Komag Announces 1998 Fourth Quarter and Fiscal Year Results
SOURCE: Komag, Inc.
SAN JOSE, Calif., Jan. 26 /PRNewswire/ -- Komag, Incorporated (Nasdaq: KMAG - news), the world's largest
independent supplier of thin-film media for computer hard disk drives, today announced financial results for its fourth
quarter and fiscal year ended January 3, 1999.
Fourth Quarter Results:
Net sales for the fourth quarter of fiscal 1998 totaled $92.7 million, up 14% from $81.3 million in the third quarter of
1998. Fourth quarter 1997 net sales were $159.0 million.
The net loss for the fourth quarter of 1998 was $18.8 million, or $0.35 per share based on 53.5 million shares. The net
loss for the third quarter of 1998 was $27.4 million, or $0.51 per share based on 53.4 million shares. Net income for the
fourth quarter of 1997 was $1.2 million, or $0.02 per share based on 53.6 million shares.
Excluding favorable non-recurring adjustments totaling $8.0 million from the third quarter's results, the company's
financial performance improved by over $16 million between the third and fourth quarters of 1998. The equity
contributio of Asahi Komag Co., Ltd. (AKCL), the company's 50%-owned Japanese joint venture, to Komag's net loss
in the fourth quarter was a negative $2.9 million, or a loss of $0.05 per share. In the third quarter of 1998 AKCL's equity
contribution was a negative $3.3 million, or a loss of $0.06 per share.
1998 Fiscal Year Results:
Net sales for fiscal year 1998 were $328.9 million, down 48% from 1997 due to adverse industry conditions. Net sales
for fiscal year 1997 were a record $631.1 million.
The net loss for fiscal year 1998 was $366.3 million, or $6.89 per share. The 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 to
reflect the economic effect of industry price erosion for disk media and the projected underutilization of the company's
production equipment and facilities. AKCL's equity contribution to Komag's net loss for fiscal 1998 was a negative $27.0
million, or a loss of $0.51 per share.
Komag posted a net loss in fiscal 1997 of $22.1 million, or $0.42 per share. These results included a pre-tax $52.2
million restructuring charge for the consolidation of the company's U.S. manufacturing operations and other
non-recurring adjustments. AKCL's equity contribution to Komag's net loss for fiscal 1997 was a negative $4.9 million,
or a loss of $0.09 per share.
Fourth Quarter Review:
''The fourth quarter was a pivotal period for Komag. Excellent internal execution and a higher unit sales volume due to
improving industry conditions generated strong sequential improvement in our operating results. During the past quarter
we made significant progress against our material cost reduction and yield improvement targets as a result of the focused
efforts of our manufacturing and R&D teams. Furthermore, tight control of expenditures for working capital and capital
assets, coupled with our improved operating results, allowed the company to generate positive net cash flow for the
fourth quarter. In comparison, we consumed cash at a rate of approximately $25 million per quarter during the earlier
June and September quarters. As a result of our efforts we exited the year with $127.8 million in cash and investments,''
said Stephen C. Johnson, president and chief executive officer of Komag, Incorporated.
Fourth quarter unit sales increased to 10.0 million disks from 8.5 million disks in the third quarter of 1998.
Magnetoresistive (MR) disks, including advanced giant magnetoresistive (GMR) disks, accounted for 97% of the
company's fourth quarter unit sales. GMR disks alone accounted for 12% of unit sales. Sales of 3 1/2-inch disks capable
of storing at least 3.2 gigabytes (GB) per platter totaled 7.0 million disks, or 70% of the company's fourth quarter unit
shipments. Unit production from the company's U.S. and Malaysian factories increased to 11.4 million disks in the
fourth quarter from 7.1 million disks in the third quarter oe 1998. Disk products manufactured using the company's new
advanced plated, polished substrate and epitaxial sputtering processes accounted for approximately 79% of the disks
produced in the recently completed quarter, up from 60% in the third quarter of 1998.
Business Outlook:
The company continues to make excellent progress in the qualification of higher areal density disk products at capacities
of 5.1 to 6.5 GB per platter. The company expects that over 60% of the company's first quarter shipments will be at the
4.3 GB per platter capacity point.
''Based upon our current outlook, the company plans to achieve slightly higher net sales andliealize further
improvements in operating performance during the first quarter of 1999. The tra ectory of our product yields, combined
with continuing improvement in our material input costs, should result in a sequential reduction in unit production costs.
