AMKOR TECHNOLOGY, INC. 10-K

Item 8. Financial Statements and Supplementary Data We present the information required by Item 8 of Form 10-K here in the following order: Page Report of Independent Registered Public Accounting Firm 49 Consolidated Statements of Income — Years ended December 31, 2020, 2019 and 2018 52 Consolidated Statements of Comprehensive Income — Years ended December 31, 2020, 2019 and 2018 53 Consolidated Balance Sheets — December 31, 2020 and 2019 54 Consolidated Statements of Stockholders’ Equity — Years ended December 31, 2020, 2019 and 2018 55 Consolidated Statements of Cash Flows — Years December 31, 2020, 2019 and 2018 56 Notes to Consolidated Financial Statements 58 Schedule II — Valuation and Qualifying Accounts — Years ended December 31, 2020, 2019 and 2018 89 48 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Amkor Technology, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Amkor Technology, Inc. and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of income, of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2020 appearing under Item 8 (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Change in Accounting Principle As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. 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. 49 Table of Contents Definition and Limitations of Internal Control over Financial Reporting A company’s 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 company’s 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 company’s 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. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Accounting for Income Taxes As described in Notes 1 and 4 to the consolidated financial statements, the Company recorded income tax expense of $46.2 million for the year ended December 31, 2020, and net deferred tax assets of $88.5 million and unrecognized tax benefits of $32.6 million as of December 31, 2020. 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 for net operating loss and tax credit carryforwards. Management monitors on an ongoing basis its ability to utilize deferred tax assets and whether there is a need for a related valuation allowance. In evaluating the ability to recover deferred tax assets in the jurisdictions from which they arise, management considers 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. The Company operates in and files income tax returns in various U.S. and foreign jurisdictions, which are subject to examination by tax authorities. Years open to examination 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. The principal considerations for our determination that performing procedures relating to accounting for income taxes is a critical audit matter are the significant judgment by management in determining the income tax provision and other tax positions. This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating audit evidence relating to income taxes. The audit effort involved the use of professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained. 50 Table of Contents Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to accounting for income taxes, including the controls addressing the completeness and accuracy of the data utilized. These procedures also included, among others (i) testing the income tax provision calculation and underlying data, including the effective tax rate reconciliation, significant return to provision adjustments, and permanent and temporary differences, (ii) evaluating management’s assessment of the realizability of deferred tax assets on a jurisdictional basis, (iii) evaluating the identification of reserves for unrecognized tax benefits and the reasonableness of the “more likely than not” determination considering the jurisdictions, court decisions, legislative actions, statute of limitations, and developments in tax examinations, and (iv) using professionals with specialized skill and knowledge to assist in evaluating the reasonableness of management’s judgment and estimates, including application of foreign and domestic tax laws and regulations. /s/ PricewaterhouseCoopers LLP Phoenix, Arizona February 19, 2021 We have served as the Company’s auditor since 2000. 51 Table of Contents AMKOR TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF INCOME For the Year Ended December 31, 2020 2019 2018 (In thousands, except per share data) Net sales $ 5,050,589 $ 4,052,650 $ 4,316,466 Cost of sales 4,149,775 3,403,211 3,605,901 Gross profit 900,814 649,439 710,565 Selling, general and administrative 302,842 278,631 295,239 Research and development 140,727 137,638 157,182 Total operating expenses 443,569 416,269 452,421 Operating income 457,245 233,170 258,144 Interest expense 64,168 71,587 78,946 Other (income) expense, net 6,395 1,773 ( 6,617 ) Total other expense, net 70,563 73,360 72,329 Income before taxes 386,682 159,810 185,815 Income tax expense 46,183 37,182 56,250 Net income 340,499 122,628 129,565 Net income attributable to noncontrolling interests ( 2,361 ) ( 1,740 ) ( 2,473 ) Net income attributable to Amkor $ 338,138 $ 120,888 $ 127,092 Net income attributable to Amkor per common share: Basic $ 1.40 $ 0.50 $ 0.53 Diluted $ 1.40 $ 0.50 $ 0.53 Shares used in computing per common share amounts: Basic 241,509 239,725 239,329 Diluted 242,248 240,122 239,741 The accompanying notes are an integral part of these statements. 52 Table of Contents AMKOR TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Year Ended December 31, 2020 2019 2018 (In thousands) Net income $ 340,499 $ 122,628 $ 129,565 Other comprehensive income (loss), net of tax: Adjustments to net unrealized gains (losses) on available-for-sale debt investments 21 — — Adjustments to unrealized components of defined benefit pension plans 602 ( 7,479 ) ( 3,644 ) Foreign currency translation 7,532 2,782 4,937 Total other comprehensive income (loss) 8,155 ( 4,697 ) 1,293 Comprehensive income 348,654 117,931 130,858 Comprehensive income attributable to noncontrolling interests ( 2,361 ) ( 1,740 ) ( 2,473 ) Comprehensive income attributable to Amkor $ 346,293 $ 116,191 $ 128,385 The accompanying notes are an integral part of these statements. 53 Table of Contents AMKOR TECHNOLOGY, INC. CONSOLIDATED BALANCE SHEETS December 31, 2020 2019 (In thousands, except per share data) ASSETS Current assets: Cash and cash equivalents $ 698,002 $ 894,948 Restricted cash 1,007 610 Short-term investments (amortized cost of $ 133,744 in 2020) 133,769 6,348 Accounts receivable, net of allowances of $ 863 and $ 1,314 , respectively 962,643 850,753 Inventories 297,293 220,602 Other current assets 40,218 28,272 Total current assets 2,132,932 2,001,533 Property, plant and equipment, net 2,566,002 2,404,850 Operating lease right of use assets 147,236 148,549 Goodwill 27,325 25,976 Restricted cash 3,188 2,974 Other assets 145,628 111,733 Total assets $ 5,022,311 $ 4,695,615 LIABILITIES AND EQUITY Current liabilities: Short-term borrowings and current portion of long-term debt $ 149,007 $ 144,479 Trade accounts payable 636,434 571,054 Capital expenditures payable 181,339 77,044 Accrued expenses 349,207 267,226 Total current liabilities 1,315,987 1,059,803 Long-term debt 1,005,339 1,305,755 Pension and severance obligations 159,610 176,971 Long-term operating lease liabilities 84,420 91,107 Other non-current liabilities 102,996 71,740 Total liabilities 2,668,352 2,705,376 Commitments and contingencies (Note 17) 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, 288,923 and 286,877 shares issued, and 242,829 and 240,805 shares outstanding, respectively 289 287 Additional paid-in capital 1,953,378 1,927,739 Retained earnings 562,502 234,077 Accumulated other comprehensive income (loss) 27,270 19,115 Treasury stock, at cost, 46,094 and 46,072 shares, respectively ( 217,740 ) ( 217,479 ) Total Amkor stockholders’ equity 2,325,699 1,963,739 Noncontrolling interests in subsidiaries 28,260 26,500 Total equity 2,353,959 1,990,239 Total liabilities and equity $ 5,022,311 $ 4,695,615 The accompanying notes are an integral part of these statements. 54 Table of Contents AMKOR TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Additional Paid- In Capital Retained Earnings (Accumulated Deficit) 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) Balance at December 31, 2017 285,129 $ 285 $ 1,903,357 $ ( 13,903 ) $ 22,519 ( 45,945 ) $ ( 215,982 ) $ 1,696,276 $ 23,433 $ 1,719,709 Net income — — — 127,092 — — — 127,092 2,473 129,565 Other comprehensive income (loss) — — — — 1,293 — — 1,293 — 1,293 Treasury stock acquired through surrender of shares for tax withholding — — — — — ( 22 ) ( 189 ) ( 189 ) — ( 189 ) Issuance of stock through share-based compensation plans 223 — 1,050 — — — — 1,050 — 1,050 Share-based compensation — — 5,018 — — — — 5,018 — 5,018 Subsidiary dividends to noncontrolling interests — — — — — — — — ( 546 ) ( 546 ) Balance at December 31, 2018 285,352 $ 285 $ 1,909,425 $ 113,189 $ 23,812 ( 45,967 ) $ ( 216,171 ) $ 1,830,540 $ 25,360 $ 1,855,900 Net income — — — 120,888 — — — 120,888 1,740 122,628 Other comprehensive income (loss) — — — — ( 4,697 ) — — ( 4,697 ) — ( 4,697 ) Treasury stock acquired through surrender of shares for tax withholding — — — — — ( 105 ) ( 1,308 ) ( 1,308 ) — ( 1,308 ) Issuance of stock through share-based compensation plans 1,525 2 11,403 — — — — 11,405 — 11,405 Share-based compensation — — 6,911 — — — — 6,911 — 6,911 Subsidiary dividends to noncontrolling interests — — — — — — — — ( 600 ) ( 600 ) Balance at December 31, 2019 286,877 $ 287 $ 1,927,739 $ 234,077 $ 19,115 ( 46,072 ) $ ( 217,479 ) $ 1,963,739 $ 26,500 $ 1,990,239 Net income — — — 338,138 — — — 338,138 2,361 340,499 Other comprehensive income (loss) — — — — 8,155 — — 8,155 — 8,155 Treasury stock acquired through surrender of shares for tax withholding — — — — — ( 22 ) ( 261 ) ( 261 ) — ( 261 ) Issuance of stock through share-based compensation plans 2,046 2 17,609 — — — — 17,611 — 17,611 Share-based compensation — — 8,030 — — — — 8,030 — 8,030 Cash dividends declared — — — ( 9,713 ) — — — ( 9,713 ) — ( 9,713 ) Subsidiary dividends to noncontrolling interests — — — — — — — — ( 601 ) ( 601 ) Balance at December 31, 2020 288,923 $ 289 $ 1,953,378 $ 562,502 $ 27,270 ( 46,094 ) $ ( 217,740 ) $ 2,325,699 $ 28,260 $ 2,353,959 The accompanying notes are an integral part of these statements. 