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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
| | | | | | | | | | | |
☑ | | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | For the Quarterly Period Ended | March 31, 2024 |
or |
☐ | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | For the transition period from to |
Commission File Number 000-29472
AMKOR TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | | | | |
Delaware | | | | 23-1722724 |
(State or other jurisdiction of incorporation or organization) | | | | (I.R.S. Employer Identification Number) |
2045 East Innovation Circle
Tempe, AZ 85284
(Address of principal executive offices and zip code)
(480) 821-5000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
Common Stock, $0.001 par value | AMKR | The NASDAQ Global Select Market |
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 ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Large accelerated filer | ☑
| Accelerated filer | ☐
| Non-accelerated filer | ☐
| Smaller reporting company | ☐ | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The number of outstanding shares of the registrant’s Common Stock as of April 25, 2024 was 246,170,251.
QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended March 31, 2024
TABLE OF CONTENTS
Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements within the meaning of the federal securities laws, including, but not limited to, statements regarding (1) the amount, timing and focus of our expected capital investments in 2024, (2) our ability to fund our operating activities and financial requirements for the next twelve months, (3) the effect of changes in revenue levels and capacity utilization on our gross margin, (4) the impact of health conditions or pandemics, such as the Covid-19 pandemic, on our operations, financial results and supply chain, (5) the focus of our research and development activities, (6) the anticipated impact of tax law changes in the jurisdictions in which we operate, (7) the grant and expiration of conditional reduced tax rates in jurisdictions in which we operate and expectations regarding our effective tax rate and the availability of tax incentives, (8) the creation or release of valuation allowances related to taxes in the future, (9) our repurchase or repayment of outstanding debt, (10) payment of dividends, (11) compliance with restrictive covenants in the indentures and agreements governing our current and future indebtedness, (12) expected contributions to foreign pension plans and potential future conversion of our unfunded severance plan in Korea to a defined contribution plan, (13) liability for unrecognized tax benefits and the potential impact of our unrecognized tax benefits on our effective tax rate, (14) the effect of foreign currency exchange rate exposure on our financial results, (15) the volatility of the trading price of our common stock, (16) changes to our internal controls related to integration of acquired operations and implementation of an enterprise resource planning system, (17) our efforts to enlarge our customer base in certain geographic areas and markets, (18) demand for advanced packages in mobile and automotive devices and our technology leadership and potential growth in the communications and automotive and industrial end markets, (19) projects to install or integrate new information technology systems or upgrade our existing systems, (20) our expected revenue recognition, (21) the anticipated schedule for and benefits from our new manufacturing facility in Bac Ninh, Vietnam (the “Vietnam Facility”), (22) the effects of business, economic, political, legal and regulatory impacts, conflicts or natural disasters on our global operations, (23) the impact of rising interest rates on our investment portfolio and (24) other statements that are not historical facts. You are cautioned not to place undue reliance on forward-looking statements, which are often characterized by terminology such as “may,”
QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended March 31, 2024
TABLE OF CONTENTS
“will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or “intend,” by the negative of these terms or other comparable terminology or by discussions of strategy, plans or intentions. All forward-looking statements in this Form 10-Q are made based on our current expectations, forecasts, estimates and assumptions. Because such statements include risks and uncertainties, actual results may differ materially from those anticipated in such forward-looking statements as a result of various factors, including those set forth in Part II, Item 1A and other sections of this Form 10-Q, in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”) and from time to time in our other reports filed with or furnished to the Securities and Exchange Commission (“SEC”). You should carefully consider the trends, risks and uncertainties described in this Form 10-Q, the 2023 Form 10-K and other reports filed with or furnished to the SEC before making any investment decision with respect to our securities. If any of these trends, risks or uncertainties continues or occurs, our business, financial condition or operating results could be materially and adversely affected, the trading prices of our securities could decline and you could lose part or all of your investment. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement. We assume no obligation to review or update any forward-looking statements to reflect events or circumstances occurring after the date of this Form 10-Q except as may be required by applicable law.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| (In thousands, except per share data) |
Net sales | $ | 1,365,511 | | | $ | 1,471,539 | | | | | |
Cost of sales | 1,163,868 | | | 1,277,118 | | | | | |
Gross profit | 201,643 | | | 194,421 | | | | | |
Selling, general and administrative | 90,346 | | | 78,671 | | | | | |
Research and development | 38,171 | | | 47,047 | | | | | |
| | | | | | | |
Total operating expenses | 128,517 | | | 125,718 | | | | | |
Operating income | 73,126 | | | 68,703 | | | | | |
Interest expense | 16,439 | | | 16,167 | | | | | |
| | | | | | | |
Other (income) expense, net | (15,295) | | | (3,552) | | | | | |
Total other expense, net | 1,144 | | | 12,615 | | | | | |
Income before taxes | 71,982 | | | 56,088 | | | | | |
Income tax expense | 12,196 | | | 10,864 | | | | | |
Net income | 59,786 | | | 45,224 | | | | | |
Net (income) loss attributable to non-controlling interests | (889) | | | 127 | | | | | |
Net income attributable to Amkor | $ | 58,897 | | | $ | 45,351 | | | | | |
| | | | | | | |
Net income attributable to Amkor per common share: | | | | | | | |
Basic | $ | 0.24 | | | $ | 0.18 | | | | | |
Diluted | $ | 0.24 | | | $ | 0.18 | | | | | |
| | | | | | | |
Shares used in computing per common share amounts: | | | | | | | |
Basic | 246,008 | | | 245,330 | | | | | |
Diluted | 247,614 | | | 247,087 | | | | | |
The accompanying notes are an integral part of these statements.
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| (In thousands) |
Net income | $ | 59,786 | | | $ | 45,224 | | | | | |
Other comprehensive income (loss), net of tax: | | | | | | | |
Adjustments to net unrealized gains (losses) on available-for-sale debt investments | (308) | | | 601 | | | | | |
Adjustments to unrealized components of defined benefit pension plans | (85) | | | (97) | | | | | |
Foreign currency translation | (9,047) | | | (2,113) | | | | | |
| | | | | | | |
Total other comprehensive income (loss) | (9,440) | | | (1,609) | | | | | |
Comprehensive income | 50,346 | | | 43,615 | | | | | |
Comprehensive (income) loss attributable to non-controlling interests | (889) | | | 127 | | | | | |
Comprehensive income attributable to Amkor | $ | 49,457 | | | $ | 43,742 | | | | | |
The accompanying notes are an integral part of these statements.
AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| (In thousands, except per share data) |
ASSETS |
Current assets: | | | |
Cash and cash equivalents | $ | 1,118,004 | | | $ | 1,119,818 | |
| | | |
Short-term investments (amortized cost of $454,767 and $474,663 in 2024 and 2023, respectively) | 454,669 | | | 474,869 | |
Accounts receivable, net of allowances | 1,093,960 | | | 1,149,493 | |
Inventories | 331,070 | | | 393,128 | |
Other current assets | 47,312 | | | 58,502 | |
Total current assets | 3,045,015 | | | 3,195,810 | |
Property, plant and equipment, net | 3,367,434 | | | 3,299,445 | |
Operating lease right of use assets | 106,873 | | | 117,006 | |
Goodwill | 18,641 | | | 20,003 | |
Restricted cash | 781 | | | 799 | |
Other assets | 146,322 | | | 138,062 | |
Total assets | $ | 6,685,066 | | | $ | 6,771,125 | |
LIABILITIES AND EQUITY |
Current liabilities: | | | |
Short-term borrowings and current portion of long-term debt | $ | 112,968 | | | $ | 131,624 | |
Trade accounts payable | 618,378 | | | 754,453 | |
Capital expenditures payable | 234,762 | | | 106,368 | |
Short-term operating lease liability | 27,112 | | | 33,616 | |
Accrued expenses | 309,976 | | | 358,414 | |
Total current liabilities | 1,303,196 | | | 1,384,475 | |
Long-term debt | 1,038,346 | | | 1,071,832 | |
Pension and severance obligations | 79,647 | | | 87,133 | |
Long-term operating lease liabilities | 52,924 | | | 56,837 | |
Other non-current liabilities | 180,345 | | | 175,813 | |
Total liabilities | 2,654,458 | | | 2,776,090 | |
Commitments and contingencies (Note 15) | | | |
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; 292,494 and 292,167 shares issued; and 246,154 and 245,888 shares outstanding in 2024 and 2023, respectively | 292 | | | 292 | |
Additional paid-in capital | 2,014,782 | | | 2,008,170 | |
Retained earnings | 2,199,300 | | | 2,159,831 | |
Accumulated other comprehensive income (loss) | 6,910 | | | 16,350 | |
Treasury stock, at cost, 46,340 and 46,279 shares in 2024 and 2023, respectively | (224,157) | | | (222,335) | |
Total Amkor stockholders’ equity | 3,997,127 | | | 3,962,308 | |
Non-controlling interests in subsidiaries | 33,481 | | | 32,727 | |
Total equity | 4,030,608 | | | 3,995,035 | |
Total liabilities and equity | $ | 6,685,066 | | | $ | 6,771,125 | |
The accompanying notes are an integral part of these statements.
