SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

þ		QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2005

or

o		TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 000-29472

AMKOR TECHNOLOGY, INC.

Delaware		23-1722724
(State of incorporation)		(I.R.S. Employer Identification Number)

1900 South Price Road
Chandler, AZ 85248
(480) 821-5000
(Address of principal executive offices and zip code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes þ No o

     The number of outstanding shares of the registrant’s Common Stock as of August 1, 2005 was 176,714,357.

 

 

QUARTERLY REPORT ON FORM 10-Q

June 30, 2005

TABLE OF CONTENTS

						Page
						No.
PART I. Financial Information
Item 1.				Financial Statements (unaudited)			3
Item 2.				Management’s Discussion and Analysis of Financial Condition and Results of Operations			26
Item 3.				Quantitative and Qualitative Disclosures About Market Risk			33
Item 4.				Controls and Procedures			35
PART II. Other Information
Item 1.				Legal Proceedings			35
Item 2.				Unregistered Sales of Equity Securities and Use of Proceeds			39
Item 3.				Defaults Upon Senior Securities			39
Item 4.				Submission of Matters to a Vote of Security Holders			39
Item 5.				Other Information			39
Item 6.				Exhibits			39
				Signatures
EX-10.6
EX-10.7
EX-12.1
EX-31.1
EX-31.2
EX-32

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)

		For the Three Months Ended								For the Six Months Ended
		June 30,								June 30,
		2005				2004				2005				2004
Net sales		$	489,335			$	492,536			$	906,816			$	957,182
Cost of sales			422,837				397,761				796,923				750,559
Gross profit			66,498				94,775				109,893				206,623
Operating expenses:
Selling, general and administrative			66,865				55,916				127,331				109,422
Research and development			9,924				9,900				18,824				18,877
Provision for legal settlements and contingencies (Note 12)			—				—				50,000				1,500
Total operating expenses			76,789				65,816				196,155				129,799
Operating income (loss)			(10,291	)			28,959				(86,262	)			76,824
Other expense (income):
Interest expense, net			41,395				36,360				81,908				69,650
Foreign currency exchange loss (gain)			(1,773	)			2,635				459				2,710
Other expense (income), net (Note 6)			2,063				(25,541	)			2,241				(23,744	)
Total other expense			41,685				13,454				84,608				48,616
Income (loss) before income taxes and minority interest			(51,976	)			15,505				(170,870	)			28,208
Minority interest			926				3				1,937				(355	)
Income (loss) before income taxes			(51,050	)			15,508				(168,933	)			27,853
Provision for income taxes			1,353				5,528				2,540				6,963
Net income (loss)		$	(52,403	)		$	9,980			$	(171,473	)		$	20,890
Per share data:
Basic and diluted net income (loss) per common share		$	(0.30	)		$	0.06			$	(0.97	)		$	0.12
Shares used in computing basic income (loss) per common share			176,371				175,304				176,045				174,961
Shares used in computing diluted income (loss) per common share			176,371				175,872				176,045				178,028

The accompanying notes are an integral part of these statements.

AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)

		June 30,				December 31,
		2005				2004
Assets
Current assets:
Cash and cash equivalents		$	228,204			$	372,284
Accounts receivable:
Trade, net of allowance of $5,164 in 2005 and $5,074 in 2004			294,918				265,547
Other			5,304				3,948
Inventories, net (Note 3)			116,719				111,616
Other current assets			30,276				32,591
Total current assets			675,421				785,986
Property, plant and equipment, net (Note 4)			1,427,915				1,380,396
Goodwill (Note 5)			655,940				656,052
Intangibles, net (Note 5)			42,863				47,302
Investments (Note 6)			11,101				13,762
Other assets			75,441				81,870
Total assets		$	2,888,681			$	2,965,368
Liabilities and Stockholders’ Equity
Current liabilities:
Bank overdraft		$	—			$	102
Short-term borrowings and current portion of long-term debt (Note 9)			281,639				52,147
Trade accounts payable			307,344				211,706
Accrued expenses (Note 7)			159,857				175,075
Total current liabilities			748,840				439,030
Long-term debt (Note 9)			1,810,377				2,040,813
Other non-current liabilities			125,462				109,317
Total liabilities			2,684,679				2,589,160
Commitments and contingencies (Note 12)
Minority interest			4,937				6,679
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 issued and outstanding of 176,714 in 2005 and 175,718 in 2004			178				176
Additional paid-in capital			1,326,310				1,323,579
Accumulated deficit			(1,140,545	)			(969,072	)
Accumulated other comprehensive income			13,122				14,846
Total stockholders’ equity			199,065				369,529
Total liabilities and stockholders’ equity		$	2,888,681			$	2,965,368

The accompanying notes are an integral part of these statements.

AMKOR TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)

		For the Six Months Ended
		June 30,
		2005				2004
Cash flows from operating activities:
Net income (loss)		$	(171,473	)		$	20,890
Depreciation and amortization			122,044				110,661
Other non-cash items			6,398				(15,102	)
Changes in assets and liabilities excluding effects of acquisitions			25,318				33,344
Net cash (used in) provided by operating activities			(17,713	)			149,793
Cash flows from investing activities:
Payments for property, plant and equipment			(124,397	)			(284,182	)
Acquisition, net of cash acquired			—				(33,963	)
Proceeds from the sale of property, plant and equipment			443				4,995
Proceeds from the sale of investments			—				49,409
Proceeds from note receivable			—				18,627
Net cash used in investing activities			(123,954	)			(245,114	)
Cash flows from financing activities:
Net change in bank overdrafts			(102	)			(3,790	)
Borrowings under a revolving credit facility			111,760				123,267
Payments under a revolving credit facility			(111,488	)			(124,062	)
Proceeds from the issuance of long-term debt			12,722				251,816
Payments for debt issuance costs			—				(3,886	)
Payments on long-term debt, including redemption premium payment in 2004			(17,619	)			(171,926	)
Proceeds from issuance of stock through stock compensation plans			2,733				5,726
Net cash (used in) provided by financing activities			(1,994	)			77,145
Effect of exchange rate fluctuations on cash and cash equivalents			(419	)			(488	)
Net decrease in cash and cash equivalents			(144,080	)			(18,664	)
Cash and cash equivalents, beginning of period			372,284				313,259
Cash and cash equivalents, end of period		$	228,204			$	294,595
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest		$	82,957			$	61,602
Income taxes		$	1,916			$	14,451

The accompanying notes are an integral part of these statements.

AMKOR TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Interim Financial Statements

     Basis of Presentation. The condensed consolidated financial statements and related disclosures as of June 30, 2005 and for the three and six months ended June 30, 2005 and 2004 are unaudited, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In our opinion, these financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for the fair presentation of the results for the interim periods. These financial statements should be read in conjunction with our latest annual report as of December 31, 2004 filed on Form 10-K/A with the Securities and Exchange Commission. The results of operations for the three and six months ended June 30, 2005 are not necessarily indicative of the results to be expected for the full year. Certain previously reported amounts have been reclassified to conform to the current presentation.

     Use of Estimates. The condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.”), using management’s best estimates and judgments where appropriate. These estimates and judgments affect the reported amounts of assets and liabilities and disclosure of the contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ materially from these estimates and judgments.

