-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, iaW6Keds3OgZehrFyPvVeyO8Xw5tPVORVzGhMKss++28Xr6bctSLlWxEJ240nkv+ 9sXZ/Ff8uU9bATTk6MSLKQ== 0000891618-95-000411.txt : 19950721 0000891618-95-000411.hdr.sgml : 19950721 ACCESSION NUMBER: 0000891618-95-000411 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950702 FILED AS OF DATE: 19950719 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: KOMAG INC /DE/ CENTRAL INDEX KEY: 0000813347 STANDARD INDUSTRIAL CLASSIFICATION: MAGNETIC & OPTICAL RECORDING MEDIA [3695] IRS NUMBER: 942914864 STATE OF INCORPORATION: DE FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16852 FILM NUMBER: 95554659 BUSINESS ADDRESS: STREET 1: 275 S HILLVIEW DR CITY: MILPITAS STATE: CA ZIP: 95035 BUSINESS PHONE: 4089462300 MAIL ADDRESS: STREET 1: 275 S HILLVIEW DR CITY: MILPITAS STATE: CA ZIP: 95035 10-Q 1 FORM 10-Q FOR THE QUARTER ENDING JULY 2,1995 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JULY 2, 1995 COMMISSION FILE NUMBER 0-16852 KOMAG, INCORPORATED (REGISTRANT) INCORPORATED IN THE STATE OF DELAWARE I.R.S. EMPLOYER IDENTIFICATION NUMBER 94-2914864 275 SOUTH HILLVIEW DRIVE, MILPITAS, CALIFORNIA 95035 TELEPHONE: (408) 946-2300 INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO ON JULY 2, 1995, 23,379,829 SHARES OF THE REGISTRANT'S COMMON STOCK, $0.01 PAR VALUE, WERE ISSUED AND OUTSTANDING. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 INDEX KOMAG, INCORPORATED
PAGE NO. -------- PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (Unaudited) Consolidated income statements -- Three- and six-months ended July 2, 1995, and July 3, 1994......................................................... 3 Consolidated balance sheets -- July 2, 1995, and January 1, 1995......... 4 Consolidated statements of cash flows -- Six months ended July 2, 1995, and July 3, 1994......................................................... 5 Notes to consolidated financial statements -- July 2, 1995............... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................ 7 PART OTHER INFORMATION II.... Item 1. Legal Proceedings........................................................ 10 Item 2. Changes in Securities.................................................... 10 Item 3. Defaults Upon Senior Securities.......................................... 10 Item 4. Submission of Matters to a Vote of Security Holders...................... 10 Item 5. Other Information........................................................ 11 Item 6. Exhibits and Reports on Form 8-K......................................... 11 SIGNATURES.......................................................................... 12
2 3 PART I. FINANCIAL INFORMATION KOMAG, INCORPORATED CONSOLIDATED INCOME STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED -------------------- --------------------- JULY 2 JULY 3 JULY 2 JULY 3 1995 1994 1995 1994 -------- ------- -------- -------- Net sales.......................................... $120,807 $97,774 $225,870 $195,475 Cost of sales...................................... 74,787 67,877 147,083 132,690 -------- ------- -------- -------- GROSS PROFIT............................. 46,020 29,897 78,787 62,785 Operating expenses: Research, development and engineering............ 5,947 5,488 12,012 10,813 Selling, general and administrative.............. 10,496 6,391 18,038 13,916 -------- ------- -------- -------- 16,443 11,879 30,050 24,729 -------- ------- -------- -------- OPERATING INCOME......................... 29,577 18,018 48,737 38,056 Other income (expense): Interest income.................................. 1,130 801 2,164 1,518 Interest expense................................. (584) (770) (1,198) (1,622) Other, net....................................... 828 (285) 444 152 -------- ------- -------- -------- 1,374 (254) 1,410 48 Income before income taxes, minority interest, and equity in joint venture income................... 30,951 17,764 50,147 38,104 Provision for income taxes......................... 7,737 5,035 12,537 11,050 -------- ------- -------- -------- Income before minority interest and equity in joint venture income................................... 23,214 12,729 37,610 27,054 Minority interest in net income of consolidated subsidiary....................................... 456 259 871 407 Equity in net income of unconsolidated joint venture.......................................... 603 1,484 1,502 2,751 -------- ------- -------- -------- NET INCOME............................... $ 23,361 $13,954 $ 38,241 $ 29,398 ======== ======= ======== ======== Net income per share............................... $ 0.96 $ 0.61 $ 1.59 $ 1.29 ======== ======= ======== ======== Number of shares used in per share computation..... 24,234 22,822 23,985 22,758 ======== ======= ======== ========
See notes to consolidated financial statements. 3 4 KOMAG, INCORPORATED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
