HUTCHINSON, Minn., April 28, 2009 (GLOBE NEWSWIRE) -- Hutchinson Technology Incorporated (Nasdaq:HTCH) today reported a net loss of $57.7 million, or $2.49 per diluted share, on net sales of $79.0 million for its fiscal 2009 second quarter ended March 29, 2009. Results for the quarter included:
* Asset impairment charges of $18.7 million related to manufacturing and support equipment in the company's assembly and components operations; and * Severance and other costs of $4.8 million related primarily to the previously announced closure of the company's assembly operations in Sioux Falls, South Dakota.
Excluding these items, Hutchinson Technology's net loss for the fiscal 2009 second quarter would have been $34.2 million, or $1.48 per share. In the comparable fiscal 2008 period, the company reported a net loss of $6.2 million, or $0.25 per share, on net sales of $143.8 million.
The decline in fiscal 2009 second quarter net sales resulted primarily from a 40% decline in suspension assembly shipments compared with the fiscal 2008 second quarter and reduced the company's ability to cover its fixed costs, resulting in a gross loss of $11.8 million or 15%. The gross loss included a $7.8 million cost burden related to TSA+ flexure production. Increased TSA+ volume and further yield improvements helped reduce this burden from $9.5 million in the fiscal 2009 first quarter.
The company also announced that it is taking additional actions to reduce costs, improve cash flow, meet the current portion of its debt obligations and make strategic investments as needed. "We are further restructuring the company to adjust to market conditions and the expected phase out of suspension assembly shipments to Seagate Technology over the next 18 to 24 months," said Wayne Fortun, president and chief executive officer. The restructuring actions include eliminating approximately 300 additional positions, bringing overall employment to about 2,500 by the end of the fiscal 2009 third quarter. The company estimates that its financial results for its fiscal 2009 third quarter ending June 28, 2009 will include approximately $25 million of severance and asset impairment charges related to these restructuring actions. "These actions should generate approximately $50 million in annualized cost savings. Combined with other restructuring actions we have taken this year, we estimate we have reduced our costs by approximately $175 million on an annualized basis, and these savings will become fully realized in our fiscal 2009 fourth quarter. This will position the company to generate positive free cash flow at quarterly revenue of $85 million to $90 million," said Fortun.
The company's total cash and investments at the end of the fiscal 2009 second quarter totaled $293 million, compared with $299 million at the end of the preceding quarter. The company has further reduced its planned fiscal 2009 capital spending from $40 million to less than $30 million.
Disk Drive Components Division
The company shipped approximately 107 million suspension assemblies in the fiscal 2009 second quarter, down from 155 million in the preceding quarter. Kathleen Skarvan, president of the Disk Drive Components Division, attributed the sequential quarter decline in suspension assembly volume primarily to lower demand for disk drives, lower disk drive production as the drive makers reduced inventories and a modest loss of market share. As previously reported, the company's combined shipments for the mobile and enterprise segments declined more than 50% sequentially, while shipments for the 3.5" ATA segment increased approximately 15%. This shift in product mix was the primary reason that average selling price declined sequentially from $0.76 to $0.71.
The company shipped approximately 10 million TSA+ suspension assemblies in the fiscal 2009 second quarter, up from 4.5 million in the preceding quarter. Unit costs for TSA+ suspension assemblies have continued to decline as a result of increasing TSA+ volume and further optimization of TSA+ production processes. "We expect our TSA+ shipments to further increase in subsequent quarters and the associated ramp of TSA+ production volume will continue to reduce the gross margin burden," said Skarvan. "Compared to current subtractive flexures, additive TSA+ flexures provide superior performance and will ultimately have a lower cost."
The company currently expects fiscal 2009 third quarter suspension assembly shipments to increase on a sequential basis, in contrast to the historical norm of a decrease in the June quarter. Skarvan said that shipments to Seagate are expected to decline to less than 10% of the company's total suspension assembly volume in its fiscal 2009 fourth quarter, and the remaining volume will be phased out subsequently. Skarvan added that the company continues to ramp suspension assembly programs with all of the other disk drive makers.
