Hutchinson Technology Second Quarter Loss Totals $13.1 Million On Weak Demand, Pre-Tax Charges and Tax-Rate Adjustment
Company Suspends Photoetching Operations in Eau Claire, Eliminates 950 Positions Company-Wide
HUTCHINSON, Minn., April 18 /PRNewswire/ -- Hutchinson Technology Incorporated (Nasdaq: HTCH) today reported a net loss of $13,101,000, or $.53 per diluted share, on net sales of $110,937,000 for the fiscal second quarter ended March 26, 2000. The results include a pre-tax charge to earnings of approximately $1,200,000, or $.04 per diluted share, related to severance costs for approximately 350 positions eliminated in the quarter. The fiscal 2000 second quarter and fiscal year-to-date results also include an adjustment of the company's effective tax rate from 29 percent to 25 percent. This results in a reduced tax benefit for which a fiscal year-to-date negative adjustment of $2,788,000, or $.11 per diluted share, was recorded in the fiscal second quarter. In the comparable fiscal 1999 period, the company reported net earnings of $13,748,000, or $.54 per diluted share, on net sales of $152,366,000.
For the six months ended March 26, 2000, Hutchinson Technology reported a net loss of $52,270,000, or $2.11 per diluted share, on net sales of $234,760,000. The results include a pre-tax charge to earnings of $47,728,000, or $1.45 per diluted share, related to write-downs of certain assets and severance costs for approximately 600 positions eliminated during the first six months of fiscal 2000. In the comparable fiscal 1999 period, the company reported net income of $25,281,000, or $1.05 per diluted share, on net sales of $307,641,000.
Wayne M. Fortun, Hutchinson Technology's president and chief executive officer, said that in light of continued weak demand for suspension assemblies, the company will immediately suspend photoetching operations at its Eau Claire, Wis. plant and consolidate those photoetching operations into its Hutchinson, Minn. plant. This will result in the elimination of approximately 200 production and support positions at the Eau Claire plant. The company is also eliminating approximately 750 additional positions across its plants; 350 in Eau Claire, 210 in Hutchinson, 180 in Sioux Falls, S.D. and 10 in Plymouth, Minn. After these workforce reductions, employment at Hutchinson Technology will total approximately 5,250, including approximately 2,500 at its Hutchinson plant, 1,050 at its Sioux Falls plant, 1,510 at its Eau Claire plant and 190 at its Plymouth plant.
The most recent workforce reduction will result in a charge against earnings of approximately $3,700,000, or $.11 per diluted share, which the company will recognize in its fiscal third quarter ending June 25, 2000. Employees whose positions are eliminated are being offered a severance package. Additionally, the company will recognize a write-down of value for excess manufacturing equipment. The write-down is expected to be in the range of $5,000,000 to $8,000,000, or $.15 to $.24 per diluted share, which the company will recognize in its fiscal third quarter ending June 25, 2000.
Fortun said the company currently estimates that the suspension of photoetching operations in Eau Claire, workforce reductions completed through April 2000 and other operations consolidations and expense reduction measures implemented in its current fiscal year will generate cost reductions of approximately $110,000,000 on an annualized basis beginning primarily in the fiscal fourth quarter. "Despite these consolidations and cost reductions, at current demand levels we do not expect to return to profitability during the rest of this fiscal year. We currently expect to report a third quarter net loss of $.35 to $.45 per diluted share, excluding the previously mentioned charges for severance costs and asset write-downs, on net sales currently projected to $100 to $105 million," said Fortun. He said in light of its financial performance expectations for the remainder of the fiscal year, the company is negotiating amendments to covenants of certain financing agreements. "We are maintaining a strong cash position and believe we can continue to manage operations to be near cash-flow neutral as a result of our ongoing efforts to adjust expenses to current market conditions," said Fortun.
During the fiscal 2000 second quarter, the company shipped 119 million suspension assemblies compared to 133 million in its fiscal 2000 first quarter and 149 million in the fiscal 1999 second quarter. TSA suspensions accounted for approximately 54 percent of units shipped in both the fiscal 2000 second quarter and the fiscal 2000 first quarter compared to 40 percent of units shipped in the fiscal 1999 second quarter.
Fortun said the decline in suspension assembly shipments resulted from a continuation of trends that have dampened demand for the past several quarters. "The decreased demand for our products results primarily from reductions in disk drive component counts and, to a lesser extent, improving head-gimbal assembly yields at our customers and shifts in suspension assembly market share on certain programs. The decreased demand has resulted in continued under-utilization of our manufacturing capacity," said Fortun. "We remain confident, however, that overall demand for disk storage will continue to increase and eventually offset the effects of reduced component counts and yield improvements," said Fortun.
Hutchinson Technology is the leading worldwide supplier of suspension assemblies for disk drives.
This announcement contains forward-looking statements regarding the company's financial results for its fiscal 2000 third quarter and fiscal year, expected cost reduction efforts and results and overall demand for suspension assemblies and disk drive storage. 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 consumption of disk drives or suspension assemblies, faster or slower improvements in disk drive data densities which affect suspension assembly demand, the company's ability to fully realize anticipated cost reductions and other factors described from time to time in the company's reports filed with the Securities and Exchange Commission.
(Financial data follows.)