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Additional Paid- In Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | | | | | Total Amkor Stockholders’ Equity | | Noncontrolling Interest in Subsidiaries | | Total Equity |
| Common Stock | | | | | Treasury Stock | | | |
| Shares | | Par Value | | | | | Shares | | Cost | | | |
| (In thousands) |
| | | | | | | | | | | | | | | | | | | |
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Balance at December 31, 2023 | 292,167 | | | $ | 292 | | | $ | 2,008,170 | | | $ | 2,159,831 | | | $ | 16,350 | | | (46,279) | | | $ | (222,335) | | | $ | 3,962,308 | | | $ | 32,727 | | | $ | 3,995,035 | |
Net income | — | | | — | | | — | | | 58,897 | | | — | | | — | | | — | | | 58,897 | | | 889 | | | 59,786 | |
Other comprehensive income (loss) | — | | | — | | | — | | | — | | | (9,440) | | | — | | | — | | | (9,440) | | | — | | | (9,440) | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Treasury stock acquired through surrender of shares for tax withholding | — | | | — | | | — | | | — | | | — | | | (61) | | | (1,822) | | | (1,822) | | | — | | | (1,822) | |
Issuance of stock through share-based compensation plans | 327 | | | — | | | 1,356 | | | — | | | — | | | — | | | — | | | 1,356 | | | — | | | 1,356 | |
Share-based compensation | — | | | — | | | 5,256 | | | — | | | — | | | — | | | — | | | 5,256 | | | — | | | 5,256 | |
Cash dividends declared ($0.07875 per common share) | — | | | — | | | — | | | (19,428) | | | — | | | — | | | — | | | (19,428) | | | — | | | (19,428) | |
Subsidiary dividends to non-controlling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (135) | | | (135) | |
Balance at March 31, 2024 | 292,494 | | | $ | 292 | | | $ | 2,014,782 | | | $ | 2,199,300 | | | $ | 6,910 | | | (46,340) | | | $ | (224,157) | | | $ | 3,997,127 | | | $ | 33,481 | | | $ | 4,030,608 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Balance at December 31, 2022 | 291,249 | | | $ | 291 | | | $ | 1,996,344 | | | $ | 1,874,644 | | | $ | 16,699 | | | (46,158) | | | $ | (219,226) | | | $ | 3,668,752 | | | $ | 30,949 | | | $ | 3,699,701 | |
Net income | — | | | — | | | — | | | 45,351 | | | — | | | — | | | — | | | 45,351 | | | (127) | | | 45,224 | |
Other comprehensive income (loss) | — | | | — | | | — | | | — | | | (1,609) | | | — | | | — | | | (1,609) | | | — | | | (1,609) | |
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| | | | | | | | | | | | | | | | | | | |
Treasury stock acquired through surrender of shares for tax withholding | — | | | — | | | — | | | — | | | — | | | (111) | | | (2,823) | | | (2,823) | | | — | | | (2,823) | |
Issuance of stock through share-based compensation plans | 565 | | | 1 | | | 1,523 | | | — | | | — | | | — | | | — | | | 1,524 | | | — | | | 1,524 | |
Share-based compensation | — | | | — | | | 3,708 | | | — | | | — | | | — | | | — | | | 3,708 | | | — | | | 3,708 | |
Cash Dividends declared ($0.075 per common share) | — | | | — | | | — | | | (18,426) | | | — | | | — | | | — | | | (18,426) | | | — | | | (18,426) | |
Subsidiary dividends to non-controlling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (136) | | | (136) | |
Balance at March 31, 2023 | 291,814 | | | $ | 292 | | | $ | 2,001,575 | | | $ | 1,901,569 | | | $ | 15,090 | | | (46,269) | | | $ | (222,049) | | | $ | 3,696,477 | | | $ | 30,686 | | | $ | 3,727,163 | |
The accompanying notes are an integral part of these statements.
AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | |
| For the Three Months Ended March 31, |
| 2024 | | 2023 |
| (In thousands) |
Cash flows from operating activities: | | | |
Net income | $ | 59,786 | | | $ | 45,224 | |
Depreciation and amortization | 144,925 | | | 156,762 | |
| | | |
| | | |
Other operating activities and non-cash items | 14,100 | | | (2,821) | |
Changes in assets and liabilities | (56,499) | | | (23,419) | |
Net cash provided by operating activities | 162,312 | | | 175,746 | |
Cash flows from investing activities: | | | |
Payments for property, plant and equipment | (96,169) | | | (98,224) | |
Proceeds from sale of property, plant and equipment | 3,439 | | | 652 | |
| | | |
Proceeds from foreign exchange forward contracts | 740 | | | 20,267 | |
Payments for foreign exchange forward contracts | (24,596) | | | (20,358) | |
Payments for short-term investments | (111,760) | | | (172,409) | |
Proceeds from sale of short-term investments | 16,014 | | | 21,549 | |
Proceeds from maturities of short-term investments | 121,684 | | | 92,655 | |
Other investing activities | 4,545 | | | 164 | |
Net cash used in investing activities | (86,103) | | | (155,704) | |
Cash flows from financing activities: | | | |
Proceeds from revolving credit facilities | — | | | 370,000 | |
Payments of revolving credit facilities | — | | | (370,000) | |
Proceeds from short-term debt | 5,012 | | | 11,042 | |
Payments of short-term debt | (5,669) | | | (5,840) | |
| | | |
| | | |
Payments of long-term debt | (29,100) | | | (35,980) | |
| | | |
| | | |
| | | |
| | | |
Payments of finance lease obligations | (19,684) | | | (15,148) | |
| | | |
| | | |
| | | |
Payments of dividends | (19,383) | | | (18,430) | |
Other financing activities | (1,053) | | | (1,850) | |
Net cash used in financing activities | (69,877) | | | (66,206) | |
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash | (8,164) | | | (2,943) | |
Net decrease in cash, cash equivalents and restricted cash | (1,832) | | | (49,107) | |
Cash, cash equivalents and restricted cash, beginning of period | 1,120,617 | | | 962,406 | |
Cash, cash equivalents and restricted cash, end of period | $ | 1,118,785 | | | $ | 913,299 | |
Non-cash investing and financing activities: | | | |
Property, plant and equipment included in capital expenditures payable | $ | 195,405 | | | $ | 177,615 | |
| | | |
Right of use assets acquired through finance lease liabilities | 17,811 | | | 17,513 | |
Right of use assets acquired through operating lease liabilities | 2,321 | | | 3,180 | |
| | | |
| | | |
The accompanying notes are an integral part of these statements.
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Interim Financial Statements
Basis of Presentation. The Consolidated Financial Statements and related disclosures as of March 31, 2024, and for the three months ended March 31, 2024 and 2023, contained in this Form 10-Q (the “Consolidated Financial Statements”) are unaudited pursuant to the rules and regulations of the SEC. The December 31, 2023 Consolidated Balance Sheet data contained in this Form 10-Q was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to SEC rules and regulations. In our opinion, the Consolidated Financial Statements include all adjustments (consisting only of normal recurring adjustments) necessary for the fair statement of the results for the interim periods and should be read in conjunction with the financial statements included in the 2023 Form 10-K. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full year ending December 31, 2024. Unless the context otherwise requires, all references to “Amkor,” “we,” “us” or “our” are to Amkor Technology, Inc. and its wholly and majority-owned subsidiaries.