JULY 2 JANUARY 1 1995 1995 --------- --------- (UNAUDITED) (NOTE) ASSETS Current Assets Cash and cash equivalents............................................ $ 79,173 $ 47,329 Short-term investments............................................... 17,000 46,619 Accounts receivable less allowances of $2,380 in 1995 and $2,223 in 1994.............................................................. 56,259 44,778 Inventories: Raw materials..................................................... 18,916 15,030 Work-in-process................................................... 4,391 5,652 Finished goods.................................................... 1,958 3,419 --------- --------- Total inventories............................................ 25,265 24,101 Prepaid expenses and deposits........................................ 2,058 1,611 Deferred income taxes................................................ 7,069 7,069 --------- --------- Total current assets......................................... 186,824 171,507 Investment in Unconsolidated Joint Venture............................. 28,805 22,653 Property, Plant and Equipment Land................................................................. 4,360 4,360 Building............................................................. 34,484 33,322 Equipment............................................................ 355,364 294,626 Furniture............................................................ 5,570 4,711 Leasehold Improvements............................................... 47,388 45,633 --------- --------- 447,166 382,652 Less allowances for depreciation and amortization.................... (181,728) (153,769) --------- --------- Net property, plant and equipment............................ 265,438 228,883 Deposits and Other Assets.............................................. 893 1,052 --------- --------- $ 481,960 $ 424,095 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Trade accounts payable............................................... $ 23,160 $ 17,842 Accounts payable to related parties.................................. 2,791 2,354 Accrued compensation and benefits.................................... 21,292 17,913 Other liabilities.................................................... 1,451 1,665 Income taxes payable................................................. 5,402 271 Current portion of long-term debt.................................... 11,357 13,232 --------- --------- Total current liabilities.................................... 65,453 53,277 Long-term Debt, less current portion................................... 11,667 16,250 Deferred Income Taxes.................................................. 18,725 18,725 Other Long-term Liabilities............................................ 511 548 Minority Interest in Consolidated Subsidiary........................... 4,671 4,080 Stockholders' Equity Preferred stock...................................................... -- -- Common stock......................................................... 234 229 Additional paid-in capital........................................... 245,093 238,262 Retained earnings.................................................... 125,031 86,790 Accumulated foreign currency translation adjustments................. 10,575 5,934 --------- --------- Total stockholders' equity................................... 380,933 331,215 --------- --------- $ 481,960 $ 424,095 ========= =========
- --------------- Note: The balance sheet at January 1, 1995 has been derived from the audited financial statements at that date. See notes to consolidated financial statements. 4 5 KOMAG, INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
SIX MONTHS ENDED --------------------- JULY 2 JULY 3 1995 1994 -------- -------- OPERATING ACTIVITIES Net income........................................................... $ 38,241 $ 29,398 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization..................................... 28,822 22,633 Provision for losses on accounts receivable....................... (73) 134 Equity in net income of unconsolidated joint venture.............. (1,502) (2,751) Loss on disposal of equipment..................................... 480 594 Deferred rent..................................................... (37) 25 Minority interest in net income of consolidated subsidiary........ 871 407 Changes in operating assets and liabilities: Accounts receivable............................................. (11,408) 1,560 Inventories..................................................... (1,164) 7,842 Prepaid expenses and deposits................................... (456) 1,384 Trade accounts payable.......................................... 5,318 (3,279) Accounts payable to related parties............................. 437 (379) Accrued compensation and benefits............................... 3,379 (435) Other liabilities............................................... (214) (560) Income taxes payable............................................ 5,131 3,181 Restructuring liability......................................... -- (14,125) -------- -------- Net cash provided by operating activities.................... 67,825 45,629 INVESTING ACTIVITIES Acquisition of property, plant and equipment......................... (65,970) (35,486) Purchases of short-term investments.................................. (6,525) (42,121) Proceeds from short-term investments at maturity..................... 36,144 47,948 Proceeds from disposal of equipment.................................. 113 2,470 Deposits and other assets............................................ 159 285 -------- -------- Net cash used in investing activities........................ (36,079) (26,904) FINANCING ACTIVITIES Increase in notes payable............................................ -- 1,500 Payments of notes payable............................................ -- (4,500) Payments of long-term obligations.................................... (6,458) (6,280) Sale of Common Stock, net of issuance costs.......................... 6,836 6,336 Distribution to minority interest holder............................. (280) (280) -------- -------- Net cash provided by (used in) financing activities.......... 98 (3,224) Increase in cash and cash equivalents........................... 31,844 15,501 Cash and cash equivalents at beginning of year....................... 47,329 27,159 -------- -------- Cash and cash equivalents at end of period........................... $ 79,173 $ 42,660 ======== ========
