SAN JOSE, Calif., Oct. 25 /PRNewswire-FirstCall/ -- Komag,
Incorporated (NASDAQ:KOMG), a leading independent supplier of
thin-film media for disk drives, today announced record revenue of
$239.6 million and diluted earnings per share of $1.04, for the
third quarter of 2006. These financial results represent a 33%
increase in revenue and a 7% increase in diluted earnings per share
over the same period last year. (Logo:
http://www.newscom.com/cgi-bin/prnh/19990816/KOMGLOGO ) Revenue and
diluted earnings per share for the nine month period ended October
1, 2006 were $681.7 million and $3.35, respectively, a 38% increase
in revenue and a 35% increase in diluted earnings per share for the
nine months ended October 1, 2006 compared to the same nine month
period of the prior year. Tim Harris, Komag's Chief Executive
Officer stated, "Overall market demand for our products has
continued to increase and we reached another record quarter of
revenue in the third quarter of 2006, as well as another solid
quarter of earnings. This is the ninth consecutive quarter of
increasing revenue for Komag. Our third quarter net income was
impacted by a slower shipment rate than expected early in the
quarter and compensation related expenses for executive
retirements." "In the third quarter of 2006, we continued to
achieve strong manufacturing performance while qualifying and
ramping new products. Further, we are very pleased to have
completed qualification and began initial shipments to a new
customer," said Mr. Harris. Net income and diluted earnings per
share for the third quarter of 2006 and the nine-month period ended
October 1, 2006 includes compensation charges (primarily non-cash
stock compensation) of $2.9 million and $6.0 million, respectively,
related to the retirement of certain executive officers. Third
Quarter Review Sales to Seagate, Western Digital and Hitachi Global
Storage Technologies accounted for 38%, 34% and 24% of total
revenue in the third quarter of 2006, respectively. Total finished
disk shipments were 38.1 million in the third quarter of 2006. High
capacity 3.5-inch advanced disks at storage capacities of 160GB
represented approximately 33% of total finished disk shipments in
the third quarter of 2006. Shipments of 120GB and greater disks
represented approximately 54% of Komag's total finished disk
shipments in the third quarter of 2006. These disks are primarily
targeted for high capacity desktop and multi-platter consumer
applications. These rapidly growing consumer applications include
personal video recorders (PVRs), digital video recorders (DVRs),
high definition television (HDTV), external storage, gaming and
other home entertainment devices. Other revenue, which includes
sales of aluminum substrates, nickel-plated polished aluminum
substrates and textured substrates, accounted for 10% of total
revenue in the third quarter of 2006. Komag is the world's largest
hard disk aluminum substrate manufacturer. While substrates are
primarily produced for internal use in the manufacture of finished
disks, the high quality of Komag's substrates has led to continuing
market opportunities to sell substrates externally to strategic
customers. Business Outlook "Komag is currently qualified and
shipping new perpendicular magnetic recording (PMR) media for
3.5-inch disk drives. We expect significant PMR media shipments in
the fourth quarter of 2006 and further expect that shipments will
continue to increase over the course of 2007. In addition to our
development activities on 95mm PMR media products, we are also
working on advanced PMR product designs for 65mm aluminum and glass
products for shipment during 2007. Current overall expectations for
the fourth quarter of 2006 are that demand for our products remains
strong and our factories are expected to run at near to full
manufacturing capacity. Based on current demand, we expect that
total revenue in the fourth quarter of 2006 could increase up to 5%
from the record third quarter level. We further expect that an
aggressive product transition will continue, including the ramping
of our PMR products. Based on our expected revenue and support for
the new advanced product transitions, net margin is expected to be
in the range of 15% to 17% in the fourth quarter of 2006. During
the fourth quarter of 2006, we expect to maintain our finished
media capacity at approximately 40 million disks per quarter. This
is below our previously expected year end exit rate of 43 million
disks per quarter. We maintain close coordination with our
customers and currently believe that 40 million disks is the
appropriate level of capacity to meet customer demand and achieve
near full capacity utilization for the fourth quarter. Komag is
committed to supporting the growing demand for digital storage by
maintaining our high quality, low cost manufacturing structure,
providing advanced technology products, excellent customer support
and providing rational capacity in conjunction with strategic
supply agreements with our customers, with the goals of growing our
business and providing financial returns to our stockholders," said
Mr. Harris. About Komag Founded in 1983, Komag is a leading
independent supplier of thin-film disks, the primary high-capacity
storage medium for digital data. Komag leverages the combination of
its world-class U.S. research and development center and Malaysian
manufacturing operations to produce disks that meet the
high-volume, stringent quality, low cost and demanding technology
needs of its customers. By enabling rapidly improving storage
density at ever-lower cost per gigabyte, Komag seeks to create
