Can someone explain why HTCH is blaming their lousy earnings on poor unit sales of disk drives?
HTCH produces around 70% of suspension assemblies for disk drives worldwide.
The number of drives sold worldwide is increasing by over 15% a year (15% is my wild guess, but exact figures aren't needed).
HTCH is blaming the slowdown of their unit sales on disk drive makers clearing out inventory (for 2 quarters already, and now going into a third quarter????)
Can somebody clarify the situation for me?
I know HTCH reported lousy earnings for the last two quarters. And now they are forecasting a loss for the December quarter. And they are blaming it on poor unit sales of disk drives by the disk drive makers, rather than on margin pressure for the suspension assemblies. Why doesn't HTCH just blame their problems on margin pressure (and any other cost factors such as investment costs, yield problems, etc.)
From what I understand , the number of disk drives being sold worldwide is still rising strongly.
So how can HTCH blame their problems on poor (unit) sales of disk drives?
biz.yahoo.com
Tuesday November 4 5:15 PM EST
Company Press Release
Hutchinson Technology Reports Fourth Quarter and Year
End Results
HUTCHINSON, Minn., Nov. 4 /PRNewswire/ -- Hutchinson Technology Incorporated
(Nasdaq:HTCH) today reported net income of $411,000, or $.02 per share, on net sales of
$100,354,000 for the 13-week fiscal fourth quarter ended September 28, 1997. The company had
previously announced that it expected to operate at or near break-even for the fourth quarter. In the
14-week fiscal 1996 fourth quarter, Hutchinson Technology reported net income of $1,409,000, or
$.08 per share, on net sales of $91,890,000.
For the fiscal year ended September 28, 1997, the company reported a 204 percent increase in net
income to $41,909,000 compared to $13,802,000 in fiscal 1996. Fiscal 1997 net income per share
increased 170 percent to $2.21 from $.82 in fiscal 1996 while fiscal 1997 net sales grew 28 percent
to $453,232,000 from $353,186,000 in fiscal 1996.
Fiscal 1996 earnings per share included a $.23 per share charge reflecting recognition of certain
fixed commitments to IBM under a technology sharing agreement. In addition, earnings per share
figures for the fiscal 1996 fourth quarter and full year have been adjusted to reflect a three-for-one
split of the company's common stock effective February 11, 1997.
Fourth Quarter Results Match Expectations
Wayne M. Fortun, Hutchinson Technology's president and chief executive officer, said the decline in
fourth quarter net income compared to the year-ago period resulted from decreasing demand for
suspension assemblies in the last two quarters. During the fiscal 1997 fourth quarter, the company
shipped 156 million suspension assemblies, compared to 195 million in the fiscal 1997 third quarter.
(In the 14-week fiscal 1996 fourth quarter, the company shipped 143 million suspension
assemblies.) ''We believe this decline in demand results from disk drive manufacturers temporarily
slowing production of certain models to reduce inventories,'' said Fortun. ''As a result of continued
low demand and the drag on earnings related to development and production ramp-up costs for our
TSA suspensions, we expect to report a net loss for our fiscal first quarter,'' said Fortun.
Fiscal 1997 Net Income Up 204 Percent
Commenting on fiscal 1997 results, Fortun said the year-over-year increases in net sales and net
income resulted from the company's ability to meet increased customer demand at increased
efficiency. For the full year, the company's shipments of suspension assemblies increased 33 percent
to 719 million from 539 million in fiscal 1996 while its gross profit margin increased to 26 percent
from 23 percent in the prior fiscal year.
''Having capacity sufficient to meet customer demand was key to delivering the growth in net sales
and net income we achieved in fiscal 1997,'' said Fortun. ''We will continue to focus on increasing
output through improvements in productivity and efficiency as well as planned additions to capacity.''
Fortun said the start of photo etching operations at the company's Eau Claire, Wis. plant is
proceeding as planned and construction is on schedule for the company's new Sioux Falls, S.D.
plant and for additional manufacturing and office space at its Hutchinson, Minn. plant. ''While
demand currently trails year-ago levels, we continue to plan for increases in our suspension
shipments that are in line with historical increases,'' said Fortun. Over the past five fiscal years, the
company's shipments of suspension assemblies have grown at an average annual rate of 32 percent.
The company's TSA suspensions (suspension assemblies incorporating integrated electrical leads)
are now in use on three disk drive programs and are designed into nine other programs. ''We are
increasing our output of TSA suspensions as quickly as possible to satisfy the rising demand from
customers who have found that TSA suspensions offer significant manufacturing and performance
advantages,'' said Fortun. He noted that in fiscal 1997 the company produced approximately 8
million TSA suspensions and that during the fiscal 1997 fourth quarter alone, the company produced
3.6 million TSA suspensions or an average of 280,000 per week. During the first five weeks of the
first fiscal 1998 quarter, the company produced an average of 500,000 TSA suspensions per week.
