HUTCHINSON, Minn., April 27, 2016 (GLOBE NEWSWIRE) -- Hutchinson Technology Incorporated (NASDAQ:HTCH) ("HTI") today reported net sales of $54.2 million for its fiscal 2016 second quarter ended March 27, 2016.  Suspension assembly shipments for the quarter totaled 85.4 million compared with 106.6 million in the preceding quarter.  Rick Penn, Hutchinson Technology's president and chief executive officer, said that shipments were at the low end of the company's expectations for the March quarter, which is typically a seasonally slower period for the disk drive industry and its suppliers.

Gross profit in the fiscal 2016 second quarter totaled $5.7 million, or 10.5% of net sales, compared with $11.7 million, or 18.3% of net sales in the preceding quarter.  Gross profit declined sequentially due to the decreased volume, resulting in lower leverage of the company's capacity and fixed costs.

The company reported a fiscal 2016 second quarter net loss of $9.6 million, or $0.28 per share. The net loss for the quarter included:
  • $900,000 of merger-related expenses;
  • $500,000 of severance costs related to a reduction of approximately 80 positions in Hutchinson, Minnesota, due in part to the company's ongoing transition of high-volume assembly operations to Thailand; and
  • $360,000 of non-cash interest expense, partially offset by
  • a $700,000 foreign currency gain.

Excluding these items, the company's net loss for the fiscal 2016 second quarter was $8.5 million, or $0.25 per share.

In the preceding quarter, the company reported a net loss of $5.3 million, or $0.16 per share.  The net loss for the quarter included: $3.4 million of merger-related expenses; $590,000 of tax benefits related to recently enacted federal income tax legislation; $350,000 of non-cash interest expense; and a $30,000 foreign currency gain.  Excluding these items, the company's net loss for the fiscal 2016 first quarter was $2.1 million, or $0.06 per share.

Cash and investments at the end of the fiscal 2016 second quarter totaled $47.9 million, compared with $49.0 million at the end of the preceding quarter.  Capital spending in the quarter totaled $3.2 million and is currently expected to total approximately $10 million for the fiscal year.  As in the preceding quarter, there were no outstanding borrowings under the company's revolving line of credit at the end of the fiscal 2016 second quarter.

The company's net cash, as defined by its November 1, 2015 merger agreement with TDK Corporation ("TDK"), was $51.3 million at the end of the fiscal 2016 second quarter, compared with $49.9 million at the end of the preceding quarter.  The company currently expects the transactions described in the merger agreement to be completed during the second calendar quarter of 2016.  Under the terms of the merger agreement, TDK will acquire all of the outstanding shares of common stock of HTI for base consideration of $3.62 per share, plus additional consideration of up to $0.38 per share, depending on the level of net cash held by HTI as of the measurement date, as defined in the merger agreement. The full amount of additional consideration would be realized if the company's net cash equals or exceeds $35 million as of the measurement date.

For its fiscal 2016 third quarter, the company currently expects its suspension assembly shipments to range from 80 million to 90 million.  Average selling price in the fiscal third quarter is expected to be flat to up slightly, depending on the mix of products shipped, compared with 57 cents in the preceding quarter.  Gross profit is expected to be about flat with the fiscal 2016 second quarter.  "With demand likely to remain soft in our third quarter, we are giving priority to containing costs and maximizing our cash balance as we work to conclude our merger with TDK," said Penn.

About Hutchinson TechnologyHutchinson 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 StatementsThis announcement contains forward-looking statements regarding demand for and shipments of the company's products, pricing, production costs, operating performance, capital spending, financial results and the completion of the transactions contemplated by the company's merger agreement with TDK. 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, the company's inability to consummate the transactions contemplated by the company's merger agreement with TDK due to the failure to satisfy conditions to its completion and other risks to consummation of the transaction 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     Twenty-Six Weeks Ended
      March 27,   March 29,     March 27,   March 29,
        2016       2015         2016       2015  
                     
                     
Net sales   $     54,160     $     62,359       $     118,087     $     134,782  
Cost of sales     48,448       56,097         100,654       117,056  
  Gross profit     5,712       6,262         17,433       17,726  
                     
Research and development expenses     5,602       7,097         11,459       13,139  
Selling, general and administrative expenses     5,905       5,848         11,112       11,833  
Merger - related expenses     938         -           4,375         -    
Severance   and site consolidation expenses       503         -             503         159  
  Loss from operations     (7,236 )     (6,683 )       (10,016 )     (7,405 )
                     
Other income (expense), net     937       267         1,088       (288 )
Loss on extinguishment of long-term debt       -           -             -           (4,318 )
Interest income     20       15         32       19  
Interest expense       (3,359 )       (3,270 )         (6,642 )       (7,723 )
  Loss before income taxes     (9,638 )     (9,671 )       (15,538 )     (19,715 )
                     
(Benefit) provision for income taxes       (10 )       32           (613 )       (113 )
                     
  Net loss   $     (9,628 )   $     (9,703 )     $     (14,925 )   $     (19,602 )
                     
Basic loss per share   $     (0.28 )   $     (0.29 )     $     (0.44 )   $     (0.61 )
                     
Diluted loss per share   $     (0.28 )   $     (0.29 )     $     (0.44 )   $     (0.61 )
                     
Weighted-average common shares outstanding     33,905       33,270         33,790       31,910  
                     
