Chandler, Ariz., October 29, 2008 – Amkor Technology, Inc. (NASDAQ: AMKR) today reported its financial results for the third quarter ended September 30, 2008

Third quarter net sales of $720 million were up 4% sequentially from the second quarter of 2008 and up 4% from the third quarter of 2007. Third quarter net income was $34 million, down 48% from the second quarter of 2008 and down 44% from the third quarter of 2007. Third quarter earnings per diluted share was $0.18, a decrease of $0.15 or 45% compared to the second quarter of 2008 and a decrease of $0.12 or 40% compared to the third quarter of 2007. Third quarter results included a charge of $49 million ($48 million, net of tax) or $0.22 per diluted share, relating to an interim order issued by the Arbitration Panel on October 27, 2008 relating to Amkor’s license agreement with Tessera. Excluding the Tessera charge, our results for the third quarter were in line with or higher than previous guidance. The final award will be determined by the Panel following a recalculation of damages by the parties’ respective experts. Accordingly, Amkor’s estimate is subject to change and the amounts ultimately owed may differ from our estimate. The Panel also denied Tessera’s request to terminate the license. Amkor remains a licensee under the agreement with the rights and benefits of a licensee along with ongoing obligations to pay royalties for covered products.

“Our business reflects the trends in the worldwide semiconductor industry generally and is affected particularly by levels of consumer spending,” said James Kim, chairman and chief executive officer of Amkor. “Third quarter results reflect strong performance in a challenging economic environment. The 4% sequential growth in revenue was below historical seasonal levels, as customers managed their inventories in response to reduced consumer demand. The current uncertainties about global economic conditions make it very difficult for our customers and us to accurately forecast and plan future business activities. Based on current customer forecasts, we expect our fourth quarter revenues to decline 15% to 20% from the third quarter of 2008.”

“We will remain focused on cash flow generation and are committed to our strategy, initiated late 2005, of reducing costs and controlling capital spending, prudent investment in technology in close collaboration with our customers, and a disciplined approach to pricing,” said Kim. “We continue to focus on improving the efficiency of our factory operations and administrative functions. Through September 30, 2008 we have reduced our headcount by over 700 employees and expect to save $4 million a quarter prospectively.”

“Unit shipments were up 18% sequentially to 2.5 billion packaged units while revenues grew by 4%,” commented Ken Joyce, president and chief operating officer. “Our revenue growth continues to be driven by our advanced package technologies including 3-D and flip chip packages. Revenues for 3-D and flip chip packaging solutions grew 50% for the third quarter compared to a year ago. During the third quarter we also saw a recovery in our leadframe business, which had the highest level of unit growth among all our businesses. Due to their low material costs, leadframe packages sold at lower unit prices than other packages and, as a result, unit growth outpaced revenue growth during the quarter.”

“Gross margin for the third quarter was 19%, down from 23% in the second quarter of 2008 and down from 25% in the third quarter of 2007,” said Joanne Solomon, chief financial officer. “Included in our cost of sales for the quarter were $10 million in charges relating to previously announced reductions in workforce as well as an estimate of $45 million for accrued and unpaid royalties owed to Tessera. The $45 million charge for Tessera reduced our gross margin by 6 percentage points. The record volume of unit shipments through our factories and the resulting high capacity utilization rates contributed to our gross margin.”

Selling, general and administrative expenses of $60.5 million for the third quarter were down from $67.4 million in the second quarter of 2008 and $64.1 million in the third quarter of 2007 primarily due to lower legal and travel costs during the period.

Third quarter net income included a foreign currency gain of $23 million, principally due to the depreciation of the Korean won and the resulting re-measurement of Amkor’s Korean employee benefit plan liability. We also accrued approximately $4 million as an estimate of interest owed to Tessera for unpaid royalties

“Amkor’s effective income tax rate for the third quarter was 32%, which is substantially higher than typical as a result of the accrual for Tessera royalties having little tax benefit. The effective income tax rate also reflects the recording of a valuation allowance of approximately $8 million offsetting certain foreign deferred tax assets. We anticipate the effective tax rate for the full year 2008 will be approximately 13%,” said Solomon.

“Capital additions totaled $92 million, which was less than anticipated for the third quarter. In response to current industry conditions and a weakening outlook for the fourth quarter and 2009, we have reduced the scope of certain capital projects,” said Solomon. “While we continue to make capital investments in areas of strategic importance to our company, we constantly make spending adjustments in direct response to customer demand. We expect capital additions to be approximately $45 million in the fourth quarter of 2008, with capital intensity of approximately 13% for the full year 2008. We would expect to manage our business at lower levels of capital intensity during 2009, subject to market conditions and strategic opportunities.”