BioMeasurement Division
Net sales for the BioMeasurement Division totaled $458,000, up from $265,000 in the preceding quarter. Rick Penn, president of the BioMeasurement Division, said that almost all of fiscal 2009's second quarter sales were to customers who are using the InSpectra StO2 system in clinical applications rather than for research. "These applications include trauma, emergency medicine, intensive care and peri-operative care," said Penn.
After adding 19 new customers during the fiscal 2009 second quarter, the BioMeasurement Division now has 74 customers and the installed base of monitors exceeds 140. The second quarter growth included increased monitor sales in Europe and the United States and sales through distributors in parts of Europe and the Middle East. "The growing base of installed systems should begin to result in increased sensor sales as our system becomes routinely used to manage treatment in a wide range of critical care settings," said Penn.
The company expects fiscal 2009 net sales for the BioMeasurement Division to reach $3 million to $5 million, with the division's operating losses narrowing on the revenue growth and cost reductions within the division.
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, April 28. Individual investors and news media may participate in the conference call live via the webcast. The webcast will be available through the Investor Relations page on Hutchinson Technology's web site at www.htch.com. 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, workforce reductions, production capability and costs, product and process development, product commercialization and adoption, debt obligations, capital expenditures, cost savings, 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 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 29, March 30, March 29, March 30,
2009 2008 2009 2008
---------- ---------- ---------- ----------
Net sales $ 79,004 $ 143,844 $ 198,675 $ 316,921
Cost of sales 90,778 124,903 210,582 265,063
---------- ---------- ---------- ----------
Gross (loss) profit (11,774) 18,941 (11,907) 51,858
Research and
development expenses 7,454 10,260 16,337 20,670
Selling, general and
administrative
expenses 14,934 18,436 31,350 36,799
Severance and other
expenses 4,787 24,314
Asset impairment
charge 18,688 50,968
Litigation charge -- -- -- 2,494
---------- ---------- ---------- ----------
Loss from operations (57,637) (9,755) (134,876) (8,105)
Interest expense (2,986) (2,912) (5,720) (5,872)
Interest Income 928 3,642 2,187 7,915
Gain on debt
extinguishment -- -- 12,175 --
Other income, net 1,793 688 4,520 1,329
---------- ---------- ---------- ----------
Loss before income
taxes (57,902) (8,337) (121,714) (4,733)
(Benefit) provision
for income taxes (204) (2,100) 61 (786)
---------- ---------- ---------- ----------
Net loss $ (57,698) $ (6,237) $(121,775) $ (3,947)
========== ========== ========== ==========
Basic loss per share $ (2.49) $ (0.25) $ (5.28) $ (0.15)
========== ========== ========== ==========
Diluted loss per share $ (2.49) $ (0.25) $ (5.28) $ (0.15)
========== ========== ========== ==========
Weighted-average
common shares
outstanding 23,160 25,254 23,078 25,747
========== ========== ========== ==========
Weighted-average
common and diluted
shares outstanding 23,160 25,254 23,078 25,747
========== ========== ========== ==========
Hutchinson Technology Incorporated
Condensed Consolidated Balance Sheets - Unaudited
(In thousands, except shares data)
March 29, September 28,
ASSETS 2009 2008
------------- -------------
Current assets:
Cash and cash equivalents $ 184,610 $ 62,309
Short-term investments 10,854 108,944
Trade receivables, net 42,872 100,928
Other receivables 7,268 8,847
Inventories 69,624 76,459
Other current assets 4,875 7,326
------------- -------------
Total current assets 320,103 364,813
Long-term investments 97,199 92,166
Property, plant and equipment, net 337,828 415,088
Other assets 7,002 9,220
------------- -------------
$ 762,132 $ 881,287
============= =============
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Current maturities of long-term debt $ 91,562 $ 1,444
Accounts payable 18,215 26,519
Accrued expenses 12,455 14,537
Accrued compensation 30,540 21,178
