Amkor Reports Third Quarter 2009 Results

October 27, 2009 4:07 PM EDT

CHANDLER, Ariz.--(BUSINESS WIRE)-- Amkor Technology, Inc. (NASDAQ: AMKR), a leading provider of semiconductor assembly and test services, today reported its financial results for the quarter ended September 30, 2009.

Third quarter net sales of $616 million were up 22% sequentially from the second quarter of 2009 and down 14% from the third quarter of 2008. Third quarter net income was $81 million or $0.31 per diluted share, compared to $9 million or $0.05 per diluted share in the second quarter.

Net income for the third quarter of 2009 includes income tax benefits of $34 million or $0.12 per diluted share primarily from the release of a tax valuation allowance at our subsidiary in Korea. Net income for the third quarter of 2008 was $29 million, or $0.15 per diluted share. Net income for the third quarter of 2008 included a charge of $52 million or $0.25 per diluted share, relating to the resolution of a patent license dispute.

"We performed well in the third quarter, delivering strong results," said Ken Joyce, chief executive officer of Amkor. "Net sales increased 22%, reflecting higher than typical seasonal growth, primarily driven by demand for communications and consumer applications. We achieved gross margin of 25% for the quarter, up sequentially from 20% in the second quarter of 2009, as we benefited from higher levels of capacity utilization and our earlier cost reduction efforts. As the global economy continues to improve, we are prudently investing in expanding capacity for our advanced interconnect technologies in close alignment with customer product roadmaps."

"Looking ahead to the fourth quarter, we expect net sales to be flat, plus or minus 2%, from the third quarter of 2009 and gross margin of 23% to 25% based on current forecasts from our customers," added Joyce.

"We generated $81 million in free cash flow in the third quarter and ended the quarter with a cash balance of $447 million and total debt of just under $1.5 billion," said Joanne Solomon, Amkor's chief financial officer. "During the third quarter, we repurchased $25 million of our 7.125% senior notes due 2011 and $49 million of our 7.75% senior notes due 2013. We have an aggregate of $86 million of debt coming due through the end of 2010, and the remaining $119 million of our 7.125% notes and 2.5% convertible notes mature in 2011."

"Third quarter 2009 capital additions were $78 million. We expect capital additions for the fourth quarter to be approximately $70 million and approximately $200 million for the full year 2009 with full year capital intensity of approximately 9%. Our third quarter 2009 and planned capital additions are primarily related to expanding our capacity in response to increased levels of customer demand," said Solomon.

Selected operating data for the third quarter of 2009 is included in a section before the financial tables.

Business Outlook

Based upon the latest available information, we have the following expectations for the fourth quarter of 2009:

    --  Net sales flat, plus or minus 2%, from the third quarter of 2009
    --  Gross margin between 23% and 25%
    --  Net income - in the range of $0.17 to $0.23 per diluted share

Conference Call Information

Amkor will conduct a conference call on October 27, 2009 at 5:00 p.m. eastern time. This call is being webcast and can be accessed at Amkor's web site at www.amkor.com. You may also access the call by dialing 888-561-1799. A replay of the call will be made available at Amkor's web site or by dialing 800-406-7325 (access passcode # 4169497). 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 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, statements regarding the following: expectations regarding net sales and gross margin in the fourth quarter of 2009; the expected dollar amount and focus of our capital additions and the expected level of capital intensity; and the statements made under Business Outlook including those regarding net sales, gross margin and net income. 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;
    --  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 additions;
    --  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;
    --  worldwide economic effects of terrorist attacks, natural disasters and
        military conflict;
    --  our ability to reduce 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 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, 2008 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.

AMKOR TECHNOLOGY, INC.

