-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CX4aFTCCwNqEN9oev7NGRz/8SyqCFiajPySApmcITGMtzejHxTts9T4yv44B67zD 6+6hoFozI4IO3she6GLxLg== 0000891618-96-001592.txt : 19960809 0000891618-96-001592.hdr.sgml : 19960809 ACCESSION NUMBER: 0000891618-96-001592 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960808 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HMT TECHNOLOGY CORP CENTRAL INDEX KEY: 0001005967 STANDARD INDUSTRIAL CLASSIFICATION: MAGNETIC & OPTICAL RECORDING MEDIA [3695] IRS NUMBER: 943084354 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-27586 FILM NUMBER: 96605419 BUSINESS ADDRESS: STREET 1: 1055 PAGE AVE CITY: FREMONT STATE: CA ZIP: 94538 BUSINESS PHONE: 5104903100 MAIL ADDRESS: STREET 1: 1055 PAGE AVENUE CITY: FREMONT STATE: CA ZIP: 94538 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1996 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended June 30, 1996 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from ____ to _____ COMMISSION FILE NUMBER: HMT TECHNOLOGY CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 94-3084354 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 1055 PAGE AVENUE, FREMONT, CA 94538 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Registrant's telephone number, including area code: (510) 490-3100 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ ___ As of June 30, 1996, 40,297,929 shares of the registrant's common stock, par value $0.001 per share, which is the only class of common stock of the registrant, were outstanding. 1 2 HMT TECHNOLOGY CORPORATION QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
PART I FINANCIAL INFORMATION Page Item 1. Financial Statements Condensed Consolidated Balance Sheets at June 30, 1996 and March 31, 1996............ 3 Condensed Consolidated Statements of Operations for the three months ended June 30, 1996 and 1995........................................ 4 Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 1996 and 1995........................................ 5 Notes to Condensed Consolidated Financial Statements................................. 6 Item 2. Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations.............................................. 7 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.................................................... 10 Signatures.......................................................................... 11
2 3 HMT TECHNOLOGY CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Dollar amounts in thousands)
JUNE 30, MARCH 31, 1996 1996 -------- --------- ASSETS (Unaudited) Current assets: Cash and cash equivalents .................................. $ 43,175 $ 35,843 Receivables, net ........................................... 40,638 31,427 Inventories ................................................ 11,016 7,129 Deposits, prepaid expenses and other assets ................ 835 879 Deferred income taxes ...................................... 5,028 5,028 -------- -------- Total current assets ............................... 100,692 80,306 Property, plant and equipment, net ........................... 93,483 79,128 Other assets ................................................. 1,355 1,415 Deferred income taxes ........................................ 4,937 4,937 -------- -------- Total assets ....................................... $200,467 $165,786 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ........................................... $ 12,900 $ 13,911 Accrued liabilities ........................................ $ 24,415 $ 16,682 Obligations under capital leases -- current portion ........ 3,385 3,814 -------- -------- Total current liabilities .......................... 40,700 34,407 Subordinated promissory notes payable to stockholders ........ 47,000 47,000 Obligations under capital leases, net of current portion ..... 4,114 4,698 Long-term notes payable, net of current portion -- -- -------- -------- Total liabilities .................................. 91,814 86,105 Commitments Mandatorily Redeemable Series A Preferred Stock .............. 61,040 60,157 Common Stock ................................................. 41 39 Additional paid-in capital ................................... 90,105 77,913 Retained earnings ............................................ 34,116 18,221 Distribution in excess of basis .............................. (76,649) (76,649) -------- -------- Total stockholders' equity .............................. 47,613 19,524 -------- -------- Total liabilities and stockholders' equity ......... $200,467 $165,786 ======== ========
See accompanying notes 3 4 HMT TECHNOLOGY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)
THREE MONTHS ENDED JUNE 30, ------------------ 1996 1995 -------- ------ (Unaudited) Net sales................................................................. $76,420 $28,589 Cost of sales............................................................. 44,014 21,971 ------- ------ Gross profit............................................................ 32,406 6,618 Operating expenses: Research and development................................................ 1,260 788 Selling, general and administrative..................................... 3,036 1,401 ------- ------ Total operating expenses............................................. 4,296 2,189 ------- ------ Operating income................................................ 28,110 4,429 Interest expense and other, net........................................... 1,048 1,739 ------- ------ Income before income tax provision....................................... 27,062 2,690 Income tax provision, net................................................. 10,284 123 ------- ------ Net income........................................................... $16,778 $2,567 Accretion for dividends on Mandatorily Redeemable Series A Preferred Stock......................................................... (883) -- ------- ------ Net income available for common stockholders.............................. $15,895 $2,567 ------- ------ Net income available for common stockholders per share................................................... $0.36 $0.07 ------- ------ Shares used in computing per share amounts................................ 44,015 34,822 ------- ------