55 Table of Contents AMKOR TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Year Ended December 31, 2020 2019 2018 (In thousands) Cash flows from operating activities: Net income $ 340,499 $ 122,628 $ 129,565 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 510,396 524,177 571,961 Amortization of deferred debt issuance costs and premiums 1,979 1,640 1,120 Deferred income taxes 3,143 25,931 ( 13,110 ) Loss on debt retirement 3,042 8,536 1,512 Loss (gain) on disposal of fixed assets, net ( 2,821 ) ( 4,477 ) 5,310 Share-based compensation 8,030 6,911 5,018 Other, net ( 779 ) 4,394 2,558 Changes in assets and liabilities, net of acquisitions: Accounts receivable ( 106,693 ) ( 124,140 ) 80,571 Inventories ( 75,499 ) 10,208 ( 16,310 ) Other current assets ( 12,348 ) ( 2,369 ) 4,329 Other assets ( 22,614 ) 2,253 1,986 Trade accounts payable 48,786 38,670 ( 43,490 ) Accrued expenses 69,151 ( 33,297 ) ( 78,136 ) Pension and severance obligations ( 21,535 ) ( 12,216 ) ( 4,653 ) Net operating lease ROU asset 871 ( 127,743 ) — Operating lease liabilities 2,537 131,967 — Other non-current liabilities 23,888 ( 9,223 ) 15,179 Net cash provided by operating activities 770,033 563,850 663,410 Cash flows from investing activities: Payments for property, plant and equipment ( 553,021 ) ( 472,433 ) ( 547,122 ) Proceeds from sale of property, plant and equipment 3,819 10,117 2,841 Proceeds from insurance recovery for property, plant and equipment — 1,538 1,371 Payments for short-term investments ( 535,368 ) ( 5,935 ) ( 6,477 ) Proceeds from sale of short-term investments 247,081 — — Proceeds from maturities of short-term investments 159,015 6,469 4,829 Proceeds from foreign exchange forward contracts 49,226 13,550 6,754 Payments for foreign exchange forward contracts ( 14,031 ) ( 15,593 ) ( 5,864 ) Other investing activities 4,574 ( 202 ) 6,285 Net cash used in investing activities ( 638,705 ) ( 462,489 ) ( 537,383 ) Cash flows from financing activities: Proceeds from revolving credit facilities 312,000 272,700 — Payments of revolving credit facilities ( 332,000 ) ( 272,700 ) ( 75,000 ) Proceeds from short-term debt 86,769 51,434 23,341 Payments of short-term debt ( 87,353 ) ( 52,635 ) ( 46,631 ) Proceeds from issuance of long-term debt 331,033 975,575 596,226 Payments of long-term debt ( 648,514 ) ( 862,927 ) ( 535,738 ) Payments for debt issuance costs ( 1,644 ) ( 7,027 ) ( 3,796 ) Payments of finance lease obligations ( 9,851 ) ( 6,574 ) ( 3,930 ) Proceeds from issuance of stock through share-based compensation plans 17,611 11,405 1,050 Other financing activities ( 1,770 ) ( 1,001 ) 3,855 Net cash (used in) provided by financing activities ( 333,719 ) 108,250 ( 40,623 ) Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash 6,056 870 ( 204 ) Net (decrease) increase in cash, cash equivalents and restricted cash ( 196,335 ) 210,481 85,200 Cash, cash equivalents and restricted cash, beginning of period 898,532 688,051 602,851 Cash, cash equivalents and restricted cash, end of period $ 702,197 $ 898,532 $ 688,051 The accompanying notes are an integral part of these statements. 56 Table of Contents AMKOR TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Year Ended December 31, 2020 2019 2018 (In thousands) Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 61,295 $ 65,992 $ 77,575 Income taxes 43,404 44,495 63,080 Non-cash investing and financing activities: Property, plant and equipment included in capital expenditures payable 181,376 77,250 256,070 Right of use assets acquired through operating lease liabilities 41,672 60,963 — Right of use assets acquired through finance lease liabilities 10,517 10,835 17,163 Dividends declared and unpaid 9,713 — — The accompanying notes are an integral part of these statements. 57 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements 1. Description of Business and Summary of Significant Accounting Policies Description of Business Amkor is one of the world’s leading providers of outsourced semiconductor packaging 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: • Designing and developing innovative packaging and test technologies; • Offering a broad portfolio of cost-effective solutions and services; • Focusing on strategic end markets that offer solid growth potential; • Cultivating long-standing relationships with our customers, which include many of the world’s leading semiconductor companies; • Collaborating with customers, original equipment manufacturers (“OEMs”) and equipment and material suppliers; • Developing a competitive cost structure with disciplined capital investment; • Building expertise in high-volume manufacturing processes and developing a reputation for high quality and solid execution; and • Providing a geographically diverse operating base, with research and development, engineering support and production capabilities at various facilities in China, Japan, Korea, Malaysia, the Philippines, Portugal and Taiwan. Basis of Presentation Our Consolidated Financial Statements include the accounts of Amkor Technology, Inc. and our subsidiaries (“Amkor”). Our 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. We reflect the remaining portion of variable interest entities and foreign subsidiaries that are not wholly owned as noncontrolling interests. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates, including those related to acquisitions, revenue recognition, income taxes, inventory, long lived assets and contingencies. These estimates are based on management’s best knowledge of current events, historical experience, actions that we may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. As a result, actual results could differ materially from these estimates and assumptions, including the impact of Covid-19 and any deterioration in the global business and economic environment. Certain prior year amounts have been reclassified to conform to current year presentation. Consolidation of Variable Interest Entities We have variable interests in certain Philippine realty corporations in which we have a 40 % ownership. We lease land and buildings in the Philippines from these entities and we are the primary beneficiary of these arrangements. As of December 31, 2020, the combined book value of the assets and liabilities associated with these Philippine realty corporations included in our Consolidated Balance Sheet was $ 17.0 million and $ 0.1 million, respectively. The impact of consolidating these variable interest entities on our Consolidated Statements of Income was not significant, and other than our lease payments, we have not provided any significant assistance or other financial support to these variable 58 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) interest entities for the years ended December 31, 2020, 2019 or 2018. 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 other than our Japan operations. 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 daily exchange rates, except for expenses related to balance sheet amounts which are 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, net in the period in which they occur. The Japanese Yen is the functional currency of our Japan operations. The asset and liability amounts of our Japan operations 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 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 transaction exchange gains or losses are included in other expense (income) in the period in which they occur. Risks and Concentrations The semiconductor industry is characterized by rapid technological change, competitive pricing pressures and cyclical market patterns. Our financial results are affected by a wide variety of factors, including general economic conditions worldwide, economic conditions specific to the semiconductor industry, the timely implementation of new package and test technologies, the ability to safeguard patents and intellectual property in a rapidly evolving market and reliance on materials and equipment suppliers. In addition, the semiconductor market has historically been cyclical and subject to significant economic downturns at various times. 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 and our ability to control our costs including labor, material, overhead and financing costs. A significant portion of our revenues is concentrated with a small group of customers (Note 18). Direct sales to our largest customer increased during 2020 and accounted for 14.5 % of our net revenue for the year ended December 31, 2020. The loss of a significant customer, a business combination among customers, a reduction in orders or decrease in price from a significant customer or disruption in any of our significant strategic partnerships or other commercial arrangements could have a material adverse effect on our business, liquidity, results of operations, financial condition and cash flows. Financial instruments, for which we are subject to credit risk, consist principally of accounts receivable and cash, cash equivalents and short-term investments. 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. In addition, we may utilize non-recourse factoring to mitigate credit risk when considered appropriate. We have historically mitigated our credit risk with respect to cash and cash equivalents through diversification of our holdings into various high quality money market funds and bank deposit accounts. Our short-term investments are principally investments in debt securities with maximum duration of twelve months and ranges from AAA to BBB rated financial instruments. Our short-term investments are primarily in direct obligation of the US Government or its agencies, corporate bonds, asset backed securities, commercial paper, and municipal bonds. At December 31, 2020, our cash and cash equivalents were maintained in various U.S. and foreign bank operating and time deposit accounts and invested in U.S. money market funds. 