HTCH Hutchinson Technology Incorporated (MM)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

 

November 2, 2015

Date of report (Date of earliest event reported)

 

HUTCHINSON TECHNOLOGY INCORPORATED

(Exact Name of Registrant as Specified in its Charter)

 

Minnesota		001-34838		41-0901840
(State of Incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

 

40 West Highland Park Drive N.E., Hutchinson, Minnesota					55350
(Address of Principal Executive Offices)					(Zip Code)

 

(320) 587-3797

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Item 2.02

Results of Operations and Financial Condition.

 

On November 2, 2015, we issued a press release regarding our financial results for the fiscal quarter ended September 27, 2015, which is furnished as Exhibit 99.1 hereto.

 

The press release includes certain “non-GAAP financial measures” within the meaning of the rules of the Securities and Exchange Commission. With respect to such non-GAAP financial measures, we have disclosed in the press release the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles (“GAAP”) and have provided a reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measure. Management believes that the non-GAAP measures provide useful information to investors regarding our results of operations and financial condition because they eliminate unusual items impacting earnings and facilitate a more meaningful comparison and understanding of our operating performance for the current, past and future periods.

 

Item 9.01

Financial Statements and Exhibits.

 

(d) Exhibits

 

99.1

Press Release dated November 2, 2015, regarding our financial results for the fiscal quarter ended September 27, 2015.

 

 

 

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	HUTCHINSON TECHNOLOGY INCORPORATED
Date: November 2, 2015	/s/ David P. Radloff                                         David P. Radloff Vice President and Chief Financial Officer

 

 

 

 

 

EXHIBIT INDEX

 

No.	Description	Manner of Filing
99.1	Press Release dated November 2, 2015, regarding our financial results for the fiscal quarter ended September 27, 2015.	Furnished Electronically

 

Exhibit 99.1

 

HUTCHINSON TECHNOLOGY REPORTS FOURTH QUARTER RESULTS

 

Gross Profit Improves on 22% Sequential Volume Growth

 

Hutchinson, Minn., Nov. 2, 2015 -- Hutchinson Technology Incorporated (NASDAQ: HTCH) today reported net sales of $63.4 million for its fiscal fourth quarter ended September 27, 2015. Suspension assembly shipments for the quarter totaled 105.4 million, up 22% from 86.6 million in the preceding quarter.

 

“As we expected, overall demand for suspension assemblies grew in what is typically a seasonally stronger period for disk drive production,” said Rick Penn, Hutchinson Technology’s president and chief executive officer. “Our sales to all of our major disk drive customers increased in the quarter and we also benefited from our market position on suspension assemblies for 2.5-inch disk drives.”

 

Gross profit in the fiscal 2015 fourth quarter totaled $7.5 million, or 11.8% of net sales, up from $4.8 million, or 8.8% of net sales, in the fiscal third quarter. The improvement resulted from the higher volume in the quarter and the resulting increase in operating leverage. The company continued to optimize costs by shifting assembly production to its Thailand assembly operation, which accounted for 92% of the fourth quarter’s assembly production, up from 89% in the preceding quarter.

 

The company’s operating loss in the fiscal fourth quarter declined to $3.9 million from $6.1 million in the preceding quarter. The improvement resulted from the increase in gross profit and lower research and development expenses, which declined to $3.8 million from $5.2 million in the preceding quarter due primarily to the recognition of $1.5 million of previously deferred income described below. Penn noted that research and development expenses are expected to return to $5 million to $6 million in the fiscal 2016 first quarter.

 

Penn said that results from reliability testing for its new shape memory alloy (“SMA”) optical image stabilization (“OIS”) actuator have been encouraging. “We have shipped prototypes of our Gemini OIS actuator to lensholder assembly manufacturers and currently expect some smartphone makers to begin receiving prototype camera modules that use our new OIS actuator by the end of this calendar year.”

 

For its fiscal 2015 fourth quarter, the company reported a net loss of $9.3 million, or $0.28 per share. The net loss for the quarter included:

 

·

a $2.4 million foreign currency loss;

 

·

a $1.6 million asset impairment charge on the company’s development center building in Hutchinson, Minnesota; and

 

·

$340,000 of non-cash interest expense, partially offset by

 

·

$1.5 million of previously deferred income related to a former cost-sharing agreement for development of the company’s SMA OIS actuator.

