Read-Rite Corp. (RDRT) 6 -5/16: manufacturer of MR recording heads, head gimbal and head stack assemblies for disk drives posts a fiscal Q2 loss of $0.39 a share, much wider than the First Call loss estimate of $0.17 a share, vs year-ago loss of $1.29 a share; revenues fell 11.7% to $206 mln; see press release .....
Read-Rite Reports Second Quarter Fiscal 1999 Results
PR Newswire - April 26, 1999 16:15
MILPITAS, Calif., April 26 /PRNewswire/ -- Read-Rite Corporation (Nasdaq: RDRT) today announced sales of $206.2 million and a net loss and net loss per share of $19.4 million and $0.39, respectively, for the second fiscal quarter ended March 28, 1999. The company previously announced sales of $206 million and that it expected a loss for the second fiscal quarter. The second quarter results compare to sales of $230.2 million and net income and net income per share of $1.1 million and $0.02, respectively, for the first fiscal quarter ended December 27, 1998; and sales of $187.1 million and a net loss and net loss per share of $62.2 million and $1.29, respectively, for the second fiscal quarter of 1998. For the first six months of fiscal 1999, sales were $436.4 million with a net loss and net loss per share of $18.3 million and $0.37, respectively; as compared to sales of $448.4 million and a net loss and net loss per share of $153.1 million and $3.17, respectively, for the first six months of fiscal year 1998.
The decline in sales from the first fiscal quarter was mainly the result of a significant drop in the number of head gimbal assemblies (HGAs) per hard disk drive coupled with reduced demand for product during the latter portion of the quarter. Total heads shipped during the quarter were 19.3 million, down 15% from the previous quarter, negatively impacting gross margin. Gross margin was further impacted by higher production costs as the company began the introduction of giant magnetoresistive (GMR) HGAs into its factories. The company ended the quarter with a cash balance of $151.9 million, a $43 million increase from the previous quarter, as Read-Rite continued its execution on capital efficiency, inventory control and receivables management. Subsequent to the end of its second fiscal quarter, Read-Rite further increased its cash balances by drawing down $100 million on its credit facility.
The company expects the challenging industry environment will continue for the balance of fiscal 1999, especially within the desktop segment, as significant pricing pressures and the trend for fewer heads per drive are expected to continue. As a result, the company expects sales for the third fiscal quarter to be down from the previous quarter and also expects to report an operating loss for the June quarter. Read-Rite is taking action to adjust its cost structure in light of current industry conditions. The company will take a charge during the June quarter of approximately $25-$30 million, of which approximately $8-$10 million is cash related. The charge relates to a worldwide reduction in headcount of 2,500, or 14% of the company's employees, combined with other asset related charges. Read-Rite estimates the actions taken so far will result in quarterly savings to the company of approximately $10-$15 million when fully implemented.
As Read-Rite enters the second half of fiscal 1999, the company is in the final phase of several qualifications on GMR pico products and expects to ramp production of GMR pico products later this quarter. The company's strategy is to use its GMR technology to increase its customer base and is working on a significant number of disk drive designs for the desktop and enterprise markets.
Read-Rite Corporation is one of the world's leading independent manufacturers of MR recording heads, head gimbal assemblies (HGAs) and head stack assemblies (HSAs) for disk drives and magnetoresistive heads for tape drives. The company is headquartered in Milpitas, California and has operations in Japan, Thailand, the Philippines and Singapore. The company's home page on the World Wide Web can be reached at readrite.com.
This news release contains statements which include forward-looking information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended, and is subject to the "safe harbor" created by those sections. These statements include, but are not limited to: that the company expects that challenging industry conditions will continue, including pricing pressures and fewer heads per hard disk drive; that the company expect that sales for the third fiscal quarter will be down from the previous quarter; that the company expects that it will report an operating loss for the June quarter; that the company will take a charge of $25-$30 million in the June quarter and that only $8-$10 million is cash related; that the headcount reduction and other asset related charges will result in quarterly savings of $10-$15 million when fully implemented; that the company's strategy is to use its GMR technology to increase its customer base; and that the company expects to ramp production of GMR pico heads later in the June quarter. The company's actual results for future periods could differ materially from those projected in such forward-looking information. Factors that could cause actual results to differ include, but are not limited to: industry conditions could worsen, including more severe pricing pressure and a steeper decline in heads per hard disk drive, causing the decline in sales and operating loss for the third fiscal quarter to exceed current company expectations; the June quarter charge could exceed $25-$30 million and the cash related charges could exceed $8-$10 million, and the quarterly savings from these charges may be less than $10-$15 million; the company's strategy of expanding its customer base may not succeed; the company may not ramp production of GMR pico heads later in the June quarter; and the other factors described in the company's reports filed with the Securities and Exchange Commission, including, but not limited to, its Annual Report on Form 10-K for fiscal 1998 and quarterly report on Form 10-Q for the first quarter of Fiscal Year 1999 ended December 27, 1998. Read-Rite undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of such statements.
Read-Rite Corporation
Consolidated Condensed Balance Sheets
(In thousands)
March 31, September 30,
1999 1998
(Unaudited)
Assets
Cash, cash equivalents and short-term
investments $151,925 $108,482
Accounts receivable, net 93,154 110,337
Inventories 65,678 52,367
Prepaid expenses and other current assets 8,779 10,061
Total current assets 319,536 281,247
Property, plant and equipment, net 525,983 573,633
Intangibles and other assets 18,748 24,920
Total assets $864,267 $879,800
Liabilities, Minority Interest in Consolidated
Subsidiary and Stockholders' Equity
Current liabilities $195,859 $183,629
Long-term debt 390,071 388,248
Deferred income taxes and other liabilities 30,047 31,978
Total liabilities 615,977 603,855
Minority interest in consolidated subsidiary 29,297 42,016
Common stock and additional paid-in capital 366,581 363,181
(Accumulated deficit) retained earnings (147,588) (129,252)
Total stockholders' equity 218,993 233,929
Total liabilities, minority interest in
consolidated subsidiary and
stockholders' equity $864,267 $879,800
Read-Rite Corporation
Consolidated Condensed Statements of Operations
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
March 31, March 31,
1999 1998 1999 1998
(Unaudited) (Unaudited)
Net sales $206,187 $187,072 $436,375 $448,443
Cost of sales 194,932 217,486 390,259 564,624
Gross margin 11,255 (30,414) 46,116 (116,181)
Research & development 23,783 23,906 47,515 45,637
Selling, general & administrative 7,504 9,234 14,793 18,730
Restructuring costs -- -- -- --
Total operating expenses 31,287 33,140 62,308 64,367
Operating income (loss) (20,032) (63,554) (16,192) (180,548)
Interest income (expense) and
other, net (6,498) (6,410) (14,914) (13,259)
Income (loss) before income
taxes and minority interest (26,530) (69,964) (31,106) (193,807)
Provision (benefit) for income
taxes (139) 50 (91) (24,719)
Minority interest in net income
(loss) of consolidated
subsidiary (6,973) (7,843) (12,719) (15,988)
Net income (loss) ($19,418) ($62,171) ($18,296) ($153,100)
Earnings (loss) per share:
Basic ($0.39) ($1.29) ($0.37) ($3.17)
Diluted ($0.39) ($1.29) ($0.37) ($3.17)
Shares used in per share
computations:
Basic 49,168 48,323 49,097 48,305
Diluted 49,168 48,323 49,097 48,305
SOURCE Read-Rite Corporation
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