59 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) Contingencies and Litigation We may be subject to certain legal proceedings, lawsuits and other claims, as discussed in Note 17. We accrue for a loss contingency, including legal proceedings, lawsuits, pending claims and other legal matters, when we conclude that the likelihood of a loss is probable and the amount of the loss can be reasonably estimated. When the reasonable estimate of the loss is within a range of amounts, and no amount in the range constitutes a better estimate than any other amount, we accrue for the amount at the low end of the range. 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. 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 are maintained in various U.S. and foreign bank operating and time deposit accounts and invested in U.S. money market funds. Restricted Cash Restricted cash, current, consists of short-term cash equivalents used to collateralize our daily banking services. Restricted cash, non-current, mainly consists of collateral to fulfill foreign trade compliance requirements. Investments Generally, we classify our short-term investments in fixed income securities as available-for-sale debt investments. All of our available-for-sale debt investments as of December 31, 2020 are available to fund current operations and are recorded at fair value (Note 6). Unrealized gains and losses on our available-for-sale debt investments are included as a separate component of accumulated other comprehensive income (loss), net of tax. Realized gains and losses on our available-for-sale debt investments and declines in value judged to be an impairment are included in other (income) expense, net. The cost of short-term investments matured or sold is based on the average cost method. We evaluate on an ongoing basis the market conditions, trends of earnings, financial condition, credit ratings, any underlying collateral and other key measures for our short-term investments in determining if and when a decline in value below the adjusted cost of our available-for-sale debt investments is an impairment. An impairment is considered if (i) we have the intent to sell the security, (ii) it is more likely than not that we will be required to sell the security before recovery of the entire amortized cost basis or (iii) we do not expect to recover the entire amortized cost basis of the security. If impairment is considered on condition (i) or (ii) above, the entire difference between the amortized cost and the fair value of the debt security is recognized in earnings. If impairment is considered based on condition (iii), the amount representing credit losses will be recognized in earnings and as an allowance for credit losses. The amount relating to all other factors will be recognized in other comprehensive income. Inventories Inventories consist of raw materials and purchased components and are stated at the lower of cost and net realizable value. Cost is principally determined by standard cost or the weighted moving average method, both of which approximate actual cost. We review and set our standard costs as needed, but at a minimum on an annual basis. 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. When a determination is made that the inventory will not be utilized in production or is not saleable, it is written-off. Other Current Assets Other current assets consist principally of prepaid assets. 60 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) 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 40 years Machinery and equipment 2 to 7 years Software and computer equipment 3 to 5 years Furniture, fixtures and other equipment 4 to 10 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 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. Leases We lease certain machinery and equipment, office space, and manufacturing facilities. Effective January 1, 2019, we adopted the requirements of the Financial Accounting Standards Board Accounting Standards Codification 842, Leases, using the modified transition approach without restating the comparative period financial statements or disclosures. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and we recognize lease expense for these leases on a straight-line basis over the lease term. We combine lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) with the non-lease components (e.g., common-area maintenance costs) for all asset classes. We use our incremental borrowing rate based on the information available at the lease commencement date to determine the lease liability. Our leases have remaining lease terms ranging from less than one year to 85 years. For purposes of calculating our lease liabilities, our lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise those options. Certain leases also include options to purchase the leased property. Goodwill Goodwill is recorded when the cost of an acquisition exceeds the fair value of the net tangible and identifiable intangible assets acquired. We review goodwill for impairment annually during the fourth quarter of each year and whenever events or changes in circumstances indicate that an impairment may exist. Impairment losses are recorded when the carrying amount of the reporting unit exceeds its fair value. The balance of goodwill in our Consolidated Balance Sheets reflects adjustments for foreign currency translation. Other Assets Other assets consist principally of deferred tax assets, refundable security deposits, and non-current prepaid taxes. Derivatives We use foreign exchange forward contracts to manage exposure to foreign exchange risk which are generally settled monthly. The derivatives are recorded at the fair value either in other current assets or accrued expenses, with the associated gains and losses charged to other (income) expense, net in the period in which they occur. We do not apply hedge accounting to the derivatives. See Note 15 for further discussion about the derivatives. 61 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) Fair Value Measurements We apply fair value accounting for 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 16 for further discussion of fair value measurements. Revenue Recognition We recognize revenue, net of sales, use, value-added and other similar taxes, as a performance obligation is satisfied in an amount reflecting the consideration to which we expect to be entitled. We apply a five-step approach in determining the amount and timing of revenue to be recognized: (1) identifying the contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations in the contract; and (5) recognizing revenue when the performance obligation is satisfied. Substantially all of our revenue is recognized as services are rendered. Our packaging and test services are our performance obligations to our customers. Our packaging services include wafer bump, probe and assembly. We provide packaging and test services to our customers either individually or as part of a combined offering. In a combined offering, we account for the individual services separately if they are determined to be distinct. We determine a service to be distinct if it is separately identifiable from other services in the combined offering and if a customer can benefit from the unique service on its own or with other resources that are readily available to the customer. The consideration, including variable consideration, is allocated between the distinct services in a combined offering based upon the stand-alone selling prices of the individual services. Our services involve a high degree of specialization which are unique based on the design and purpose of the customer’s wafers. Accordingly, our negotiated pricing reflects the customized nature of our services and represents a customer-specific stand-alone selling price. We recognize revenue as services are rendered, which generally occurs over the course of two to three weeks. Services are generally billed at completion of each individual packaging or test service or in some instances at the completion of all services in a combined offering. We recognize revenue over time as services are rendered because our services create or enhance the customer’s wafer. We utilize an input method (cost incurred plus estimated margin) to determine the amount of revenue to recognize for in-process, but incomplete, customer orders at a reporting date. During the period of providing our services, we generally do not control or take ownership of customers’ wafers, nor do we include the cost of the wafer in our cost calculations. We believe that a cost-based input method is the most appropriate manner to measure how we satisfy our performance obligations to customers because the effort and costs incurred to package and/or test customer wafers are not linear over the duration of these services. Shipping and handling costs are accounted for as a cost to fulfill our performance obligations to customers. Accordingly, we record customer payments of shipping and handling costs as a component of net sales, and the costs incurred for shipping and handling are then charged to cost of sales. Unbilled receivables are revenues that have been recognized for performance obligations that have been satisfied, or partially satisfied, in advance of billing the customer. Revenue may be recognized in advance of billing as our contracts provide us with an unconditional right to consideration for work that is performed. Total unbilled receivables as of December 31, 2020 and 2019 were $ 146.8 million and $ 125.4 million, respectively. These amounts are included in accounts receivable, net of allowances in our Consolidated Balance Sheets. At times, the company receives cash payments from customers in advance of the company’s performance. In such cases, we record deferred revenue until the performance obligation is satisfied, which represents a contract liability and is included in accrued expenses and other non-current liabilities in the consolidated balance sheets. These contract liabilities are classified as either current or long-term based on the timing of when the company expects to recognize 62 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) revenue. Contract liabilities were $ 51.6 million and $ 17.5 million as of December 31, 2020 and December 31, 2019, respectively. As of December 31, 2020 and December 31, 2019, the short-term portion of the liability was $ 30.3 million and $ 16.2 million, respectively. Revenue recognized during the year that was included in the contract liability balance at the beginning of the period was $ 14.1 million, $ 16.4 million, and $ 13.7 million, for 2020, 2019 and 2018, respectively. 