See notes to consolidated financial statements. 5 6 KOMAG, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JULY 2, 1995 NOTE 1 -- BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three- and six-month periods ended July 2, 1995 are not necessarily indicative of the results that may be expected for the year ending December 31, 1995. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended January 1, 1995. The Company uses a 52-53 week fiscal year ending on the Sunday closest to December 31. The three-month reporting periods for the comparable years included in this report are each comprised of thirteen weeks. NOTE 2 -- INVESTMENT IN DEBT SECURITIES The Company invests its excess cash in high-quality, short-term debt and equity instruments. Short-term investments consist primarily of AAA-rated, municipal auction-rate preferred stock with maturities greater than 90 days. None of the Company's investments have maturities greater than one year. The following is a summary of the Company's investments by major security type at amortized cost which approximates its fair value:
JANUARY JULY 2, 1, 1995 1995 --------- -------- (IN THOUSANDS) State and local government securities................................... $80,009 $70,765 Corporate debt securities............................................... 5,250 2,417 Mortgage-backed securities.............................................. 18,133 10,677 -------- ------- $103,392 $83,859 ======== ======= Amounts included in cash and cash equivalents........................... $86,392 $37,240 Amounts included in short-term investments.............................. 17,000 46,619 -------- ------- $103,392 $83,859 ======== =======
The Company utilizes zero-balance accounts and other cash management tools to invest all available funds including bank balances in excess of book balances. NOTE 3 -- INCOME TAXES The estimated annual effective income tax rate for 1995 of 25% is lower than the 1995 combined federal and state statutory rate of 41% and the effective income tax rate for 1994 of 30%. The Company's wholly-owned thin-film media operation, Komag USA (Malaysia) Sdn., has been granted a tax holiday for a period of five years commencing in July 1993. The decrease in the effective income tax rate for 1995 relative to 1994 is primarily due to anticipated growth in the percentage of consolidated income to be derived from the Malaysian operation in 1995. NOTE 4 -- SUBSEQUENT EVENT On July 18, 1995, the Board of Directors of the Company authorized the Company to proceed with filing a Registration Statement with the Securities and Exchange Commission for the sale of up to 2,012,500 shares of the Company's Common Stock. 6 7 KOMAG, INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS: Revenue Net sales of thin-film media increased 24% in the second quarter of 1995 relative to the second quarter of 1994. Unit sales volume growth and an increase in the overall average selling price accounted for approximately two-thirds and one-third of this substantial net sales increase, respectively. The overall average selling price typically strengthens only as the result of product mix shifts to higher-priced, more technologically advanced product offerings. Price reductions for individual product offerings are characteristic of the thin-film media industry. The Company began a rapid transition to its current highest-density product offering (1800 Oe) in the fourth quarter of 1994. Sales of this product accounted for 61% of unit sales in the second quarter of 1995. The higher sales mix of 1800 Oe product and a favorable pricing environment arising from an industry shortage of this product resulted in smaller than normal price reductions for individual product offerings and strengthened the overall average selling price in the second quarter of 1995 relative to the second quarter of 1994. Unit sales of the Company's highest density product offering in the second quarter of 1994 (1600 Oe) accounted for approximately 67% of net sales in the quarter, but revenues were adversely affected by pricing as industry supply of this product met or exceeded demand. In addition to sales of its internally produced disk products, the Company resells products manufactured by its Japanese joint venture, Asahi Komag Co., Ltd. ("AKCL"). Distribution sales of thin-film media manufactured by AKCL were $0.3 million in the second quarter of 1995 compared to $2.2 million in the second quarter of 1994. The Company expects that distribution sales of AKCL product will be minimal throughout 1995 as demand within the Japanese thin-film media market is expected