• Net sales $794 million
  • Gross margin 24%
  • Net income $78 million
  • Earnings per diluted share $0.30


CHANDLER, Ariz. – November 4, 2010 – Amkor Technology, Inc. (NASDAQ: AMKR), a leading provider of semiconductor assembly and test services, today announced financial results for the third quarter ended September 30, 2010, with net sales of $794 million, net income of $78 million, and earnings per diluted share of $0.30.

“Amkor set a new record for sales in the third quarter reflecting solid growth across all of our end markets, with notable strength in the consumer and communications areas,” said Ken Joyce, Amkor's president and chief executive officer.  “Gross margin was lower than expectations primarily due to an unanticipated shift in product mix to packages with higher material content.  The lower gross margin, together with a foreign currency loss and increased income tax expense, led to lower than anticipated earnings in the quarter.”

Select financial information for the third quarter 2010 is as follows:

  • Net Sales:  $794 million, up 6% from $749 million in the prior quarter, and up 29% from $616 million in the third quarter of 2009  
  • Gross Margin:  24%, compared to 24% in the prior quarter and 25% in the third quarter of 2009  
  • Net Income:  $78 million, up from $59 million in the prior quarter, and down from $81 million in the third quarter of 2009  
  • Earnings Per Diluted Share:  $0.30, up from $0.23 in the prior quarter, and down from $0.31 in the third quarter of 2009 


Net sales grew 6% in the third quarter, with ball grid array packages delivering the strongest performance.  Unit shipments grew 5%, to 2.9 billion units, principally driven by leadframe packaging services.

“High demand for ball grid array packages in support of gaming and TVs, which have higher material content, contributed to lower than expected gross margin.  Gross margin was also compressed by lower than anticipated utilization of some of our leadframe and chip scale capacity as some of our customers in the consumer electronics area adjusted their demand.” said Joanne Solomon, Amkor’s executive vice president and chief financial officer.

“In addition, our earnings were reduced by an $8 million foreign currency loss, or $0.03 per diluted share, primarily attributable to the appreciation of the Korean won and the resulting revaluation of Amkor’s Korean employee benefit plan liability.  Income taxes were $5 million higher than expected, or $0.02 per diluted share, primarily due to higher than anticipated profits in Taiwan,” added Solomon.

“Capital additions were $171 million during the third quarter, primarily in support of the communications area,” continued Solomon. 

Cash and cash equivalents were $417 million, and total debt was $1.4 billion, at September 30, 2010.

Selected operating data for the third quarter 2010 is included in a section before the financial tables.

Business Outlook

“As we look ahead to the fourth quarter, demand in the communications market continues to be solid,” said Joyce.  “At the same time, we see seasonal softness in demand for gaming and lower demand forecasts by some of our customers in the consumer electronics and networking areas.”

Based upon the currently available information, we have the following expectations for the fourth quarter of 2010:

  • Net sales of $715 million to $754 million, down 5% to down 10% from the prior quarter
  • Gross margin between 22% and 24%
  • Net income of $60 million to $81 million, or $0.23 to $0.31 per diluted share
  • Capital additions of approximately $75 million for the fourth quarter, and $480 million for the full year, or a full year capital intensity of approximately 16% of net sales


Conference Call Information

Amkor will conduct a conference call on November 4, 2010, at 5:00 p.m. Eastern Daylight Time. This call is being webcast and can be accessed at Amkor’s web site:  www.amkor.com.  You may also access the call by dialing 877-941-1468.  A replay of the call will be made available at Amkor’s web site or by dialing 800-406-7325 (access pass code #4376952).  The webcast is also being distributed over Thomson Reuters’ Investor Distribution Network to both institutional and individual investors.  Individual investors can listen to the call through Thomson Reuters’ individual investor center at www.companyboardroom.com or by visiting any of the investor sites in Thomson Reuters’ Individual Investor Network. Institutional investors can access the call via Thomson Reuters’ password-protected event management site, Street Events (www.streetevents.com).
 

About Amkor

Amkor is a leading provider of semiconductor assembly and test services to semiconductor companies and electronics OEMs. 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, the statements made regarding our current business outlook for the fourth quarter of 2010, including demand in the communications market, demand for gaming, consumer electronics, and networking, our expected net sales, gross margin, net income, capital additions and capital intensity.  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;
  • the effect of the global economy 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;
  • dependence on key customers;
  • weakness in the forecasts of our customers;
  • customer modification of and follow through with respect to forecasts provided to us;
  • curtailment of outsourcing by our customers;
  • our substantial indebtedness and restrictive covenants;
  • failure to realize sufficient cash flow to fund capital additions;
  • the effects of a recession or other downturn in the U.S. and other economies worldwide;
  • disruptions or deficiencies in our controls resulting from the implementation of our new enterprise resource planning system;
  • the highly unpredictable nature and costs of litigation and other legal activities and the risk of adverse results of such matters;
  • worldwide economic effects of terrorist attacks, natural disasters and military conflict;
  • our ability to control costs;
  • 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 and precious metal 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.