 

Excluding these items, the company’s net loss for the fiscal 2015 fourth quarter was $6.5 million, or $0.20 per share.

 

In the preceding quarter, the company reported a net loss of $10.2 million, or $0.30 per share, on net sales of $54.7 million. The third quarter net loss included a $1.1 million foreign currency loss and $330,000 of non-cash interest expense. Excluding these items, the company’s net loss for the fiscal 2015 third quarter was $8.7 million, or $0.26 per share.

 

Cash and investments at the end of the fiscal 2015 fourth quarter totaled $40.4 million compared with $36.4 million at the end of the preceding quarter. Cash increased primarily due to favorable changes in working capital, including a $4.7 million reduction in receivables and a $3.8 million reduction in inventories. Capital spending totaled approximately $600,000 in the quarter, compared with $2.8 million in the third quarter. In 2016, capital spending is expected to be $10 million to $15 million. There were no outstanding borrowings on the company’s revolving line of credit at quarter end compared with $3.0 million at the end of the fiscal third quarter.

 

For its fiscal 2016 first quarter, the company currently expects its suspension assembly shipments to be flat to up 5% sequentially with an average selling price of $0.57, flat with the fiscal 2015 fourth quarter. Gross profit is currently expected to be flat to up slightly on a sequential basis.

 

“We are pleased with the progress evident in our fourth quarter performance,” said Penn. “We continue to focus on improving our position in the suspension assembly market and expanding our relationships in the smartphone camera supply chain.”

 

Conference Call and Webcast Cancelled

 

Due to today’s earlier announcement of a definitive merger agreement between the company and TDK Corporation, the conference call and webcast previously scheduled for 7:00 a.m. Central Time on Friday, November 6 has been cancelled.

 

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 our market position, demand for and shipments of suspension assemblies, product mix, pricing, operating performance, market adoption and production of OIS actuators, our capital spending, operating costs 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.

 

 

INVESTOR CONTACT:	MEDIA CONTACT:
Chuck Ives	Connie Pautz
Hutchinson Technology Inc.	Hutchinson Technology Inc.
320-587-1605	320-587-1823

 

 

Hutchinson Technology Incorporated

Condensed Consolidated Statements of Operations - Unaudited

(In thousands, except per share data)

 

		Thirteen Weeks Ended								Fifty-Two Weeks Ended
		September 27,				September 28,				September 27,				September 28,
		2015				2014				2015				2014
Net sales		$	63,366			$	70,304			$	252,823			$	261,087
Cost of sales			55,889				61,353				222,791				237,186
Gross profit			7,477				8,951				30,032				23,901
Research and development expenses			3,796				4,828				22,100				17,316
Selling, general and administrative expenses			5,922				5,648				23,481				22,990
Severance  and site consolidation expenses			-				(60	)			159				2,726
Asset impairment			1,620				-				1,620				4,470
Loss from operations			(3,861	)			(1,465	)			(17,328	)			(23,601	)
Other (expense) income, net			(2,246	)			500				(3,538	)			(1,738	)
Loss on extinguishment of long-term debt			-				-				(4,318	)			-
Interest income			14				10				40				73
Interest expense			(3,219	)			(4,186	)			(14,028	)			(15,909	)
Loss before income taxes			(9,312	)			(5,141	)			(39,172	)			(41,175	)
Provision (benefit) for income taxes			24				15				(74	)			(761	)
Net loss		$	(9,336	)		$	(5,156	)		$	(39,098	)		$	(40,414	)
Basic loss per share		$	(0.28	)		$	(0.18	)		$	(1.20	)		$	(1.44	)
Diluted loss per share		$	(0.28	)		$	(0.18	)		$	(1.20	)		$	(1.44	)
Weighted-average common shares outstanding			33,533				28,072				32,711				27,993
Weighted-average diluted shares outstanding			33,533				28,072				32,711				27,993

 

Hutchinson Technology Incorporated

Condensed Consolidated Balance Sheets - Unaudited

(In thousands, except shares data)

 

