain of $3.1 million in connection with the
sale of real property in Korea used for administrative purposes.
Also in 2007, we recognized a gain of $1.7 million as a
result of an earn-out provision related to our divesture of a
specialty test operation in October 2005.
Other (Income) Expense. Other expense, net
decreased $137.7 million to $18.2 million, or 0.7% of
net sales for 2008 from $155.9 million, or 5.7% of net
sales in 2007. This decrease was driven by a $61.1 million
foreign currency gain recorded in 2008 primarily due to the
depreciation of the Korean won and the remeasurement of the
Korean won denominated severance obligation. In addition, in
2008 we recognized a gain of $36.0 million related to the
repurchase of an aggregate $118.3 million principal amount
of our 7.125% senior notes and 2.5% convertible senior
subordinated notes due in 2011. In 2007, we recognized
$15.9 million of debt retirement costs, net. The
$15.2 million reduction in interest expense is due to
reduced debt and the refinancing of certain debt with lower rate
instruments. The reduced interest expense was partially offset
by $3.3 million of interest related to the resolution of a
patent license dispute.
Income Tax Expense. In 2008, we recorded an
income tax expense of $31.8 million as compared to an
income tax expense of $12.6 million in 2007. The increase
in income tax is primarily attributable to profits in our
taxable foreign jurisdictions, the establishment of a valuation
allowance in 2008 against certain deferred tax assets in Japan,
38
and the release of a valuation allowance in 2007 at our largest
subsidiary in Taiwan. In 2008, our effective tax rate also
reflects the $671.1 million goodwill impairment charge
which did not have a significant income tax benefit.
Quarterly
Results
The following table sets forth our unaudited consolidated
financial data for the last eight quarters ended
December 31, 2009. Our results of operations have varied
and may continue to vary from quarter to quarter and are not
necessarily indicative of the results of any future period.
During the fourth quarter of 2008, we experienced a significant
reduction in demand as a result of an economic downturn and
weakening economy. This economic downturn continued in the first
quarter of 2009 with signs of recovery beginning in the second
quarter of 2009.
We believe that we have included all adjustments, consisting
only of normal recurring adjustments necessary for a fair
statement of our selected quarterly data. You should read our
selected quarterly data in conjunction with our Consolidated
Financial Statements and the related notes, included in
Item 8 Financial Statements and Supplementary
Data of this Annual Report.
Our net sales, gross profit and operating income are generally
lower in the first quarter of the year as compared to the fourth
quarter of the preceding year primarily due to the effect of
consumer buying patterns in the U.S., Europe and Asia.
Semiconductor companies in the U.S. generally reduce their
production during the holidays at the end of December which
results in a decrease in units for packaging and test services
during the first two weeks of January.
The calculation of basic and diluted per share amounts for each
quarter is based on the weighted average shares outstanding for
that period; consequently, the sum of the quarters may not
necessarily be equal to the full year basic and diluted net
income per share.
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|
|
|
|
|
|
|
|
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|
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For the Quarter Ended
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|
|
Dec. 31,
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Sept. 30,
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|
June 30,
|
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|
March 31,
|
|
|
Dec. 31,
|
|
|
Sept. 30,
|
|
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June 30,
|
|
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March 31,
|
|
|
|
2009
|
|
|
2009
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
|
2008
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share data)
|
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|
|
|
|
|
|
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Net sales
|
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$
|
667,612
|
|
|
$
|
616,205
|
|
|
$
|
506,516
|
|
|
$
|
388,776
|
|
|
$
|
548,712
|
|
|
$
|
719,731
|
|
|
$
|
690,676
|
|
|
$
|
699,483
|
|
Cost of sales
|
|
|
492,258
|
|
|
|
461,589
|
|
|
|
404,129
|
|
|
|
340,737
|
|
|
|
451,088
|
|
|
|
590,700
|
|
|
|
531,745
|
|
|
|
523,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
175,354
|
|
|
|
154,616
|
|
|
|
102,387
|
|
|
|
48,039
|
|
|
|
97,624
|
|
|
|
129,031
|
|
|
|
158,931
|
|
|
|
176,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
54,775
|
|
|
|
53,619
|
|
|
|
52,445
|
|
|
|
50,068
|
|
|
|
58,399
|
|
|
|
60,467
|
|
|
|
67,441
|
|
|
|
65,449
|
|
Research and development
|
|
|
10,907
|
|
|
|
13,364
|
|
|
|
10,035
|
|
|
|
10,147
|
|
|
|
13,192
|
|
|
|
14,084
|
|
|
|
15,095
|
|
|
|
13,856
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
671,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of real estate and specialty test operations
|
|
|
(135
|
)
|
|
|
(146
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,856
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
65,547
|
|
|
|
66,837
|
|
|
|
62,480
|
|
|
|
60,215
|
|
|
|
742,708
|
|
|
|
74,551
|
|
|
|
72,680
|
|
|
|
79,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
109,807
|
|
|
|
87,779
|
|
|
|
39,907
|
|
|
|
(12,176
|
)
|
|
|
(645,084
|
)
|
|
|
54,480
|
|
|
|
86,251
|
|
|
|
96,847
|
|
Other expense (income), net
|
|
|
25,745
|
|
|
|
37,637
|
|
|
|
28,710
|
|
|
|
6,702
|
|
|
|
(25,316
|
)
|
|
|
8,399
|
|
|
|
16,386
|
|
|
|
18,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
84,062
|
|
|
|
50,142
|
|
|
|
11,197
|
|
|
|
(18,878
|
)
|
|
|
(619,768
|
)
|
|
|
46,081
|
|
|
|
69,865
|
|
|
|
78,134
|
|
Income tax (benefit) expense
|
|
|
(3,820
|
)
|
|
|
(30,854
|
)
|
|
|
1,833
|
|
|
|
3,081
|
|
|
|
5,237
|
|
|
|
16,313
|
|
|
|
4,298
|
|
|
|
5,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
87,882
|
|
|
|
80,996
|
|
|
|
9,364
|
|
|
|
(21,959
|
)
|
|
|
(625,005
|
)
|
|
|
29,768
|
|
|
|
65,567
|
|
|
|
72,194
|
|
Net loss (income) attributable to noncontrolling interests
|
|
|
104
|
|
|
|
(133
|
)
|
|
|
(141
|
)
|
|
|
(133
|
)
|
|
|
1,927
|
|
|
|
(613
|
)
|
|
|
(335
|
)
|
|
|
(198
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Amkor
|
|
$
|
87,986
|
|
|
$
|
80,863
|
|
|
$
|
9,223
|
|
|
$
|
(22,092
|
)
|
|
$
|
(623,078
|
)
|
|
$
|
29,155
|
|
|
$
|
65,232
|
|
|
$
|
71,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Amkor per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.48
|
|
|
$
|
0.44
|
|
|
$
|
0.05
|
|
|
$
|
(0.12
|
)
|
|
$
|
(3.40
|
)
|
|
$
|
0.16
|
|
|
$
|
0.36
|
|
|
$
|
0.40
|
|
Diluted
|
|
|
0.33
|
|
|
|
0.31
|
|
|
|
0.05
|
|
|
|
(0.12
|
)
|
|
|
(3.40
|
)
|
|
|
0.15
|
|
|
|
0.33
|
|
|
|
0.36
|
|
39
Liquidity
and Capital Resources
As of December 31, 2009, we had cash and cash equivalents
of $395.4 million and availability of $96.5 million
under our $100.0 million first lien senior secured
revolving credit facility. Cash provided by operating activities
was $261.7 million for the year ended December 31,
2009 compared to $605.8 million for the year ended
December 31, 2008. We expect cash flows to be used in the
operation and expansion of our business, making capital
expenditures, paying principal and interest on our debt and for
other corporate purposes.
We operate in a capital intensive industry. Servicing our
current and future customers requires that we incur significant
operating expenses and make significant capital expenditures,
which are generally made in advance of the related revenues and
without any firm customer commitments.
We have a significant amount of indebtedness. Total debt
decreased to $1,434.2 million at December 31, 2009
from $1,493.4 million at December 31, 2008. Our
indebtedness requires us to dedicate a substantial portion of
our cash flow from operations to pay our debt. The interest
payments required on our debt are substantial.
For 2009, as part of our focus on generating cash flow and
driving greater factory and administrative efficiencies, we
implemented cost reduction measures that included lowering
executive and other employee compensation, reducing employee and
contractor headcount, and shortening work weeks. As capacity
utilization has increased during the second half of 2009, we
have experienced an increase in these costs such as restoring
compensation and reversing other temporary cost reduction
initiatives.
From time to time, we evaluate our staffing levels compared to
business needs and changes in demand in order to manage costs
and improve performance. In the year ended December 31,
2009, we reduced our work force by approximately
2,300 employees. We expect to reduce our workforce by an
additional 400 employees in connection with the plan to
wind-down and exit our manufacturing operations in Singapore,
which will require approximately $9.5 million in
termination benefit and contractual obligation payouts over the
next twelve months. In connection with the plan to wind-down and
exit our Singapore manufacturing operations, we refunded
approximately $12 million of customer advances for capacity
commitments using cash on hand in January 2010.
On October 30, 2009, Amkor and Toshiba Corporation
(Toshiba) invested in Nakaya Microdevices
Corporation forming a joint venture renamed J-Devices
Corporation (J-Devices) to provide semiconductor
assembly and final testing services in Japan. We invested
1.5 billion Japanese yen (approximately $16.7 million)
for our 30% equity interest, purchased 4.0 billion Japanese
yen (approximately $44.7 million) of assembly and test
equipment from Toshiba and leased such equipment to J-Devices.
There is no assurance that we will generate the necessary net
income or operating cash flows to meet the funding needs of our
business beyond the next twelve months due to a variety of
factors, including the cyclical nature of the semiconductor
industry and the other factors discussed in Part I,
Item 1A Risk Factors.
Capital
Additions
Our capital additions were $197.7 million, or approximately
9% of net sales for 2009. We expect that our 2010 capital
additions will be approximately 14% of net sales and we expect
our capital additions to be weighted more heavily in the first
half of 2010. The increase in capital intensity is partially due
to expanding our wafer bumping capabilities which have longer
lead times. Ultimately, the amount of our 2010 capital additions
will depend on several factors including, among others, the
performance of our business, the need for additional capacity to
service anticipated customer demand and the availability of
suitable cash flow from operations or financing.
40
The following table reconciles our activity related to property,
plant and equipment purchases as presented on the Consolidated
Statement of Cash Flows to property, plant and equipment
additions as reflected in the Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Property, plant and equipment additions
|
|
$
|
197,742
|
|
|
$
|
341,734
|
|
|
$
|
293,876
|
|
Net change in related accounts payable and deposits
|
|
|
(24,246
|
)
|
|
|
44,505
|
|
|
|
(57,636
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
|
173,496
|
|
|
|
386,239
|
|
|
|
236,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
Instruments and Related Covenants
In April 2009, we issued $250.0 million of our 6.0%
convertible senior subordinated notes due April 2014, and
amended our $100.0 million first lien revolving credit
facility and extended the term to April 2013. We have used the
net proceeds of $244.5 million to reduce other indebtedness.
In the year ended December 31, 2009, we repurchased in open
market transactions an aggregate of $289.3 million of our
outstanding debt. The debt repurchased consisted of
$156.6 million in principal amount of our
7.125% senior notes due March 2011, $69.0 million in
principal amount of our 2.5% convertible senior subordinated
notes due May 2011 and $63.7 million in principal amount of
our 7.75% senior notes due May 2013 using
$244.5 million of proceeds from the issuance of the 2014
Notes and $27.4 million of cash on hand. At
December 31, 2009, we had an aggregate of
$88.9 million of debt coming due through the end of 2010,
and in 2011 the remaining aggregate $96.1 million of our
2.5% convertible senior subordinated notes and
7.125% senior notes will mature.
In order to reduce leverage and future cash interest payments,
we may from time to time repurchase our outstanding notes for
cash or exchange shares of our common stock for our outstanding
notes. Any such transactions may be made in the open market or
through privately negotiated transactions and are subject to the
terms of our indentures and other debt agreements, market
conditions and other factors.
Many of our debt agreements have restrictions on dividend
payments and the repurchase of stock and subordinated
securities, including our convertible notes. These restrictions
are determined by defined calculations which include net income.
The $671.1 million write-off of our goodwill at
December 31, 2008 impacted these restrictions, which has
reduced our ability to pay dividends and repurchase stock and
subordinated securities, including our convertible notes. We
have never paid a dividend to our stockholders, and we do not
have any present plans for doing so. Amkor Technology, Inc. also
guarantees certain debt of our subsidiaries.
We were in compliance with all debt covenants at
December 31, 2009 and expect to remain in compliance with
these covenants for at least the next twelve months. Additional
information about our debt is available in Note 12 of the
Notes to the Consolidated Financial Statements included in
Item 8 Financial Statements and Supplementary
Data of this Annual Report.
Cash
Flows
Cash provided by operating activities was $261.7 million
for the year ended December 31, 2009 compared to
$605.8 million for the year ended December 31, 2008.
Free cash flow (which we define as net cash provided by
operating activities less purchases of property, plant and
equipment) decreased by $131.4 million to
$88.2 million for the year ended December 31, 2009
compared to $219.6 million for the year ended
December 31, 2008. Our free cash flow for the years ended
December 31, 2009 and 2008 was predominantly used to reduce
debt. Free cash flow is not a U.S. GAAP measure. See
Financing activities below for a further
discussion of free cash flow and a reconciliation to
U.S. GAAP.
