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 MILPITAS, Calif., July 26 /PRNewswire/ -- Komag Inc. (NASDAQ: KMAG), a leading supplier of thin-film media and thin-film heads for high performance Winchester disk drives, today announced its second quarter financial results for fiscal 1993.
 For the second quarter ended July 4, 1993, Komag's net sales totaled a record $103.2 million, including $84.6 million in media revenue and $18.6 million in recording head revenue. Net sales were 35 percent higher than the $76.5 million for the second quarter of 1992 and 10 percent higher than the $93.6 million recorded in the first quarter of 1993.
 Net income for the second quarter of 1993 was $8.1 million, or 37 cents per share, up 139 percent from $3.4 million, or 16 cents per share, in the same quarter a year earlier. Media operations recorded net income of $11.4 million, while Dastek Inc., the company's thin-film head joint venture with Asahi Glass America Inc., posted a net loss of $5.6 million. Upon consolidation into Komag's financial statements, Dastek's net loss was reduced by recognition of Asahi's 40-percent minority interest. Net income for the second quarter of 1993 was up 6 percent from the $7.6 million, or 35 cents per share, recorded in the first quarter of 1993.
 For the first six months of 1993 net sales totaled $196.7 million and net income was $15.7 million, or 72 cents per share. Net sales and net income for the comparable six-month period in 1992 were $147.6 million and $6.4 million, or $0.30 per share.
 "The high-end positioning of our disk products and improved manufacturing efficiencies in both our head and media operations allowed Komag to record sequentially higher financial results for the second quarter," said Stephen C. Johnson, Komag Inc.'s president and chief executive officer. "Demand for our high-end disk products remained strong during the second quarter as our product mix shifted to thinner, higher performance disks. Over 90 percent of the disk products built by our U.S. operations in the second quarter were incorporated in disk drives capable of storing 500 megabytes or more. This product distribution allowed our media operations to avert the well-publicized price wars in the low-end segments of the disk drive business," Johnson said.
 "We believe that an increased industry supply of 1400 Oersted (Oe) media has now eliminated the severe shortage of high-end media that existed during previous quarters. This increased supply has led to a softening of prices in this particular market segment. At the same time, we anticipate the transition to higher performance, 1600 Oe media will accelerate in the second half of 1993. We are well positioned for this transition due to our proven product offerings in this media class. In addition, Komag expects to begin volume shipments of next generation 1800 Oe media in early 1994. The industry transition to this higher performance media should directly benefit Komag," said Johnson.
 "We currently believe that continuing demand for our high-end disk products will allow us to utilize our media capacity in the U.S. and Malaysia effectively for the balance of 1993. Furthermore, the anticipated migration of our product line toward higher performance media should reduce the effects of pricing pressures associated with the increased supply of 1400 Oe media," said Johnson.
 Komag recently began thin-film disk production at its new 220,000-square-foot Malaysian manufacturing facility on schedule. Revenue shipments to customers from the first Malaysian production line began in early July. The second production line in this highly automated facility should commence operation in the first quarter of 1994.
 Efficiency improvements over the next several quarters should allow the Japanese joint venture, Asahi Komag Co. Ltd. (AKCL), to increase unit output from its current four production lines. In recent quarters AKCL has experienced declines in its overall average selling price. These price declines were anticipated as AKCL shifted more of its production output to local Japanese customers. With over 80 percent of its products now shipping locally, future price declines should moderate. Komag recognized $1.1 million in post-tax equity income for the second quarter based upon its 50-percent interest in the joint venture.
