SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 30, 1999
KOMAG, INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 0-16852 94-2914864
- ---------------------------- ------------------------ --------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
1704 Automation Parkway
San Jose, California 95131
(Address of principal executive offices)
(408) 576-2000
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events.
The Company issued the following press release on June 30, 1999:
KOMAG UPDATES SECOND QUARTER 1999 OUTLOOK
SAN JOSE, Calif., June 30 -- Komag, Incorporated (Nasdaq: KMAG - news), the
world's largest independent supplier of thin-film media for computer hard disk
drives, today announced revised expectations for its second quarter ending July
4, 1999. The company indicated that second quarter financial results will not
meet analysts' expectations.
Second Quarter Outlook:
Based on quarter-to-date actual results, the company now expects that second
quarter net sales will remain essentially flat sequentially on a modest growth
of approximately 5% in unit sales. In the first quarter of 1999 the company
reported net sales of $90.0 million on shipments of 10.1 million disks.
The company previously announced that second quarter unit shipments were
expected to grow 20-35% sequentially compared to first quarter actual unit
shipments due in large measure to completion of the acquisition of the disk
media operations of Western Digital Corporation (WDC) on April 9, 1999. Under
the volume purchase agreement associated with this acquisition WDC began to
purchase substantially all of its media requirements from Komag after the
closing date.
"Unit shipments in the last month of the quarter have not materialized as
expected due to recent customer order reductions and lower-than-expected volumes
on certain new product programs. In response to competitive market conditions
our customers have reduced the number of disks and heads per drive to support
the delivery of lower priced disk drives to the rapidly expanding, low cost
segment of the PC market. These customer actions, the continuing imbalance
between the supply and demand for disk products, and the lack of new
data-intensive applications continue to depress the financial performance of
Komag and the entire disk industry," said Stephen C. Johnson, president and
chief executive officer of Komag, Incorporated.
The lower-than-expected unit sales volume will further widen the net loss for
the second quarter of 1999 relative to both the actual net loss for the first
quarter and analysts' estimates for the second quarter. The company recorded a
first quarter net loss of $21.5 million, or $0.40 per share based on 53.9
million shares. The current mean of earnings estimates for the second quarter
according to First Call is a net loss of $0.55 per share, or approximately $35.0
million assuming 64.0 million shares. The higher share count for the second
quarter is attributable to the additional 10.8 million common shares issued as
part of the consideration for the WDC acquisition.
Due to expected lower unit volumes the company will close the recently acquired
WDC media operation at end of June, nearly fifteen months ahead of an earlier
transition plan. As part of this accelerated closure the company has implemented
work force reductions affecting approximately 400 people, or 20% of the
post-acquisition headcount at the company's U.S. operations. The
<PAGE>
company will record a second quarter charge related to these work force
reductions and other closure activities.
"We continue to have excellent success with new product qualifications at our
customers, but industry dynamics are restricting our near-term growth
opportunities. Additionally, price pressures remain intense throughout the data
storage industry, thus heightening the need for cost efficiency in all areas of
our company. The company's cost efficiency is highly dependent on effective
capacity utilization due to the high fixed cost structure of disk manufacturing.
Therefore, our immediate challenge is to carefully balance near-term operating
efficiencies and long-term capacity decisions in a market that has been
extremely volatile and difficult to forecast. We remain committed to take
further actions to adjust our cost structure in relation to changing industry
prospects," 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. Due to the volume purchase agreement with WDC, the company's results are
more dependent on the relative success of WDC in the data storage market. Other
factors that will influence the company's actual performance include the
following: disk consumption per drive based on the relative growth rates of
areal density and overall storage usage; pricing levels determined by the
continuing imbalance between supply and demand for disk products; growth rate of
the merchant disk market as influenced by the level of captive disk production;
structural changes within the disk media industry created by combinations,
failures, and joint venture arrangements; unit volumes derived from new product
qualifications; costs related to consolidation of the media operations of Komag
and WDC; changes in manufacturing efficiencies, in particular product yields and
material input costs; factory utilization levels, including absorption of the
additional fixed manufacturing costs associated with the recently acquired WDC
facilities; and capital expenditure levels required to maintain or acquire
process equipment with capabilities to meet more stringent future product
requirements. Moreover, the company will need sufficient cash resources to
operate efficiently. The company's ability to raise additional funding will be
affected by the status of the company's credit facilities and the audit opinion
for the company's 1998 financial statements. Other risk factors that may affect
the company's financial performance are listed in the company's various SEC
filings, including its Form 10-K for the year ended January 3, 1999. The company
undertakes no obligation to publicly release any revisions to these
forward-looking statements.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Jose, State of
California, on July 1, 1999.
KOMAG, INCORPORATED
Registrant
By: /s/ William L. Potts, Jr.
------------------------------
William L. Potts, Jr.
Senior Vice President and
Chief Financial Officer