41
Net cash provided by (used in) operating, investing and
financing activities for each of the three years ended
December 31, 2009 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
(In thousands)
|
|
Operating activities
|
|
$
|
261,725
|
|
|
$
|
605,818
|
|
|
$
|
603,430
|
|
Investing activities
|
|
|
(240,878
|
)
|
|
|
(371,380
|
)
|
|
|
(231,299
|
)
|
Financing activities
|
|
|
(49,651
|
)
|
|
|
(223,625
|
)
|
|
|
(208,450
|
)
|
Operating activities: Our cash flow from
operating activities in 2009 decreased by $344.1 million
compared to 2008. Operating income for the year ended
December 31, 2009 adjusted for depreciation and
amortization, other operating activities and non-cash items
decreased $82.8 million from 2008, largely as a result of
decreased net sales. Interest expense, including related party
interest expense, for the year ended December 31, 2009
decreased by $9.6 million as compared with the year ended
December 31, 2008 as a result of reduced debt levels in
2009, debt refinanced with lower interest rate instruments and
interest on the patent license dispute in 2008 not recurring in
2009.
Changes in assets and liabilities reduced operating cash flows
during 2009 by $167.4 million principally due to an
increase in accounts receivable and inventories, reflecting an
increase in customer demand, and a reduction in accrued
expenses. Accrued expenses decreased principally due to the
payment of $160.8 million for royalties and interest
relating to the resolution of a patent license dispute and
employee benefit and separation payments. The reduction was
partially offset by an increase in trade accounts payable
attributable to increased purchases in support of the increased
business activity at the end of 2009.
Investing activities: Our cash flows used in
investing activities in 2009 decreased by $130.5 million.
This decrease was primarily due to a $212.7 million
decrease in purchases of property, plant and equipment from
$386.2 million in 2008 to $173.5 million in 2009.
Capital expenditures were lower in 2009 as a result of the
decline in sales due to the recession. In 2009, we invested
$16.7 million in an unconsolidated affiliate, J-Devices,
and purchased $44.7 million of equipment which we leased to
J-Devices.
Financing activities: Our net cash used in
financing activities in 2009 was $49.7 million, compared
with $223.6 million in 2008. Cash provided by financing
activities during 2009 included the issuance of the
$250.0 million convertible senior subordinated notes due
April 2014, $15.0 million received from our working capital
facility in China, and $31.2 million net borrowings drawn
on our revolver facilities in Japan. We used $271.9 million
in cash to repurchase senior and convertible senior subordinated
notes. With respect to our foreign subsidiaries, we paid
$65.8 million in amortizing debt and other debt payments
during 2009. During 2009 we also incurred $8.5 million in
debt issuance costs related to the issuance of convertible notes
and the amendment and extension of our first lien revolving
credit facility.
The $223.6 million net cash used in financing activities
during 2008 was primarily driven by the repayment and repurchase
of our debt. We used $80.7 million in cash to repurchase
senior and convertible senior subordinated notes. We paid the
remaining $88.2 million of our 9.25% senior notes at
maturity in February 2008. With respect to our foreign
subsidiaries, we paid $65.0 million in amortizing debt
during 2008. Proceeds from the issuance of stock through our
stock compensation plans in 2008 were $10.2 million.
We provide the following supplemental data to assist our
investors and analysts in understanding our liquidity and
capital resources. Free cash flow represents net cash provided
by operating activities less investing activities related to the
acquisition of property, plant and equipment. Free cash flow is
not defined by U.S. GAAP and our definition of free cash
flow may not be comparable to similar companies and should not
be considered a substitute
42
for cash flow measures in accordance with GAAP. We believe free
cash flow provides our investors and analysts useful information
to analyze our liquidity and capital resources.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Net cash provided by operating activities
|
|
$
|
261,725
|
|
|
$
|
605,818
|
|
|
$
|
603,430
|
|
Less purchases of property, plant and equipment
|
|
|
173,496
|
|
|
|
386,239
|
|
|
|
236,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow
|
|
$
|
88,229
|
|
|
$
|
219,579
|
|
|
$
|
367,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual
Obligations
The following table summarizes our contractual obligations at
December 31, 2009, and the effect such obligations are
expected to have on our liquidity and cash flow in future
periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due for Year Ending December 31,
|
|
|
|
Total
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
Thereafter
|
|
|
|
(In thousands)
|
|
|
Total debt(1)
|
|
$
|
1,434,185
|
|
|
$
|
88,944
|
|
|
$
|
139,631
|
|
|
$
|
43,035
|
|
|
$
|
501,147
|
|
|
$
|
271,428
|
|
|
$
|
390,000
|
|
Scheduled interest payment obligations(2)
|
|
|
441,131
|
|
|
|
98,789
|
|
|
|
92,710
|
|
|
|
89,452
|
|
|
|
68,368
|
|
|
|
40,706
|
|
|
|
51,106
|
|
Purchase obligations(3)
|
|
|
76,232
|
|
|
|
76,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease obligations
|
|
|
43,089
|
|
|
|
10,172
|
|
|
|
5,598
|
|
|
|
5,384
|
|
|
|
5,876
|
|
|
|
6,332
|
|
|
|
9,727
|
|
Severance obligations(4)
|
|
|
69,120
|
|
|
|
4,466
|
|
|
|
3,945
|
|
|
|
3,641
|
|
|
|
3,520
|
|
|
|
3,483
|
|
|
|
50,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
2,063,757
|
|
|
$
|
278,603
|
|
|
$
|
241,884
|
|
|
$
|
141,512
|
|
|
$
|
578,911
|
|
|
$
|
321,949
|
|
|
$
|
500,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Total debt decreased $59.2 million from December 31,
2008. We issued $250.0 million of our 6.0% convertible
senior subordinated notes in April 2009. We repurchased an
aggregate $289.3 million principal amount due of our
7.125% senior notes due 2011, 2.5% convertible senior
subordinated notes due 2011 and 7.75% senior notes due
2013. We repaid $65.8 million of annual amortizing debt
during 2009. |
|
(2) |
|
Scheduled interest payment obligations were calculated using
stated coupon rates for fixed rate debt and interest rates
applicable at December 31, 2009 for variable rate debt. |
|
(3) |
|
Represents capital-related purchase obligations in addition to
accounts payable outstanding at December 31, 2009 for 2009
capital additions. |
|
(4) |
|
Represents estimated benefit payments for our Korean subsidiary
severance plan. |
In addition to the obligations identified in the table above,
other non-current liabilities recorded in our Consolidated
Balance Sheet at December 31, 2009 include:
|
|
|
|
|
$18.7 million of foreign pension plan obligations for which
the timing and actual amount of funding required is uncertain.
We expect to contribute $6.4 million to the plans during
2010.
|
|
|
|
$4.8 million net liability associated with unrecognized tax
benefits. Due to the high degree of uncertainty regarding the
amount and the timing of any future cash outflows associated
with our unrecognized tax benefits, we are unable to reasonably
estimate the amount and period of ultimate settlement, if any,
with the various taxing authorities.
|
Off-Balance
Sheet Arrangements
As of December 31, 2009, we had no off-balance sheet
guarantees or other off-balance sheet arrangements as defined in
Item 303(a)(4)(ii) of SEC
Regulation S-K,
other than our operating leases. Operating lease commitments are
included in the contractual obligations table above.
43
Other
Contingencies
We refer you to Note 16 Commitments and
Contingencies to our Consolidated Financial Statements in
Part II, Item 8 of this Annual Report for a discussion
of our contingencies related to litigation and other legal
matters. If an unfavorable ruling were to occur in these
matters, there exists the possibility of a material adverse
impact on our business, liquidity, results of operations,
financial position and cash flows in the period in which the
ruling occurs. The potential impact from the legal proceedings,
on our business, liquidity, results of operations, financial
position and cash flows, could change in the future.
Critical
Accounting Policies and Use of Estimates
We have identified the policies below as critical to our
business operations and the understanding of our results of
operations. A summary of our significant accounting policies
used in the preparation of our Consolidated Financial Statements
appears in Note 1 of the Notes to the Consolidated
Financial Statements included in Item 8 Financial
Statements and Supplementary Data of this Annual Report.
Our preparation of this Annual Report on
Form 10-K
requires us to make estimates and assumptions that affect the
reported amount of assets and liabilities, disclosure of
contingent assets and liabilities at the date of our financial
statements and the reported amounts of revenue and expenses
during the reporting period. There can be no assurance that
actual results will not differ from those estimates.
Revenue Recognition. We recognize revenue from
our packaging and test services when there is evidence of a
fixed arrangement, delivery has occurred or services have been
rendered, fees are fixed or determinable and collectibility is
reasonably assured. Generally these criteria are met and revenue
is recognized upon shipment. If the revenue recognition criteria
are not met, we defer the revenue. Deferred revenue generally
results from two types of transactions; customer advances and
invoicing at interim points prior to shipping. Customer advances
represent supply agreements with customers where we commit
capacity in exchange for customer prepayment of services. These
prepayments are deferred and recorded as customer advances
within accrued expenses and other non-current liabilities.
Deferred revenue also relates to contractual invoicing at
interim points prior to the shipment of the finished product.
The invoicing that is completed in advance of our revenue
recognition criteria being met is recorded as deferred revenue.
We do not take ownership of customer-supplied semiconductor
wafers. Title and risk of loss remain with the customer for
these materials. Accordingly, the cost of the customer-supplied
materials is not included in the Consolidated Financial
Statements.
An allowance for sales credits is recorded as a reduction to
sales and accounts receivable during the period of sale such
that accounts receivable is reported at its estimated net
realizable value. The allowance for sales credits is an estimate
of the future credits we will issue for billing adjustments
primarily for invoicing corrections and miscellaneous customer
claims and is estimated based upon recent credit issuance,
historical experience, as well as specific identification of
known or expected sales credits at the end of the reporting
period. Additionally, provisions are made for doubtful accounts
when there is doubt as to the collectibility of accounts
receivable. The allowance for doubtful accounts is recorded as
bad debt expense, classified as selling, general and
administrative expense. The allowance for doubtful accounts is
based upon specification of doubtful accounts considering the
age of the receivable balance, the customers historical
payment history and current credit worthiness as well as
specific identification of any known or expected collectability
issues.
Income Taxes. We operate in and file income
tax returns in various U.S. and
non-U.S. jurisdictions
which are subject to examination by tax authorities. The tax
returns for open years in all jurisdictions in which we do
business are subject to change upon examination. We believe that
we have estimated and provided adequate accruals for potential
additional taxes and related interest expense that may
ultimately result from such examinations. We believe that any
additional taxes or related interest over the amounts accrued
will not have a material effect on our financial condition,
results of operations or cash flows. However, resolution of
these matters involves uncertainties and there are no assurances
that the outcomes will be favorable. In addition, changes in the
mix of income from our foreign subsidiaries, expiration of tax
holidays and changes in tax laws or regulations could result in
increased effective tax rates in the future.
44
Additionally, we record valuation allowances for deferred tax
assets for which it is more likely than not that the related tax
benefits will not be realized. U.S. GAAP requires companies
to weigh both positive and negative evidence in determining the
need for a valuation allowance for deferred tax assets. As a
result of net losses experienced in recent years in certain
jurisdictions, we have determined that a valuation allowance is
required for certain deferred tax assets including those related
to all of our net operating loss carryforwards in the
U.S. We will release such valuation allowances as the
related deferred tax benefits are realized on our tax returns or
when sufficient net positive evidence exists to conclude it is
more likely than not that the deferred tax assets will be
realized.
Valuation of Inventory. We order raw materials
based on customers forecasted demand. If our customers
change their forecasted requirements and we are unable to cancel
our raw materials order or if our vendors require that we order
a minimum quantity that exceeds the current forecasted demand,
we will experience a
build-up in
raw material inventory. We will either seek to recover the cost
of the materials from our customers or utilize the inventory in
production. However, we may not be successful in recovering the
cost from our customers or be able to use the inventory in
production and, accordingly, if we believe that it is probable
that we will not be able to recover such costs we reduce the
carrying value of our inventory. Additionally, we reduce the
carrying value of our inventories for the cost of inventories we
estimate is excess and obsolete based on the age of our
inventory and forecasted demand we receive from our customers.
When a determination is made that the inventory will not be
utilized in production or is not saleable, it is disposed of and
written-off.
Inventories are stated at the lower of cost or market. Cost is
determined by the weighted moving average method or by standard
costing, both of which approximate actual cost. Cost is based on
normal capacity utilization, with costs arising from
underutilization of capacity expensed when incurred.
Long-lived Assets. Property, plant and
equipment are stated at cost. Depreciation is calculated by the
straight-line method over the estimated useful lives of
depreciable assets. Depreciable lives are as follows:
|
|
|
Buildings and improvements
|
|
10 to 25 years
|
Machinery and equipment
|
|
3 to 7 years
|
Software and computer equipment
|
|
3 to 5 years
|
Furniture, fixtures and other equipment
|
|
3 to 10 years
|
Land use rights
|
|
50 years
|
Cost and accumulated depreciation for property retired or
disposed of are removed from the accounts and any resulting gain
or loss is included in earnings. Expenditures for maintenance
and repairs are charged to expense as incurred.