“We generated $47 million of free cash flow in the third quarter,” added Solomon. “Our cash balance increased to $444 million, while total debt decreased to just over $1.6 billion at quarter end. Since the beginning of 2006, we have generated over $700 million in free cash flow, reduced total debt by over $500 million, and reduced our debt net of cash by approximately $750 million. Other than an approximate $55 million annually of amortizing debt, we have no significant debt due until 2011. While the near-term outlook for the semiconductor industry has continued to weaken, our financial position and liquidity remain sound.”

Selected operating data for the third quarter of 2008 is included in a section before the financial tables.

Business Outlook

On the basis of customers’ forecasts, we have the following expectations for the fourth quarter of 2008:

  • Sales – Down 15% to 20% from the third quarter of 2008
  • Gross Margin – between 18% to 21%
  • Net income – in the range of $0.03 to $0.12 per diluted share

Amkor will conduct a conference call on October 29, 2008 at 5:00 p.m. eastern time. This call is being webcast by Thomson Financial and can be accessed at Amkor’s web site at www.amkor.com. You may also access the call by dialing 303-205-0033. A replay of the call will be made available at Amkor’s web site or by dialing 303-590-3000 (access passcode #11119823).

The webcast is also being distributed over Thomson Financial’s Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through Thomson Financial individual investor center at www.companyboardroom.com or by visiting any of the investor sites in Thomson Financial’s Individual Investor Network. Institutional investors can access the call via Thomson Financial’s password-protected event management site, StreetEvents (www.streetevents.com).

About Amkor

Amkor is a leading provider of semiconductor assembly and test services. The company offers semiconductor companies and electronics OEMs a complete set of microelectronics design and manufacturing services. More information on Amkor is available from the company’s SEC filings and on Amkor’s website: www.amkor.com.

Forward Looking Statement Disclaimer

This press release contains forward-looking statements within the meaning of federal securities laws. All statements other than statements of historical fact are considered forward looking statements including, without limitation, statements regarding the following: our estimate of charges relating to the Tessera arbitration; expectations regarding further weakening in demand; our anticipated revenue growth; our anticipated level of debt repayment; our focus on cash flow generation and our strategy regarding reducing costs, controlling spending, prudent investment and pricing discipline; our expectations regarding capital intensity; the expected dollar amount of our capital additions and the focus of our capital spending; expectations regarding our effective tax rate for 2008; our statements regarding the near term outlook for the semiconductor industry and our financial position and liquidity; and the statements regarding sales, gross margin and net income per diluted share contained under Business Outlook. These forward-looking statements involve a number of risks, uncertainties, assumptions and other factors that could affect future results and cause actual results and events to differ materially from historical and expected results and those expressed or implied in the forward looking statements, including, but not limited to, the following: the highly unpredictable nature of the semiconductor industry; deteriorating market conditions; the effect of the financial crisis on credit markets, financial institutions, customers, suppliers and consumers; inability to achieve high capacity utilization rates; volatility of consumer demand for products incorporating our semiconductor packages; weakness in the forecasts of Amkor’s customers; customer modification of and follow through with respect to forecasts provided to Amkor; curtailment of outsourcing by our customers; our substantial indebtedness and restrictive covenants; failure to realize sufficient cash flow to fund capital expenditures; the effects of a recession in the U.S. and other economies worldwide; the highly unpredictable nature and costs of litigation and other legal activities and the risk of adverse results of such matters, including the amount of the final award in our litigation with Tessera; the outcome of the pending SEC investigation; worldwide economic effects of terrorist attacks, natural disasters and military conflict; our ability to reduce costs, and control capital spending, make prudent investments in technology and maintain pricing discipline; competitive pricing and declines in average selling prices; timing and volume of orders relative to production capacity; fluctuations in manufacturing yields; competition; dependence on international operations and sales; dependence on raw material and equipment suppliers and changes in raw material costs; exchange rate fluctuations; dependence on key personnel; difficulties in managing growth; enforcement of intellectual property rights; environmental and other governmental regulations; and technological challenges.

Other important risk factors that could affect the outcome of the events set forth in these statements and that could affect our operating results and financial condition are discussed in the company’s Annual Report on Form 10-K for the year ended December 31, 2007 and in the company’s subsequent filings with the Securities and Exchange Commission made prior to or after the date hereof. Amkor undertakes no obligation to review or update any forward looking statements to reflect events or circumstances occurring after the date of this press release.


