Read-Rite Reports Third Quarter Fiscal 1999 Results
PR Newswire - July 14, 1999 16:15
MILPITAS, Calif., July 14 /PRNewswire/ -- Read-Rite Corporation (Nasdaq: RDRT) today announced sales for the third fiscal quarter ended June 27, 1999 of $174.8 million, and a net loss and a net loss per share for the quarter of $57.3 million and $1.16, respectively. This compares to sales for the previous quarter ended March 28, 1999 of $206.2 million and a net loss and net loss per share of $19.4 million and $.39, respectively. The net loss for the third quarter includes a restructuring charge of $22.1 million incurred at Read-Rite and its wholly owned subsidiaries and an additional $15.6 million asset related charge incurred at the company's Japanese joint venture, Read-Rite SMI. After adjusting for minority interest, the restructuring charge accounted for $29.9 million of the net loss. The results for the quarter ended June 27, 1999 also include a one-time tax benefit of $25.9 million and, after adjusting for the minority interest, translated into a $19.5 million net benefit. The net loss and net loss per share, excluding the restructuring charge and tax benefit and adjusted for minority interest, was $46.9 million and $.95, respectively.
Despite this very difficult environment, Read-Rite is pleased with its ability to manage working capital. Focused efforts continued on inventory control, capital efficiency and accounts receivable. Significant improvements were made in inventory management, as turns increased to 18.4, ending the quarter with net inventory balances of $42.1 million, a $23.6 million reduction from the March quarter. In April, Read-Rite borrowed $100 million on its credit facility and subsequently paid down $45 million during the quarter. Cash balances increased $72.5 million from the March quarter to $224.4 million as of June 1999, an increase of $115.9 million from the year ended September 27, 1998. Subsequent to the end of the third fiscal quarter, the company further increased its cash balances by an additional $45 million, drawing down on the remaining portion of its credit facility.
During the quarter ended June 27, 1999, Read-Rite shipped 16.1 million heads, a decline of 16.2% from the previous quarter. The industry decline in heads per disk drive, combined with the severe industry pricing pressures and GMR transition further impacted results for the quarter. The limited visibility in the storage industry, in terms of unit volumes, storage capacities required by end-users and the continued fierce pricing environment, make short-term sales expectations and financial results extremely difficult to quantify. As a result, although Read-Rite expects sequentially lower sales and a loss for the fourth quarter ending September 26, 1999, the company is unable to provide more specific information as to the expected results for the September quarter. The company currently anticipates a rebound in sales during the first quarter of fiscal year 2000, as the company ramps production on new programs which will result in a broadening of the customer base, combined with the seasonal factors usually associated with the December quarter.
During the June quarter, the company completed the transfer of the GMR wafer, slider, HGA and HSA processes to the manufacturing facilities. Read-Rite has received volume purchase orders for major GMR programs from Maxtor and Seagate and is currently ramping production of GMR heads for Seagate's Barracuda ATA 7200 rpm drive. The company expects to receive formal qualification on these two programs within the next several weeks and anticipates additional GMR qualifications before the end of the quarter. During the quarter, the company further demonstrated its capability for technology leadership and announced another world record in recording head density, achieving an areal density of 20.9 gigabits per platter, or over 29 gigabytes per 3.5-inch platter, on GMR heads manufactured at its production facility in Fremont. Read-Rite believes the unique GMR design is extendable beyond 30 gigabits, and will use elements of this innovative design in customer programs for areal densities exceeding 8 gigabytes per platter.
Read-Rite Corporation is one of the world's leading independent manufacturers of magnetic recording heads, head gimbal assemblies (HGAs) and head stack assemblies (HSAs) for disk drives and 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: the company's limited visibility in the storage industry, in terms of unit volumes, storage capacities required by end-users and the continued fierce pricing environment, make short-term sales expectations and financial results difficult to quantify; that the company expects sequentially lower sales and a loss for the fourth quarter ending September 26, 1999; that the company anticipates a rebound in sales during the first quarter of fiscal year 2000, as the company ramps production on new programs which will result in a broadening of the customer base, combined with the seasonal factors usually associated with the December quarter; that the company expects formal qualifications on two GMR programs within the next several weeks; the company plans on using elements of its new GMR design in customer products beyond 8 GB per platter; and that the company anticipates that this new design will be extendable beyond 30 gigabits per square inch. 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: the current unfavorable industry conditions could continue through the end of the year and/or worsen; Read-Rite may not be successful in expanding its customer base; the company's ability to quickly and cost effectively ramp volume production on GMR products; the ability of the company to successfully incorporate and bring to market elements on the technology on the 20.9 gigabit demonstration; the company may not succeed in extending the areal density beyond 20.9 gigabits per square inch; 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 reports on Form 10-Q for the first and second quarter of Fiscal Year 1999 ended December 27, 1998 and March 28, 1999 respectively. 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 Statements of Operations
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
June 30, June 30,
1999 1998 1999 1998
(Unaudited) (Unaudited)
Net sales $174,766 $184,247 $611,141 $632,690
Cost of sales 193,421 198,996 583,680 763,620
Gross margin (18,655) (14,749) 27,461 (130,930)
Research & development 24,677 23,353 72,192 68,990
Selling, general &
administrative 7,045 8,556 21,838 27,286
Restructuring costs 37,685 93,728 37,685 93,728
Total operating expenses 69,407 125,637 131,715 190,004
Operating income (loss) (88,062) (140,386) (104,254) (320,934)
Interest income (expense)
and other, net (5,905) (4,506) (20,819) (17,765)
Income (loss) before income
taxes and minority interest (93,967) (144,892) (125,073) (338,699)
Provision (benefit) for
income taxes (25,879) 74 (25,970) (24,645)
Minority interest in net
income (loss) of
consolidated subsidiary (10,793) (7,816) (23,512) (23,804)
Net income (loss) ($57,295) ($137,150) ($75,591) ($290,250)
Earnings (loss) per share:
Basic ($1.16) ($2.82) ($1.53) ($5.99)
Diluted ($1.16) ($2.82) ($1.53) ($5.99)
Shares used in per share
computations:
Basic 49,540 48,702 49,245 48,437
Diluted 49,540 48,702 49,245 48,437
Read-Rite Corporation
Consolidated Condensed Balance Sheets
(In thousands)
June 30, September 30,
1999 1998
(Unaudited)
Assets
Cash, cash equivalents and short-term investments $224,424 $108,482
Accounts receivable, net 79,898 110,337
Inventories 42,114 52,367
Prepaid expenses and other current assets 8,218 10,061
Total current assets 354,654 281,247
Property, plant and equipment, net 478,888 573,633
Intangibles and other assets 18,510 24,920
Total assets $852,052 $879,800
Liabilities, Minority Interest in Consolidated
Subsidiary and Stockholders' Equity
Current liabilities $184,091 $183,629
Long-term debt 450,856 388,248
Deferred income taxes and other liabilities 5,863 31,978
Total liabilities 640,810 603,855
Minority interest in consolidated subsidiary 46,836 42,016
Common stock and additional paid-in capital 369,250 363,181
(Accumulated deficit) retained earnings (204,844) (129,252)
Total stockholders' equity 164,406 233,929
Total liabilities, minority interest
in consolidated subsidiary and
stockholders' equity $852,052 $879,800
SOURCE Read-Rite Corporation
/CONTACT: Jane Conn of Read-Rite Corporation, 510-683-7676/
/Web site: readrite.com
(RDRT)
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