SAN JOSE, Calif., July 26 /PRNewswire-FirstCall/ -- Komag,
Incorporated (NASDAQ:KOMG), a leading independent supplier of
thin-film media for disk drives, today announced record revenue and
diluted earnings per share of $233.6 million and $1.21,
respectively, for the second quarter of 2006. These financial
results represent a 35% increase in revenue and a 32% increase in
diluted earnings per share over the same period last year. (Logo:
http://www.newscom.com/cgi-bin/prnh/19990816/KOMGLOGO ) First
quarter 2006 revenue and diluted earnings per share were $208.5
million, and $1.09, respectively. Revenue and diluted earnings per
share in the second quarter of 2005 were $172.7 million and $0.92,
respectively. T.H. Tan, Komag's Chief Executive Officer stated,
"Overall market demand for our products remained very strong in the
second quarter of 2006. We are extremely proud of our ability to
deliver another record quarter with a 12% increase in revenue and
an 11% increase in diluted earnings per share over the prior
quarter. This is the eighth consecutive quarter of both increasing
revenue and net income for Komag." "The second quarter was an
outstanding quarter for Komag in many ways. Not only did we achieve
record revenue and diluted earnings per share, we also
significantly increased our manufacturing capacity and ramped to
volume a number of new products during the quarter. In addition,
our customer base and product mix changed significantly with
Seagate's acquisition of Maxtor. This obviously could not have
happened as smoothly as it did without the extraordinary efforts of
the entire Komag team. I would like to take this opportunity to
thank all of the Komag employees for this outstanding achievement,"
said Mr. Tan. Second Quarter Review Sales to Western Digital,
Seagate/Maxtor, and Hitachi Global Storage Technologies accounted
for 38%, 32% and 26% of total revenue in the second quarter of
2006, respectively. Total finished disk shipments were 36.6 million
in the second quarter of 2006. High capacity 3.5-inch advanced
disks at storage capacities of 120GB and greater including
shipments of 160GB disks represented approximately 44% of Komag's
total finished disk shipments in the second quarter of 2006. These
disks are primarily targeted for multi-platter consumer
applications. These rapidly growing applications include personal
video recorders (PVRs), digital video recorders (DVRs), high
definition television (HDTV), external storage, gaming and other
home entertainment devices. Disks for high-end server drives
represented 5% of finished disk shipments during the second quarter
of 2006. Other revenue, which includes sales of aluminum
substrates, nickel-plated polished aluminum substrates and textured
substrates, accounted for 10% of total revenue in the second
quarter of 2006. Komag is the world's largest hard disk aluminum
substrate manufacturer. Disk substrates are primarily produced for
internal use in the manufacture of finished disks. In addition, the
high quality of Komag's substrates has led to continuing market
opportunities to sell substrates externally. Business Outlook
"Current expectations for 2006 are that overall demand for our
products remains strong and our factories continue to run at full
manufacturing capacity. Our capacity expansion plans remain on or
slightly ahead of schedule and we expect to have 39 million
finished disk capacity in the third quarter of 2006. Based on
current demand and our capacity expansion plans, we expect total
revenue in the third quarter of 2006 could increase approximately
5% from the record second quarter level. With continuing aggressive
product development and production transition activities for
multiple advanced products and customers, we currently expect net
margin to be in the range of 16% to 17% in the third quarter. In
addition, with Seagate's completion of the acquisition of Maxtor,
we expect that unit shipments of finished media to Seagate in the
third quarter of 2006 will increase from the combined unit shipment
level to Seagate/Maxtor in the second quarter of 2006. Further,
based on the anticipated demand for finished media and our capacity
expansion plans, we expect to exit the fourth quarter of 2006 with
capacity of 43 million disks per quarter. With this expected
capacity expansion and the current demand outlook, we would
anticipate a further increase in revenue during the traditionally
seasonally strong fourth quarter from the expected third quarter
level. Our current capacity expansion plans are based on strategic
supply agreements with each of our major customers. As part of
these agreements, Komag has made certain commitments to increase
capacity and our customers have agreed to purchase certain amounts
of media. In addition, our customers have agreed to make certain
pre-payments for media to help mitigate the cash impact of the
capital spending required for Komag to increase capacity. Komag is
committed to support the growing demand for digital storage by
maintaining our low cost manufacturing structure, providing
advanced technology products and providing rational capacity
increases 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. Tan. 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 third quarter of 2006 could be
approximately 5% higher than the second quarter of 2006 and
increase further in the fourth quarter of 2006, the Company's
expectation that net margin will be in the range of 16% to 17% in
the third quarter of 2006, the expectation that unit shipments to
Seagate in the third quarter of 2006 will increase over the
combined unit shipments to Seagate and Maxtor in the second quarter
of 2006, the Company's ability to increase capacity during 2006 and
the expected amounts and timing of such increased capacity, the
Company's ability to accurately estimate net margin, the market for
unit shipments of disks and disk drives and 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 Six Six Months Months Months Months Months Ended Ended
Ended Ended Ended July 2, April 2, July 3, July 2, July 3, 2006
2006 2005 2006 2005 Net Sales $233,627 $208,512 $172,740 $442,139
$313,015 Cost of Sales 168,659 149,419 124,660 318,078 229,872
Gross Profit 64,968 59,093 48,080 124,061 83,143 Gross Profit %
27.8% 28.3% 27.8% 28.1% 26.6% Research, Development, and
Engineering Expense 16,081 15,075 12,834 31,156 23,989 Selling,
General, and Administrative Expense 9,125 8,024 5,787 17,149 11,322
Gain on Disposal of Assets (26) (60) (1,360) (86) (1,749) Operating
Income 39,788 36,054 30,819 75,842 49,581 Interest Income 1,867
2,071 1,044 3,938 1,794 Interest Expense (441) (441) (442) (882)
(883) Other Income (Expense), Net 41 (476) (23) (435) (51) Income
before Income Taxes 41,255 37,208 31,398 78,463 50,441 Provision
for Income Taxes 966 971 1,505 1,937 2,021 Net Income $40,289
$36,237 $29,893 $76,526 $48,420 Net Income % 17.2% 17.4% 17.3%
17.3% 15.5% Basic Net Income per Share $1.35 $1.22 $1.04 $2.57
$1.70 Diluted Net Income per Share $1.21 $1.09 $0.92 $2.31 $1.51
Basic Shares Outstanding 29,883 29,685 28,834 29,784 28,549 Diluted
Shares Outstanding 33,544 33,499 32,971 33,525 32,669 KOMAG,
INCORPORATED Condensed Consolidated Balance Sheets (in thousands)
July 2, 2006 January 1, 2006 ASSETS (Unaudited) (NOTE 1) Cash, Cash
Equivalents, and Short-Term Investments $190,199 $205,034
Receivables, Net 127,978 116,217 Inventories 75,421 54,000 Prepaid
Expenses and Deposits 1,370 1,846 Total Current Assets 394,968
377,097 Property, Plant, and Equipment, Net 517,671 351,046 Other
Assets 3,212 3,308 TOTAL ASSETS $915,851 $731,451 LIABILITIES AND
STOCKHOLDERS' EQUITY Trade Accounts Payable $161,777 $97,901
Customer Advances 140,160 102,898 Other Liabilities 22,514 28,585
Total Current Liabilities 324,451 229,384 Long-Term Debt 80,500
80,500 Long-Term Deferred Rent 2,827 2,562 Stockholders' Equity
508,073 419,005 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $915,851
$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, of Komag,
Incorporated, +1-408-576-2000, or Web site: http://www.komag.com/
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