HTI Earnings and New Smartphone Component 01 Aug 14

Hutchinson Technology Incorporated (NASDAQ: HTCH) today (Friday) reported net sales of $59.8 million for its fiscal third quarter ended June 29, 2014, on suspension assembly shipments of 97.5 million, down 4% from 101.7 million in the preceding quarter.  Gross profit in the fiscal 2014 third quarter was $3.6 million, or 6% of net sales, compared with $5.9 million, or 10% of net sales, in the preceding quarter.   

Rick Penn, Hutchinson Technology’s president and chief executive officer, said the sequential decline in gross profit was in line with the company’s expectations for the quarter.  “As planned, we decreased production volume in the third quarter, which is typically a seasonally slower period for suspension assembly demand.  The lower production volume resulted in lower fixed cost absorption and a decline in gross profit,” said Penn. 

Penn noted that the company has made significant progress on its site consolidation efforts and expects the resulting cost benefits to become more meaningful as the company exits the current fiscal year.  “With the production volumes we are now achieving at our Thailand operation, we were able to exit our Eau Claire assembly operation in June,” said Penn.  “In addition, we expect to vacate our leased Plymouth facility after we finish consolidating the stamping operation into our Hutchinson site by the end of the fiscal year.”  Penn said the Thailand operation accounted for 64% of assembly production in the third quarter, up from 55% in the preceding quarter, and is expected to account for 70% to 80% of fourth quarter assembly production. 

For its fiscal 2014 third quarter, the company reported a net loss of $11.2 million, or $0.40 per share.  The net loss included: 
§        $1.5 million of severance and site consolidation costs; 
§        $800,000 of non-cash interest expense; and 
§        a $100,000 foreign currency gain. 
Excluding these items, the company’s third quarter net loss was $8.9 million, or $0.32 per share. 

Penn said the company is also making progress in its new business development initiative, which focuses on leveraging its precision manufacturing capabilities and equipment capacity to produce components in new market segments.  As part of this effort, the company was recently selected to provide an optical image stabilization (“OIS”) actuator for a smartphone camera and has begun manufacturing of this new product.