Hutchinson: Fiscal 4Q13 Financial Results

Hutchinson Technology Incorporated reported suspension assembly shipments of 102.6 million for its fiscal fourth quarter ended September 29, 2013, up from 99.3 million in the preceding quarter.

The company reported a net loss of $14.6 million, or $0.53 per share, on net sales of $63.7 million.

The net loss for the fiscal 2013 fourth quarter included a $1.7 million impairment of BioMeasurement inventory, $900,000 of site consolidation costs, $800,000 of non-cash interest expense and a $100,000 foreign currency loss. Excluding these items, the company’s fiscal 2013 fourth quarter net loss totaled $11.0 million, or $0.40 per share.

In the preceding quarter, the company reported a net loss of $15.9 million, or $0.59 per share, on net sales of $61.3 million. The net loss for the fiscal 2013 third quarter included a $3.4 million foreign currency loss, $750,000 of non-cash interest expense and $600,000 of site consolidation costs. Excluding these items, the company’s fiscal 2013 third quarter net loss totaled $11.1 million, or $0.41 per share.

The company incurred a gross loss of $400,000, or 1% of net sales, in the fiscal 2013 fourth quarter, compared with a gross profit of $1.4 million, or 2% of net sales, in the preceding quarter. Excluding the impairment of BioMeasurement inventory, gross profit in the 2013 fourth quarter would have been $1.4 million, or 2% of net sales, reflecting the impact of the low yields that resulted from the manufacturing issues noted below.

“While we resolved the previously reported process issues encountered in our third quarter, we missed our operational targets in two areas during the fourth quarter,” said Rick Penn, Hutchinson president and CEO. “At our Thailand assembly operation, the aggressive ramp, combined with a heavier mix of new dual-stage actuated (DSA) programs, put pressure on our yields and efficiencies and caused them to come in lower than planned. We have intensified our support and expect improved operational performance as we ramp additional programs and continue to transition more assembly production to Thailand.”

Penn said the company also experienced low yields in the last month of the quarter from a manufacturing issue in its components operation that has since been corrected. He noted that neither of the issues impacted suspension assembly shipments to customers.

“Although we are disappointed with these manufacturing issues, we have addressed them and are confident our operational performance will improve going forward,” said Penn.

ASP in the fiscal 2013 fourth quarter was $0.60 compared to $0.59 in the preceding quarter. DSA suspension assemblies accounted for 23% of fourth quarter shipments, up from 20% in the preceding quarter, and are expected to account for about 25% of volume in the fiscal 2014 first quarter.

Output from the company’s Thailand assembly operation accounted for 48% of assembly production in the fiscal 2013 fourth quarter, up from 35% in the preceding quarter. The company expects 55% to 60% of assembly production to come from its Thailand operation in the fiscal 2014 first quarter.

Cash and investments at the end of the 2013 fourth quarter totaled $40.6 million, up from $37.5 million at the end of the preceding quarter. Cash generated by operations in the fourth quarter totaled $3.0 million and capital spending in the quarter totaled $3.8 million. Outstanding borrowings on the company’s revolving line of credit totaled $4.0 million at the end of the fiscal 2013 fourth quarter compared with zero at the end of the preceding quarter.

Penn said the company expects its suspension assembly shipments in the fiscal 2014 first quarter to be flat to up 5% compared with the fiscal 2013 fourth quarter. ASP is expected to stay relatively flat, as increasing shipments of DSA suspensions are offset by a transition from development pricing to high-volume pricing on DSA suspensions.

“Although we faced some challenges this past quarter, we remain well positioned to meet our customers’ advancing requirements,” said Penn. “As our execution improves and we move through fiscal 2014, we expect to realize the benefits from transitioning more assembly production to Thailand, consolidating our U.S. operations and continuing to improve our overall cost structure. Looking longer-term, we are confident our business can generate attractive profitability and free cash flow as our volume grows.“