KOMAG INC /DE/
425, 2000-08-21
MAGNETIC & OPTICAL RECORDING MEDIA
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<PAGE>   1
                                             Filed by Komag, Incorporated
                                             Pursuant to Rule 425 under the
                                             Securities Act of 1933, and deemed
                                             filed pursuant to Rule 14a-12 under
                                             the Securities and Exchange Act of
                                             1934. Subject Company:
                                             HMT Technology Corporation
                                             Commission File No. 333-39340




                              KOMAG, INCORPORATED
                             SLIDE PRESENTATION TO
                           ANALYSTS AND STOCKHOLDERS
                               FIRST PRESENTED ON
                                AUGUST 21, 2000

                                 [KOMAG LOGO]


Komag Overview                                                       August 2000


Forward-Looking Statements
--------------------------------------------------------------------------------

The following presentation 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 below. Factors that could cause or contribute to such
differences include, but are not limited to, risks relating to the consummation
of the contemplated merger with HMT Technology Corporation ("HMT"), including
the risk that required stockholder approval might not be obtained in a timely
manner or at all. In addition, statements in this presentation relating to the
expected benefits of the contemplated merger are subject to risks relating to
the timing and successful completion of technology and product development
efforts, integration of the technologies and businesses of Komag and HMT,
unanticipated expenditures, changing relationships with customers, suppliers and
strategic partners. Predictions about overall product demand, product pricing
and new product development and introduction may differ due to unanticipated
changes in the disk market. These and other factors are described in the most
recent Form 10-Q, most recent Form 10-K and other periodic reports filed by
Komag and HMT with the Securities and Exchange Commission.



Komag Overview                                                      [KOMAG LOGO]

                                     Page 1
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Komag's Leadership Position
--------------------------------------------------------------------------------

        World's Largest Independent Disk Producer

                - Over 465 Million Disks Produced

        Leading Technology / Superior Disk Product

                - 19% of 2Q 2000 Shipments at 15 GB or greater

                - Recently Demonstrated 70 GB Media

                - Low-Cost Glass Substrates in Development

        Strategically Well Positioned For The Long Term

                - 100% of Production in Low-Cost Area (Malaysia)

                - Access to Global Customer Base

                - State-of-the-Art Equipment Set

                - Mailing Proxy for Stockholder Vote on HMT Merger

                - Meeting Date: September 20, 2000



Komag Overview                                                      [KOMAG LOGO]

                                     Page 2
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Presentation Outline

--------------------------------------------------------------------------------

        1. Q2 2000 Results

        2. Industry / Market Overview

                Why New Business Model Required

        3. Komag's New Business Model

                The New Komag

        4. Komag - HMT Merger



Komag Overview                                                      [KOMAG LOGO]

                                     Page 3
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Financial Results Summary
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                         (In Millions)

                                         Q2 99     Q3 99     Q4 99     Q1 00     Q2 00
                                        ------    ------     -----    ------     -----
<S>                                     <C>       <C>        <C>      <C>       <C>
Net Sales                                 $93        $80       $65       $80       $83
Gross Margin ($)                          ($5)      ($18)      ($1)      $13       $10
Gross Margin (%)                          (5%)      (23%)      (2%)      16%       12%
EBITDA w/o Restructuring                   $2        ($9)       $6       $21       $16
Net Loss                                 ($38)     ($229)       $6       ($5)      ($6)
Net Loss w/o Restructuring               ($33)      ($46)       $6       ($7)      ($7)

Capital Expenditures                       $9        $11        $3        $2        $2
Net Cash Flow                            ($31)      ($11)     ($14)       $2      ($17)
Net Cash Flow w/o Restructuring          ($27)       ($4)      ($2)      $11      ($11)
Net Cash Flow w/o Restructuring
      & Bank Repayment / Fees            ($27)       ($4)      ($2)      $11        $8
Cash Balance                              $94        $84       $70       $72       $55

Units Sold                               11.1        9.7       8.9      10.8      11.8

Overall ASP                              $8.43     $8.25     $7.69     $7.40     $7.07
EPS                                     ($0.60)   ($3.50)    $0.09    ($0.08)   ($0.10)
EPS w/o Restructuring                   ($0.53)   ($0.70)    $0.09    ($0.08)   ($0.10)
</TABLE>



Komag Overview                                                      [KOMAG LOGO]

                                     Page 4
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Media Suppliers
--------------------------------------------------------------------------------
        Q2 2000 Unit Shipments





  [Bar graph presentation of total media shipments in the disk drive industry,
   including presentation of Komag and AKCL shipments compared with those of
                             industry competitors.]