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 or technologies 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. 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 for 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 tax benefits will not be realized. 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. For most of our U.S. and foreign deferred tax assets, we consider it more likely than not that we will have sufficient taxable income to allow us to realize these deferred tax assets. However, in the event taxable income falls short of current expectations, we may need to establish a valuation allowance against such deferred tax assets. 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. Related interest and penalties are classified as income taxes in the financial statements. See Note 4 for further discussion regarding unrecognized income tax benefits. 2. Share-Based Compensation Plans Our share-based compensation is measured at fair value and expensed over the service period (generally the vesting period). The amount of compensation expense to be recognized is adjusted for an estimated forfeiture rate which is based on historical data. For the years ended December 31, 2020, 2019 and 2018, we recognized share-based compensation attributable to stock options and restricted shares of $ 8.0 million, $ 6.9 million and $ 5.0 million, respectively, primarily in selling, general and administrative expenses. The corresponding deferred income tax benefits for stock options or restricted shares is $ 1.3 million, $ 1.3 million and $ 1.0 million for 2020, 2019 and 2018 respectively. Equity Incentive Plan Second Amended and Restated 2007 Equity Incentive Plan. The Second Amended and Restated 2007 Equity Incentive Plan, (the “2007 Plan”) 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 63 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) services to Amkor and its subsidiaries. The 2007 Plan is effective through 2027 and can be terminated at the discretion of the Board of Directors. There were originally 17.0 million shares of our common stock reserved for issuance under the 2007 Plan and at December 31, 2020 there were 2.9 million shares available for grant. Stock options 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 one to four year vesting schedule and the term of the options granted is no longer than ten years . Upon option exercise, we may issue new shares of common or treasury stock. 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. The dividend yield is based on the annualized declared quarterly dividend rate divided by our closing stock price at the date of the grant. The following table summarizes our stock option activity for the year ended December 31, 2020: Number of Shares (In thousands) Weighted-Average Exercise Price per Share Weighted-Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (In thousands) Outstanding at December 31, 2019 5,845 $ 9.11 Granted 805 12.85 Exercised ( 1,882 ) 9.26 Forfeited or expired ( 402 ) 9.56 Outstanding at December 31, 2020 4,366 $ 9.70 7.47 $ 23,391 Fully vested at December 31, 2020 and expected to vest thereafter 4,245 $ 9.66 7.43 $ 22,877 Exercisable at December 31, 2020 2,197 $ 8.92 6.41 $ 13,407 The following assumptions were used to calculate the weighted-average fair values of the options granted: For the Year Ended December 31, 2020 2019 2018 Expected life (in years) 5.6 6.0 6.0 Risk-free interest rate 0.3 % 2.5 % 2.7 % Volatility 52 % 43 % 42 % Dividend yield 0.3 % — — Weighted-average grant date fair value per option granted $ 5.79 $ 4.06 $ 4.17 Total unrecognized compensation expense from stock options was $ 8.3 million as of December 31, 2020, which is expected to be recognized over a weighted-average period of approximately 2.1 years beginning January 1, 2021. Restricted Shares We grant restricted shares to directors and employees under the 2007 Plan. Restricted shares granted to directors vest on the earlier of the one year anniversary of the grant date or the date of the next annual meeting of stockholders. Generally, other restricted shares vest ratably over three years , with 8.33 % of the shares vesting in equal quarterly 64 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) installments such that 100 % of the shares will become vested on the third anniversary of the award, subject to the recipient’s continued employment with us on the applicable vesting dates. In addition, provided that the restricted shares have not been forfeited earlier, for certain grants, the restricted shares will vest upon the recipient’s death or disability, or upon a change in control of Amkor. The value of the restricted shares is determined based on the fair market value of the underlying shares on the date of the grant and is recognized ratably over the vesting period. Upon vesting of restricted stock awards, we may issue new shares of common or treasury stock. The following table summarizes our restricted share activity for the year ended December 31, 2020: Number of Shares (In thousands) Weighted- average Grant Date Fair Value (Per Share) Non-vested at December 31, 2019 146 $ 8.48 Awards granted 430 13.61 Awards vested ( 164 ) 9.39 Awards forfeited — — Non-vested at December 31, 2020 412 13.47 Total unrecognized compensation cost from restricted shares was $ 4.7 million as of December 31, 2020, which is expected to be recognized over a weighted-average period of approximately 2.2 years beginning January 1, 2021. 3. Other Income and Expense Other income and expense consists of the following: For the Year Ended December 31, 2020 2019 2018 (In thousands) Interest income $ ( 5,449 ) $ ( 6,655 ) $ ( 4,133 ) Foreign currency (gain) loss, net 9,608 1,944 1,451 Loss on debt retirement 3,042 8,536 1,512 Other ( 806 ) ( 2,052 ) ( 5,447 ) Total other (income) expense, net $ 6,395 $ 1,773 $ ( 6,617 ) 4. Income Taxes Geographic sources of income (loss) before taxes are as follows: For the Year Ended December 31, 2020 2019 2018 (In thousands) United States $ 38,719 $ 1,138 $ 5,535 Foreign 347,963 158,672 180,280 Income before taxes $ 386,682 $ 159,810 $ 185,815 The provision for income taxes includes current federal, state and foreign taxes payable and those deferred because of temporary differences between the financial statement and the tax bases of assets and liabilities. 65 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) The components of the provision (benefit) for income taxes are as follows: For the Year Ended December 31, 2020 2019 2018 (In thousands) Current: Federal $ 4,608 $ ( 179 ) $ 22,003 State 134 3 39 Foreign 38,298 11,427 47,318 43,040 11,251 69,360 Deferred: Federal ( 7,877 ) 1,832 5,468 State ( 535 ) 299 2,993 Foreign 11,555 23,800 ( 21,571 ) 3,143 25,931 ( 13,110 ) Income tax expense $ 46,183 $ 37,182 $ 56,250 The reconciliation between the U.S. federal statutory income tax rate of 21% for 2020, 2019 and 2018 and our income tax expense is as follows: For the Year Ended December 31, 2020 2019 2018 (In thousands) U.S. federal statutory income tax rate $ 81,203 $ 33,560 $ 39,021 State taxes, net of federal benefit 346 293 1,677 Foreign income taxed at different rates ( 27,988 ) ( 10,600 ) 6,340 Foreign exchange (loss) gain 6,710 84 ( 3,797 ) Change in valuation allowance ( 15,624 ) 18,374 ( 12,662 ) Adjustments related to prior years ( 2,575 ) ( 3,190 ) 1,898 U.S. tax reform (the Tax Act) — — 22,284 Income tax credits generated ( 21,525 ) ( 9,006 ) ( 18,106 ) Foreign earnings and profits 23,853 3,360 387 Foreign derived intangible income ( 6,339 ) ( 3,195 ) — Expiration of net operating losses and credits 144 3,084 19,462 Settlements and changes in uncertain tax positions 6,801 3,256 ( 1,230 ) Other 1,177 1,162 976 Income tax expense $ 46,183 $ 37,182 $ 56,250 The change in valuation allowance for 2020, 2019 and 2018 is primarily the result of changes in our ability to realize net operating loss, tax credit, and other carryforwards. As a result of certain capital investments, export commitments and employment levels, income from operations in Korea, Malaysia, the Philippines and Singapore was subject to reduced income tax rates and, in some cases, was exempt from income taxes. We recognized $ 27.6 million, $ 14.7 million and $ 1.9 million in tax benefits as a result of the tax holidays in 2020, 2019 and 2018, respectively. The benefit of the tax holidays on diluted earnings per share was approximately $ 0.11 , $ 0.06 and $ 0.01 for 2020, 2019 and 2018, respectively. 66 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) The following is a summary of the components of our deferred tax assets and liabilities: December 31, 2020 2019 (In thousands) Deferred tax assets: Net operating loss carryforwards $ 24,791 $ 25,905 Income tax credits 93,056 98,158 Property, plant and equipment 25,342 27,199 Deferred interest expense 10,306 12,361 Accrued liabilities 57,586 61,812 Receivable 33,295 30,558 Unrealized foreign exchange loss 5,603 2,750 Operating lease liabilities 20,343 18,164 Other 11,741 11,889 Total deferred tax assets 282,063 288,796 Valuation allowance ( 121,310 ) ( 136,934 ) Total deferred tax assets net of valuation allowance 160,753 151,862 Deferred tax liabilities: Property, plant and equipment 28,440 23,747 Deferred gain 11,907 11,193 Unrealized foreign exchange gain 5,620 1,195 Unbilled receivables 2,031 3,580 Operating lease right of use assets 19,704 17,687 Other 4,514 4,125 Total deferred tax liabilities 72,216 61,527 Net deferred tax assets $ 88,537 $ 90,335 Recognized as: Other assets $ 95,045 $ 90,465 Other non-current liabilities ( 6,508 ) ( 130 ) Total $ 88,537 $ 90,335 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. 