Connie Pautz Corporate Communications Director Hutchinson Technology 320-587-1823
Darlene Polzin Investor Relations Director Hutchinson Technology 320-587-1605
HUTCHINSON TECHNOLOGY REPORTS THIRD QUARTER EARNINGS PER SHARE OF $0.65 ON INCREASED OUTPUT AND RECORD QUARTERLY REVENUES
Third Quarter Results Include Net Tax Benefit of $2.8 Million, or $0.09 Per Diluted Share
HUTCHINSON, Minn., July 21, 2005 -— Hutchinson Technology Incorporated (Nasdaq/NMS: HTCH) today reported net income of $19,642,000, or $0.65 per diluted share, on net sales of $169,676,000 for its fiscal third quarter ended June 26, 2005. Net income for the quarter was increased by approximately $2.8 million, or $0.09 per diluted share, as a result of a refund, with interest, of certain Minnesota corporate income taxes paid for the years 1995 through 1999 and the reversal of a related tax reserve, offset in part by an adjustment to the carrying value of net operating loss (NOL) carryforwards. Excluding these items, the company’s fiscal 2005 third quarter net income would have totaled $16,850,000, or $0.56 per diluted share.
In the comparable fiscal 2004 period, the company reported net income of $40,340,000, or $1.30 per diluted share, on net sales of $100,400,000. Results for the 2004 period included a reversal of certain reserves related to the future tax benefits of NOL carryforwards, which increased fiscal 2004 third quarter net income by approximately $36.2 million, or $1.14 per diluted share. Excluding this tax benefit, the company’s fiscal 2004 third quarter net income would have totaled $4,138,000, or $0.16 per diluted share.
For the 39 weeks ended June 26, 2005, Hutchinson Technology reported net income of $48,224,000, or $1.63 per diluted share, on net sales of $473,336,000. Excluding the fiscal third quarter items described above, net income for the 39 weeks ended June 26, 2005 would have totaled $45,432,000, or $1.54 per diluted share. For the comparable fiscal 2004 period, the company reported net income of $68,159,000, or $2.22 per diluted share, on net sales of $347,390,000. Excluding the fiscal 2004 tax benefit noted above, the company’s fiscal 2004 year-to-date net income would have totaled $31,957,000, or $1.08 per diluted share.
Hutchinson Technology President and Chief Executive Officer Wayne Fortun said demand for suspension assemblies remained strong in the third quarter, but that capacity constraints resulted in shipments below the company’s initial expectations. “Our shipments increased for the fourth consecutive quarter and our net sales for the period reached a record high,” said Fortun. “We were, however, unable to meet some customers’ requirements fully because our additions to capacity for the quarter were short of our goals.”
2—Hutchinson Technology Reports Third Quarter Results
Fortun said that the demand-capacity mismatch was greatest late in the third quarter because of product mix issues, and that the company is working to correct the mismatch and expects to resolve it in the fourth quarter. In addition, while the company was capacity constrained on certain products in the third quarter, it was also able to build inventory on other customer programs.
The company shipped approximately 188 million suspension assemblies during the fiscal 2005 third quarter, up from approximately 181 million in the preceding quarter and 114 million in the fiscal 2004 third quarter. Overall average selling prices in the 2005 third quarter were $0.86 compared with $0.85 in both the preceding quarter and the fiscal 2004 third quarter. The increase results in part from a richer mix of products incorporating value-added features. TSA suspensions accounted for approximately 88 percent of units shipped during the quarter.
Gross margin in the 2005 third quarter was 30 percent compared with 30 percent in the preceding quarter and 24 percent in the 2004 third quarter. The increase in 2005 third quarter gross margin compared to the 2004 period resulted primarily from the increase in volume, partially offset by inefficiencies resulting from operating at peak capacity while bringing new units into production and by higher costs for expedited production and shipping.
The company generated approximately $48.3 million in cash from operations during the 2005 third quarter. At quarter end, the company’s cash, cash equivalents and securities held for sale totaled $264.3 million compared with $281.6 million at the end of the preceding quarter.
