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| 8-K - FORM 8-K - HUTCHINSON TECHNOLOGY INC | f8k_012610.htm |
EXHIBIT 99.1
HUTCHINSON TECHNOLOGY REPORTS FIRST QUARTER NET INCOME OF $2.2 MILLION
Financial Results Improve on Sequential Growth in Shipments and Revenue
Hutchinson, Minn., Jan. 26, 2010 -- Hutchinson Technology Incorporated (NASDAQ: HTCH) today reported net income of $2.2 million, or $0.09 per diluted share, on net sales of $108.3 million for its fiscal 2010 first quarter ended December 27, 2009.
The company’s fiscal 2010 first quarter gross profit was $20.8 million, or 19 percent of net sales, an increase of $3.3 million or more than 200 basis points compared with the preceding quarter as a result of higher shipment volume and net sales. Compared with the prior year’s first quarter, gross profit increased by
$20.9 million despite an $11.4 million decline in net sales, reflecting the benefits of the company’s fiscal 2009 restructuring and cost reduction actions. Net income for the fiscal 2010 first quarter included:
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· |
A non-cash interest expense of $2.1 million resulting from the company’s adoption of Financial Accounting Standards Board guidance for accounting for convertible debt instruments. As the company previously disclosed, the adoption of this guidance is expected to result in non-cash interest expense of approximately $8.5 million in fiscal
2010. |
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· |
A non-recurring income tax benefit of $2.3 million, primarily due to a recent change in U.S. tax law that enabled the company to carry back some of its net operating losses to prior years and apply for a refund of taxes paid in those years. |
Excluding these two items, net income for the fiscal 2010 first quarter would have been $2.0 million, or $0.09 per diluted share.
In the comparable fiscal 2009 period, the company had a net loss of $66.2 million, or $2.88 per share, on net sales of $119.7 million. The company’s fiscal 2006 through fiscal 2009 financial statements have been adjusted to reflect the required retrospective adoption of the
accounting guidance noted above. Results for the fiscal 2009 first quarter included asset impairment charges of $32.3 million, severance costs of $19.5 million, a $12.2 million gain on the repurchase of $59.9 million par value of the company’s 2.25% Convertible Subordinated Notes due 2010, a $2.4 million net gain related to the valuation of the company’s auction-rate securities portfolio and a non-cash interest expense of $2.1 million related to the retrospective adoption of the accounting
guidance noted above. Excluding these items, the company would have reported a fiscal 2009 first quarter net loss of $26.8 million, or $1.17 per share.
Cash from operations in the fiscal 2010 first quarter totaled $24.0 million and capital expenditures totaled $4.1 million. During the quarter, the company repurchased $4.5 million of its 2.25% Convertible Subordinated Notes due March 2010, leaving a balance due of $41.1 million. The company added $15 million to its cash
and investments balance, which totaled $242 million at the end of the fiscal 2010 first quarter.
“Our first quarter operating performance benefited from sequential quarter growth in shipments and net sales, as well as the lower costs resulting from our fiscal 2009 restructuring actions,” said Wayne M. Fortun, Hutchinson Technology’s president and chief executive officer. “In addition, we increased our
cash and investments balance while further reducing our debt,” said Fortun. “To achieve consistent profitability, we will continue to focus on improving our TSA+ production efficiency, expanding TSA+ adoption, establishing operations in Thailand and growing revenue in our BioMeasurement Division.”
Disk Drive Components Division
As previously reported, the company shipped approximately 155 million suspension assemblies in the fiscal 2010 first quarter, up 7 percent from 145 million in the preceding quarter and about flat with the fiscal 2009 first quarter. Compared with the preceding quarter, shipments of suspension assemblies for 3.5-inch ATA and enterprise
applications increased, shipments for 2.5-inch ATA applications were about flat and shipments for 1.8-inch ATA applications declined, as is seasonally typical.
Average selling price in the fiscal 2010 first quarter was 68 cents, compared with 70 cents in the preceding quarter and 76 cents in the fiscal 2009 first quarter. The decline in fiscal 2010 first quarter average selling price was a result of a competitive pricing environment and the mix of products shipped.