See accompanying notes 4 5 HMT TECHNOLOGY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
THREE MONTHS ENDED JUNE 30, --------------------------- 1996 1995 ---- ---- (Unaudited) Cash flows from operating activities: Net income ...................................... $ 16,778 $ 2,567 Adjustments to reconcile net income to net cash used in operations: Depreciation and amortization ................ 4,411 3,749 Loss on disposal of assets ................... 2,988 -- Changes in operating assets and liabilities: Receivables ................................ (9,211) (9,028) Inventories ................................ (3,887) 1,225 Deposits, prepaid expenses and other assets 44 1,208 Accounts payable ........................... (1,011) 1,083 Accrued liabilities ........................ 7,733 1,513 -------- ------- Net cash provided by operating activities ............................ 17,845 2,317 -------- ------- Cash flows from investing activities: Expenditures for property, plant and equipment .. (21,741) (3,893) Decrease (increase) in other assets ............. 47 (47) -------- ------- Net cash used in investing activities ...... (21,694) (3,940) -------- ------- Cash flows from financing activities: Principal payments on obligations under capital leases ....................................... (1,013) (2,483) Net proceeds from short-term borrowings ................................... -- 4,200 Proceeds from issuance of Common Stock .......... 12,194 -- -------- ------- Net cash provided by financing activities ............................ 11,181 1,717 -------- ------- Net increase in cash and cash equivalents ......... 7,332 94 Cash and cash equivalents at beginning of period .. 35,843 878 -------- ------- Cash and cash equivalents at end of period ........ $ 43,175 $ 972 -------- ------- Supplemental disclosure of cash flow information: Cash paid for interest during the period ........ $ 1,564 $ 1,887 Cash paid for income taxes during the period .... $ 5,000 $ -- Supplemental disclosure of noncash investing and financing activities: Accretion for dividends on mandatorily redeemable Series A Preferred Stock ..................... $ 883 $ --
See accompanying notes 5 6 HMT TECHNOLOGY CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements have been prepared by the Company without audit in accordance with generally accepted accounting principles for interim financial information and pursuant to rules and regulations of the Securities and Exchange Commission. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair representation have been included. These financial statements should be read in conjunction with the Company's consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996. Operating results for the quarter ended June 30, 1996 may not necessarily be indicative of the results to be expected for any other interim period or for the full year. Fiscal Year The Company uses a 52-week fiscal year ending on March 31 and thirteen- to fourteen-week quarters that end on the Sunday closest to the calendar quarter end. Stock Split The Company's Board of Directors effected a 31-for-1 stock split on March 13, 1996. All shares and per share data in the accompanying financial statements have been retroactively restated to reflect the stock split. Inventories Inventories are stated at the lower of cost or market, and are reported net of reserves. Cost is determined using the first-in, first-out basis.
JUNE 30, MARCH 31, -------- --------- 1996 1996 ---- ---- (IN THOUSANDS) Raw materials............................................................... $4,915 $1,284 Work-in-process............................................................. 4,097 5,123 Finished goods.............................................................. 2,004 722 ------- ------ $11,016 $7,129 ======= ======
6 7 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Discussion contains forward looking statements, which are subject to certain risks and uncertainties, including without limitation those described in the Company's Annual Report on Form 10-K, which has been filed with the Securities and Exchange Commission. Actual results may differ materially OVERVIEW HMT Technology Corporation is an independent supplier of high-performance thin film disks for high-end, high-capacity hard disk drives, which in turn are used in high-end PCs, network servers and workstations. HMT was incorporated in 1988 as a subsidiary of Hitachi Metals for the purpose of acquiring certain assets and certain liabilities of the thin film division of Xidex Corporation, which had been producing thin film disks since 1983. Since completing the acquisition, the Company has continued to supply thin film disks to manufacturers of hard disk drives. On November 30, 1995, the Company effected the Leveraged Recapitalization pursuant to which the Company repurchased from Hitachi Metals all of the outstanding shares of Common Stock of the Company, and certain investment funds, members of management and Hitachi Metals purchased Common Stock, Series A Preferred Stock and Subordinated Notes. During March and April 1996, the Company sold 9,660,000 shares