Hutchinson Technology Reports Fourth Quarter Results

HUTCHINSON, Minn., Oct. 31, 2013 (GLOBE NEWSWIRE) -- Hutchinson Technology Incorporated (Nasdaq:HTCH) today reported suspension assembly shipments of 102.6 million for its fiscal fourth quarter ended September 29, 2013, up from 99.3 million in the preceding quarter. The company reported a net loss of $14.6 million, or $0.53 per share, on net sales of $63.7 million. The net loss for the fiscal 2013 fourth quarter included a $1.7 million impairment of BioMeasurement inventory, $900,000 of site consolidation costs, $800,000 of non-cash interest expense and a $100,000 foreign currency loss. Excluding these items, the company's fiscal 2013 fourth quarter net loss totaled $11.0 million, or $0.40 per share.

In the preceding quarter, 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 fiscal 2013 third 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.

The company incurred a gross loss of $400,000, or 1% of net sales, in the fiscal 2013 fourth quarter, compared with a gross profit of $1.4 million, or 2% of net sales, in the preceding quarter. Excluding the impairment of BioMeasurement inventory, gross profit in the 2013 fourth quarter would have been $1.4 million, or 2% of net sales, reflecting the impact of the low yields that resulted from the manufacturing issues noted below.

"While we resolved the previously reported process issues encountered in our third quarter, we missed our operational targets in two areas during the fourth quarter," said Rick Penn, Hutchinson Technology's president and chief executive officer. "At our Thailand assembly operation, the aggressive ramp, combined with a heavier mix of new dual-stage actuated (DSA) programs, put pressure on our yields and efficiencies and caused them to come in lower than planned. We have intensified our support and expect improved operational performance as we ramp additional programs and continue to transition more assembly production to Thailand." Penn said the company also experienced low yields in the last month of the quarter from a manufacturing issue in its components operation that has since been corrected. He noted that neither of the issues impacted suspension assembly shipments to customers. "Although we are disappointed with these manufacturing issues, we have addressed them and are confident our operational performance will improve going forward," said Penn.

Average selling price in the fiscal 2013 fourth quarter was $0.60 compared to $0.59 in the preceding quarter. DSA suspension assemblies accounted for 23% of fourth quarter shipments, up from 20% in the preceding quarter, and are expected to account for about 25% of volume in the fiscal 2014 first quarter.

Output from the company's Thailand assembly operation accounted for 48% of assembly production in the fiscal 2013 fourth quarter, up from 35% in the preceding quarter. The company expects 55% to 60% of assembly production to come from its Thailand operation in the fiscal 2014 first quarter.

Cash and investments at the end of the 2013 fourth quarter totaled $40.6 million, up from $37.5 million at the end of the preceding quarter. Cash generated by operations in the fourth quarter totaled $3.0 million and capital spending in the quarter totaled $3.8 million. Outstanding borrowings on the company's revolving line of credit totaled $4.0 million at the end of the fiscal 2013 fourth quarter compared with zero at the end of the preceding quarter.

Penn said the company expects its suspension assembly shipments in the fiscal 2014 first quarter to be flat to up 5% compared with the fiscal 2013 fourth quarter. Average selling price is expected to stay relatively flat, as increasing shipments of DSA suspensions are offset by a transition from development pricing to high-volume pricing on DSA suspensions.

"Although we faced some challenges this past quarter, we remain well positioned to meet our customers' advancing requirements," said Penn. "As our execution improves and we move through fiscal 2014, we expect to realize the benefits from transitioning more assembly production to Thailand, consolidating our U.S. operations and continuing to improve our overall cost structure. Looking longer-term, we are confident our business can generate attractive profitability and free cash flow as our volume grows."

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. As a key worldwide supplier of suspension assemblies for disk drives, the company's products help customers improve overall disk drive performance and meet the demands of an ever-expanding digital universe.

Cautionary Note Regarding Forward-Looking Statements

This announcement contains forward-looking statements, including statements regarding demand for and shipments of 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 Fourteen Weeks Ended Fifty-Two Weeks Ended Fifty-Three Weeks Ended
  September 29, 2013 September 30, 2012 September 29, 2013 September 30, 2012
         
         
Net sales  $ 63,659  $ 63,626  $ 249,596  $ 248,589
Cost of sales 64,031 63,867 233,171 245,068
Gross (loss) profit (372) (241) 16,425 3,521
         
Research and development expenses 3,695 4,088 14,621 16,474
Selling, general and administrative expenses 5,709 6,866 23,676 28,398
Site consolidation and severance expenses  885  --   2,873  (711)
Debt refinancing costs  --   201  --   4,127
Flood related costs, net of Insurance recoveries  --   546  --   (4,640)
Loss from operations (10,661) (11,942) (24,745) (40,127)
         
Other (expense) income, net (108) 1,273 (550) 1,646
Gain on extinguishment of long-term debt  --   --  4,986  5,897
Interest Income 14 39 98 131
Interest expense (3,750) (4,016) (15,121) (16,551)
Gain on short- and long-term investments  --   --   272  567
Loss before income taxes (14,505) (14,646) (35,060) (48,437)
         
Provision for income taxes  50  85  16 205
         
Net loss  $ (14,555)  $ (14,731)  $ (35,076)  $ (48,642)
         
Basic loss per share  $ (0.53)  $ (0.62)  $ (1.35)  $ (2.06)
         
Diluted loss per share  $ (0.53)  $ (0.62)  $ (1.35)  $ (2.06)
         
Weighted-average common shares outstanding 27,568 23,884 25,981 23,565
         
Weighted-average diluted shares outstanding 27,568 23,884 25,981 23,565
     
Hutchinson Technology Incorporated
Condensed Consolidated Balance Sheets - Unaudited
(In thousands, except shares data)
     
