Hutchinson Technology Incorporated (Nasdaq:HTCH) today reported a
net loss of $9.7 million, or $0.29 per share, on net sales of $62.4
million, for its fiscal second quarter ended March 29, 2015. The
net loss included $430,000 of non-cash interest expense and a
$140,000 foreign currency gain. Excluding these items, the
company's net loss for the fiscal 2015 second quarter was $9.4
million, or $0.28 per share.
In the preceding quarter, the company reported a net loss of
$9.9 million, or $0.32 per share, on net sales of $72.4 million.
The net loss included a $4.3 million loss on debt extinguishment,
$860,000 of non-cash interest expense, $640,000 of foreign currency
losses and $160,000 of site consolidation costs. Excluding these
items, the company's net loss for the fiscal 2015 first quarter was
$3.9 million, or $0.13 per share.
Compared with the preceding quarter, the company's suspension
assembly shipments declined 17% to 101.1 million. "We had
anticipated a seasonal decline in shipments in our second quarter,
but the decline was steeper than we expected, primarily due to
weakness in the personal computer market," said Rick Penn,
Hutchinson Technology's president and chief executive officer.
"While our current demand is still heavily weighted toward PC
applications, cloud and hyperscale applications are expected to
provide future growth for suspension assembly demand," said
Penn.
Gross profit in the fiscal 2015 second quarter totaled $6.3
million, or 10.0% of net sales, compared with $11.5 million, or
15.8% of net sales, in the preceding quarter. The decline resulted
from the lower volume in the quarter which reduced operating
leverage as the company curtailed production and managed inventory
down. Despite the reduced operating leverage, Penn said that
operating efficiency in the quarter remained strong in its
component and assembly operations. The company's Thailand
assembly operation accounted for 85% of assembly production in the
second quarter, up from 77% in the preceding quarter.
Regarding its shape memory alloy (SMA) optical image
stabilization (OIS) actuator, Penn said the company continues to
focus on optimizing manufacturing processes and refining product
designs in order to increase acceptance among smartphone and camera
module manufacturers. "As we work to win new programs, customer
interest in our SMA technology is encouraging," said
Penn. "The smartphone camera market is in the early phases of
adopting OIS technology, and as we've stated previously, we are
still in the initial stages of developing this new opportunity."
Total research and development expenses increased to $7.1 million
in the fiscal 2015 second quarter compared to $6.0 million in the
preceding quarter, with the increase attributable to additional
costs for OIS product and process development.
Cash and investments at the end of the fiscal 2015 second
quarter totaled $43.6 million compared with $34.5 million at the
end of the preceding quarter. Cash generated by operations in the
quarter totaled $15.6 million and included the remainder of an
advance payment from a customer and other working capital
improvements. Capital spending totaled $8.2 million in the
second quarter.
"The seasonal weakness that we saw in the March quarter has
continued into the June quarter, with an extremely slow start to
the quarter as customers have reacted to lower disk drive demand by
reducing their build plans and their levels of suspension
inventory," said Penn. As a result, the company currently
expects fiscal 2015 third quarter suspension assembly shipments to
be down approximately 10% compared with the second quarter and
average selling price to be 58 to 59 cents per part. Due to the
lower volume, third quarter gross profit is also expected to
decline compared to the second quarter.
"The current weakness in demand is disappointing but consistent
with seasonal demand and production in the disk drive industry and,
in particular, the weight that personal computing applications
still carry in our mix of business," said Penn. "In the second
half of the calendar year, we expect higher volume due to increased
worldwide suspension assembly demand and an improving position on
customers' disk drive programs. We're also encouraged by the level
of development activity that is occurring with our customers across
all of the disk drive segments. Beyond our core business, our
SMA OIS product presents an attractive opportunity to extend our
precision manufacturing expertise into a new market."
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 supplier of critical precision
component technologies. As a key supplier of suspension
assemblies for disk drives, we help customers improve overall disk
drive performance and meet the demands of an ever-expanding digital
universe. Through our new business development initiatives, we
focus on leveraging our unique precision manufacturing capabilities
in new markets to improve product performance, reduce size, lower
cost, and reduce time to market.