The company’s first quarter shipments of TSA+ suspension assemblies totaled approximately 25 million, up 36 percent from the preceding quarter. With the increased volume, the company reduced its TSA+ cost per part by approximately 16 percent in the fiscal 2010 first quarter
compared with the preceding quarter. However, the TSA+ cost burden increased to $7.4 million in the fiscal 2010 first quarter from $7.1 million in the preceding quarter due to lower than expected TSA+ yields.
“Our TSA+ yield declined slightly in the first quarter as we began implementing certain process improvements that we expect to create long-term benefits,” said Kathleen Skarvan, president of the Disk Drive Components Division. “With continued growth in TSA+ suspension
assembly volume and improvement in our TSA+ manufacturing efficiencies and yields, we believe we can eliminate the cost burden associated with TSA+ flexure production in the second half of the fiscal year and begin to achieve a cost advantage for TSA+ flexures over current subtractive TSA flexures soon after.”
Skarvan said the company has begun construction of an assembly operation in Thailand and hiring of management and support staff and expects to begin operations there in the second half of calendar 2010. “The Thailand operation will improve our ability to serve our customers’ operations in Asia and enable us to reduce
our labor costs, freight costs and future income taxes,” she said. Skarvan reaffirmed that the Thai assembly operation will require about $15 million in fiscal 2010 capital spending.
Regarding the outlook for suspension assembly demand and pricing, Skarvan said the company expects demand to closely track the growth in worldwide shipments of disk drives in calendar 2010 and that pricing will remain competitive. “However, in the March quarter we expect suspension demand to decline in line with historical
seasonality based on our understanding of customer build plans and a temporary reduction in suspension assemblies per disk drive,” said Skarvan.
BioMeasurement Division
The company’s BioMeasurement Division reported fiscal 2010 first quarter net sales of $509,000, compared with $624,000 in the preceding quarter and $265,000 in the fiscal 2009 first quarter. Rick Penn, president of the BioMeasurement Division, attributed the sequential quarter
decline in net sales primarily to delays in sales to new customers.
Focusing on year-over-year comparisons, Penn noted that net sales, the number of customers and the installed base of InSpectra™ StO2 Tissue
Oxygenation monitors have all doubled or nearly doubled, with the number of customers growing to more than 100 worldwide and the installed base of monitors reaching nearly 250. “Among our growing customer base, we are focused on educating clinicians regarding the use of InSpectra StO2 in specific clinical situations,” said Penn. “More than 100 physicians will participate in our Advanced StO2 Education
Programs during the first two quarters of fiscal 2010, nearly triple the total number of physicians that participated in all of fiscal 2009. We are encouraged by the increased demand for this training and believe that as the number of physicians who understand the use and value of StO2 readings in patient care grows, so will the usage of InSpectra StO2 sensors.” Penn
said the division continues to expect fiscal 2010 net sales of $4 million to $6 million.
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 on Tuesday, January 26. Individual investors and news media may participate in the conference call live via the webcast. The webcast will be available through the Investors
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. The company’s Disk Drive Components Division is a leading worldwide supplier of suspension assemblies for disk drives. The company’s BioMeasurement Division is focused on
bringing to the market new technologies and products that provide information clinicians can use to improve the quality of health care and reduce costs.
Cautionary Note Regarding Forward-Looking Statements
This announcement contains forward-looking statements regarding demand for and shipments of disk drives and the company’s products, pricing, production capability and costs, assembly operations in Thailand, product commercialization and adoption, customer education, capital expenditures, cost reductions, operating performance 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, 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 establish an assembly operation in Asia and other factors described from time to time in the company's reports filed with the Securities and Exchange Commission.
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INVESTOR CONTACT:
Chuck Ives
Hutchinson Technology Inc.
320-587-1605 |
MEDIA CONTACT:
Connie Pautz
Hutchinson Technology Inc.