Komag Overview                                                      [KOMAG LOGO]

                                     Page 5
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Supply-Demand Imbalance in Merchant Market
--------------------------------------------------------------------------------

        Reasons For Imbalance:

                - Advancement in Areal Densities

                - Capacity Additions (1995-1996)

                - Market Share Gains by Captive Suppliers



Komag Overview                                                      [KOMAG LOGO]

                                     Page 6
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Areal Density and Capacity Increases
--------------------------------------------------------------------------------

- Unprecedented areal density advancements led to flat unit growth

<TABLE>
<CAPTION>
                                                                   Future
      CAGR                   1990-1996     1997     1998-1999    (Long-Term)
      ----                   ---------     ----     ---------    -----------
<S>                          <C>          <C>       <C>          <C>
      Bits Stored             100% +       100%     90-100%       [arrow up]

      Areal Density           30-40%      60-70%    90-100%       [arrow left
                                                                   and right]

      Media Unit Shipments    40-50%      20-25%      0%          [arrow up]
</TABLE>

                Source: IDC, TrendFocus and Company



Komag Overview                                                      [KOMAG LOGO]

                                     Page 7
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Komag's Rapidly Changing Product Life Cycles
--------------------------------------------------------------------------------

        - There have been tremendous advancements in areal density due to the
          exploitation of MR and GMR technology





 [Bar graph depiction of the short product life cycle of successive generations
                                   of disks.]





Komag Overview                                                      [KOMAG LOGO]

                                     Page 8
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Areal Density and Capacity Increases
--------------------------------------------------------------------------------

        - Historical growth and media shortages forced capacity additions by
          captive manufacturers

                - Capacity additions came online during the 1997-1998 time
                  period

                - Vertically integrated drive makers (SEG, IBM, Fujitsu)
                  increased % of disks made internally

                - Price competition increased as independent media suppliers
                  attempted to avoid losing market share in the shrinking
                  merchant market





             [Bar graph showing captive versus independent supply.]





Komag Overview                                                      [KOMAG LOGO]

                                     Page 9
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Q2 2000 Media Consumption
--------------------------------------------------------------------------------
        Unit Shipments





[Bar graph presentation of media consumption by customer, showing consumption of
                       Komag and AKCL media by customer.]





Komag Overview                                                      [KOMAG LOGO]

                                    Page 10
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Demand Will Increase In The Future
--------------------------------------------------------------------------------
        Desktop Disk Drives





[Line graph depicting Komag's estimate of the future market for disks in desktop
                                 disk drives.]




        Source: TrendFocus, IDC and Company

Komag Overview                                                      [KOMAG LOGO]


                                    Page 11
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Why A New Business Model Is Required
--------------------------------------------------------------------------------

        - Storage Industry is in a Period of Change

                - End user market places a higher emphasis on price reduction as
                  opposed to more absolute storage

                - All drive manufacturers execute on product deliveries at the
                  same time in contrast to historical performance

                - Lower drive prices (cost per GB) promote new applications in
                  the consumer market




Komag Overview                                                      [KOMAG LOGO]

                                    Page 12
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Komag's New Business Model
--------------------------------------------------------------------------------

        "Under my leadership we will manage company resources tightly, actively
        pursue new customer partnerships and evaluate opportunities to effect
        changes in the structure of the media industry"

                                -- T.H. Tan, August 5, 1999




Komag Overview                                                      [KOMAG LOGO]


                                    Page 13
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Komag's New Business Model
--------------------------------------------------------------------------------

        - Eliminated finished disk production in U.S.