		September 27,				September 28,
		2015				2014
ASSETS
Current assets:
Cash and cash equivalents		$	39,454			$	37,939
Short-term investments - restricted			965				965
Trade receivables, net			15,860				23,971
Other receivables			2,707				2,894
Inventories			40,148				48,978
Other current assets			3,588				4,323
Total current assets			102,722				119,070
Property, plant and equipment, net			134,509				153,169
Other assets			4,281				2,926
Total assets		$	241,512			$	275,165
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current debt, net of discount		$	3,000			$	48,731
Current portion of capital lease obligation			2,188				2,109
Accounts payable			19,877				19,055
Accrued expenses			7,077				6,406
Accrued compensation			9,388				9,312
Total current liabilities			41,530				85,613
Long-term debt, net of discount			122,156				87,168
Capital lease obligation			4,220				4,464
Other long-term liabilities			2,731				3,092
Shareholders' equity:
Common stock $.01 par value, 100,000,000 shares
authorized, 33,540,000 and 28,102,000
issued and outstanding			335				281
Additional paid-in capital			452,165				433,308
Accumulated other comprehensive loss			(4,309	)			(543	)
Accumulated loss			(377,316	)			(338,218	)
Total shareholders' equity			70,875				94,828
Total liabilities and shareholders' equity		$	241,512			$	275,165

 

Hutchinson Technology Incorporated

Condensed Consolidated Statements of Cash Flows - Unaudited

(Dollars in thousands)

 

		Fifty-Two Weeks Ended
		September 27,				September 28,
		2015				2014
Operating activities:
Net loss		$	(39,098	)		$	(40,414	)
Adjustments to reconcile net loss to
cash provided by (used for) operating activities:
Depreciation and amortization			31,945				37,204
Stock-based compensation			1,415				1,345
Loss on disposal of assets			63				(57	)
Asset impairment charge			1,620				4,470
Non-cash interest expense			1,963				3,343
Loss on extinguishment of debt			4,318				-
Severance and site consolidation expenses			(27	)			27
Changes in operating assets and liabilities			16,566				(7,392	)
Cash provided by (used for) operating activities			18,765				(1,474	)
Investing activities:
Capital expenditures			(17,940	)			(17,283	)
Proceeds from sale / leaseback of equipment			3,221				6,395
Proceeds from sale of building and other assets			-				4,563
Change in restricted cash			382				1,662
Purchases of marketable securities			(1,930	)			(2,395	)
Sales / maturities of marketable securities			1,930				2,630
Cash used for investing activities			(14,337	)			(4,428	)
Financing activities:
Proceeds from issuance of common stock			83				59
Repayments of capital lease			(2,382	)			(1,739	)
Repayments of revolving credit line			(127,773	)			(189,389	)
Proceeds from revolving credit line			118,240				194,942
Repayments of debt			(41,322	)			-
Proceeds from private placement of debt			37,500				-
Proceeds from term loan			15,000				-
Debt refinancing costs			(3,175	)			-
Cash (used for) provided by financing activities			(3,829	)			3,873
Effect of exchange rate changes on cash			916				565
Net increase (decrease) in cash and cash equivalents			1,515				(1,464	)
Cash and cash equivalents at beginning of period			37,939				39,403
Cash and cash equivalents at end of period		$	39,454			$	37,939

 

Hutchinson Technology Incorporated

Reconciliation of Non-GAAP to GAAP Financial Measures - Unaudited

(In thousands, except per share data)

 

		Thirteen Weeks Ended
		September 27,				June 28,				September 28,
		2015				2015				2014
Net loss - GAAP		$	(9,336	)		$	(10,160	)		$	(5,156	)
Subtract deferred income recognized			(1,520	)			-				-
Subtract foreign currency gain			-				-				(396	)
Subtract reversal of severance expense			-				-				(325	)
Add foreign currency loss			2,355				1,093				-
Add non-cash interest expenses			340				332				869
Add site consolidation and severance expenses			-				-				268
Add asset impairment			1,620				-				-
Net loss - Adjusted		$	(6,541	)		$	(8,735	)		$	(4,740	)
Net loss per common share – GAAP:
Basic loss income per share		$	(0.28	)		$	(0.30	)		$	(0.18	)
Diluted loss income per share		$	(0.28	)		$	(0.30	)		$	(0.18	)
Net loss per common share – Adjusted:
Basic loss per share		$	(0.20	)		$	(0.26	)		$	(0.17	)
Diluted loss per share		$	(0.20	)		$	(0.26	)		$	(0.17	)
Weighted average common and common equivalent shares outstanding:
Basic			33,533				33,493				28,072
Diluted			33,533				33,493				28,072

 

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.