This announcement contains forward-looking statements regarding demand for the company's
products and manufacturing capacity. 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 fluctuating order rates and product mix, slower or faster customer
acceptance of its new products, difficulties in producing its TSA suspensions, difficulties in expanding
capacity, changes in manufacturing efficiencies and the other factors described from time to time in
the company's reports filed with the Securities and Exchange Commission, including but not limited
to its Current Report on Form 8-K filed October 1, 1996; its Registration Statement on Form S-3
filed February 5, 1997 and its Form 1O-Q for the fiscal quarter ended June 29, 1997.
Hutchinson Technology is the leading worldwide supplier of suspension assemblies for disk drives.
Further information about Hutchinson Technology is available on the World Wide Web at
www.htch.com.
Hutchinson Technology Incorporated
(Nasdaq:HTCH - news)
Fourth Quarter Ended
Sept. 28, 1997 Sept. 29, 1996
Net sales $100,354,000 $91,890,000
Gross profit $14,308,000 $18,461,000
Income (loss) from operations $(177,000) $1,905,000
Net income $411,000 $1,409,000
Net income per share $0.02 $0.08
Weighted average common and
common equivalent shares
outstanding 20,334,000 16,746,000
Year Ended
Sept. 28, 1997 Sept. 29, 1996
Net sales $453,232,000 $353,186,000
Gross profit $117,279,000 $79,570,000
Income from operations $52,716,000 $18,203,000
Net income $41,909,000 $13,802,000
Net income per share $2.21 $.82
Weighted average common and
common equivalent shares
outstanding 18,978,000 16,806,000
At Sept. 28, 1997 At Sept. 29, 1996
Total assets $429,839,000 $238,983,000
Cash and cash equivalents $98,340,000 $22,884,000
Total shareholders' investment $282,958,000 $133,684,000
Consolidated Statements of Operations
(in thousands, except per share data)
Thirteen Fourteen Fifty-Two Fifty-Three
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
1997 1996 1997 1996
Net sales $100,354 $91,890 $453,232 $353,186
Cost of sales 86,046 73,429 335,953 273,616
Gross profit 14,308 18,461 117,279 79,570
Research and development 5,028 8,609 20,185 27,651
Selling, general and
administrative expenses 9,457 7,947 44,378 33,716
Income from operations (177) 1,905 52,716 18,203
Other income, net 1,217 202 4,143 1,158
Interest expense (517) (739) (3,143) (2,108)
Income before income taxes 523 1,368 53,716 17,253
Provision for income taxes 112 (41) 11,807 3,451
Net income $411 $1,409 $41,909 $13,802
Net income per common and
common equivalent shares $0.02 $0.08 $2.21 $0.82
Weighted average common
and common equivalent
shares outstanding 20,334 16,746 18,978 16,806
Consolidated Balance Sheets
(Dollars in thousands)
September 28, September 29,
ASSETS 1997 1996
Current assets:
Cash and cash equivalents $98,340 $22,884
Securities available for sale 20,211 3,064
Trade receivables, net 51,467 46,803
GE lease receivable 31,073 5,242
Other receivables 3,504 4,233
Inventories 27,189 17,235
Prepaid taxes and other expenses 11,562 9,204
Total current assets 243,346 108,665
Property, plant and equipment, at cost:
Land, buildings and improvements 45,437 39,888
Equipment 218,289 189,989
Construction in progress 84,345 34,801
Less: Accumulated depreciation (172,818) (142,972)
Net property, plant and equipment 175,253 121,706
Other assets 11,240 8,612
$429,839 $238,983
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Current maturities of long-term debt $5,332 $5,760
Accounts payable and accrued expenses 39,373 23,008
Accrued compensation 19,407 12,187
Accrued income taxes 6,078 5,608
Total current liabilities 70,190 46,563
Long-term debt 72,862 53,185
Other long-term liabilities 3,829 5,551
Shareholders' investment:
Common stock $.01 par value, 45,000,000
shares authorized, 19,619,000 and
16,356,000 issued and outstanding 196 164
Additional paid-in capital 150,676 43,343
Retained earnings 132,086 90,177
Total shareholders' investment 282,958 133,684
$429,839 $238,983
Consolidated Statements of Cash Flows
Fiscal Years Ended
(in thousands) September 28, September 29,
1997 1996
Operating activities:
Net income $41,909 $13,802
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 38,299 33,565
Deferred tax benefit (2,608) (6,085)
Loss on disposal of assets 266 344
Changes in operating assets
and liabilities (1,050) (1,722)
Cash provided by operating activities 76,816 39,904
Investing activities:
Capital expenditures (82,639) (77,065)
Increase in GE lease receivable (25,831) (5,242)
Proceeds from the sale of assets -- 15,300
Purchases of marketable securities (31,343) (4,944)
Sales of marketable securities 14,196 3,070
Cash used for investing activities (125,617) (68,881)
Financing activities:
Proceeds from issuance of long-term debt 25,000 25,500
Repayments of long-term debt (5,751) (4,255)
Net proceeds from issuance of
common stock 105,008 137
Cash provided by (used for)
financing activities 124,257 21,382
Net increase (decrease) in cash and
cash equivalents 75,456 (7,595)
Cash and cash equivalents at beginning
of year 22,884 30,479
Cash and cash equivalents
at end of year $98,340 $22,884
SOURCE Hutchinson Technology
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