of Common Stock at $10.00 per share (including exercise of the underwriters' over-allotment option) through its initial public offering. The net proceeds (after underwriter's discounts and commissions and other costs associated with the initial public offering) totaled $88.7 million. The Company has recently begun construction on a new production facility at its Fremont, California site. In addition, the Company recently acquired an aluminum substrate manufacturing facility and related equipment located in Eugene, Oregon, and has begun expansion of that facility. The Company derives substantially all of its sales from the sale of thin film disks to a small number of customers. Loss of or a reduction in orders from one or more of the Company's customers could result in a substantial reduction in net sales. Because many of the Company's expense levels are based, in part, on its expectations as to future revenues, decreases in net sales may result in a disproportionately greater negative impact on operating results. Due to the rapid technological change and frequent development of new disk drive products, it is common in the industry for the relative mix of customers and products to change rapidly, even from quarter to quarter. At any one time the Company typically supplies disks in volume for fewer than ten disk drive products. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1996 AND 1995 Net Sales. Net sales were $76.4 million in the first quarter of fiscal 1997 compared with $28.6 million in first quarter of fiscal 1996, representing an increase of 167.3%. The increase in net sales in the first quarter of fiscal 1997 was primarily attributable to an increase in manufacturing capacity and improved utilization of existing capacity, improved manufacturing processes, and increased yields, resulting in higher production volume and unit shipments. Substantially all of the Company's net sales consist of products delivered to customers in Asia, primarily foreign subsidiaries of U.S. companies. Gross Profit (Loss). Gross margin was 42.4% in first quarter of fiscal 1997, compared with 23.1% in the first quarter of fiscal 1996. The increase in gross margin was primarily a result of decreased unit production costs, improved utilization of manufacturing capacity, improved manufacturing processes, increased yields and the absorption of fixed costs over higher unit production volume effected by the refocusing of the strategy and operations of the Company. 7 8 Operating Expenses. The Company's operating expenses were $4.3 million in the first quarter of fiscal 1997 as compared to $2.2 million in the first quarter of fiscal 1996. Research and development expenses were $1.3 million, or 1.6% of net sales, and $700,000, or 2.8% of net sales, respectively, over the same periods. Research and development expenses increased in absolute dollars due to an increase in headcount related to the Company's new product introductions, but declined as percentage of net sales, primarily a result of the substantial increase in net sales over the same period. Selling, general and administrative expenses were $3.0 million, or 4.0% of net sales, in the first quarter of fiscal 1997 compared with $1.4 million, or 4.9% of net sales, in the first quarter of fiscal 1996. The increase in selling, general and administrative expenses in absolute dollars reflected increased headcount necessary to support higher production volume and unit shipments, while the decline as a percentage of net sales primarily reflects the increase in net sales over the same period. The Company anticipates that operating expenses will continue to increase in absolute dollars as headcount is increased to support new product introductions, anticipated higher levels of production volume and unit shipments, as well as the demands of administering a stand-alone public entity, although as a percentage of net sales, operating expenses may fluctuate from period to period. Provision for Income Taxes. The Company recorded an income tax provision of $10.3 million in the first quarter of fiscal 1997, reflecting an effective tax rate of approximately 38%. The income tax provision of $123,000 recorded during the first quarter of fiscal 1996 was based upon state income taxes of Hitachi Metals (the former parent company of HMT) allocated to the Company. Due to net operating loss carryforwards, the Company required no federal income tax provision during this period. The Company's operating results historically have been, and may continue to be, subject to significant quarterly and annual fluctuations. As a result, the Company's operating results in any quarter may not be indicative of its future performance. Factors affecting operating results include: market acceptance of new products; timing of significant orders; changes in pricing by the Company or its competitors; timing of product announcements by the Company, its customers or its competitors; order cancellations, modifications and quantity adjustments and shipment reschedulings; changes in product mix; manufacturing yields; the level of utilization of the Company's production capacity; increases in production and engineering costs associated with initial manufacture of new products; and changes in the cost of or limitations on the availability of materials. The impact of these and other factors on the Company's revenues and operating results in any future period cannot be forecasted with certainty. The Company's expense levels are based, in part, on its expectations as to future revenues. Because the Company's sales are generally made pursuant to purchase orders that are subject to cancellation, modification, quantity reduction or rescheduling on short notice and without significant penalties, the Company's backlog as of any particular date may not be indicative of sales for any future period, and such changes could cause the Company's net sales to fall below expected levels. If revenue levels are below expectations, operating results are likely to be materially adversely affected. Net income, if any, and gross margins may be disproportionately affected by a reduction in net sales because a proportionately smaller amount of the Company's expenses varies with its revenues. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1996 the Company had $43.2 million in cash and cash equivalents as compared to $35.8 million at March 31, 1996. During the first quarter of fiscal 1997, the Company financed its cash requirements primarily through cash from operating and financing activities. The Company's operations provided net cash of $17.8 million and $2.3 million for the first quarter of fiscal 1997 and 1996, respectively. Cash generated during the first quarter of fiscal 1997 reflected net income plus depreciation and amortization, as well as an increase in liabilities, partially offset by increases in receivables and inventories. Increased sales and improved margins contributed to the increase in positive cash flow provided by operations during the most recent quarter. The Company invested $21.7 million and $3.9 million in property, plant and equipment during the first quarter of fiscal 1997 and 1996, respectively. During May 1996, the Company purchased an 8 9 aluminum substrate manufacturing facility and other related equipment in Eugene, Oregon for approximately $4.8 million. The Company expects to spend in excess of $150.0 million on capital expenditures directed toward expansion of production capacity over the next twelve months, although there can be no assurance regarding the timing and amounts of such expenditures. Cash provided by financing activities for the first quarter of fiscal 1997 reflected the $12.2 million in cash generated from options exercised and the sale of approximately 1.3 million shares of common stock pursuant to the underwriters' over-allotment option in connection with the Company's initial public offering. As of June 30, 1996, the Company's principal sources of liquidity consisted of cash and cash equivalents, and a $30.0 million revolving credit facility under which there were no borrowings. At June 30, 1996, the Company had indebtedness of $47.0 million in principal amount of Subordinated Notes payable to existing stockholders that bear interest at 12.0% (increasing by 1% per year commencing January 1, 1999) and begin to require annual payments of principal on December 31, 2003. The Company also had outstanding $59.0 million of Series A Preferred Stock. The revolving credit facility is secured by all of the Company's assets. The Company believes existing cash balances, cash generated from operations, and funds available under its credit facilities, will provide adequate cash to fund its operations for at least the next twelve months. While operating activities are expected to provide cash in certain periods, continued expansion of the Company's manufacturing capacity will require the Company to obtain additional sources of financing. Additional sources of long-term liquidity could include cash generated from operations and debt and equity financings. The Company continues to have significant future obligations and expects that it will require additional capital to support planned expansion of the Company's manufacturing capacity and growth, if any. There can be no assurance that the Company will be able to obtain alternative sources of financing on favorable terms, if at all, at such time or times as the Company may require such capital. 9 10 PART II Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit No. 11.1 Calculation of earnings per share. (b) Reports on Form 8-K: During the quarter ended March 31, 1996, there were no reports on Form 8-K filed by the Company. 10 11 SIGNATURES Pursuant to the requirements of the Securities Exchange act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HMT TECHNOLOGY CORPORATION (Registrant) Date: August 1, 1996 BY: /s/ Peter S. Norris ---------------------- --------------------- Peter S. Norris Vice President and Chief Financial Officer Date: August 1, 1996 BY: /s/ Ronald L. Schauer ---------------------- ----------------------- Ronald L. Schauer President and Chief Executive Officer 11 EX-11.1 2 NET INCOME PER SHARE 1 EXHIBIT 11.1 HMT TECHNOLOGY CORPORATION STATEMENT REGARDING COMPUTATION OF NET INCOME PER SHARE (1) (In thousands, except per share data)
QUARTER ENDED JUNE 30, ---------------------- 1996 1995 ---- ---- Primary and Fully Diluted: Weighted average shares outstanding for the period.......... 39,965 29,656 Common equivalent shares pursuant to Staff Accounting Bulletin No. 83............................................. -- 5,166 Dilutive options and warrants ............................. 4,050 -- ------- ------- Shares used in computing per share amounts.................. 44,015 34,822 ------- ------- Net income available for common stockholders.............................................. $15,895 $ 2,567 ------- ------- Net income available for common stockholders per share...... $ 0.36 $ .07 ------- -------
(1) Primary and fully diluted calculations are substantially the same 12 EX-27 3 FINANCIAL DATA SCHEDULE
5 0001005967 HMT TECHNOLOGY CORP. 1000 3-MOS MAR-31-1996 APR-01-1996 JUN-30-1996 43,175 0 41,265 627 11,016 100,692 138,664 45,181 200,467 40,700 0 61,040 0 90,146 (42,533) 47,613 76,420 76,420 44,014 44,014 4,296 15 1,048 27,062 10,284 16,778 0 0 0 16,778 .36 .36
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