We review long-lived assets, including property, plant and
equipment and finite-lived intangible assets, for impairment
whenever events or changes in circumstances indicate that its
carrying amount may not be recoverable. Recoverability of a
long-lived asset group held and used in operations is measured
by a comparison of the carrying amount to the sum of the
undiscounted cash flows expected to result from the use and
eventual disposition of the asset group. If such asset group is
considered to be impaired, the impairment loss is measured as
the amount by which the carrying amount of the asset group
exceeds its fair value. Fair market value is determined
primarily using the anticipated cash flows discounted at a rate
commensurate with the risk involved. Long-lived assets to be
disposed of are carried at the lower of cost or fair value less
the costs of disposal.
Legal Contingencies. We are subject to certain
legal proceedings, lawsuits and other claims. We assess the
likelihood of any adverse judgment or outcome related to these
matters, as well as potential ranges of probable losses. Our
determination of the amount of reserves required, if any, for
these contingencies is based on a careful analysis of each
individual issue, often with the assistance of outside legal
counsel. We record provisions in our Consolidated Financial
Statements for pending litigation when we determine that an
unfavorable outcome is probable and the amount of the loss can
be reasonably estimated.
Our assessment of required reserves may change in the future due
to new developments in each matter. The present legislative and
litigation environment is substantially uncertain, and it is
possible that our liquidity, results of
45
operations, financial position and cash flows could be
materially and adversely affected by an unfavorable outcome or
settlement of our pending litigation and other claims.
Recently
Adopted and Recently Issued Standards
For information regarding recently adopted and recently issued
accounting standards, see Note 2 to the Consolidated
Financial Statements included within Item 8 of this Annual
Report.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
Market
Risk Sensitivity
We are exposed to market risks, primarily related to foreign
currency and interest rate fluctuations. In the normal course of
business, we employ established policies and procedures to
manage the exposure to fluctuations in foreign currency values
and changes in interest rates. Our use of derivative
instruments, including forward exchange contracts, has
historically been insignificant; however, we continue to
evaluate the use of hedging instruments to manage market risk.
We have not entered into any derivative transactions during the
year ended December 31, 2009 and have no outstanding
contracts as of December 31, 2009.
Foreign
Currency Risks
We currently do not have forward contracts or other instruments
to reduce our exposure to foreign currency gains and losses. To
the extent possible, we manage our foreign currency exposures by
using natural hedging techniques to minimize the foreign
currency rate risk.
The U.S. dollar is our reporting currency and the
functional currency for the majority of our foreign subsidiaries
including our largest subsidiaries in Korea and the Philippines
and also our subsidiaries in China, Singapore and Taiwan.
Effective July 1, 2009, we changed the functional currency
for our Taiwanese operations to the U.S. dollar primarily
due to an increase in the mix of our U.S. dollar
denominated sales. For our subsidiaries in Japan, the local
currency is the functional currency.
We have foreign currency exchange rate risk associated with the
remeasurement of monetary assets and monetary liabilities on our
Consolidated Balance Sheet that are denominated in currencies
other than the functional currency. The most significant foreign
denominated monetary asset or liability is our Korean severance
obligation which represents approximately 77% of the net
monetary exposure. We performed a sensitivity analysis of our
foreign currency exposure as of December 31, 2009, to
assess the potential impact of fluctuations in exchange rates
for all foreign denominated assets and liabilities. Assuming a
10% adverse movement for all currencies against the
U.S. dollar as of December 31, 2009, our income before
income taxes would have been approximately $10 million
lower.
In addition, we have foreign currency exchange rate exposure on
our results of operations. For the year ended December 31,
2009, approximately 88% of our net sales were denominated in
U.S. dollars. Our remaining net sales were principally
denominated in Japanese yen and Korean won for local country
sales. For the year ended December 31, 2009, approximately
51% of our cost of sales and operating expenses were denominated
in U.S. dollars and were largely for raw materials and
factory supplies. The remaining portion of our cost of sales and
operating expenses was principally denominated in the Asian
currency where our production facilities are located and largely
consisted of labor and utilities. To the extent that the
U.S. dollar weakens against these Asian-based currencies,
similar foreign currency denominated transactions in the future
will result in higher sales and higher operating expenses.
Similarly, our sales and operating expenses will decrease if the
U.S. dollar strengthens against these foreign currencies.
We performed a sensitivity analysis of our foreign currency
exposure as of December 31, 2009 to assess the potential
impact of fluctuations in exchange rates for all foreign
denominated sales and expenses. Assuming a 10% adverse movement
from the year ended December 31, 2009 exchange rates of the
U.S. dollar compared to all of these Asian-based currencies
as of December 31, 2009, our operating income would have
been approximately $64 million lower.
There are inherent limitations in the sensitivity analysis
presented, primarily due to the assumption that foreign exchange
rate movements across multiple jurisdictions are similar and
would be linear and instantaneous. As a
46
result, the analysis is unable to reflect the potential effects
of more complex market or other changes that could arise which
may positively or negatively affect our results of operations.
We have foreign currency exchange rate exposure on our
stockholders equity as a result of the translation of our
subsidiaries where the Japanese yen is the functional currency.
To the extent the U.S. dollar strengthens against the
Japanese yen, the translation of these foreign currency
denominated transactions will result in reduced sales, operating
expenses, assets and liabilities. Similarly, our sales,
operating expenses, assets and liabilities will increase if the
U.S. dollar weakens against the Japanese yen. The effect of
foreign exchange rate translation on our Consolidated Balance
Sheet for the twelve months ended December 31, 2009 and
2008 was a net foreign translation loss of $0.5 million and
gain of $3.8 million, respectively, and was recognized as
an adjustment to equity through other comprehensive (loss)
income.
Interest
Rate Risks
We have interest rate risk with respect to our long-term debt.
As of December 31, 2009, we had a total of
$1,434.2 million of debt of which 83.3% was fixed rate debt
and 16.7% was variable rate debt. Our variable rate debt is
principally related to our foreign borrowings and any amounts
outstanding under our $100.0 million revolving line of
credit, under which no amounts were drawn as of
December 31, 2009. The fixed rate debt consisted of senior
notes, senior subordinated notes and subordinated notes. As of
December 31, 2008, we had a total of $1,493.4 million
of debt of which 82.6% was fixed rate debt and 17.4% was
variable rate debt. Changes in interest rates have different
impacts on the fixed and variable rate portions of our debt
portfolio. A change in interest rates on the fixed portion of
the debt portfolio impacts the fair value of the instrument but
has no impact on interest expense or cash flows. A change in
interest rates on the variable portion of the debt portfolio
impacts the interest incurred and cash flows but does not
generally impact the fair value of the instrument. The fair
value of the convertible notes is also impacted by changes in
the market price of our common stock.
The table below presents the interest rates, maturities and fair
value of our fixed and variable rate debt as of
December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
Thereafter
|
|
|
Total
|
|
|
Fair Value
|
|
|
Long term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate debt (In thousands)
|
|
$
|
|
|
|
$
|
96,082
|
|
|
$
|
|
|
|
$
|
458,291
|
|
|
$
|
250,000
|
|
|
$
|
390,000
|
|
|
$
|
1,194,373
|
|
|
$
|
1,626,079
|
|
Average interest rate
|
|
|
|
|
|
|
5.1
|
%
|
|
|
|
|
|
|
7.4
|
%
|
|
|
6.0
|
%
|
|
|
9.3
|
%
|
|
|
7.5
|
%
|
|
|
|
|
Variable rate debt (In thousands)
|
|
$
|
88,944
|
|
|
$
|
43,549
|
|
|
$
|
43,035
|
|
|
$
|
42,856
|
|
|
$
|
21,428
|
|
|
$
|
|
|
|
$
|
239,812
|
|
|
$
|
242,595
|
|
Average interest rate
|
|
|
3.1
|
%
|
|
|
4.8
|
%
|
|
|
4.8
|
%
|
|
|
4.8
|
%
|
|
|
4.8
|
%
|
|
|
|
|
|
|
4.2
|
%
|
|
|
|
|
See Note 15 Fair Value Measurements included in
our Consolidated Financial Statements in Part II,
Item 8 of this Annual Report for a discussion on the fair
valuation of our debt instruments.
Equity
Price Risks
We have convertible notes that are convertible into our common
stock. We currently intend to repay our remaining convertible
notes upon maturity, unless converted, repurchased or
refinanced. If investors were to decide to convert their notes
to common stock, our future earnings would benefit from a
reduction in interest expense and our common stock outstanding
would be increased. If we paid a premium to induce such
conversion, our earnings could include an additional charge.
Further, the trading price of our common stock has been and is
likely to continue to be highly volatile and could be subject to
wide fluctuations. Such fluctuations could impact our decision
or ability to utilize the equity markets as a potential source
of our funding needs in the future.
47
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
We present the information required by Item 8 of
Form 10-K
here in the following order:
48
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Amkor Technology,
Inc.:
In our opinion, the consolidated financial statements listed in
the accompanying index present fairly, in all material respects,
the financial position of Amkor Technology, Inc. and its
subsidiaries at December 31, 2009 and 2008, and the results
of their operations and their cash flows for each of the three
years in the period ended December 31, 2009 in conformity
with accounting principles generally accepted in the United
States of America. In addition, in our opinion, the financial
statement schedule listed in the accompanying index presents
fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated
financial statements. Also in our opinion, the Company
maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2009, based on
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). The Companys management is
responsible for these financial statements and financial
statement schedule, for maintaining effective internal control
over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting,
included in Managements Report on Internal Control Over
Financial Reporting appearing under Item 9A. Our
responsibility is to express opinions on these financial
statements, on the financial statement schedule, and on the
Companys internal control over financial reporting based
on our integrated audits. We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement and
whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial
statements included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an
understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers
LLP
Phoenix, Arizona
February 24, 2010
49
AMKOR
TECHNOLOGY, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands, except per share data)
|
|
|
Net sales
|
|
$
|
2,179,109
|
|
|
$
|
2,658,602
|
|
|
$
|
2,739,445
|
|
Cost of sales
|
|
|
1,698,713
|
|
|
|
2,096,864
|
|
|
|
2,057,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
480,396
|
|
|
|
561,738
|
|
|
|
681,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
210,907
|
|
|
|
251,756
|
|
|
|
254,365
|
|
Research and development
|
|
|
44,453
|
|
|
|
56,227
|
|
|
|
41,650
|
|
Goodwill impairment
|
|
|
|
|
|
|
671,117
|
|
|
|
|
|
Gain on sale of real estate and specialty test operations
|
|
|
(281
|
)
|
|
|
(9,856
|
)
|
|
|
(4,833
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
255,079
|
|
|
|
969,244
|
|
|
|
291,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
225,317
|
|
|
|
(407,506
|
)
|
|
|
390,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
102,396
|
|
|
|
118,729
|
|
|
|
133,896
|
|
Interest expense, related party
|
|
|
13,000
|
|
|
|
6,250
|
|
|
|
6,250
|
|
Interest income
|
|
|
(2,367
|
)
|
|
|
(8,749
|
)
|
|
|
(9,797
|
)
|
Foreign currency loss (gain)
|
|
|
3,339
|
|
|
|
(61,057
|
)
|
|
|
8,961
|
|
(Gain) loss on debt retirement, net
|
|
|
(15,088
|
)
|
|
|
(35,987
|
)
|
|
|
15,876
|
|
Equity in earnings of unconsolidated affiliate
|
|
|
(2,373
|
)
|
|
|
|
|
|
|
|
|
Other (income) expense, net
|
|
|
(113
|
)
|
|
|
(1,004
|
)
|
|
|
668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense, net
|
|
|
98,794
|
|
|
|
18,182
|
|
|
|
155,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
126,523
|
|
|
|
(425,688
|
)
|
|
|
234,837
|
|
Income tax (benefit) expense
|
|
|
(29,760
|
)
|
|
|
31,788
|
|
|
|
12,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
156,283
|
|
|
|
(457,476
|
)
|
|
|
222,240
|
|
Net (income) loss attributable to noncontrolling interests
|
|
|
(303
|
)
|
|
|
781
|
|
|
|
(2,376
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Amkor
|
|
$
|
155,980
|
|
|
$
|
(456,695
|
)
|
|
$
|
219,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Amkor per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.85
|
|
|
$
|
(2.50
|
)
|
|
$
|
1.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.67
|
|
|
$
|
(2.50
|
)
|
|
$
|
1.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing per common share amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
183,067
|
|
|
|
182,734
|
|
|
|
180,597
|
|
Diluted
|
|
|
263,379
|
|
|
|
182,734
|
|
|
|
208,767
|
|
The accompanying notes are an integral part of these statements.
