KMAG is down because of their earnings. Revs are down, and cash is down big time. From 8M to 2.7M. They're burning through their cash, and will need some type of infusion to continue. Good luck with it. Might bounce, but these low priced NASDAQ stocks, ain't what they used to be.
Thursday July 19, 4:16 pm Eastern Time Press Release SOURCE: Komag, Incorporated Komag Announces Second Quarter Results SAN JOSE, Calif., July 19 /PRNewswire/ -- Komag, Incorporated (Nasdaq: KMAG - news), the largest independent producer of media for disk drives, today announced its financial results for the second fiscal quarter of 2001.
(Photo: http://www.newscom.com/cgi-bin/prnh/19990816/KMAGLOGO ) Net sales for the second fiscal quarter of 2001 totaled $77.4 million, down 12% from $87.9 million recorded in the first quarter of 2001. The company's net loss for the second quarter of 2001, before an impairment charge, improved to $45.9 million, compared to a loss of $51.0 million, in the first quarter of 2001. Including the impairment charge, primarily to account for a write-down of the company's land and buildings held for sale and recognition of lease obligations for equipment no longer in service, the company's net loss was $89.0 million or $0.80 per share based on 111.8 million weighted average shares outstanding.
Review of Second Quarter Operations
Komag shipped 11.0 million disks during the second quarter of 2001, in line with the company's earlier forecast. During the second quarter of 2001, Komag also shipped 3.5 million nickel plated and polished (NPP) substrates. Second quarter disk production was approximately 10.1 million units, 97% of which were made in the company's Malaysian factories.
Second quarter average selling price for finished disks was $6.36 per disk, up slightly from $6.35 in the first quarter of 2001. Sales to Maxtor, Seagate and Western Digital were 32%, 10%, and 46% of revenue, respectively.
Komag ended the quarter with a cash and short-term investment balance of $28.0 million compared with $51.6 million at the end of the first quarter. The drop in cash was due primarily to approximately $12 million of severance and closure expenses for closing the company's U.S. manufacturing facilities, $10 million of operating losses related to under-utilization of the company's U.S. manufacturing operations prior to closure, and $6 million spent to facilitize equipment transferred to the company's Malaysian factories. These activities resulted in consolidation of 100% of the company's manufacturing operations in its Malaysian facilities on budget and ahead of schedule during the second quarter.
Earnings before interest, taxes, depreciation and amortization, were essentially break even for the quarter. The company expects this measure of performance to improve substantially now that the manufacturing operations have been fully consolidated into Malaysia. Komag's ending accounts receivable balance improved to 28 days of sales outstanding and inventory turns improved to 19 annualized turns despite the drop in unit shipments in the second quarter. The company's management continues to focus significant effort on minimizing working capital.
Business Outlook
``We expect average selling prices and unit shipments to remain flat for the remainder of the fiscal year,'' commented T.H. Tan, Komag's chief executive officer. ``Our announced strategy, to locate 100% of our production capacity overseas to achieve lower manufacturing costs, is critical to the company's health as we wait for the inevitable upturn in our market. We have significantly lowered our fixed cost structure by smoothly relocating our manufacturing assets from Fremont, California to our subsidiary in Malaysia. This transition was completed ahead of schedule during the second quarter and did not disrupt shipments to our customers.''
``Komag's technology continues to provide leading edge products to disk drive customers. We and our customers are in the early stages of the transition to 40 GB per platter drive platforms and we continue on schedule to qualify 60 GB per disk programs,'' added Mr. Tan.
``We are building Komag for the long-term and are confident that we have the infrastructure and technology in place for the future. While our revenue shortfall this quarter is disappointing, the work we have done to restructure our operations puts us in a position where we can operate more cost efficiently without harming our future,'' said Mr. Tan.
Debt Restructuring
On June 29, 2001, Komag withdrew its Registration Statement on Form S-4/S-3 originally filed on April 5, 2001 to effect a proposed exchange offer in connection with the restructuring of its convertible bonds due January 15, 2004. This proposed exchange offer was one of many parts of Komag's global debt restructuring plan. Subsequent to the end of the quarter, the company did not pay the outstanding senior debt that became due on June 30, 2001, and did not pay interest on the convertible bonds due July 15, 2001. Although the company was not able to implement its proposed plan, it continues negotiations with its senior lenders and is exploring other alternatives for restructuring its balance sheet.
``We are pleased that our creditors agree with us that the maximum long-term enterprise value will be achieved through continuing operations, combined with a financial restructuring that provides for a more manageable debt structure,'' said Mr. Tan. ``We are confident of our viability and expect to continue our global operations while enhancing value through our U.S. debt restructuring process. Our management team is committed to an outcome that will be in the best interests of our stakeholders, including creditors, customers, suppliers, employees, and shareholders.''
Conference Call
Komag will conduct a conference call with the investment community at 2:00 p.m. PDT. The conference call will be broadcast live over the Internet: http://www.komag.com (Click on Webcast).
A replay of the conference call via the web will be available after 5:00 p.m. PDT on July 19, 2001 until 5:00 p.m. PDT on July 26, 2001 by accessing the same URL address as the live audio webcast.
