Hutchinson Technology Incorporated (NASDAQ: HTCH) is reporting net sales of $60.7 million for its fiscal 2014 second quarter ended March 30, 2014, on suspension assembly shipments of 101.7 million, down 12% from 115.7 million in the preceding quarter. Gross profit in the fiscal 2014 second quarter was $5.9 million, or 10% of net sales, compared with $5.5 million, or 8% of net sales in the preceding quarter.
Rick Penn, Hutchinson Technology’s president and chief executive officer, said the company’s second quarter suspension assembly shipments declined due to weakness in the enterprise segment, which utilizes a higher number of suspensions per drive, slower-than-expected ramps on certain new customer programs and seasonal softness. “Despite the near-term weakness in demand, we believe we are well positioned with our key customers,” said Penn.
“During the quarter, we leveraged our capacity to build inventory that will be used to facilitate the transfer of additional production to our Thailand plant,” said Penn. “We also realized improved yields at our Thailand and U.S. assembly operations and in our TSA+ process.” Second quarter gross profit benefited from the inventory build and the resulting fixed cost leverage and the increases in manufacturing yields and efficiencies.
The company’s Thailand operation accounted for 55% of assembly production during the quarter, up from 52% in the preceding quarter. “Our cost structure will benefit from continuing to shift more assembly volume to our Thailand plant, which we expect will account for about 60% to 65% of assembly production in our fiscal 2014 third quarter,” said Penn.
For its fiscal 2014 second quarter, the company reported a net loss of $8.7 million. The net loss included:
- $800,000 of non-cash interest expense;
- $700,000 of severance and other costs related to the ongoing consolidation of the company’s operations; and
- a $600,000 foreign currency gain.
Excluding these items, the company’s fiscal 2014 second quarter net loss was $7.8 million, or $0.28 per share.