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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.