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As filed with the Securities and Exchange Commission on October 16, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
--------------------
READ-RITE CORPORATION
(Exact name of Registrant as specified in its charter)
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Delaware 94-2770690
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
44100 Osgood Road
Fremont, California 95035
(408) 262-6700
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
--------------------
Alan S. Lowe
Chief Executive Officer
Read-Rite Corporation
44100 Osgood Road
Fremont, California 95035
(408) 262-6700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
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If only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Proposed Amount of
Maximum Maximum Registration
Amount Offering Aggregate Fee
to be Price Offering
Title of Securities to be Registered Registered Per Share(1) Price
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<S> <C> <C> <C> <C>
Common Stock, $0.0001 par value per share; 4,057,142 shares $ 10.94 $ 44,385,133
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Common Stock, $0.0001 par value per share;
issuable upon the exercise of a warrant to
purchase shares of Common Stock 2,857,142 $ 10.94 $ 31,257,133
Total 6,914,284 $ 75,642,266 $ 19,969.56
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</TABLE>
(1) The proposed maximum offering price per share was estimated in accordance
with Rule 457(c) solely for the purpose of calculating the amount of the
registration fee based on the average of the high and low prices of the
Registrant's common stock as reported on the Nasdaq National Market on
October 10, 2000.
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The Registrant hereby amends this Registration Statement on such date as
may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration Statement shall
become effective on such date as the Commission acting pursuant to said
Section 8(a) may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ The information in this prospectus is not complete and may be changed. We +
+ may not sell these securities until the registration statement filed with +
+ the Securities and Exchange Commission is effective. This prospectus is +
+ not an offer to sell these securities and it is not soliciting an offer to +
+ buy these securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated October 16, 2000
Preliminary Prospectus
Read-Rite Corporation
6,914,284 Shares
Common Stock
--------------------
The 6,914,284 shares of our common stock offered by this prospectus consist
of: (i) 4,057,142 shares originally issued by us in connection with private
placements to the State of Wisconsin Investment Board and to Tyco Sigma Ltd. an
affiliate of Tyco International Inc., and (ii) 2,857,142 shares issuable upon
the exercise of a warrant held by Tyco Sigma Limited received in connection with
the private placement. The State of Wisconsin Investment Board and Tyco Sigma
Limited are identified in this prospectus as selling stockholders. The selling
stockholders are offering all of the shares to be sold in this offering. We will
not receive any of the proceeds from this offering. In connection with the
private placement, we have agreed to register the shares offered by this
prospectus.
The selling stockholders may sell all or a portion of the shares from time
to time on the Nasdaq National Market at prices which will be determined by the
prevailing market price for the shares or in negotiated transactions.
Our common stock is traded on the Nasdaq National Market under the symbol
"RDRT." On October 10, 2000, the last sale price of our common stock was
$9.9375.
--------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
--------------------
The date of this prospectus is October 16.
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TABLE OF CONTENTS
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PAGE
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<S> <C>
Our Company................................................................ 2
Description of the Common Stock............................................ 2
Risk Factors............................................................... 2
Use of Proceeds............................................................ 13
Price Range of Common Stock................................................ 13
Dividend Policy............................................................ 14
Plan of Distribution....................................................... 14
Legal Matters.............................................................. 14
Experts.................................................................... 14
Where You Can Find Additional Information.................................. 14
</TABLE>
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OUR COMPANY
We were incorporated in California in 1981 and reincorporated in Delaware
in 1985. Our principal executive offices are located at 44100 Osgood Road,
Fremont, California 94539, and our telephone number at that location is (408)
262-6700.
DESCRIPTION OF THE COMMON STOCK
This prospectus is part of a registration statement of Form S-3 (file no.
333-______) and relates to sales of 6,914,284 shares our common stock. On
August 31, 2000, we sold 1,200,000 shares of our common stock to the State of
Wisconsin Investment Board for an aggregate purchase price of $9,036,000. On
September 1, 2000, we sold 2,857,142 shares of our common stock and a warrant to
purchase an additional 2,857,142 shares of our common stock to Tyco Sigma Ltd.
for an aggregate of $14,999,995.50. Complete descriptions of the purchase price
terms of the sales are set forth in the Stock Purchase Agreement and Stock and
Warrant Purchase Agreement which are exhibits to our registration statement
referenced above.
RISK FACTORS
You should carefully consider the risks described below. An investment in
our common stock involves a high degree of risk. You should carefully consider
the following risk factors primarily related to our common stock offered by this
prospectus and to our business and operations. You should also carefully
consider the other information in this prospectus and in the documents
incorporated by reference. Some of these factors have affected our financial
condition or operating results in the past or are currently affecting us. All
of these factors could affect our future financial condition or operating
results. The risks and uncertainties described below are not the only ones
facing our company. Additional risks and uncertainties that we do not presently
know or that we currently deem immaterial may also impair our business
operations.
If any of the following risks actually occur, they could materially
adversely affect our business, financial condition or operating results. In that
case, the trading price of our common stock and notes could decline.