67 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) Valuation allowance against deferred tax assets consist of the following: December 31, 2020 2019 (In thousands) Valuation allowance: U.S. $ 62,820 $ 80,241 Foreign 58,490 56,693 Total valuation allowance $ 121,310 $ 136,934 We had recorded a valuation allowance against our interest expense carryforward as a result of the limitation of deductibility of interest expense contained in the Tax Act. Realization of the carryforward is dependent on generating sufficient taxable income to overcome the interest limitation provisions. Although utilization of this carryforward is not assured, in light of our current earnings and recent estimates of future taxable income, management believes sufficient positive evidence exists to conclude that the valuation allowance is no longer needed and reversed the $ 12.4 million valuation allowance in 2020. Our net operating loss carryforwards (“NOLs”) are as follows: December 31, 2020 2019 Expiration (In thousands) U.S. Federal NOLs $ 22,683 $ 23,977 2021-2024 U.S. State NOLs 88,170 93,674 2021-2038 Foreign NOLs 85,960 85,123 2022-2028 At December 31, 2020 and 2019, a portion of our remaining U.S. federal net operating loss carryforward was reserved with a valuation allowance due to ownership change limitations from a prior year acquisition as well as certain state net operating loss carryforwards expected to expire unused. Our tax credit carryforwards are as follows: December 31, 2020 2019 Expiration (In thousands) U.S. Foreign Tax Credits $ 70,265 $ 77,983 2026-2027 U.S. Other Tax Credits 168 1,404 2026 Foreign Tax Credits 22,623 18,771 2021-2030 At December 31, 2020 and 2019, a portion of our U.S. and foreign tax credit carryforwards were reserved with a valuation allowance for the amount expected to expire unused. Due to the changes in the Tax Act, distributions of cash to the U.S. as dividends generally will not be subject to U.S. federal income tax. We have not provided foreign withholding taxes or state income taxes on the undistributed earnings of our foreign subsidiaries, 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 foreign withholding tax if they are remitted as dividends. We estimate that repatriation of these foreign earnings would generate withholding taxes and state income taxes of approximately $ 119.1 million. 68 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) We operate in and file income tax returns in various U.S. and foreign jurisdictions which are subject to examination by tax authorities. We have tax returns that are open to examination in various jurisdictions for tax years 2010-2020. 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 examinations will be favorable. Our unrecognized tax benefits are subject to change as examinations of specific tax years are completed in the respective jurisdictions. 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. Current examinations include our 2012, 2013 and 2018 Philippine income tax returns and our 2018 Singapore income tax return. A reconciliation of the beginning and ending gross amount of unrecognized tax benefits is as follows: For the Year Ended December 31, 2020 2019 2018 (In thousands) Balance at January 1 $ 26,242 $ 25,268 $ 27,211 Additions based on tax positions related to the current year 10,427 8,944 401 Additions for tax positions of prior years 1,173 188 636 Reductions for tax positions of prior years ( 280 ) ( 4,539 ) ( 2,958 ) Reductions related to settlements with tax authorities — ( 1,886 ) — Reductions from lapse of statutes of limitations ( 4,964 ) ( 1,733 ) ( 22 ) Balance at December 31 $ 32,598 $ 26,242 $ 25,268 The net increase in our unrecognized tax benefits was $ 6.4 million from December 31, 2019 to December 31, 2020. The increase was primarily related to income attribution offset by decreases from the lapse of statutes of limitations. At December 31, 2020, all of our gross unrecognized tax benefits would reduce our effective tax rate, if recognized. It is reasonably possible that unrecognized tax benefits related to entity classification and withholding taxes will decrease in the next 12 months by up to $ 7.1 million due to the lapse of statutes of limitations in foreign jurisdictions. The liability related to our unrecognized tax benefits is $ 28.3 million as of December 31, 2020 and is reported as a component of other non-current liabilities. The unrecognized tax benefits presented in the table above also include positions that have reduced deferred tax assets. The balance of accrued and unpaid interest and penalties is $ 4.7 million as of December 31, 2020 and is included as a component of other non-current liabilities in connection with our unrecognized tax benefits. 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 includes restricted shares held by retirement eligible recipients and is reduced for treasury stock. Diluted EPS is computed on the basis of the weighted-average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period. Dilutive potential common shares include outstanding stock options and unvested restricted shares. 69 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) The following table summarizes the computations of basic and diluted EPS: For the Year Ended December 31, 2020 2019 2018 (In thousands, except per share data) Net income available to Amkor common stockholders $ 338,138 $ 120,888 $ 127,092 Weighted-average shares outstanding — basic 241,509 239,725 239,329 Effect of dilutive securities: Stock options and restricted share awards 739 397 412 Weighted-average shares outstanding — diluted 242,248 240,122 239,741 Net income attributable to Amkor per common share: Basic $ 1.40 $ 0.50 $ 0.53 Diluted 1.40 0.50 0.53 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 Year Ended December 31, 2020 2019 2018 (In thousands) Stock options and restricted share awards 2,412 5,379 3,662 70 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) 6. Investments The following table summarizes our cash equivalents and available-for-sale debt investments: December 31, 2020 Fair Value Level Amortized Cost Gross Unrealized Gains Gross Unrealized Losses (1) Total Fair Value Level 1 Level 2 (In thousands) Cash equivalents Certificate of deposits $ 976 $ — $ — $ 976 $ 976 $ — Commercial paper 5,293 — — 5,293 — 5,293 Corporate bonds 1,744 — — 1,744 — 1,744 Money market funds 138,290 — — 138,290 138,290 — Municipal bonds 400 — — 400 — 400 Total cash equivalents (2) 146,703 — — 146,703 139,266 7,437 Short-term investments Asset-backed securities 19,111 18 ( 9 ) 19,120 — 19,120 Certificate of deposits 5,046 — — 5,046 5,046 — Commercial paper 15,148 — — 15,148 — 15,148 Corporate bonds 50,771 16 ( 12 ) 50,775 — 50,775 Municipal bonds 12,702 8 ( 2 ) 12,708 — 12,708 U.S. government agency bonds 8,415 3 — 8,418 — 8,418 U.S. government bonds 17,605 3 — 17,608 17,608 — Variable rate demand notes 300 — — 300 — 300 Total short-term investments 129,098 48 ( 23 ) 129,123 22,654 106,469 Total (3) $ 275,801 $ 48 $ ( 23 ) $ 275,826 $ 161,920 $ 113,906 (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 we do not believe it is more likely than not that we will be required to sell these investments before recovery of their amortized cost bases. (2) During the year ended December 31, 2020, we sold cash equivalent investments for proceeds of $ 27.1 million and realized no gain or loss on such sales. (3) In January 2021, we increased our available-for-sale debt investments by approximately $ 60 million. The following table summarizes the contractual maturities of our cash equivalents and available-for-sale debt investments as of December 31, 2020: Amortized Cost Fair Value Within 1 year $ 259,652 $ 259,667 After 1 year through 5 years 14,705 14,713 After 5 years through 10 years 1,444 1,446 Total $ 275,801 $ 275,826 71 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) Actual maturities can differ from contractual maturities due to various factors including whether the issuers have the right to call or prepay obligations without call or prepayment penalties, and we view our available-for-sale debt investments as available for current operations. As of December 31, 2020, the amortized cost and the fair market value of our held-to-maturity government bond (Level 1) maturing within a year is $ 4.7 million. The following table summarizes our debt investments as of December 31, 2019: December 31, 2019 (In thousands) Cash equivalent money market funds (Level 1) (1) $ 384,474 Short-term investment government bond (Level 2) (2) 6,348 (1) The cash equivalent money market funds (Level 1) at December 31, 2019 have been corrected to include $ 286.7 million of cash equivalents that were excluded in previously reported amounts. There was no change to total cash and cash equivalents reported on our consolidated balance sheet. We determined this was immaterial to the prior period but have presented the balance as revised for comparability. (2) The fair market value of the security is $ 6.3 million. 7. 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 this program, 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 year ended December 31, 2020 and 2019, we sold accounts receivable totaling $ 499.3 million and $ 680.4 million, net of discounts and fees of $ 2.9 million and $ 4.4 million, respectively. 