     Income Taxes. For the three and six months ended June 30, 2005, income tax expense was $1.4 million and $2.5 million, reflecting an effective tax rate of 2.7% and 1.5%, respectively. For the three and six months ended June 30, 2004, income tax expense was $5.5 million and $7.0 million, reflecting an effective tax rate of 35.6% and 25.0%, respectively. Our effective tax rates for the three and six months ended June 30, 2005 and the six months ended June 30, 2004 differ significantly from the U.S. statutory tax rate of 35% primarily due to net operating losses in the U.S. and certain foreign jurisdictions which we can not use to offset taxable income in other foreign jurisdictions. Income tax expense for the three and six months ended June 30, 2005 and 2004 related primarily to foreign withholding taxes and income taxes at our profitable foreign locations.

     We operate in and file income tax returns in various U.S. and foreign jurisdictions which are subject to examination by tax authorities. Our tax returns have been examined through 1998 in the Philippines and the U.S., through 2000 in Taiwan, and through 2002 in Japan. The tax returns for open years in all jurisdictions in which we do business are subject to changes upon examination. During 2003, the Internal Revenue Service commenced an examination related to years 2000 and 2001. In February 2005, we verbally agreed to a settlement in principle with the IRS for these years. As a component of the settlement, we agreed to make certain income adjustments to our U.S. tax returns in the years 2000 through 2003 for local attribution of income resulting from significant inter-company transactions, including ownership and use of intellectual property, in various U.S. and foreign jurisdictions. These adjustments would effectively lower our U.S. net operating loss carry-forwards at December 31, 2004 by $52.7 million. This settlement agreement is not final until review and approval by the Congressional Joint Committee on Taxation, the timing of which is uncertain. We believe that we have estimated and provided adequate accruals for the additional taxes and interest expense that will result from these adjustments. Our estimated tax liability is subject to change as examinations of specific tax years are completed in the respective jurisdictions. We believe that any additional taxes or related interest over the amounts accrued will not have a material adverse effect on our financial condition or results of operations, nor do we expect that examinations to be completed in the near term would have a material favorable impact. In addition, changes in the mix of income from our foreign subsidiaries, expiration of tax holidays and changes in tax laws or regulations could result in increased effective tax rates in the future.

     Recent Accounting Pronouncements. In March 2005, the Financial Accounting Standards Board (the “FASB”) issued FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (“FIN 47”), which is an interpretation of Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations.” FIN 47 clarifies terminology within SFAS No. 143 and requires an entity to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liability’s fair value can be reasonably estimated. FIN 47 is effective for fiscal years ending after December 15, 2005. We do not anticipate that the adoption of FIN 47 will have a material impact on our consolidated balance sheet or statements of operations, shareholders’ equity or cash flows.

     In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections”. SFAS 154 replaces APB No. 20, “Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements” and establishes retrospective application as the required method for reporting a change in accounting principle. SFAS 154 provides guidance for determining whether retrospective application of a change in accounting principle is impracticable and for reporting a change when retrospective application is impracticable. The reporting of a correction of an error by restating previously issued financial statements is also addressed. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We do not anticipate that that the adoption of SFAS 154 will have a material impact on our consolidated balance sheet and statements of operations, shareholders’ equity or cash flows.

     In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment. SFAS No. 123R is a revision of SFAS No. 123, Accounting for Stock Based Compensation and supersedes APB 25. Among other items, SFAS No. 123R eliminates the use of APB 25 and the intrinsic value method of accounting and requires companies to recognize the cost of employee services received in exchange for awards of equity instruments, based on the grant date fair value of those awards, in the financial statements. On April 14, 2005, the Securities and Exchange Commission amended the effective date of SFAS No. 123R to January 1, 2006, for calendar year companies. We intend to adopt this statement on the new effective date and have not yet determined the method of adoption.

     We currently utilize a standard option pricing model (Black-Scholes) to measure the fair value of stock options granted to employees. While SFAS No. 123R permits entities to continue to use such a model, the standard also permits the use of a “lattice” model. We have not yet determined which model we will use to measure the fair value of employee stock options upon the adoption of SFAS No. 123R.

     SFAS No. 123R also requires the benefits associated with the tax deductions in excess of recognized compensation cost be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after the effective date. These future amounts cannot be estimated because they depend on when the employees exercise stock options, among other things.

     We are currently reviewing the effect SFAS No. 123R will have on our financial statements; however, we believe the impact to our net income (loss) will be determined by the number of options that we grant in the future. In August 2004 we accelerated the vesting of all outstanding employee stock options, thereby eliminating charges to our future statements of operations related to these stock options. We also undertook the acceleration to enhance employee morale and to help retain high-potential individuals in the face of a downturn in our industry conditions.

     Stock Compensation. We apply Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations, to our stock option plans. No compensation expense has been recognized for our employee stock options that have been granted. If compensation costs for our stock option plans had been determined using the fair value method of accounting as set forth in SFAS No. 123, Accounting for Stock-Based Compensation, our reported net income (loss) and per share amounts would have been decreased (increased).

     The following table illustrates the effect on net income (loss) and per share amounts if the fair value based method had been applied to all outstanding and unvested awards in each period.

		For the Three Months Ended								For the Six Months Ended
		June 30,								June 30,
		2005				2004				2005				2004
		(In thousands, except per share data)
Net income (loss):
Net income (loss), as reported		$	(52,403	)		$	9,980			$	(171,473	)		$	20,890
Deduct: Total stock-based employee compensation determined under fair value based method, net of tax			(1,289	)			(8,264	)			(2,764	)			(16,584	)
Pro forma net income (loss)		$	(53,692	)		$	1,716			$	(174,237	)		$	4,306

		For the Three Months Ended								For the Six Months Ended
		June 30,								June 30,
		2005				2004				2005				2004
		(In thousands, except per share data)
Income (loss) per share:
Basic and diluted:
As reported		$	(0.30	)		$	0.06			$	(0.97	)		$	0.12
Pro forma		$	(0.30	)		$	0.01			$	(0.99	)		$	0.02

In order to calculate the fair value of stock options at date of grant, we used the Black-Scholes option pricing model. The following assumptions were used to calculate weighted average fair values of the options granted:

		For the Three and Six Months Ended
		June 30,
		2005				2004
Expected life (in years)			4				4
Risk-free interest rate			3.9	%			3.6	%
Volatility			90.6	%			87.0	%
Dividend yield			—				—

2. Comprehensive Income (Loss)

		For the Three Months Ended								For the Six Months Ended
		June 30,								June 30,
		2005				2004				2005				2004
		(In thousands)
Net income (loss)		$	(52,403	)		$	9,980			$	(171,473	)		$	20,890
Unrealized gain (loss) on investments, net of tax			4				(14,118	)			(2,104	)			(9,439	)
Reclassification adjustment for losses included in net income (loss)			1,772				—				1,772				—
Foreign currency translation, net of tax			(9	)			(1,945	)			(1,392	)			1,116
Total comprehensive income (loss)		$	(50,636	)		$	(6,083	)		$	(173,197	)		$	12,567

3. Inventories

     Inventories consist of the following:

		June 30,				December 31,
		2005				2004
		(In thousands)
Raw materials and purchased components		$	112,279			$	114,808
Work-in-process			26,932				21,150
Finished goods			959				960
			140,170				136,918
Inventory reserve			(23,451	)			(25,302	)
		$	116,719			$	111,616

4. Property, Plant and Equipment

     Property, plant and equipment consist of the following:

		June 30,				December 31,
		2005				2004
		(In thousands)
Land		$	112,323			$	112,009
Land use rights			19,945				19,945
Buildings and improvements			651,417				633,528
Machinery and equipment			2,066,842				1,953,392
Furniture, fixtures and other equipment			166,052				165,446
Construction in progress			101,195				102,952
			3,117,774				2,987,272
Less: Accumulated depreciation and amortization			(1,689,859	)			(1,606,876	)
		$	1,427,915			$	1,380,396

The following table reconciles our payments for property, plant and equipment as presented on the condensed consolidated statements of cash flows to property, plant and equipment additions as reflected in the balance sheets:

		For the Six Months Ended
		June 30,
		2005				2004
		(In thousands)
Payments for property, plant and equipment		$	124,397			$	284,182
Increase in property, plant and equipment accounts payable and accrued liabilities, net			37,118				10,475
Property, plant and equipment additions		$	161,515			$	294,657

5. Goodwill and Intangibles

     The change in the carrying value of goodwill is as follows:

		(In thousands)
Balance as of December 31, 2004		$	656,052
Translation adjustments			(112	)
Balance as of June 30, 2005		$	655,940

     Intangibles as of June 30, 2005 consist of the following:

						Accumulated
		Gross				Amortization				Net
		(In thousands)
Patents and technology rights		$	73,275			$	(37,702	)		$	35,573
Customer relationship and supply agreement			8,858				(1,568	)			7,290
		$	82,133			$	(39,270	)		$	42,863

     Intangibles as of December 31, 2004 consist of the following:

						Accumulated
		Gross				Amortization				Net
		(In thousands)
Patents and technology rights		$	72,973			$	(33,595	)		$	39,378
Customer relationship and supply agreement			8,858				(934	)			7,924
		$	81,831			$	(34,529	)		$	47,302

     Amortization expense was $2.4 million and $1.8 million for the three months ended June 30, 2005 and 2004, respectively. Amortization expense was $4.7 million and $3.1 million for the six months ended June 30, 2005 and 2004, respectively

     Based on the amortizing assets recognized in our balance sheet at June 30, 2005, amortization expense for each of the next five fiscal years is estimated as follows:

		(In thousands)
2005 (remaining)		$	4,715
2006			9,458
2007			9,455
2008			9,455
2009			4,548

6. Investments

     Investments consist of the following:

		June 30,				December 31,
		2005				2004
		(In thousands)
Marketable securities classified as available for sale:
DongbuAnam Semiconductor, Inc. (ownership of 2% at June 30, 2005 and December 31, 2004)		$	10,287			$	12,940
Other marketable securities classified as available for sale			717				722
Total marketable securities			11,004				13,662
Other investments			97				100
		$	11,101			$	13,762

     During the second quarter of 2005 we recorded an impairment of $2.3 million associated with our investment in DongbuAnam Semiconductor Inc., formerly Anam Semiconductor, Inc. (“ASI”), as the decline in value of this investment was considered to be other than temporary.

     During the second quarter of 2004, we sold 10.1 million shares of ASI common stock for approximately $49.7 million, or $4.91 per share. The pre-tax gain related to this transaction was $21.6 million, net of $0.3 million of transaction costs.

7. Accrued Expenses

     Accrued expenses consist of the following:

		June 30,				December 31,
		2005				2004
		(In thousands)
Accrued income taxes		$	36,108			$	35,387
Accrued payroll			25,313				25,648
Accrued interest			33,909				34,547
Other accrued expenses			64,527				79,493
		$	159,857			$	175,075

8. Corporate Relocation Expenses

     During the third quarter of 2004, we commenced efforts to relocate certain corporate functions from our West Chester, Pennsylvania location to our Chandler, Arizona location. In connection with these efforts, we paid $1.2 million in severance and related costs. Of this $1.2 million, we recorded a charge of $0.9 million to selling, general and administrative expenses during 2004, and we charged the remaining $0.3 million to selling, general and administrative expenses during the first quarter of 2005. During the six months ended June 30, 2005 we paid out the $1.2 million in severance benefits.

9. Debt

     The major components of debt consist of the following:

		June 30,				December 31,
		2005				2004
		(In thousands)
Senior secured credit facilities:
$30.0 million revolving line of credit, LIBOR plus 3.5% due June 2007		$	—			$	—
Second Lien Term loan, LIBOR plus 4.5% due October 2010			300,000				300,000
9.25% Senior notes due February 2008			470,500				470,500
7.75% Senior notes due May 2013			425,000				425,000
7.125% Senior notes due March 2011			248,554				248,454
10.5% Senior subordinated notes due May 2009			200,000				200,000
5.75% Convertible subordinated notes due June 2006, convertible at $35.00 per share			233,000				233,000
5% Convertible subordinated notes due March 2007, convertible at $57.34 per share			146,422				146,422
Notes payable			16,203				15,675
Other debt			52,337				53,909
			2,092,016				2,092,960
Less: Short-term borrowings and current portion of long-term debt			(281,639	)			(52,147	)
		$	1,810,377			$	2,040,813

     We have a significant amount of indebtedness and expect this will continue for the foreseeable future. Our indebtedness requires us to dedicate a substantial portion of our cash flow from operations to service debt and interest payments.

     Our 5.75% Convertible Subordinated Notes mature on June 1, 2006 at which time we will be required to repay the $233 million principal amount currently outstanding. We are evaluating various alternatives to refinance this obligation, which has been classified as a current liability in our consolidated balance sheet as of June 30, 2005. We expect to refinance these notes with the proceeds of one or more new issuances of debt and or equity. Assuming we are able to successfully refinance these notes in a timely manner, we believe that our existing cash balances, available credit lines, cash flow from operations and available equipment lease financing will be sufficient to fund our debt service, working capital and equipment purchases over the next twelve months.

     We cannot assure you that funds to refinance the 5.75% Convertible Subordinated Notes or our other outstanding debt will be available when we need it or, if available, that it will be available on satisfactory terms. In addition, the terms of the senior notes and senior subordinated notes significantly reduce our ability to incur additional debt. Failure to obtain any such required additional financing could have a material adverse effect on us. In May 2005 our liquidity and debt ratings were lowered reflecting heightened liquidity concerns and weak operating results. In addition, this sufficiency of our available cash is dependent on our business performing in line with our current expectations. The performance of our business is dependent on many factors and subject to risks and uncertainties as discussed in our Risk Factors filed in our Annual Report on Form 10-K/A for the year ended December 31, 2004.

     On April 22, 2003, we entered into a $200.0 million senior secured credit facility consisting of a $170.0 million term loan maturing January 31, 2006 (the “2006 Term Loan”) and a $30.0 million revolving line of credit that was available through October 2005. The funds available under this credit facility were used to repay a $96.9 million term loan previously outstanding and for general corporate purposes. In March 2004, with the proceeds from our 7.125% senior notes (discussed further below), we satisfied in full the 2006 Term Loan, which carried a balance of $168.7 million. In connection with the satisfaction of the 2006 Term Loan, we recorded charges during the first quarter of 2004 of $1.7 million for the associated premiums paid and $1.0 million for the associated unamortized deferred debt issuance costs.