Our operating results and cash flow may fluctuate because of a number of
factors.
Our operating results and cash flow have fluctuated significantly in the
past and are likely to continue to fluctuate in the future as a result of the
following factors:
. short product life cycles that require us to constantly qualify new
products for our customers' programs;
. our inability to be selected as an initial supplier, generally
referred to as "design-in wins," on customer programs due to increased
competition or our failure to execute;
. industry cycles of excess and insufficient manufacturing capacity and
aggressive pricing strategies;
. low product manufacturing yields;
. delayed product introductions;
. under-utilization of capacity for lower than anticipated demand;
. decreased demand or decreased average selling prices for our products;
. increased operating costs associated with the ramp-up of production
due to increased capacity;
. capacity constraints on certain technologies;
. product mix changes;
. increased material costs or the unavailability of material or
equipment;
. disruptions in our domestic or foreign operations;
. new competitive entrants to the market;
. reduced average selling prices; and
. delays and cancellations of customer product orders.
As a result of these factors, our past financial results are not
necessarily a good predictor of our future operating results. Further, our
future operating results may not meet the expectations of public market analysts
and investors.
Any decrease in demand for our products could further reduce our revenue,
operating margins and cash flows.
Our customers provide us with individual purchase orders that may be
changed or cancelled on short notice, often without material penalties. In the
past, our operating results have been harmed by fluctuations in demand for our
products. Demand for our products is generally difficult to accurately predict.
In the past, demand for our product has been impacted as follows:
. in the second half of fiscal 1996, we had significant orders
unexpectedly cancelled or rescheduled;
. in the first quarter of fiscal 1998, there was an abrupt reduction in
demand for advanced inductive thin film products as there was a
quicker than expected industry transition from advanced inductive to
magnetoresistive technology;
. in fiscal 1998, we were harmed by general industry conditions;
. in fiscal 1999, the industry made a faster than anticipated transition
from magnetoresistive technology to giant magnetoresistive technology;
and
. technology advances increasing areal densities have had the impact of
lowering the average number of heads per drive.
We were harmed in each case because of the decreases in demand. If
cancellations or reductions in demand for our products occur in the future, our
business, financial condition and results of operations could be seriously
harmed.
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Delays and cancellations of our customer orders may cause us to underutilize our
production capacity, which could significantly reduce our gross margins and
result in significant losses.
Our business has a large amount of fixed costs as the industry is highly
capital intensive. If there is a decrease in demand for our products, our
production capacity could be under-utilized and as a result we may experience:
. equipment write-offs;
. restructuring charges;
. reduced average selling prices;
. increased unit costs; and
. employee layoffs.
We have had losses in recent years and we may not be able to regain
profitability in the foreseeable future, which could adversely affect our
ability to implement our business and finance strategies.
We had net losses of approximately $82.28 million for the nine month period
ended June 30, 2000 and $155.7 million in fiscal 1999 and $319.7 million in
fiscal 1998 after having net income of $76.2 million in fiscal 1997. These
losses were caused in part by:
. continued competitive pricing pressure;
. industry trends toward fewer head gimbal assemblies for each headstack
assembly;
. short product life cycles, which resulted in write-down of excess
inventory and obsolete products and equipment; and
. the industry's quicker than expected transition in fiscal 1998 from
advanced inductive to magnetoresistive technology and in fiscal 1999
from magnetoresistive to giant magnetoresistive technology.
If we are unable to successfully compete in the highly competitive disk drive
industry, our operating results could be harmed.
The disk drive industry is highly competitive at both the drive level and
the component level. Our products often have short life cycles. The price for
our products declines substantially over their useful life. We compete on price
and our ability to deliver new technology in a timely manner. We also compete on
customer service and support, product quality and manufacturing capability. If
we are unable to effectively compete, our business, operating results and
financial condition could be harmed.
Our competitors in the merchant market include TDK, Alps and IBM. We also
compete against disk drive manufacturers with "captive" or internal recording
head manufacturing capabilities, such as Fujitsu, Hitachi, IBM and Seagate.
These manufacturers are formidable competitors because they have greater
resources and greater customer access. For example in June 1998, one of our
largest customers, Western Digital Corporation, announced an agreement with IBM
under which IBM would supply Western Digital with giant magnetoresistive heads
and other components for Western Digital's manufacture of desktop hard disk
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drives. If our competitors enter into similar agreements with our customers to
supply giant magnetoresistive products in the merchant market in volume
quantities at competitive pricing, our operating results could be harmed.
We receive a large percentage of our revenues from only a few customers, the
loss of any one would adversely affect our business and financial condition.
We sell our products to a limited number of customers. During the third
quarter of fiscal 2000, Maxtor, Quantum HDD, Samsung and Western Digital each
represented over 10% of revenues and together represented approximately 89% of
revenues. As a result, we are heavily dependent upon a limited number of
customers. If we lose a large customer or if one or more of our large customers
reduces their orders, our business, financial condition and operating results
will be harmed.
If one or more of our customers is acquired, merged or liquidated, our operating
results could be harmed.
