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Document is copied.
Filed by Komag, Incorporated Pursuant to Rule 425 under the
Securities Act of 1933.
Subject Company: Komag, Incorporated
Commission File No. 333-58316
KOMAG, INCORPORATED
WEBSITE PRESENTATION MATERIAL
FIRST POSTED ON
MAY 3, 2001
On May 3, 2001 Komag posted the following presentation on its website:
[KOMAG LOGO]
KOMAG
INVESTOR OVERVIEW APRIL 2001
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FORWARD-LOOKING STATEMENTS
The following presentation 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, shipment volume, revenue,
net loss, utilization of facilities, future operating costs, the ability to move
manufacturing assets, and the cost and timing of such moves. 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 company's ability to successfully
consolidate manufacturing operations in Malaysia on time and on budget,
variability in demand for and average selling price of disks, the impact of
demand variation on factory utilization, the company's ability to achieve its
operating yield, cost and profitability targets, the company's ability to
satisfy customer qualification requirements at its Malaysian facilities, and
requirements for glass substrates. In addition, statements in this presentation
relating to the company's plan to restructure its outstanding debt, including a
proposed new debt financing from Malaysian sources, the exchange of convertible
bonds and the use of cash and bonds to settle certain of the company's existing
debt are subject to risks relating to the company's ability to complete the
transactions on acceptable terms, or at all, the timing of completion of the
transactions, and the company's ability to satisfy all of the conditions
precedent to the transactions. These and other risk factors are described in the
company's Registration Statement on Form S-4/S-3 (SEC Filing Nos. 333-58316 &
333- 58448), most recent Annual Report on Form 10-K and other periodic reports
filed by Komag with the Securities and Exchange Commission. Komag undertakes no
obligation to update forward-looking statements to reflect events or
circumstances occurring after the date of such statements.
Investor Overview - April 2001 Page 2 KOMAG
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KOMAG HIGHLIGHTS
Investor Overview - April 2001 Page 3 KOMAG
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KEYS TO KOMAG'S SUCCESS
- Experienced management team
- World's largest independent disk producer
- Successful integration with HMT
- Access to global customer base
- Leading technology
- Highly competitive and low cost structure
Investor Overview - April 2001 Page 4 KOMAG
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PARALLEL EFFORT
- - Return operations to profitability
- - Improve the capital structure
Investor Overview - April 2001 Page 5 KOMAG
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OPERATIONS UPDATE
Investor Overview - April 2001 Page 6 KOMAG
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HISTORICAL RESULTS OF OPERATIONS
Q1 00 Q2 00 Q3 00 Q4 00 Q1 01
------ ------ ------ ------ ------
Net Sales $ 80 $ 83 $ 84 $ 111 $ 88
Gross Margin ($) $ 13 $ 10 $ 10 $ 2 $ (6)
Gross Margin (%) 16% 12% 12% 2% (6)%
EBITDA w/o Restructuring $ 21 $ 16 $ 16 $ 5 $ (3)
Net Loss $ (5) $ (6) $ (13) $ (44) $ (51)
Net Loss w/o Restructuring $ (7) $ (7) $ (13) $ (36) $ (51)
Capital Expenditures $ (2) $ (2) $ (9) $ (15) $ (17)
Net Cash Flow $ 2 $ (17) $ (1) $ 26 $ (29)
Net Cash Flow w/o Restructuring $ 11 $ (11) $ (1) 28* $ (29)
Cash Balance $ 72 $ 55 $ 55 $ 81 $ 52
Units Sold 10.8 11.8 12.2 15.3 12.7
Disk ASP $ 6.93 $ 6.55 $ 6.53 $ 6.40 $ 6.35
EPS $(0.08) $(0.10) $(0.19) $(0.40) $(0.46)
EPS w/o Restructuring $(0.08) $(0.10) $(0.19) $(0.33) $(0.46)
- -------
* Includes $49 million acquired in HMT merger
Investor Overview - April 2001 Page 7 KOMAG
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IMPROVED INDUSTRY LANDSCAPE
Investor Overview - April 2001 Page 8 KOMAG
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WHAT HAPPENED?