Selected Operating Data

Sales Data:                                 Q3 2009      Q2 2009      Q3 2008

Packaging services:

Wirebond - leadframe                          28    %      25    %      29    %

Wirebond - laminate                           44    %      43    %      40    %

Flip chip and wafer level processing          17    %      20    %      20    %

Packaging services                            89    %      88    %      89    %

Test services                                 11    %      12    %      11    %

Total sales                                   100   %      100   %      100   %

Packaged units (in millions):

Wirebond - leadframe                          1,802        1,229        1,957

Wirebond - laminate                           419          330          390

Flip chip and wafer level processing          126          134          157

Total packaged units                          2,347        1,693        2,504

Net sales from top ten customers              54    %      54    %      49    %

Capacity utilization                          82    %      66    %      86    %

End Market Distribution Data (an approximation based on a sampling of our
largest customers):

Communications                                50    %      49    %      42    %

Consumer                                      30    %      30    %      33    %

Computing                                     13    %      14    %      15    %

Other                                         7     %      7     %      10    %

Total                                         100   %      100   %      100   %

Earnings per Share Data:                    Q3 2009      Q2 2009      Q3 2008

                                            (in millions, except per share data)

Net income attributable to Amkor - basic    $ 81         $ 9          $ 29

Adjustment for dilutive securities on net
income:

Interest on 2.5% convertible notes due        -            -            1
2011, net of tax

Interest on 6.25% convertible notes due       2            -            2
2013, net of tax

Interest on 6.0% convertible notes due        4            4            -
2014, net of tax

Net income attributable to Amkor - diluted  $ 87         $ 13         $ 32

Weighted average shares outstanding -         183          183          183
basic

Effect of dilutive securities:

Stock options                                 -            -            1

2.5% convertible notes due 2011               3            -            13

6.25% convertible notes due 2013              13           -            13

6.0% convertible notes due 2014               83           83           -

Weighted average shares outstanding -         282          266          210
diluted

Net income attributable to Amkor per
common share:

Basic                                       $ 0.44       $ 0.05       $ 0.16

Diluted                                     $ 0.31       $ 0.05       $ 0.15

                                            Q3 2009      Q2 2009      Q3 2008

                                            (in millions)

Capital Investment Data:

Property, plant and equipment additions     $ 78         $ 27         $ 92

Net change in related accounts payable and    (36   )      -            34
deposits

Purchases of property, plant and equipment  $ 42         $ 27         $ 126

Depreciation and amortization               $ 74         $ 77         $ 79

Free Cash Flow Data:

Net cash provided by operating activities   $ 123        $ 96         $ 173

Less purchases of property, plant and         (42   )      (27   )      (126  )
equipment

Free cash flow*                             $ 81         $ 69         $ 47

*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,

                         2009         2008          2009           2008

                         (In thousands, except per share data)

Net sales                $ 616,205    $ 719,731     $ 1,511,497    $ 2,109,890

Cost of sales              461,589      590,700       1,206,455      1,645,776

Gross profit               154,616      129,031       305,042        464,114

Operating expenses:

Selling, general and       53,619       60,467        156,132        193,357
administrative

Research and               13,364       14,084        33,546         43,035
development

Gain on sale of real       (146    )    -             (146      )    (9,856    )
estate

Total operating            66,837       74,551        189,532        226,536
expenses

Operating income           87,779       54,480        115,510        237,578

Other (income) expense:

Interest expense, net      24,465       30,119        77,436         83,866

Interest expense,          3,813        1,562         9,187          4,687
related party

Foreign currency loss      8,259        (23,026 )     2,161          (44,100   )
(gain)

Loss (gain) on debt        1,226        -             (15,658   )    -
retirement, net

Other income, net          (126    )    (256    )     (77       )    (955      )

Total other expense,       37,637       8,399         73,049         43,498
net

Income before income       50,142       46,081        42,461         194,080
taxes

Income tax (benefit)       (30,854 )    16,313        (25,940   )    26,551
expense

Net income                 80,996       29,768        68,401         167,529

Net income attributable
to noncontrolling          133          613           407            1,146
interests

Net income attributable  $ 80,863     $ 29,155      $ 67,994       $ 166,383
to Amkor