We are heavily dependent on a limited number of customers. If one of these
customers is acquired or merged, our business, financial condition and operating
results could be harmed. For example, in a series of transactions, Seagate:
. acquired the tape head operations of AMC in fiscal 1995;
. completed the acquisition of Conner Peripherals, Inc., then one of our
major customers, in fiscal 1996; and
. completed the acquisition of Quinta Corporation, our partner and sole
customer for our magneto-optical head development effort, in August
1997.
Because we sell our products to a limited number of customers, we have a
concentration of credit risk.
We are subject to the credit risk of our customers. Consequently, if any
one of our customers experiences financial difficulties, our financial condition
and business would be affected. For example, in November 1997 Micropolis Ltd.
ceased doing business. As a result, in fiscal 1997, we wrote-off $9.3 million of
accounts receivables due from that customer as well as additional write-off of
our inventory and equipment related to that customer's orders.
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If our customers vertically integrate by acquiring or increasing internal
production and assembly of head gimbal assemblies or headstack assemblies, our
operating results could be harmed.
If one or more of our customers vertically integrates by acquiring or
increasing their internal head gimbal assembly or headstack assembly production
capability, our business, financial condition and results of operations could be
harmed. For example, in 1994, Quantum Corporation, one of our principal
customers with no previous magnetic recording head capacity, acquired Digital
Equipment Corporation's recording head and disk drive operations. In May 1997,
Quantum Corporation announced the formation of a joint venture with its primary
manufacturing partner in Japan, Matsushita Kotobuki Electronics, to manufacture
magnetoresistive recording heads for rigid disk drives. In October 1998, Quantum
and Matsushita announced that the joint venture was dissolved, but Matsushita
retaining the slider fabrication and head gimbal assembly factory. Matsushita
continues to operate this facility. If Matsushita re-enters the wafer
fabrication business and becomes a full line manufacturer, we may not be able to
supply head gimbal assemblies to Quantum Corporation. Any further vertical
integration in this industry could also materially and adversely affect our
business, financial condition and results of operations.
Because our customers in the disk drive industry have been limiting the number
of suppliers of recording heads, we may not be able to achieve design-in wins.
Our customers in the disk drive industry have been increasingly moving
towards limiting their number of suppliers of recording heads per program. Our
customers also have focused their own efforts on fewer and larger new programs.
As a result, we expect it will be increasingly important for us to successfully
achieve design-in wins for all major programs for our primary customers. As a
result, the loss of any customer, a significant decrease in orders from one or
more large customers, or if we fail to achieve a design-in win or wins on
particular customer programs, our business, financial condition and results of
operations could be harmed.
Our industry experiences rapid technological change, and our inability to timely
anticipate and develop new products and production technologies could harm our
competitive position.
Technology changes rapidly in our industry. The rapid changes require us to
address current technologies and anticipate new technologies. If we are unable
to anticipate and smoothly transition to new technologies, our business,
financial condition and results of operations may suffer. For example, in the
first quarter of fiscal 1998, we incurred a special charge of $114.8 million,
primarily for the write-off of equipment and inventory associated with the
phase-out of advanced inductive technologies. In the third quarter of fiscal
year 1999, we incurred a restructuring charge of $37.7 million for the write-off
of equipment associated with our transition to giant magnetoresistive technology
and the decrease in customer demand for the earlier generation magnetoresistive
heads. In the second quarter of fiscal 2000, we exited certain wafer fab and
headstack manufacturing facilities and announced charges of approximately $95
million. Similar changes in the future will have an adverse effect on our
business.
The rapid introduction of new, higher performance products, shorter product
life cycles and the trend toward fewer heads per drive places significant
pricing pressure on hard disk drives and drive components, including recording
heads. In addition, during fiscal 1998, the sub $700 PC market emerged. Users in
the sub $700 PC market typically require less storage capacities. As a result,
they require a lower number of heads per drive than that for the office desktop
computer applications. We expect growth in the sub $700 PC market and the trend
for lower number of heads per drive to continue for the foreseeable future.
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We expect the development and advancement of technologies, such as pico
sliders and giant magnetoresistive heads, to continue in fiscal 2000. Other
manufacturers may already have or may develop more advanced giant
magnetoresistive technology or giant magnetoresistive production capability than
we possess or may develop. In addition, other alternative data storage
technologies, such as solid-state (flash or ferroelectric) memory or optical
disk drive technologies, are being developed that do not utilize our products.
If one of our competitors introduces improved or new technologies or products
before we do, or if we are unable to respond to new product introductions by our
competitors, our business, financial condition and results of operations could
be seriously harmed.
If we underestimate or overestimate our capacity requirements, our business,
financial condition and results of operations could be harmed.
We have made substantial capital expenditures and installed significant
production capacity to support our new technologies, to meet the increased
demand for our products, to improve manufacturing yields and to increase our
margins. We made capital expenditures during fiscal 1999 of $101.0 million and
$186.2 million during fiscal 1998. We plan to spend approximately $90 million
during fiscal 2000. We cannot guarantee that our net sales and cash flows from
operations will increase enough to absorb these additional costs or that we will
have sufficient capital to finance our planned capital expenditures.
