Amkor Technology, Inc. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a Q4-only filing; fourth-quarter results are noted separately below. Amkor provides outsourced semiconductor packaging and test services and operates primarily in Asia.
Financial performance and liquidity
| Metric | 2020 | 2019 |
|---|---|---|
| Net sales | $5.051 billion | $4.053 billion |
| Gross profit / margin | $900.8 million / 17.8% | $649.4 million / 16.0% |
| Operating income / margin | $457.2 million / 9.1% | $233.2 million / 5.8% |
| Net income attributable to Amkor | $338.1 million | $120.9 million |
| Diluted EPS | $1.40 | $0.50 |
| Cash from operating activities | $770.0 million | $563.9 million |
| Capital expenditures | $553.0 million | $472.4 million |
| Free cash flow (company-defined, non-GAAP) | $220.8 million | $103.1 million |
| Cash and cash equivalents | $698.0 million | $894.9 million |
| Working capital | $816.9 million | $941.7 million |
At year-end, cash plus short-term investments totaled $831.8 million, including $683.1 million held offshore. Debt was $1.154 billion on the balance sheet; scheduled principal repayments total $1.164 billion, including $149.0 million due in 2021. Amkor reported covenant compliance and $316.0 million of available foreign revolving credit, plus $60.1 million available under term facilities. The company said existing cash, investments, operating cash flow and credit availability should fund requirements for at least 12 months. Current assets were $2.133 billion and current liabilities $1.316 billion.
The board initiated a $0.04 quarterly dividend in October 2020; the first payment, $9.7 million in aggregate, was made in January 2021. The 2020 cash-flow statement reports $333.7 million of cash used in financing activities.
Material changes and operating trends
- Sales grew 24.6% year over year, mainly on higher advanced-product sales in communications, consumer and computing. Smartphone-market recovery and a new high-volume consumer product contributed; work-from-home demand lifted computing. Automotive and industrial demand weakened amid Covid-19 disruption.
- Advanced Products rose to $3.202 billion, or 63.4% of sales, from $2.111 billion, or 52.1%. Mainstream Products declined to $1.848 billion from $1.942 billion.
- Gross margin expanded 1.8 percentage points. Higher volume and utilization supported improvement, partly offset by product mix shifting toward products with higher material content.
- Operating cash flow increased by $206.2 million. Investment cash outflow rose to $638.7 million, primarily reflecting capital spending and short-term investment purchases. Financing cash flow shifted from $108.3 million provided in 2019 to $333.7 million used in 2020, mainly due to net debt repayments in Korea and Taiwan.
- Interest expense fell 10.4% to $64.2 million, reflecting refinancing of higher-rate debt and lower variable rates. The effective tax rate was 11.9%, versus 23.3%; 2020 included a $20.2 million discrete tax benefit from deferred tax assets.
- Communications represented 41% of sales, consumer 24%, automotive/industrial/other 20%, and computing 15%. Apple accounted for 14.5% of 2020 net sales; the ten largest customers represented 65%.
Fourth quarter: Net sales were $1.371 billion, versus $1.178 billion in Q4 2019; operating income was $159.2 million versus $118.4 million, and net income attributable to Amkor was $126.7 million versus $99.1 million. Q4 2020 included the $20.2 million discrete tax benefit.
Outlook, risks and unusual items
- Management expected 2021 capital expenditures of approximately $700 million, focused on advanced packaging and test equipment. The amount remains dependent on demand, project timing, business performance and funding availability; the filing does not provide numerical revenue or earnings guidance.
- Management described overall customer demand as strong in 2020, especially in communications and consumer, while automotive and industrial remained affected by the pandemic. It cited advanced packaging, second-wave customer conversions, automotive growth and broader end-market exposure as opportunities.
- Key risks include semiconductor cyclicality, high fixed costs and dependence on utilization, limited customer purchase commitments and pricing pressure, customer concentration, international operations, supply constraints, technology/yield execution, and Covid-19 effects on demand, labor and logistics.
- Japan factory consolidation generated $18.0 million of restructuring charges in 2020; approximately $4.1 million of additional charges were estimated, with actions expected to finish in the first half of 2021.
- Korea’s unfunded severance obligation was $98.0 million. Foreign defined-benefit pension plans were underfunded by $67.3 million; expected 2021 pension contributions were approximately $23 million.
- Other watch items include $33.0 million of recorded net unrecognized-tax-benefit liability, tax holidays and examinations, foreign-exchange exposure, and debt maturities and covenants. The auditor issued unqualified opinions on the financial statements and internal controls; income-tax accounting was identified as a critical audit matter.
Important facts for investors to verify
- Whether advanced-product growth and improved utilization can persist, and whether the planned $700 million capital program earns adequate returns.
- Whether customer and end-market concentration—especially Apple at 14.5% of sales and the top ten at 65%—changes materially.
- How automotive and industrial demand, Covid-related disruptions, and supply-chain constraints evolve.
- Debt repayment capacity, credit availability, covenant headroom, and the amount of offshore cash practically available after potential taxes.
- Future tax rates as incentives expire or tax positions are resolved, including the sustainability of the 2020 tax benefit.
- Restructuring costs and completion, Korean severance cash requirements, and pension funding needs.