Cautionary Note Regarding Forward-Looking
Statements
This announcement contains forward-looking statements regarding
demand for and shipments of suspension assemblies, product mix,
pricing, market position, operating performance, market adoption
and production of OIS actuators 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 and other factors described from time to time
in the company's reports filed with the Securities and Exchange
Commission.
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Hutchinson Technology
Incorporated |
Condensed Consolidated
Statements of Operations - Unaudited |
(In thousands, except per share
data) |
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|
Thirteen Weeks
Ended |
Twenty-Six Weeks
Ended |
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March 29, |
March 30, |
March 29, |
March 30, |
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2015 |
2014 |
2015 |
2014 |
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|
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Net sales |
$ 62,359 |
$ 60,699 |
$ 134,782 |
$ 131,011 |
Cost of sales |
56,097 |
54,836 |
117,056 |
119,618 |
Gross profit |
6,262 |
5,863 |
17,726 |
11,393 |
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|
Research and development
expenses |
7,097 |
4,389 |
13,139 |
8,331 |
Selling, general and administrative
expenses |
5,848 |
6,212 |
11,833 |
12,075 |
Severance and site consolidation
expenses |
-- |
650 |
159 |
1,242 |
Asset impairment |
-- |
-- |
-- |
4,470 |
Loss from
operations |
(6,683) |
(5,388) |
(7,405) |
(14,725) |
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Other income (expense),
net |
267 |
656 |
(288) |
(2,417) |
Loss on extinguishment of long-term
debt |
-- |
-- |
(4,318) |
-- |
Interest income |
15 |
10 |
19 |
35 |
Interest expense |
(3,270) |
(3,959) |
(7,723) |
(7,736) |
Loss before income
taxes |
(9,671) |
(8,681) |
(19,715) |
(24,843) |
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Provision (benefit) for income
taxes |
32 |
25 |
(113) |
(791) |
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Net loss |
$ (9,703) |
$ (8,706) |
$ (19,602) |
$ (24,052) |
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Basic loss per share |
$ (0.29) |
$ (0.31) |
$ (0.61) |
$ (0.86) |
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Diluted loss per share |
$ (0.29) |
$ (0.31) |
$ (0.61) |
$ (0.86) |
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Weighted-average common shares
outstanding |
33,270 |
28,047 |
31,910 |
27,923 |
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Weighted-average diluted shares
outstanding |
33,270 |
28,047 |
31,910 |
27,923 |
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Hutchinson Technology
Incorporated |
Condensed Consolidated
Balance Sheets - Unaudited |
(In thousands, except shares
data) |
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March 29, |
September 28, |
|
2015 |
2014 |
ASSETS |
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Current assets: |
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Cash and cash
equivalents |
$ 42,596 |
$ 37,939 |
Short-term investments -
restricted |
965 |
965 |
Trade receivables,
net |
15,781 |
23,971 |
Other receivables |
2,451 |
2,894 |
Inventories |
47,402 |
48,978 |
Other current
assets |
4,258 |
4,323 |
Total current
assets |
113,453 |
119,070 |
Property, plant and equipment,
net |
152,074 |
153,169 |
Other assets |
4,744 |
2,926 |
Total assets |
$ 270,271 |
$ 275,165 |
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LIABILITIES AND SHAREHOLDERS'
EQUITY |
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Current liabilities: |
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Current debt, net of
discount |
$ 3,000 |
$ 48,731 |
Current portion of capital lease
obligation |
2,470 |
2,109 |
Accounts payable |
17,245 |
19,055 |
Accrued expenses |
12,809 |
6,406 |
Accrued
compensation |
9,575 |
9,312 |
Total current
liabilities |
45,099 |
85,613 |
Long-term debt, net of
discount |
122,983 |
87,168 |
Capital lease
obligation |
5,294 |
4,464 |
Other long-term
liabilities |
3,718 |
3,092 |
Shareholders' equity: |
|
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Common stock $.01 par value,
100,000,000 shares authorized, 33,465,000 and 28,102,000 issued and
outstanding |
335 |
281 |
Additional paid-in
capital |
451,388 |
433,308 |
Accumulated other comprehensive
loss |
(726) |
(543) |
Accumulated loss |
(357,820) |
(338,218) |