We face risks associated with our international operations that could harm our
company.
Substantially all of our machining, assembly and test operations for our
head gimbal assembly, our headstack assembly and tape head assembly operations
are conducted outside of the Unites States in Thailand and the Philippines. As a
result, our international operations are subject to a variety of risks,
including:
. obtaining requisite governmental permits and approvals;
. currency exchange fluctuations and restrictions;
. variable or higher tax rates;
. expiration of tax holidays;
. political instability;
. changes in government policies relating to foreign investment and
operations;
. cultural issues;
. labor problems;
. trade restrictions;
. transportation delays and interruptions; and
. changes in tariff and freight rates.
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We have in the past had labor organizational activities at some of our
foreign operations. While none of our employees are currently represented by a
union, we may be unable to avoid work stoppages or other labor issues in the
future.
In addition, several Asian countries, including Japan, Thailand and the
Philippines, have experienced fluctuations in the value of their currencies
relative to the U.S. dollar in recent periods. These foreign currency
fluctuations may impact our ability to manufacture products in these markets. We
enter into foreign currency forward contracts to manage our exposure to foreign
currency fluctuations. These hedging activities, however, do not completely
eliminate the exposure to foreign currency risk.
Any failure to manage our inventory could adversely affect our company.
The hard disk drive industry is subject to business cycles and rapid
technological change. As a result, if we do not properly manage our inventory,
we could have too much, or too little, inventory on hand. We monitor our
inventories on a periodic basis and provide inventory write-downs if deemed
appropriate for excess, obsolete or lower of cost or market concerns. We have
limited remedies in the event of order cancellations because of:
. our dependence on a few customers;
. the limited number of product programs for each customer; and
. the magnitude of the commitments we must make to support our
customers' product programs.
If a customer cancels or reduces a product program, or experiences
financial difficulties, we may take significant inventory charges. We have taken
charges and provided inventory write-downs in the past. We may in the future
have to take additional inventory write-downs if we are unable to obtain
necessary product qualifications or our customers cancel their orders.
We manufacture custom products for a limited number of customers. As a
result, we cannot typically shift raw materials, work-in-process or finished
goods from customer to customer. We must invest substantial resources and make
significant materials commitments to our customers. In addition, the disk drive
products typically have very short life cycles. Our customers have also
implemented just-in-time hubs to limit their purchase order commitments from us.
If our customer does not have demand from their end customer, they will not use
the inventory from the just-in-time hub. If the inventory is not used, we may
have excess or obsolete inventory and increased inventory risk. Customers also
have cancelled or materially modified purchase orders with us without
significant penalties. Cancelled orders could lead to charges for inventory
obsolescence, which could seriously harm our business, operating results and
financial condition.
Problems associated with our complex manufacturing processes could harm our
revenues.
Our manufacturing processes involve numerous complex steps. Minor
deviations can cause substantial manufacturing yield loss and, in some cases,
suspension of production. Manufacturing yields for new products initially tend
to be lower until we complete product development and commence volume
manufacturing. Yields typically increase as we ramp to full production. Because
forward product pricing assumes improving manufacturing yields, material
variances between projected and actual manufacturing yields have a direct effect
on our gross margin and profitability. In addition, the shortening of product
life cycles requires us to produce new products at higher volume and acceptable
manufacturing yields without, in
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many cases, reaching the longer-term, higher volume manufacturing cycle
conducive to higher manufacturing yields and declining costs.
Increased amounts of defective products could harm our business.
We typically test our head gimbal assemblies before shipment to ensure that
the head gimbal assemblies meet customer specifications. Customers may return
defective lots if the customer determines that an agreed upon percentage of the
head gimbal assemblies in the lot do not meet specifications. We expect
manufacturing yields to increase during fiscal 2000 as we ramp-up production of
giant magnetoresistive head gimbal assemblies. However, we may not be able to
increase yield or achieve component cost levels, manufacturing yields and
productivity levels necessary to achieve adequate giant magnetoresistive head
gimbal assembly margins.
Because we depend on a limited number of suppliers, if our suppliers experience
capacity constraints or production failures, our production could be
significantly harmed.
We depend on a limited number of suppliers and subcontractors for our raw
materials. In some cases, we depend on a single source. Limitations or
interruptions in the supply of these components could severely and adversely
affect our production and operating results. We have limited alternative sources
of key materials such as wafer substrates, wires and suspensions and these
suppliers are also generally determined in advance by our customers. In
addition, we frequently rely on a single equipment supplier for a particular
type of equipment due to either a lack of viable alternatives or to insure
process consistency. As a result, if our suppliers experience capacity
constraints or production failures, our production could be significantly
harmed.
If we are unable to adequately protect our intellectual property rights, our
operating results and financial condition may be harmed.