8. Property, Plant and Equipment Property, plant and equipment consist of the following: December 31, 2020 2019 (In thousands) Land $ 221,304 $ 219,785 Buildings and improvements 1,625,355 1,571,653 Machinery and equipment 5,736,797 5,303,729 Finance lease machinery and equipment 40,856 34,158 Furniture, fixtures and other equipment 20,774 19,740 Software and computer equipment 231,171 220,264 Construction in progress 48,602 12,593 Total property, plant and equipment 7,924,859 7,381,922 Less accumulated depreciation and amortization ( 5,358,857 ) ( 4,977,072 ) Total property, plant and equipment, net $ 2,566,002 $ 2,404,850 72 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) The following table summarizes our depreciation expense: For the Year Ended December 31, 2020 2019 2018 (In thousands) Depreciation expense $ 509,770 $ 522,011 $ 570,304 9. Leases The components of lease expense were as follows: For the Year Ended December 31, 2020 2019 (In thousands) Operating lease cost $ 52,882 $ 41,559 Finance lease cost Amortization of leased assets 6,520 5,240 Interest on lease liabilities 987 933 Total finance lease cost 7,507 6,173 Short-term lease cost 7,188 8,927 Variable lease cost 5,307 5,416 Net lease cost $ 72,884 $ 62,075 Rent expense was $ 43.6 million for the year ended December 31, 2018. Other information related to leases was as follows: For the Year Ended December 31, 2020 2019 Supplemental Cash Flows Information (in thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 53,323 $ 39,870 Operating cash flows for finance leases 946 893 Financing cash flows for finance leases 9,851 6,574 Weighted Average Remaining Lease Term (years) Operating leases 3.9 4.7 Finance leases 3.1 3.6 Weighted Average Discount Rate Operating leases 4.0 % 4.2 % Finance leases 4.0 % 4.6 % 73 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) Maturities of lease liabilities were as follows: December 31, 2020 Operating Leases Finance Leases (In thousands) 2021 $ 55,196 $ 13,409 2022 36,850 6,395 2023 19,974 3,777 2024 10,213 1,063 2025 7,925 997 Thereafter 17,255 2,046 Total future minimum lease payments 147,413 27,687 Less: Imputed interest ( 13,245 ) ( 1,997 ) Total $ 134,168 $ 25,690 As of December 31, 2020, we have entered into additional lease agreements that have not yet commenced of approximately $ 8 million. 10. Accrued Expenses Accrued expenses consist of the following: December 31, 2020 2019 (In thousands) Payroll and benefits $ 143,383 $ 115,693 Short-term operating lease liability 49,748 40,972 Deferred revenue and customer advances 30,269 16,177 Income taxes payable 26,602 11,661 Short-term finance lease liability 12,634 9,121 Accrued severance plan obligations (Note 12) 10,837 13,408 Accrued interest 10,767 11,638 Other accrued expenses 64,967 48,556 Total accrued expenses $ 349,207 $ 267,226 74 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) 11. Debt Short-term borrowings and long-term debt consist of the following: December 31, 2020 2019 (In thousands) Debt of Amkor Technology, Inc.: Senior notes: 6.625 % Senior notes, due September 2027 $ 525,000 $ 525,000 Other 2,039 — Debt of subsidiaries: Amkor Technology Korea, Inc.: $ 30 million revolving credit facility, applicable bank rate plus 1.11 % (1) — — Term loan, fund floating rate plus 1.60 %, due June 2020 — 24,000 Term loan, fixed rate at 1.80 %, due May 2021 (2) — — Term loan, applicable bank rate plus 2.03 %, due July 2022 — 40,000 Term loan, applicable bank rate plus 2.03 %, due September 2022 (3) — 60,000 Term loan, applicable bank rate plus 1.77 %, due April 2023 (4) 51,541 — Term loan, LIBOR plus 2.56 %, due December 2023 — 200,000 Term loan, applicable bank rate plus 1.98 %, due December 2028 (5) 50,000 66,000 Amkor Technology Japan, Inc.: Short-term term loans, variable rate (6) 6,663 7,071 Term loan, fixed rate at 0.86 %, due June 2022 14,528 23,018 Term loan, fixed rate at 0.60 %, due July 2022 3,390 5,064 Term loan, fixed rate at 1.30 %, due July 2023 138,499 179,541 Term loan, fixed rate at 1.35 %, due December 2024 220,823 262,407 Term loan, fixed rate at 1.20 %, due December 2025 (7) 105,569 — Amkor Assembly & Test (Shanghai) Co., Ltd.: Term loan, LIBOR plus 1.60 %, due March 2022 28,000 29,000 Term loan, LIBOR Plus 1.40 %, due March 2022 18,250 19,250 Other: $ 250 million senior secured revolving credit facility, LIBOR plus 1.25 %- 1.75 %, due July 2023 (Singapore) (8) — — Credit facility, TAIFX plus the applicable bank rate, due December 2024 (Taiwan) (9) — 20,000 1,164,302 1,460,351 Less: Unamortized discount and deferred debt costs, net ( 9,956 ) ( 10,117 ) Less: Short-term borrowings and current portion of long-term debt ( 149,007 ) ( 144,479 ) Long-term debt $ 1,005,339 $ 1,305,755 (1) In October 2020, we renewed this revolving credit facility agreement for a one-year term with availability of $ 30.0 million. Principal is payable at maturity, six months after draw of funds, and interest is payable monthly in arrears. During the year ended December 31, 2020, we borrowed $ 60.0 million and repaid the full $ 60.0 million. As of December 31, 2020, $ 30.0 million was available to be drawn. 75 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) (2) In May 2020, we entered into a KRW ₩ 60 billion term loan agreement with the option to re-borrow the funds through May 2021. Principal is payable at maturity and interest is payable monthly in arrears, at a fixed rate of 1.80 %. During the year ended December 31, 2020, we borrowed and repaid ₩ 60 billion ($ 48.4 million). As of December 31, 2020, ₩ 60 billion, or approximately $ 55 million, was available to be drawn. (3) In July 2019, we entered into a $ 140.0 million term loan due September 2022. Principal is payable at maturity, and interest is payable quarterly in arrears. During the year ended December 31, 2020, we borrowed $ 80.0 million available under this loan and repaid the full $ 140.0 million. (4) In April 2020, we borrowed KRW ₩ 150 billion (US$ 122.0 million) under a new term loan due April 2023. Principal is payable at maturity and interest is payable monthly in arrears. During the year ended December 31, 2020, we repaid KRW ₩ 94 billion ($ 86.0 million). (5) In December 2018, we entered into a term loan agreement pursuant to which we may borrow up to $ 90.0 million for capital expenditures. Principal is payable in semiannual installments and interest is payable quarterly in arrears (fixed at a weighted average of 3.88 % as of December 31, 2020). (6) We entered into various short-term term loans which mature semiannually. Principal and interest are payable in monthly installments. As of December 31, 2020, $ 4.8 million was available to be drawn. (7) In December 2020, we borrowed ¥ 10.9 billion (US$ 105.0 million) under a new term loan agreement due December 2025, guaranteed by Amkor Technology, Inc. and our subsidiary, Amkor Technology Singapore Holding Pte, Ltd. Principal is due in 20 equal, quarterly installments plus accrued interest, through maturity. (8) In July 2018, our subsidiary, Amkor Technology Singapore Holding Pte, Ltd., entered into a $ 250.0 million senior secured revolving credit facility, which is guaranteed by Amkor Technology, Inc. The availability for our revolving credit facility is based on the amount of eligible accounts receivable. Principal is payable at maturity. During the year ended December 31, 2020, we borrowed and repaid $ 150.0 million. As of December 31, 2020, $ 250.0 million was available to be drawn. (9) In December 2019, we entered into a $ 56.0 million borrowing arrangement. This arrangement includes a $ 20.0 million term loan and a $ 36.0 million revolving credit facility. During the year ended December 31, 2020, we borrowed $ 72.0 million and repaid $ 92.0 million. As of December 31, 2020, $ 36.0 million was available to be drawn. Certain of our foreign debt is collateralized by the land, buildings, equipment and accounts receivable in the respective locations. The carrying value of all collateral exceeds the carrying amount of the collateralized debt. Interest Rates Interest is payable semiannually on our senior notes and quarterly or monthly on our other fixed- and variable-rate debt. Refer to the table above for the interest rates on our fixed-rate debt and to the table below for the interest rates on our variable-rate debt. 76 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) December 31, 2020 2019 Amkor Technology Korea, Inc.: Term loan, fund floating rate plus 1.60 %, due June 2020 — 3.90 % Term loan, applicable bank rate plus 1.77 %, due April 2023 2.40 % — Term loan, LIBOR plus 2.56 %, due December 2023 — 4.49 % Amkor Technology Japan, Inc: Short-term term loans, variable rate 0.27 % 0.22 % Amkor Assembly & Test (Shanghai) Co., Ltd.: Term loan, LIBOR plus 1.60 %, due March 2022 1.83 % 3.53 % Term loan, LIBOR Plus 1.40 %, due March 2022 1.63 % 3.30 % Amkor Technology Taiwan Ltd.: Revolving credit facility, TAIFX plus the applicable bank rate, due December 2024 — 3.35 % Compliance with Debt Covenants 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. and Amkor Technology Singapore Holding Pte, Ltd. 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 or, in the case of our Singapore Revolver, borrowing availability, 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 December 31, 2020 and 2019. Maturities Total Debt (In thousands) Payments due for the year ending December 31, 2021 $ 149,007 2022 182,373 2023 170,776 2024 81,461 2025 27,400 Thereafter 553,285 Total debt $ 1,164,302 77 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) 12. Pension and Severance Plans Korean Severance Plan Our subsidiary in Korea maintains an unfunded severance plan that covers certain employees that were employed prior to August 1, 2015. To the extent eligible employees are terminated, our subsidiary in Korea would be required to make lump-sum severance payments on behalf of these eligible employees for service provided prior to August 1, 2015. Factors used to determine severance benefits include employees’ length of service, seniority and rate of pay. The employees’ length of service and seniority are fixed as of July 31, 2015. The employees’ rate of pay is adjusted to the rate of pay at the time of termination. Accrued severance benefits are estimated assuming all eligible employees were to terminate their employment at the balance sheet date. Our contributions to the National Pension Plan of the Republic of Korea are deducted from accrued severance benefit liabilities. On August 1, 2015, our subsidiary in Korea began sponsoring a defined benefit pension plan and a defined contribution plan. Existing employees at that time were given the option of choosing either a defined benefit pension plan or a defined contribution plan for their future benefits and new employees since that date are enrolled in a defined contribution plan. The changes to the balance of our accrued severance plan obligations are as follows: For the Year Ended December 31, 2020 2019 2018 (In thousands) Balance at January 1 $ 127,547 $ 142,298 $ 153,920 Provision of severance benefits 6,542 1,306 1,939 Severance payments (1) ( 42,457 ) ( 10,659 ) ( 7,611 ) Foreign