Commenting on demand trends and production capacity, Fortun said suspension assembly shipments industry-wide are now expected to increase by approximately 35 percent in calendar 2005 compared with 2004, with disk drive shipments estimated to increase more than 20 percent in calendar 2005. “We expect our capacity to be at about 20 million parts per week early in our fiscal 2006 first quarter, up from about 16 million at the end of the third quarter,” said Fortun. “At 20 million parts per week, we believe our output will be better aligned with demand, but we will continue to expand capacity as demand requires.”
For its fiscal 2005 fourth quarter, the company currently expects suspension assembly shipments to range from 190 to 200 million units in what has historically been a seasonally slower period. Overall average selling prices are expected to range from $0.85 to $0.87 generating 2005 fourth quarter net sales of approximately $165 million to $180 million. The company is expecting 2005 fourth quarter gross margins of 28 to 30 percent resulting in net income per diluted share of $0.55 to $0.65.
Hutchinson Technology is the leading worldwide supplier of suspension assemblies for disk drives. Hutchinson Technology’s BioMeasurement Division provides health professionals with simple, accurate methods to measure the oxygen in tissue.
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3—Hutchinson Technology Reports Third Quarter Results
This announcement contains forward-looking statements regarding demand for and shipments of the company’s products, the company’s manufacturing capacity, and worldwide suspension assembly and disk drive shipments, results of operations and operating performance. The company does not undertake to update its forward-looking statements. 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 demand and market consumption of disk drives or suspension assemblies, the company’s ability to increase manufacturing capacity, the company’s ability to produce suspension assemblies with features at levels of precision, quality, variety, volume and cost its customers require, changes in product mix, changes in required investment to increase manufacturing capacity and other factors described from time to time in the company’s reports filed with the Securities and Exchange Commission.
The company will conduct a conference call and webcast for investors beginning at 4:00 p.m. Central Daylight Time (CDT) on July 21, 2005. Individual investors and news media may participate in the conference call via the live webcast. The webcast will be available through the Investor Relations page on Hutchinson Technology’s web site atwww.htch.com or atwww.streetevents.com. Webcast participants will need to complete a brief registration form and should allow extra time before the webcast begins to register and, if necessary, download and install audio software. A replay of the call will be available beginning at approximately 6:00 p.m. CDT on July 21 until midnight CDT on July 25. To access the replay, dial 800-405-2236 or 303-590-3000 and enter 11032651# at the reservation number prompt.
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4—Hutchinson Technology Reports Third Quarter Results
Hutchinson Technology Incorporated Condensed Consolidated Statements of Cash Flows — Unaudited (Dollars in thousands)
Thirty-Nine Weeks Ended
June 26,
June 27,
2005
2004
Operating activities:
Net income
$
48,224
$
68,159
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization
49,057
43,245
Deferred income taxes
14,301
(36,426
)
Loss on disposal of assets
52
186
Changes in operating assets and liabilities
10,569
408
Cash provided by operating activities
122,203
75,572
Investing activities:
Capital expenditures
(137,182
)
(59,726
)
Purchases of marketable securities
(413,983
)
(335,367
)
Sales of marketable securities
422,370
315,933
Cash used for investing activities
(128,795
)
(79,160
)
Financing activities:
Repayments of long-term debt
—
—
Repayments of capital lease obligation
—
—
Net proceeds from issuance of convertible subordinated notes
-
-
Net proceeds from issuance of common stock
20,637
8,552
Cash provided by (used for) financing activities
20,637
8,552
Net increase in cash and cash equivalents
