Hutchinson Technology Reports Third Quarter Results

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

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