We believe that the success of our business depends on our proprietary
technology, information processes and know-how. Much of our proprietary
information and technology relating to manufacturing processes is not patented
and may not be patentable. We rely primarily on trade secret protection to
protect our intellectual property. We face a number of intellectual property
risks:
. our competitors may be able to develop similar technology
independently;
. we may not be able to adequately protect our technology;
. claims allowed on any patents held by us may not be sufficiently broad
to protect our technology; and
. foreign intellectual property laws may not adequately protect our
intellectual property rights.
We expect to continue to file patent applications when appropriate to
protect our proprietary technologies. However, seeking patent protection can be
expensive and time consuming. We may not be able to enforce patents outside the
U.S. As a result, we may not be able to stop our competitors from infringing on
our patents.
We have, from time to time, been notified of claims that we may be
infringing patents owned by others. If we receive additional claims of
infringement in the future, we may decide to seek licenses under patents that we
are allegedly infringing. However, we may not be able to obtain a license on
acceptable terms.
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If we have to defend an infringement claim or if we fail to obtain a key patent
license, we may incur substantial liabilities or be unable to manufacture
products utilizing such patented inventions.
Our inability to retain and attract key personnel and a skilled workforce may
materially and adversely affect our financial condition.
We depend on a limited number of key management, sales, engineering,
customer support and product development personnel. Many of our key personnel
would be difficult to replace and are not subject to employment or non-
competition agreements. We believe our future success will depend on our ability
to attract and retain highly-skilled managerial, engineering, sales, customer
support and product development personnel. Competition for qualified personnel
in our industry and geographic locations is intense. If we are unable to retain
existing or hire key personnel, our business, financial condition and results of
operations could be harmed.
The nature of our operations makes us susceptible to material environmental
liabilities which could adversely affect our financial condition.
We are subject to a variety of federal, state, local and foreign
regulations relating to:
. the use, storage, discharge and disposal of hazardous materials used
during our manufacturing process;
. the treatment of water used in our manufacturing process; and
. air quality management.
We are required to obtain necessary permits for expanding our facilities.
We must also comply with new regulations on our existing operations. Public
attention has increasingly been focused on the environmental impact of
manufacturing operations that use hazardous materials. If we fail to comply with
environmental regulations or fail to obtain the necessary permits:
. we could be subject to significant penalties;
. our ability to expand or operate at locations in California or our
locations in Thailand and the Philippines could be restricted;
. our ability to establish additional operations in other locations
could be restricted; or
. we could be required to obtain costly equipment or incur significant
expenses to comply with environmental regulations.
Any accidental hazardous discharge could result in significant liability
and clean-up expenses which could harm our business, financial condition and
results of operations.
We use a significant amount of water in our manufacturing process. Future
drought conditions could cause the state or local authorities to mandate higher
fees or reductions in water usage allocations. If we are required to restrict
our production because of water scarcity, our business, financial condition and
results of operations could be adversely affected.
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Possible volatility of price of common stock
The market price of our common stock has been volatile in the past, and
the market price of our common stock may be volatile in the future. The market
price of our common stock may be significantly affected by the following
factors:
. the cyclical nature of the markets addressed by our products;
. the availability and extent of utilization of manufacturing capacity;
. erosion in the price of our products;
. the timing of new product introductions, the ability to develop and
implement new technologies and other competitive factors;
. our announcement of new products or product enhancements or similar
announcements by our competitors; and
. general market conditions or market conditions specific to particular
industries.
In addition, the stock prices of many companies in the technology and
emerging growth sectors have fluctuated widely due to events unrelated to their
operating performance. These fluctuations may adversely affect the market price
of our common stock. See "Price Range of Common Stock."
If our plan to restructure or replace our existing bank facility fails, we will
not be able to successfully implement our business and financial strategy.
We may not be able to successfully restructure our bank facility or obtain
new financing to replace the current bank facility. Our ability to restructure
our bank facility or obtain new financing will depend, among other things, on
our ability to complete one or more of the following transactions:
. raising cash from the sale of existing assets; and
. refinancing the bank facility by raising additional funds through a
variety of alternative sources, including proceeds of a new lending
arrangement, the sale of additional securities or from the proceeds of
an asset-based financing arrangement.
If we are unable to sell portions of our existing assets, or sell
additional securities or enter into a new bank facility such as an asset-backed
facility, we will not be able to refinance the bank facility. We may not receive
any offers for our assets or the offers we may receive may not adequately
reflect the value of the assets. Any of these factors could cause us to be
unable to restructure or replace our bank facility.
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Concerns from current and prospective customers, suppliers, employees and
lenders about the going-concern explanatory paragraph in our audit report could
adversely affect our operating results and financial condition.
We incurred operating losses in fiscal years 1998 and 1999. We are also not
in compliance with a number of financial covenants under our bank facility. Our
failure to comply with covenants under our bank facility has forced us to seek
to obtain short-term waivers to the bank facility, the most recent waiver
extending to April 4, 2001. Due to the short-term nature of the waivers, we
have had to reclassify our debt under the bank facility from long-term debt to
short-term. As a result, our independent auditors have included a going-concern
explanatory paragraph for our fiscal year ended September 30, 1999. This
emphasis paragraph represents our auditor's conclusion that there is substantial
doubt as to our ability to continue as a going concern in the near term. If we
are unable to raise additional funds or refinance the bank facility, our
auditors may not remove the explanatory paragraph from their opinion and any of
the following may occur.