About Komag:
Founded in 1983, Komag is the world's largest independent supplier of thin-film disks, the primary high-capacity storage medium for digital data. Komag leverages the combination of its U.S. R&D centers with its world-class Malaysian manufacturing operations to produce disks that meet the high-volume, stringent quality, low cost and demanding technology needs of its customers. By enabling rapidly improving storage density at ever-lower cost per gigabyte, Komag creates extraordinary value for consumers of computers, enterprise storage systems and electronic appliances such as peer-to-peer servers, digital video recorders and game boxes.
For more information about Komag, visit Komag's Internet home page at http://www.komag.com or call Komag's Investor Relations 24-hour Hot Line at +1-888-66-KOMAG or +1-408-576-2901.
Forward-Looking Statements
This press release contains certain ``forward-looking'' statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbors created thereby. These statements represent the company's current judgment and include estimates of future shipment volume, average selling prices and costs, improvement in the market for disks, technology advancements and the ability to continue to meet customer needs, maximizing long term value and expectations that restructuring U.S. debt will not hinder operations elsewhere. The company's actual results for future periods could differ materially from those projected in such forward-looking information. Among the factors that could cause actual results to differ are variability in demand for and average selling price of disks, the impact of demand variation on factory utilization, the company's ability to achieve its operating yield, cost and profitability targets, the company's ability to satisfy customer qualification requirements, the company's ability to restructure its existing debt obligations and the other factors described in the company's reports filed with the Securities and Exchange Commission, including, but not limited to, its most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Komag undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of such statements.
KOMAG, INCORPORATED Consolidated Statements of Operations (in thousands, except per share data) (Unaudited)
Three Months Ended Six Months Ended July 1, April 1, July 2, July 1, July 2, 2001 2001 2000 2001 2000
Net Sales $77,351 $87,856 $83,468 $165,207 $163,101 Cost of Sales 79,251 93,430 73,534 172,681 140,329 Gross Profit (Loss) (1,900) (5,574) 9,934 (7,474) 22,772 Gross Profit (Loss) % (2.5%) (6.3%) 11.9% (4.5%) 14.0% Research & Development Expense 9,825 10,669 8,343 20,494 16,892 Selling, General & Administrative Expense 6,361 5,711 3,769 12,072 7,414 Amortization of Intangibles 6,505 7,565 2,555 14,070 5,110 Impairment/ Restructuring Charges (Credits) 43,020 -- (711) 43,020 (2,661) Operating Loss (67,611) (29,519) (4,022) (97,130) (3,983) Interest Income 404 852 1,168 1,256 2,150 Interest Expense (21,565) (22,163) (7,457) (43,728) (13,908) Other Income 609 1,025 196 1,634 571 Loss Before Income Taxes, Minority Interest and Equity Loss (88,163) (49,805) (10,115) (137,968) (15,170) Provision for Income Taxes 321 460 450 781 826 Minority Interest in Net Income (Loss) of Consolidated Subsidiary (449) 12 (319) (437) (456) Equity in Net Loss of Unconsolidated Company 928 737 -- 1,665 -- Loss Before Extraordinary Gain (88,963) (51,014) (10,246) (139,977) (15,540) Extraordinary Gain -- -- 3,772 -- 3,772 Net Loss ($88,963) ($51,014) ($6,474) ($139,977) ($11,768) Net Loss % (115.0%) (58.1%) (7.8%) (84.7%) (7.2%)
Basic and Diluted Net Loss Before Extraordinary Gain Per Share ($0.80) ($0.46) ($0.16) ($1.25) ($0.24)
Basic and Diluted Extraordinary Gain Per Share $ -- $ -- $0.06 $ -- $0.06
Basic and Diluted Net Loss Per Share ($0.80) ($0.46) ($0.10) ($1.25) ($0.18)
Basic and Diluted Shares Outstanding 111,828 111,645 66,039 111,737 65,958
KOMAG, INCORPORATED Consolidated Balance Sheets (in thousands)
July 1, 2001 Dec 31, 2000 ASSETS (Unaudited) (See Note A) Cash and Short-Term Investments $27,973 $80,664 Net Accounts Receivable 24,157 40,243 Inventories 16,362 21,442 Deposits and Other Current Assets 2,976 6,299 Total Current Assets 71,468 148,648 Investment in Unconsolidated Company 6,335 12,000 Net Property, Plant & Equipment 302,790 354,873 Net Intangible Assets 102,061 116,131 Deposits and Other Assets 1,465 1,409 TOTAL ASSETS $484,119 $633,061
LIABILITIES AND STOCKHOLDERS' EQUITY Current Portion of Long-Term Debt $201,740 $216,740 Accounts Payable Trade 31,437 31,501 Accrued Liabilities 44,119 44,576 Costs to Exit Certain Business Activities 6,458 17,927 Restructuring Liabilities 6,612 14,277 Total Current Liabilities 290,366 325,021
Note Payable to Related Party 27,285 25,649 Other Liabilities 20,354 17,254 Convertible Subordinated Debt 133,692 111,896
Minority Interest in Consolidated Subsidiary 943 1,380
Common Stock 587,423 587,249 Accumulated Deficit (575,944) (435,967) Accumulated Other Comprehensive Income -- 579 TOTAL STOCKHOLDERS' EQUITY 11,479 151,861 TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $484,119 $633,061
(A) The Consolidated Balance Sheet at December 31, 2000, was derived from the audited financial statements.
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