Company Press Release
JTS Reports Fiscal 1997 Second Quarter Results
SAN JOSE, Calif., Sept. 23 /PRNewswire/ -- JTS Corporation (Amex:JTS), today reported a net loss of $58.4 million, or 49 cents per fully
diluted share, on net revenues of $28.4 million for the second fiscal quarter ended August 3, 1997. These results compare to disk drive
revenues of $17.6 million in the second quarter a year ago when JTS Corporation was a private company.
As previously disclosed, second fiscal quarter revenues were significantly lower and losses higher than the preceding quarter. The primary
factors impacting revenue levels were a greater than expected summer downturn in the disk drive industry, lower-than-planned shipments of
the Champion family of disk drives, significantly higher-than-anticipated price erosion, decline in sales of older products and price
protection measures taken for channel inventories. Initial component shortages and other shortfalls limited Champion production on the
accelerated basis the company expected to achieve.
Losses reflected low production levels, a six week factory shutdown, write-offs associated with obsolete inventory, as well as start-up costs
associated with the Champion ramp. Additional expense provisions were made for excess capacity, increased accounts receivable reserves
and costs associated with the company's simplification of its business.
During the quarter, the company took several non-recurring charges. Gross margins were impacted by $31.9 million of inventory write-offs.
Operating margins were impacted by a $1.4 million capital equipment write-off.
The company said disk drive channel inventories were reduced substantially at the close of the second fiscal quarter. For the month of
August, disk drive sales have been robust and product sell-through is exceeding historical levels. Indications at the close of August
suggest that company expenses are tracking to revenue targets.
Tom Mitchell, president and chief executive officer at JTS Corporation provided the following business update, ``We are currently shipping
our disk drives to first-tier personal computer original equipment manufacturers (OEMs). We expect to significantly grow our OEM business
in the third and fourth fiscal quarters. We continue to strategically focus on broadening our OEM base and improving our distribution
channels, thereby reducing our exposure to distributors. Going forward, it is our intention to participate only in the mid-range of the
personal computer market, not in the entry-level personal computer market.''
JTS has sustained an active financing program with major vendors, new investors and current investors. As filed with the US Securities and
Exchange Commission through form 13D on August 21, 1997, Pax Clearing Company LP, the entity that clears for Amber Arbitrage Fund,
has acquired 14,041,600 shares of JTS common stock or approximately 12% of the shares outstanding as of August 3, 1997. During the
second fiscal quarter, JTS completed preferred-to- common stock conversions of $19 million. The company said that of the $40 million in
total of Series B and C Convertible Preferred issued, approximately $4.8 million preferred stock has yet to be converted as of September 19,
1997.
About JTS Corporation:
JTS Corporation, with headquarters in San Jose, Calif., was founded in 1994 to design, manufacture and supply enhanced-capacity hard disk
drives for the notebook and desktop personal computer market. JTS offers an innovative line of disk drives that provide higher capacity and
lower cost per megabyte than competitive alternatives in the desktop and portable computer market. The president and chief executive
officer of JTS, Tom Mitchell, was formerly the president and chief operating officer of Conner Peripherals and co- founder, president and
chief operating officer of Seagate Technology.
For further information, contact JTS Corporation at 166 Baypointe Parkway, San Jose, California 95134. Phone: (408) 468-1800, Fax: (408)
468-1619. Website: www.jtscorp.com
Except for the historical information contained herein, the discussion in this press release contains forward-looking statements that involve
certain risks and uncertainties. The Company's actual results could differ materially from those discussed here. Factors that could cause or
contribute to such variances include, but are not limited to, the Company's limited operating history; the need for additional financing; the
uncertainty of market acceptance of the Company's products; the highly competitive market; the Company's ability to achieve and maintain
volume shipments of products mentioned in this press release; the Company's dependence on its relationship with Compaq Computer; its
dependence on a single manufacturing facility and those additional risk factors discussed from time to time in the Company's SEC reports,
including but not limited to the Company's Annual Report on form 10K for the year ended February 2, 1997.
JTS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
Aug. 3, Feb. 2,
1997 1997
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (including $1,400, and
$1,800 held as restricted balances at August 3, 1997
and February 2, 1997, respectively) $5,228 $24,766
Accounts receivable, less allowance for doubtful
accounts of $3,948 and $1,615 at August 3, 1997 and
February 2, 1997, respectively 20,680 21,445
Inventories 15,273 17,750
Other current assets 2,418 2,341
Total current assets 43,600 66,302
PROPERTY AND EQUIPMENT, net 30,029 27,674
ACQUIRED TECHNOLOGY, net 18,109 19,618
GOODWILL, net 15,796 16,673
OTHER ASSETS 698 450
TOTAL $108,232 $130,717
LIABILITIES AND SHAREHOLDERS' EQUITY DEFICIT
CURRENT LIABILITIES:
Bank line of credits $21,170 $10,540
Borrowings under factoring arrangement 6,389 2,981
Accounts payable 65,952 33,327
Accrued liabilities 17,115 16,415
Current portion of long-term obligations 2,805 1,967
Total current liabilities 113,431 65,230
LONG-TERM OBLIGATIONS 52,982 53,081
STOCKHOLDERS' EQUITY DEFICIT:
Convertible preferred stock, $.001 par value --
authorized, 10,000,000 shares; outstanding, 17,525
and 40,000 shares at August 3, 1997 and February 2,
1997, respectively - -
Common stock, $.001 par value -- authorized,
250,000,000 shares; outstanding, 133,919,078 and
104,744,765 at August 3, 1997 and February 2, 1997,
respectively 134 105
Additional paid-in capital 350,360 349,961
Notes receivable from shareholders (2,475) (2,510)
Accumulated deficit (406,177) (335,150)
Total stockholders' equity deficit (58,181) 12,406
TOTAL $ 108,232 $130,717
JTS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Amounts)
Unaudited
Three Months Six Months
Ended Ended
Aug. 3, June 30, Aug. 3, June 30,
1997 1996 1997 1996
NET SALES $28,412 $1,040 $101,825 $7,762
Cost of sales 70,603 931 140,823 5,689
GROSS MARGIN (DEFICIT) (42,190) 109 (38,998) 983
Amortization of acquired technology 701 - 1,402 -
Amortization of Goodwill 492 - 984 -
Research and development expense 5,264 106 11,964 307
Selling, general and administrative
expense 7,883 879 13,471 8,698
Total operating expenses 14,340 985 27,822 9,005
OPERATING LOSS (56,530) (876) (66,819) (8,025)
Other income (loss), net 451 203 291 6,783
Interest income 32 331 323 663
Interest expense (2,328) (569) 3,994 (1,138)
NET LOSS (58,375) (911) (70,199) (1,717)
Preferred Stock Dividends (372) - (828) -
NET LOSS ATTRIBUTABLE TO COMMON
SHAREHOLDERS $(58,747) $(911)$(71,027)$(1,717)
LOSS PER COMMON SHARE $(0.49) $(0.01) $(0.63) $(0.03)
Weighted average number of
shares used in computations 119,622 63,839 112,731 63,770
SOURCE JTS Corporation
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