Contact:

Amkor Technology, Inc., Chandler
Joanne Solomon
Executive Vice President & Chief Financial Officer
480-786-7878
joanne.solomon@amkor.com

 

AMKOR TECHNOLOGY, INC.
Selected Operating Data


             
Sales Data:   Q3 2010   Q2 2010   Q3 2009
             
Packaging services (in millions):            
Chip scale package   $
244
    $ 234     $ 206  
Ball grid array    
212
      194       129  
Leadframe    
204
      202       172  
Other packaging     52       48       42  
Packaging services    
712
      678       549  
Test services     82       71       67  
Total sales   $
794
    $ 749     $ 616  
             
Packaging services:            
Chip scale package     31 %     31 %     33 %
Ball grid array     27 %     26 %     21 %
Leadframe     26 %     27 %     28 %
Other packaging     6 %     6 %     7 %
Packaging services     90 %     90 %     89 %
Test services     10 %     10 %     11 %
Total sales     100 %     100 %     100 %
             
Packaged units (in millions):            
Chip scale package    
618
      580       481  
Ball grid array    
72
      61       57  
Leadframe    
2,185
      2,093       1,802  
Other packaging     8       7       7  
Total packaged units    
2,883
      2,741       2,347  
             
Net sales from top ten customers     55 %     55 %     54 %
Capacity utilization    
87
%     87 %     82 %
             
End Market Distribution Data (an approximation including representative devices and applications based on a sampling of our largest customers. Prior periods were revised for an expanded sampling methodology and refinement of our classifications):
             
Communications (cell phones, Ethernet, WiMAX, wireless LAN, Bluetooth)     34 %     34 %     40 %
Consumer (gaming, set top boxes, TV, portable media)     30 %     30 %     28 %
Computing (PCs, servers, displays, hard disk drive, printers, other peripherals)     14 %     14 %     13 %
Networking (infrastructure, routers, network servers)     13 %     13 %     12 %
Other (auto, industrial)     9 %     9 %     7 %
Total     100 %     100 %     100 %
                         
 

AMKOR TECHNOLOGY, INC.
Selected Operating Data (Continued)

 
               
      Q3 2010   Q2 2010   Q3 2009
  Gross Margin Data:            
  Net sales     100 %     100 %     100 %
  Cost of sales:            
  Materials     43 %     42 %     39 %
  Labor     12 %     13 %     13 %
  Other manufacturing     21 %     21 %     23 %
  Gross margin     24 %     24 %     25 %
               
  Packaging services gross margin     22 %     24 %     25 %
  Test services gross margin     36 %     27 %     28 %
               
  Earnings per Share Data:   (in millions, except per share data)
               
 
Net income attributable to Amkor - basic
  $ 78     $ 59     $ 81  
 
Adjustment for dilutive securities on net income:
           
  Interest on 2.5% convertible notes due 2011, net of tax     -       -       -  
  Interest on 6.25% convertible notes due 2013, net of tax     2       2       2  
  Interest on 6.0% convertible notes due 2014, net of tax     4       4       4  
 
Net income attributable to Amkor - diluted
  $ 84     $ 65     $ 87  
               
  Weighted average shares outstanding - basic     183       183       183  
  Effect of dilutive securities:            
  Stock options and unvested restricted shares     -       1       -  
  2.5% convertible notes due 2011     3       3       3  
  6.25% convertible notes due 2013     13       13       13  
  6.0% convertible notes due 2014     83       83       83  
  Weighted average shares outstanding - diluted     282       283       282  
               
 
Net income attributable to Amkor per common share:
           
  Basic   $ 0.42     $ 0.32     $ 0.44  
  Diluted   $ 0.30     $ 0.23     $ 0.31  
               
  Capital Investment Data:            
  Property, plant and equipment additions   $ 171     $ 158     $ 78  
  Net change in related accounts payable and deposits     (37 )     (82 )     (36 )
  Purchases of property, plant and equipment   $ 134     $ 76     $ 42  
  Depreciation and amortization   $ 83     $ 78     $ 74  
               
  Free Cash Flow Data:            
  Net cash provided by operating activities   $ 176     $ 87     $ 123  
  Less purchases of property, plant and equipment     (134 )     (76 )     (42 )
  Free cash flow*   $ 42     $ 11     $ 81  
                           
 
*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 additions. 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.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)



                 
    For the Three Months   For the Nine Months
    Ended September 30,   Ended September 30,
    2010   2009   2010   2009
    (In thousands, except per share data)
                 
Net sales   $ 793,971     $ 616,205     $ 2,188,874     $ 1,511,497  
Cost of sales     605,713       461,589       1,684,461       1,206,455  
Gross profit     188,258       154,616       504,413       305,042  
                 