Total shareholders'
equity |
93,177 |
94,828 |
Total liabilities and shareholders'
equity |
$ 270,271 |
$ 275,165 |
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Hutchinson Technology
Incorporated |
Condensed Consolidated
Statements of Cash Flows - Unaudited |
(Dollars in thousands) |
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Twenty-Six Weeks
Ended |
|
March 29, |
March 30, |
|
2015 |
2014 |
Operating activities: |
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Net loss |
$ (19,602) |
$ (24,052) |
Adjustments to reconcile net loss
to cash provided by (used for) operating activities: |
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Depreciation and
amortization |
16,419 |
19,927 |
Stock-based
compensation |
661 |
592 |
Loss on disposal of
assets |
39 |
76 |
Asset impairment
charge |
-- |
4,470 |
Non-cash interest
expense |
1,290 |
1,633 |
Loss on extinguishment of
debt |
4,318 |
-- |
Severance and site consolidation
expenses |
(27) |
366 |
Changes in operating assets and
liabilities |
15,599 |
(3,200) |
Cash provided by (used for)
operating activities |
18,697 |
(188) |
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Investing activities: |
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Capital
expenditures |
(14,505) |
(10,480) |
Proceeds from sale / leaseback of
equipment |
2,408 |
6,395 |
Proceeds from sale of
building |
-- |
4,364 |
Change in restricted
cash |
(974) |
1,549 |
Purchases of marketable
securities |
(965) |
(1,200) |
Sales / maturities of marketable
securities |
965 |
1,200 |
Cash (used for) provided by
investing activities |
(13,071) |
1,828 |
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Financing activities: |
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Proceeds from issuance of common
stock |
60 |
26 |
Repayments of capital
lease |
(1,113) |
(732) |
Repayments of revolving credit
line |
(76,523) |
(116,252) |
Proceeds from revolving credit
line |
66,990 |
114,272 |
Repayments of debt |
(39,822) |
-- |
Proceeds from private placement
of debt |
37,500 |
-- |
Proceeds from term
loan |
15,000 |
-- |
Debt refinancing
costs |
(3,175) |
-- |
Cash used for financing
activities |
(1,083) |
(2,686) |
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Effect of exchange rate changes on
cash |
114 |
679 |
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Net increase (decrease) in cash and
cash equivalents |
4,657 |
(367) |
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Cash and cash equivalents at
beginning of period |
37,939 |
39,403 |
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Cash and cash equivalents at end of
period |
$ 42,596 |
$ 39,036 |
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Hutchinson Technology
Incorporated |
Reconciliation of
Non-GAAP to GAAP Financial Measures - Unaudited |
(In thousands, except per share
data) |
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Thirteen Weeks
Ended |
|
March 29, |
December 28, |
March 30, |
|
2015 |
2014 |
2014 |
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Net loss - GAAP |
$ (9,703) |
$ (9,898) |
$ (8,706) |
Subtract foreign currency
gain |
(139) |
-- |
(576) |
Add foreign currency
loss |
-- |
640 |
-- |
Add loss on debt
extinguishment |
-- |
4,318 |
-- |
Add non-cash interest
expenses |
431 |
858 |
834 |
Add site consolidation and
severance expenses |
-- |
159 |
650 |
Net loss - Adjusted |
$ (9,411) |
$ (3,923) |
$ (7,798) |
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Net loss per common share –
GAAP: |
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Basic loss income per
share |
$ (0.29) |
$ (0.32) |
$ (0.31) |
Diluted loss income per
share |
$ (0.29) |
$ (0.32) |
$ (0.31) |
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Net loss per common share –
Adjusted: |
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Basic loss per share |
$ (0.28) |
$ (0.13) |
$ (0.28) |
Diluted loss per share |
$ (0.28) |
$ (0.13) |
$ (0.28) |
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Weighted average common and common
equivalent shares outstanding: |
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|
|
|
|
|
|
Basic |
33,267 |
30,548 |
28,047 |
Diluted |
33,267 |
30,548 |
28,047 |
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Net loss per common share
basic and diluted, is calculated by dividing net loss 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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