to continue to absorb most of AKCL's production output. Net sales increased 16% in the first half of 1995 relative to the first half of 1994. Over three-quarters of the increase was due to higher unit sales volume. The overall average selling price increased between the comparable six-month periods due to the transition to 1800 Oe product and the favorable pricing environment arising from strong market demand. Distribution sales of AKCL manufactured thin-film media were $0.4 million in the first half of 1995 compared to $5.5 million in the first half of 1994. During the second quarter of 1995 three customers individually accounted for at least ten percent of consolidated net sales: Seagate Technology, Inc. (42%), Quantum Corporation (24%), and Hewlett-Packard Company (21%). The Company expects that it will continue to derive a substantial portion of its sales from a relatively few number of customers. The distribution of sales among customers may vary from quarter to quarter based on the match of the Company's product capabilities with specific disk drive programs of the customers. Increased production volume may occur due to increased effective capacity (additional production lines and/or reduced process cycle time) and improvements in manufacturing efficiencies (yields and/or equipment utilization). The increased unit production volume required to support the growth in unit sales in the second quarter of 1995 relative to the second quarter of 1994 was almost entirely achieved through an increase in effective production capacity. The Company has historically increased effective production capacity through implementation of process improvement programs designed to improve unit output and the addition of sputtering lines. Shortened process cycle times resulting from these process improvement programs accounted for nearly one-half of the increase in effective capacity in the second quarter of 1995 relative to the second quarter of 1994. Net physical capacity additions provided the remaining increase in unit production volume. The Company added its thirteenth, fourteenth and fifteenth sputtering lines in January 1994, August 1994 and March 1995, respectively. One of the Company's fifteen sputtering lines is exclusively devoted to research and development activities. In late 1994, the Company began a program to upgrade its sputtering machines to enhance product capabilities and shorten process cycle times. The Company expects one machine will be out 7 8 of production on a rotating basis for the next two years. Unit production provided by a slightly improved manufacturing yield mostly offset the unfavorable impact of lower equipment utilization in the second quarter of 1995 relative to the second quarter of 1994. An electrical power outage affecting most of the Malaysian island of Penang halted production at the Company's Penang facility for several days late in the second quarter of 1995 and contributed to the decrease in equipment utilization. Increased unit production volume in the first half of 1995 compared to the first half of 1994 was primarily achieved through higher effective capacity in the current year period. Approximately one-half of the effective capacity increase resulted from process cycle time reductions. Net physical capacity additions provided the remaining increase in effective capacity. The effects of slightly lower equipment utilization in the first half of 1995 relative to the first half of 1994 were partially offset by an improvement in manufacturing yields. The Company anticipates that overall unit production volume will continue to rise during the third and fourth quarters of 1995 but not necessarily at the same rate as between the first and second quarters of 1995. Assuming market demand continues to remain strong, the Company will remain production constrained during this time period. Gross Margin The gross margin percentage for the second quarter of 1995 increased substantially to 38.1% from 30.6% in the second quarter of 1994. The increase was attributable to the combination of a higher overall average selling price and a reduction in the overall average unit production cost, resulting primarily from shortened cycle times. The electrical power disruption in Malaysia partially offset the effects of these shortened cycle times on the average unit production cost. The Company believes it is adequately insured for this manufacturing disruption and has accrued for a settlement in other income. The gross margin percentage for the first half of 1995 increased to 34.9% from 32.1% for the first half of 1994. The increase was primarily attributable to the higher overall average selling price associated with the mix of 1800 Oe product. The positive effects of manufacturing efficiencies achieved during the first half of 1995 were offset in part by 1800 Oe production start-up costs incurred during the first quarter at the Company's Malaysian facility, by process equipment write-offs recorded for the cessation of the Company's magneto-optic disk product line, and by the effects of the electrical power disruption in Malaysia. The gross margin percentage for the second quarter of 1995 reached an historical high for the Company and increased markedly from the 31.2% achieved for the first quarter of 1995. The elimination of start-up costs associated with the production ramp of 