------------- -------------
Total current liabilities 152,772 63,678
Long-term debt, less
current maturities 61,242 2,498
Convertible subordinated notes 225,000 375,000
Other long-term liabilities 1,657 3,009
Shareholders' investment:
Common stock $.01 par value,
100,000,000 shares authorized,
23,172,000 and 22,941,000 issued and
outstanding 232 229
Additional paid-in capital 375,889 371,965
Accumulated other comprehensive income
(loss) 1,338 (869)
Accumulated (loss) earnings (55,998) 65,777
------------- -------------
Total shareholders' investment 321,461 437,102
------------- -------------
$ 762,132 $ 881,287
============= =============
Hutchinson Technology Incorporated
Condensed Consolidated Statements of Cash Flows - Unaudited
(Dollars in thousands)
Twenty-Six Weeks Ended
----------------------------
March 29, March 30,
2009 2008
------------- -------------
Operating activities:
Net loss $ (121,775) $ (3,947)
Adjustments to reconcile net loss to
cash provided by operating
activities:
Depreciation and amortization 44,757 55,551
Stock-based compensation 2,865 2,953
Benefit for deferred taxes (67) (1,278)
Asset impairment charge 50,878 --
Gain on long-term investments (3,910) --
Gain on extinguishment of debt, net (12,175) --
Loss on disposal of assets 37 570
Litigation charge 12,513 2,494
Changes in operating assets and
liabilities 56,523 17,402
------------- -------------
Cash provided by operating
activities 29,646 73,745
------------- -------------
Investing activities:
Capital expenditures (17,693) (36,875)
Purchases of marketable securities (10,852) (785,301)
Sales/maturities of marketable
securities 109,101 831,510
------------- -------------
Cash provided by investing
activities 80,556 9,334
------------- -------------
Financing activities:
Repayment of long-term debt (48,469) (661)
Repurchase of common stock -- (47,721)
Net proceeds from issuance of common
stock 1,062 7,215
Net proceeds from loan 59,506 --
------------- -------------
Cash provided by (used for)
financing activities 12,099 (41,167)
------------- -------------
Net increase in cash and cash
equivalents 122,301 41,912
Cash and cash equivalents at beginning
of period 62,309 64,509
------------- -------------
Cash and cash equivalents at end of
period $ 184,610 $ 106,421
============= =============
Hutchinson Technology Incorporated
Earnings Per Share Calculation - Unaudited
(In thousands, except per share data)
Thirteen Weeks Ended Twenty-Six Weeks Ended
---------------------- ----------------------
March 29, March 30, March 29, March 30,
2009 2008 2009 2008
---------- ---------- ---------- ----------
Net loss (A) $ (57,698) $ (6,237) $(121,775) $ (3,947)
Plus: interest expense
on convertible
subordinated
notes -- -- -- --
Less: additional
profit sharing
expense and
income tax
provision -- -- -- --
---------- ---------- ---------- ----------
Net loss available to
common
shareholders (B) $ (57,698) $ (6,237) $(121,775) $ (3,947)
========== ========== ========== ==========
Weighted average
common shares
outstanding (C) 23,160 25,254 23,078 25,747
Dilutive potential
common shares -- -- -- --
Weighted average
common and diluted
shares
outstanding (D) 23,160 25,254 23,078 25,747
========== ========== ========== ==========
Basic loss
per share ((A)/(C)) $ (2.49) $ (0.25) $ (5.28) $ (0.15)
Diluted loss
per share ((B)/(D)) $ (2.49) $ (0.25) $ (5.28) $ (0.15)
Hutchinson Technology Incorporated
Reconciliation of Non-GAAP to GAAP Financial Measures -
Unaudited (In thousands, except per share data)
Thirteen Weeks Ended
----------------------------
March 29, March 30,
2009 2008
------------- -------------
Net loss - GAAP $ (57,698) $ (6,237)
Add severance expenses 4,787 --
Add asset impairment charge 18,688 --
Add Litigation charge -- --
Subtract gain on extinguishment of debt -- --
Subtract gain on long-term investments -- --
------------- -------------
Net loss - Adjusted $ (34,223) $ (6,237)
============= =============
Net loss per common share - Adjusted:
Basic loss per share $ (1.48) $ (0.25)
Diluted loss per share $ (1.48) $ (0.25)
Weighted average common and common
equivalent shares outstanding:
Basic 23,160 25,254
Diluted 23,160 25,254
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.