50
AMKOR
TECHNOLOGY, INC.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
395,406
|
|
|
$
|
424,316
|
|
Restricted cash
|
|
|
2,679
|
|
|
|
4,880
|
|
Accounts receivable:
|
|
|
|
|
|
|
|
|
Trade, net of allowances
|
|
|
328,252
|
|
|
|
259,630
|
|
Other
|
|
|
18,666
|
|
|
|
14,183
|
|
Inventories
|
|
|
155,185
|
|
|
|
134,045
|
|
Other current assets
|
|
|
32,737
|
|
|
|
23,862
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
932,925
|
|
|
|
860,916
|
|
Property, plant and equipment, net
|
|
|
1,364,630
|
|
|
|
1,473,763
|
|
Intangibles, net
|
|
|
9,975
|
|
|
|
11,546
|
|
Investments
|
|
|
19,108
|
|
|
|
|
|
Restricted cash
|
|
|
6,795
|
|
|
|
1,696
|
|
Other assets
|
|
|
99,476
|
|
|
|
36,072
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,432,909
|
|
|
$
|
2,383,993
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Short-term borrowings and current portion of long-term debt
|
|
$
|
88,944
|
|
|
$
|
54,609
|
|
Trade accounts payable
|
|
|
361,263
|
|
|
|
241,684
|
|
Accrued expenses
|
|
|
155,630
|
|
|
|
258,449
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
605,837
|
|
|
|
554,742
|
|
Long-term debt
|
|
|
1,095,241
|
|
|
|
1,338,751
|
|
Long-term debt, related party
|
|
|
250,000
|
|
|
|
100,000
|
|
Pension and severance obligations
|
|
|
83,067
|
|
|
|
116,789
|
|
Other non-current liabilities
|
|
|
9,063
|
|
|
|
30,548
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
2,043,208
|
|
|
|
2,140,830
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (see Note 16)
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
Amkor stockholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, 10,000 shares
authorized,
|
|
|
|
|
|
|
|
|
designated Series A, none issued
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, 500,000 shares
authorized, issued
|
|
|
|
|
|
|
|
|
and outstanding of 183,171 in 2009 and 183,035 in 2008
|
|
|
183
|
|
|
|
183
|
|
Additional paid-in capital
|
|
|
1,500,246
|
|
|
|
1,496,976
|
|
Accumulated deficit
|
|
|
(1,122,241
|
)
|
|
|
(1,278,221
|
)
|
Accumulated other comprehensive income
|
|
|
5,021
|
|
|
|
18,201
|
|
|
|
|
|
|
|
|
|
|
Total Amkor stockholders equity:
|
|
|
383,209
|
|
|
|
237,139
|
|
Noncontrolling interests in subsidiaries
|
|
|
6,492
|
|
|
|
6,024
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
389,701
|
|
|
|
243,163
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
2,432,909
|
|
|
$
|
2,383,993
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Total Amkor
|
|
|
Noncontrolling
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional Paid-
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Stockholders
|
|
|
Interest in
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
In Capital
|
|
|
Deficit
|
|
|
Income (Loss)
|
|
|
Equity
|
|
|
Subsidiaries
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
178,109
|
|
|
$
|
178
|
|
|
$
|
1,441,194
|
|
|
$
|
(1,041,390
|
)
|
|
$
|
(6,062
|
)
|
|
$
|
393,920
|
|
|
$
|
4,603
|
|
|
$
|
398,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
219,864
|
|
|
|
|
|
|
|
219,864
|
|
|
|
2,376
|
|
|
|
222,240
|
|
Unrealized loss on available for sale investments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,004
|
)
|
|
|
(1,004
|
)
|
|
|
|
|
|
|
(1,004
|
)
|
Reclassification adjustment for losses included in income, net
of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
|
|
|
|
44
|
|
|
|
|
|
|
|
44
|
|
Pension liablility adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,136
|
)
|
|
|
(3,136
|
)
|
|
|
|
|
|
|
(3,136
|
)
|
Cumulative translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,935
|
|
|
|
3,935
|
|
|
|
43
|
|
|
|
3,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
219,703
|
|
|
|
2,419
|
|
|
|
222,122
|
|
Issuance of stock through employee stock purchase plan and stock
options
|
|
|
3,690
|
|
|
|
4
|
|
|
|
37,046
|
|
|
|
|
|
|
|
|
|
|
|
37,050
|
|
|
|
|
|
|
|
37,050
|
|
Stock compensation expense
|
|
|
|
|
|
|
|
|
|
|
3,946
|
|
|
|
|
|
|
|
|
|
|
|
3,946
|
|
|
|
|
|
|
|
3,946
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
181,799
|
|
|
|
182
|
|
|
|
1,482,186
|
|
|
|
(821,526
|
)
|
|
|
(6,223
|
)
|
|
|
654,619
|
|
|
|
7,022
|
|
|
|
661,641
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(456,695
|
)
|
|
|
|
|
|
|
(456,695
|
)
|
|
|
(781
|
)
|
|
|
(457,476
|
)
|
Unrealized loss on available for sale investments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(80
|
)
|
|
|
(80
|
)
|
|
|
|
|
|
|
(80
|
)
|
Reclassification adjustment for losses included in income, net
of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80
|
|
|
|
80
|
|
|
|
|
|
|
|
80
|
|
Pension liablility adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,623
|
|
|
|
20,623
|
|
|
|
|
|
|
|
20,623
|
|
Cumulative translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,801
|
|
|
|
3,801
|
|
|
|
(217
|
)
|
|
|
3,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(432,271
|
)
|
|
|
(998
|
)
|
|
|
(433,269
|
)
|
Issuance of stock through employee stock purchase plan and stock
options
|
|
|
1,236
|
|
|
|
1
|
|
|
|
10,202
|
|
|
|
|
|
|
|
|
|
|
|
10,203
|
|
|
|
|
|
|
|
10,203
|
|
Stock compensation expense
|
|
|
|
|
|
|
|
|
|
|
4,588
|
|
|
|
|
|
|
|
|
|
|
|
4,588
|
|
|
|
|
|
|
|
4,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
183,035
|
|
|
|
183
|
|
|
|
1,496,976
|
|
|
|
(1,278,221
|
)
|
|
|
18,201
|
|
|
|
237,139
|
|
|
|
6,024
|
|
|
|
243,163
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
155,980
|
|
|
|
|
|
|
|
155,980
|
|
|
|
303
|
|
|
|
156,283
|
|
Pension liablility adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,632
|
)
|
|
|
(12,632
|
)
|
|
|
|
|
|
|
(12,632
|
)
|
Cumulative translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(548
|
)
|
|
|
(548
|
)
|
|
|
165
|
|
|
|
(383
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142,800
|
|
|
|
468
|
|
|
|
143,268
|
|
Issuance of stock through stock options
|
|
|
136
|
|
|
|
|
|
|
|
693
|
|
|
|
|
|
|
|
|
|
|
|
693
|
|
|
|
|
|
|
|
693
|
|
Stock compensation expense
|
|
|
|
|
|
|
|
|
|
|
2,577
|
|
|
|
|
|
|
|
|
|
|
|
2,577
|
|
|
|
|
|
|
|
2,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
183,171
|
|
|
$
|
183
|
|
|
$
|
1,500,246
|
|
|
$
|
(1,122,241
|
)
|
|
$
|
5,021
|
|
|
$
|
383,209
|
|
|
$
|
6,492
|
|
|
$
|
389,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
52
AMKOR
TECHNOLOGY, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
156,283
|
|
|
$
|
(457,476
|
)
|
|
$
|
222,240
|
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
305,510
|
|
|
|
309,920
|
|
|
|
283,267
|
|
Goodwill impairment
|
|
|
|
|
|
|
671,117
|
|
|
|
|
|
Amortization of deferred debt issuance costs and discounts
|
|
|
4,780
|
|
|
|
4,717
|
|
|
|
5,562
|
|
Provision for accounts receivable
|
|
|
(80
|
)
|
|
|
265
|
|
|
|
(1,251
|
)
|
Deferred income taxes
|
|
|
(30,599
|
)
|
|
|
8,811
|
|
|
|
(7,532
|
)
|
Equity in earnings of unconsolidated affiliate
|
|
|
(2,373
|
)
|
|
|
|
|
|
|
|
|
(Gain) loss on debt retirement, net
|
|
|
(15,088
|
)
|
|
|
(35,987
|
)
|
|
|
6,876
|
|
Loss on disposal of fixed assets and gain on sale of specialty
test operations, net
|
|
|
7,262
|
|
|
|
2,887
|
|
|
|
2,602
|
|
Stock-based compensation
|
|
|
2,577
|
|
|
|
4,588
|
|
|
|
3,946
|
|
Other, net
|
|
|
838
|
|
|
|
1,243
|
|
|
|
3,352
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(68,912
|
)
|
|
|
144,942
|
|
|
|
(9,073
|
)
|
Other receivables
|
|
|
(4,338
|
)
|
|
|
(9,070
|
)
|
|
|
1,063
|
|
Inventories
|
|
|
(20,991
|
)
|
|
|
16,696
|
|
|
|
15,516
|
|
Other current assets
|
|
|
5,173
|
|
|
|
6,155
|
|
|
|
17,042
|
|
Other assets
|
|
|
(1,214
|
)
|
|
|
2,922
|
|
|
|
1,528
|
|
Trade accounts payable
|
|
|
96,854
|
|
|
|
(81,598
|
)
|
|
|
9,282
|
|
Accrued expenses
|
|
|
(108,712
|
)
|
|
|
92,115
|
|
|
|
18,083
|
|
Other non-current liabilities
|
|
|
(65,245
|
)
|
|
|
(76,429
|
)
|
|
|
30,927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
261,725
|
|
|
|
605,818
|
|
|
|
603,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
|
(173,496
|
)
|
|
|
(386,239
|
)
|
|
|
(236,240
|
)
|
Proceeds from the sale of property, plant and equipment and
specialty test operations
|
|
|
3,116
|
|
|
|
15,480
|
|
|
|
6,909
|
|
Investment in unconsolidated affiliate
|
|
|
(16,735
|
)
|
|
|
|
|
|
|
|
|
Purchase of equipment leased to unconsolidated affiliate
|
|
|
(44,681
|
)
|
|
|
|
|
|
|
|
|
Change in restricted cash
|
|
|
(2,898
|
)
|
|
|
(2,242
|
)
|
|
|
(168
|
)
|
Proceeds from sale of securities
|
|
|
|
|
|
|
2,460
|
|
|
|
|
|
Other investing activities
|
|
|
(6,184
|
)
|
|
|
(839
|
)
|
|
|
(1,800
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(240,878
|
)
|
|
|
(371,380
|
)
|
|
|
(231,299
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under revolving credit facilities
|
|
|
41,410
|
|
|
|
619
|
|
|
|
86,150
|
|
Payments under revolving credit facilities
|
|
|
(10,171
|
)
|
|
|
(633
|
)
|
|
|
(109,296
|
)
|
Proceeds from issuance of short-term working capital facility
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt
|
|
|
100,000
|
|
|
|
|
|
|
|
300,000
|
|
Proceeds from issuance of related party debt
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
Payments of long-term debt, net of redemption premiums and
discounts
|
|
|
(338,104
|
)
|
|
|
(233,814
|
)
|
|
|
(518,913
|
)
|
Payments for debt issuance costs
|
|
|
(8,479
|
)
|
|
|
|
|
|
|
(3,441
|
)
|
Proceeds from issuance of stock through stock compensation plans
|
|
|
693
|
|
|
|
10,203
|
|
|
|
37,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(49,651
|
)
|
|
|
(223,625
|
)
|
|
|
(208,450
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate fluctuations on cash and cash equivalents
|
|
|
(106
|
)
|
|
|
3,433
|
|
|
|
1,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(28,910
|
)
|
|
|
14,246
|
|
|
|
165,376
|
|
Cash and cash equivalents, beginning of period
|
|
|
424,316
|
|
|
|
410,070
|
|
|
|
244,694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
395,406
|
|
|
$
|
424,316
|
|
|
$
|
410,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
116,223
|
|
|
$
|
121,297
|
|
|
$
|
135,964
|
|
Income taxes
|
|
|
11,991
|
|
|
|
21,997
|
|
|
|
12,837
|
|
Noncash investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivable for equipment leased to unconsolidated affiliate
|
|
|
44,681
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
53
AMKOR
TECHNOLOGY, INC.
|
|
1.
|
Description
of Business and Summary of Significant Accounting
Policies
|
Description
of Business
Amkor is one of the worlds leading subcontractors of
semiconductor packaging (sometimes referred to as assembly) and
test services. Amkor pioneered the outsourcing of semiconductor
packaging and test services through a predecessor in 1968 and
over the years we have built a leading position by:
|
|
|
|
|
Designing and developing new package and test technologies;
|
|
|
|
Offering a broad portfolio of packaging and test technologies
and services;
|
|
|
|
Cultivating long-standing relationships with our customers,
which include many of the worlds leading semiconductor
companies and collaborating with original equipment
manufacturers (OEMs);
|
|
|
|
Developing expertise in high-volume manufacturing
processes; and
|
|
|
|
Having a diversified operational scope, with production
capabilities in China, Japan, Korea, the Philippines, Singapore,
Taiwan and the United States (U.S.).
|
Basis
of Presentation
The Consolidated Financial Statements include the accounts of
Amkor Technology, Inc. and our subsidiaries (Amkor).
The Consolidated Financial Statements reflect the elimination of
all significant inter-company accounts and transactions. Our
investments in variable interest entities in which we are the
primary beneficiary are consolidated.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Subsequent events have been evaluated up to and including
February 24, 2010, which is the date these consolidated
financial statements were issued.
Consolidation
of Variable Interest Entities
We have variable interests in certain Philippine realty
corporations in which we have a 40% ownership and from whom we
lease land and buildings in the Philippines, for which we are
the primary beneficiary. As of December 31, 2009, the
combined book value of the assets and the liabilities associated
with these Philippine realty corporations included in our
Consolidated Balance Sheet was $19.0 million and
$0.5 million, respectively. The impact of consolidating
these variable interest entities on our Consolidated Statements
of Operations was not significant and other than our lease
payments, we have not provided any significant assistance or
other financial support to these variable interest entities for
the years ended December 31, 2009, 2008 or 2007. The
creditors of the Philippine realty corporations have no recourse
to our general credit.
