READ-RITE ANNOUNCES FIRST FISCAL QUARTER 2000 RESULTS COMPANY COMPLETES GMR TRANSITION WITH SEQUENTIAL REVENUE GROWTH, REDUCED LOSSES AND ENTERS SECOND FISCAL QUARTER WITH STRONG BACKLOG
Read-Rite successfully completed the transition to GMR during the quarter, with GMR-based technology representing 74% of revenue. The company's drive for cost and yield improvements during this transition also produced promising results as evidenced by the significant reduction in the net loss for the December quarter as compared to the September quarter. Throughout the first fiscal quarter, Read-Rite announced the final qualifications and shipped in volume on the following significant GMR customer disk drive programs:
"The robust design of our GMR products led to these significant product announcements and, as a result, we now have one of the broadest customer program bases in recent company history. We are especially pleased to have Quantum back as a customer, shipping HGA's once again to one of the world's largest disk drive manufacturers," said Cyril J. Yansouni, chairman and chief executive officer. "We indicated that the emphasis on the December quarter was to complete our transition to GMR. As these product announcements demonstrate, we have successfully completed this transition with our factories producing over 10 million GMR heads during the first fiscal quarter of 2000 as compared to the 1 million GMR heads shipped in the September quarter," he added.
Read-Rite paid back $41.2 million under its bank credit facility during the December quarter, with total borrowings under the facility at $101.3 million. Accounts receivable balances increased by $31 million as the GMR ramp was completed during the December quarter, and inventory grew by $11.2 million from September levels as the company prepares for strong revenue growth in the second fiscal quarter. Read-Rite ended the quarter with cash balances of $114.2 million. With respect to its bank credit facility, the company obtained a waiver through February 25, 2000; consequently, the bank debt is treated as a current liability. As a result, the company's auditors have included an explanatory paragraph in their audit report filed with the fiscal year 1999 Form 10K which is being submitted today to the Securities and Exchange Commission. Read-Rite is currently in negotiation with the bank group to amend the facility and believes its ability to control expenditures and to secure financing will be sufficient to fund its operations throughout the current fiscal year. The company remains focused on the cost structure at its factories and will take appropriate actions to improve efficiency and productivity at these locations.
During the quarter, Read-Rite's tape head business also experienced sequential growth as the company announced final qualification and started to ship its multi-channel tape heads to Benchmark Tape Systems Corp. for its 40 GB DLT1 tape drive. The company believes it is well positioned for strong growth in the tape head business throughout fiscal year 2000 based on shipments to Benchmark, the company's existing leadership position in the Travan segment and the Quantum development agreement and planned production for their Super DLT program.
In November 1999, Read-Rite announced another areal density breakthrough, achieving 36 billion bits per square inch, or approximately 50 gigabytes per platter. Over the past 14 months, the company's advanced technology demonstrations have established new benchmarks in the industry for performance. Read-Rite's demonstrations have achieved over a 250% increase in areal density over the company's first record setting demonstration of 13.5 billion bits per square inch in September 1998. More significantly, the fully integrated GMR read/write heads used in these demonstrations were produced at the company's production facility in Fremont, California, on manufacturing equipment utilized for today's GMR programs.
With the transition to GMR completed, Read-Rite now enters the March quarter with strong demand for its products and expects strong sequential unit and revenue growth as the company ships in volume on the mainstream 10 GB per platter programs.
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 Milpitas, California and has operations in Japan, Thailand, the Philippines and Singapore. The company's home page on the world wide web can be reached at http://www.readrite.com.
This news release contains 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 the company's belief that its ability to control expenditures and to secure financing will be sufficient to fund its operations throughout the current fiscal year; the company is focused on the cost structure at its factories and will take appropriate actions to improve efficiency and productivity at these locations; the company's belief that it is well positioned for strong growth in the tape head business throughout fiscal year 2000 based upon shipments to Benchmark, the company's existing leadership position in the Travan segment and the Quantum development agreement and planned production for their SDLT program; the company's belief that it expects strong sequential unit and revenue growth as the company ships in volume on the mainstream 10 GB per platter programs. The company's actual results for future periods could differ materially from those projected in such forward-looking information. Factors that could cause actual results to differ include, but are not limited to: the current unfavorable industry conditions could worsen; the company's anticipated unit and revenue growth in the next fiscal quarter may not occur; demand for the company's products could weaken and lead to order cancellations or reschedules; the company's ability to achieve and maintain satisfactory yields on its products; the company may be unsuccessful in controlling its expenditures and in securing financing to fund its operations for the balance of the fiscal year; the competition may introduce products earlier and/or be more cost efficient than the company; the company's anticipated growth in its tape head business may not occur; 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. 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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