Weighted-average diluted shares outstanding     33,905       33,270         33,790       31,910  
                     

 
                   
Hutchinson Technology Incorporated  
Condensed Consolidated Balance Sheets - Unaudited  
(In thousands, except shares data)  
                   
            March 27,   September 27,  
              2016       2015    
ASSETS                
Current assets:              
  Cash and cash equivalents     $     47,434     $     39,454    
  Short-term investments - restricted       506       965    
  Trade receivables, net         8,046       15,860    
  Other receivables         1,814       2,707    
  Inventories         37,242       40,148    
  Other current assets         3,231       3,588    
            Total current assets       98,273       102,722    
Property, plant and equipment, net       123,808       134,509    
Other assets         3,686       4,281    
Total assets       $     225,767     $     241,512    
                   
LIABILITIES AND SHAREHOLDERS' EQUITY          
Current liabilities:              
  Current debt, net of discount     $     86,874     $     3,000    
  Current portion of capital lease obligation     2,259       2,188    
  Accounts payable     15,209       19,877    
  Accrued compensation         9,809       9,388    
  Accrued expenses and other       7,438       4,239    
  Accrued interest         2,785       2,838    
           Total current liabilities       124,374       41,530    
Long-term debt, net of discount       37,500       122,156    
Capital lease obligation         3,276       4,220    
Other long-term liabilities         3,171       2,731    
Shareholders' equity:              
  Common stock $.01 par value, 100,000,000 shares        
    auth orized, 33,915,000 and 33,540,000                
    issued and outstanding       339       335    
  Additional paid-in capital         452,830       452,165    
  Accumulated other comprehensive loss     (3,482 )     (4,309 )  
  Accumulated loss         (392,241 )     (377,316 )  
           Total shareholders' equity       57,446       70,875    
Total liabilities and shareholders' equity     $     225,767     $     241,512    
                   

 
             
Hutchinson Technology Incorporated  
Condensed Consolidated Statements of Cash Flows - Unaudited  
(Dollars in thousands)  
             
      Twenty-Six Weeks Ended  
      March 27,   March 29,  
        2016       2015    
Operating activities:        
  Net loss $     (14,925 )   $     (19,602 )  
  Adjustments to reconcile net loss to        
  cash provided by operating activities:        
    Depreciation and amortization   14,559       16,419    
    Stock-based compensation   636       661    
    (Gain) loss on disposal of assets     (418 )       39    
    Non-cash interest expense   718       1,290    
    Loss on extinguishment of debt     -           4,318    
    Severance and site consolidation expenses     387         (27 )  
    Changes in operating assets and liabilities   11,676       15,599    
      Cash provided by operating activities   12,633       18,697    
             
Investing activities:        
  Capital expenditures   (4,582 )     (14,505 )  
  Proceeds from sale / leaseback of equipment     707         2,408    
  Change in restricted cash   32       (974 )  
  Purchases of marketable securities   (506 )     (965 )  
  Sales / maturities of marketable securities   965       965    
      Cash used for investing activities   (3,384 )     (13,071 )  
             
Financing activities:        
  Proceeds from issuance of common stock     33         60    
  Repayments of capital lease     (1,288 )       (1,113 )  
  Repayments of revolving credit line     (29,752 )       (76,523 )  
  Proceeds from revolving credit line     29,752         66,990    
  Repayments of debt     (1,500 )       (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   (2,755 )     (1,083 )  
             
Effect of exchange rate changes on cash   1,486         114    
             
Net increase in cash and cash equivalents   7,980       4,657    
             
Cash and cash equivalents at beginning of period   39,454       37,939    
             
Cash and cash equivalents at end of period $     47,434     $     42,596    
             

 
                 
Hutchinson Technology Incorporated  
Reconciliation of Non-GAAP to GAAP Financial Measures - Unaudited  
(In thousands, except per share data)  
                 
      Thirteen Weeks Ended  
      March 27,   December 27,   March 29,  
        2016       2015       2015    
                 
Net loss - GAAP     $     (9,628 )   $     (5,297 )   $     (9,703 )  
Subtract foreign currency gain         (713 )       (33 )       (139 )  
Subtract tax benefit         -         (589 )       -    
Add foreign currency loss         -         -         -    
Add non-cash interest expenses         364         354         431    
Add merger - related expenses         938         3,437         -    
Add site consolidation and severance expenses       503         -         -    
Net loss - Adjusted     $     (8,536 )   $     (2,128 )   $     (9,411 )  
                 
                 
Net loss per common share - GAAP:                
                 
Basic loss income per share     $     (0.28 )   $     (0.16 )   $     (0.29 )  
Diluted loss income per share     $     (0.28 )   $     (0.16 )   $     (0.29 )  
                 
Net loss per common share - Adjusted:                
                 
Basic loss per share     $     (0.25 )   $     (0.06 )   $     (0.28 )  
Diluted loss per share     $     (0.25 )   $     (0.06 )   $     (0.28 )  
                 
Weighted average common and common equivalent shares outstanding:                
                 
Basic     33,790       33,674       33,267    
Diluted     33,790       33,674       33,267    
             
             
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.  
     
     
INVESTOR CONTACT:		Chuck Ives			Hutchinson Technology Inc.	320-587-1605			MEDIA CONTACT:Connie PautzHutchinson Technology Inc.320-587-1823

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