Foreign
Currency Translation
The U.S. dollar is the functional currency of our
subsidiaries in China, Korea, the Philippines, Singapore, and
Taiwan, and the foreign currency asset and liability amounts at
these subsidiaries are remeasured into U.S. dollars at
end-of-period
exchange rates, except for nonmonetary items which are
remeasured at historical rates. Foreign currency income and
expenses are remeasured at average exchange rates in effect
during the period, except for expenses related to balance sheet
amounts remeasured at historical exchange rates. Exchange gains
and losses arising from remeasurement of foreign
currency-denominated monetary assets and liabilities are
included in other income (expense) in the period in which they
occur.
54
AMKOR
TECHNOLOGY, INC.
Notes to
Consolidated Financial
Statements (Continued)
Effective July 1, 2009, we changed the functional currency
for our operations in Taiwan to the U.S. dollar primarily
due to an increase in the mix of our U.S. dollar
denominated sales. The change in functional currency is applied
on a prospective basis. The U.S dollar-translated amounts of
nonmonetary assets and liabilities at June 30, 2009 became
the historical accounting basis for those assets and liabilities
at July 1, 2009.
The local currency is the functional currency of our
subsidiaries in Japan and was the functional currency of our
subsidiaries in Taiwan prior to July 1, 2009. The asset and
liability amounts of these subsidiaries are translated into
U.S. dollars at
end-of-period
exchange rates. Income and expenses are translated into
U.S. dollars at average exchange rates in effect during the
period. The resulting asset and liability translation
adjustments are reported as a component of accumulated other
comprehensive income in the stockholders equity section of
the balance sheet. Assets and liabilities denominated in a
currency other than the functional currency are remeasured into
the functional currency prior to translation into
U.S. dollars and the resulting exchange gains or losses are
included in other income (expense) in the period in which they
occur.
Concentrations
and Credit Risk
Financial instruments, for which we are subject to credit risk,
consist principally of accounts receivable and cash and cash
equivalents. With respect to accounts receivable, we mitigate
our credit risk by selling primarily to well established
companies, performing ongoing credit evaluations and making
frequent contact with customers. We have historically mitigated
our credit risk with respect to cash and cash equivalents
through diversification of our holdings into various high
quality mutual funds and bank deposit accounts. At
December 31, 2009, our cash and cash equivalents are
invested in U.S. money market funds and various
U.S. and foreign bank operating and time deposit accounts.
Risks
and Uncertainties
Our future results of operations involve a number of risks and
uncertainties. Factors that could affect our business or future
results and cause actual results to vary materially from
historical results include, but are not limited to, dependence
on the highly cyclical nature of the semiconductor industry,
fluctuations in operating results, high fixed costs, our failure
to meet guidance, declines in average selling prices, decisions
by our integrated device manufacturer customers to curtail
outsourcing, our substantial indebtedness, our ability to fund
liquidity needs, our ability to draw on our current loan
facilities, our restrictive covenants contained in the
agreements governing our indebtedness, significant severance
plan obligations, failure to maintain an effective system of
internal controls, product return and liability risks, the
absence of significant backlog in our business, our dependence
on international operations and sales, proposed changes to
U.S. tax laws, our management information systems may prove
inadequate, attracting and retaining qualified employees,
difficulties consolidating and evolving our operational
capabilities, our dependence on materials and equipment
suppliers, loss of customers, our need for significant capital
expenditures, impairment charges, litigation incident to our
business, adverse tax consequences, rapid technological change,
complexity of packaging and test processes, competition, our
need to comply with existing and future environmental
regulations, the enforcement of intellectual property rights by
or against us, fire, flood or other calamity and continued
control by existing stockholders.
We believe that our cash flow from operating activities together
with existing cash and cash equivalents will be sufficient to
fund our working capital, capital expenditure and debt service
requirements for at least the next twelve months. Thereafter,
our liquidity will continue to be affected by, among other
things, volatility in the global economy and credit markets, the
performance of our business, our capital expenditure levels and
our ability to either repay debt out of operating cash flow or
refinance debt at or prior to maturity with the proceeds of debt
or equity offerings.
We are subject to certain legal proceedings, lawsuits and other
claims, as discussed in Note 16. We assess the likelihood
of any adverse judgment or outcome related to these matters, as
well as potential ranges of probable losses. Our determination
of the amount of reserves required, if any, for these
contingencies is based on an analysis
55
AMKOR
TECHNOLOGY, INC.
Notes to
Consolidated Financial
Statements (Continued)
of each individual issue, often with the assistance of outside
legal counsel. We record provisions in our Consolidated
Financial Statements for pending litigation when we determine
that an unfavorable outcome is probable and the amount of the
loss can be reasonably estimated.
Cash
and Cash Equivalents
We consider all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Our
cash and cash equivalents consist of amounts invested in
U.S. money market funds and various U.S. and foreign
bank operating and time deposit accounts.
Restricted
Cash
Restricted cash, current, consists of short-term cash
equivalents used to collateralize our daily banking services and
foreign trade compliance requirements. Restricted cash,
non-current, consists of an amount in escrow related to an
arbitration proceeding (see Note 16) and collateral
for foreign tax obligations.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined by the weighted moving average method or by standard
costing, both of which approximate actual cost. Cost is based on
normal capacity utilization, with costs arising from
underutilization of capacity expensed when incurred. We reduce
the carrying value of our inventories for the cost of inventory
we estimate is excess and obsolete based on the age of our
inventories and forecasted demand we receive from our customers.
When a determination is made that the inventory will not be
utilized in production or is not saleable, it is disposed of and
written-off.
Property,
Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation
is calculated by the straight-line method over the estimated
useful lives of depreciable assets which are as follows:
|
|
|
Buildings and improvements
|
|
10 to 25 years
|
Machinery and equipment
|
|
3 to 7 years
|
Software and computer equipment
|
|
3 to 5 years
|
Furniture, fixtures and other equipment
|
|
3 to 10 years
|
Land use rights
|
|
50 years
|
Cost and accumulated depreciation for property retired or
disposed of are removed from the accounts and any resulting gain
or loss is included in earnings. Expenditures for maintenance
and repairs are charged to expense as incurred. Depreciation
expense was $298.5 million, $299.8 million and
$272.8 million for 2009, 2008 and 2007, respectively.
We review long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount may
not be recoverable. Recoverability of a long-lived asset group
to be held and used in operations is measured by a comparison of
the carrying amount to the sum of the undiscounted cash flows
expected to result from the use and eventual disposition of the
asset group. If such asset group is considered to be impaired,
the impairment loss is measured as the amount by which the
carrying amount of the asset group exceeds its fair value.
Long-lived assets to be disposed of are carried at the lower of
cost or fair value less the costs of disposal.
Intangibles
and Goodwill
Finite-lived intangible assets include customer relationship and
supply agreements as well as patents and technology rights and
are amortized on a straight-line basis over their estimated
useful lives, generally for periods ranging from 5 to
10 years. We continually evaluate the reasonableness of the
useful lives of these assets. Finite-
56
AMKOR
TECHNOLOGY, INC.
Notes to
Consolidated Financial
Statements (Continued)
lived intangibles are tested for recoverability whenever events
or changes in circumstances indicate the carrying amount may not
be recoverable. An impairment loss, if any, would be measured as
the excess of the carrying value over the fair value determined
by discounted cash flows. Amortization of finite-lived assets
was $7.0 million, $10.1 million and $10.4 million
for 2009, 2008 and 2007, respectively.
We previously had goodwill which was fully impaired and written
off in 2008. See Note 9 for more information.
Investments
On October 30, 2009, we acquired a 30% interest in an
assembly and test services business in Japan, J-Devices
Corporation (J-Devices). See Note 10 for
additional information. Our investment is accounted for as an
equity method investment. We evaluate the investment for
impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. To the extent
the book value of the investment exceeds its assessed fair
value, we will record an appropriate impairment charge.
Other
Non-current Assets
Other non-current assets consist principally of deferred income
tax assets, financing lease receivables (see Note 10),
deferred debt issuance costs, refundable security deposits and
prepaid pension assets.
Other
Non-current Liabilities
Other non-current liabilities consist primarily of customer
advance payments, deferred revenue and liabilities associated
with uncertain income tax positions. See Note 4 and
Note 14 for more information.
Accumulated
Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss)
consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Unrealized foreign currency translation gains
|
|
$
|
12,001
|
|
|
$
|
12,549
|
|
Unrecognized pension (costs) gains
|
|
|
(6,980
|
)
|
|
|
5,652
|
|
|
|
|
|
|
|
|
|
|
Total accumulated other comprehensive income
|
|
$
|
5,021
|
|
|
$
|
18,201
|
|
|
|
|
|
|
|
|
|
|
The unrecognized pension costs are net of deferred income tax
benefits of $0.8 million and $0.1 million at
December 31, 2009 and 2008, respectively. No income taxes
are provided on foreign currency translation gains as foreign
earnings are considered permanently invested.
Fair
Value Measurements
We apply fair value accounting for all financial assets and
liabilities that are recognized or disclosed at fair value in
the financial statements on a recurring or nonrecurring basis.
We define fair value as the price that would be received from
selling an asset or paid to transfer a liability in the
principal or most advantageous market for the asset or liability
in an orderly transaction between market participants at the
measurement date. See Note 15 for further discussion of
fair value measurements.
Revenue
Recognition
We recognize revenue from our packaging and test services when
there is evidence of a fixed arrangement, delivery has occurred
or services have been rendered, fees are fixed or determinable
and collectibility is reasonably
57
AMKOR
TECHNOLOGY, INC.
Notes to
Consolidated Financial
Statements (Continued)
assured. Generally these criteria are met and revenue is
recognized upon shipment. If the revenue recognition criteria
are not met, we defer the revenue. Deferred revenue generally
results from two types of transactions: customer advances
and invoicing at interim points prior to shipment. Customer
advances represent supply agreements with customers where we
commit capacity in exchange for customer prepayment of services.
These prepayments are deferred and recorded as customer advances
within accrued expenses and other non-current liabilities.
Deferred revenue also relates to contractual invoicing at
interim points prior to the shipment of the finished product.
The invoicing that is completed in advance of our revenue
recognition criteria being met is recorded as deferred revenue.
We do not take ownership of customer supplied semiconductor
wafers. Title and risk of loss remains with the customer for
these materials at all times. Accordingly, the cost of the
customer supplied materials is not included in the Consolidated
Financial Statements.
An allowance for sales credits is recorded as a reduction to
sales and accounts receivable during the period of sale such
that accounts receivable is reported at its estimated net
realizable value. The allowance for sales credits is an estimate
of the future credits we will issue for billing adjustments
primarily for invoicing corrections and miscellaneous customer
claims and is estimated based upon recent credit issuance,
historical experience, as well as specific identification of
known or expected sales credits at the end of the reporting
period. Additionally, provisions are made for doubtful accounts
when there is doubt as to the collectibility of accounts
receivable. The allowance for doubtful accounts is recorded as
bad debt expense and is classified as selling, general and
administrative expense. The allowance for doubtful accounts is
based upon specification of doubtful accounts considering the
age of the receivable balance, the customers historical
payment history and current credit worthiness as well as
specific identification of any known or expected collectability
issues.
Shipping
and Handling Fees and Costs
Amounts billed to customers for shipping and handling are
presented in net sales. Costs incurred for shipping and handling
are included in cost of sales.
Research
and Development Costs
Research and development expenses include costs attributable to
the conduct of research and development programs primarily
related to the development of new package designs and improving
the efficiency and capabilities of our existing production
processes. Such costs include salaries, payroll taxes, employee
benefit costs, materials, supplies, depreciation and maintenance
of research equipment, services provided by outside contractors
and the allocable portions of facility costs such as rent,
utilities, insurance, repairs and maintenance, depreciation and
general support services. All costs associated with research and
development are expensed as incurred.
Income
Taxes
Income taxes are accounted for using the asset and liability
method. Under this method, deferred income tax assets and
liabilities are recognized for the future tax consequences
attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities
and their respective tax basis as well as net operating loss and
tax credit carryforwards. Deferred income tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which these temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the
enactment date. A valuation allowance is provided for those
deferred tax assets for which it is more likely than not that
the related benefits will not be realized.
In determining the amount of the valuation allowance, we
consider all available evidence of realization, as well as
feasible tax planning strategies, in each taxing jurisdiction.
If all or a portion of the remaining deferred tax assets will
not be realized, the valuation allowance will be increased with
a charge to income tax expense. Conversely, if
58
AMKOR
TECHNOLOGY, INC.
Notes to
Consolidated Financial
Statements (Continued)
we will ultimately be able to utilize all or a portion of the
deferred tax assets for which a valuation allowance has been
provided, the related portion of the valuation allowance will be
released to income as a credit to income tax expense. We monitor
on an ongoing basis our ability to utilize our deferred tax
assets and the continuing need for a related valuation allowance.
We recognize in our Consolidated Financial Statements the impact
of an income tax position, if that position is more likely than
not of being sustained on audit, based on the technical merits
of the position. See Note 4 for more information regarding
unrecognized income tax benefits.
|
|
2.
|
New
Accounting Standards
|
Recently
Adopted Standards
In August 2009, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update
(ASU)
No. 2009-05,
Measuring Liabilities at Fair Value (ASU
2009-05),
which amends Accounting Standards Codification (ASC)
Topic 820, Fair Value Measurements. ASU
2009-05
clarifies the application of certain valuation techniques in
circumstances when a quoted price in an active market for the
identical liability is not available and clarifies that when
estimating the fair value of a liability, the fair value is not
adjusted to reflect the impact of contractual restrictions that
prevent its transfer. The guidance provided in this ASU became
effective for us beginning October 1, 2009. The adoption of
ASU 2009-05
did not have a material impact on our financial statements.