                - Transitioned entire production to Malaysia

                - Lowest manufacturing cost structure in the industry

        - Leverage technology and low cost capacity to change customer
          relationships

        - Forged agreement to merge with HMT

        - Increased scale will enable greater investment in:

                - R&D

                - Growth

        - Begin diversification process



Komag Overview                                                      [KOMAG LOGO]

                                    Page 14
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Steps Taken Towards New Business Model
--------------------------------------------------------------------------------

        Actions result in savings of $34 million per quarter

                - Annualized, $136 million in savings

                - Of this, over $120 million is cash savings

        Specific Actions

                - Closed San Jose factories

                        - $9 million per quarter in cash savings

                        - $3 million per quarter in lower depreciation charges

                - Reduced the workforce by 1,400 U.S. employees

                        - $17 million per quarter in cash savings

                - Operating expenses reduced from Q2 1999 levels

                        - R&D spending reduced by $3 million per quarter

                        - S,G&A spending reduced by $2 million per quarter



Komag Overview                                                      [KOMAG LOGO]


                                    Page 15
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Benefits of Manufacturing in Malaysia
--------------------------------------------------------------------------------

- Seven years of operating experience in Malaysia

        - December 1999 production 100% from 55% in July 1999

        - Yields equivalent to former U.S. factories

- Allows "full" utilization of Malaysian installed capacity

        - Current:    12-13 million disks/quarter

        - Short-term: 14 million disks/quarter

        - Long-term:  Excess equipment available to extend capacity without
                      significant new cash outlays

        - Facilities: 20 million disks/quarter.

- Cost structure advantages

        - Labor costs 80% lower than U.S. and Japanese costs

        - "Fixed" costs 20% to 30% lower

- Proximity to customers



Komag Overview                                                      [KOMAG LOGO]

                                    Page 16
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Technology Strategy
--------------------------------------------------------------------------------

- Leverage technology to change customer relationships

        - Low-cost glass (LCG) substrates

                - Shipping samples

                - 50% of standard glass substrate cost

                - Use LCG to increase media sales to vertically integrated
                  customers

                - Designing production-ready tooling

        - Opportunities at Seagate, IBM, Maxtor, Fujitsu and Hitachi

        - Joint Development - Joint Venture

        - Diversification



Komag Overview                                                      [KOMAG LOGO]

                                    Page 17
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Benefit of New Business Model
--------------------------------------------------------------------------------

        - Returned company to positive net cash flow in 1Q 00

        - EBITDA = $16 million in 2Q 2000

        - Restructured Senior Debt

                - Cure covenant default

                - Extend debt maturities

        - HMT Merger



Komag Overview                                                      [KOMAG LOGO]


                                    Page 18
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Komag - HMT Merger
--------------------------------------------------------------------------------

        - Komag & HMT signed definitive agreement to merge

        - HMT shareholders will receive 0.9094 shares of Komag stock for each
          share of HMT stock

        - Tax-free transaction to be accounted for under purchase accounting

        - Merger subject to approval from shareholders only Meeting Date:
          September 20, 2000



Komag Overview                                                      [KOMAG LOGO]

                                    Page 19
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Komag - HMT Merger
--------------------------------------------------------------------------------

      This Strategic Transaction:

        - Strengthens Research & Development Leadership
             R&D is the "Admission Ticket"

        - Leverages Low Cost Manufacturing Model
             Low Cost Ensures Sustainability

        - Increases Scale

        - Expands Customer Base

        - Alleviates Capacity Constraints

        - Strengthens Management



Komag Overview                                                      [KOMAG LOGO]

                                    Page 20
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What Our Largest Customer Thinks
--------------------------------------------------------------------------------

"Komag and HMT have announced their intention to merge, creating the world's
largest supplier of thin-film disks for hard drives. For Western Digital, this
is an important and positive development.

The combination of these two companies will create widespread efficiencies that
will ensure us the lowest possible cost for the media that we buy. . . .

The Komag/HMT merger will bring together two outstanding technology groups into
an industry-leading creative force. . . .

Over the last year Komag has demonstrated itself to be a very strategic partner,
providing a strong foundation as we move forward working with the new combined
entity."

