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Hutchinson Technology Reports Fourth Quarter Results

HUTCHINSON, Minn., Nov. 5, 2014 (GLOBE NEWSWIRE) -- Hutchinson Technology Incorporated (Nasdaq:HTCH) today reported a net loss of $5.2 million, or $0.18 per share, for its fiscal fourth quarter ended September 28, 2014 compared with a net loss of $11.2 million, or $0.40 per share in the preceding quarter. The company attributed the improved financial performance to higher volume, the benefits of site consolidation, other cost reductions and improved operating performance.

The net loss for the fiscal 2014 fourth quarter included $870,000 of non-cash interest expense, a $400,000 foreign currency gain, a $325,000 reversal of an accrual for severance costs and $270,000 of site consolidation costs. Excluding these items, the company's net loss for the fiscal 2014 fourth quarter was $4.7 million, or $0.17 per share. In the preceding quarter, the company's $11.2 million net loss included $1.5 million of severance and site consolidation costs, $800,000 of non-cash interest expense and a $100,000 foreign currency gain. Excluding these items, the company's fiscal 2014 third quarter net loss was $8.9 million, or $0.32 per share.

As previously reported, net sales for the fiscal 2014 fourth quarter totaled $70.3 million, up 18% compared with the preceding quarter. The company's suspension assembly shipments totaled 117.1 million in the quarter, up 20% from 97.5 million in the preceding quarter. "Our suspension assembly shipments increased due to an increase in disk drive production levels and our improved share positions on several disk drive programs," said Rick Penn, Hutchinson Technology's president and chief executive officer.

Gross profit in the fiscal 2014 fourth quarter improved to $9.0 million, or 13% of net sales, up from $3.6 million, or 6% of net sales, in the preceding quarter. The increase in gross profit resulted from the higher volume in the quarter, lower costs and improved operating performance. "The lower costs we are achieving through consolidation of our manufacturing operations and other cost reduction measures, combined with improved manufacturing output and yields, helped us convert an 18% increase in net sales into a significant increase in gross profit," said Penn.

Penn said output at the company's Thailand assembly operation increased by 33% compared with the preceding quarter. He said the Thailand operation produced 78% of the company's assembly volume in the fiscal 2014 fourth quarter, up from 64% in the preceding quarter, and is expected to produce about 80% of its assembly volume in the fiscal 2015 first quarter.

During its fourth quarter, the company began ramping production of its shape memory alloy (SMA) optical image stabilization (OIS) actuator. "We are delivering our SMA OIS actuators for a smartphone that will be introduced in China by the end of the calendar year," said Penn. "While we are still in the early phases of bringing our SMA OIS actuator to the market, the smartphone camera market represents a significant growth opportunity for us, and the advantages of our SMA OIS actuator are attracting growing interest from other smartphone and camera module makers. We are focused on winning new programs and increasing our production efficiency and capacity."

On October 23, the company completed a previously reported offering of $37.5 million of 8.50% Convertible Senior Notes due 2019, and the company also completed an exchange of $15 million of its 8.50% Senior Secured Second Lien Notes due 2017 for 2.5 million shares of its common stock and warrants to purchase an additional 2.5 million shares of its common stock.

"These financing transactions position us to address the $39.8 million of debt that can be put to us in January 2015," said Dave Radloff, Hutchinson Technology's chief financial officer. Radloff reaffirmed that the company is also pursuing additional first lien financing of up to $15 million. Radloff also said that the company has entered into an agreement under which it will receive a $15 million advance payment from a customer in the company's fiscal 2015 first quarter for suspension assemblies expected to ship to that customer in the fiscal 2015 second quarter.

Cash and investments totaled $38.9 million at the end of the fiscal 2014 fourth quarter compared to $40.2 million at the end of the preceding quarter. Outstanding borrowings on the company's revolving line of credit were $9.5 million at the end of the fourth quarter compared to $4.8 million at the end of the preceding quarter. As previously reported, the company increased borrowings under its revolving line of credit during the fourth quarter to accommodate working capital needs, including an increase in accounts receivable that resulted from the increase in sales.

Regarding its outlook, the company said it expects fiscal 2015 first quarter suspension assembly shipments to be 120 million to 125 million as its participation on customers' programs continues to improve. Average selling price is expected to remain at approximately $0.58 while gross profit should improve modestly on higher volume.

"The work we have been doing to reduce our costs, ramp production in Thailand, streamline our U.S. operations and strengthen our competitive position is beginning to benefit our financial performance," said Penn. "We thank our customers for their ongoing commitment and support and our employees for their exceptional effort and dedication. We look forward to pursuing the opportunities in front of us in the hard disk drive and smartphone camera markets and expect to make further progress on improving our financial results and cash flow in the new fiscal year."