In July 2009, the FASB issued ASU
2009-01,
Generally Accepted Accounting Principles (ASU
2009-01).
The issued guidance establishes the ASC as the source of
authoritative U.S. GAAP recognized by the FASB to be
applied by nongovernmental entities. Rules and interpretive
releases of the Securities and Exchange Commission
(SEC) and its staff are not included in the ASC but
will continue to apply to SEC registrants. The guidance, which
is now codified as ASC Topic 105, Generally Accepted
Accounting Principles, became effective for financial
statements issued for interim and annual periods ending after
September 15, 2009. Our adoption of ASU
2009-01 did
not have any impact on our financial position, results of
operations or cash flows.
In May 2009, the FASB issued authoritative guidance establishing
general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial
statements are issued or are available to be issued. This
guidance has been codified as ASC Topic 855, Subsequent
Events, and became effective for interim or annual periods
ending after June 15, 2009 on a prospective basis.
In April 2009, the FASB issued additional authoritative guidance
related to fair value measurements, fair value disclosures and
other-than-temporary
impairments, which is now codified as ASC Topic 320,
Investments, ASC Topic 820, Fair Value Measurements
and Disclosures, and ASC Topic 825, Financial
Instruments. This guidance provides additional direction on
estimating fair value when the volume and level of activity for
an asset or liability have significantly decreased, and includes
information on identifying circumstances that indicate a
transaction is not orderly. In addition, the guidance clarifies
the interaction of the factors that should be considered when
determining whether a debt security is other than temporarily
impaired, and improves the presentation of
other-than-temporary
impairments in the financial statements. Finally, it amends
existing disclosure requirements to require disclosures about
fair value of financial instruments in interim financial
statements as well as in annual financial statements. This
guidance became effective for periods ending after June 15,
2009 with early adoption permitted. We elected to early adopt
this guidance for our March 31, 2009 interim financial
statements; the adoption did not have any impact on our
consolidated financial statements.
In December 2008, the FASB issued amended disclosure
requirements for postretirement benefit plan assets, which has
been codified as ASC Topic 715, Compensation
Retirement Benefits (ASC Topic 715). ASC Topic 715
amends the required disclosures regarding plan assets in an
employers defined benefit pension or other postretirement
plan, including investment allocation decisions, inputs and
valuation techniques used to measure the fair value of plan
assets and significant concentrations of risks within plan
assets. The disclosure requirements
59
AMKOR
TECHNOLOGY, INC.
Notes to
Consolidated Financial
Statements (Continued)
became effective for fiscal years ending after December 15,
2009. The adoption of ASC Topic 715 required additional
disclosures in the financial statements related to the assets of
our foreign defined benefit pension plans but did not impact our
financial results. See Note 13 for additional information.
In May 2008, the FASB issued authoritative guidance related to
certain convertible debt instruments that, by their stated
terms, may be settled in cash (or other assets) upon conversion,
including partial cash settlement, unless the embedded
conversion option is required to be separately accounted for as
a derivative. This guidance has been codified principally in ASC
Topic 470, Debt. Issuers of convertible debt instruments
subject to the provisions of this guidance are required to
separately account for the liability and equity components in a
manner that will reflect the entitys nonconvertible debt
borrowing rate when interest cost is recognized in subsequent
periods. This guidance became effective for financial statements
issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years. Our convertible
debt instruments do not contain the features of the instruments
covered by this guidance; accordingly, our adoption of this
guidance on January 1, 2009, did not have an impact on our
financial statements.
In April 2008, the FASB issued guidance on the factors that
should be considered in developing renewal or extension
assumptions used to determine the useful life of a recognized
intangible asset, which has been codified in ASC Topic 350,
Intangibles Goodwill and Other. The guidance
also requires expanded disclosures related to the determination
of intangible asset useful lives. This guidance applies
prospectively to intangible assets acquired
and/or
recognized on or after January 1, 2009. Our adoption of
this guidance on January 1, 2009, did not have an impact on
our financial statements.
In December 2007, the FASB issued amended disclosure
requirements for noncontrolling interests in consolidated
financial statements, which has been codified as ASC Topic 810,
Consolidation (ASC Topic 810). ASC Topic 810
requires that (1) noncontrolling (minority) interests be
reported as a component of stockholders equity,
(2) net income attributable to the parent and to the
noncontrolling interest be separately identified in the
consolidated statement of operations, (3) changes in a
parents ownership interest while the parent retains its
controlling interest be accounted for as equity transactions,
(4) any retained noncontrolling equity investment upon the
deconsolidation of a subsidiary be initially measured at fair
value and (5) sufficient disclosures are provided that
clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners. ASC Topic
810 is effective for financial statements issued for fiscal
years beginning after December 15, 2008, and interim
periods within those fiscal years. We adopted the provisions of
ASC Topic 810 on January 1, 2009 and, as required, we have
adjusted prior periods for comparative purposes. Minority
interests reported in our December 31, 2008 Consolidated
Balance Sheet were retrospectively adjusted to comply with ASC
Topic 810 and are reported as a component of equity identified
as noncontrolling interests. The caption Net income
(loss) in our Consolidated Statements of Operations
represents the consolidated operating results for Amkor
including noncontrolling interests. In addition, earnings or
losses attributable to the noncontrolling interests are
separately disclosed on the face of the Consolidated Statements
of Operations for all periods presented in the manner prescribed
by ASC Topic 810. See the Consolidated Statement of
Stockholders Equity and Comprehensive Income (Loss) for
disclosure of the changes in equity and comprehensive (loss)
income attributable to Amkor and our noncontrolling interests.
In December 2007, the FASB issued guidance on accounting for
business combinations, which has been codified as ASC Topic 805,
Business Combinations. Under this guidance, an acquiring
entity is required to recognize all the assets acquired and
liabilities assumed in a transaction at the acquisition-date
fair value with limited exceptions. It further changes the
accounting treatment for certain specific acquisition related
items including: (1) expensing acquisition related costs as
incurred; (2) valuing noncontrolling interests at fair
value at the acquisition date of a controlling interest; and
(3) expensing restructuring costs associated with an
acquired business. Additionally, it includes a substantial
number of new disclosure requirements. This guidance will be
applied prospectively to business combinations for which the
acquisition date is on or after January 1, 2009.
60
AMKOR
TECHNOLOGY, INC.
Notes to
Consolidated Financial
Statements (Continued)
In September 2006 and February 2008, the FASB issued guidance on
fair value measurements which has been codified as ASC Topic
820, Fair Value Measurements and Disclosures (ASC
Topic 820). ASC Topic 820 defines fair value, establishes
a framework for measuring fair value and expands disclosure of
fair value measurements. This guidance was effective for
financial assets and liabilities in fiscal years beginning after
November 15, 2007, and for non-financial assets and
liabilities in fiscal years beginning after November 15,
2008, except for items that are recognized or disclosed at fair
value in the financial statements on a recurring basis. The
adoption of this guidance on January 1, 2008 with respect
to financial assets and liabilities measured at fair value did
not have a material impact on our financial statements. The
adoption of this guidance on January 1, 2009 with respect
to non-financial assets and liabilities measured or disclosed at
fair value on a non-recurring basis, did not have an adoption
date impact on our consolidated financial statements and applies
to measurements of fair value of non-financial assets and
liabilities when a fair value measurement is required. See
Note 15 for additional information and disclosure for fair
value measurements.
Recently
Issued Standards
In December 2009, the FASB issued ASU
2009-17,
Improvements to Financial Reporting by Enterprises Involved
with Variable Interest Entities (ASU
2009-17).
This ASU codified consolidation guidance previously issued in
June 2009 which applies to variable interest entities and will
affect the overall consolidation analysis under FASB
Interpretation No. 46(R). This standard is effective for
fiscal years beginning after November 15, 2009. We do not
expect ASU
2009-17 to
have a material impact on our financial statements upon adoption.
In December 2009, the FASB issued ASU
2009-16,
Accounting for Transfers of Financial Assets (ASU
2009-16).
This ASU codified guidance previously issued in June 2009 which
amends existing derecognition guidance, eliminates the exemption
from consolidation for qualifying special-purpose entities, and
requires additional disclosures about a transferors
continuing involvement in transferred financial assets. This
standard is effective for fiscal years beginning after
November 15, 2009, and applies to financial asset transfers
occurring on or after the effective date. We do not expect ASU
2009-16 to
have a material impact on our financial statements upon adoption.
|
|
3.
|
Stock
Compensation Plans
|
Beginning in 2006, all of our share-based compensation,
including grants of employee stock options, is measured at fair
value and expensed over the service period (generally the
vesting period). For all grants, the amount of compensation
expense to be recognized is adjusted for an estimated forfeiture
rate which is based on historical data.
The following table presents stock-based compensation expense
included in the Consolidated Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Cost of sales
|
|
$
|
81
|
|
|
$
|
823
|
|
|
$
|
1,343
|
|
Selling, general, and administrative
|
|
|
2,097
|
|
|
|
3,087
|
|
|
|
2,603
|
|
Research and development
|
|
|
399
|
|
|
|
678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
$
|
2,577
|
|
|
$
|
4,588
|
|
|
$
|
3,946
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61
AMKOR
TECHNOLOGY, INC.
Notes to
Consolidated Financial
Statements (Continued)
Equity
Incentive Plans
Stock options are generally granted with an exercise price equal
to the market price of the stock at the date of grant.
Substantially all of the options granted are exercisable
pursuant to a two to five year vesting schedule and the term of
the options granted is no longer than ten years.
2007 Equity Incentive Plan. On August 6,
2007, our shareholders approved the 2007 Equity Incentive Plan,
(the 2007 Plan) that provides for the grant of the
following types of incentive awards: (i) stock options,
(ii) restricted stock, (iii) restricted stock units,
(iv) stock appreciation rights, (v) performance units
and performance shares and (vi) other stock or cash awards.
Those eligible for awards include employees, directors and
consultants who provide services to Amkor and its subsidiaries.
The effective date of this plan was January 1, 2008, and
there were originally 17,000,000 shares of our common stock
reserved for issuance under the 2007 Equity Incentive Plan.
2003 Nonstatutory Inducement Grant Stock
Plan. On September 9, 2003, we initiated the
2003 Nonstatutory Inducement Grant Stock Plan (the 2003
Plan). The 2003 Plan generally provides for the grant to
employees, directors and consultants of stock options and stock
purchase rights and is generally used as an inducement benefit
for the purpose of retaining new employees. There is a provision
for an annual replenishment to bring the number of shares of
common stock reserved for issuance under the plan up to 300,000
as of each January 1.
1998 Director Option Plan. The Director
Plan terminated in January 2008. The options granted under the
Director Plan were automatic and non-discretionary. Each option
granted to a non-employee director vests over a three year
period.
1998 Stock Plan. The 1998 Stock Plan
terminated in January 2008. The 1998 Stock Plan generally
provided for grants to employees, directors and consultants of
stock options and stock purchase rights. The options granted
vest over a two to five year period.
A summary of the stock option plans, the respective plan
termination dates and shares available for grant as of
December 31, 2009 is shown below.
|
|
|
|
|
|
|
2007 Equity
|
|
2003
|
Stock Option Plans
|
|
Incentive Plan
|
|
Inducement Plan
|
|
Contractual life (years)
|
|
10
|
|
10
|
Plan termination date
|
|
Board of Directors
Discretion
|
|
Board of Directors
Discretion
|
Shares available for grant at December 31, 2009 (in
thousands)
|
|
16,355
|
|
436
|
In order to calculate the fair value of stock options at the
date of grant, we use the Black-Scholes option pricing model.
Expected volatilities are based on historical performance of our
stock. We also use historical data to estimate the timing and
amount of option exercises and forfeitures within the valuation
model. The expected term of the options is based on evaluations
of historical and expected future employee exercise behavior and
represents the period of time that options granted are expected
to be outstanding. The risk-free interest rate for periods
within the contractual life of the option is based on the
U.S. Treasury yield curve in effect at the time of grant.
62
AMKOR
TECHNOLOGY, INC.
Notes to
Consolidated Financial
Statements (Continued)
The following assumptions were used to calculate weighted
average fair values of the options granted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Expected life (in years)
|
|
|
5.9
|
|
|
|
6.0
|
|
|
|
6.3
|
|
Risk-free interest rate
|
|
|
2.3
|
%
|
|
|
3.3
|
%
|
|
|
4.1
|
%
|
Volatility
|
|
|
76
|
%
|
|
|
77
|
%
|
|
|
80
|
%
|
Dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average grant date fair value per option granted
|
|
$
|
2.70
|
|
|
$
|
7.85
|
|
|
$
|
6.46
|
|
The following is a summary of all option activity for the year
ended December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
Aggregate
|
|
|
|
Number of
|
|
|
Weighted Average
|
|
|
Remaining
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Contractual Term
|
|
|
Value
|
|
|
|
(In thousands)
|
|
|
per Share
|
|
|
(Years)
|
|
|
(In thousands)
|
|
|
Outstanding at December 31, 2008
|
|
|
9,282
|
|
|
$
|
10.39
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
120
|
|
|
|
4.07
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(136
|
)
|
|
|
5.12
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(964
|
)
|
|
|
10.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009
|
|
|
8,302
|
|
|
|
10.35
|
|
|
|
4.2
|
|
|
$
|
3,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2009
|
|
|
7,243
|
|
|
|
10.51
|
|
|
|
3.6
|
|
|
$
|
2,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully vested and expected to vest at December 31, 2009
|
|
|
8,191
|
|
|
|
10.37
|
|
|
|
4.1
|
|
|
$
|
3,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The intrinsic value of options exercised for the years ended
December 31, 2009, 2008 and 2007 was $0.2 million,
$4.1 million and $12.2 million, respectively.