Use of Estimates. The Consolidated Financial Statements have been prepared in conformity with U.S. GAAP, using management’s best estimates and judgments where appropriate. These estimates and judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ materially from these estimates and judgments as a result of, for example, any worsening of the global business and economic environment.
Leases. Total long-term finance lease liabilities as of March 31, 2024 and December 31, 2023 were $49.7 million and $47.8 million, respectively.
Goodwill. The balance of goodwill in the Consolidated Balance Sheets contained in this Form 10-Q reflects adjustments for foreign currency translation.
Unbilled Receivables. Total unbilled receivables as of March 31, 2024 and December 31, 2023 were $229.8 million and $260.8 million, respectively.
Contract Liabilities. Contract liabilities were $123.6 million and $135.5 million as of March 31, 2024 and December 31, 2023, respectively. As of March 31, 2024 and December 31, 2023, the short-term portions of the liabilities were $67.4 million and $71.1 million, respectively. The remainder of the March 31, 2024 contract liability balance is expected to be recognized in revenue over the next 1-5 years. Revenue recognized during the three months ended March 31, 2024 and 2023 that was included in the contract liabilities balance at the beginning of the period was $18.9 million and $21.5 million, respectively.
Share-based compensation. In February 2024, long-term incentive awards were granted in the form of time-vested restricted stock units (“RSUs”) and performance-vested restricted stock units (“PSUs”) to our management pursuant to the 2021 Equity Plan with different terms from those issued in prior years. For a description of the RSUs and PSUs granted in prior years, please refer to our Consolidated Financial Statements in Part II, Item 8, Note 2 of the 2023 Form 10-K.
The RSUs granted in the first quarter of 2024 will generally vest in three equal installments on the anniversary of the grant date, subject to the recipient’s continued employment with the Company at the time of vesting. The value of the RSUs is determined based on the fair market value of the underlying shares on the date of the grant, reduced by the present value of dividends or dividend equivalent rights expected to be paid on our common stock prior to vesting.
The PSUs granted in the first quarter of 2024 are divided between PSUs based on earnings per share in each of 2024, 2025 and 2026 (“EPS PSUs”), and PSUs based on relative total shareholder return (“rTSR PSUs”), compared to the components of the PHLX Semiconductor Index (the “SOX”) over a three-year period, with half of the awards as EPS PSUs and half as rTSR PSUs.
For the EPS PSUs, the value is determined based on the fair market value of the underlying shares on the date of the grant, reduced by the present value of dividends or dividend equivalent rights expected to be paid on our common stock prior to vesting. The number of shares of our common stock to be received annually at vesting will range from 0% to
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
225%. For the rTSR PSUs, the Company estimated the grant-date fair value of the PSUs subject to a market condition using a Monte Carlo simulation model, using the following weighted-average assumptions: risk-free interest rate of 4.33% and annualized volatility of 46.77%. The grant date fair value of the PSUs was $27.07. The number of shares of our common stock to be received at vesting will range from 0% to 150% of the target grant amount based on rTSR performance over the three-year performance period. The Company recognizes the grant date fair value of the PSUs as compensation expense ratably over the vesting period.
Recently Issued Standards. In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires disclosure of additional income tax information, primarily related to effective tax rate reconciliation and income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. Adoption of this ASU should be applied on a prospective basis, but retrospective application is permitted. We are currently evaluating the impact of this new standard on our financial statements, which is expected to result in enhanced disclosures.
2. Net Sales by Product Group and End Market
The following table presents our net sales by product group:
| | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| (In thousands) | | |
Advanced products (1) | $ | 1,069,709 | | | $ | 1,067,377 | | | | | |
Mainstream products (2) | 295,802 | | | 404,162 | | | | | |
Total net sales | $ | 1,365,511 | | | $ | 1,471,539 | | | | | |
(1) Advanced products include flip chip, memory and wafer-level processing and related test services.
(2) Mainstream products include all other wirebond packaging and related test services.
Net sales by end market consist of the following:
| | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
Communications (smartphones, tablets) | 47 | % | | 45 | % | | | | |
Automotive, industrial and other (ADAS, electrification, infotainment, safety) | 22 | % | | 26 | % | | | | |
Computing (data center, infrastructure, PC/laptop, storage) | 17 | % | | 17 | % | | | | |
Consumer (AR & gaming, connected home, home electronics, wearables) | 14 | % | | 12 | % | | | | |
Total net sales | 100 | % | | 100 | % | | | | |
3. Other Income and Expense
Other income and expense consist of the following:
| | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| (In thousands) |
Interest income | $ | (16,796) | | | $ | (10,433) | | | | | |
Foreign currency loss (gain), net | 1,545 | | | 6,763 | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Other, net | (44) | | | 118 | | | | | |
Total other (income) expense, net | $ | (15,295) | | | $ | (3,552) | | | | | |
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
4. Income Taxes
Income tax expense of $12.2 million for the three months ended March 31, 2024 reflects income taxes, foreign withholding taxes and minimum taxes.
We monitor on an ongoing basis our ability to utilize our deferred tax assets and whether there is a need for a related valuation allowance. In evaluating our ability to recover our deferred tax assets in the jurisdictions from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies and recent results of operations.
We maintain a valuation allowance on certain U.S. and foreign deferred tax assets. Such valuation allowances are released as the related tax benefits are realized or when sufficient evidence exists to conclude that it is more likely than not that the deferred tax assets will be realized.
Unrecognized tax benefits represent reserves for potential tax deficiencies or reductions in tax benefits that could result from federal, state or foreign tax audits. Gross unrecognized tax benefits decreased from $31.5 million as of December 31, 2023 to $30.6 million as of March 31, 2024. All of our unrecognized tax benefits would reduce our effective tax rate if recognized. Our unrecognized tax benefits are subject to change for effective settlement of examinations, changes in the recognition threshold of tax positions, the expiration of statutes of limitations and other factors.
We have tax returns that are open to examination in various jurisdictions for tax years 2013-2023. The open years contain matters that could be subject to differing interpretations of applicable tax laws and regulations related to the amount and/or timing of income, deductions and tax credits. There can be no assurance that the outcome of the examinations will be favorable. In certain circumstances where we elect to appeal the results of an examination, we may be required to make tax assessment payments to proceed with the administrative appeal process.
5. Earnings Per Share
Basic earnings per share (“EPS”) is computed by dividing net income attributable to Amkor common stockholders by the weighted-average number of common shares outstanding during the period. The weighted-average number of common shares outstanding is reduced for treasury stock.
Diluted EPS is computed based on the weighted-average number of common shares outstanding plus the effect of dilutive potential common shares outstanding during the period. Dilutive potential common shares include outstanding stock options, performance-vested restricted stock units, time-vested restricted stock units and unvested restricted shares.
The following table summarizes the computation of basic and diluted EPS:
| | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| (In thousands, except per share data) |
Net income attributable to Amkor common stockholders | $ | 58,897 | | | $ | 45,351 | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Weighted-average number of common shares outstanding - basic | 246,008 | | | 245,330 | | | | | |
Effect of dilutive securities: | | | | | | | |
Share-based awards | 1,606 | | | 1,757 | | | | | |
Weighted-average number of common shares outstanding - diluted | 247,614 | | | 247,087 | | | | | |
Net income attributable to Amkor per common share: | | | | | | | |
Basic | $ | 0.24 | | | $ | 0.18 | | | | | |
Diluted | 0.24 | | | 0.18 | | | | | |
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
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 anti-dilutive:
| | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| (In thousands) |
Share-based awards | 11 | | | — | | | | | |
| | | | | | | |
6. Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss), net of tax, consist of the following:
| | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized Gains (Losses) on Available-for-Sale Debt Investments (1) | | Defined Benefit Pension (2) | | Foreign Currency Translation | | Total |
| (In thousands) |
Accumulated other comprehensive income (loss) at December 31, 2023 | $ | 212 | | | $ | 15,905 | | | $ | 233 | | | $ | 16,350 | |
Other comprehensive income (loss) before reclassifications | (253) | | | — | | | (9,047) | | | (9,300) | |
Amounts reclassified from accumulated other comprehensive income (loss) | (55) | | | (85) | | | — | | | (140) | |
Other comprehensive income (loss) | (308) | | | (85) | | | (9,047) | | | (9,440) | |
Accumulated other comprehensive income (loss) at March 31, 2024 | $ | (96) | | | $ | 15,820 | | | $ | (8,814) | | | $ | 6,910 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized Gains (Losses) on Available-for-Sale Debt Investments (1) | | Defined Benefit Pension (2) | | Foreign Currency Translation | | Total |
| (In thousands) |
Accumulated other comprehensive income (loss) at December 31, 2022 | $ | (1,573) | | | $ | 14,220 | | | $ | 4,052 | | | $ | 16,699 | |
Other comprehensive income (loss) before reclassifications | 645 | | | — | | | (2,113) | | | (1,468) | |
Amounts reclassified from accumulated other comprehensive income (loss) | (44) | | | (97) | | | — | | | (141) | |
Other comprehensive income (loss) | 601 | | | (97) | | | (2,113) | | | (1,609) | |
Accumulated other comprehensive income (loss) at March 31, 2023 | $ | (972) | | | $ | 14,123 | | | $ | 1,939 | | | $ | 15,090 | |
(1) Amounts reclassified out of accumulated other comprehensive income (loss) are included as other (income) expense, net (Note 3).
