Interesting to see Komag mention the industry first 4.3 gig program. I've heard WDC has just such a program which has yet to be announced using RDRT heads. Still, the bleeding losses are so big. Do you think they have any exclusive lead on these 4.3 gig platters? Seems like RDRT is teaming with HMT on most of their high end, so they'll probably be just another source.
Regards, Mark
Komag Inc. (KMAG) 2 5/8 unch: supplier of thin-film media for computer hard disk drives posts a Q3 loss of $0.66 a share, narrower that the First Call loss estimate of $0.87 a share, vs year-ago loss of $1.01 a share; net sales fell 37.3% from a year-ago to $81.3 mln, but were up 3% on a sequential basis; see press release.....
Komag Announces Third Quarter Results
PR Newswire - October 15, 1998 16:35
SAN JOSE, Calif., Oct. 15 /PRNewswire/ -- Komag, Incorporated (Nasdaq: KMAG), the world's largest independent supplier of thin-film media for computer hard disk drives, today announced financial results for the third quarter ended September 27, 1998.
Third Quarter Results:
For the third quarter of fiscal 1998 net sales totaled $81.3 million, up 3% from $78.8 million in the second quarter of 1998. Net sales in the third quarter of 1997 were $129.7 million.
The net loss for the third quarter of 1998 was $27.4 million, or $0.51 per share based on 53.4 million shares. The third quarter net loss included a favorable impact of $8.0 million due to certain non-recurring inventory adjustments. The equity contribution of Asahi Komag Co., Ltd. (AKCL), the company's 50%-owned Japanese joint venture, to Komag's net loss in the third quarter was a negative $3.3 million, or a loss of $0.06 per share.
The company's net loss for the second quarter of 1998 was $261.9 million, or $4.95 per share based on 52.9 million shares. The net loss for the third quarter a year ago was $52.7 million, or $1.01 per share based on 52.4 million shares. Both periods include significant charges that complicate quarterly comparisons.
The second quarter 1998 net loss included a charge of $187.8 million composed primarily of an impairment charge that effectively reduced the valuation of the company's assets. The third quarter 1997 net loss included a restructuring charge of $52.2 million for the consolidation of the company's U.S. manufacturing facilities. Additionally, Komag recorded charges for inventory write-downs and net losses from AKCL in both periods.
"As expected, continuing weak merchant market demand for disk media negatively impacted our third quarter financial performance. On a sequential basis we did, however, narrow our quarterly net loss, exclusive of the unusual charges and the equity losses from AKCL in both periods. Reduced payroll costs, lower depreciation charges, and improved unit demand more than offset a 4% decline in average selling price to produce this favorable result. Improved unit volume and the absence of large equipment write-offs supported a sequential improvement in AKCL's third quarter financial results. Most importantly, customer feedback on our new disk products remains very favorable and we exited the third quarter with a strengthening backlog, suggesting near-term stability of demand for our disk products," said Stephen C. Johnson, president and chief executive officer of Komag, Incorporated.
"While the first three quarters of 1998 were very difficult for Komag and the data storage industry in general, I am encouraged by certain trends underlying our third quarter results. Our manufacturing staffing is now closely aligned with expected production levels and commitments for new capital equipment are being tightly controlled. Reductions in material input costs and improvements in manufacturing yields are on target with our expectations. An increased focus on working capital asset management is also yielding benefits as evidenced by the $20 million reduction in our inventories during the recently completed quarter. As a result of our actions we had $126.6 million in cash and investments at the end of the third quarter," said Johnson.
Third quarter unit sales increased to 8.5 million disks from 7.8 million disks in the second quarter of 1998. Advanced magnetoresistive (MR) disks, including production of the industry's first 3 1/2-inch giant magnetoresistive (GMR) disks, accounted for 95% of the company's third quarter unit sales. Sales of 3 1/2-inch disks capable of storing between 2-4 gigabytes (GB) per platter totaled 7.8 million disks, or 92% of the company's third quarter unit sales. Unit production from the company's U.S. and Malaysian factories decreased to 7.1 million disks in the third quarter from 8.9 million disks in the second quarter of 1998. Disk products manufactured using the company's new advanced plated, polished substrate and epitaxial sputtering processes accounted for approximately 60% of the disks produced in the recently completed quarter.
As previously disclosed and as a result of the company's second quarter loss, the company remains in technical default of certain financial covenants in its various bank credit facilities. The company is not in payment default under any of these facilities. The company and its current lenders remain in discussions to amend the terms of these existing agreements.
Business Outlook:
"Bringing industry-leading products to market in a timely and cost-effective manner is essential to improving Komag's financial performance. Our R&D organization continues to make excellent progress in the qualification of higher areal density disk products, including the industry's first 4.3 GB per platter desktop program from our Penang operations. Launching products from our two plants in Penang is particularly important as our Malaysian facilities have the potential to be more cost-effective than similar facilities in Japan, Singapore, or the U.S. where our competitors operate," said Johnson.
"Orders for our disk products began to pick up at the end of third quarter. Based upon our current outlook, the company expects to achieve higher sales and further improvements in operating performance during the fourth quarter. As a result, we expect to narrow our fourth quarter operating loss and move toward our goal of achieving a cash-positive operating position. With moderate growth in net sales and continued progress against our internal operating targets, we may achieve positive operating cash flow as early as the first quarter of 1999. The exact timing for attainment of our goals, however, remains subject to increased demand for disk media, stabilization in industry pricing for media, the company's continued success with new product introductions, and realization of our projected cost reductions and yield improvements," said Johnson.
Forward-Looking Statements:
The above information contains predictions, estimates and other forward-looking statements that involve a number of risks and uncertainties. While this outlook represents Komag's current judgment on the future direction of the business, actual results may differ materially from any future performance suggested above. Factors that could cause actual results to differ include the following: availability of sufficient cash resources; changes in the industry supply-demand relationship and related pricing for enterprise and desktop disk products; timely and successful product qualification of next-generation products; timely and successful deployment of new process technologies into manufacturing; utilization of manufacturing facilities; changes in manufacturing efficiencies, in particular product yields and material input costs; extensibility of process equipment to meet more stringent future product requirements; vertical integration and consolidation within the company's limited customer base; increased competition; structural changes within the disk media industry such as combinations, failures, and joint venture arrangements; availability of certain sole-sourced raw material supplies; and the risk factors listed in the company's various SEC filings, including its Form 10-K for the year ended December 28, 1997. The company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
About Komag:
Founded in 1983, Komag, Incorporated has produced over 350 million thin-film disks, the primary storage medium for digital data used in computer disk drives. The company is well-positioned as the broad-based strategic supplier of choice for the industry's leading disk drive manufacturers. Through its highly automated factories in the United States, Japan and Southeast Asia, Komag provides high quality, leading-edge disk products at a low overall cost of ownership. These attributes enable Komag to partner with customers in the execution of their time-to-market design and time-to-volume manufacturing strategies.
For more information about Komag, visit Komag's Internet home page at komag.com or call Komag's Investor Relations 24-hour Hot Line at 888-66-KOMAG or 408-576-2901. |