- - Storage density growth outstripped demand for bits
- - The industry overbuilt its capacity leading to intense competition
- - Captive suppliers took market share to avoid losses
- - ECONOMICS 101: Oversupply resulted in falling prices
Investor Overview - April 2001 Page 9 KOMAG
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THE INDUSTRY IS RATIONALIZING OVERCAPACITY RESULTS IN FACTORY CLOSURES
- IBM closes Ireland factory (2001)
- AKCL closes (2001)
- MCI closed Japanese factory (2000)
- Komag/HMT merger (2000)
- Seagate closed Mexico substrate factory (2000)
- Seagate closed Tuas (Singapore) media factory (1999)
- Komag bought WD Ops/shut them down (1999)
- Stormedia bankruptcy (1998)
Investor Overview - April 2001 Page 10 KOMAG
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INDUSTRY CAPACITY DISKS PER QUARTER
[GRAPH]
[Bar graph presentation of industry capacity for media disks per quarter from
1997 to current. Source: as reported by TrendFocus for 1997-2000 data in its
annual reports, and current capacity data is based on Komag's estimates.]
Investor Overview - April 2001 Page 11 KOMAG
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KOMAG'S STRATEGY
Investor Overview - April 2001 Page 12 KOMAG
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DRIVE FUTURE IS BRIGHT
- Disks-per-drive stabilized on the desktop
- The market is growing, data storage requirements are doubling
every 12 months
- Growth will track demand for computers
- Alternative applications are materializing
- Such as, game boxes, peer-to-peer servers and personal video
recorders and personal TV (TiVo)
- IDC projects greater than 90% annual growth rate
- ECON 101:
- Prices have stabilized
- Industry will return to profitability
Investor Overview - April 2001 Page 13 KOMAG
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DEMAND WILL INCREASE IN THE FUTURE
[GRAPH]
[Bar graph presentation of demand for desktop disk drives and disks per drive,
showing increases in demand on a quarterly basis from Q1 99 to Q1 02. Source:
TrendFocus, IDC and Company.]
Investor Overview - April 2001 Page 14 KOMAG
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KOMAG'S COMPETITIVE ADVANTAGES
- World's largest independent supplier
- 13% total market share (33% independent)
- Leading technology and resources to hold that advantage
- Global customer breadth
- Lowest cost structure
- Sole U.S. merchant supplier
- Strong management
- Scalability
Investor Overview - April 2001 Page 15 KOMAG
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KOMAG'S STRATEGY
- Maintain leadership in high-end products
- Commit to advanced technology
- Strengthen collaborative relationships with leading head and disk
drive manufacturers
- Improve advanced manufacturing processes to drive economies of
scale
- Improve yields and reduce cost through quality and process
improvement
- Maintain competitive cost structure - utilize Malaysian operations
Investor Overview - April 2001 Page 16 KOMAG
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1Q01 SHIPMENTS BY SUPPLIER
[GRAPH]
[Bar graph presentation of media shipments in the disk drive industry by
supplier, including presentation of Komag shipments compared with those of
industry competitors, including Seagate, IBM, Fuji, Fujitsu, Maxtor, MCC, Showa,
Trace, Hoya, Hitachi, AKCI and other.]
Investor Overview - April 2001 Page 17 KOMAG
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1Q01 SHIPMENTS BY CUSTOMER
[GRAPH]
[Bar graph presentation of total media shipments by customer in the disk drive
industry, including presentation of Komag and AKCL shipments compared with those
of MKE, WD, Maxtor, Samsung, Fujitsu, Seagate, Toshiba, Hitachi, IBM, Excelstor,
Iomega.]