     In June 2004, we entered into a new $30.0 million senior secured revolving credit facility (the “Facility”). The Facility, which is available through June 2007, replaced our prior $30.0 million secured revolving line of credit which was scheduled to mature on October 31, 2005. At June 30, 2005, there was $29.7 million available under this Facility. As of June 30, 2005, we have outstanding $0.3 million of standby letters of credit. Such standby letters of credit are used in our ordinary course of business and are collateralized by our cash balances.

     In October 2004, we entered into a $300.0 million senior secured second lien term loan credit facility with a group of institutional lenders. The term loan bears interest at a rate of LIBOR plus 450 basis points and matures in October 2010. The net proceeds of $288.8 million from the term loan were used for working capital and general corporate purposes.

     In March 2004, we sold $250.0 million of 7.125% senior notes due March 2011. The notes were priced at 99.321% of the $250.0 million face value, yielding an effective interest rate of 7.25%. We sold these notes in a private placement and the notes were resold to qualified institutional investors. We used the net proceeds of the issuance to satisfy in full our outstanding term loan due 2006 of $168.7 million and used the remainder of the proceeds for general corporate purposes, including working capital and capital expenditures. The notes have a coupon rate of 7.125% annually and interest payments are due semi-annually. In connection with the offering of these notes, we entered into a registration rights agreement with the purchasers. The registration rights agreement entitled the purchasers, within 210 days from the original issuance, to exchange their notes for registered notes with substantially identical terms as the original notes. We filed a registration statement with the Securities and Exchange Commission for the exchange of the notes, and the exchange was completed in July 2004.

     At June 30, 2005 we were in compliance with all debt covenants contained in our loan agreements and have met all debt payment obligations.

     At June 30, 2005 our notes payable balance primarily consists of a $15.4 million note (net of a $0.1 million unamortized debt discount) related to our Unitive acquisitions, which is due in the third quarter of 2005. At June 30, 2005 our other debt primarily relates to our foreign subsidiaries. The significant components of other debt include term debt and a revolving line of credit. One of our Japanese subsidiaries utilizes the revolving line of credit for working capital purposes and term debt for equipment financing. The revolving line of credit is due in the fourth quarter of 2005 and we expect to extend the agreement or refinance the amount owed.

     Our Taiwanese subsidiaries have various amounts of term debt maturing between 2007 and 2010. These debt instruments do not include significant financial covenants. During the second quarter of 2005 one of our Taiwanese subsidiaries entered into a one year revolving line of credit agreement for borrowings up to approximately $1.9 million and a new term debt agreement in the amount of $12.7 million which was used to refinance existing term debt.

10. Pension and Severance Plans

     Our Philippine, Taiwanese and Japanese subsidiaries sponsor defined benefit plans that cover substantially all of their respective employees who are not covered by statutory plans. Charges to expense are based upon costs computed by independent actuaries. The components of net periodic pension cost for these defined benefit plans are as follows:

		For the Three Months Ended								For the Six Months Ended
		June 30,								June 30,
		2005				2004				2005				2004
						(In thousands)
Service cost		$	1,714			$	1,146			$	3,151			$	2,293
Interest cost on projected benefit obligation			558				419				1,079				835
Expected return on plan assets			(343	)			508				(654	)			472
Amortization of transition obligation			41				25				79				51
Recognized gain (loss)			12				(750	)			24				(953	)
Total pension expense		$	1,982			$	1,348			$	3,679			$	2,698

     For the three and six months ended June 30, 2005, $0.2 million and $0.6 million, respectively, was contributed to fund the pension plans. We presently anticipate contributing $4.7 million in 2005 to fund the pension plans.

     Our Korean subsidiary participates in an accrued severance plan that covers employees and directors with one year or more of service. Eligible plan participants are entitled to receive a lump-sum payment upon termination of their employment, based on their length of service and 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. The contributions to the national pension fund made under the National Pension Plan of the Republic of Korea are deducted from accrued severance benefit liabilities. For the three months ended June 30, 2005 and 2004, the provision recorded for severance benefits was $6.6 million and $5.4 million, respectively. For the six months ended June 30, 2005 and 2004, the provision recorded for severance benefits was $13.7 million and $9.7 million, respectively. The balance recorded in long-term

liabilities for accrued severance was $104.7 million and $92.0 million at June 30, 2005 and December 31, 2004, respectively.

11. Earnings Per Share

     SFAS No. 128, “Earnings Per Share,” requires dual presentation of basic and diluted earnings per share on the face of the income statement. Basic EPS is computed using only the weighted average number of common shares outstanding for the period, while diluted EPS is computed assuming conversion of all dilutive securities, such as options, convertible debt and warrants. For the three and six months ended June 30, 2005, we excluded from the computation of diluted earnings per share 17.3 million and 9.2 million of outstanding options and convertible notes for common stock, respectively, potentially dilutive securities which would have an antidilutive effect on EPS due to our net loss for the periods. For the three months ended June 30, 2004, we excluded from the computation of diluted earnings per share 15.1 million, and 9.2 million of outstanding options and convertible notes for common stock, respectively, and for the six months ended June 30, 2004, we excluded 12.6 million and 9.2 million of outstanding options and convertible notes for common stock, respectively, potentially dilutive securities which would have an antidilutive effect on EPS.

		For the Three Months Ended								For the Six Months Ended
		June 30,								June 30,
		2005				2004				2005				2004
						(In thousands)
Weighted average common shares			176,371				175,304				176,045				174,961
Effect of dilutive stock options			—				568				—				3,067
Weighted average shares applicable to diluted earnings per share			176,371				175,872				176,045				178,028

12. Indemnifications, Guarantees and Contingencies

Indemnifications and Guarantees

     We have indemnified members of our board of directors and our corporate officers against any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that the indemnitee is or was a director or officer of the company. These officers and directors are indemnified, to the fullest extent permitted by law, against related expenses, judgments, fines and any amounts paid in settlement. We also maintain Directors and Officers insurance coverage in order to mitigate our exposure to these indemnification obligations. The maximum amount of future payments is generally unlimited. Due to the nature of this indemnification, it is not possible to make a reasonable estimate of the maximum potential loss or range of loss. No assets are held as collateral and no specific recourse provisions exist related to this indemnification.

     We generally provide a standard ninety-day warranty on our services. Our warranty activity has historically been immaterial and is expected to continue to be immaterial in the foreseeable future.

Litigation

     We are currently a party to various legal proceedings, including those noted below. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on our net results in the period in which the ruling occurs. The estimate of the potential impact from the following legal proceedings on our financial position or overall results of operations could change in the future. Attorney fees related to legal matters are expensed as incurred.

