Hutchinson Preliminary 4FQ14 Financial Results

Hutchinson Technology Inc. reported preliminary results for its fiscal 2014 fourth quarter ended September 28, 2014.

The company shipped 117.1 million suspension assemblies in the fourth quarter, above the company’s previously announced guidance of 110 million to 115 million suspension assemblies and up 20% from 97.5 million in the preceding quarter.

Rick Penn, president and CEO, said that increases in customers’ HDD drive production levels and the company’s improved participation on several disk drive programs led to the sequential increase in shipments.

Net sales for the quarter totaled approximately $70.3 million compared with $59.8 million in the preceding quarter.

ASP of $0.58 was flat compared with the preceding quarter.

The company estimates that its gross margin for the fiscal 2014 fourth quarter was 12% to 13% of net sales compared to 6% of net sales in the preceding quarter.

Penn said that the effects of higher volume, the company’s cost reduction efforts and improved operational performance contributed to the margin improvement in the fourth quarter. The company’s Thailand operation accounted for 78% of assembly production in the fourth quarter, up from 64% in the preceding quarter.

Cash and investments totaled $38.9 million at the end of the fiscal 2014 fourth quarter compared to $40.2 million at the end of the preceding quarter.

Outstanding borrowings on the company’s revolving line of credit were $9.5 million at the end of the fourth quarter compared to $4.8 million at the end of the preceding quarter. The additional borrowing was driven by working capital needs, including an increase in accounts receivable due to the increase in net sales.

In its fiscal 2015 first quarter, the company said that it currently expects a modest sequential increase in suspension assembly shipments.

The company also announced the pricing of a registered direct offering of $37.5 million of its 8.50% Convertible Senior Notes due 2019 and an agreement to privately exchange $15 million of the company’s outstanding 8.50% Senior Secured Second Lien Notes due 2017 for 2.5 million shares of its common stock and warrants exercisable for an additional 2.5 million shares of its common stock.

The company also announced that it is pursuing added liquidity through additional first lien financing of up to $15 million. Additionally, the company is in discussions with a customer who has offered to consider providing an advance payment within the range of $10 million to $15 million in the company’s fiscal 2015 first quarter for suspension assemblies expected to ship to that customer in the fiscal 2015 second quarter.

“These financing actions position us to address the outstanding balance of our existing 8.50% convertible notes due 2026 that can be put back to us in January 2015,” said Penn. “We thank our customers for their ongoing commitment and support, and we look forward to pursuing the opportunities in front of us and delivering improved financial results in fiscal 2015.“