Total unrecognized compensation expense from stock options,
excluding any forfeiture estimate, was $5.9 million as of
December 31, 2009, which is expected to be recognized over
a weighted-average period of 2.4 years beginning
January 1, 2010.
For the years ended December 31, 2009, 2008 and 2007, cash
received under all share-based payment arrangements was
$0.7 million, $10.2 million and $37.1 million,
respectively. There was no tax benefit realized. The related
cash receipts are included in financing activities in the
accompanying Consolidated Statements of Cash Flows.
Restricted
stock shares
In February 2010, we granted 472,000 restricted stock shares to
employees under the 2007 Equity Incentive Plan. The restricted
stock shares vest over a 4 year period. The valuation of
restricted stock shares is determined based on the fair market
value of the underlying shares on the date of grant.
63
AMKOR
TECHNOLOGY, INC.
Notes to
Consolidated Financial
Statements (Continued)
Geographic sources of income (loss) before income taxes are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
United States
|
|
$
|
(45,512
|
)
|
|
$
|
(19,141
|
)
|
|
$
|
(4,728
|
)
|
Foreign
|
|
|
172,035
|
|
|
|
(406,547
|
)
|
|
|
239,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income (loss) before income taxes
|
|
$
|
126,523
|
|
|
$
|
(425,688
|
)
|
|
$
|
234,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The provision for income taxes includes federal, state and
foreign taxes currently payable and those deferred because of
temporary differences between the financial statement and the
tax bases of assets and liabilities.
The components of the (benefit) provision for income taxes are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(1,882
|
)
|
|
$
|
272
|
|
|
$
|
(63
|
)
|
State
|
|
|
316
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
2,405
|
|
|
|
22,705
|
|
|
|
20,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
839
|
|
|
|
22,977
|
|
|
|
20,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
2,286
|
|
|
|
|
|
|
|
|
|
State
|
|
|
119
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
(33,004
|
)
|
|
|
8,811
|
|
|
|
(7,532
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30,599
|
)
|
|
|
8,811
|
|
|
|
(7,532
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (benefit) provision
|
|
$
|
(29,760
|
)
|
|
$
|
31,788
|
|
|
$
|
12,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64
AMKOR
TECHNOLOGY, INC.
Notes to
Consolidated Financial
Statements (Continued)
The reconciliation between the U.S. federal statutory
income tax rate of 35% and our income tax (benefit) provision is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
U.S. federal tax at 35%
|
|
$
|
44,257
|
|
|
$
|
(148,951
|
)
|
|
$
|
82,176
|
|
State taxes, net of federal benefit
|
|
|
884
|
|
|
|
843
|
|
|
|
(1,007
|
)
|
Foreign (loss) income taxed at different rates
|
|
|
(56,301
|
)
|
|
|
10,503
|
|
|
|
(59,188
|
)
|
Foreign exchange (gain) loss
|
|
|
4,926
|
|
|
|
(54,238
|
)
|
|
|
(3,898
|
)
|
Goodwill impairment
|
|
|
|
|
|
|
231,185
|
|
|
|
|
|
Expiration of capital loss carryforward
|
|
|
22,714
|
|
|
|
34,518
|
|
|
|
51,227
|
|
Change in valuation allowance
|
|
|
(53,722
|
)
|
|
|
(29,165
|
)
|
|
|
(29,123
|
)
|
Adjustments related to prior years
|
|
|
12,198
|
|
|
|
(12,555
|
)
|
|
|
(20,689
|
)
|
Income tax credits generated
|
|
|
(9,377
|
)
|
|
|
(3,312
|
)
|
|
|
(6,537
|
)
|
Repatriation of foreign earnings and profits
|
|
|
4,846
|
|
|
|
|
|
|
|
|
|
Other permanent differences
|
|
|
(185
|
)
|
|
|
2,960
|
|
|
|
(364
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(29,760
|
)
|
|
$
|
31,788
|
|
|
$
|
12,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2008, we recorded a $671.1 million goodwill impairment
charge which did not have a significant income tax benefit.
The following is a summary of the components of our deferred tax
assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
154,351
|
|
|
$
|
150,335
|
|
Capital loss carryforwards
|
|
|
18,221
|
|
|
|
40,934
|
|
Income tax credits
|
|
|
24,582
|
|
|
|
14,337
|
|
Property, plant and equipment
|
|
|
18,253
|
|
|
|
18,600
|
|
Accrued liabilities
|
|
|
24,502
|
|
|
|
23,355
|
|
Unrealized foreign exchange loss
|
|
|
8,355
|
|
|
|
14,110
|
|
Other
|
|
|
22,530
|
|
|
|
20,833
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
270,794
|
|
|
|
282,504
|
|
Valuation allowance
|
|
|
(208,925
|
)
|
|
|
(261,613
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets net of valuation allowance
|
|
|
61,869
|
|
|
|
20,891
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
4,484
|
|
|
|
5,210
|
|
Deferred gain
|
|
|
6,941
|
|
|
|
|
|
Other
|
|
|
5,642
|
|
|
|
3,005
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
17,067
|
|
|
|
8,215
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
44,802
|
|
|
$
|
12,676
|
|
|
|
|
|
|
|
|
|
|
65
AMKOR
TECHNOLOGY, INC.
Notes to
Consolidated Financial
Statements (Continued)
At December 31, 2009 and 2008, current deferred tax assets
of $9.7 million and $6.4 million, respectively, are
included in other current assets, and non-current deferred tax
assets of $41.8 million and $8.3 million,
respectively, are included in other assets in the Consolidated
Balance Sheet. In addition, at December 31, 2009 and 2008,
current deferred tax liabilities of $6.1 million and
$0.3 million, respectively, are included in other current
liabilities and non-current deferred tax liabilities of
$0.6 million and $1.7 million, respectively, are
included in other non-current liabilities in the Consolidated
Balance Sheets.
In 2009, the valuation allowance on our deferred tax assets
decreased by $52.7 million primarily as a result of a
$25.6 million decrease associated with the release of a
valuation allowance on net deferred tax assets of our subsidiary
in Korea and a $22.7 million decrease associated with the
expiration of U.S. capital loss carryforwards.
The release of the valuation allowance at our subsidiary in
Korea in the third quarter of 2009 was primarily the result of
the sustained profitability of our operations in Korea through
the most recent economic downturn which provided sufficient
positive evidence it was more likely than not the deferred tax
assets would be realized in the future. In Korea, we have tax
holidays which begin to phase-out in 2011. We have deductible
temporary differences, primarily related to accruals for our
severance plan in Korea and depreciation differences, which we
expect to reverse in periods beyond 2010 where we do not have a
100% tax exemption. Partially offsetting these deferred tax
assets are taxable temporary differences which will also reverse
in future periods. The positive evidence considered in the
decision to release the valuation allowance included:
(i) the taxable income reported by our Korean subsidiary in
2008 and for the first nine months of 2009 during a period of
global economic weakness; (ii) the cumulative profitability
of our Korean subsidiary since 2002 through two economic
downturns in the semiconductor industry; and (iii) the
absence of any plans or trends in our business which would
suggest the demonstrated history of profitability would not
continue into the future. The negative evidence considered
included the worldwide economic climate and related decline in
operating results of the subsidiary in the three months ended
December 31, 2008 and the three months ended March 31,
2009.
In 2008, the valuation allowance on our deferred tax assets
decreased by $29.4 million primarily as a result of a
$34.5 million decrease associated with the expiration of
U.S. capital loss carryforwards, partially offset by an
increase of $8.3 million for a valuation allowance
established against certain Japanese deferred tax assets.
In 2007, the valuation allowance on our deferred tax assets
decreased by $37.0 million primarily as a result of a
$51.2 million decrease associated with the expiration of
U.S. capital loss carryforwards and a $17.8 million
decrease associated with the use of all remaining net operating
loss carryforwards and the release of the valuation allowance on
all deferred tax assets at our largest subsidiary in Taiwan
because of sustained profitability. In addition, deferred tax
assets of $7.6 million and a related valuation allowance of
the same amount were reduced in 2007 in connection with the
adoption of a standard on accounting for uncertainty in income
taxes. These decreases in our valuation allowance in 2007 were
partially offset by an increase of $32.9 million on
deferred tax assets recorded in 2007 in certain foreign
jurisdictions that we forecasted would become tax deductions
beyond our tax holiday periods. We provided a full valuation
allowance on these deferred tax assets primarily because we did
not have sufficient positive evidence that it was more likely
than not we would realize these tax benefits.
At December 31, 2008, the valuation allowance included
approximately $21.4 million relating to the tax benefits of
pre-acquisition net operating losses and credits. In 2008, we
reduced goodwill by approximately $1.7 million due to the
utilization of pre-acquisition net operating losses in a Taiwan
subsidiary. After December 31, 2008, the reduction in
valuation allowance as a result of any additional realization of
pre-acquisition net operating losses and credits reduced income
tax expense in accordance with the adoption of the accounting
standard on business combinations.
At December 31, 2009, the valuation allowance included
amounts relating to tax benefits of tax deductions associated
with employee stock options. If these benefits are subsequently
realized, they will be recorded to contributed capital in the
amount of $7.0 million. As a result of net operating loss
carryforwards, we were not able to
66
AMKOR
TECHNOLOGY, INC.
Notes to
Consolidated Financial
Statements (Continued)
recognize the excess tax benefits of stock option deductions in
2009 because the deductions did not reduce income tax payable.
As a result of certain capital investments, export commitments
and employment levels, income from operations in Korea, the
Philippines, China, Singapore and Taiwan is subject to reduced
tax rates, and in some cases is exempt from income taxes. In
Korea, we have tax holidays resulting from our investment in the
Kwangju, Seoul and Pupyong facilities. The Kwangju tax holiday
provides a 100% tax exemption through 2010, followed by a 50%
exemption through 2013. The Seoul and Pupyong tax holiday
provides a 100% tax exemption through 2011, followed by a 50%
exemption through 2014. After the holidays expire we will be
subject to the Korean statutory rate which is currently 24% for
2010 and 2011 and 22% after 2011. In the Philippines, we operate
in economic zones and benefit from tax holidays on qualified
products as a result of certain capital investments we have
made. For 2005 through 2009, qualifying Philippine operations
benefited from a full tax holiday, expiring at various times
through 2013, while the remaining operations benefited from a
perpetual reduced tax rate of 5%. As a result of our 2001
investment in China, we expect to benefit from a 100% tax
holiday for two years and then a 50% tax holiday for an
additional three years. The tax holiday in China commenced on
January 1, 2008. In October 2006, we were granted a ten
year pioneer incentive award in Singapore. The 100% tax holiday
on Singapore operations commenced on January 1, 2007. We
were granted a five year tax holiday on certain product lines in
Taiwan beginning January 1, 2007 and an additional tax
holiday on certain product lines beginning January 1, 2010.
As a result of the net operating losses incurred by certain of
our foreign subsidiaries subject to tax holidays, we did not
realize any benefits relating to such tax holidays in 2009, 2008
or 2007 in China, Korea and Singapore. In 2009, 2008 and 2007,
our Philippines operations recognized $3.4 million,
$2.6 million and $0.4 million, respectively, in tax
benefits and our Taiwan operations recognized less than $0.1,
$0.2 million and $0.6 million, respectively, in tax
benefits as a result of the tax holiday on certain qualifying
operations.
At December 31, 2009, we have U.S. and state net
operating losses available to be carried forward totaling
$365.5 million and $258.7 million, respectively,
expiring in varying amounts through 2029. Additionally, as of
December 31, 2009, certain of our foreign operations have
$53.1 million of net operating losses available for
carryforward expiring in varying amounts through 2017. The
deferred tax assets associated with $41.3 million of the
foreign losses have been reserved with a valuation allowance. We
also have U.S. capital loss carryforwards of
$45.6 million which will expire in 2013. U.S. capital
loss carryforwards of $56.8 million and $84.6 million
expired as of December 31, 2009 and 2008, respectively. The
deferred tax assets associated with our U.S. and state net
operating losses and capital losses available for carryforward
have been fully reserved with a valuation allowance at
December 31, 2009 and 2008. Also, our ability to utilize
our U.S. net operating and capital loss carryforwards may
be limited in the future if we experience an ownership change as
defined by the Internal Revenue Code.
At December 31, 2009, we have various tax credits available
to be carried forward including U.S foreign income tax credits
totaling $8.1 million, expiring in 2016, Taiwanese income
tax credits totaling $7.6 million expiring in varying
amounts through 2014 and Korean income tax credits totaling
$6.4 million expiring in varying amounts through 2014. The
deferred tax assets associated with the U.S. foreign income
tax credits and $5.4 million of the Taiwanese income tax
credits have been reserved with a valuation allowance. Income
tax credits generated by certain of our foreign subsidiaries in
2009, 2008, and 2007 have been recognized in our income tax
provision (benefit).