Epoxy Mold Compound Litigation

     We have become party to an increased number of litigation matters relative to our historic levels. Much of our recent litigation relates to an allegedly defective epoxy mold compound, formerly used in some of our packaging services, which is alleged to be responsible for certain semiconductor chip failures. In the case of the two pending matters, we believe we have meritorious defenses, as well as valid third-party claims against Sumitomo Bakelite Co., Ltd. (“Sumitomo Bakelite”), the manufacturer of the challenged epoxy product, should the epoxy mold compound be found to be defective. We cannot be certain, however, that we will be able to recover any amount from Sumitomo Bakelite if we are held liable in this matter, or that any adverse result would not have a material impact upon us. Moreover, other customers of ours have made inquiries about the epoxy mold compound, which was widely used in the semiconductor industry, and no assurance can be given that

claims similar to those already asserted will not be made against us by other customers in the future.

          Fujitsu Limited v. Cirrus Logic, Inc., et al.

     On April 16, 2002, we were served with a third-party complaint in an action entitled Fujitsu Limited v. Cirrus Logic, Inc., in the United States District Court for the Northern District of California, San Jose Division. Subsequently, substantially the same case was filed in the Superior Court of California, Santa Clara County, and the United States District Court case was stayed. In this action, Fujitsu Limited (“Fujitsu”) alleged that semiconductor devices it purchased from Cirrus Logic, Inc. (“Cirrus Logic”) were defective in that a certain epoxy mold compound manufactured by Sumitomo Bakelite and Sumitomo Plastics America, Inc. (“Sumitomo Plastics” and collectively with Sumitomo Bakelite, the “Sumitomo Bakelite Parties”) and used by us in the manufacture of the chip caused a short circuit which rendered Fujitsu disk drive products inoperable. Cirrus Logic, in response, denied the allegations of the complaint, cross-complained against Fujitsu for unpaid invoices, and filed its cross-complaint against us alleging that any liability for chip defects should be assigned to us because we assembled the subject semiconductor devices. We filed a cross-complaint against Sumitomo Bakelite asserting claims for breach of warranties and indemnification.

     On April 18 and 19, 2005, we participated in a private mediation with all parties involved. As a result of the mediation, on April 28, 2005 an agreement was reached among Fujitsu, Cirrus Logic, the Sumitomo Bakelite Parties and ourselves to settle this litigation and the parties entered the agreement into the record in Superior Court; thereafter, the parties memorialized and executed their settlement agreement in written form. Pursuant to the settlement agreement, we paid $40 million to Fujitsu in consideration of a release from and dismissal of all claims related to this litigation. We also agreed to dismiss our claims against Sumitomo Bakelite as part of the parties’ settlement agreement. The $40 million is reflected as part of the provision for legal settlements and contingencies in our Statement of Operations for the six months ended June 30, 2005. The $40 million was paid during the second quarter of 2005.

     Seagate Technology LLC v. Atmel Corporation, et al.

     In March 2003, we were served with a cross-complaint in an action between Seagate Technology LLC and Seagate Technology International (“Seagate”) and Atmel Corporation and Atmel Sarl (“Atmel”) in the Superior Court of California, Santa Clara County. Atmel’s cross-complaint seeks indemnification from us for any damages incurred from the claims by Seagate involving the allegedly defective epoxy mold compound manufactured by Sumitomo Bakelite. We answered Atmel’s cross-complaint, denying all liability, and filed a cross-complaint against Sumitomo Bakelite seeking indemnification. Atmel later amended its cross-complaint to include claims for negligence and negligent misrepresentation against us and added ChipPAC Inc. (“ChipPAC”) and Sumitomo Bakelite as cross-defendants. ChipPAC filed a cross-complaint against Sumitomo Bakelite and us.

     On April 14, 2005 an agreement was reached among Seagate, Atmel, ChipPAC, Sumitomo Bakelite and ourselves to settle this litigation. We agreed to pay $5 million to Seagate in consideration of a release from and dismissal of all claims related to this litigation. We also agreed to dismiss our claims against Sumitomo Bakelite as part of the parties’ settlement agreement. The $5 million is reflected as part of the provision for legal settlements and contingencies in our Statement of Operations for the six months ended June 30, 2005. The $5 million was paid during the second quarter of 2005.

     Maxtor Corporation v. Koninklijke Philips Electronics N.V., et al.

     In April 2003, we were served with a cross-complaint in an action between Maxtor Corporation (“Maxtor”) and Koninklijke Philips Electronics (“Philips”) in the Superior Court of California, Santa Clara County. Philips’ cross-complaint sought indemnification from us for any damages incurred from the claims by Maxtor involving the allegedly defective epoxy mold compound manufactured by Sumitomo Bakelite. Philips subsequently filed a cross-complaint directly against the Sumitomo Bakelite Parties, alleging, among other things, that the Sumitomo Bakelite Parties breached their contractual obligations to both us and Philips by supplying a defective mold compound resulting in the failure of certain Philips semiconductor devices. We denied all liability in this matter and also asserted a cross-complaint against Sumitomo Bakelite. The Sumitomo Bakelite Parties denied any liability. Maxtor and Philips reached a settlement of Maxtor’s claims against Philips on or about April 28, 2004 in which, reportedly, Philips agreed to pay Maxtor $24.8 million. On October 15, 2004, we and Sumitomo Bakelite reached a settlement agreement whereby Sumitomo Bakelite agreed to indemnify us for any damages awarded to Philips in excess of $3.5 million. In exchange, we dismissed our cross-claims against Sumitomo Bakelite. Trial of this matter before a jury began on October 18, 2004 and closing arguments were heard on November 29, 2004. On December 1, 2004, the Court and the jury rendered verdicts in our favor related to all of Philips’ claims against us. By those verdicts, we were exonerated

of all alleged liability. The jury’s verdict further determined the Sumitomo Bakelite Parties’ share of liability to be 57% and Philips’ share to be 43%. Philips has agreed not to appeal the judgment in our favor in return for our agreement not to seek costs of suit from Philips.

     We recorded a charge of $1.5 million related to the above matter during the three months ended March 31, 2004. However, in response to the December 1, 2004 verdict, we reversed this charge during the three months ended December 31, 2004.

Pending Epoxy Mold Litigation

     While the ultimate outcome is uncertain, as a result of the previously discussed epoxy mold compound litigation settlements, we have established a loss accrual related to the following two pending claims. This amount is reflected as part of the provision for legal settlements and contingencies in our Statement of Operations for the six months ended June 30, 2005.

     Fairchild Semiconductor Corporation v. Sumitomo Bakelite Singapore Pte. Ltd., et al.

     In September 2003, we were served with an amended complaint filed by Fairchild Semiconductor Corporation (“Fairchild”) against us, the Sumitomo Bakelite Parties and Sumitomo Bakelite Singapore Pte. Ltd. (collectively with the Sumitomo Bakelite Parties, the “Sumitomo Bakelite Defendants”) in the Superior Court of California, Santa Clara County. The amended complaint seeks damages related to our use of Sumitomo Bakelite’s epoxy mold compound in assembling Fairchild’s semiconductor packages. We answered Fairchild’s amended complaint, denying all liability, and filed a cross-complaint against Sumitomo Bakelite seeking indemnification.

     In August 2005, we reached an agreement with Fairchild and the Sumitomo Bakelite Defendants to settle all claims involving us in this litigation. We have agreed to pay $3 million to Fairchild and release our claims against Sumitomo Bakelite in consideration of a release from and dismissal of all claims against us. We had previously accrued for this amount as part of the provision for legal settlements and contingencies in our Statement of Operations for the three months ended March 31, 2005. The $3 million settlement is expected to be paid during the third quarter of 2005.