14,045
4,964
Cash and cash equivalents at beginning of period
33,704
67,505
Cash and cash equivalents at end of period
$
47,749
$
72,469
5
Hutchinson Technology Incorporated Earnings Per Share Calculation — Unaudited (In thousands, except per share data)
Thirteen Weeks Ended
Thirty-Nine Weeks Ended
June 26,
June 27,
June 26,
June 27,
2005
2004
2005
2004
Net income (A)
$
19,642
$
40,340
$
48,224
$
68,159
Plus: interest expense on convertible
subordinated notes
1,008
1,008
3,025
3,022
Less: additional profit sharing expense and
income tax provision
358
228
1,046
683
Net income available to common shareholders (B)
$
20,292
$
41,120
$
50,203
$
70,498
Weighted average common shares outstanding (C)
25,378
26,073
25,107
26,016
Dilutive potential common shares
5,725
5,526
5,617
5,696
Weighted average common and diluted shares outstanding (D)
31,103
31,599
30,724
31,712
Basic earnings per share [(A)/(C)]
$
0.77
$
1.55
$
1.92
$
2.62
Diluted earnings per share [(B)/(D)]
$
0.65
$
1.30
$
1.63
$
2.22
6
Hutchinson Technology Incorporated Condensed Consolidated Statements of Operations — Unaudited (In thousands, except per share data)
Thirteen Weeks Ended
Thirty-Nine Weeks Ended
GAAP
Non-GAAP
GAAP
Non-GAAP
June 26,
Non-GAAP
June 26,
June 26,
Non-GAAP
June 26,
2005
Adjustments
2005
2005
Adjustments
2005
Net sales
$
169,676
$
—
$
169,676
$
473,336
$
—
$
473,336
Cost of sales
118,242
—
118,242
333,264
—
333,264
Gross profit
51,434
—
51,434
140,072
—
140,072
Research and development expenses
9,571
—
9,571
25,488
—
25,488
Selling, general and administrative expenses
21,150
133
(3
)
21,017
61,133
133
(3
)
61,000
Income from operations
20,713
(133
)
20,846
53,451
(133
)
53,584
Interest expense
(395
)
—
(395
)
(1,636
)
—
(1,636
)
Interest Income
3,020
1,249
(2
)
1,771
5,724
1,249
(2
)
4,475
Other income, net
1,283
—
1,283
3,586
—
3,586
Income before income taxes
24,621
1,116
23,505
61,125
1,116
60,009
Provision (benefit) for income taxes
4,979
(1,676
)
(1
)
6,655
12,901
(1,676
)
(1
)
14,577
Net income
$
19,642
$
2,792
$
16,850
$
48,224
$
2,792
$
45,432
Basic earnings per share
$
0.77
$
0.66
$
1.92
$
1.81
Diluted earnings per share
$
0.65
$
0.56
$
1.63
$
1.54
Weighted average common shares outstanding
25,378
25,378
25,107
25,107
Weighted average common and diluted shares outstanding
31,103
31,103
30,724
30,724
(1) Amounts reflect the refund of certain Minnesota corporate income taxes paid for the year 1995 through 1999 and the reversal of a related tax reserve offset in part by an adjustment to the carrying value of net operating loss carryforwards.
(2) Amounts reflect interest income related to the refund in (1).
(3) Amounts reflect the incentive compensation expense related to (2).
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Hutchinson Technology Incorporated Condensed Consolidated Statements of Operations — Unaudited (In thousands, except per share data)
Thirteen Weeks Ended
Thirty-Nine Weeks Ended
GAAP
Non-GAAP
GAAP
Non-GAAP
June 27,
Non-GAAP
June 27,
June 27,
Non-GAAP
June 27,
2004
Adjustments
2004
2004
Adjustments
2004
Net sales
$
100,400
$
—
$
100,400
$
347,390
$
—
$
347,390
Cost of sales
76,520
—
76,520
246,435
—
246,435
Gross profit
23,880
—
23,880
100,955
—
100,955
Research and development expenses
7,441
—
7,441
19,115
—
19,115
Selling, general and administrative expenses
15,121
—
15,121
48,239
—
48,239
Income from operations
1,318
—
1,318
33,601
—
33,601
Interest expense
(815
)
—
(815
)
(2,621
)
—
(2,621
)
Interest Income
1,230
—
1,230
3,373
—
3,373
Other income, net
1,082
—
1,082
2,806
—
2,806
Income before income taxes
2,815
—
2,815
37,159
—
37,159
Provision (benefit) for income taxes
(37,525
)
(36,202
)
(1
)
(1,323
)
(31,000
)
(36,202
)
(1
)
5,202
Net income
$
40,340
$
36,202
$
4,138
$
68,159
$
36,202
$
31,957
Basic earnings per share
$
1.55
$
0.16
$
2.62
$
1.23
Diluted earnings per share
$
1.30
$
0.16
$
2.22
$
1.08
Weighted average common shares outstanding
26,073
26,073
26,016
26,016
Weighted average common and diluted shares outstanding
31,599
31,599
31,712
31,712
(1) Amounts reflect release of a significant portion of the valuation allowance previously established related to the future tax benefits of net operating loss carrryforwards.
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