1800 Oe products and the substantial on-going manufacturing efficiency improvements, combined with a rising overall average selling price due to strong market demand and an industry shortage of 1800 Oe disks, resulted in the record gross margin percentage. To the extent these factors continue, gross margins should continue to exceed the Company's historical levels. There can be no assurance, however, that industry demand for high performance 1800 Oe products will continue to outpace supply. In the event that market supply meets or exceeds demand or the Company is unable to continue to increase its production mix of 1800 Oe products, the Company's gross margin percentage would likely decrease. In the longer term the Company believes that the gross margin percentage may not be sustainable at these record high levels. Operating Expenses Research and development ("R&D") expenses increased 8% ($0.5 million) and 11% ($1.2 million) in the three- and six-month periods of 1995, respectively, compared to the comparable periods of 1994. The increases between these periods were mainly due to development costs for advanced thin-film media. Selling, general and administrative ("SG&A") expenses increased $4.1 million in both the second quarter of 1995 relative to the second quarter of 1994 and in the first half of 1995 relative to the first half of 1994. The increases were primarily due to higher provisions for the Company's bonus and profit sharing programs resulting from the substantially higher operating performance in the 1995 periods. Excluding provisions for bad debts and the Company's bonus and profit sharing programs, SG&A expenses increased approximately 8 9 $0.1 million between the three-month periods and $0.5 million between the six-month periods. Increases in administrative costs required to support the growth in the business accounted for the increase. Interest and Other Income/Expense Interest income increased $0.3 million (41%) in the second quarter of 1995 relative to the second quarter of 1994 and $0.6 million (43%) in the first half of 1995 relative to the first half of 1994. The increases were due primarily to higher interest rates in the current year periods. Average cash and short-term investment balances were relatively unchanged between the three- and six-month comparisons. Interest expense decreased $0.2 million (24%) in the second quarter of 1995 relative to the second quarter of 1994 and $0.4 million (26%) in the first half of 1995 relative to the comparable period in 1994 due to lower average outstanding debt balances in the current year periods. Other income increased $1.1 million in the second quarter of 1995 compared to the second quarter of 1994 and $0.3 million in the first half of 1995 relative to the first half of 1994. The increase between the three-month comparisons was primarily due to the accrual for an insurance recovery related to the electrical power disruption at the Company's Malaysian manufacturing facility. The increase between the six-month periods was the net effect of the insurance accrual and lower foreign currency gains at the Company's Malaysian operations in the first half of 1995. Income Taxes The estimated annual effective income tax rate for 1995 of 25% is lower than the 1995 combined federal and state statutory rate of 41% and the effective income tax rate for 1994 of 30%. The Company's wholly-owned thin-film media operation, Komag USA (Malaysia) Sdn., has been granted a tax holiday for a period of five years commencing July 1993. The decrease in the effective income tax rate for 1995 relative to 1994 is primarily due to anticipated growth in the percentage of consolidated income to be derived from the Malaysian operation in 1995. Minority Interest in KMT/Equity in Net Income of AKCL The minority interest in the net income of consolidated subsidiary represented Kobe Steel USA Holdings Inc's 45% share of Komag Material Technology, Inc.'s ("KMT's") net income. KMT recorded net income of $1.0 million and $1.9 million in the second quarter and first half of 1995, respectively, compared to $0.6 million and $0.9 million in the second quarter and first half of 1994, respectively. The Company records 50% of AKCL's net income as equity in net income of unconsolidated joint venture. AKCL reported net income of $1.2 million in the second quarter of 1995, down from $3.0 million in the second quarter of 1994. AKCL reported net income of $3.0 million for the first half of 1995 compared to $5.5 million for the first half of 1994. AKCL's functional currency is the Japanese yen and the Company translates AKCL's yen-based income statements to U.S. dollars at the average exchange rate for the period. The yen strengthened approximately 18% and 14% between the comparable three- and six-month periods, respectively. AKCL's net income would have been approximately $0.8 million and $2.3 million in the second quarter and first half of 1995, respectively, had the yen-based income statement been translated at the average rates in effect for the comparable 1994 periods. The differences between the 1994 results and the yen adjusted 1995 results for both the three- and six-month periods were attributable to the combination of lower operating performance and the continued partial writedown of AKCL's investment in Headway Technologies, Inc. AKCL recorded writedowns of $1.2 million