     Maxim Integrated Products, Inc. v. Amkor Technology, Inc., et al.

     In August 2003, we were served with a complaint filed by Maxim Integrated Products, Inc. (“Maxim”) against us and the Sumitomo Bakelite Parties in the Superior Court of California, Santa Clara County. The complaint seeks damages related to our use of Sumitomo Bakelite’s epoxy mold compound in assembling Maxim’s semiconductor packages. We have asserted cross-claims against Sumitomo Bakelite for indemnification. Written discovery is ongoing, with depositions and expert discovery to follow. The Court has set a trial date of April 24, 2006. We have denied all liability. We intend to defend ourselves vigorously, pursue our cross-claims against Sumitomo Bakelite and seek judgment in our favor.

Other Litigation

     Amkor Technology, Inc. v. Motorola, Inc.

     In August 2002, we filed a complaint against Motorola, Inc. (“Motorola”) seeking declaratory judgment relating to a controversy between us and Motorola concerning: (i) the assignment by Citizen Watch Co., Ltd. (“Citizen”) to us of a Patent License Agreement dated January 25, 1996 between Motorola and Citizen (the “License Agreement”) and concurrent assignment by Citizen to us of Citizen’s interest in U.S. Patents 5,241,133 and 5,216,278 (the “‘133 and ‘278 patents”) which patents relate to BGA packages; and (ii) our obligation to make certain payments pursuant to an immunity agreement (the “Immunity Agreement”) dated June 30, 1993 between us and Motorola, pending in the Superior Court of the State of Delaware in and for New Castle County.

     We and Motorola resolved the controversy with respect to all issues relating to the Immunity Agreement, and all claims and counterclaims filed by the parties in the case relating to the Immunity Agreement were dismissed or otherwise disposed of without further litigation. The claims relating to the License Agreement and the ‘133 and ‘278 Patents remained pending.

     We and Motorola both filed motions for summary judgment on the remaining claims, and oral arguments were heard in September 2003. On October 6, 2003, the Superior Court of Delaware ruled in favor of us and issued an Opinion and Order granting our motion for summary judgment and denying Motorola’s motion for summary judgment. Motorola filed an

appeal in the Supreme Court of Delaware. In May 2004, the Supreme Court reversed the Superior Court’s decision, and remanded for further development of the factual record. A trial date has been set for October 17, 2005. We believe we will prevail on the merits at the Superior Court level. In addition, should Motorola prevail, we believe we will have recourse against Citizen.

     Citizen Watch Co. Ltd. v. Amkor Technology, Inc.

     We entered into an intellectual property assignment agreement (“IPAA”) with Citizen Watch Co., Ltd. (“Citizen”) with an effective date of March 28, 2002, pursuant to which Citizen assigned to us (i) its rights under a Patent License Agreement dated January 25, 1996 between Motorola and Citizen (the “License Agreement”) and (ii) Citizen’s interest in the ‘133 and ‘278 patents. The parties entered into the IPAA in conjunction with having entered into a Master Purchase Agreement under which we purchased substantially all of the assets of a division of Citizen in April 2002. Subsequent to that transaction, Motorola challenged the validity of Citizen’s assignment of its rights under the License Agreement to us, which resulted in our litigation with Motorola, Inc., which is described above (the “Motorola case”). Pending resolution of the Motorola case, and in accordance with the terms of the IPAA, we are withholding final payment of 1.4 billion yen ($12.7 million based on the spot exchange rate at June 30, 2005).

     In March 2004, Citizen submitted a Demand for Arbitration in the International Chamber of Commerce (“ICC”), claiming breach of our obligation to make the deferred payment of 1.4 billion yen. In May 2004, we filed our Answer to Request for Arbitration, Counterclaim and Request for Abeyance of Proceedings. In our Answer, we contend, among other things, that we do not have an obligation to make the deferred payment due to (i) our inability to perfect the rights assigned by Citizen under the License Agreement, and (ii) Citizen’s breach of its representations and warranties that it had all right and authority to assign its rights under the License Agreement to us.

     The arbitration hearing before the ICC on this matter was held in May 2005. A ruling by the ICC is expected by October 31, 2005.

     Alcatel Business Systems v. Amkor Technology, Inc., Anam Semiconductor, Inc.

     On November 5, 1999, we agreed to sell certain semiconductor parts to Alcatel Microelectronics, N.V. (“AME”), a subsidiary of Alcatel S.A. The parts were manufactured for us by Anam Semiconductor, Inc. (“ASI”) and delivered to AME. AME transferred the parts to another Alcatel subsidiary, Alcatel Business Systems (“ABS”), which incorporated the parts into cellular phone products. In early 2001, a dispute arose as to whether the parts sold by us were defective. On March 18, 2002, ABS and its insurer filed suit against us and ASI in the Paris Commercial Court of France, claiming damages of approximately 50.4 million Euros (approximately $60.8 million based on the spot exchange rate at June 30, 2005). We have denied all liability and intend to vigorously defend ourselves and have not established a loss accrual associated with this claim. Additionally, we have entered into a written agreement with ASI whereby ASI has agreed to indemnify us fully against any and all loss related to the claims of AME, ABS and ABS’ insurer. The Paris Commercial Court commenced a special proceeding before a technical expert to report on the facts of the dispute. The report of the court-appointed expert was put forth on December 31, 2003. The report does not specifically allocate liability to any particular party. On May 18, 2004, the Paris Commercial Court of France declared that it did not have jurisdiction over the matter. The Court of Appeal of Paris heard the appeal regarding jurisdiction during October 2004, confirmed the first tier ruling and dismissed the appeal on November 3, 2004. A motion was recently filed by ABS and its insurer before the French Supreme Court to challenge the lack of jurisdiction ruling and a brief was filed by ABS and its insurer in June 2005. We will file a response brief before the French Supreme Court on August 30, 2005.

     In response to the French lawsuit, on May 22, 2002, we filed a petition to compel arbitration in the United States District Court for the Eastern District of Pennsylvania against ABS, AME and ABS’ insurer, claiming that the dispute is subject to the arbitration clause of the November 5, 1999 agreement between us and AME. ABS and ABS’ insurer have refused to arbitrate and continue to challenge the lack of jurisdiction ruling.

     Amkor Technology, Inc. v. Carsem (M) Sdn Bhd, Carsem Semiconductor Sdn Bhd, and Carsem Inc.

