Hutchinson: Fiscal 4Q15 Financial Results

Hutchinson Technology Incorporated reported net sales of $63.4 million for its fiscal fourth quarter ended September 27, 2015.

Suspension assembly shipments for the quarter totaled 105.4 million, up 22% from 86.6 million in the preceding quarter.

“As we expected, overall demand for suspension assemblies grew in what is typically a seasonally stronger period for disk drive production,” said Rick Penn, president and CEO. “Our sales to all of our major disk drive customers increased in the quarter and we also benefited from our market position on suspension assemblies for 2.5-inch disk drives.”

Gross profit in the fiscal 2015 fourth quarter totaled $7.5 million, or 11.8% of net sales, up from $4.8 million, or 8.8% of net sales, in the fiscal third quarter. The improvement resulted from the higher volume in the quarter and the resulting increase in operating leverage. The company continued to optimize costs by shifting assembly production to its Thailand assembly operation, which accounted for 92% of the fourth quarter’s assembly production, up from 89% in the preceding quarter.

The company’s operating loss in the fiscal fourth quarter declined to $3.9 million from $6.1 million in the preceding quarter. The improvement resulted from the increase in gross profit and lower research and development expenses, which declined to $3.8 million from $5.2 million in the preceding quarter due primarily to the recognition of $1.5 million of previously deferred income described below. Penn noted that research and development expenses are expected to return to $5 million to $6 million in the fiscal 2016 first quarter.

Penn said that results from reliability testing for its new shape memory alloy (SMA) optical image stabilization (OIS) actuator have been encouraging. “We have shipped prototypes of our Gemini OIS actuator to lensholder assembly manufacturers and currently expect some smartphone makers to begin receiving prototype camera modules that use our new OIS actuator by the end of this calendar year.”

For its fiscal 2015 fourth quarter, the company reported a net loss of $9.3 million, or $0.28 per share.

• The net loss for the quarter included:
• $2.4 million foreign currency loss;
• $1.6 million asset impairment charge on the company’s development center building in Hutchinson, Minnesota; and
• $340,000 of non-cash interest expense, partially offset by
• $1.5 million of previously deferred income related to a former cost-sharing agreement for development of the company’s SMA OIS actuator.

Excluding these items, the company’s net loss for the fiscal 2015 fourth quarter was $6.5 million, or $0.20 per share.

In the preceding quarter, the company reported a net loss of $10.2 million, or $0.30 per share, on net sales of $54.7 million. The third quarter net loss included a $1.1 million foreign currency loss and $330,000 of non-cash interest expense. Excluding these items, the company’s net loss for the fiscal 2015 third quarter was $8.7 million, or $0.26 per share.

Cash and investments at the end of the fiscal 2015 fourth quarter totaled $40.4 million compared with $36.4 million at the end of the preceding quarter.  Cash increased primarily due to favorable changes in working capital, including a $4.7 million reduction in receivables and a $3.8 million reduction in inventories.

Capital spending totaled approximately $600,000 in the quarter, compared with $2.8 million in the third quarter. In 2016, capital spending is expected to be $10 million to $15 million.  

There were no outstanding borrowings on the company’s revolving line of credit at quarter end compared with $3.0 million at the end of the fiscal third quarter.  

For its fiscal 2016 first quarter, the company currently expects its suspension assembly shipments to be flat to up 5% sequentially with an average selling price of $0.57, flat with the fiscal 2015 fourth quarter. Gross profit is currently expected to be flat to up slightly on a sequential basis.

“We are pleased with the progress evident in our fourth quarter performance,” said Penn. “We continue to focus on improving our position in the suspension assembly market and expanding our relationships in the smartphone camera supply chain.”