Net income attributable
to Amkor per common
share:

Basic                    $ 0.44       $ 0.16        $ 0.37         $ 0.91

Diluted                  $ 0.31       $ 0.15        $ 0.32         $ 0.84

Shares used in
computing per common
share amounts:

Basic                      183,060      183,001       183,048        182,633

Diluted                    282,356      209,989       238,568        209,848

AMKOR TECHNOLOGY, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

                                                September 30,    December 31,
                                                2009             2008

                                                (In thousands)

ASSETS

Current assets:

Cash and cash equivalents                       $ 446,716        $ 424,316

Restricted cash                                   2,679            4,880

Accounts receivable:

Trade, net of allowances                          341,677          259,630

Other                                             5,171            14,183

Inventories                                       142,264          134,045

Other current assets                              42,316           23,862

Total current assets                              980,823          860,916

Property, plant and equipment, net                1,372,578        1,473,763

Intangibles, net                                  11,650           11,546

Restricted cash                                   6,317            1,696

Other assets                                      58,141           36,072

Total assets                                    $ 2,429,509      $ 2,383,993

LIABILITIES AND EQUITY

Current liabilities:

Short-term borrowings and current portion of    $ 69,834         $ 54,609
long-term debt

Trade accounts payable                            324,981          241,684

Accrued expenses                                  220,349          258,449

Total current liabilities                         615,164          554,742

Long-term debt                                    1,149,300        1,338,751

Long-term debt, related party                     250,000          100,000

Pension and severance obligations                 94,812           116,789

Other non-current liabilities                     9,813            30,548

Total liabilities                                 2,119,089        2,140,830

Equity:

Amkor stockholders' equity:

Preferred stock                                   -                -

Common stock, $0.001 par value, 500,000 shares
authorized, issued and outstanding of 183,102     183              183
in 2009 and 183,035 in 2008

Additional paid-in capital                        1,499,299        1,496,976

Accumulated deficit                               (1,210,227 )     (1,278,221 )

Accumulated other comprehensive income            14,606           18,201

Total Amkor stockholders' equity                  303,861          237,139

Noncontrolling interests in subsidiaries          6,559            6,024

Total equity                                      310,420          243,163

Total liabilities and equity                    $ 2,429,509      $ 2,383,993

AMKOR TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

                                                  For the Nine Months Ended

                                                  September 30,

                                                  2009          2008

                                                  (In thousands)

Cash flows from operating activities:

Net income                                        $ 68,401      $ 167,529

Depreciation and amortization                       230,887       229,501

Gain on debt retirement, net                        (15,658  )    -

Other operating activities and non-cash items       (12,080  )    20,947

Changes in assets and liabilities                   (114,740 )    39,414

Net cash provided by operating activities           156,810       457,391

Cash flows from investing activities:

Purchases of property, plant and equipment          (111,929 )    (317,109 )

Proceeds from the sale of property, plant and       1,570         15,257
equipment

Proceeds from sale of investment                    -             2,460

Other investing activities                          (8,573   )    (702     )

Net cash used in investing activities               (118,932 )    (300,094 )

Cash flows from financing activities:

Borrowings under revolving credit facilities        -             619

Payments under revolving credit facilities          -             (633     )

Proceeds from issuance of short-term debt           15,000        -

Proceeds from issuance of long-term debt            100,000       -

Proceeds from issuance of related party debt        150,000       -

Payments of long-term debt                          (272,214 )    (135,913 )

Payments for debt issuance costs                    (8,479   )    -

Proceeds from issuance of stock through stock       348           10,201
compensation plans

Net cash used in financing activities               (15,345  )    (125,726 )

Effect of exchange rate fluctuations on cash and    (133     )    2,197
cash equivalents

Net increase in cash and cash equivalents           22,400        33,768

Cash and cash equivalents, beginning of period      424,316       410,070

Cash and cash equivalents, end of period          $ 446,716     $ 443,838

    Source: Amkor Technology, Inc.

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