     In November 2003, we filed complaints against Carsem (M) Sdn Bhd, Carsem Semiconductor Sdn Bhd, and Carsem Inc. (collectively “Carsem”) with the International Trade Commission (“ITC”) in Washington, D.C. and subsequently in the Northern District of California. The complaints allege infringement of our United States Patent Nos. 6,433,277, 6,455,356, and 6,630,728 (collectively the “Amkor Patents”). We allege that by making, using, selling, offering for sale, or importing

into the U.S. the Carsem Dual and Quad Flat No-Lead Package, Carsem has infringed on one or more of our MicroLeadFrame® packaging technology claims in the Amkor Patents. The District Court action had been stayed pending resolution of the ITC case. The ITC Administrative Law Judge (“ALJ”) conducted an evidentiary hearing during July and August of 2004 in Washington D.C. and issued an initial determination that Carsem infringed some of our patent claims relating to our MicroLeadFrame® package technology, that some of our 21 asserted patent claims are valid, and that all of our asserted patent claims are enforceable. However, the ALJ did not find a statutory violation of the Tariff Act. We filed a petition in November 2004 to have the ALJ’s ruling reviewed by the full International Trade Commission. The ITC has ordered a new claims construction related to various disputed claim terms and has remanded the case to the ALJ for further proceedings. The ITC has subsequently authorized the ALJ to reopen the record on certain discovery issues related to third party conception documents. The ITC has ordered the ALJ to issue the final Initial Determination by November 9, 2005 and has set a new date of February 9, 2006 for completion of the investigation. The District court action remains stayed pending completion of the ITC investigation.

     Other Matters

     In June 2004, the Securities and Exchange Commission (the “Commission”) informed us that it was conducting an informal inquiry into certain trading in Amkor securities. We believe that the inquiry relates to transactions in our securities by certain individuals, which may include certain insiders or former insiders. The primary focus of the inquiry appears to be activities during the first half of 2004. We have cooperated with the inquiry by voluntarily producing documents to the Commission and providing testimony. The Commission staff has not informed us of any conclusions of wrongdoing by any person or entity.

13. Related Party Transactions

     Mr. JooHo Kim is an executive officer of Amkor and a brother of James J. Kim, our Chairman and CEO. Mr. JooHo Kim owns with his children 19.2%, at June 30, 2005, of Anam Information Technology, Inc., a company that provides computer hardware and software components to Amkor Technology Korea, Inc. (a subsidiary of Amkor). For the three months ended June 30, 2005 and 2004, purchases from Anam Information Technology, Inc. were $0.5 million and $0.1 million, respectively. For the six months ended June 30, 2005 and 2004, purchases from Anam Information Technology, Inc. were $0.6 million and $1.2 million, respectively. Amounts due to Anam Information Technology, Inc. at June 30, 2005, and December 31, 2004 were not significant.

     Mr. JooHo Kim, together with his wife and children, own 96.1%, at June 30, 2005, of Jesung C&M, a company that provides cafeteria services to Amkor Technology Korea, Inc. For the three months ended June 30, 2005 and 2004 purchases from Jesung C&M were $1.7 million and $1.7 million, respectively. For the six months ended June 30, 2005 and 2004 purchases from Jesung C&M were $3.3 million and $3.2 million, respectively. Amounts due to Jesung C&M at June 30, 2005 and December 31, 2004 were $0.6 million and $0.6 million, respectively.

     Dongan Engineering Co., Ltd. is 100% owned by JooCheon Kim, a brother of James J. Kim. Mr. JooCheon Kim is not an employee of Amkor. Dongan Engineering Co., Ltd. provides construction and maintenance services to Amkor Technology Korea, Inc. and Amkor Technology Philippines, Inc., both subsidiaries of Amkor. For the three months ended June 30, 2005 and 2004 purchases from Dongan Engineering Co., Ltd were $0.2 million and $1.2 million, respectively. For the six months ended June 30, 2005 and 2004 purchases from Dongan Engineering Co., Ltd were $0.4 million and $1.9 million, respectively. Amounts due to Dongan Engineering Co., Ltd. at June 30, 2005 and December 31, 2004 were $0.1 million and $0.2 million, respectively.

     We purchase leadframe inventory from Acqutek Semiconductor & Technology Co., Ltd. James J. Kim’s ownership in Acqutek Semiconductor & Technology Co., Ltd. is approximately 17.7% at June 30, 2005. For the three months ended June 30, 2005 and 2004 purchases from Acqutek Semiconductor & Technology Co., Ltd. were $2.2 million and $4.5 million, respectively. For the six months ended June 30, 2005 and 2004 purchases from Acqutek Semiconductor & Technology Co., Ltd. were $5.2 million and $8.0 million, respectively. Amounts due to Acqutek Semiconductor & Technology Co., Ltd. at June 30, 2005 and December 31, 2004 were $1.4 million and $0.6 million, respectively.

     We lease office space in West Chester, Pennsylvania from trusts related to James J. Kim. Amounts paid for this lease for the three months ended June 30, 2005 and 2004 were $1.0 million and $0.3 million, respectively. Amounts paid for this lease for the six months ended June 30, 2005 and 2004 were $1.3 million and $0.5 million, respectively. During the second quarter of 2005 we vacated a substantial portion of the leased office space and paid the trusts $0.7 million to settle our

remaining obligation associated with that space which is included in the $1.0 million paid to the trusts for the three months ended June 30, 2005. For the three months ended June 30, 2005 and 2004 our sublease income includes $0.1 million and $0.1 million respectively, from related parties. For the six months ended June 30, 2005 and 2004 our sublease income includes $0.3 million and $0.3 million respectively, from related parties. The sublease income has been assigned to the trusts as part of vacating the office space. We currently lease approximately 2,700 square feet of office space from these trusts.

14. Subsidiary Guarantors

     Payment obligations under our senior and senior subordinated notes (see Note 9), totaling $1,344 million, are fully and unconditionally guaranteed by certain of our wholly-owned subsidiaries. The subsidiaries that guarantee our senior and senior subordinated notes consist of Unitive, Inc., Unitive Electronics, Inc., Amkor International Holdings, LLC, Amkor Technology Limited, P-Four, LLC and Amkor/Anam Pilipinas, L.L.C.

     Presented below is condensed consolidating financial information for the parent, the guarantor subsidiaries and the non-guarantor subsidiaries. Investments in subsidiaries are accounted for by the parent and subsidiaries on the equity method of accounting. Earnings of subsidiaries are, therefore, reflected in the parent’s and guarantor subsidiaries’ investments in subsidiaries’ accounts. The elimination columns eliminate investments in subsidiaries and inter-company balances and transactions. Separate financial statements and other disclosures concerning the guarantor subsidiaries are not presented because the guarantor subsidiaries are wholly-owned and have unconditionally guaranteed the senior notes and senior subordinated notes on a joint and several basis. There are no significant restrictions on the ability of any guarantor subsidiary to directly or indirectly make distributions to us.