and $2.2 million (net of tax) in the second quarter of 1995 and first half of 1995, respectively. AKCL will continue such write downs until Headway emerges from the development stage. These writedowns are a function of losses incurred at Headway. LIQUIDITY AND CAPITAL RESOURCES: Cash and short-term investments of $96.2 million at the end of the second quarter of 1995 increased $2.2 million from the end of the prior fiscal year. Consolidated operating activities generated $67.8 million in cash during the first half of 1995 and more than funded the Company's $66.0 million of capital spending during the six-month period. Sales of Common Stock under the Company's stock option and stock purchase 9 10 programs during this period generated $6.8 million, while repayments of long-term obligations used $6.5 million. Total capital expenditures for 1995 are currently planned at approximately $150 million. Construction of a 230,000 square-foot manufacturing plant on a 55-acre site in the east Malaysian state of Sarawak, capital expenditures associated with process improvements in the U.S. and Malaysian facilities, installation of two additional sputtering lines, and payments on an additional sputtering line (expected to be installed in Malaysia in 1996) are the major components of the capital plan. Non-cancellable commitments at July 2, 1995 total approximately $80 million. The Company believes that, in order to achieve its long-term expansion objectives and maintain and enhance its competitive position, it will need significant additional financial resources over the next several years for capital expenditures, working capital and research and development. The Company has recently announced its intention to proceed with the registration and public offering of up to 2,012,500 shares of the Company's Common Stock. During the two-year period of 1995 and 1996, the Company expects to spend approximately $400 million to add production capacity at its existing facilities, add a new U.S. manufacturing facility, and begin construction of a southeast Asian facility. While the Company has potential cash resources to fund these expenditures through a combination of the proceeds of the anticipated public offering, its existing cash balances, cash flow from operations, and funds available from existing bank lines of credit, new debt or equity financing may be required to fund this level of capital expenditures. If the Company is unable to obtain sufficient capital it could be required to reduce its capital equipment and research and development expenditures which could materially adversely affect the Company's results of operations. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS -- Not Applicable. ITEM 2. CHANGES IN SECURITIES -- Not Applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES -- Not Applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -- (a) The Annual Meeting of Stockholders was held on May 24, 1995. (b) The meeting included the election of the Board of Directors, submitted as Item No. 1, whose names are as follows: Tu Chen Stephen C. Johnson Craig R. Barrett Chris A. Eyre Irwin Federman George A. Neil Max Palevsky Anthony Sun Masayoshi Takebayashi (c) Other matters voted upon at the stockholders meeting were: Item No. 2, Approval of Amendments to Restated 1987 Stock Option Plan; and Item No. 3, Ratification of the Selection of Ernst & Young LLP as the Company's Independent Auditors for the year ended December 31, 1995. 10 11 Shares of Common Stock voted were as follows: Item No. 1 (Election of Board of Directors)
TOTAL VOTE FOR TOTAL VOTE WITHHELD EACH DIRECTOR FROM EACH DIRECTOR -------------- -------------------- Tu Chen............................................ 20,076,957 216,301 Stephen C. Johnson................................. 20,077,097 216,161 Craig R. Barrett................................... 20,134,097 159,161 Chris A. Eyre...................................... 20,133,897 159,361 Irwin Federman..................................... 20,134,047 159,211 George A. Neil..................................... 20,077,097 216,161 Max Palevsky....................................... 20,133,847 159,411 Anthony Sun........................................ 20,133,597 159,661 Masayoshi Takebayashi.............................. 20,076,928 216,330
BROKER FOR AGAINST ABSTAIN NON-VOTE ----------- ---------- -------- -------- Item No. 2 (Amendment to Restated 1987 Stock Option Plan)......................... 15,772,071 4,207,976 216,226 -- Item No. 3 (Selection of Independent Auditors).... 20,258,964 7,195 27,099 --
(d) Not Applicable. ITEM 5. OTHER INFORMATION -- Not Applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits -- Not Applicable. (b) Form 8-K -- Not Applicable. 11 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KOMAG, INCORPORATED (Registrant) By: /s/ WILLIAM L. POTTS, JR. William L. Potts, Jr. Vice President and Chief Financial Officer By: /s/ STEPHEN C. JOHNSON Stephen C. Johnson President and Chief Executive Officer July 18, 1995 12 EX-27.1 2 FDS SCHEDULE
5 0000813347 0 1000 U.S. DOLLARS 3-MOS DEC-31-1995 APR-03-1995 JUL-02-1995 1 79,173 17,000 58,619 2,360 25,265 186,824 447,166 181,728 481,960 65,453 11,667 234 0 0 380,699 481,960 120,807 120,807 74,787 74,787 16,443 (12) 584 30,951 7,737 23,361 0 0 0 23,361 0.96 0.96
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