. our customer relationships and orders with our customers could
deteriorate;
. suppliers could reduce their willingness to extend credit;
. employee attrition could increase; and
. new lenders could be unwilling to refinance our bank facility.
If our financial condition continues to deteriorate, we may have to seek relief
under Chapter 11 of the Bankruptcy Code.
If our financial condition continues to deteriorate and we are unable to
reduce our losses or obtain additional financing, we may be forced to seek
relief under Chapter 11 of the bankruptcy code. Chapter 11 permits a company to
remain in control of its business, protected by a stay of all creditor action,
while the company attempts to negotiate and confirm a plan of reorganization
with its creditors. If we commenced a case under Chapter 11, we would expect
deterioration in our customer relationships, a reduction in orders, the loss of
suppliers and an erosion of employee morale. We may be unsuccessful in our
attempts to confirm a plan of reorganization with our creditors as many Chapter
11 cases are unsuccessful and virtually all involve substantial expense and
damage to the business. When a company is unsuccessful in obtaining confirmation
of a plan or reorganization, the assets of the company are liquidated.
While we have not performed a liquidation analysis, we believe that in a
bankruptcy liquidation, the holders of common stock would not be expected to
receive any proceeds.
We have a large amount of debt and our ability to meet our debt payment
obligations depends upon our future operating performance and cash flows.
We incurred net losses of approximately $82.28 million for the nine month
period ended June 30, 2000, $155.7 million in fiscal 1999 and $319.7 million in
fiscal 1998. These losses could continue. If we are unable to refinance our bank
facility and reduce the level of our existing debt, we may not be able to make
payments on our existing debt. As of June 30, 2000, we had approximately $302.8
million of debt.
-11-
<PAGE>
Our ability to make scheduled debt and interest payments will depend on our
future operating performance and cash flow. Our operating performance and cash
flow, in part, are subject to economic factors beyond our control, including
prevailing interest rates. We may not be able to generate enough cash flow to
meet our obligations and commitments, including payments under our bank
facilities or on our 6 1/2% and 10% Convertible Subordinated Notes. If we cannot
generate sufficient cash flow from operations to service our debt, we may need
to refinance our debt, dispose of assets, or issue equity to obtain the
necessary funds. We do not know whether we will be able to refinance our debt,
issue equity or dispose of assets to raise funds on a timely basis or on terms
satisfactory to us. In addition, our current bank facility restricts our ability
to raise funds through asset sales.
Our large amount of debt could negatively impact the company in many ways,
including:
. reducing funds available to fund our business operations and for other
corporate purposes because portions of our cash flow from operations
must be dedicated to the payment of principal and interest on our
debt;
. impairing our ability to obtain additional financing for working
capital, capital expenditures, acquisitions or general corporate
purposes;
. increasing vulnerability to increases in interest rates;
. reducing financial flexibility because the debt outstanding under our
current bank facility is secured by substantially all of our existing
and future acquired assets and 65% of the capital stock of our
existing and future acquired international operating subsidiaries;
. placing us at a competitive disadvantage because we are substantially
more leveraged than certain of our competitors;
. hindering our ability to adjust rapidly to changing market conditions;
and
. making us more vulnerable to a downturn in general economic conditions
or in our business.
We may not be able to raise future capital for the substantial capital
expenditures needed to operate our business competitively.
Our business is highly capital intensive. We need to have enough production
capacity and flexibility to meet our customers' needs. Our ability to accurately
plan our expected production capacity may be inhibited by:
. the pace of technological change;
. availability of financing;
. unpredictable demand variations;
. the effects of variable manufacturing yields; and
. the long lead times for our plant and equipment expenditures,
requiring major expenditure commitments well before actual
requirements.
-12-
<PAGE>
Due to our recent financial performance, we may not be able to maintain
adequate sources of capital to finance our capital expenditures. We do not know
when the additional financing will be available to us or available on favorable
terms. If we use equity as a source of capital, it could be dilutive to existing
stockholders and noteholders.
Delisting of our common stock could have a material adverse effect on the market
price of, and the efficiency of the trading market for, our common stock, the
notes.
USE OF PROCEEDS
The proceeds that Read-Rite received from the private placements will be
used for general working capital purposes.
PRICE RANGE OF COMMON STOCK
The following table sets forth the range of high and low sale prices of our
common stock for the indicated periods, as reported by the Nasdaq National
Market.