(2) Amounts reclassified out of accumulated other comprehensive income (loss) are included as a component of net periodic pension cost (Note 12) or other (income) expense, net (Note 3).
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
7. Investments
All of our available-for-sale debt investments as of March 31, 2024 are available to fund current operations and are recorded at fair value (Note 14).
The following table summarizes our cash equivalents and available-for-sale debt investments:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 |
| | | Fair Value Level |
| Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses (1) | | Total Fair Value | | Level 1 | | Level 2 |
| (In thousands) |
Cash equivalents | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Commercial paper | $ | 51,970 | | | $ | — | | | $ | — | | | $ | 51,970 | | | $ | — | | | $ | 51,970 | |
Corporate bonds | 1,657 | | | — | | | — | | | 1,657 | | | — | | | 1,657 | |
| | | | | | | | | | | |
Money market funds | 97,440 | | | — | | | — | | | 97,440 | | | 97,440 | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
U.S. government bonds | 16,936 | | | — | | | — | | | 16,936 | | | 16,936 | | | — | |
| | | | | | | | | | | |
Total cash equivalents (2) | 168,003 | | | — | | | — | | | 168,003 | | | 114,376 | | | 53,627 | |
| | | | | | | | | | | |
Short-term investments | | | | | | | | | | | |
Asset-backed securities | 62,076 | | | 99 | | | (27) | | | 62,148 | | | — | | | 62,148 | |
Certificate of deposits | 19,294 | | | — | | | — | | | 19,294 | | | 19,294 | | | — | |
Commercial paper | 45,383 | | | — | | | — | | | 45,383 | | | — | | | 45,383 | |
Corporate bonds | 255,876 | | | 277 | | | (301) | | | 255,852 | | | — | | | 255,852 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
U.S. government agency bonds | 4,729 | | | — | | | (4) | | | 4,725 | | | — | | | 4,725 | |
U.S. government bonds | 62,212 | | | — | | | (142) | | | 62,070 | | | 62,070 | | | — | |
| | | | | | | | | | | |
Total short-term investments | 449,570 | | | 376 | | | (474) | | | 449,472 | | | 81,364 | | | 368,108 | |
Total | $ | 617,573 | | | $ | 376 | | | $ | (474) | | | $ | 617,475 | | | $ | 195,740 | | | $ | 421,735 | |
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2023 |
| | | Fair Value Level |
| Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses (1) | | Total Fair Value | | Level 1 | | Level 2 |
| (In thousands) |
Cash equivalents | | | | | | | | | | | |
Asset-backed securities | $ | 138 | | | $ | — | | | $ | — | | | $ | 138 | | | $ | — | | | $ | 138 | |
| | | | | | | | | | | |
Commercial paper | 48,063 | | | — | | | — | | | 48,063 | | | — | | | 48,063 | |
| | | | | | | | | | | |
Money market funds | 60,719 | | | — | | | — | | | 60,719 | | | 60,719 | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
U.S. government bonds | 2,996 | | | — | | | — | | | 2,996 | | | 2,996 | | | — | |
Total cash equivalents | 111,916 | | | — | | | — | | | 111,916 | | | 63,715 | | | 48,201 | |
| | | | | | | | | | | |
Short-term investments | | | | | | | | | | | |
Asset-backed securities | 65,340 | | | 170 | | | (22) | | | 65,488 | | | — | | | 65,488 | |
Certificate of deposits | 17,086 | | | — | | | — | | | 17,086 | | | 17,086 | | | — | |
Commercial paper | 56,273 | | | — | | | — | | | 56,273 | | | — | | | 56,273 | |
Corporate bonds | 251,671 | | | 432 | | | (299) | | | 251,804 | | | — | | | 251,804 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
U.S. government agency bonds | 13,200 | | | — | | | (9) | | | 13,191 | | | — | | | 13,191 | |
U.S. government bonds | 65,881 | | | 13 | | | (79) | | | 65,815 | | | 65,815 | | | — | |
| | | | | | | | | | | |
Total short-term investments | 469,451 | | | 615 | | | (409) | | | 469,657 | | | 82,901 | | | 386,756 | |
Total | $ | 581,367 | | | $ | 615 | | | $ | (409) | | | $ | 581,573 | | | $ | 146,616 | | | $ | 434,957 | |
(1)All unrealized losses have been in a continuous loss position for less than 12 months. We do not intend to sell the investments in an unrealized loss position, and it is not more likely than not that we will be required to sell these investments before recovery of their amortized cost bases.
(2)For three months ended March 31, 2024 and 2023, we sold cash equivalent investments for proceeds of $5.8 million and $13.0 million, respectively, and realized no gain or loss on such sales.
The following table summarizes the contractual maturities of our cash equivalents and available-for-sale debt investments as of March 31, 2024:
| | | | | | | | | | | | | | | | | | | | | | |
| | Amortized Cost | | Fair Value | | | | | | | | |
| | (In thousands) | | | | | | | | |
Within 1 year | | $ | 459,067 | | | $ | 458,887 | | | | | | | | | |
After 1 year through 5 years | | 96,430 | | | 96,440 | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Asset-backed securities | | 62,076 | | | 62,148 | | | | | | | | | |
Total | | $ | 617,573 | | | $ | 617,475 | | | | | | | | | |
Actual maturities can differ from contractual maturities due to various factors including the issuers may have the right to call or prepay obligations without call or prepayment penalties.
As of March 31, 2024 and December 31, 2023, the amortized cost and the fair market value of our held-to-maturity government bond (Level 1) maturing within a year was $5.2 million.
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
8. Factoring of Accounts Receivable
For certain accounts receivable, we use non-recourse factoring arrangements with third-party financial institutions to manage our working capital and cash flows. Under these arrangements, we sell receivables to a financial institution for cash at a discount to the face amount. As part of the factoring arrangements, we perform certain collection and administrative functions for the receivables sold. For the three months ended March 31, 2024 and 2023, we sold receivables totaling $24.4 million and $78.0 million, respectively, net of discounts and fees. Discounts and fees were insignificant for the three months ended March 31, 2024, and $0.2 million for the three months ended March 31, 2023.
9. Property, Plant and Equipment
Property, plant and equipment consist of the following:
| | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| (In thousands) |
Land | $ | 211,211 | | | $ | 212,722 | |
Buildings and improvements | 2,149,095 | | | 2,080,589 | |
Machinery and equipment | 7,104,414 | | | 7,022,614 | |
Finance lease assets | 224,983 | | | 209,506 | |
Furniture, fixtures and other equipment | 22,460 | | | 22,655 | |
Software and computer equipment | 206,633 | | | 200,362 | |
Construction in progress | 198,263 | | | 223,332 | |
Total property, plant and equipment | 10,117,059 | | | 9,971,780 | |
Accumulated depreciation and amortization | (6,749,625) | | | (6,672,335) | |
Total property, plant and equipment, net | $ | 3,367,434 | | | $ | 3,299,445 | |
The following table summarizes our depreciation expense:
| | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| (In thousands) |
Depreciation expense | $ | 144,787 | | | $ | 156,614 | | | | | |
We periodically assess the estimated useful lives of our property, plant and equipment. Based on our assessment of test equipment and its increased interchangeability enabling broader and longer use, we extended the estimated useful lives of test equipment from five years to seven years as of January 1, 2024. As a result, the reduction in depreciation expense of approximately $15 million benefited net income and diluted earnings per share by approximately $13 million and $0.05 for the first quarter of 2024, respectively.
