Amkor Reports Record Second Quarter Sales

CHANDLER, Ariz.—(BUSINESS WIRE)—July 26, 2006— Amkor Technology, Inc. (NASDAQ: AMKR) reported record second quarter 2006 sales of $687 million, up 40% from the second quarter of 2005 and up 6% from the first quarter of 2006. Amkor's second quarter 2006 net income was $24 million, or $0.13 per diluted share, compared with a net loss of $52 million, or ($0.30) per share, in the second quarter of 2005. During the second quarter of 2006, in connection with refinancing transactions to address near-term debt maturities, Amkor recorded charges, with no net tax effect, of $28 million, or $0.14 per share.

"I am pleased with our performance this quarter, as we realized continued strong growth in flip chip, 3D packaging and test, consistent with the strategic investments we've made in these areas during the past two years," said James Kim, Chairman and Chief Executive Officer. "During the quarter, we continued to build on our industry leadership in a variety of advanced package applications."

"We expect that the robust year-over-year growth rates achieved over the past several quarters will begin to moderate," said Kim. "While there are signs that the U.S. economy is slowing, the global economy does not appear to be slowing as fast. Given the breadth of our customer base and end markets that we support, we believe that this should provide some stability with respect to overall demand."

"During the second quarter, we completed a series of financing transactions to address our near-term debt maturities and reduce ongoing interest expense. We also used available cash to retire $132 million in 5.75% convertible subordinated notes at maturity on June 1, 2006 and to repurchase $4 million in 5% convertible notes due March 2007," said Kim. "To put our improved liquidity into perspective, at the beginning of 2005, we had more than $1.1 billion of debt maturing through 2009. Today the amount is approximately $360 million."

"We remain committed to maintaining a disciplined approach to our business model, with rational capital investments, continued cost management, and a clear focus on driving operating efficiencies throughout the organization," said Kim. "I expect that we will make additional progress in utilizing free cash flow to reduce our remaining debt. Based on current forecasts, we believe we will have sufficient cash resources available to retire the remaining $142 million of 5% convertible notes due March 2007."

"We achieved record sales and units in the second quarter, driven by high performance applications, cell phones and other portable devices," said Ken Joyce, Amkor's Chief Financial Officer.

Second quarter gross margin rose to 25% from 24% in the first quarter. "During the second quarter, we commenced the build out of our new wafer bumping and test facility in Singapore and our new assembly and test factory in Shanghai," said Joyce. "Depreciation expense and other costs associated with these factories will continue to influence gross margin until we build a critical mass of revenue in these operations."

During the quarter, we recorded a $3 million impairment of an equity investment, which is reflected in Other (income) expense, net.

Capital expenditures totaled $93 million in the second quarter and $196 million for the first six months. "We currently plan to limit our full year 2006 capital additions to $300 million, which includes approximately $50 million for facilities principally for our new factories in China and Singapore," said Joyce. "Our 2006 capital equipment budget remains focused on strategic growth areas of wafer level processing, test, and flip chip assembly. We will continue to monitor business conditions and are prepared to adjust this estimate."

"During the quarter, we took several steps to strengthen our financial liquidity," said Joyce. "We issued $400 million of 9.25% senior notes due 2016 and used most of the net proceeds to repurchase $352 million of our 9.25% senior notes due 2008. In addition, we issued $190 million in 2.5% convertible senior subordinated notes due 2011 and used the net proceeds to redeem $178 million of our $200 million in 10.5% senior subordinated notes due 2009. In connection with the repurchased and redeemed notes, we recognized charges, with no net tax effect, totaling $28 million, or $0.14 per share. Going forward, we expect to realize substantial interest savings from refinancing most of the 10.5% senior subordinated notes with 2.5% senior subordinated convertible debt."

"We have achieved positive free cash flow for the past three quarters, and given our financial strategy and current view of business conditions, we anticipate that this trend should continue for the rest of the year," said Joyce.

For the full year 2006, we anticipate an effective tax rate of 7.8% which reflects the utilization of U.S. and foreign net operating loss carryforwards and tax holidays in certain of our foreign jurisdictions. At June 30, 2006, Amkor had U.S. net operating losses available for carryforward totaling $336 million expiring through 2025. Additionally, at June 30, 2006, we had $78 million of non-U.S. operating losses available for carryforward, expiring through 2011.

Selected operating data for the second quarter 2006 is included in a section before the financial tables.

Business Outlook

On the basis of our customers' forecasts, we have the following expectations for the third quarter of 2006:

-- Sales flat to up 2% from the second quarter of 2006

-- Gross margin in the range of 24% to 25%

-- Net income in the range of $0.23 to $0.27 per diluted share

The Company also announced today that its Board of Directors has formed a special committee of independent directors to undertake a voluntary review of Amkor's historical stock option practices. The committee will be assisted by independent counsel.

Amkor will conduct a conference call on July 26, 2006 at 5:00 p.m. eastern time. The call can be accessed by dialing 303-205-0033 or by visiting the investor relations page of our web site: or CCBN's website, An archive of the webcast can be accessed through the same links and will be available until our next quarterly earnings conference call. An audio replay of the call will be available for 48 hours following the conference call by dialing 303-590-3000 passcode: 11061882.

About Amkor

Amkor is a leading provider of advanced semiconductor assembly and test services. The company offers semiconductor companies and electronics OEMs a complete set of microelectronic design and manufacturing services. More information on Amkor is available from the company's SEC filings and on Amkor's web site:

Forward Looking Statement Disclaimer

This press release contains forward-looking statements within the meaning of federal securities laws, including, without limitation, statements regarding the following: expectations regarding year-over-year growth rates; anticipated growth rates of the U.S. and global economies; expectations with respect to level of overall demand; expectations regarding the reduction of remaining debt from free cash flow; expectations regarding sufficiency of cash resources to satisfy the $142 million of 5% convertible notes due March 2007; expectations regarding impact of depreciation expense and other costs associated with new factories on gross margin; expectations regarding the level and focus of additional capital expenditures for 2006; expectations regarding the achievement of positive free cash flow for the rest of 2006; expectations regarding the effective tax rate for full year 2006 and the statements regarding sales, gross margin and net income contained under Business Outlook. These forward-looking statements are subject to a number of risks and uncertainties that could affect future results and cause actual results and events to differ materially from historical and expected results, including, but not limited to, the following: the highly unpredictable nature of the semiconductor industry; 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 high leverage and restrictive covenants; failure to realize sufficient cash flow to fund capital expenditures; deterioration of the U.S. or other economies; 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; competitive pricing and declines in average selling prices; timing and volume of orders relative to the production capacity; fluctuations in manufacturing yields; competition; dependence on international operations and sales; dependence on raw material and equipment suppliers; exchange rate fluctuations; dependence on key personnel; difficulties in managing growth; enforcement of intellectual property rights; environmental regulations; and technological challenges.

Further information on risk factors that could affect the outcome of the events set forth in these statements and that could affect the company's operating results and financial condition is detailed in the company's filings with the Securities and Exchange Commission, including Form 10-K for the year ended December 31, 2005, and Form 10-Q for the quarter ended March 31, 2006, and current reports on Form 8-K. Amkor undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this document.

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