We anticipate that the rate of improvement in our product costs will offset the rate of decline in our average selling price
during the first quarter. As a result, we expect to reduce our operating loss in the first quarter and position ourselves to
return to profitability if unit volumes rise in subsequent quarters. The exact timing for attainment of our goals, however,
remains subject to increased demand for disk media, stabiliza ofn of media pricing, our 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 those set forth above and the following: changes in the industry supply-demand relationship and related
pricing for enterprise and desktop disk products; timely and successful qualification of next-generation products;
utilization of manufacturing facilities; changes in manufacturing efficiencies, in particular product yields and material
input costs; availability of sufficient cash resources; extensibility of process equipment to meet more stringent future
product requirements; structural changes within the disk media industry such as combinations, failures, and joint venture
arrangements; vertical integration and consolidation within the company's customer base; dependence of the company's
sales on a limited number of customers; increased competition; timely and successful deployment of new process
technologies into manufacturing; 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 370 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.
KOMAG, INCORPORATED
Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
Jan 3, Sept 27, Dec 28, Jan 3, Dec 28,
1999 1998 1997 1999 1997
Net Sales $92,704 $81,314 $159,025 $328,883 $631,082
Cost of S les 85,421 84,117 140,657 391,635 537,536
Gross Profit
(Loss) 7,283 (2,803) 18,368 (62,752) 93,546
Gross Profit
(Loss) % 7.9% (3.4%) 11.6% (19.1%) 14.8%
Research
& Development
Expense 14,296 14,312 14,970 61,637 51,427
Selling, General
& Administrative 5,355 4,854 5,860 19,762 27,523
Restructuring
Charge -- -- -- 187,768 52,157
Operating Loss (12,368) (21,969) (2,462) (331,919) (37,561)
Interest Income 1,983 1,888 980 8,804 4,753
Interest Expense (5,140) (4,763) (2,603) (19,212) (9,116)
Other Income
(ExpeExe) (4) 943 2,423 4,853 4,104
Loss Before Income
Taxes, Minority
Interest and
Equity Loss (15,529) (23,901) (1,662) (337,474) (37,820)
Provisi n
(Benefit) for
Income Taxes 356 256 (6,204) 1,315 (20,982)
Minority Interest
in Net Income (Loss)
of Consolidated
Subsidiary 85 (38) 37 544 400
Equity in Net Loss
of Unconsolidated
Joint Venture (2,875) (3,330) (3,336) (27,003) (4,865)
Net Income
(Loss) ($18,845) ($27,449) $1,169 ($366,336) ($22,103)
Net Income
(Loss) % (20.3%) (33.8%) 0.7% (111.4%) (3.5%)
Basic Earnings
(Loss) Per Shr e ($0.35) ($0.51) $0.02 ($6.89) ($0.42)
Diluted Earnings
(Loss) Per Share ($0.35) ($0.51) $0.02 ($6.89) ($0.42)
Basic Shares
Outstanding 53,465 53,444 52,551 53,169 52,217
Diluted Shares
Outstanding 53,465 53,444 53,570 53,169 52,217
KOMAG, INCORPORATED
Consolidated Balance Sheets
(in thousands)
Jan 3, 1999 Dec 28, 1997
(See Note A)
ASSETS
Cash and Short-Term Investments $127,817 $166,197
Net Accounts Receivable Trade 39,304 77,667
Inventories 33,640 66,778
Deposits and Other Current Assets 18,577 61,047
Total Current Assets 219,338 371,689
Investment in Unconsolidated Joint Venture 1,399 30,126
Net Property, Plant & Equipment 470,017 678,596
Deposits and Other Assets 3,341 4,253
TOTAL ASSETS $694,095 $1,084,664
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Portion of Long-Term Debt $260,000 $ --
Accounts Payable Trade 29,122 47,136
Accrued Liabilities 18,932 17,201
Restructuring Liability 4,128 11,253
Total Current Liabilities 312,182 75,590
Long-Term Debt, Less Current Portion -- 245,000
Other Liabilities 53,967 74,295
Minority Interest in Consolidated
Subsidiary 4,139 3,595
Common Stock 408,088 402,397
Retained Earnings (Deficit) (84,860) 281,476
Foreign Currency Translation
Adjustments 579 2,311
TOTAL STOCKHOLDERS' EQUITY 323,807 686,184
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $694,095 $1,084,664
(A) The Consolidated Balance Sheets at January 3, 1999 and
December 28, 1997 have been derived from the Audited Financial
Statements.
SOURCE: Komag, Inc. |