Income taxes have not been provided on substantially all of the
undistributed earnings of our foreign subsidiaries
(approximately $313.3 million at December 31,
2009) over which we have sufficient influence to control
the distribution of such earnings and have determined that
substantially all such earnings have been reinvested
indefinitely. These earnings could become subject to either or
both federal income tax and foreign withholding tax if they are
remitted as dividends, if foreign earnings are loaned to any of
our domestic subsidiaries, or if we sell our investment in such
subsidiaries. We estimate that repatriation of these foreign
earnings would generate additional foreign withholding taxes of
approximately $46.7 million. There would not be a
substantial U.S. federal income tax upon repatriation since
our U.S. net operating losses currently exceed the amount
of
67
AMKOR
TECHNOLOGY, INC.
Notes to
Consolidated Financial
Statements (Continued)
undistributed foreign earnings. We estimate that repatriation of
these foreign earnings would generate up to approximately
$1.8 million of alternative minimum tax not offset by
foreign tax credits.
In 2009, we provided U.S. income tax on approximately
$13.8 million of foreign earnings from two subsidiaries
where we made the decision to not reinvest indefinitely based on
changed facts and circumstances. The U.S. income tax of
$4.8 million on these foreign dividends was fully offset by
the benefit of our U.S. net operating losses.
We operate in and file income tax returns in various
U.S. and foreign jurisdictions which are subject to
examination by tax authorities. In 2009, the tax authorities in
Korea examined income tax returns of our subsidiary covering the
periods from 2004 to 2008. The examination did not result in
significant income tax payments. We remain subject to
examination for years after 2005 in the U.S. (Federal),
Japan and the Philippines, and for years after 2003 in China,
Singapore, and Taiwan. Our tax returns for open years in all
jurisdictions are subject to changes upon examination.
A reconciliation of the beginning and ending gross amount of
unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Balance at January 1
|
|
$
|
20,920
|
|
|
$
|
17,663
|
|
|
$
|
11,809
|
|
Additions based on tax positions related to the current year
|
|
|
1,332
|
|
|
|
5,341
|
|
|
|
5,846
|
|
Additions for tax positions of prior years
|
|
|
1,243
|
|
|
|
1,673
|
|
|
|
339
|
|
Reductions for tax positions of prior years
|
|
|
(17,456
|
)
|
|
|
(3,341
|
)
|
|
|
(19
|
)
|
Reductions related to settlements with tax authorities
|
|
|
(281
|
)
|
|
|
|
|
|
|
(312
|
)
|
Reductions from lapse of statutes of limitations
|
|
|
(667
|
)
|
|
|
(416
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31
|
|
$
|
5,091
|
|
|
$
|
20,920
|
|
|
$
|
17,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximately $4.5 million of the $17.5 million of
reductions for tax positions of prior years reduced our income
tax expense in 2009. The remaining $13.0 million represents
a change in deferred tax assets which were subject to a full
valuation allowance and therefore did not impact income tax
expense. At December 31, 2009, substantially all of our
gross unrecognized tax benefits would reduce our effective tax
rate, if recognized.
The liability related to our unrecognized tax benefits is
$4.8 million as of December 31, 2009 and is reported
as a component of other non-current liabilities. The
unrecognized tax benefits in the table above include the
reduction of deferred tax assets, which are not included in the
liability reported as a component of other non-current
liabilities.
It is reasonably possible that the total amount of unrecognized
tax benefits will decrease by up to $2.8 million within
12 months due to the expiration of statutes of limitations
related to revenue attribution and eligibility for certain tax
incentives.
We have recognized less than $0.1 million of interest and
penalties in the Consolidated Statement of Operations for the
year ended December 31, 2009 in connection with our
unrecognized tax benefits. Interest and penalties are classified
as income taxes in the financial statements. The total amount of
interest and penalties included in other non-current liabilities
in connection with our unrecognized tax benefits is
$0.4 million as of December 31, 2009.
Our unrecognized tax benefits are subject to change as
examinations of specific tax years are completed in the
respective jurisdictions. We believe that any taxes, or related
interest and penalties, over the amounts accrued, will not have
a material effect on our financial condition, results of
operations or cash flows, nor do we expect that examinations to
be completed in the near term would have a material favorable
impact. However, tax return examinations involve uncertainties
and there can be no assurances that the outcome of examinations
will be favorable.
68
AMKOR
TECHNOLOGY, INC.
Notes to
Consolidated Financial
Statements (Continued)
Basic earnings per share (EPS) is computed by
dividing net income (loss) by the weighted average number of
common shares outstanding during the period. Diluted EPS adjusts
net income and the outstanding shares for the dilutive effect of
stock options and convertible debt. The basic and diluted EPS
amounts are the same for the year ended December 31, 2008
as a result of the potentially dilutive securities being
antidilutive due to a net loss. The following table summarizes
the computation of basic and diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands, except per share data)
|
|
|
Net income (loss) basic
|
|
$
|
155,980
|
|
|
$
|
(456,695
|
)
|
|
$
|
219,864
|
|
Adjustment for dilutive securities on net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on 2.5% convertible notes due 2011, net of tax
|
|
|
2,084
|
|
|
|
|
|
|
|
5,357
|
|
Interest on 6.25% convertible notes due 2013, net of tax
|
|
|
6,370
|
|
|
|
|
|
|
|
6,310
|
|
Interest on 6.0% convertible notes due 2014, net of tax
|
|
|
12,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) diluted
|
|
$
|
176,520
|
|
|
$
|
(456,695
|
)
|
|
$
|
231,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding basic
|
|
|
183,067
|
|
|
|
182,734
|
|
|
|
180,597
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
61
|
|
|
|
|
|
|
|
1,796
|
|
2.5% convertible notes due 2011
|
|
|
4,530
|
|
|
|
|
|
|
|
13,023
|
|
6.25% convertible notes due 2013
|
|
|
13,351
|
|
|
|
|
|
|
|
13,351
|
|
6.0% convertible notes due 2014
|
|
|
62,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding diluted
|
|
|
263,379
|
|
|
|
182,734
|
|
|
|
208,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.85
|
|
|
$
|
(2.50
|
)
|
|
$
|
1.22
|
|
Diluted
|
|
|
0.67
|
|
|
|
(2.50
|
)
|
|
|
1.11
|
|
The following table summarizes the potential shares of common
stock that were excluded from diluted EPS, because the effect of
including these potential shares was antidilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Stock options
|
|
|
7,982
|
|
|
|
9,281
|
|
|
|
5,092
|
|
6.25% convertible notes due 2013
|
|
|
|
|
|
|
13,351
|
|
|
|
|
|
2.5% convertible notes due 2011
|
|
|
|
|
|
|
12,238
|
|
|
|
|
|
5.0% convertible notes due 2007
|
|
|
|
|
|
|
|
|
|
|
504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total potentially dilutive shares
|
|
|
7,982
|
|
|
|
34,870
|
|
|
|
5,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options excluded from diluted EPS because the exercise
price was greater than the average market price of the common
shares
|
|
|
7,982
|
|
|
|
7,230
|
|
|
|
5,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69
AMKOR
TECHNOLOGY, INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
6.
|
Accounts
Receivable, Trade
|
Accounts receivable, trade consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Accounts receivable
|
|
$
|
331,590
|
|
|
$
|
264,745
|
|
Allowance for sales credits
|
|
|
(2,877
|
)
|
|
|
(4,281
|
)
|
Allowance for doubtful accounts
|
|
|
(461
|
)
|
|
|
(834
|
)
|
|
|
|
|
|
|
|
|
|
Total accounts receivable trade, net of allowances
|
|
$
|
328,252
|
|
|
$
|
259,630
|
|
|
|
|
|
|
|
|
|
|
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Raw materials and purchased components
|
|
$
|
119,393
|
|
|
$
|
110,713
|
|
Work-in-process
|
|
|
35,792
|
|
|
|
23,332
|
|
|
|
|
|
|
|
|
|
|
Total inventories
|
|
$
|
155,185
|
|
|
$
|
134,045
|
|
|
|
|
|
|
|
|
|
|
|
|
8.
|
Property,
Plant and Equipment
|
Property, plant and equipment consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Land
|
|
$
|
106,395
|
|
|
$
|
104,887
|
|
Land use rights
|
|
|
19,945
|
|
|
|
19,945
|
|
Buildings and improvements
|
|
|
832,782
|
|
|
|
828,108
|
|
Machinery and equipment
|
|
|
2,382,220
|
|
|
|
2,384,342
|
|
Software and computer equipment
|
|
|
151,208
|
|
|
|
150,349
|
|
Furniture, fixtures and other equipment
|
|
|
27,030
|
|
|
|
28,385
|
|
Construction in progress
|
|
|
57,775
|
|
|
|
29,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,577,355
|
|
|
|
3,545,519
|
|
Less accumulated depreciation and amortization
|
|
|
(2,212,725
|
)
|
|
|
(2,071,756
|
)
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment, net
|
|
$
|
1,364,630
|
|
|
$
|
1,473,763
|
|
|
|
|
|
|
|
|
|
|
70
AMKOR
TECHNOLOGY, INC.
Notes to
Consolidated Financial
Statements (Continued)
The following table reconciles our activity related to property,
plant and equipment purchases as presented on the Consolidated
Statement of Cash Flows to property, plant and equipment
additions reflected on the Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Property, plant and equipment additions
|
|
$
|
197,742
|
|
|
$
|
341,734
|
|
|
$
|
293,876
|
|
Net change in related accounts payable and deposits
|
|
|
(24,246
|
)
|
|
|
44,505
|
|
|
|
(57,636
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
$
|
173,496
|
|
|
$
|
386,239
|
|
|
$
|
236,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
Goodwill
and Other Intangible Assets
|
The change in the carrying value of goodwill, all of which
relates to our packaging services segment, is as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Balance as of December 31, 2007
|
|
$
|
673,385
|
|
Pre-acquistion tax benefit adjustment
|
|
|
(1,700
|
)
|
Translation adjustments
|
|
|
(568
|
)
|
Impairment
|
|
|
(671,117
|
)
|
|
|
|
|
|
Balance as of December 31, 2008
|
|
$
|
|
|
|
|
|
|
|
Balance as of December 31, 2009
|
|
$
|
|
|
|
|
|
|
|
At December 31, 2008, we recorded a goodwill impairment of
$671.1 million. We completed our annual impairment analysis
during the second quarter of 2008 and determined that no
impairment existed as of the date of that analysis. Based upon a
combination of factors, including a significant and sustained
decline in our market capitalization below our carrying value of
net assets and the deteriorating macro-economic environment, we
concluded that sufficient indicators existed to require us to
perform an interim goodwill impairment analysis at
December 31, 2008. Accordingly, we performed an interim
first step of our goodwill impairment test using a discounted
cash flow model and determined that the carrying value of the
packaging reporting unit exceeded its fair value, indicating
goodwill impairment existed.
We then performed a second step of the impairment assessment to
determine the implied fair value of goodwill. The result of our
valuation indicated that there was no remaining implied value
attributable to goodwill in our packaging segment and
accordingly, we expensed all $671.1 million of the
remaining goodwill as of December 31, 2008.
Intangibles as of December 31, 2009 consist of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Gross
|
|
|
Amortization
|
|
|
Net
|
|
|
|
(In thousands)
|
|
|
Patents and technology rights
|
|
$
|
53,059
|
|
|
$
|
(48,214
|
)
|
|
$
|
4,845
|
|
Supply agreements
|
|
|
14,483
|
|
|
|
(9,353
|
)
|
|
|
5,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangibles
|
|
$
|
67,542
|
|
|
$
|
(57,567
|
)
|
|
$
|
9,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71
AMKOR
TECHNOLOGY, INC.
Notes to
Consolidated Financial
Statements (Continued)
Intangibles as of December 31, 2008 consist of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Gross
|
|
|
Amortization
|
|
|
Net
|
|
|
|
(In thousands)
|
|
|
Patents and technology rights
|
|
$
|
76,246
|
|
|
$
|
(67,304
|
)
|
|
$
|
8,942
|
|
Supply agreements
|
|
|
8,858
|
|
|
|
(6,254
|
)
|
|
|
2,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangibles
|
|
$
|
85,104
|
|
|
$
|
(73,558
|
)
|
|
$
|
11,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of identifiable intangible assets was
$7.0 million, $10.1 million and $10.4 million in
2009, 2008 and 2007, respectively. Based on the amortizing
assets recognized in our balance sheet at December 31,
2009, amortization for each of the next five years is estimated
as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
2010
|
|
$
|
4,453
|
|
2011
|
|
|
2,835
|
|
2012
|
|
|
1,057
|
|
2013
|
|
|
754
|
|
2014
|
|
|
526
|
|
Thereafter
|
|
|
350
|
|
|
|
|
|
|
Total amortization
|
|
$
|
9,975
|
|
|
|
|
|
|
Investments consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Carrying
|
|
|
Ownership
|
|
|
Carrying
|
|
|
Ownership
|
|
|
|
Value
|
|
|
Percentage
|
|
|
Value
|
|
|
Percentage
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Investment in unconsolidated affiliate
|
|
$
|
19,108
|
|
|
|
30.0
|
%
|
|
$
|
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
19,108
|
|
|
|
|
|
|
$
|
|
|
|
|