High Low
--------- ---------
Fiscal year ended September 30, 1998:
First Quarter.............................. $ 27-1/4 $ 15-1/8
Second Quarter............................. 17-9/16 12-3/8
Third Quarter.............................. 15-1/2 6-3/4
Fourth Quarter............................. 9-13/16 5-7/16
Fiscal year ended September 30, 1999:
First Quarter.............................. $ 17-1/16 $ 5-3/4
Second Quarter............................. 20-9/16 6-3/64
Third Quarter.............................. 9-1/2 5-1/8
Fourth Quarter............................. 6-7/8 3-1/2
Fiscal year ending September 30, 2000:
First Quarter.............................. $ 6 $ 3-3/8
Second Quarter............................. 6-3/4 3
Third Quarter.............................. 4-3/4 1-7/8
Fourth Quarter............................. 11-3/4 2-1/16
On October 10, 2000, the last reported sale price of the common stock on
the Nasdaq National Market was $9.9375 per share.
-13-
<PAGE>
DIVIDEND POLICY
We do not pay dividends on our common stock. We currently intend to retain
all earnings, if any, for use in our business and do not anticipate paying cash
dividends to holders of our common stock. Our existing credit facility currently
restricts the payment of dividends.
PLAN OF DISTRIBUTION
The State of Wisconsin Investment Board and Tyco Sigma Limited (the
"selling stockholders") may sell all or a portion of the shares from time to
time on the Nasdaq National Market for their own accounts at prices prevailing
in the public market at the times of such sales. The selling stockholders may
also make private sales directly or through one or more brokers. These brokers
may act as agents or as principals. The selling stockholders will pay all sales
commissions and similar expenses related to the sale of the shares. We will pay
all expenses related to the registration of the shares.
The selling stockholders and any broker executing selling orders on behalf
of the selling stockholders may be considered an "underwriter" under the
Securities Act. As a result, commissions received by a broker may be treated as
underwriting commissions under the Securities Act. Any broker-dealer
participating as an agent in that kind of transaction may receive commissions
from the selling stockholders and from any purchaser of shares.
SELLING SHAREHOLDERS
The following table lists, as of the date of this Prospectus, (i) the name
of each of the Selling Shareholders, (ii) the number of shares of Common Stock
that each such Selling Shareholder beneficially owned as of such date, (iii) the
number of shares of Common Stock owned by each Selling Shareholder that may be
offered for sale from time to time by this Prospectus, and (iv) the number of
shares of Common Stock to be held by each such Selling Shareholder assuming the
sale of all the Common Stock offered under this Prospectus. Except as indicated,
none of the Selling Shareholders has held any position or office or had a
material relationship with us or any of our affiliates within the past three
years other than as a result of the ownership of our Common Stock. We may amend
or supplement this Prospectus from time to time to update the disclosure set
forth herein.
<TABLE>
<CAPTION>
Shares Beneficially Owned
Shares Shares Which May After Offering
Beneficially Percentage be Sold Pursuant to ----------------------------
Selling Shareholder Owned Ownership this Prospectus Number Percent(%)
------------------------------------ ------------- ------------ -------------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
State of Wisconsin Investment Board
P.O. Box 7842
Madison, WI 53707.................. 12,596,244 18.3% 1,200,000 11,396,244 18.4%
Tyco Sigma Ltd.
One Tyco Park
Exeter, NH 03833................... 5,714,284** 8.3% 5,714,284** 0 *
</TABLE>
* less than 1%
** consists of 2,857,142 shares of Common Stock and a warrant to purchase
2,857,142 shares of Common Stock.
*** based on 68,871,492 shares of Common Stock consisting of 61,957,208 shares
of Common Stock on totalization on August 6, 2000 and 6,914,284 shares of Common
Stock that may be sold pursuant to this Prospectus
of Common Stock
LEGAL MATTERS
The validity of the issuance of the common stock offered by this prospectus
will be passed upon for Read-Rite Corporation by Wilson Sonsini Goodrich &
Rosati, Professional Corporation, Palo Alto, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K as
of September 30, 1999 and 1998 and for each of the three years in the period
ended September 30, 1999, as set forth in their report (which contains an
explanatory paragraph describing conditions that raise substantial doubt about
the Company's ability to continue as a going concern as described in Note 1 to
the consolidated financial statements), which is incorporated by reference in
this prospectus and elsewhere in the registration statement. Our financial
statements and schedule are incorporated by reference in reliance on Ernst &
Young LLP's report, given on their authority as experts in accounting and
auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file reports, proxy statements and other information with the
Commission, in accordance with the Securities Exchange Act of 1934. You may read
and copy our reports, proxy statements and other information filed by us at the
public reference facilities of the Commission in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for
further information about the public reference rooms. Our reports, proxy
statements and other information filed with the Commission are available to the
public over the Internet at the Commission's World Wide Web site at
http://www.sec.gov.
-14-
<PAGE>
The Commission allows us to "incorporate by reference" the information we
filed with them, which means that we can disclose important information by
referring you to those documents. The information incorporated by reference is
considered to be a part of this prospectus, and information that we file later
with the Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
by us with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act until our offering is complete:
. Annual Report on Form 10-K for the fiscal year ended September 30,
1999,
. Quarterly Reports on Form 10-Q for the fiscal quarters ended December
29, 1999, April 2, 2000 and July 2, 2000; and
. Current Reports on Form 8-K, filed February 7, 2000 and March 13,
2000.