currency (gain) loss 6,530 ( 5,398 ) ( 5,950 ) Balance at December 31 98,162 127,547 142,298 Payments remaining with the National Pension Fund ( 158 ) ( 161 ) ( 172 ) Total accrued severance plan obligations at December 31 98,004 127,386 142,126 Less current portion of accrued severance plan obligations (Note 10) 10,837 13,408 13,179 Non-current portion of accrued severance plan obligations $ 87,167 $ 113,978 $ 128,947 (1) In 2020, some employees accepted our offer to convert their Korean severance plan participation to a defined contribution plan. 78 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) Foreign Defined Benefit Pension Plans Our subsidiaries in Japan, Korea, Malaysia, the Philippines and Taiwan sponsor defined benefit plans (the “Plans”). Charges to expense are based upon actuarial analyses. The following table summarizes the changes to the Plans’ benefit obligations, fair value of the Plans’ assets and the funded status of the Plans at December 31, 2020 and 2019: For the Year Ended December 31, 2020 2019 (In thousands) Change in projected benefit obligation: Projected benefit obligation at January 1 $ 207,448 $ 175,712 Service cost 29,848 31,355 Interest cost 4,980 5,244 Benefits paid ( 8,380 ) ( 11,742 ) Actuarial (gain) loss 6,104 12,540 Effects of curtailment ( 2,410 ) — Settlement (1) ( 31,804 ) ( 5,310 ) Foreign exchange (gain) loss 16,723 ( 351 ) Projected benefit obligation at December 31 222,509 207,448 Change in plan assets: Fair value of plan assets at January 1 145,158 123,370 Actual gain (loss) on plan assets 11,400 12,221 Employer contributions 25,080 27,134 Settlement (1) ( 31,804 ) ( 5,310 ) Benefits paid ( 8,380 ) ( 11,742 ) Foreign exchange gain (loss) 13,757 ( 515 ) Fair value of plan assets at December 31 155,211 145,158 Funded status of the Plans at December 31 $ ( 67,298 ) $ ( 62,290 ) (1) In 2020, some employees accepted our offer to convert their defined benefit pension plan participation to a defined contribution plan. December 31, 2020 2019 (In thousands) Amounts recognized in the Consolidated Balance Sheets consist of: Prepaid benefit cost (included in non-current assets) $ 4,856 $ 498 Accrued benefit liability (included in pension and severance obligations) ( 72,154 ) ( 62,788 ) Net amount recognized at year end $ ( 67,298 ) $ ( 62,290 ) The accumulated benefit obligation as of December 31, 2020 and 2019 was $ 164.7 million and $ 154.7 million, respectively. 79 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) The following table summarizes, by component, the change in accumulated other comprehensive income (loss), net of tax related to our Plans: Prior Service Cost Actuarial Net Gain (Loss) Total (In thousands) Balance at December 31, 2018 $ 602 $ 2,057 $ 2,659 Amortization and settlement gain included in net periodic pension cost — ( 589 ) ( 589 ) Net gain (loss) arising during period — ( 6,890 ) ( 6,890 ) Adjustments to unrealized components of defined benefit pension plan included in other comprehensive income (loss) — ( 7,479 ) ( 7,479 ) Balance at December 31, 2019 602 ( 5,422 ) ( 4,820 ) Amortization and settlement gain included in net periodic pension cost — 208 208 Net gain (loss) arising during period — 394 394 Adjustments to unrealized components of defined benefit pension plan included in other comprehensive income (loss) — 602 602 Balance at December 31, 2020 $ 602 $ ( 4,820 ) $ ( 4,218 ) Information for pension plans with benefit obligations in excess of plan assets is as follows: December 31, 2020 2019 (In thousands) Plans with underfunded or non-funded projected benefit obligation: Aggregate projected benefit obligation $ 140,424 $ 197,377 Aggregate fair value of plan assets 68,270 134,589 Plans with underfunded or non-funded accumulated benefit obligation: Aggregate accumulated benefit obligation 76,426 71,059 Aggregate fair value of plan assets 25,292 24,043 The following table summarizes total pension expense: For the Year Ended December 31, 2020 2019 2018 (In thousands) Components of net periodic pension cost and total pension expense: Service cost $ 29,848 $ 31,355 $ 32,913 Interest cost 4,980 5,244 4,867 Expected return on plan assets ( 5,506 ) ( 6,412 ) ( 5,640 ) Amortization of prior service cost — — 6 Recognized actuarial (gain) loss 56 ( 374 ) ( 147 ) Net periodic pension cost 29,378 29,813 31,999 Settlement (gain) loss 62 ( 210 ) ( 1,639 ) Total pension expense $ 29,440 $ 29,603 $ 30,360 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. 80 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) The following table summarizes the weighted-average assumptions used in computing the net periodic pension cost and projected benefit obligations: For the Year Ended December 31, 2020 2019 2018 Discount rate for determining net periodic pension cost 2.5 % 3.1 % 3.2 % Discount rate for determining benefit obligations at December 31 2.3 % 2.5 % 3.1 % Rate of compensation increase for determining net periodic pension cost 3.7 % 3.6 % 3.8 % Rate of compensation increase for determining benefit obligations at December 31 3.7 % 3.7 % 3.6 % Expected rate of return on plan assets for determining net periodic pension cost 3.8 % 5.1 % 4.9 % The measurement date for determining the Plans’ assets and benefit obligations is December 31, each year. Discount rates are generally derived from yield curves constructed from high-quality corporate or foreign government bonds, for which the timing and amount of cash outflows approximate the estimated payouts. The expected rate of return assumption is based on weighted-average expected returns for each asset class. Expected returns reflect a combination of historical performance analysis and the forward-looking views of the financial markets and include input from our actuaries. We have no control over the direction of our investments in our defined benefit plans in Taiwan as the local Labor Standards Law Fund mandates such contributions into a cash account balance at the Bank of Taiwan. Our defined benefit pension plan in Malaysia is a non-funded plan, and as such, no asset exists related to this plan. Our investment strategies for our defined benefit plans in Japan, Korea and the Philippines, are based on long-term, sustained asset growth through low to medium risk investments. The current rate of return assumption targets are based on asset allocation strategies as follows: Allocation Debt Equity Other Japan defined benefit plan 65 % 33 % 2 % Korea defined benefit plan 15 % 40 % 45 % Philippine defined benefit plan 40 % 50 % 10 % 81 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) The fair value of our pension plan assets, by asset category utilizing the fair value hierarchy as discussed in Note 16, is as follows: December 31, 2020 December 31, 2019 (1) Level 1 Level 2 Total Level 1 Level 2 Total (In thousands) (In thousands) Cash and cash equivalents $ 1,219 $ — $ 1,219 $ 3,572 $ — $ 3,572 Equity securities 16,071 — 16,071 24,342 — 24,342 Debt securities Government bonds 6,571 — 6,571 3,106 — 3,106 Treasury notes 8,069 — 8,069 3,516 — 3,516 Mutual and commingled funds Equity funds 38,939 7,530 46,469 30,801 6,902 37,703 Debt funds 13,720 17,268 30,988 11,404 15,276 26,680 Guaranteed investment contracts — 34,281 34,281 — 33,931 33,931 Taiwan retirement fund 12,748 — 12,748 11,359 — 11,359 Other, net ( 2,365 ) 1,160 ( 1,205 ) 99 850 949 Total fair value of pension plan assets $ 94,972 $ 60,239 $ 155,211 $ 88,199 $ 56,959 $ 145,158 (1) In the current year, plan assets were categorized at the fund level rather than the underlying individual investment of the fund. Prior year amounts were reclassified to conform to current year presentation. The Taiwan retirement fund category of our plan assets represents accounts that our subsidiaries in Taiwan have in a government labor retirement fund in the custody of the Bank of Taiwan. The accounts earn a minimum guaranteed rate of return and are invested in a mix of cash, domestic and foreign equity securities and domestic and foreign debt securities. We expect to make contributions of approximately $ 23 million during 2021. We closely monitor the funded status of the Plans with respect to legislative requirements. We intend to make at least the minimum contribution required by law each year. The estimated future benefit payments related to our foreign defined benefit plans are as follows: Payments (In thousands) 2021 $ 13,482 2022 11,299 2023 13,528 2024 14,894 2025 18,252 2026 to 2030 125,576 Defined Contribution Plans We sponsor defined contribution plans in Korea, Malaysia, Taiwan and the U.S. Total defined contribution expense was $ 16.5 million, $ 13.6 million and $ 12.2 million for 2020, 2019 and 2018, respectively. 82 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) 13. Dividends In October 2020, we announced that our Board of Directors approved the initiation of a regular quarterly cash dividend on our common stock. The first quarterly dividend of $ 0.04 per share, representing an initial dividend payment of $ 9.7 million in the aggregate, was paid on January 7, 2021 to stockholders of record as of December 18, 2020 . 14. Accumulated Other Comprehensive Income (Loss) The following table reflects the changes in accumulated other comprehensive income (loss), net of tax: Unrealized Gain (Losses) on Available-for-Sale Debt Investments (1) Defined Benefit Pension (2) Foreign Currency Translation Total (In thousands) Balance at December 31, 2018 $ — $ 2,659 $ 21,153 $ 23,812 Other comprehensive income (loss) before reclassifications — ( 6,890 ) 2,782 ( 4,108 ) Amounts reclassified from accumulated other comprehensive income (loss) — ( 589 ) — ( 589 ) Other comprehensive income (loss) — ( 7,479 ) 2,782 ( 4,697 ) Balance at December 31, 2019 $ — $ ( 4,820 ) $ 23,935 $ 19,115 Other comprehensive income (loss) before reclassifications 17 394 7,532 7,943 Amounts reclassified from accumulated other comprehensive income (loss) 4 208 — 212 Other comprehensive income (loss) 21 602 7,532 8,155 Balance at December 31, 2020 $ 21 $ ( 4,218 ) $ 31,467 $ 27,270 (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). 