Maxtor Corp. (MXTR) 7 9/16 +9/16: developer and manufacturer of hard disk drives posts a Q1 net of $0.17 a share, in line with the First Call estimate, vs year-ago $0.10 a share......
but....
Message 9085928
Komag Inc. (KMAG) 3 13/16 +1/8: manufacturer and marketer of thin film media disks for hard disk drives posts a Q1 loss of $0.40 a share, a penny wider than the First Call mean, vs year-ago loss of $1.10 a share; net sales rose 18.3% to $90.01 mln......
Full earnings report;
go2net.newsalert.com
This is an additional statement to the earnings report.
Komag Updates 1999 First Quarter Outlook and Discusses Other Actions
SAN JOSE, Calif., April 1 /PRNewswire/ -- Komag, Incorporated (Nasdaq: KMAG - news), the world's largest independent supplier of thin-film media for computer hard disk drives, today announced that its financial results for the first quarter of 1999 will not meet analysts' expectations. The company made additional comments on the status of negotiations with its lenders in regard to an amended credit facility and the filing of its Form 10-K for fiscal year 1998. The company is scheduled to announce first quarter 1999 financial results on April 22, 1999 after the close of the market.
First Quarter Outlook:
As previously announced, the company anticipated higher net sales and improved operating performance for the first quarter of 1999 relative to the fourth quarter of 1998. Based on the company's current outlook, first quarter net sales are now expected to decline 3-5% sequentially on essentially flat unit sales volume. In the fourth quarter of 1998 the company reported net sales of $92.7 million on shipments of 10.0 million disks.
The company's unit production volume for the first quarter was reduced to mirror the quarter's unit sales volume in order to minimize inventory build. As a result of this action, unit production for the first quarter should fall approximately 11-13% below the fourth quarter 1998 production level of 11.4 million disks. The fixed production cost per unit in the first quarter will therefore increase sequentially as the company's fixed costs are spread over fewer units. While unit production costs will be favorably impacted by sequentially higher product yields, the higher fixed cost per unit will minimize, or possibly eliminate, the improvement in the company's overall unit production cost between the fourth quarter of 1998 and the first quarter of 1999.
The company expects to report sequentially lower operating expenses for the first quarter. This reduction will only partially offset the lower net sales and higher production costs. As a result, the company will most likely generate a first quarter net loss in excess of the $18.8 million net loss reported for the fourth quarter of 1998. Despite the higher net loss, the company expects to exit the first quarter with over $120 million in cash and investments.
10-K Filing and Bank Negotiations:
The company will file its 10-K annual report for 1998 with the Securities and Exchange Commission no later than the required filing date of April 5, 1999. The audit opinion in this filing will include a going concern paragraph that highlights the company's continuing default under certain financial covenants contained in the company's existing bank credit facilities and the need to cure this covenant default. The company is not in payment default and continues to pay all interest charges and fees associated with its credit facilities on their scheduled due dates. The company is continuing to work with its lenders to amend its existing credit agreements. Upon amendment of its bank loan agreements the company will seek to have the audit opinion reissued without the additional paragraph.
Prior to the announcement of the company's planned acquisition of Western Digital Corporation's media business, the company and its lenders had reached substantial agreement on a common set of terms and conditions that would be used to amend the company's three outstanding credit facilities. Documentation of this agreement, which would cure the default, was in process before the announcement date of the acquisition. The impact of the acquisition on Komag's projected financial results, however, has required the company and its lenders to reexamine the terms and conditions for amending the company's existing bank loans. As a result, the loan amendments have not been completed, but negotiations on this matter are progressing.
The company and Western Digital are still negotiating the definitive agreements for the proposed acquisition. While the parties had originally hoped to close the transaction before the end of March, the closing deadline has been extended into April. The company's lenders have expressed a desire to review the substantive points of the acquisition agreement before finalization of an amended loan package. Unfortunately, the filing deadline for the company's 10-K will occur before the acquisition agreement and amended loan package are completed. As a result of this timing, the company's auditors were required to include the additional paragraph in their audit opinion.
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. In particular, the statements regarding the first quarter outlook could change due to the actual level of unit shipments during the last week of the company's accounting quarter ending April 4, 1999. The outlook for the first quarter could also change due to accounting adjustments as the financial statements for the quarter are prepared and detailed factual information for the quarter is gathered. As to the statements concerning bank negotiations and the company's audit opinion, there can be no assurance either that the bank negotiations will be successfully concluded or that the company's auditors will be able to reissue their opinion without the additional paragraph discussed above. Moreover, there can be no assurance that the Western Digital transaction will be completed as planned. Other risk factors that may affect the company's financial performance are listed in the company's various SEC filings, including its Form 10-K for the year ended January 3, 1999 which will be filed no later than April 5, 1999. The company undertakes no obligation to publicly release any revisions to these forward-looking statements.
About Komag:
Founded in 1983, Komag, Incorporated has produced over 380 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.
SOURCE: Komag, Incorporated
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