. The description of our common stock which is contained on our
Registration Statement on Form 8-A filed with the Commission on
September 6, 1991 pursuant to Section 12 of the Exchange Act,
including any amendment or report filed for the purpose of updating
any such description.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Investor Relations Department
Read-Rite Corporation
44100 Osgood Road
Fremont, California 94539
(510) 683-7676
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these securities in any state where the offer is not permitted. You
should not assume the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of those
documents.
-15-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Securities and Exchange Commission registration fee............. $ 20,000
Fees and expenses of counsel.................................... 10,000
Fees and expenses of accountants................................ 17,000
Blue sky fees and expenses...................................... 1,000
Miscellaneous................................................... 2,000
--------
Total.......................................................... $ 40,000
========
Except for the Securities and Exchange Commission registration fee, all of
the foregoing expenses have been estimated. All of the above expenses will be
paid by Read-Rite.
Item 15. Indemnification of Directors and Officers.
Read-Rite's Certificate of Incorporation (the "Certificate") limits, to the
maximum extent permitted by Delaware law, the personal liability of directors
for monetary damages for their conduct as a director. Read-Rite's Bylaws provide
that Read-Rite shall indemnify its officers and directors and may indemnify its
employees and other agents to the fullest extent permitted by law.
Section 145 of the Delaware General Corporation Law ("Delaware Law")
provides that a corporation may indemnify a director, officer, employee or agent
made a party to an action by reason of the fact that he was a director, officer,
employee or agent of the corporation or was serving at the request of the
corporation against expenses actually and reasonably incurred by him in
connection with such action if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation and with respect to any criminal action, had no reasonable cause to
believe his conduct was unlawful.
Delaware Law does not permit a corporation to eliminate a director's duty
of care, and the provisions of the Certificate have no effect on the
availability of equitable remedies such as injunction or rescission, based upon
a director's breach of the duty of care. Insofar as indemnification for
liabilities arising under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), may be permitted to foregoing provisions and agreements, the
Registrant has been informed that in the opinion of the staff of the Commission
such indemnification is against public policy as expressed in the Exchange Act
and is therefore unenforceable.
Item 16. Exhibits.
Exhibit Number Description
-------------- -----------------------------------------------------------------
4.2 Form of Stock Purchase Agreement between Read-Rite Corporation
and the State of Wisconsin Investment Board, dated August 31,
2000.
4.3 Form of Stock and Warrant Purchase Agreement between Read-Rite
Corporation and Tyco Sigma Limited, dated September 1, 2000.
4.4 Form of Warrant to Purchase Common Stock.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Counsel to the Registrant.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Counsel to the Registrant (included in Exhibit 5.1).
II-1
<PAGE>
24.1 Power of Attorney (reference is made to page II-3)
Item 17. Undertakings.
(a) The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's Annual
Report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Milpitas, State of California, on October 13, 2000.
READ-RITE CORPORATION
By: /s/ Alan S. Lowe
------------------------------------
Alan S. Lowe
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Alan S.
Lowe and John T. Kurtzweil and each of them, as attorneys-in-fact, each with the
power of substitution, for him or her in any and all capacities, to sign any
amendment to this Registration Statement and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting to said attorneys-in-fact, and each of them, full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all interests and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact or either of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
---------------------------------------- ---------------------------------------- --------------------------
<S> <C> <C>
/s/ Alan S. Lowe president and Chief Executive Officer October 13, 2000
---------------------------------------- (Principal Executive Officer) and
Alan S. Lowe Director
/s/ John T. Kurtzweil Senior Vice President and Chief October 13, 2000
---------------------------------------- Financial Officer (Principal Financial
John T. Kurtzweil Officer)
/s/ Cyril J. Yansouni Chairman of the Board of Directors October 13, 2000
----------------------------------------
Cyril J. Yansouni
/s/ William J. Almon Director October 13, 2000
----------------------------------------
William J. Almon
/s/ Michael L. Hackworth Director October 13, 2000
----------------------------------------
Michael L. Hackworth
/s/ Mathew J. O'Rourke Director October 13, 2000
----------------------------------------
Mathew J. O'Rourke
/s/ Dr. Robert M. White Director October 13, 2000
----------------------------------------
Dr. Robert M. White
</TABLE>
II-3
<PAGE>
READ-RITE CORPORATION
REGISTRATION STATEMENT ON FORM S-3
----------------------------------
INDEX TO EXHIBITS
EXHIBIT INDEX
Exhibit
Number Description
------------- -----------------------------------------------------------------
4.2 Stock Purchase Agreement between Read-Rite Corporation and the
State of Wisconsin Investment Board, dated August 31, 2000.
4.3 Stock and Warrant Purchase Agreement between Read-Rite
Corporation and Tyco Sigma Limited, dated September 1, 2000.
4.4 Warrant to Purchase Common Stock.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Counsel to the Registrant.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Counsel to the Registrant (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-3).