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
10. Accrued Expenses
Accrued expenses consist of the following:
| | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| (In thousands) |
Payroll and benefits | $ | 95,100 | | | $ | 115,604 | |
| | | |
Deferred revenue and customer advances | 67,439 | | | 71,117 | |
Short-term finance lease liabilities | 52,734 | | | 57,761 | |
Income taxes payable | 30,471 | | | 35,215 | |
Accrued severance plan obligations | 7,518 | | | 7,906 | |
Accrued interest | 2,318 | | | 11,175 | |
Other accrued expenses | 54,396 | | | 59,636 | |
Total accrued expenses | $ | 309,976 | | | $ | 358,414 | |
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
11. Debt
Following is a summary of short-term borrowings and long-term debt:
| | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| (In thousands) |
Debt of Amkor Technology, Inc.: | | | |
Senior notes: | | | |
6.625% Senior notes, due September 2027 | $ | 525,000 | | | $ | 525,000 | |
Debt of subsidiaries: | | | |
Amkor Technology Korea, Inc.: | | | |
Term loan, fixed rate at 1.85%, due April 2024 (1) | — | | | — | |
Term loan, fixed rate at 2.12%, due December 2028 | 200,000 | | | 200,000 | |
Amkor Technology Japan, Inc.: | | | |
Short-term term loans, variable rate (2) | 4,136 | | | 5,098 | |
Term loan, fixed rate at 1.35%, due December 2024 | 28,246 | | | 40,414 | |
Term loan, fixed rate at 1.20%, due December 2025 | 25,206 | | | 30,913 | |
Term loan, fixed rate at 1.23%, due December 2026 | 47,605 | | | 55,729 | |
Term loan, fixed rate at 1.59%, due December 2027 | 77,800 | | | 89,053 | |
Term loan, fixed rate at 1.80%, due December 2028 | 109,845 | | | 124,078 | |
Amkor Assembly & Test (Shanghai) Co., Ltd.: | | | |
Term loans, SOFR plus 0.75%, weighted average of 6.06% as of March 31, 2024, due June 2025 | 37,000 | | | 37,000 | |
Term loans, SOFR plus 0.75%, weighted average of 6.06% as of March 31, 2024, due 2025 | 57,000 | | | 57,500 | |
Term loans, SOFR plus 0.95%, due December 2026 (3) | 45,000 | | | 45,000 | |
Other: | | | |
Credit facility, TAIFX plus the applicable bank rate, due December 2024 (Taiwan) (4) | — | | | — | |
Senior secured revolving credit facility, applicable bank rate plus 1.75%, due March 2027 (Singapore) (5) | — | | | — | |
| 1,156,838 | | | 1,209,785 | |
Less: Unamortized discount and deferred debt costs, net | (5,524) | | | (6,329) | |
Less: Short-term borrowings and current portion of long-term debt | (112,968) | | | (131,624) | |
Long-term debt | $ | 1,038,346 | | | $ | 1,071,832 | |
(1)In April 2021, we entered into a ₩80.0 billion term loan agreement with the option to borrow and re-borrow the funds up to six times per year through April 2024. Principal is payable at maturity, and interest is payable monthly, at a fixed rate of 1.85%. As of March 31, 2024, ₩80.0 billion, or approximately $59 million, was available to be drawn.
(2)We entered into various short-term term loans which mature semiannually. Principal and interest are payable in monthly installments. Interest as of March 31, 2024 is at an annual base rate equal to the Tokyo Interbank Offered Rate plus 0.18% to 0.20% (weighted average of 0.25% as of March 31, 2024). As of March 31, 2024, $2.9 million was available to be drawn.
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
(3)In February 2024, Amkor Assembly & Test (Shanghai) Co. Ltd. amended the term loan due December 2026 to reduce the interest rate from SOFR plus 1.40% to SOFR plus 0.95% (weighted average of 6.27% as of March 31, 2024). This contractual amendment is treated as a modification with no recognized gain or loss.
(4)In March 2022, Amkor Technology Taiwan Ltd. (“ATT”) amended an existing revolving credit facility to reduce availability from $36.0 million to $15.0 million. As of March 31, 2024, $15.0 million was available for future borrowings under such credit facility.
(5)In March 2022, Amkor Technology Singapore Holdings Pte. Ltd. (“ATSH”) entered into a $600.0 million senior secured revolving credit facility (the “2022 Singapore Revolver”), which is guaranteed by Amkor Technology, Inc., ATT and Amkor Advanced Technology, Inc. (“AATT”). The maximum borrowing capacity under the 2022 Singapore Revolver is limited to a base amount equal to the lesser of: (1) $600.0 million; or (2) $250.0 million plus a variable amount equal to 37.5% of our consolidated accounts receivable balance. As of March 31, 2024, $600.0 million was available for future borrowings under the 2022 Singapore Revolver.
Certain of our foreign debt is collateralized by the land, buildings, equipment and accounts receivable in the respective locations. As of March 31, 2024, the collateralized debt balance was $627.7 million, of which $319.0 million of assets were pledged as collateral.
The debt of Amkor Technology, Inc. is structurally subordinated in right of payment to all existing and future debt and other liabilities of our subsidiaries. From time to time, Amkor Technology, Inc., ATT, AATT, and ATSH guarantee certain debt of our subsidiaries. The agreements governing our indebtedness contain affirmative and negative covenants which restrict our ability to pay dividends and could restrict our operations. These restrictions are determined in part by calculations based upon cumulative net income and do not currently have a material impact on our ability to make dividend payments or stock repurchases.
We were in compliance with all debt covenants at March 31, 2024.
12. Pension Plans
Foreign Defined Benefit Pension Plans
Our subsidiaries in Japan, Korea, Malaysia, the Philippines and Taiwan sponsor defined benefit pension plans. Charges to expense are based upon actuarial analyses. The components of net periodic pension cost for these defined benefit pension plans are as follows:
| | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| (In thousands) |
Service cost | $ | 3,484 | | | $ | 3,828 | | | | | |
Interest cost | 1,459 | | | 1,603 | | | | | |
Expected return on plan assets | (1,418) | | | (1,311) | | | | | |
| | | | | | | |
Recognized actuarial gain | (97) | | | (98) | | | | | |
Net periodic pension cost | $ | 3,428 | | | $ | 4,022 | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
The components of net periodic pension cost other than the service cost component are included in other (income) expense, net in our Consolidated Statements of Income.
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Defined Contribution Pension Plans
We sponsor defined contribution pension plans in Korea, Malaysia, Taiwan and the U.S. The following table summarizes our defined contribution expense:
| | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| (In thousands) |
Defined contribution expense | $ | 8,414 | | | $ | 8,796 | | | | | |
13. Derivatives
We use foreign currency forward contracts to mitigate foreign currency risk of certain monetary assets and liabilities denominated in foreign currencies. We do not enter into such contracts for trading or speculative purposes. These derivative instruments are not designated as hedging instruments.
As of March 31, 2024 and December 31, 2023, our foreign exchange forward contracts consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| Notional Value | | Fair Value (Level 2) | | Balance Sheet Location | | Notional Value | | Fair Value (Level 2) | | Balance Sheet Location |
| (In thousands) |
Japanese yen | $ | 235,397 | | | $ | 457 | | | Other current assets | | $ | 279,027 | | | $ | 2,745 | | | Other current assets |
Korean won | 76,415 | | | (11) | | | Accrued expenses | | 59,036 | | | (97) | | | Accrued expenses |
Philippine peso | 9,009 | | | (12) | | | Accrued expenses | | 6,553 | | | (20) | | | Accrued expenses |
Singapore dollar | 14,741 | | | (50) | | | Accrued expenses | | 11,506 | | | 20 | | | Other current assets |
Taiwan dollar | 38,850 | | | 28 | | | Other current assets | | 37,914 | | | 89 | | | Other current assets |
Total forward contracts | $ | 374,412 | | | $ | 412 | | | | | $ | 394,036 | | | $ | 2,737 | | | |
For the three months ended March 31, 2024 and 2023, the derivatives resulted in a net loss of $27.5 million and $12.0 million, which were partially offset by the foreign currency gains associated with the underlying net liabilities.