320-587-1823 |
(Financial statements follow)
Hutchinson Technology Incorporated
Condensed Consolidated Statements of Operations - Unaudited
(In thousands, except per share data)
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Thirteen Weeks Ended |
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December 27, |
December 28, |
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2009 |
2008 (1) |
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Net sales |
$ | 108,256 | $ | 119,671 | ||||
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Cost of sales |
87,479 | 119,804 | ||||||
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Gross profit (loss) |
20,777 | (133 | ) | |||||
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Research and development expenses |
5,147 | 8,883 | ||||||
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Selling, general and |
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administrative expenses |
12,501 | 16,416 | ||||||
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Severance and other expenses |
- | 19,527 | ||||||
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Asset impairment charge |
- | 32,280 | ||||||
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Income (loss) from operations |
3,129 | (77,239 | ) | |||||
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Interest expense |
(4,197 | ) | (4,876 | ) | ||||
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Interest income |
409 | 1,259 | ||||||
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Gain on extinguishment of debt |
5 | 12,175 | ||||||
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Other income, net |
558 | 323 | ||||||
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Gain on short- and long-term investments |
64 | 2,404 | ||||||
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Loss before income taxes |
(32 | ) | (65,954 | ) | ||||
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(Benefit) provision for income taxes |
(2,252 | ) | 265 | |||||
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Net income (loss) |
$ | 2,220 | $ | (66,219 | ) | |||
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Basic earnings (loss) per share |
$ | 0.10 | $ | (2.88 | ) | |||
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Diluted earnings (loss) per share |
$ | 0.09 | $ | (2.88 | ) | |||
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Weighted-average common |
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shares outstanding |
23,359 | 22,996 | ||||||
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Weighted-average common |
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and diluted shares outstanding |
23,609 | 22,996 | ||||||
(1) Restated due to the required retrospective adoption of the accounting guidance for convertible debt instruments.
Hutchinson Technology Incorporated
Condensed Consolidated Balance Sheets - Unaudited
(In thousands, except shares data)
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December 27, |
September 27, |
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ASSETS |
2009 |
2009 (1) |
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Current assets: |
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Cash and cash equivalents |
$ | 118,461 | $ | 106,391 | ||||
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Short-term investments |
101,024 | 96,316 | ||||||
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Trade receivables, net |
59,812 | 63,448 | ||||||
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Other receivables |
11,851 | 8,445 | ||||||
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Inventories |
48,055 | 46,878 | ||||||
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Other current assets |
3,177 | 4,932 | ||||||
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Total current assets |
342,380 | 326,410 | ||||||
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Long-term investments |
22,176 | 24,316 | ||||||
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Property, plant and equipment, net |
268,883 | 279,336 | ||||||
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Other assets |
5,064 | 5,425 | ||||||
| $ | 638,503 | $ | 635,487 | |||||
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LIABILITIES AND SHAREHOLDERS' INVESTMENT |
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Current liabilities: |
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Current maturities of long-term debt |
$ | 97,941 | $ | 102,804 | ||||
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Accounts payable |
20,750 | 17,536 | ||||||
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Accrued expenses |
10,701 | 11,183 | ||||||
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Accrued compensation |
13,800 | 13,139 | ||||||
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Total current liabilities |
143,192 | 144,662 | ||||||
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Long-term debt, less current maturities |
540 | 946 | ||||||
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Convertible subordinated notes |
168,515 | 166,464 | ||||||
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Other long-term liabilities |
1,361 | 1,705 | ||||||
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Shareholders' investment: |
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Common stock $.01 par value, 100,000,000 shares |
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authorized, 23,359,000 and 23,359,000 |
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issued and outstanding |
234 | 234 | ||||||
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Additional paid-in capital |
419,569 | 418,572 | ||||||
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Accumulated other comprehensive income |
2,471 | 2,503 | ||||||
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Accumulated earnings |
(97,379 | ) | (99,599 | ) | ||||
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Total shareholders' investment |
324,895 | 321,710 | ||||||
| $ | 638,503 | $ | 635,487 | |||||
(1) Restated due to the required retrospective adoption of the accounting guidance for convertible debt instruments.