15. Derivatives We use foreign currency forward contracts to mitigate foreign currency risk of certain assets and monetary 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. 83 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) As of December 31, 2020 and 2019, our foreign exchange forward contracts consisted of the following: December 31, 2020 December 31, 2019 Notional Value Fair Value (Level 2) Balance Sheet Location Notional Value Fair Value (Level 2) Balance Sheet Location (In thousands) Japanese Yen $ 465,192 $ 1,279 Other current assets $ 391,643 $ 2,225 Other current assets Korean Won 161,612 190 Other current assets 74,076 86 Other current assets Philippine Peso 10,974 ( 7 ) Accrued expenses — — N/A Total forward contracts $ 637,778 $ 1,462 $ 465,719 $ 2,311 For the years ended December 31, 2020, 2019 and 2018, the derivatives resulted in a net gain of $ 35.9 million, $ 0.1 million and $ 2.5 million respectively, which were offset by the foreign currency losses associated with the underlying net liabilities. 16. 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, including money market funds (Note 6), we use inputs 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. 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 cash equivalent money market funds and restricted cash money market funds. We also review goodwill for impairment annually during the fourth quarter of each year. 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 (Note 15) 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, operating lease right of use assets and goodwill, at fair value on a nonrecurring basis. 84 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) We measure the fair value of our debt for disclosure purposes. The following table presents the fair value of financial instruments that are not recorded at fair value on a recurring basis: December 31, 2020 December 31, 2019 Fair Value Carrying Value Fair Value Carrying Value (In thousands) Senior notes (Level 1) $ 570,339 $ 519,803 $ 576,875 $ 519,211 Revolving credit facilities and term loans (Level 2) 647,557 634,543 940,756 931,023 Total financial instruments $ 1,217,896 $ 1,154,346 $ 1,517,631 $ 1,450,234 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. 17. 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 make a determination as to 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. Settlement of Patent License Litigation Under the terms of a January 2015 patent license litigation settlement, Amkor agreed to pay a total of $ 155.0 million in 16 equal quarterly recurring payments commencing in the first quarter of 2015 and continuing through the fourth quarter of 2018. At December 31, 2020 and 2019, we had no remaining liability under this settlement agreement. Purchase Commitments In order to provide packaging and test services, we purchase materials under various long-term supply contracts. Future minimum payments to be made under these contracts for the period 2021 through 2027 are $ 11.0 million. 18. Business Segments, Customer Concentrations and Geographic Information We operate as a single operating segment as managed by our Chief Executive Officer, who is considered our chief operating decision maker (“CODM”). The CODM bears the ultimate responsibility for, and is actively engaged in, the allocation of resources and the evaluation of our operating and financial results. We have concluded that we have a single operating segment based on the following: 85 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) • We are managed under a functionally-based organizational structure with the head of each function reporting directly to the CODM; • We assess performance, including incentive compensation, based on consolidated operating performance and financial results; • Our CODM allocates resources and makes other operating decisions based on specific customer business opportunities and • We have an integrated process for the design, development and manufacturing services we provide to all of our customers. We also have centralized sales and administrative functions. Net sales by product group consist of the following: For the Year Ended December 31, 2020 2019 2018 (In thousands) Advanced Products $ 3,202,094 $ 2,110,815 $ 2,118,571 Mainstream Products 1,848,495 1,941,835 2,197,895 Total net sales $ 5,050,589 $ 4,052,650 $ 4,316,466 (1) Advanced products include flip chip and wafer-level processing and related test services. (2) Mainstream products include wirebond packaging and related test services. Net sales by end market consist of the following : For the Year Ended December 31, 2020 2019 2018 Communications (handheld devices, smartphones, tablets) 41 % 38 % 44 % Consumer (connected home, set-top boxes, televisions, visual imaging, wearables) 24 % 18 % 12 % Automotive, industrial and other (driver assist, infotainment, performance, safety) 20 % 27 % 26 % Computing (datacenter, infrastructure, PC/laptop, storage) 15 % 17 % 18 % Total net sales 100 % 100 % 100 % Net sales by region based on customer headquarters location consist of the following: For the Year Ended December 31, 2020 2019 2018 (In thousands) Japan $ 1,152,641 $ 1,061,265 $ 1,156,797 Europe, Middle East and Africa 848,301 625,592 605,932 Asia Pacific (excluding Japan) 672,563 487,406 535,894 Total foreign countries 2,673,505 2,174,263 2,298,623 United States 2,377,084 1,878,387 2,017,843 Total net sales $ 5,050,589 $ 4,052,650 $ 4,316,466 In 2020, one customer accounted for 14.5 % of total net sales and another customer accounted for 10.2 % of net sales in 2018. No single customer accounted for more than 10% of net sales in 2019. 86 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) Property, plant and equipment, net, based on physical location, consist of the following: December 31, 2020 2019 (In thousands) China $ 397,849 $ 419,749 Japan 172,520 177,936 Korea 1,428,855 1,179,966 Malaysia 37,718 41,030 Philippines 187,108 215,941 Portugal 69,458 63,975 Taiwan 264,959 298,982 Other foreign countries 910 1,167 Total foreign countries 2,559,377 2,398,746 United States 6,625 6,104 Total property, plant and equipment, net $ 2,566,002 $ 2,404,850 19. Restructuring and Other Exit Activities As part of our ongoing efforts to improve our manufacturing operations and manage costs, we regularly evaluate our staffing levels and facility requirements compared to business needs. The following table summarizes our exit activities associated with these efforts. “Charges” represents the initial charge related to the exit activity. “Cash Payments” consists of the utilization of “Charges.” “Non-cash Amounts” consists of translation adjustments. Japan Consolidation Activities During the year ended December 31, 2020, we recorded restructuring charges of $ 18.0 million associated with our Japan factory consolidation efforts. We recorded these charges to selling, general and administrative expenses within the Consolidated Statements of Income. All amounts accrued at December 31, 2020 are classified as current liabilities. We expect to complete these restructuring actions in the first half of fiscal 2021. Facility Costs (1) Employee Separation Costs Other Exit Costs (2) Total (In thousands) Accrual at December 31, 2019 $ 2,196 $ 271 $ 174 $ 2,641 Charges 9,679 5,548 2,779 18,006 Cash payments ( 7,536 ) ( 4,056 ) ( 2,731 ) ( 14,323 ) Non-cash amounts 26 ( 4 ) ( 3 ) 19 Accrual at December 31, 2020 $ 4,365 $ 1,759 $ 219 $ 6,343 Total cumulative charges incurred to date $ 14,179 $ 8,258 $ 3,523 $ 25,960 Estimated additional charges to be incurred $ 3,640 $ 275 $ 151 $ 4,066 (1) Facility costs primarily consist of equipment relocation costs directly resulting from the restructuring actions. (2) Other exit costs primarily consist of employee relocation and training costs directly resulting from the restructuring actions. 87 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) 20. Quarterly Results (unaudited) The following table sets forth our consolidated unaudited financial data for the last eight quarters ended December 31, 2020. We believe that we have included all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of our selected quarterly data. 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. For the Quarter Ended Dec 31, 2020 (a) Sept 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 (b) Sept 30, 2019 Jun 30, 2019 (c) Mar 31, 2019 (d) (In thousands, except per share data) Net sales $ 1,371,041 $ 1,354,023 $ 1,172,909 $ 1,152,616 $ 1,178,464 $ 1,083,917 $ 895,305 $ 894,964 Gross profit 278,501 241,085 192,320 188,908 222,984 182,240 123,454 120,761 Operating income 159,179 127,469 86,524 84,073 118,385 78,855 22,510 13,420 Income tax expense 12,679 15,753 12,905 4,846 764 9,141 5,897 21,380 Net income (loss) 126,965 92,897 56,140 64,497 99,816 54,486 ( 9,006 ) ( 22,668 ) Net income (loss) attributable to Amkor 126,674 92,151 55,424 63,889 99,147 54,070 ( 9,450 ) ( 22,879 ) Net income (loss) attributable to Amkor per common share: Basic $ 0.52 $ 0.38 $ 0.23 $ 0.27 $ 0.41 $ 0.23 $ ( 0.04 ) $ ( 0.10 ) Diluted $ 0.52 $ 0.38 $ 0.23 $ 0.26 $ 0.41 $ 0.23 $ ( 0.04 ) $ ( 0.10 ) (a) In the fourth quarter of 2020, we recorded a $ 20.2 million discrete tax benefit from the recognition of deferred tax assets we expect to utilize in future years. (b) In the fourth quarter of 2019, we recorded a $ 3.8 million discrete income tax benefit, primarily related to changes in the valuation of certain deferred tax assets. (c) In the second quarter of 2019, we incurred an $ 8.4 million charge related to the early redemption of our 2022 Notes. (d) In the first quarter of 2019, we recorded a $ 14.9 million non-cash discrete income tax charge to reduce the value of certain deferred tax assets. 88 Table of Contents SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS Balance at Beginning of Period Additions (Credited) Charged to Expense Write-offs Balance at End of Period (In thousands) Deferred tax asset valuation allowance: Year ended at December 31, 2018 $ 83,251 54,421 ( 19,112 ) $ 118,560 Year ended at December 31, 2019 $ 118,560 21,496 ( 3,122 ) $ 136,934 Year ended at December 31, 2020 $ 136,934 ( 15,311 ) ( 313 ) $ 121,310 89 Table of Contents Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure None.