14. Fair Value Measurements
The accounting framework for determining fair value includes a hierarchy for ranking the quality and reliability of the information used to measure fair value, which enables the reader of the financial statements to assess the inputs used to develop those measurements. The fair value hierarchy consists of three tiers as follows: Level 1, defined as quoted market prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, model-based valuation techniques for which all significant assumptions are observable in the market or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and Level 3, defined as unobservable inputs that are not corroborated by market data. For our Level 2 short-term investments, we consider factors such as actual trade data, benchmark yields, broker/dealer quotes, and other similar data obtained from quoted market prices and independent pricing vendors to determine the fair value of these assets and liabilities.
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
The fair values of cash, accounts receivable, trade accounts payable, capital expenditures payable and certain other current assets and accrued expenses approximate carrying values because of their short-term nature. The carrying value of certain other non-current assets and liabilities approximates fair value. Our assets and liabilities recorded at fair value on a recurring basis include restricted cash money market funds and short-term investments, including investments classified as cash equivalents. Cash equivalent money market funds and restricted cash money market funds are invested in U.S. money market funds and various U.S. and foreign bank operating and time deposit accounts, which are due on demand or carry a maturity date of less than three months when purchased. No restrictions have been imposed on us regarding withdrawal of balances with respect to our cash equivalents as a result of liquidity or other credit market issues affecting the money market funds we invest in or the counterparty financial institutions holding our deposits.
Our derivative financial instruments are valued using quoted market prices for similar assets. Counterparties to these derivative contracts are highly rated financial institutions.
We also measure certain assets and liabilities, including property, plant and equipment and goodwill, at fair value on a nonrecurring basis.
We measure the fair value of our debt for disclosure purposes. The following table presents the fair value of our debt:
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| Fair Value | | Carrying Value | | Fair Value | | Carrying Value |
| (In thousands) |
Senior notes (Level 1) | $ | 528,008 | | | $ | 522,028 | | | $ | 531,778 | | | $ | 521,839 | |
Revolving credit facilities and term loans (Level 2) | 615,973 | | | 629,286 | | | 666,316 | | | 681,617 | |
Total debt | $ | 1,143,981 | | | $ | 1,151,314 | | | $ | 1,198,094 | | | $ | 1,203,456 | |
The estimated fair value of our senior notes is based primarily on quoted market prices reported on or near the respective balance sheet dates. The estimated fair value of our revolving credit facilities and term loans is calculated using a discounted cash flow analysis, which utilizes market-based assumptions, including forward interest rates adjusted for credit risk.
15. Commitments and Contingencies
We generally warrant that our services will be performed in a professional and workmanlike manner and in compliance with our customers’ specifications. We accrue costs for known warranty issues. Historically, our warranty costs have been immaterial.
Legal Proceedings
We are involved in claims and legal proceedings and may become involved in other legal matters arising in the ordinary course of our business. We evaluate these claims and legal matters on a case-by-case basis to determine the impact, if any, on our business, liquidity, results of operations, financial condition or cash flows. Although the outcome of these matters is uncertain, we believe that the ultimate outcome of these claims and proceedings, individually and in the aggregate, will not have a material adverse impact to us. Our evaluation of the potential impact of these claims and legal proceedings on our business, liquidity, results of operations, financial condition or cash flows could change in the future.
In accordance with the accounting guidance for loss contingencies, including legal proceedings, lawsuits, pending claims and other legal matters, we accrue for a loss contingency when we conclude that the likelihood of a loss is probable and the amount of the loss can be reasonably estimated. We adjust our accruals from time to time as we receive additional information, but the loss we incur may be significantly greater than or less than the amount we have accrued. We disclose loss contingencies if we believe they are material and there is at least a reasonable possibility that a loss has been incurred. Attorney fees related to legal matters are expensed as incurred.
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Lease Commitments
As of March 31, 2024 we have entered into additional lease agreements that have not yet commenced of approximately $58 million.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Amkor is one of the world’s leading providers of outsourced semiconductor packaging and test services. Our financial goal is profitable sales growth. To achieve this goal, we are focused on leveraging our leadership position in services for advanced technologies, providing our customers with a geographically diverse manufacturing footprint, growing within the industry secular growth markets of 5G, automotive, high-performance computing (“HPC”) and Internet-of-Things (“IoT”), optimizing utilization of existing assets, and selectively growing our scale and scope through strategic investments.
We are an industry leader in developing and commercializing advanced packaging and test technologies, which we believe provide substantial value to our customers. Advanced packages, which account for a significant portion of mobile phone semiconductor value, are the preferred choice in the high-end smartphone market. The use of advanced packages in automotive applications is also growing, largely due to new, data-intensive applications which require increased pin count and performance. With the continuing trend towards cloud-based computing and the expanding use of artificial intelligence, innovative advanced packaging solutions are needed to achieve the increased performance and power consumption requirements for this market. In consumer devices, further miniaturization and increasing functionality within IoT devices also require advanced packaging. We believe that demand for advanced packaging services will continue to grow as our customers and leading electronics original equipment manufacturers strive for smaller device geometries, higher levels of integration and performance and lower power consumption. We intend to continue to leverage our investments in advanced technology to meet the demand for these services in high growth markets.
Our broad geographic footprint, including our manufacturing presence in multiple countries across Asia, in Portugal and our headquarters in the United States, is a key differentiator and positions us to continue to support global supply chains and to participate in initiatives to regionalize supply chains. We are preparing to deliver advanced system-in-package (“SiP”) modules and other advanced packages from our Vietnam Facility beginning in the second half of 2024. In addition, we are progressing plans to build an advanced packaging and test facility in Arizona. We believe our unique geographic footprint provides customers with multiple options to mitigate risk and diversify their supply chains.
Another key factor in our success is the optimization of asset utilization. We build and utilize manufacturing lines which support multiple customers, and we increase factory utilization through sophisticated planning processes and intensive efficiency improvement activities.
From time to time, we identify attractive opportunities to strengthen our leadership position and market share through expansion of our operations, joint ventures, acquisitions and other strategic investments. We believe that selective growth through these strategic actions can further strengthen customer relationships, help to maintain and enhance our technological leadership, diversify our revenue streams and improve our profits.
As a supplier in the semiconductor industry, our business is cyclical and impacted by broad economic factors. Historical trends indicate there has been a strong correlation between worldwide gross domestic product levels, consumer spending and semiconductor industry cycles. We believe that the general semiconductor market is currently going through a cyclical correction. The semiconductor industry has experienced significant and sometimes prolonged cyclical upturns and downturns in the past. We cannot predict the timing, strength or duration of any correction, economic slowdown, recession or subsequent economic recovery.
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 firm customer commitments. We fund our operations, including capital expenditures and debt service requirements, with cash flows from operations, existing cash and cash equivalents, short-term investments, borrowings under available credit facilities and proceeds from any additional financing. Maintaining an appropriate level of liquidity is important to our business and depends on, among other considerations, the performance of our business, our capital expenditure levels, our ability to repay debt out of our operating cash flows or proceeds from debt or equity financings and our investment strategy. As of March 31, 2024, we had cash and cash equivalents and short-term investments of $1,118.0 million and $454.7 million, respectively.
Our net sales, gross profit, operating income, cash flows, liquidity and capital resources have historically fluctuated significantly from quarter to quarter due to many factors, including the seasonality of our business, the cyclical nature of the semiconductor industry and other factors discussed in the “Risk Factors” section in Part II, Item 1A of this Form 10-Q. We expect macroeconomic conditions to be challenging in the first half of 2024. To prepare for future growth, we will continue to make prudent investments, and we will closely manage capacity expansion and control costs in response to changes in market conditions.
Financial Summary
Our net sales decreased $106.0 million, or 7.2%, to $1,365.5 million for the three months ended March 31, 2024 compared to $1,471.5 million for the three months ended March 31, 2023. The decrease was primarily due to lower sales in our automotive and industrial end market.