Hutchinson Technology Incorporated
Condensed Consolidated Statements of Cash Flows - Unaudited
(Dollars in thousands)
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Thirteen Weeks Ended |
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December 27, |
December 28, |
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2009 |
2008 (1) |
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Operating activities: |
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Net income (loss) |
$ | 2,220 | $ | (64,077 | ) | |||
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Adjustments to reconcile net income (loss) to |
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cash provided by operating activities: |
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Depreciation and amortization |
14,836 | 23,698 | ||||||
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Stock-based compensation |
997 | 1,557 | ||||||
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Non-cash interest expense |
2,051 | 2,142 | ||||||
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Gain on short- and long-term investments |
(64 | ) | (2,404 | ) | ||||
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Impairment of assets |
- | 32,280 | ||||||
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Loss on disposal of assets |
147 | 47 | ||||||
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Severance and other expenses |
- | 19,527 | ||||||
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Gain on extinguishment of debt |
(5 | ) | (12,175 | ) | ||||
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Changes in operating assets and liabilities |
3,798 | 35,178 | ||||||
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Cash provided by operating activities |
23,980 | 35,773 | ||||||
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Investing activities: |
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Capital expenditures |
(4,098 | ) | (11,846 | ) | ||||
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Purchases of marketable securities |
(11,629 | ) | (1,652 | ) | ||||
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Sales/maturities of marketable securities |
9,077 | 81,811 | ||||||
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Cash (used for) provided by investing activities |
(6,650 | ) | 68,313 | |||||
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Financing activities: |
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Repayments of long-term debt |
(5,260 | ) | (48,110 | ) | ||||
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Net proceeds from loan |
- | 59,532 | ||||||
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Net proceeds from issuance of common stock |
- | 541 | ||||||
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Cash (used for) provided by financing activities |
(5,260 | ) | 11,963 | |||||
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Net increase in cash and cash equivalents |
12,070 | 116,049 | ||||||
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Cash and cash equivalents at beginning of period |
106,391 | 62,309 | ||||||
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Cash and cash equivalents at end of period |
$ | 118,461 | $ | 178,358 | ||||
(1) Restated due to the required retrospective adoption of the accounting guidance for convertible debt instruments.
Hutchinson Technology Incorporated
Earnings Per Share Calculation - Unaudited
(In thousands, except per share data)
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Thirteen Weeks Ended |
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December 27, |
December 28, |
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2009 |
2008 (1) |
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Net income (loss) (A) |
$ | 2,220 | $ | (66,219 | ) | |||
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Plus: interest expense on convertible |
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subordinated notes |
- | - | ||||||
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Less: additional profit sharing expense and |
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income tax provision |
- | - | ||||||
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Net income (loss) available to common shareholders (B) |
$ | 2,220 | $ | (66,219 | ) | |||
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Weighted average common shares outstanding (C) |
23,359 | 22,996 | ||||||
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Dilutive potential common shares |
250 | - | ||||||
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Weighted average common and diluted shares |
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outstanding (D) |
23,609 | 22,996 | ||||||
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Basic earnings (loss) per share [(A)/(C)] |
$ | 0.10 | $ | (2.88 | ) | |||
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Diluted earnings (loss) per share [(B)/(D)] |
$ | 0.09 | $ | (2.88 | ) | |||
(1) Restated due to the required retrospective adoption of the accounting guidance for convertible debt instruments.
Hutchinson Technology Incorporated
Reconciliation of Non-GAAP to GAAP Financial Measures - Unaudited
(In thousands, except per share data)
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Thirteen Weeks Ended |
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December 27, |
December 28, |
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2009 |
2008 (1) |
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Net income (loss) - GAAP |
$ | 2,220 | $ | (66,219 | ) | |||
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Add asset impairment charge |
32,280 | |||||||
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Add severance expenses |
19,527 | |||||||
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Add non-cash interest expense |
2,051 | 2,146 | ||||||
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Subtract gain on extinguishment of debt |
(12,175 | ) | ||||||
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Subtract gain on short- and long-term investments |
(2,404 | ) | ||||||
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Subtract income tax benefit |
(2,252 | ) | - | |||||
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Net income (loss) - Adjusted |
$ | 2,019 | $ | (26,845 | ) | |||
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Net income per common share – Adjusted: |
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Basic earnings (loss) per share |
$ | 0.09 | $ | (1.17 | ) | |||
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Diluted earnings (loss) per share |
$ | 0.09 | $ | (1.17 | ) | |||
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Weighted average common and common
equivalent shares outstanding: |
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Basic |
23,359 | 22,996 | ||||||
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Diluted |
23,609 | 22,996 | ||||||
Net income 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.
(1) Restated due to the required retrospective adoption of the accounting guidance for convertible debt instruments.