Read-Rite Reports Second Quarter and First Half of Fiscal 1998 Results
MILPITAS, Calif., April 15 /PRNewswire/ -- Today Read-Rite Corporation
(Nasdaq: RDRT - news) reported net sales of $187.1 million during the
second quarter ended March 31, 1998, a 34 percent decrease compared to
net sales of $282.1 million during the second quarter ended March 31,
1997. The company's net loss was $62.2 million during the second quarter
of fiscal 1998, compared to net income of $23.6 million during the
second quarter of fiscal 1997. Diluted loss per share was $1.29 based on
48.3 million shares outstanding during the second quarter of fiscal
1998, compared to diluted earnings per share of $0.48 based on 48.8
million shares outstanding during the second quarter of fiscal 1997.
During the first half of fiscal 1998, net sales were $448.4 million
compared to $533.7 million during the first half of fiscal 1997. The
company's net loss during the first half of fiscal 1998 was $153.1
million, compared to net income of $29.3 million during the first half
of fiscal 1997. Diluted loss per share was $3.17 based on 48.3 million
shares outstanding during the first half of fiscal 1998, compared to
diluted earnings per share of $0.61 based on 48.5 million shares
outstanding for the first half of fiscal 1997. The results for the first
half of fiscal 1998 included after tax charges during the first quarter
ended December 31, 1997 of $91.8 million primarily due to the write-off
of assets and inventory associated with the faster than expected
phase-out of advanced inductive recording heads.
During the second quarter of fiscal 1998, Read-Rite shipped 15.0 million
recording heads, which included heads shipped in 3.3 million headstack
assemblies (HSAs). Magnetoresistive (MR) recording heads accounted for
78% of the company's net sales during the second quarter of fiscal 1998,
compared to 46% of the company's net sales during the first quarter of
fiscal 1998.
The disk drive industry continued to experience a product oversupply
during the second quarter of fiscal 1998, which reduced demand and
significantly increased pricing competition in the recording head
manufacturing sector. To address these issues, the company has
implemented specific cost reduction efforts. As part of the cost
reduction efforts, the company reduced its overall headcount by
approximately 1,800 during the second quarter of fiscal 1998. Total
headcount was 23,300 at March 31, 1998. Additionally, Read-Rite made
significant progress on its operational excellence program, intended to
improve asset utilization, decrease cycle time and increase
productivity.
Given the difficult industry environment, Read-Rite is pleased with its
progress on new technologies. Qualifications continue for the next
generation, 2.8 Gigabyte (GB), 3.4 GB and 4.3 GB per 3.5-inch disk MR
recording heads. The company has also delivered prototype Giant MR
(GMR)/Spin Valve technology products to customers with capacity points
ranging from 5.0 GB to 8.2 GB per 3.5-inch disk. The company is
positioned well for the next generation product cycles as it has now
completed the transition of its manufacturing facilities from inductive
technology to MR based technologies.
Read-Rite Corporation is one of the world's leading manufacturers of
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, Malaysia, the Philippines and Singapore. The company's
home page on the World Wide Web can be reached at www.readrite.com.
This news release contains 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 reported progress on its
operational excellence program and its belief that its progress on new
technologies positions the Company well for next generation product
cycles. The Company's actual results could differ materially from those
anticipated in these forward-looking statements. Factors that could
cause actual results to differ include, but are not limited to: the
current unfavorable industry environment which could continue longer
than expected or worsen; the mix of product shipments between heads and
headstack may vary; the Company's ability to ramp-up volume production
quickly and cost-effectively on its new MR and GMR products; design-ins
and qualifications for the Company's 2.8GB, 3.4GB and 4.3GB per 3.5-inch
disk MR products and 5.0 GB to 8.2 GB per 3.5-inch disk GMR/Spin Valve
products or future products may not occur or could be slower than
anticipated; competitors may introduce MR and GMR products earlier
and/or be more cost-efficient than the Company; and/or 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 1997 and Quarterly Report on Form 10-Q for the
First Quarter of Fiscal 1998 ended December 31, 1997. 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 Statements of Operations
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
March 31, March 31,
1998 1997 1998 1997
(Unaudited) (Unaudited)
Net sales $187,072 $282,068 $448,443 $533,656
Cost of sales 217,486 219,688 564,624 435,462
Gross margin (30,414) 62,380 (116,181) 98,194
% of net sales (16.3%) 22.1% (25.9%) 18.4%
Research & development 23,906 15,691 45,637 30,629
% of net sales 12.8% 5.6% 10.2% 5.7%
Selling, general
& administrative 9,234 10,370 18,730 21,123
% of net sales 4.9% 3.7% 4.2% 4.0%
Total operating expenses 33,140 26,061 64,367 51,752
% of net sales 17.7% 9.2% 14.4% 9.7%
Operating Income (loss) (63,554) 36,319 (180,548) 46,442
% of net sales (34.0%) 12.9% (40.3%) 8.7%
Interest income (expense)
and other, net (6,410) (549) (13,259) (2,064)
Income (loss) before
income taxes and
minority interest (69,964) 35,770 (193,807) 44,378
% of net sales (37.4%) 12.7% (43.2%) 8.3%
Provision (benefit) for
income taxes 50 8,428 (24,719) 11,096
Minority interest in
net income (loss) of
consolidated subsidiary (7,843) 3,787 (15,988) 3,940
Net income (loss) ($62,171) $23,555 ($153,100) $29,342
% of net sales (33.2%) 8.4% (34.1%) 5.5%
Basic earnings (loss)
per share ($1.29) $0.50 ($3.17) $0.62
Shares used in basic
per share calculation 48,323 47,203 48,305 47,089
Diluted earnings (loss)
per share ($1.29) $0.48 ($3.17) $0.61
Shares used in diluted
per share calculation 48,323 48,816 48,305 48,457
Read-Rite Corporation
Consolidated Condensed Balance Sheets
(In thousands)
March 31, September 30,
1998 1997
(Unaudited)
ASSETS
Current Assets:
Cash, cash equivalents and
short-term investments $169,349 $298,097
Accounts receivable, net 119,419 173,335
Inventories 61,288 91,487
Prepaid expenses and other
current assets 20,887 20,375
Total current assets 370,943 583,294
Property, plant and equipment, net 671,940 672,813
Intangibles and other assets 36,977 45,374
Total Assets $1,079,860 $1,301,481
LIABILITIES, MINORITY INTEREST IN
CONSOLIDATED SUBSIDIARY AND
STOCKHOLDERS' EQUITY
Current liabilities $215,210 $240,109
Long-term debt 398,558 403,871
Deferred income taxes and
other liabilities 13,892 38,726
Total liabilities 627,660 682,706
Minority interest in
consolidated subsidiary 57,134 73,122
Stockholders' equity:
Common stock and additional
paid-in capital 358,277 354,551
Retained earnings 36,789 191,102
Total stockholders' equity 395,066 545,653
Total Liabilities, Minority
Interest in Consolidated Subsidiary
and Stockholders' Equity $1,079,860 $1,301,481
SOURCE: Read-Rite Corporation
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