Gross margin for the three months ended March 31, 2024 increased to 14.8% compared to 13.2% for the three months ended March 31, 2023. The increase in gross margin was primarily due to the extension of the estimated useful life of our test equipment from five years to seven years, a decrease in the mix of products sold with higher material content and net favorable foreign currency exchange rate movements, partially offset by a decrease in net sales and resulting lower factory utilization.
Operating income margin increased 70 basis points to 5.4% for the three months ended March 31, 2024 from 4.7% for the three months ended March 31, 2023. The increase in our operating income margin was primarily due to the increase in our gross margin discussed above and recovery of bad debt expense, partially offset by costs associated with the opening of the Vietnam Facility and increased employee compensation costs.
Our capital expenditures totaled $96.2 million for the three months ended March 31, 2024 compared to $98.2 million for the three months ended March 31, 2023. Our spending was primarily focused on investments in advanced packaging and test equipment.
Net cash provided by operating activities was $162.3 million for the three months ended March 31, 2024 compared to $175.7 million for the three months ended March 31, 2023. This decrease was primarily due to changes in working capital, offset by higher operating profits.
Results of Operations
The following table sets forth certain operating data as a percentage of net sales for the periods indicated:
| | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
Net sales | 100.0 | % | | 100.0 | % | | | | |
Materials | 51.9 | % | | 52.9 | % | | | | |
Labor | 11.2 | % | | 11.3 | % | | | | |
Other manufacturing costs | 22.1 | % | | 22.6 | % | | | | |
Gross margin | 14.8 | % | | 13.2 | % | | | | |
Selling, general and administrative | 6.6 | % | | 5.3 | % | | | | |
Research and development | 2.8 | % | | 3.2 | % | | | | |
Operating income | 5.4 | % | | 4.7 | % | | | | |
Net income attributable to Amkor | 4.3 | % | | 3.1 | % | | | | |
Net Sales
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, | | |
| 2024 | | 2023 | | Change | | | | | | |
| (In thousands, except percentages) |
Net sales | $ | 1,365,511 | | | $ | 1,471,539 | | | $ | (106,028) | | | (7.2) | % | | | | | | | | |
The decrease in net sales for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily due to lower sales in our automotive and industrial end market. This end market decreased 22% compared to 2023, mainly due to elevated customer inventories.
Gross Profit and Gross Margin
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, | | |
| 2024 | | 2023 | | Change | | | | | | |
| (In thousands, except percentages) |
Gross profit | $ | 201,643 | | | $ | 194,421 | | | $ | 7,222 | | | | | | | |
Gross margin | 14.8 | % | | 13.2 | % | | 1.6 | % | | | | | | |
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, there tends to be a strong relationship between our revenue levels and gross margin. Accordingly, relatively modest increases or decreases in revenue can have a significant effect on margin and on labor and other manufacturing costs as a percentage of revenue, depending on product mix, utilization, foreign currency exchange rate movements and seasonality. We have expanded our business in advanced packaging, which tends to have higher material costs than our other products. As we continue to increase production of these higher material cost products, there could be an impact on our profitability, depending on overall utilization.
Gross profit and gross margin increased for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to the extension of the estimated useful life of our test equipment from five years to seven years, a decrease in the mix of products sold with higher material content and net favorable foreign currency exchange rate movements, partially offset by a decrease in net sales and resulting lower factory utilization.
Selling, General and Administrative
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, | | |
| 2024 | | 2023 | | Change | | | | | | |
| (In thousands, except percentages) |
Selling, general and administrative | $ | 90,346 | | | $ | 78,671 | | | $ | 11,675 | | | 14.8 | % | | | | | | | | |
Selling, general and administrative expenses increased for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to costs associated with the opening of the Vietnam Facility and increased employee compensation costs, partially offset by the recovery of bad debt expense.
Research and Development
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, | | |
| 2024 | | 2023 | | Change | | | | | | |
| (In thousands, except percentages) |
Research and development | $ | 38,171 | | | $ | 47,047 | | | $ | (8,876) | | | (18.9) | % | | | | | | | | |
Research and development activities are focused on developing new packaging and test services and improving the efficiency and capabilities of our existing production processes. The costs related to our technology and product development projects are included in research and development expense until the project moves into production. Once production begins, the costs relating to production become part of the cost of sales, including ongoing depreciation for the equipment previously held for research and development activities.
Research and development expenses decreased for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to utilization mix of assets shared with manufacturing and projects moving into production, partially offset by incremental research and development costs in our Portugal facility.
Other Income and Expense
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| For the Three Months Ended March 31, | | |
| 2024 | | 2023 | | Change | | | | | | |
| (In thousands, except percentages) |
Interest expense | $ | 16,439 | | | $ | 16,167 | | | $ | 272 | | | 1.7 | % | | | | | | | | |
Interest income | (16,796) | | | (10,433) | | | (6,363) | | | 61.0 | % | | | | | | | | |
Foreign currency loss (gain), net | 1,545 | | | 6,763 | | | (5,218) | | | (77.2) | % | | | | | | | | |
| | | | | | | | | | | | | | | |
Other, net | (44) | | | 118 | | | (162) | | | >(100)% | | | | | | | | |
Total other expense, net | $ | 1,144 | | | $ | 12,615 | | | $ | (11,471) | | | (90.9) | % | | | | | | | | |
Interest income increased for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to increases in our cash and cash equivalent and available-for-sale debt investment balances and higher interest rates.
The changes in foreign currency loss (gain), net for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 were primarily due to managing more of our net monetary exposure with foreign exchange forward contracts and the strengthening of the U.S. dollar compared to the foreign currencies of our subsidiaries, mainly the Japanese yen, and the associated impact on our net monetary exposure.
Income Tax Expense
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| For the Three Months Ended March 31, | | |
| 2024 | | 2023 | | Change | | | | | | |
| (In thousands) |
Income tax expense | $ | 12,196 | | | $ | 10,864 | | | $ | 1,332 | | | | | | | |
Income tax expense, which includes foreign withholding taxes and minimum taxes, reflects the applicable tax rates in effect in the various countries where our income is earned and is subject to volatility depending on the relative mix of earnings in each location. Income tax expense increased for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to an increase in income before income taxes.
During the three months ended March 31, 2024 and 2023, our subsidiaries in Korea and Singapore operated under various conditional reduced tax rates. Beginning in 2024, our subsidiary in Vietnam also operated under various conditional reduced tax rates. As these conditional reduced tax rates expire, income earned in these jurisdictions will be subject to higher statutory income tax rates, which may cause our effective tax rate to increase.
See Note 4 to our Consolidated Financial Statements in Part 1, Item 1 of this Form 10-Q for additional information about our income tax expense.
Liquidity
We assess our liquidity based on our current expectations regarding sales and operating expenses, capital spending, dividend payments, stock and debt repurchases, debt service requirements and other funding needs. Based on this assessment, we believe that our cash flow from operating activities, together with existing cash and cash equivalents, short-term investments and availability under our credit facilities, will be sufficient to fund our working capital, capital expenditures, dividend payments, debt service, debt repurchases and other financial requirements for at least the next twelve months.
Our liquidity is affected by, among other factors, volatility in the global economy and credit markets, the performance of our business, our capital expenditure levels, other uses of our cash including any dividends and purchases of stock or debt under any repurchase program, any acquisitions, joint ventures or other investments and our ability to either repay debt out of operating cash flow or refinance it at or prior to maturity with the proceeds from debt or equity offerings. There can be no assurance that we will generate the necessary net income or operating cash flows, or be able to borrow sufficient funds, 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 other factors discussed in Part II, Item 1A of this Form 10-Q.
Our primary source of cash and the source of funds for our operations are cash flows from operations, current cash and cash equivalents, short-term investments, borrowings under available credit facilities and proceeds from any additional debt or equity financings. Please refer to Note 7 and Note 11 to our Consolidated Financial Statements in Part 1, Item 1 of this Form 10-Q for additional information on our investments and borrowings, respectively.
As of March 31, 2024, we had cash and cash equivalents and short-term investments of $1,572.7 million. Included in our cash and short-term investments balances as of March 31, 2024 is $1,393.1 million held offshore by our foreign subsidiaries. We have the ability to access cash held offshore by our foreign subsidiaries primarily through the repayment of intercompany debt obligations. If we were to distribute this offshore cash to the U.S. as dividends from our foreign subsidiaries, the dividends generally would not be subject to U.S. federal income tax, but the distributions may be subject to foreign withholding and state income taxes.