 "Dastek's unit shipments and revenue for the second quarter increased 40 percent over the prior quarter's results. Progress in our manufacturing efficiencies continues on track and the results of our product development efforts remain encouraging. Difficult conditions in the disk drive and recording head industries, however, resulted in price reductions and order cutbacks at Dastek that adversely affected the second quarter. Dastek also received order reductions on one significant customer program in volume production during the June quarter that will affect the second half of 1993," Johnson said.
 "In spite of these setbacks, we remain cautiously optimistic that Dastek's financial results will show improvement in the second half of 1993. While third quarter revenues at Dastek will most likely be flat to slightly down in comparison to the June quarter, we expect that volume production of more advanced microslider and nanoslider inductive thin-film heads will result in higher fourth quarter sales. We hav delivered samples of these new products to customers and anticipate completion of the required product qualifications during the third quarter. The success of these new product introductions will significantly affect Dastek's financial performance during the fourth quarter. Aside from these engineering and manufacturing factors under Dastek's direct control, second half 1993 performance could be adversely impacted by price reductions arising from the competitive conditions within the recording head market," Johnson said.
 Komag is the only independent volume supplier of both thin-film disks and thin-film heads, two performance enabling components used in today's advanced Winchester disk drives. Winchester disk drives are the primary storage devices used by computers. Founded in 1983, Komag and its consolidated subsidiaries maintain 870,000 square feet of manufacturing and administrative space in California and Malaysia, and employ approximately 3,400 people. Komag also manufactures and sells thin-film disk products through an unconsolidated subsidiary, Asahi Komag Co. Ltd., which is among the top three media producers in Japan.
 Consolidated Income Statements
 (Unaudited, in thousands, except per-share data)
 Three Months Six Months
 Ended: July 4, June 28, July 4, June 28,
 1993 1992 1993 1992
 Net sales $103,180 $ 76,479 $196,736 $147,597
 Cost of sales 75,501 62,065 146,365 117,434
 Gross profit 27,679 14,414 50,371 30,163
 Research & development
 expense 7,435 6,027 14,373 12,427
 Selling, general &
 administrative 7,263 4,985 14,045 10,451
 Operating profit 12,981 3,402 21,953 7,285
 Other income (expense) (702) 704 (1,382) 1,516
 Income before income taxes,
 minority interests and
 equity income 12,279 4,106 20,571 8,801
 Provision for income
 taxes 7,368 2,370 12,343 4,650
 Minority interests in
 net loss of consolidated
 subsidiaries (2,079) (2,256) (4,983) (2,781)
 Equity in net income
 (loss) of unconsolidated
 joint venture 1,068 (623) 2,475 (549)
 Net income $ 8,058 $ 3,369 $ 15,686 $ 6,383
 Net income per share $ 0.37 $ 0.16 $ 0.72 $ 0.30
 Shares used in calculating
 per-share amount 21,902 21,301 21,917 21,471
 Consolidated Balance Sheets
 (In thousands)
 July 4, 1993 Jan. 3, 1993
 (Unaudited) (See Note A)
 Cash and short-term investments $ 86,834 $ 89,343
 Net accounts receivable trade 45,440 33,301
 Inventories 25,083 20,197
 Deposits and other current assets 10,585 10,589
 Total current assets 167,942 153,430
 Investment in unconsolidated
 joint venture 13,293 8,371
 Net property, plant & equipment 210,529 192,051
 Deposits and other assets 1,958 1,997
 Total assets $393,722 $355,849
 Accounts payable trade $ 27,308 $ 27,615
 Accrued liabilities 21,094 19,155
 Long-term obligations - current portion 6,648 8,766
 Total current liabilities 55,050 55,536
 Long-term obligations 39,229 27,613
 Other liabilities 7,044 7,379
 Minority interests in consolidated
 subsidiaries 15,832 16,583
 Common stock 218,272 219,597
 Note receivable from stockholder --- (11,031)
 Retained earnings 53,855 38,169
 Foreign currency translation
 adjustments 4,440 2,003
 Total stockholders' equity 276,567 248,738
 Total liabilities and stockholders'
 equity $393,722 $355,849
 (A) The consolidated balance sheet at Jan. 3, 1993, has been derived from the audited financial statements.
 -0- 7/26/93
 /CONTACT: David H. Allen, T. Hunt Payne or William L. Potts Jr., all of Komag, 408-946-2300/

CO: Komag Inc.; Asahi Komag Co. Ltd. ST: California IN: CPR SU: ERN

GT-TB -- SJ007 -- 5854 07/26/93 16:09 EDT
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Publication:PR Newswire
Date:Jul 26, 1993

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