  September 29, 2013 September 30, 2012
ASSETS    
Current assets:    
Cash and cash equivalents  $ 39,403  $ 53,653
Short-term investments restricted 1,200 1,200
Trade receivables, net 21,680 21,438
Other receivables 3,214 3,880
Inventories 44,285 41,432
Other current assets 6,383 7,203
Total current assets 116,165 128,806
Property, plant and equipment, net 186,914 202,468
Other assets 3,596 5,014
Total assets  $ 306,675  $ 336,288
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current liabilities:    
Current maturities of short- and long-term debt, net of discount  $ 3,980  $ 11,698
Current portion of capital lease obligation 1,122  -- 
Accounts payable 23,535 13,982
Accrued expenses 6,066 6,350
Accrued compensation 9,251 9,656
Total current liabilities 43,954 41,686
Long-term debt, net of discount 123,023 125,232
Capital lease obligation 2,968  -- 
Other long-term liabilities 2,497 1,540
Shareholders' equity:    
Common stock $.01 par value, 100,000,000 shares authorized, 27,581,000 and 23,900,000 issued and outstanding 276 239
Additional paid-in capital 431,909 430,448
Accumulated other comprehensive loss (148) (129)
Accumulated loss (297,804) (262,728)
Total shareholders' equity 134,233 167,830
Total liabilities and shareholders' equity  $ 306,675  $ 336,288
     
Hutchinson Technology Incorporated
Condensed Consolidated Statements of Cash Flows - Unaudited
(Dollars in thousands)
     
  Fifty-Two Weeks Ended Fifty-Three Weeks Ended
  September 29, 2013 September 30, 2012
Operating activities:    
Net loss  $ (35,076)  $ (48,642)
Adjustments to reconcile net loss to cash provided by operating activities:    
Depreciation and amortization 38,891 41,459
Stock-based compensation 1,140 1,979
Gain on short- and long-term investments (272) (567)
Loss on disposal of assets 98 418
Asset impairment charge  --   8,537
Non-cash interest expense 3,335 5,467
Gain on extinguishment of debt  (4,986)  (5,897)
Severance and site consolidation expenses  --   (1,741)
Changes in operating assets and liabilities 2,955 37,079
 Cash provided by operating activities 6,085 38,092
     
Investing activities:    
Capital expenditures (18,880) (27,880)
Proceeds from sale/leaseback of equipment  5,025  -- 
Change in restricted cash 1,698  (2,799)
Purchases of marketable securities (1,200) (2,813)
Sales / maturities of marketable securities 1,472 3,789
 Cash used for investing activities (11,885) (29,703)
     
Financing activities:    
Net proceeds from issuance of common stock 358  -- 
Repayments of capital lease  (783)  -- 
Repayments of revolving credit line  (237,525)  (311,771)
Proceeds from revolving credit line  241,505  301,362
Repayments of debt  (23,470)  (37,154)
Proceeds from private placement of debt  11,590  39,400
Debt refinancing costs  (359)  (4,127)
 Cash used for financing activities (8,684) (12,290)
     
Effect of exchange rate changes on cash 234  -- 
     
Net decrease in cash and cash equivalents (14,250) (3,901)
     
Cash and cash equivalents at beginning of period 53,653 57,554
     
Cash and cash equivalents at end of period  $ 39,403  $ 53,653
         
Hutchinson Technology Incorporated
Loss Per Share Calculation - Unaudited
(In thousands, except per share data)
         
  Thirteen Weeks Ended Fourteen Weeks Ended Fifty-Two Weeks Ended Fifty-Three Weeks Ended
  September 29, 2013 September 30, 2012 September 29, 2013 September 30, 2012
         
Net loss (A)  $ (14,555)  $ (14,731)  $ (35,076)  $ (48,642)
         
Weighted average common shares outstanding (B) 27,568 23,884 25,981 23,565
Dilutive potential common shares  --   --   --   -- 
Weighted average common and diluted shares outstanding (C) 27,568 23,884 25,981 23,565
         
Basic loss per share [(A)/(B)]  $ (0.53)  $ (0.62)  $ (1.35)  $ (2.06)
Diluted loss per share [(A)/(C)]  $ (0.53)  $ (0.62)  $ (1.35)  $ (2.06)
       
Hutchinson Technology Incorporated
Reconciliation of Non-GAAP to GAAP Financial Measures - Unaudited
(In thousands, except per share data)
       
  Thirteen Weeks Ended Thirteen Weeks Ended Fourteen Weeks Ended
  September 29, 2013 June 30, 2013 September 30, 2012
       
Net loss - GAAP  $ (14,555)  $ (15,866)  $ (14,731)
Add BioMeasurment inventory impairment  1,747  --  --
Add foreign currency loss  122  3,368  --
Subtract foreign currency gain  --  --  (738)
Add non-cash interest expenses  765  749  980
Add site consolidation expenses  885  638  --
Add flood-related costs  --  --  546
Add debt refinancing costs  --  --  201
Net loss - Adjusted  $ (11,036)  $ (11,111)  $ (13,742)
       
       
Net loss per common share – GAAP:      
       
Basic loss per share  $ (0.53)  $ (0.59)  $ (0.62)
Diluted loss per share  $ (0.53)  $ (0.59)  $ (0.62)
       
Net loss per common share – Adjusted:      
       
Basic loss per share  $ (0.40)  $ (0.41)  $ (0.58)
Diluted loss per share  $ (0.40)  $ (0.41)  $ (0.58)
       
Weighted average common and common equivalent shares outstanding:      
       
Basic 27,568 27,084 23,884
Diluted 27,568 27,084 23,884
       
Net loss 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