As of March 31, 2024, our net liability associated with unrecognized tax benefits is $26.7 million. Due to the uncertainty regarding the amount and timing of any future cash outflows associated with our unrecognized tax benefits, we are unable to reasonably estimate the amount and timing of ultimate settlement, if any, with the various taxing authorities.
For certain accounts receivable, we use non-recourse factoring arrangements with third party financial institutions to manage our working capital and cash flows. Under these arrangements, we sell receivables to a financial institution for cash at a discount to the face amount. Available capacity under these arrangements is dependent on the level of our trade accounts receivable eligible to be sold, the financial institutions’ willingness to purchase such receivables and the limits provided by the financial institutions. These factoring arrangements can be reduced or eliminated at any time due to market conditions and changes in the creditworthiness of customers. For the three months ended March 31, 2024 and 2023, we sold accounts receivable totaling $24.4 million and $78.0 million, respectively, net of discounts and fees. Discounts and fees were insignificant for the three months ended March 31, 2024, and $0.2 million for the three months ended March 31, 2023.
We operate in a capital-intensive industry. Servicing our current and future customers may require that we incur significant operating expenses and make significant investments in equipment and facilities, which are generally made in advance of the related revenues and without firm customer commitments.
The maximum borrowing capacity under the 2022 Singapore Revolver is limited to a base amount equal to the lesser of: (1) $600.0 million; or (2) $250.0 million plus a variable amount equal to 37.5% of our consolidated accounts receivable balance. As of March 31, 2024, we had availability of $600.0 million. As of March 31, 2024, our foreign subsidiaries had $615.0 million available for future borrowings under revolving credit facilities, including the 2022 Singapore Revolver, and $62.3 million available to be borrowed under term loan credit facilities for working capital purposes and capital expenditures. For additional information regarding the 2022 Singapore Revolver, please refer to Note 11 to our Consolidated Financial Statements in Part 1, Item 1 of this Form 10-Q.
As of March 31, 2024, we had debt of $1,151.3 million, with $113.0 million payable within 12 months. As of March 31, 2024, the interest payment obligations, based on stated coupon rates for fixed rate debt and interest rates applicable at March 31, 2024 for variable rate debt, were $160.4 million during the remaining term of the debt. Interest payment obligations payable within 12 months is $51.4 million. We were in compliance with all debt covenants as of March 31, 2024, and we expect to remain in compliance with these covenants for at least the next twelve months. For additional information regarding our debt arrangements, please refer to Note 11 to our Consolidated Financial Statements in Part 1, Item 1 of this Form 10-Q.
Certain of our debt agreements have restrictions on dividend payments and the repurchase of stock and subordinated securities. These restrictions are determined in part by our covenant compliance and on calculations based upon cumulative net income and do not currently have a material impact on our ability to make dividend payments or stock repurchases.
The debt of Amkor Technology, Inc. is structurally subordinated in right of payment to all existing and future debt and other liabilities of our subsidiaries. From time to time, Amkor Technology Inc., ATT, AATT and ATSH guarantee certain debt of our subsidiaries.
In order to reduce our debt and future cash interest payments, we may from time to time repurchase or redeem our outstanding senior notes for cash or exchange shares of our common stock for our outstanding senior notes. Any such transaction may be made in the open market, through privately negotiated transactions or otherwise and would be subject to the terms of our indentures and other debt agreements, market conditions and other factors.
Our subsidiary in Korea maintains an unfunded severance plan that covers certain employees who were employed prior to August 1, 2015. As of March 31, 2024, the severance liability was $44.3 million, with $7.5 million payable within 12 months. Accrued severance benefits are estimated assuming all eligible employees were to terminate their employment at the balance sheet date. For service periods subsequent to August 1, 2015, employees participate in either a defined benefit pension plan or a defined contribution pension plan. From time to time, we may offer employees the option to convert from the severance plan to the defined contribution plan, which would require us to fund the converted portion of the liability. In addition, as of March 31, 2024, we had foreign pension plan obligations of $42.7 million, for which the timing and actual amount of impact on our future cash flow is uncertain. For additional information regarding our pension and severance plans, please refer to Note 12 to our Consolidated Financial Statements in Part 1, Item 1 of this Form 10-Q and in Note 12 to the 2023 Form 10-K.
We lease certain machinery and equipment, office space and manufacturing facilities. As of March 31, 2024, our total remaining operating lease obligations and finance lease obligations were $93.7 million and $114.7 million, respectively, with $30.3 million and $57.4 million payable within 12 months, respectively. The lease obligations represent our future minimum lease payments including interest payments.
We had off-balance sheet purchase obligations for capital expenditures, long-term supply contracts and other contractual commitments. As of March 31, 2024, the purchase obligations were $441.6 million, with $394.9 million payable within 12 months.
Capital Returns
During the three months ended March 31, 2024, we paid total quarterly cash dividends of $19.4 million, and we currently anticipate that we will continue to pay quarterly cash dividends in the future. However, the payment, amount and timing of future dividends remain within the discretion of our Board of Directors and will depend upon our results of operations, financial condition, cash requirements, debt restrictions and other factors.
Capital Resources
We make significant capital expenditures in order to service the demand of our customers, which are primarily focused on investments in advanced packaging and test equipment. During the three months ended March 31, 2024, our capital expenditures totaled $96.2 million.
We expect that our 2024 capital expenditures will be approximately $750 million. Ultimately, the amount of our 2024 capital expenditures will depend on several factors including, among others, the timing and implementation of any capital projects under review, the performance of our business, economic and market conditions, the cash needs and investment opportunities for the business, the need for additional capacity to service anticipated customer demand, equipment lead times and the availability of cash flows from operations or financing. We expect that our 2024 capital expenditures related to our planned advanced packaging and test facility in Arizona will be primarily for design and construction planning. The primary sources of funds for our capital expenditures are cash flows from operations, current cash and cash equivalents, short-term investments, borrowings under available credit facilities and proceeds from any additional debt or equity financings. Please refer to Note 7 and Note 11 to our Consolidated Financial Statements in Part 1, Item 1 of this Form 10-Q for additional information on our investments and borrowings, respectively.
In addition, we are subject to risks associated with our capital expenditures, including those discussed in the “Risk Factors” section in Part II, Item 1A of this Form 10-Q under the caption “We make substantial investments in equipment and facilities to support the demand of our customers, which may materially and adversely affect our business if the demand of our customers does not develop as we expect or is adversely affected.”
Cash Flows
Net cash provided by (used in) operating, investing and financing activities for the three months ended March 31, 2024 and 2023, was as follows:
| | | | | | | | | | | |
| For the Three Months Ended March 31, |
| 2024 | | 2023 |
| (In thousands) |
Operating activities | $ | 162,312 | | | $ | 175,746 | |
Investing activities | (86,103) | | | (155,704) | |
Financing activities | (69,877) | | | (66,206) | |
Operating activities: Our cash flow provided by operating activities for the three months ended March 31, 2024 decreased by $13.4 million compared to the three months ended March 31, 2023, primarily due to changes in working capital, offset by higher operating profits.
Investing activities: Our cash flow used in investing activities for the three months ended March 31, 2024 decreased by $69.6 million compared to the three months ended March 31, 2023, primarily due to lower payments for short-term investments and higher proceeds from maturities of short-term investments, offset by higher net payments for foreign exchange forward contracts.
Financing activities: The net cash used in financing activities for the three months ended March 31, 2024 and 2023 was primarily due to net debt repayments, the payments of our quarterly dividend and finance lease obligations.
We provide the following supplemental data to assist our investors and analysts in understanding our liquidity and capital resources. We define “free cash flow” as net cash provided by operating activities less payments for property, plant and equipment, plus proceeds from the sale of, insurance recovery for and grants for property, plant and equipment, if applicable. Free cash flow is not defined by U.S. GAAP. We believe free cash flow to be relevant and useful information to our investors because it provides them with additional information in assessing our liquidity, capital resources and financial operating results. Our management uses free cash flow in evaluating our liquidity, our ability to service debt, our ability to fund capital expenditures and our ability to pay dividends and the amount of dividends to be paid. However, free cash flow has certain limitations, including that it does not represent the residual cash flow available for discretionary expenditures since other, non-discretio