		Condensed Consolidating Balance Sheet
		June 30, 2005
		(In thousands)
						Guarantor				Non-Guarantor
		Parent				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Current assets:
Cash and cash equivalents		$	138,275			$	13,262			$	76,667			$	—			$	228,204
Accounts receivable			148,043				44,759				107,420				—				300,222
Inventories			80,319				7,891				28,509				—				116,719
Other current assets			2,610				626				27,040				—				30,276
Total current assets			369,247				66,538				239,636				—				675,421
Inter-company			1,225,866				(84,784	)			(1,141,082	)			—				—
Property, plant and equipment, net			47,341				321,737				1,058,837				—				1,427,915
Investments			708,610				334,839				835,380				(1,867,728	)			11,101
Goodwill			37,188				24,287				594,465				—				655,940
Other assets			73,614				2,957				41,733				—				118,304
Total assets		$	2,461,866			$	665,574			$	1,628,969			$	(1,867,728	)		$	2,888,681
Current liabilities:
Short term borrowings and current portion of long-term debt		$	249,271			$	293			$	32,075			$	—			$	281,639
Other current liabilities			223,372				46,175				197,654				—				467,201
Total current liabilities			472,643				46,468				229,729				—				748,840
Long-term debt			1,790,476				—				19,901				—				1,810,377
Other non-current liabilities			798				12,433				112,231				—				125,462
Total liabilities			2,263,917				58,901				361,861				—				2,684,679
Minority interest			—				—				4,937				—				4,937
Total stockholders equity			197,949				606,673				1,262,171				(1,867,728	)			199,065
Total liabilities and stockholders equity		$	2,461,866			$	665,574			$	1,628,969			$	(1,867,728	)		$	2,888,681

14. Subsidiary Guarantors — (continued)

		Condensed Consolidating Balance Sheet
		December 31, 2004
		(In thousands)
						Guarantor				Non-Guarantor
		Parent				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Current assets:
Cash and cash equivalents		$	267,692			$	26,217			$	78,375			$	—			$	372,284
Accounts receivable			125,927				30,835				112,733				—				269,495
Inventories			76,162				7,614				27,840				—				111,616
Other current assets			3,445				2,601				26,545				—				32,591
Total current assets			473,226				67,267				245,493				—				785,986
Inter-company			1,163,793				(88,206	)			(1,075,587	)			—				—
Property, plant and equipment, net			51,912				336,438				992,046				—				1,380,396
Investments			776,393				355,828				860,960				(1,979,419	)			13,762
Goodwill			37,188				24,280				594,584				—				656,052
Other assets			84,436				6,888				37,848				—				129,172
Total assets		$	2,586,948			$	702,495			$	1,655,344			$	(1,979,419	)		$	2,965,368
Current liabilities:
Short term borrowings and current portion of long-term debt		$	14,965			$	965			$	36,217			$	—			$	52,147
Other current liabilities			177,339				32,680				176,864				—				386,883
Total current liabilities			192,304				33,645				213,081				—				439,030
Long-term debt			2,024,244				—				16,569				—				2,040,813
Other non-current liabilities			871				10,307				98,139				—				109,317
Total liabilities			2,217,419				43,952				327,789				—				2,589,160
Minority interest			—				—				6,679				—				6,679
Total stockholders equity			369,529				658,543				1,320,876				(1,979,419	)			369,529
Total liabilities and stockholders equity		$	2,586,948			$	702,495			$	1,655,344			$	(1,979,419	)		$	2,965,368

14. Subsidiary Guarantors — (continued)

		Condensed Consolidating Statement of Operations
		For the three months ended June 30, 2005
		(In thousands)
						Guarantor				Non-Guarantor
		Parent				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Net sales		$	330,861			$	123,058			$	270,193			$	(234,777	)		$	489,335
Cost of sales			299,117				118,490				236,563				(231,333	)			422,837
Gross profit (loss)			31,744				4,568				33,630				(3,444	)			66,498
Operating expenses:
Selling, general and administrative			35,220				12,731				22,358				(3,444	)			66,865
Research and development			104				2,476				7,344				—				9,924
Total operating expenses			35,324				15,207				29,702				(3,444	)			76,789
Operating income (loss)			(3,580	)			(10,639	)			3,928				—				(10,291	)
Other expense (income):
Interest expense, net			23,846				1,462				16,087				—				41,395
Foreign currency loss (gain)			(346	)			(455	)			(972	)			—				(1,773	)
Other expense (income), net			24,739				5,108				9,791				(37,575	)			2,063
Total other expense (income)			48,239				6,115				24,906				(37,575	)			41,685
Income (loss) before income taxes and minority interest			(51,819	)			(16,754	)			(20,978	)			37,575				(51,976	)
Minority interest			—				—				926				—				926
Income (loss) before income taxes			(51,819	)			(16,754	)			(20,052	)			37,575				(51,050	)
Provision for income taxes (benefit)			584				1,011				(242	)			—				1,353
Net income (loss)		$	(52,403	)		$	(17,765	)		$	(19,810	)		$	37,575			$	(52,403	)

14. Subsidiary Guarantors — (continued)

		Condensed Consolidating Statement of Operations
		For the three months ended June 30, 2004
		(In thousands)
						Guarantor				Non-Guarantor
		Parent				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Net sales		$	321,630			$	166,088			$	236,968			$	(232,150	)		$	492,536
Cost of sales			281,762				123,787				222,180				(229,968	)			397,761
Gross profit (loss)			39,868				42,301				14,788				(2,182	)			94,775
Operating expenses:
Selling, general and administrative			33,318				7,268				17,512				(2,182	)			55,916
Research and development			2,283				1,577				6,040				—				9,900
Total operating expenses			35,601				8,845				23,552				(2,182	)			65,816
Operating income (loss)			4,267				33,456				(8,764	)			—				28,959
Other expense (income):
Interest expense, net			21,638				592				14,130				—				36,360
Foreign currency loss (gain)			1,990				123				522				—				2,635
Other expense (income), net			(32,201	)			29,945				(32,536	)			9,251				(25,541	)
Total other expense (income)			(8,573	)			30,660				(17,884	)			9,251				13,454
Income (loss) before income taxes and minority interest			12,840				2,796				9,120				(9,251	)			15,505
Minority interest			—				—				3				—				3
Income (loss) before income taxes			12,840				2,796				9,123				(9,251	)			15,508
Provision for income taxes (benefit)			2,860				385				2,283				—				5,528
Net income (loss)		$	9,980			$	2,411			$	6,840			$	(9,251	)		$	9,980

14. Subsidiary Guarantors — (continued)

		Condensed Consolidating Statement of Operations
		For the six months ended June 30, 2005
		(In thousands)
						Guarantor				Non-Guarantor
		Parent				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Net sales		$	611,773			$	234,503			$	499,214			$	(438,674	)		$	906,816
Cost of sales			548,513				231,813				449,035				(432,438	)			796,923
Gross profit (loss)			63,260				2,690				50,179				(6,236	)			109,893
Operating expenses:
Selling, general and administrative			66,181				24,430				42,956				(6,236	)			127,331
Research and development			1,172				4,345				13,307				—				18,824
Provision for legal settlements and contingencies			50,000				—				—				—				50,000
Total operating expenses			117,353				28,775				56,263				(6,236	)			196,155
Operating income (loss)			(54,093	)			(26,085	)			(6,084	)			—				(86,262	)
Other expense (income):
Interest expense, net			48,389				2,481				31,038				—				81,908
Foreign currency loss (gain)			304				365				(210	)			—				459
Other expense (income), net			67,794				22,769				23,579				(111,901	)			2,241
Total other expense (income)			116,487				25,615				54,407				(111,901	)			84,608
Income (loss) before income taxes and minority interest			(170,580	)			(51,700	)			(60,491	)			111,901				(170,870	)
Minority interest			—				—				1,937				—				1,937
Income (loss) before income taxes			(170,580	)			(51,700	)			(58,554	)			111,901				(168,933	)
Provision for income taxes (benefit)			893				985				662				—				2,540
Net income (loss)		$	(171,473	)		$	(52,685	)		$	(59,216	)		$	111,901			$	(171,473	)