Contact:
Amkor Technology, Inc.
Company Contact:
Joanne Solomon
Corporate Vice President & CFO
480-821-5000 ext. 5416
jsolo@amkor.com

Investor Relations Contact:
Claire McAdams
Investor Relations
530-274-0551
cmcad@amkor.com

AMKOR TECHNOLOGY, INC.

Selected Operating Data

           
           
Sales Data: Q3 2008   Q2 2008   Q3 2007
           
Packaging services:          
Wirebond - leadframe   29 %     28 %     34 %
Wirebond - laminate   40 %     40 %     52 %
Flip chip and wafer level processing   20 %     20 %     3 %
Packaging services   89 %     88 %     89 %
Test services   11 %     12 %     11 %
Total sales   100 %     100 %     100 %
           
Packaged units (in millions):          
Wirebond - leadframe   1,957       1,638       1,763  
Wirebond - laminate   390       339       363  
Flip chip and wafer level processing   157       141       141  
Total packaged units   2,504       2,118       2,267  
           
Net sales from top ten customers   49 %     49 %     48 %
Capacity utilization   86 %     73 %     83 %
           
End Market Distribution Data (an approximation based on a sampling of our largest customers):
Communications   42 %     42 %     40 %
Consumer   33 %     32 %     32 %
Computing   15 %     16 %     19 %
Other   10 %     10 %     9 %
Total   100 %     100 %     100 %
           
           
Earnings per Share Data: Q3 2008   Q2 2008   Q3 2007
 

(in millions, except per share data)

           
Net income - basic $ 34     $ 65     $ 61  
Adjustment for dilutive securities on net income:          
Interest on 2.5% convertible notes due 2011, net of tax   1       1       1  
Interest on 6.25% convertible notes due 2013, net of tax   2       2       2  
Net income - diluted $ 37     $ 68     $ 64  
           
Weighted average shares outstanding - basic   183       183       182  
Effect of dilutive securities:          
Stock options   1       1       2  
2.5% convertible notes due 2011   13       13       13  
6.25% convertible notes due 2013   13       13       13  
Weighted average shares outstanding - diluted   210       210       210  
           
Net income per common share:          
Basic $ 0.19     $ 0.36     $ 0.33  
Diluted $ 0.18     $ 0.33     $ 0.30  
           
           
  Q3 2008   Q2 2008   Q3 2007
  (in millions)
Capital Investment Data:          
Property, plant and equipment additions $ 92     $ 122     $ 78  
Net change in related accounts payable and deposits   34       (20 )     (20 )
Purchases of property, plant and equipment $ 126     $ 102     $ 58  
Depreciation and amortization $ 79     $ 77     $ 74  
           
Free Cash Flow Data:          
Net cash provided by operating activities $ 173     $ 103     $ 160  
Less purchases of property, plant and equipment   (126 )     (102 )     (58 )

Free cash flow(*)

$ 47     $ 1     $ 102  

 


                     

* We define free cash flow as net cash provided by operating activities less purchases of property, plant and equipment. Free cash flow is not defined by generally accepted accounting principles. However, we believe free cash flow to be relevant and useful information to our investors because it provides them with additional information in assessing our liquidity, capital resources and financial operating results. Our management uses free cash flow in evaluating our liquidity, our ability to service debt and our ability to fund capital expenditures. However, this measure should be considered in addition to, and not as a substitute for, or superior to, cash flows or other measures of financial performance prepared in accordance with generally accepted accounting principles, and our definition of free cash flow may not be comparable to similarly titled measures reported by other companies.

AMKOR TECHNOLOGY, INC.

CONDENSED CONSOLIDATED INCOME STATEMENTS
(Unaudited)
                 
                 
    For the Three Months Ended   For the Nine Months Ended
    Sept 30,   Sept 30,
      2008       2007       2008       2007  
    (In thousands, except per share data)
                 
Net sales   $ 719,731     $ 689,083     $ 2,109,890     $ 1,992,557  
Cost of sales     585,700       519,152       1,640,776       1,513,596  
Gross profit     134,031       169,931       469,114       478,961  
                 