           -- Matt Massingill, Western Digital CEO, in a letter to WD
              employees on April 26, 2000



Komag Overview                                                      [KOMAG LOGO]

                                    Page 21
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Media Suppliers (Pro Forma)
--------------------------------------------------------------------------------
  Q2 2000 Media Shipments





[Bar graph presentation of total media shipments in the disk drive industry,
including a pro forma presentation of Komag, AKCL and HMT shipments compared
with those of industry competitors.]





Komag Overview                                                      [KOMAG LOGO]

                                    Page 22
<PAGE>   23

Media Consumption (Pro Forma)
--------------------------------------------------------------------------------
  Q2 2000 Media Shipments





[Bar graph presentation of media consumption by customer, showing pro forma
consumption of Komag, AKCL and HMT media by customer.]





Komag Overview                                                      [KOMAG LOGO]

                                    Page 23
<PAGE>   24

Summary
--------------------------------------------------------------------------------

- Market Conditions have Changed Dramatically and Permanently

- Price Erosion will Place Further Stress on Media Suppliers with High-Cost
  Structures

- R&D Capabilities will be Leveraged for Unique Solutions and Product
  Differentiation

- Komag has Instituted Aggressive Restructuring Actions to Size and Focus its
  Resources

- Komag is the Best Positioned company in the Industry



Komag Overview                                                      [KOMAG LOGO]

                                    Page 24

                                 [KOMAG LOGO]
<PAGE>   25



ADDITIONAL INFORMATION AND WHERE TO FIND IT

Komag has filed a Registration Statement on SEC Form S-4 in connection with the
merger with HMT Technology Corporation, and Komag and HMT expect to mail a Joint
Proxy Statement/Prospectus to stockholders of Komag and HMT containing
information about the merger. Investors and security holders are urged to read
the Registration Statement and the Joint Proxy Statement/Prospectus carefully.
The Registration Statement and the Joint Proxy Statement/Prospectus contain
important information about Komag, HMT, the merger and related matters.
Investors and security holders are able to obtain free copies of these documents
through the website maintained by the U.S. Securities and Exchange Commission at
http://www.sec.gov. Free copies of the Joint Statement/Prospectus and these
other documents may also be obtained from Komag by directing a request through
the Investor Relations portion of the website at http://www.komag.com or by mail
to Komag, Incorporated, 1710 Automation Parkway, San Jose, CA 95131, attention:
Investor Relations, telephone: (408) 576-2000.

In addition to the Registration Statement and the Joint Proxy
Statement/Prospectus, Komag and HMT file annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any reports, statements or other information
filed by Komag or HMT at the SEC public reference rooms at 450 Fifth Street,
N.W., Washington, D.C. 20549 or at any of the Commission's other public
reference rooms in New York, New York and Chicago, Illinois. Please call the
Commission at 1-800-SEC-0330 for further information on the public reference
rooms. Komag's and HMT's filings with the Commission are also available to the
public from commercial document-retrieval services and at the website maintained
by the Commission at http://www.sec.gov.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

Komag will be soliciting proxies from Komag stockholders and HMT will be
soliciting proxies from HMT stockholders in favor of the adoption of the merger
agreement. The directors and executive officers of Komag and the directors and
executive officers of HMT may be deemed to be participants in Komag's
solicitation of proxies and HMT's solicitation of proxies, respectively.
Information concerning the directors and officers is contained in the
Registration Statement.

The directors and executive officers of HMT have interests in the merger, some
of which may differ from, or may be in addition to, those of HMT's stockholders
generally. Information concerning those interests is contained in the
Registration Statement.

ABOUT KOMAG:

Founded in 1983, Komag, Incorporated has produced over 465 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
advanced development facilities in the United States and high volume production
factories in Southeast Asia, Komag provides high quality, leading-edge disk
products at a low overall cost to its customers. 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
http://www.komag.com or call Komag's Investor Relations 24-hour Hot Line at
888-66-KOMAG or 408-576-2901.

Contact:  KOMAG, INCORPORATED, San Jose, CA
          Ted Siegler at (408) 576-2209
          E-mail communications: [email protected]





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