FOR IMMEDIATE RELEASE
READ-RITE EXITS FISCAL YEAR WITH POSITIVE GROSS MARGINS AND TARGETS DOUBLE-DIGIT REVENUE GROWTH AND PROFITABILITY FOR THE FIRST FISCAL QUARTER OF 2001
FREMONT, CA � November 1, 2000 -- Read-Rite Corporation (Nasdaq: RDRT) today reported for the fourth fiscal quarter, ended October 1, 2000, revenues of $146.0 million, a positive gross margin of $8.2 million, and a pro forma net loss and net loss per share of $16.1 million and $0.25, respectively. The pro forma results are approximately $21.6 million better than those of the third fiscal quarter�s pro forma results due primarily to increased efficiencies, lower costs, higher volume and improved average selling prices. For the fourth quarter, the pro forma results exclude a net gain of $3.0 million related to a change in the estimate upon the finalization of the restructuring charges booked in a previous quarter and a $29.3 million charge related to conversion of the 10% convertible subordinated bonds.
Under generally accepted accounting principles (�GAAP�), for the fiscal quarter ended October 1, 2000, Read-Rite Corporation reported a net loss and net loss per share of $42.5 million and $0.66, respectively, and for the fiscal year ended October 1, 2000, a net loss and net loss per share of $124.8 million and $2.26, respectively.
�I am gratified by the energy and accomplishments of our people and the progress we have made in all areas of the business during the last several quarters,� stated Alan S. Lowe, president and chief executive officer. �We have solidified our position as the technology leader with our superior performance on 20GB products; we have restructured and streamlined our manufacturing operations resulting in savings of approximately $80-$100 million per year; and we have improved our balance sheet by eliminating debt and increasing shareholder equity while at the same time reducing interest expense by approximately $20 million per year. Last but not least, we have identified and taken action to capitalize on an enormous opportunity in the fiber optics communications market with the establishment of Scion Photonics. All of these efforts now put us in position to achieve our goal of profitability.�
Despite the slow start to the fourth quarter, Read-Rite Corporation realized an 8.3% quarter-to-quarter growth in GMR head shipments for a total of approximately 19 million heads during the quarter. The increase was attributable mainly to qualifications on and volume shipments for several 20GB per platter customer programs. �Being early on these programs and obtaining qualifications during this past quarter position us to capture additional market share and, with it, to realize profitability in the December quarter,� said Alan S. Lowe.
On October 19, 2000, the company completed the automatic conversion of its outstanding 10% convertible subordinated notes due September 1, 2004. For convenience, the company has included a pro forma balance sheet showing the effect of the bond conversion. The conversion reduced long-term debt by $187.5 million. During the fourth fiscal quarter the company recorded a non-cash charge of approximately $29.3 million for the payment of the interest premium attached to the early conversion of the notes. The early conversion is expected to save approximately $20.0 million per year.
During the quarter the company also announced the formation of Scion Photonics, Inc., a new venture chartered to design, market and manufacture high-performance optical components. In October, Scion Photonics received the initial funding of $25 million from the company�s partners in Scion, Tyco Ventures and Integral Capital Partners. The company continues to improve and strengthen its Scion team with the recent hiring of Dr. Venkatesan Murali as chief operating officer. Dr. Murali said �Scion�s product and manufacturing strategies will feature products based on planar lightwave circuit and silicon optical board-based technology in addition to thin-film filter products in 2001. We also expect to offer leading-edge integrated planar photonic devices in the future. For all of Scion�s product offerings, we will focus on bringing the high volume manufacturing efficiencies that are routinely achieved in the semiconductor and thin-film head industries to the optical components arena. With the team we are assembling in the areas of optics design, process technology, and assembly automation, I am confident that Scion is well on its way to becoming one of the premier suppliers of optical components and subsystems in the industry."
BUSINESS OUTLOOK
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.
Read-Rite Corporation is one of the world's leading independent manufacturers of magnetic recording heads, head gimbal assemblies (HGAs) and head stack assemblies (HSAs) for disk drives and tape drives. The company is headquartered in Fremont, California and has operations in California, Thailand, and the Philippines, and has sales offices in Japan, Singapore and South Korea. The company's website is located at http://www.readrite.com. Read-Rite is also the majority shareholder of Scion Photonics, Inc. which designs, develops, manufactures and sells both custom and standard Dense Wavelength Division Multiplexers (DWDM) and other optical communication components to address the rapidly growing worldwide fiber-optic network expansion. The company is well funded by the backing of Read-Rite Corporation, Tyco Ventures and Integral Capital Partners. Scion's website is located at http://www.scionphotonics.com.
This news release may contain statements which include forward-looking information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended, and is subject to the "safe harbor" created by those sections. These statements include, but are not limited to: that the company will save $80-100 million per year from its restructured and streamlined manufacturing operations; that the company will reduce its interest expense by $20 million per year; that company will capture additional market share in the December quarter; that the company�s revenues for the first fiscal quarter of FY2001 will increase by 20% from the fourth quarter of FY2000; that the company�s gross margin percentage will be in the low teens in the December quarter; that the company will return to profitability in the first fiscal quarter of FY2001; that Scion will feature products based on planar lightwave circuit technology, silicon optical board-based technology, and thin-film technology in 2001; that Scion will offer leading-edge integrated planar photonic devices in the future; that Scion will bring high volume manufacturing efficiencies to the optical components arena; and that Scion will become one of the premier suppliers of optical components and subsystems in the industry. 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 may not realize some or all of the savings from its restructured operations; the company may have to enter into other financing arrangements which could reduce or eliminate the anticipated interest expense reduction; the competition may introduce products earlier and/or more cost effectively than the company; the company�s anticipated revenue growth in the next fiscal quarter may not occur due to a reduction, cancellation or rescheduling of orders from the company�s customers; the company�s anticipated gross margins and profitability for the next fiscal quarter may not be realized due to the company�s inability to sustain volume production cost-effectively and with satisfactory yields; Scion may be unsuccessful in developing, designing, manufacturing and assembling some or all of its planned optical component product offerings; and the other factors described in the company's reports filed with the Securities and Exchange Commission, including, but not limited to, its Annual Report on Form 10-K for fiscal 1999 and Quarterly Reports on Form 10-Q for the first, second and third quarters of Fiscal Year 2000 ended December 31, 1999, April 2, 2000 and July 2, 2000. Read-Rite undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of such statements.
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