Operating expenses:                
Selling, general and administrative     60,467       64,080       193,357       192,223  
Research and development     14,084       10,282       43,035       30,930  
Gain on sale of real estate and specialty test operations     -       (1,717 )     (9,856 )     (4,833 )
Total operating expenses     74,551       72,645       226,536       218,320  
Operating income     59,480       97,286       242,578       260,641  
Other (income) expense:                
Interest expense, net     30,119       29,336       83,866       95,610  
Interest expense, related party     1,562       1,563       4,687       4,688  
Foreign currency (gain) loss     (23,026 )     3,399       (44,100 )     7,946  
Debt retirement costs, net     -       -       -       15,875  
Other (income) expense, net     (256 )     254       (955 )     (964 )
Total other expense     8,399       34,552       43,498       123,155  
Income before income taxes and minority interests     51,081       62,734       199,080       137,486  
Income tax expense     16,465       1,194       26,703       9,573  
Income before minority interests     34,616       61,540       172,377       127,913  
Minority interests, net of tax     (613 )     (920 )     (1,146 )     (1,713 )
Net income   $ 34,003     $ 60,620     $ 171,231     $ 126,200  
                 
Net income per common share:                
Basic   $ 0.19     $ 0.33     $ 0.94     $ 0.70  
Diluted   $ 0.18     $ 0.30     $ 0.86     $ 0.65  
                 
Shares used in computing net income per common share:                
Basic     183,001       181,664       182,633       180,200  
Diluted     209,989       209,868       209,848       208,812  
                                 
AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
         
         
    September 30,   December 31,
      2008       2007  
    (In thousands)
ASSETS        
Current assets:        
Cash and cash equivalents   $ 443,838     $ 410,070  
Restricted cash     2,670       2,609  
Accounts receivable:        
Trade, net of allowances     390,383       393,493  
Other     3,892       4,938  
Inventories     156,203       149,014  
Other current assets     36,474       27,290  
Total current assets     1,033,460       987,414  
         
Property, plant and equipment, net     1,526,180       1,455,111  
Goodwill     674,312       673,385  
Intangibles, net     13,636       20,321  
Restricted cash     1,745       1,725  
Other assets     41,539       54,650  
Total assets   $ 3,290,872     $ 3,192,606  
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities:        
Short-term borrowings and current portion of long-term debt   $ 55,764     $ 152,489  
Trade accounts payable     364,269       359,313  
Accrued expenses     228,550       165,271  
Total current liabilities     648,583       677,073  
         
Long-term debt     1,473,774       1,511,570  
Long-term debt, related party     100,000       100,000  
Pension and severance obligations     175,801       208,387  
Other non-current liabilities     29,156       33,935  
Total liabilities     2,427,314       2,530,965  
         
Minority interests     8,265       7,022  
         
Stockholders equity:        
Preferred stock     -       -  

Common stock, $0.001 par value, 500,000 shares authorized, issued and outstanding of 183,035 in 2008 and 181,799 in 2007

    183       182  
Additional paid-in capital     1,496,071       1,482,186  
Accumulated deficit     (650,295 )     (821,526 )
Accumulated other comprehensive income (loss)     9,334       (6,223 )
Total stockholders equity     855,293       654,619  
Total liabilities and stockholders equity   $ 3,290,872     $ 3,192,606  
                 
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
     
     
    For the Nine Months Ended
    September 30,
      2008       2007  
    (In thousands)
Cash flows from operating activities:        
Net income   $ 171,231     $ 126,200  
Depreciation and amortization     229,501       215,679  
Debt retirement costs     -       6,875  
Other operating activities and non-cash items     22,093       (1,081 )
Changes in assets and liabilities     34,566       66,795  
Net cash provided by operating activities     457,391       414,468  
         
Cash flows from investing activities:        
Payments for property, plant and equipment     (317,109 )     (159,942 )
Proceeds from the sale of property, plant and equipment     15,257       5,130  
Proceeds from sale of investment     2,460       -  
Other investing activities     (702 )     (1,778 )
Net cash used in investing activities     (300,094 )     (156,590 )
         
Cash flows from financing activities:        
Borrowings under revolving credit facilities     619       80,340  
Payments under revolving credit facilities     (633 )     (95,398 )
Proceeds from issuance of long-term debt     -       300,000  
Payments for debt issuance costs     -       (3,441 )
Payments of long-term debt, including redemption premium payment     (135,913 )     (486,888 )
Proceeds from issuance of stock through stock compensation plans     10,201       36,380  
Net cash used in financing activities     (125,726 )     (169,007 )
         
Effect of exchange rate fluctuations on cash and cash equivalents     2,197       1,390  
         
Net decrease in cash and cash equivalents     33,768       90,261  
Cash and cash equivalents, beginning of period     410,070       244,694  
Cash and cash equivalents, end of period   $ 443,838     $ 334,955