- Revenue up 27% over prior year period SAN JOSE, Calif., April 25
/PRNewswire-FirstCall/ -- Komag, Incorporated (NASDAQ:KOMG), a
leading independent supplier of thin-film media for disk drives,
today announced revenue of $264.7 million and diluted earnings per
share of $0.99 for the first quarter of 2007. Revenue increased 27%
over the prior year's first quarter. Finished disk shipments
increased 25% in the first quarter of 2007 compared to the prior
year period and decreased 5% from the fourth quarter of 2006.
(Logo: http://www.newscom.com/cgi-bin/prnh/19990816/KOMGLOGO ) Tim
Harris, Komag's Chief Executive Officer stated, "The first quarter
of 2007 followed a fairly typical seasonal pattern. Overall demand
for disk drives and our media tends to be slower in the first half
of the calendar year. We shipped 39.8 million finished disks in the
first quarter of 2007, of which over 8.4 million or 21% of our
finished disk shipments were advanced PMR disks. PMR disk shipments
over the last two quarters totaled 9.7 million disks." Revenue in
the first quarter included sales of precious metals inventory
totaling $11.2 million. Gross margin for the first quarter was
negatively impacted by the high cost of precious metals primarily
used in the production of PMR media and an unfavorable Malaysian
Ringgit currency rate change. In March 2007, the Company issued
$250 million of 2.125% Convertible Subordinated Notes due in 2014.
The Company used approximately $125 million of the proceeds to buy
back 3,815,000 shares of the Company's common stock. The stock
repurchases were made under a $200 million stock buy back program
established by the Board of Directors in March 2007. On April 13,
2007, the Company completed its previously announced redemption of
its $80.5 million 2.0% Convertible Subordinated Notes due 2024 (the
"2.0% Notes"). Holders of all of the 2.0% Notes elected to convert
their notes into shares of the Company's common stock, in
accordance with the terms of the notes, rather than having their
notes redeemed and receiving the redemption price. In connection
with the conversion of the 2.0% Notes, the Company issued 3,049,234
shares of its common stock. These 3,049,234 shares of common stock
have been included in the number of diluted shares outstanding for
the earnings per share calculation since the 2.0% Notes were issued
in 2004. As such, the conversion of the 2.0% Notes into shares of
common stock will not impact the number of diluted shares
outstanding in the future. First Quarter Review Sales to Western
Digital, Seagate and Hitachi Global Storage Technologies accounted
for 37%, 37% and 21% of disk product (media and substrates) revenue
in the first quarter of 2007, respectively. Total finished disk
shipments were 39.8 million in the first quarter of 2007. High
capacity 3.5-inch advanced disks with storage capacities of 160GB
and above represented approximately 41% of our total finished disk
shipments in the first quarter of 2007. This included shipments of
over 8.4 million PMR disks. 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, and the sale of precious metals inventory,
accounted for 18% of our total revenue in the first quarter. Other
revenue, excluding the sale of precious metals inventory,
represented 14% of disk product revenue. Business Outlook "We
expect that revenue in the second quarter of 2007 will be down
approximately 8% to 10%, excluding the $11.2 million sale of
precious metals inventory in the first quarter of 2007. While we
normally plan for a seasonal decline in the second quarter, we
started the second quarter more slowly than normal as some
customers readjusted their plans to the current demand environment.
