Hutchinson Technology Reports Third Quarter Results Gross Profit Declines Sequentially on Lower Leverage and Temporary Operating Inefficiency Improved Financial Performance Expected in the Fourth Quarter HUTCHINSON, Minn., July 25, 2013 (GLOBE NEWSWIRE) -- Hutchinson Technology Incorporated (Nasdaq:HTCH) today reported suspension assembly shipments of 99.3 million for its fiscal third quarter ended June 30, 2013, up from 98.9 million in the preceding quarter and in line with the company's expectations. The company reported a net loss of $15.9 million, or $0.59 per share, on net sales of $61.3 million. The net loss for the quarter included a $3.4 million foreign currency loss, $750,000 of non-cash interest expense and $600,000 of site consolidation costs. Excluding these items, the company's fiscal 2013 third quarter net loss totaled $11.1 million, or $0.41 per share. In the preceding quarter, the company reported net income of $1.9 million, or $0.07 per diluted share, on net sales of $60.9 million. Results for the fiscal 2013 second quarter included a $5.0 million gain on debt extinguishment, a $2.0 million foreign currency gain, $800,000 of non-cash interest expense and $300,000 of severance and site consolidation costs. Excluding these items, the company's second quarter net loss was $4.0 million, or $0.16 per share. Rick Penn, Hutchinson Technology's president and chief executive officer, said the company's third quarter results reflected an expected reduction in gross profit on lower production volume due to inventory usage but that the company also experienced some short-term manufacturing inefficiencies. "We resolved the manufacturing issues by the end of the quarter and our operational indicators are now in line with our targets," said Penn. "We expect our efficiency and fixed cost leverage to improve in the fourth quarter on higher production volume." Gross profit in the fiscal 2013 third quarter was $1.4 million, or 2% of net sales, compared with $8.0 million, or 13.1% of net sales, in the second quarter. In the fiscal 2013 second quarter, gross profit benefited from higher levels of flexure and assembly production as the company built inventory to accommodate a product mix change and to ensure its ability to meet customer demand while transferring production capacity to its assembly operation in Thailand. The component inventory built in the second quarter was largely consumed during the third quarter, resulting in lower fixed cost leverage and reduced gross profit. In addition, the company incurred higher variable costs during the third quarter because of the previously-mentioned operating issues that reduced efficiencies on certain suspension assemblies. Average selling price in the fiscal 2013 third quarter was $0.594 compared to $0.595 in the second quarter. Dual-stage actuated (DSA) suspensions accounted for 20% of third quarter shipments, up from 12% in the preceding quarter. Output from the company's Thailand assembly operation accounted for 35% of assembly production in the fiscal 2013 third quarter and exceeded 40% of the company's assembly production by the end of the quarter. The company expects about 50% of assembly production to come from its Thailand operation in the fiscal 2013 fourth quarter. Cash and investments at the end of the 2013 third quarter totaled $37.5 million compared with $41.1 million at the end of the preceding quarter. During the quarter, the company repaid the $2.3 million balance on its revolving line of credit. Cash generated by operations in the third quarter totaled $1.0 million and capital spending in the quarter totaled $2.4 million. Regarding the company's outlook, Penn said the company expects its fiscal 2013 fourth quarter suspension assembly shipments to increase sequentially to 100 million to 110 million. "We expect a modest sequential increase in shipments as we benefit from our positions on new customer programs that are beginning to transition to higher volumes," said Penn. Average selling price in the fourth quarter is expected to be flat to up slightly as DSA suspensions increase to 25% to 30% of fourth quarter shipments. Fourth quarter gross profit is also expected to increase sequentially, benefiting from improved operating efficiency and fixed cost leverage on higher production volume. "We expect to be back on the path to improved financial performance in our fiscal fourth quarter," said Penn. "As part of our ongoing effort to be the industry's lowest cost producer of suspension assemblies, we will continue to reduce our costs by improving