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 the company's products, pricing, production capability and costs, operating performance, operations in Thailand, cost reductions, market adoption and production of OIS actuators, financing transactions 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 Fifty-Two Weeks Ended
September 28, September 29, September 28, September 29,
2014 2013 2014 2013
Net sales $ 70,304 $ 63,659 $ 261,087 $ 249,596
Cost of sales 61,353 64,031 237,186 233,171
Gross profit (loss) 8,951 (372) 23,901 16,425
Research and development expenses 4,828 3,695 17,316 14,621
Selling, general and administrative expenses 5,648 5,709 22,990 23,676
Severance and site consolidation expenses (60) 885 2,726 2,873
Asset impairment -- -- 4,470 --
Loss from operations (1,465) (10,661) (23,601) (24,745)
Other income (expense), net 500 (108) (1,738) (550)
Gain on extinguishment of long-term debt -- -- -- 4,986
Interest income 10 14 73 98
Interest expense (4,186) (3,750) (15,909) (15,121)
Gain on short- and long-term investments -- -- -- 272
Loss before income taxes (5,141) (14,505) (41,175) (35,060)
Provision (benefit) for income taxes 15 50 (761) 16
Net loss $ (5,156) $ (14,555) $ (40,414) $ (35,076)
Basic loss per share $ (0.18) $ (0.53) $ (1.44) $ (1.35)
Diluted loss per share $ (0.18) $ (0.53) $ (1.44) $ (1.35)
Weighted-average common shares outstanding 28,072 27,568 27,993 25,981
Weighted-average diluted shares outstanding 28,072 27,568 27,993 25,981
Hutchinson Technology Incorporated
Condensed Consolidated Balance Sheets - Unaudited
(In thousands, except shares data)
September 28, September 29,
2014 2013
ASSETS
Current assets:
Cash and cash equivalents $ 37,939 $ 39,403
Short-term investments - restricted 965 1,200
Trade receivables, net 23,971 21,680
Other receivables 2,894 3,214
Inventories 48,978 44,285
Other current assets 4,323 6,383
Total current assets 119,070 116,165
Property, plant and equipment, net 153,169 186,914
Other assets 2,926 3,596
Total assets $ 275,165 $ 306,675
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current debt, net of discount $ 48,731 $ 3,980
Current portion of capital lease obligation 2,109 1,122
Accounts payable 19,055 23,535
Accrued expenses 6,406 6,066
Accrued compensation 9,312 9,251
Total current liabilities 85,613 43,954
Long-term debt, net of discount 87,168 123,023
Capital lease obligation 4,464 2,968
Other long-term liabilities 3,092 2,497
Shareholders' equity:
Common stock $.01 par value, 100,000,000 shares
authorized, 28,058,000 and 27,581,000
issued and outstanding 281 276
Additional paid-in capital 433,308 431,909
Accumulated other comprehensive loss (543) (148)
Accumulated loss (338,218) (297,804)
Total shareholders' equity 94,828 134,233
Total liabilities and shareholders' equity $ 275,165 $ 306,675
Hutchinson Technology Incorporated
Condensed Consolidated Statements of Cash Flows - Unaudited
(Dollars in thousands)
Fifty-Two Weeks Ended
September 28, September 29,
2014 2013
Operating activities:
Net loss $ (40,414) $ (35,076)
Adjustments to reconcile net loss to
cash (used) provided by operating activities:
Depreciation and amortization 37,204 38,891
Stock-based compensation 1,345 1,140
Gain on short- and long-term investments -- (272)
(Gain) loss on disposal of assets (57) 98
Asset impairment charge 4,470 --
Non-cash interest expense 3,343 3,335
Gain on extinguishment of debt -- (4,986)
Severance and other expenses 27 --
Changes in operating assets and liabilities (7,392) 2,955
Cash (used) provided by operating activities (1,474) 6,085
Investing activities:
Capital expenditures (17,283) (18,880)
Proceeds from sale/leaseback of equipment 6,395 5,025
Proceeds from the sale of building and related assets 4,563 --
Change in restricted cash 1,662 1,698
Purchases of marketable securities (2,395) (1,200)
Sales / maturities of marketable securities 2,630 1,472
Cash used for investing activities (4,428) (11,885)
Financing activities:
Proceeds from issuance of common stock 59 358
Repayments of capital lease (1,739) (783)
Repayments of revolving credit line (189,389) (237,525)
Proceeds from revolving credit line 194,942 241,505
Repayments of debt -- (23,470)
Proceeds from private placement of debt -- 11,590
Debt refinancing costs -- (359)
Cash provided (used) for financing activities 3,873 (8,684)
Effect of exchange rate changes on cash 565 234
Net decrease in cash and cash equivalents (1,464) (14,250)
Cash and cash equivalents at beginning of period 39,403 53,653
Cash and cash equivalents at end of period $ 37,939 $ 39,403
Hutchinson Technology Incorporated
Reconciliation of Non-GAAP to GAAP Financial Measures - Unaudited
(In thousands, except per share data)
Thirteen Weeks Ended
September 28, June 29, September 29,
2014 2014 2013
Net loss - GAAP $ (5,156) $ (11,207) $ (14,555)
Subtract foreign currency gain (396) (101) --
Subtract reversal of severance expense (325) -- --
Add inventory impairment -- -- 1,747
Add foreign currency loss -- -- 122
Add non-cash interest expenses 869 842 765
Add severance expense -- 1,339 --
Add site consolidation expenses 268 205 885
Net loss - Adjusted $ (4,740) $ (8,922) $ (11,036)
Net loss per common share – GAAP:
Basic loss income per share $ (0.18) $ (0.40) $ (0.53)
Diluted loss income per share $ (0.18) $ (0.40) $ (0.53)
Net loss per common share – Adjusted:
Basic loss per share $ (0.17) $ (0.32) $ (0.40)
Diluted loss per share $ (0.17) $ (0.32) $ (0.40)
Weighted average common and common equivalent shares outstanding:
Basic 28,072 28,047 27,568
Diluted 28,072 28,047 27,568
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

Source:Hutchinson Technology Incorporated