Investor Overview - April 2001 Page 18 KOMAG
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LEADING TECHNOLOGY ADVANTAGES
- Shipping 30 gigabytes ("GB") per platter
- Komag is the only fully qualified 30 GB source in the
industry
- Highest storage density disks available in the market today
- On schedule in qualifications of 40 GB and 60 GB per disk
programs
- Technology elements staged for next two years
- Rigorous demonstration of 63 Gb/sq in with Read-Rite
- Engaged with TDK/Headway in 130 Gb/sq in demonstration
- Developing a proprietary low-cost glass ("LCG") substrate
technology
Investor Overview - April 2001 Page 19 KOMAG
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OPERATING MODEL
Investor Overview - April 2001 Page 20 KOMAG
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OPERATING MODEL
- Komag's strategy includes locating production capacity in Malaysia
to achieve low manufacturing costs
- Anticipated fixed manufacturing costs at $35 million per
quarter compared with $52 million in the first quarter of
2001
- Sizing our Malaysian factories to run 16 - 17 million units per
quarter less than $5.00 per disk
- Approximately 1/2 fixed cost
- At current ASP: 20% - 25% gross margin
- Expect significant cash flow and healthier operating results
Investor Overview - April 2001 Page 21 KOMAG
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REPAIRING OUR CAPITAL STRUCTURE
Investor Overview - April 2001 Page 22 KOMAG
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CURRENT DEBT
- $209.2 million unsecured senior debt
- Due June 30, 2001
- $30.1 million promissory note to WDC
- Due April 8, 2002
- $9.3 million convertible note
- Due February 2005
- $230.0 million convertible bonds
- Due January 15, 2004
Investor Overview - April 2001 Page 23 KOMAG
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PROPOSED RESTRUCTURING
- $100 million Islamic bonds issued in Malaysia
- Exchange $230 million convertible bonds for $115 million new
convertible bonds
- Offer senior lenders $90 million cash + $___ new convertible bonds
as full settlement
- Offer WDC $___ new convertible bonds as full settlement
Investor Overview - April 2001 Page 24 KOMAG
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RISKS
- Explained fully in 10-K and S-4/S-3 filed with the SEC
- Difficult negotiation with senior lenders
- Uncertainty as to participation rate by convertible bond holders
- Must have viable capital structure to complete Malaysian
transaction
Investor Overview - April 2001 Page 25 KOMAG
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SUMMARY
- Our operational restructuring is on target and the results are
predictable
- Further reduced costs by moving manufacturing to Malaysia
ahead of schedule
- We have made a constructive proposal to our debt holders to
permanently repair our balance sheet
- Komag is on the path to succeed
Investor Overview - April 2001 Page 26 KOMAG
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[KOMAG LOGO]
KOMAG
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ADDITIONAL INFORMATION AND WHERE TO FIND IT
Komag has filed a Registration Statement on SEC Form S-4/S-3 in connection with
the proposed exchange offer involving the company's convertible bonds. Investors
and security holders are urged to read the Registration Statement carefully. The
Registration Statement and the enclosed preliminary prospectus contain important
information about Komag, the proposed financing strategies, the proposed terms
of the exchange offer, descriptions of the company's existing debt and the
proposed terms of the new convertible bonds. Investors and security holders will
be able to obtain free copies of the Registration Statement through the website
maintained by the U.S. Securities and Exchange Commission at http://www.sec.gov.
Free copies of the document may also be obtained from Komag by directing a
request through the Investor Relations portion of Komag's website at
http://www.komag.com or by mail to Komag, Incorporated, 1710 Automation Parkway,
San Jose, CA 95131, attention: Investor Relations, telephone: (408) 576-2000.
In addition to the Registration Statement, Komag files annual, quarterly and
special reports, proxy statements and other information with the Securities and
Exchange Commission. You may read and copy any reports, statements or other
information filed by Komag at the Commission's public reference rooms at 450
Fifth Street, N.W., Washington, D.C. 20549 or at any of the Commission's other
public reference rooms in New York, New York and Chicago, Illinois. Please call
the Commission at 1-800-SEC-0330 for further information on the public reference
rooms. Komag's filings with the Commission are also available to the public from
commercial document-retrieval services and at the website maintained by the
Commission at http://www.sec.gov.
ABOUT KOMAG:
Founded in 1983, Komag completed a merger with HMT Technology Corporation in
October 2000. The combined company is the world's largest independent supplier
of thin-film disks, the primary high-capacity storage medium for digital data in
computers and consumer appliances. Komag's advanced development capability and
high-volume, low-cost manufacturing expertise provide high quality, leading-edge
disk products at a low overall cost to its customers. These attributes enable
Komag to partner with customers in the execution of their time-to-market design
and time-to-volume manufacturing strategies. Supplementing its core disk
business, Komag has launched a diversification program that will leverage the
company's knowledge of magnetic recording and its ultra-high precision
manufacturing capabilities.
For more information about Komag, visit Komag's Internet home page at
http://www.komag.com or call Komag's Investor Relations 24-hour Hot Line at
888-66-KOMAG or 408-576-2901.