our manufacturing efficiency, transitioning more assembly production to Thailand and continuing to consolidate our U.S. operations." Hutchinson Technology to Host Conference Call The company will conduct a conference call and webcast for investors beginning at 4:00 p.m. Central Time today. Individual investors and news media may participate in the conference call live via the webcast, which will be available through the Investor Relations page on Hutchinson Technology's web site at www.htch.com/investors. Webcast participants will need to complete a brief registration form and should allow extra time before the webcast begins to register and, if necessary, download and install audio software. About Hutchinson Technology Hutchinson Technology is a global technology leader committed to creating value by developing solutions to critical customer problems. In the disk drive components market, the company is a key worldwide supplier of suspension assemblies for disk drives. The company's suspension assembly products help customers improve overall disk drive performance and meet the demands of an ever-expanding digital universe. In the medical device market, the company is focused on bringing new technologies and products to the market that provide information clinicians can use to improve the quality of health care and reduce costs. Cautionary Note Regarding Forward-Looking Statements This announcement contains forward-looking statements, including statements regarding demand for and shipments of disk drives, disk drive components and the company's products, product mix, pricing, production capability and costs, operating performance, operations in Thailand and the United States, cost reductions and financial results. The company does not undertake to update its forward-looking statements. These statements involve risks and uncertainties. The company's actual results could differ materially from those anticipated in these forward-looking statements as a result of changes in market demand and market consumption of disk drives or suspension assemblies, changes in demand for our products, market acceptance of new products, the company's ability to produce suspension assemblies at levels of precision, quality, volume and cost its customers require, changes in product mix, changes in customers yields, changes in storage capacity requirements, changes in expected data density, changes in the company's ability to operate its assembly operation in Thailand, changes in the company's ability to reduce costs and other factors described from time to time in the company's reports filed with the Securities and Exchange Commission. Hutchinson Technology Incorporated Condensed Consolidated Statements of Operations - Unaudited (In thousands, except per share data) Thirteen Weeks Ended Thirty-Nine Weeks Ended June 30, June 24, June 30, June 24, 2013 2012 2013 2012 Net sales $61,308 $61,005 $185,937 $184,963 Cost of sales 59,909 62,192 169,140 181,201 Gross profit (loss) 1,399 (1,187) 16,797 3,762 Research and development 4,102 4,159 10,926 12,386 expenses Selling, general and 5,585 6,509 17,967 21,532 administrative expenses Severance and site 638 -- 1,988 (711) consolidation expenses Debt refinancing costs -- 426 -- 3,926 Insurance recoveries, net of -- 3,647 -- (5,186) flood related costs Loss from operations (8,926) (15,928) (14,084) (28,185) Other (expense) income, net (3,424) (453) (442) 373 Gain on extinguishment of -- 5,897 4,986 5,897 long-term debt Interest Income 22 28 84 92 Interest expense (3,581) (3,970) (11,371) (12,535) Gain on short- and long-term -- 537 272 567 investments Loss before income taxes (15,909) (13,889) (20,555) (33,791) (Benefit) provision for income (43) 1 (34) 120 taxes Net loss $(15,866) $(13,890) $(20,521) $(33,911) Basic loss per share $(0.59) $(0.59) $(0.81) $(1.45) Diluted loss per share $(0.59) $(0.59) $(0.81) $(1.45) Weighted-average common shares 27,084 23,575 25,451 23,460 outstanding Weighted-average diluted 27,084 23,575 25,451 23,460 shares outstanding Hutchinson Technology Incorporated Condensed Consolidated Balance Sheets - Unaudited (In thousands, except shares data) June 30, September 30, 2013 2012 ASSETS Current assets: Cash and cash equivalents $36,285 $53,653 Short-term investments - restricted 1,200 1,200 Trade receivables, net 27,148 21,438 Other receivables 3,801 3,880 Inventories 46,365 41,432 Other current assets 5,270 7,203 Total current assets 120,069 128,806 Property, plant and equipment, net 187,442 202,468 Other assets 4,757 5,014 Total assets $312,268 $336,288 