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| 8-K - FORM 8-K - HUTCHINSON TECHNOLOGY INC | f8k_042716.htm |
EXHIBIT 99.1
HUTCHINSON TECHNOLOGY REPORTS SECOND QUARTER RESULTS
Net Cash as Defined by Merger Agreement Totals $51.3 Million at Quarter End
Hutchinson, Minn., April 27, 2016 -- 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 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 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.
| INVESTOR CONTACT: | MEDIA CONTACT: | |
| Chuck Ives | Connie Pautz | |
| Hutchinson Technology Inc. | Hutchinson Technology Inc. | |
| 320-587-1605 | 320-587-1823 | |
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 | ||||||||
| authorized, 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.