Operating expenses:                
Selling, general and administrative     57,735       53,619       180,387       156,132  
Research and development     12,669       13,364       36,437       33,546  
Gain on sale of real estate     -       (146 )     -       (146 )
Total operating expenses     70,404       66,837       216,824       189,532  
Operating income     117,854       87,779       287,589       115,510  
Other (income) expense:                
Interest expense     19,614       24,946       66,393       78,961  
Interest expense, related party     3,812       3,813       11,437       9,187  
Interest income     (695 )     (481 )     (2,275 )     (1,525 )
Foreign currency loss     8,456       8,259       9,010       2,161  
Loss (gain) on debt retirement, net     235       1,226       18,042       (15,658 )
Equity in earnings of unconsolidated affiliate     (2,174 )     -       (4,883 )     -  
Other income, net     (85 )     (126 )     (475 )     (77 )
Total other expense, net     29,163       37,637       97,249       73,049  
                 
Income before income taxes     88,691       50,142       190,340       42,461  
Income tax expense (benefit)     10,321       (30,854 )     8,954       (25,940 )
Net income     78,370       80,996       181,386       68,401  
Net income attributable to noncontrolling interests     (350 )     (133 )     (19 )     (407 )
Net income attributable to Amkor   $ 78,020     $ 80,863     $ 181,367     $ 67,994  
                 
Net income attributable to Amkor per common share:                
Basic   $ 0.42     $ 0.44     $ 0.99     $ 0.37  
Diluted   $ 0.30     $ 0.31     $ 0.70     $ 0.32  
                 
Shares used in computing per common share amounts:                
Basic     183,340       183,060       183,280       183,048  
Diluted     282,495       282,356       282,523       238,568  
                                 

AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)

 

         
    September 30,   December 31,
    2010   2009
    (In thousands)
ASSETS        
Current assets:        
Cash and cash equivalents   $ 417,498     $ 395,406  
Restricted cash     2,679       2,679  
Accounts receivable:        
Trade, net of allowances     450,146       328,252  
Other     17,630       18,666  
Inventories     203,873       155,185  
Other current assets     44,239       32,737  
Total current assets     1,136,065       932,925  
         
Property, plant and equipment, net     1,533,439       1,364,630  
Intangibles, net     15,360       9,975  
Investments     26,019       19,108  
Restricted cash     12,997       6,795  
Other assets     98,024       99,476  
Total assets   $ 2,821,904     $ 2,432,909  
         
LIABILITIES AND EQUITY        
Current liabilities:        
Short-term borrowings and current portion of long-term debt   $ 144,885     $ 88,944  
Trade accounts payable     540,907       361,263  
Accrued expenses     215,604       155,630  
Total current liabilities     901,396       605,837  
         
Long-term debt     985,137       1,095,241  
Long-term debt, related party     250,000       250,000  
Pension and severance obligations     97,858       83,067  
Other non-current liabilities     6,510       9,063  
Total liabilities     2,240,901       2,043,208  
         
Equity:        
Amkor stockholders' equity:        
Preferred stock     -       -  
Common stock, $0.001 par value, 500,000 shares authorized, issued
 and outstanding of 183,436 in 2010 and 183,171 in 2009
       
    183       183  
Additional paid-in capital     1,503,968       1,500,246  
Accumulated deficit     (940,874 )     (1,122,241 )
Accumulated other comprehensive income     11,489       5,021  
Treasury stock, at cost, 45 shares in 2010     (274 )     -  
Total Amkor stockholders' equity     574,492       383,209  
Noncontrolling interests in subsidiaries     6,511       6,492  
Total equity     581,003       389,701  
Total liabilities and equity   $ 2,821,904     $ 2,432,909  
                 

AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)



    For the Nine Months Ended
    September 30,
    2010   2009
    (In thousands)
Cash flows from operating activities:        
Net income
  $ 181,386     $ 68,401  
Depreciation and amortization     237,225       230,887  
Loss (gain) on debt retirement, net     10,562       (15,658 )
Other operating activities and non-cash items     (707 )     (12,080 )
Changes in assets and liabilities     (61,504 )     (114,740 )
Net cash provided by operating activities     366,962       156,810  
         
Cash flows from investing activities:        
Purchases of property, plant and equipment     (276,672 )     (111,929 )
Proceeds from the sale of property, plant and equipment     2,399       1,570  
Financing lease payment from unconsolidated affiliate     10,087       -  
Other investing activities     (10,781 )     (8,573 )
Net cash used in investing activities     (274,967 )     (118,932 )
         
Cash flows from financing activities:        
Borrowings under revolving credit facilities     3,261       -  
Payments under revolving credit facilities     (34,253 )     -  
Proceeds from issuance of short-term working capital facility     15,000       15,000  
Payments of short-term working capital facility     (15,000 )     -  
Proceeds from issuance of long-term debt     611,007       100,000  
Proceeds from issuance of long-term debt, related party     -       150,000  
Payments of long-term debt, net of redemption premiums and discounts     (643,793 )     (272,214 )
Payments for debt issuance costs     (7,737 )     (8,479 )
Proceeds from issuance of stock through share-based compensation plans     881       348  
Net cash used in financing activities     (70,634 )     (15,345 )
         
Effect of exchange rate fluctuations on cash and cash equivalents     731       (133 )
         
Net increase in cash and cash equivalents     22,092       22,400  
Cash and cash equivalents, beginning of period     395,406       424,316  
Cash and cash equivalents, end of period   $ 417,498     $ 446,716