With our expected revenue level, the mix of finished media and
substrate sales and lower capacity utilization, our net margin is
expected to be in the range of 8% to 10% in the second quarter of
2007. Komag is continuing to ramp up our PMR media and we expect
shipments of this new technology product to grow significantly over
the course of 2007. We expect to qualify into a 65mm glass PMR
program as early as the second quarter of 2007," 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
for disk products (excluding the sale of precious metals inventory
in the first quarter) in the second quarter of 2007 is expected to
be down approximately 8% to 10% compared to the first quarter of
2007, the Company's expectations regarding product transition plans
and increase in the production of PMR products, the Company's
expectations for PMR media shipments and customer qualifications
(including glass media) during 2007, the Company's expectation
regarding the growth of the disk drive industry for 2007, the
Company's expectation that net margin will be in the range of 8% to
10% in the second quarter of 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 operating yield, cost and profitability targets,
adverse changes in the currency exchange rate for the Malaysian
ringgit, continued customer demand and the impact of demand
variation on factory utilization, the performance by the Company
and customers of their obligations under the respective increased
capacity arrangements, changes in demand, changes in the price and
availability of raw materials (including ruthenium which has
experienced significant price increases), the Company's ability to
increase 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, our 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 Months Three
Months Three Months Ended Ended Ended April 1, December 31, April
2, 2007 2006 2006 Net Sales $264,666 $255,929 $208,512 Cost of
Sales 205,660 194,088 149,419 Gross Profit 59,006 61,841 59,093
Gross Profit % 22.3% 24.2% 28.3% Research, Development, and
Engineering Expense 16,499 15,408 15,075 Selling, General, and
Administrative Expense 8,467 7,289 8,024 Gain on Disposal of Assets
(54) (145) (60) Operating Income 34,094 39,289 36,054 Interest
Income 1,459 1,510 2,071 Interest Expense (511) (441) (441) Other
Income (Expense), Net (5) 7 (476) Income before Income Taxes 35,037
40,365 37,208 Provision (Benefit) for Income Taxes 2,060 (6,144)
971 Net Income $32,977 $46,509 $36,237 Net Income % 12.5% 18.2%
17.4% Basic Net Income per Share $1.09 $1.54 $1.22 Diluted Net
Income per Share $0.99 $1.39 $1.09 Basic Shares Outstanding 30,166
30,138 29,685 Diluted Shares Outstanding 33,811 33,715 33,499
KOMAG, INCORPORATED Condensed Consolidated Balance Sheets (in
thousands) April 1, 2007 December 31, 2006 ASSETS (Unaudited) (NOTE
1) Cash, Cash Equivalents, and Short- Term Investments $253,458
$171,132 Receivables, Net 136,941 140,230 Inventories: Raw
Materials 130,993 78,701 Work In Process 17,368 15,900 Finished
Goods 11,240 9,580 Total inventories 159,601 104,181 Prepaid
Expenses and Deposits 2,437 2,119 Total Current Assets 552,437
417,662 Property, Plant, and Equipment, Net 538,890 542,585 Other
Assets 21,668 17,440 TOTAL ASSETS $1,112,995 $977,687 LIABILITIES
AND STOCKHOLDERS' EQUITY Trade Accounts Payable $148,769 $139,477
Customer Advances 101,139 127,181 Other Liabilities 15,651 25,412
Total Current Liabilities 265,559 292,070 Long-Term Debt 330,500
80,500 Other Long-Term Liabilities 3,677 3,091 Stockholders' Equity
513,259 602,026 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$1,112,995 $977,687 NOTE 1: The Condensed Consolidated Balance
Sheet at December 31, 2006 was derived from the audited financial
statements. KOMAG, INCORPORATED Condensed Consolidated Statements
Of Cash Flows (In thousands) Three Months Ended April 1, 2007 April
2, 2006 (Unaudited) (Unaudited) Operating Activities Net income
$32,977 $36,237 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation and amortization of
property, plant, and equipment 25,562 14,474 Other non-cash items
7,764 4,502 Changes in operating assets and liabilities (76,931)
3,520 Net cash provided by (used in) operating activities (10,628)
58,733 Investing Activities Acquisition of property, plant, and
equipment (24,655) (73,988) Short-term investments, net (20,500)
20,050 Other 98 34 Net cash used in investing activities (45,057)
(53,904) Financing Activities Proceeds from long-term obligations,
net of issuance costs 243,235 - Repurchase of common stock
(126,492) (1,049) Proceeds from sale of common stock, net 682 2,225
Net cash provided by financing activities 117,425 1,176 Effect of
exchange rate changes on cash and cash equivalents 86 - Increase in
cash and cash equivalents 61,826 6,005 Cash and cash equivalents at
beginning of period 129,632 99,984 Cash and cash equivalents at end
of period $191,458 $105,989
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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