LIABILITIES AND SHAREHOLDERS' INVESTMENT Current liabilities: Current maturities of long-term debt, net of discount $-- $11,698 Current portion of capital lease 1,133 -- Accounts payable 16,934 13,982 Accrued expenses 8,653 6,350 Accrued compensation 10,158 9,656 Total current liabilities 36,878 41,686 Long-term debt, net of discount 122,258 125,232 Capital lease obligation 3,266 -- Other long-term liabilities 1,637 1,540 Shareholders' equity: Common stock $.01 par value, 100,000,000 shares authorized, 27,547,000 and 23,900,000 issued and outstanding 275 239 Additional paid-in capital 431,433 430,448 Accumulated other comprehensive loss (230) (129) Accumulated loss (283,249) (262,728) Total shareholders' equity 148,229 167,830 Total liabilities and shareholders' equity $312,268 $336,288 Hutchinson Technology Incorporated Condensed Consolidated Statements of Cash Flows - Unaudited (Dollars in thousands) Thirty-Nine Weeks Ended June 30, June 24, 2013 2012 Operating activities: Net loss $(20,521) $(33,911) Adjustments to reconcile net loss to cash provided by operating activities: Depreciation and amortization 29,476 29,378 Stock-based compensation 741 1,492 Gain on short- and long-term investments (272) (567) Loss on disposal of assets 125 388 Asset impairment charge -- 8,451 Non-cash interest expense 2,570 4,485 Gain on extinguishment of debt (4,986) (5,897) Severance and site consolidation expenses -- (1,741) Changes in operating assets and liabilities (4,065) 33,531 Cash provided by operating activities 3,068 35,609 Investing activities: Capital expenditures (15,037) (21,595) Proceeds from sale/leaseback of equipment 4,910 -- Change in restricted cash 1,889 (16) Purchases of marketable securities (1,200) (2,813) Sales / maturities of marketable securities 1,472 3,791 Cash used for investing activities (7,966) (20,633) Financing activities: Proceeds from issuance of common stock 280 -- Repayments of capital lease (511) -- Repayments of revolving credit line (176,271) (225,745) Proceeds from revolving credit line 176,271 215,336 Repayments of debt (23,470) (37,137) Proceeds from private placement of debt 11,590 39,400 Debt refinancing costs (359) (3,926) Cash used for financing activities (12,470) (12,072) Net (decrease) increase in cash and cash (17,368) 2,904 equivalents Cash and cash equivalents at beginning of period 53,653 57,554 Cash and cash equivalents at end of period $36,285 $60,458 Hutchinson Technology Incorporated Loss Per Share Calculation - Unaudited (In thousands, except per share data) Thirteen Weeks Ended Thirty-Nine Weeks Ended June 30, June 24, June 30, June 24, 2013 2012 2013 2012 Net loss (A) $(15,866) $(13,890) $(20,521) $(33,911) Weighted average common shares 27,084 23,575 25,451 23,460 outstanding (B) Dilutive potential common -- -- -- shares Weighted average common and diluted shares outstanding (C) 27,084 23,575 25,451 23,460 Basic loss per share [(A)/(B)] $(0.59) $(0.59) $(0.81) $(1.45) Diluted loss per share $(0.59) $(0.59) $(0.81) $(1.45) [(A)/(C)] Hutchinson Technology Incorporated Reconciliation of Non-GAAP to GAAP Financial Measures - Unaudited (In thousands, except per share data) Thirteen Weeks Ended June 30, March 31, June 24, 2013 2013 2012 Net (loss) income - GAAP $(15,866) $1,867 $(13,890) Subtract gain on extinguishment -- (4,986) (5,897) of debt Subtract foreign currency gain -- (1,980) -- Add foreign currency loss 3,368 -- 1,091 Add non-cash interest expenses 749 800 1,095 Add severance and site 638 332 -- consolidation expenses Add flood-related costs -- -- 3,647 Add debt refinancing costs -- -- 426 Net loss - Adjusted $(11,111) $(3,967) $(13,528) Net (loss) earnings per common share – GAAP: Basic (loss) earnings per share $(0.59) $0.07 $(0.59) Diluted (loss) earnings per share $(0.59) $0.07 $(0.59) Net (loss) earnings per common share – Adjusted: Basic (loss) earnings per share $(0.41) $(0.16) $(0.57) Diluted (loss) earnings per share $(0.41) $(0.16) $(0.57) Weighted average common and common equivalent shares outstanding: Basic 27,084 25,319 23,575 Diluted 27,084 26,555 23,575 Net (loss) earnings per common share basic and diluted, is calculated by dividing net income by weighted average common and common equivalent shares outstanding basic and diluted, respectively. CONTACT: INVESTOR CONTACT: Chuck Ives Hutchinson Technology Inc. 320-587-1605 MEDIA CONTACT: Connie Pautz Hutchinson Technology Inc. 320-587-1823 Hutchinson Technology Incorporated Logo
Hutchinson Technology Reports Third Quarter Results
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