Hutchinson Technology Incorporated
(Nasdaq/NMS: HTCH)
Second Quarter Ended
March 26, 2000 March 28, 1999
Net sales $110,937,000 $152,366,000
Gross profit (loss) $4,442,000 $36,390,000
Income (loss)
from operations $(14,131,000) $17,169,000
Net income (loss) $(13,101,000) $13,748,000
Net income (loss)
per common share $ (.53) $.61
Net income (loss) per common share --
Assuming dilution $(.53) $.54
Weighted average common and
common equivalent shares outstanding:
Common shares 24,758,000 22,681,000
Common shares --
assuming dilution 24,758,000 28,812,000
Twenty-Six Weeks Ended
March 26, 2000 March 28, 1999
Net sales $234,760,000 $307,641,000
Gross profit (loss) $12,425,000 $69,975,000
Asset impairment and severance $46,528,000 $--
Income (loss) from operations $(69,526,000) $33,883,000
Net income (loss) $(52,270,000) $25,281,000
Net income (loss)
per common share $(2.11) $1.19
Net income (loss) per common share --
Assuming dilution $ (2.11) $1.05
Weighted average common and
common equivalent shares outstanding:
Common shares 24,751,000 21,232,000
Common shares -- assuming dilution 24,751,000 27,222,000
At March 26, At Sept. 26,
2000 1999
Total assets $697,403,000 $751,849,000
Cash and cash equivalents $110,520,000 $98,820,000
Securities available for sale $129,022,000 $139,402,000
Total shareholders' investment $412,977,000 $464,959,000
HUTCHINSON TECHNOLOGY INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(In thousands, except per share data)
Thirteen Weeks Ended Twenty-Six Weeks Ended
March 26, March 28, March 26, March 28,
2000 1999 2000 1999
Net sales $110,937 $152,366 $234,760 $307,641
Cost of sales 106,495 115,976 222,335 237,666
Gross profit 4,442 36,390 12,425 69,975
Selling, general and
administrative
expenses 12,936 12,845 24,245 25,046
Research and
development expenses 5,637 6,376 11,178 11,046
Asset impairment
and other (Note 2) -- 46,528 --
Income (loss) from
operations (14,131) 17,169 (69,526) 33,883
Interest expense (3,490) (2,249) (6,489) (5,137)
Other income, net 3,094 2,484 6,321 3,256
Income (loss) before
income taxes (14,527) 17,404 (69,694) 32,002
Provision (benefit)
for income taxes (1,426) 3,656 (17,424) 6,721
Net income (loss) ($13,101) $13,748 ($52,270) $25,281
Basic earnings (loss)
per share ($0.53) $ 0.61 ($ 2.11) $1.19
Diluted earnings (loss)
per share ($0.53) $0.54 ($2.11) $1.05
Weighted average
common shares
outstanding 24,758 22,681 24,751 21,232
Weighted average
common and diluted
shares outstanding 24,758 28,812 24,751 27,222
HUTCHINSON TECHNOLOGY INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
(Dollars in thousands)
March 26, September 26,
2000 1999
ASSETS
Current assets:
Cash and cash equivalents $110,520 $98,820
Securities available for sale 129,022 139,402
Trade receivables, net 48,462 72,716
Other receivables 6,046 9,050
Inventories 39,918 40,984
Prepaid taxes and other expenses 17,316 17,814
Total current assets 351,284 378,786
Property, plant and equipment, net 306,938 352,936
Other assets 39,181 20,127
$697,403 $751,849
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Current maturities of long-term debt $ 4,171 $ 4,171
Accounts payable and accrued expenses 32,093 43,635
Accrued compensation 20,866 17,014
GE lease accrual 7,590 4,519
Total current liabilities 64,720 69,339
Long-term debt, less current maturities 63,587 65,562
Convertible subordinated notes 150,000 150,000
Other long-term liabilities 6,119 1,989
Shareholders' investment:
Common stock, $.01 par value,
45,000,000 shares authorized,
24,761,000 and 24,744,000 issued
and outstanding 248 247
Additional paid-in capital 363,686 363,399
Retained earnings 49,043 101,313
Total shareholders' investment 412,977 464,959
$697,403 $751,849
HUTCHINSON TECHNOLOGY INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(Dollars in thousands)
Twenty-Six Weeks Ended
March 26, March 28,
2000 1999
Operating activities:
Net income (loss) ($52,270) $25,281
Adjustments to reconcile net income (loss) to
cash provided by (used for) operating activities:
Asset impairment and other 46,528 --
Depreciation and amortization 48,063 42,390
Deferred taxes (19,363) 1,683
Change in operating assets and liabilities 21,883 272
Cash provided by operating activities 44,841 69,626
Investing activities:
Capital expenditures (41,834) (59,230)
Sales of marketable securities 64,760 8,148
Purchases of marketable securities (54,380) (41,352)
Cash used for investing activities (31,454) (92,434)
Financing activities:
Repayments of long-term debt (1,975) (2,540)
Net proceeds from
issuance of common stock 288 210,362
Cash provided by (used for)
financing activities (1,687) 207,822
Net increase in cash and
cash equivalents 11,700 185,014
Cash and cash equivalents
at beginning of period 98,820 58,942
Cash and cash equivalents
at end of period $110,520 $243,956
--------------------------------------------------------------------------------
SOURCE: Hutchinson Technology, Inc.
CONTACT: Todd Bradley, Investor Relations of Hutchinson Technology, 320-587-1605 |