extraordinary value for consumers of computers, enterprise storage
systems and electronic appliances such as digital video recorders,
game boxes and consumer electronic storage systems. For more
information about Komag, visit Komag's Internet home page at
http://www.komag.com/ . The Investors section of the website
provides a variety of financial and investor information, including
an investor presentation. To request an investor packet, call
Komag's Investor Relations at 408-576-2901. Forward-Looking
Statements This press release contains certain "forward-looking"
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended, and are subject to the safe harbors created
thereby. These statements represent the Company's current judgment
and include, but are not limited to, the expectation that revenue
in the fourth quarter of 2006 could be up to 5% higher than the
third quarter of 2006, the Company's expectation that net margin
could be in the range of 15% to 17% in the fourth quarter of 2006,
the Company's expectations regarding its product transition plans
and increase in the production of its PMR products, the Company's
expectation regarding unit production capacity in the fourth
quarter of 2006, the Company's expectations for 3.5-inch PMR media
shipments in the fourth quarter of 2006 and in 2007 and shipments
of 95mm and 65mm PMR aluminum and glass shipments in 2007, the
Company's ability to accurately estimate costs, net margin, the
market for unit shipments of disks and disk drives, the Company's
belief in continued increased demand trends, and the benefits of
the Company's increased capacity arrangements with its customers
and market growth opportunities. The Company's actual results for
future periods could differ materially from those projected in such
forward-looking statements. Factors that could cause actual results
to differ include, but are not limited to, the Company's ability to
achieve its operating yield, cost and profitability targets,
changes in the currency exchange rate for the Malaysian ringgit as
a result of the managed float system, continued customer demand and
the impact of demand variation on factory utilization, the
performance by the Company and its customers of their obligations
under the respective increased capacity arrangements, changes in
demand as a result of Seagate's acquisition of Maxtor or otherwise,
the Company's ability to increase its capacity, variability in
demand and associated impact on average selling price of disks, the
Company's ability to satisfy customer qualification requirements
and meet shipping demands, the Company's expectation that industry
unit demand will continue to grow and not decline and the Company's
ability to produce new generation disks in volume and the other
factors described in the Company's reports filed with the
Securities and Exchange Commission, including, but not limited to,
its most recent Annual Report on Form 10-K and Quarterly Reports on
Form 10-Q. Komag undertakes no obligation to update forward-looking
statements to reflect events or circumstances occurring after the
date of such statements. KOMAG, INCORPORATED Consolidated Income
Statements (in thousands, except per share data) (Unaudited) Three
Three Three Nine Nine Months Months Months Months Months Ended
Ended Ended Ended Ended Oct. 1, July 2, Oct. 2, Oct. 1, Oct. 2,
2006 2006 2005 2006 2005 Net Sales $239,608 $233,627 $180,011
$681,747 $493,026 Cost of Sales 177,828 168,659 129,124 495,906
358,996 Gross Profit 61,780 64,968 50,887 185,841 134,030 Gross
Profit % 25.8% 27.8% 28.3% 27.3% 27.2% Research, Development, and
Engineering Expense 17,621 16,081 12,054 48,777 36,043 Selling,
General, and Administrative Expense 9,971 9,125 6,090 27,120 17,412
(Gain) Loss on Disposal of Assets (133) (26) 400 (219) (1,349)
Operating Income 34,321 39,788 32,343 110,163 81,924 Interest
Income 1,559 1,867 1,552 5,497 3,346 Interest Expense (441) (441)
(441) (1,323) (1,324) Other Income (Expense), Net 2 41 (297) (433)
(348) Income before Income Taxes 35,441 41,255 33,157 113,904
83,598 Provision for Income Taxes 943 966 1,175 2,880 3,196 Net
Income $34,498 $40,289 $31,982 $111,024 $80,402 Net Income % 14.4%
17.2% 17.8% 16.3% 16.3% Basic Net Income per Share $1.15 $1.35
$1.09 $3.72 $2.79 Diluted Net Income per Share $1.04 $1.21 $0.97
$3.35 $2.48 Basic Shares Outstanding 29,969 29,883 29,396 29,846
28,842 Diluted Shares Outstanding 33,565 33,544 33,381 33,538
32,969 KOMAG, INCORPORATED Condensed Consolidated Balance Sheets
(in thousands) October 1, 2006 January 1, 2006 ASSETS (Unaudited)
(NOTE 1) Cash, Cash Equivalents, and Short-Term Investments
$164,628 $205,034 Receivables, Net 151,684 116,217 Inventories
87,968 54,000 Prepaid Expenses and Deposits 1,637 1,846 Total
Current Assets 405,917 377,097 Property, Plant, and Equipment, Net
536,558 351,046 Other Assets 7,105 3,308 TOTAL ASSETS $949,580
$731,451 LIABILITIES AND STOCKHOLDERS' EQUITY Trade Accounts
Payable $149,997 $97,901 Customer Advances 142,534 102,898 Other
Liabilities 23,433 28,585 Total Current Liabilities 315,964 229,384
Long-Term Debt 80,500 80,500 Long-Term Deferred Rent 2,959 2,562
Stockholders' Equity 550,157 419,005 TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $949,580 $731,451 NOTE 1: The Condensed
Consolidated Balance Sheet at January 1, 2006 was derived from the
audited financial statements.
http://www.newscom.com/cgi-bin/prnh/19990816/KOMGLOGO
http://photoarchive.ap.org/ DATASOURCE: Komag, Incorporated
CONTACT: Kathy Bayless, Chief Financial Officer, +1-408-576-2000,
or Web site: http://www.komag.com/
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