-----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, KWS8ZQwK+noBOKjjA8KuU+YmSKhUIBBzFfZsKKeaJJez8yT4nsVRriH1HgTJP8nh RsGltKABW7Q/7Zotf/aVCA== 0000891618-97-003057.txt : 19970808 0000891618-97-003057.hdr.sgml : 19970808 ACCESSION NUMBER: 0000891618-97-003057 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970729 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HMT TECHNOLOGY CORP CENTRAL INDEX KEY: 0001005967 STANDARD INDUSTRIAL CLASSIFICATION: 3572 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: 97646637 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 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, 1997 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: 000-27586 HMT TECHNOLOGY CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 94-3084354 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER) INCORPORATION OR ORGANIZATION) 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 July 23, 1997, 41,296,187 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. ================================================================================ 2 HMT TECHNOLOGY CORPORATION QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
PART I FINANCIAL INFORMATION Page Item 1. Financial Statements Condensed Consolidated Balance Sheets at June 30, 1997 and March 31, 1997................................................3 Condensed Consolidated Statements of Operations for the three months ended June 30, 1997 and 1996.........................4 Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 1997 and 1996.........................5 Notes to Condensed Consolidated Financial Statements.................6 Item 2. Management's Discussion and Analysis of 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 PART I FINANCIAL INFORMATION ITEM 1. Financial Statements HMT TECHNOLOGY CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
JUNE 30, MARCH 31, 1997 1997 ----------- --------- ASSETS (Unaudited) (Audited) Current assets: Cash and cash equivalents....................................... $37,391 $44,225 Short-term investments.......................................... 8,965 10,833 Receivables, net................................................ 40,281 35,794 Inventories..................................................... 16,734 11,837 Deposits, prepaid expenses and other assets..................... 1,091 474 Deferred income taxes........................................... 6,532 6,532 -------- -------- Total current assets.................................... 110,994 109,695 Construction in progress.......................................... 83,450 76,433 Property, plant and equipment, net................................ 203,553 178,875 Other assets...................................................... 8,255 8,386 -------- -------- Total assets............................................ $406,252 $373,389 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable................................................ $27,888 $26,424 Accrued liabilities............................................. 19,421 8,765 Obligations under capital leases -- current portion............. 2,172 2,679 -------- -------- Total current liabilities............................... 49,481 37,868 Long-term liabilities............................................. 8,962 3,562 Convertible subordinated promissory notes......................... 230,000 230,000 Obligations under capital leases, net of current portion.......... 2,604 3,172 Deferred tax liability, long term................................. 3,345 3,345 -------- -------- Total liabilities....................................... 294,392 277,947 Common Stock...................................................... 41 41 Additional paid-in capital........................................ 93,161 92,084 Retained earnings ................................................ 95,307 79,966 Distribution in excess of basis................................... (76,649) (76,649) -------- -------- Total stockholders' equity................................... 111,860 95,442 -------- -------- Total liabilities and stockholders' equity.............. $406,252 $373,389 ======== ========
See accompanying notes 3 4 HMT TECHNOLOGY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)
THREE MONTHS ENDED JUNE 30, --------------------- 1997 1996 ------- ------- (Unaudited) Net sales ........................................ $76,837 $76,420 Cost of sales .................................... 47,476 44,014 ------- ------- Gross profit ................................... 29,361 32,406 Operating expenses: Research and development ....................... 1,902 1,260 Selling, general and administrative ............ 3,818 3,036 ------- ------- Total operating expenses .................... 5,720 4,296 Operating income ................................. 23,641 28,110 Interest expense, net ............................ 1,685 1,048 ------- ------- Income before income tax provision ............... 21,956 27,062 Income tax provision ............................. 6,587 10,284 ------- ------- Net income .................................. $15,369 $16,778 Accretion for dividends on Mandatorily Redeemable Series A Preferred Stock ............ - (883) ------- ------- Net income available for common stockholders ..... $15,369 $15,895 ======= ======= Net income available for common stockholders per share Primary ..................................... $ 0.35 $ 0.36 ======= ======= Fully diluted ............................... $ 0.31 $ 0.36 ======= ======= Shares used in computing per share amounts Primary ..................................... 44,121 44,015 ======= ======= Fully diluted ............................... 53,805 44,015 ======= =======
See accompanying notes 4 5 HMT TECHNOLOGY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
THREE MONTHS ENDED JUNE 30, ------------------------ 1997 1996 -------- -------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income ....................................... $ 15,369 $ 16,778 Adjustments to reconcile net income to net cash used in operations: Depreciation and amortization ................. 8,080 4,411 Deferred income taxes ......................... - - Loss on disposal of assets .................... - 2,988 Net Change in operating assets and liabilities. 7,489 (6,332) -------- -------- Net cash provided by operating activities. 30,938 17,845 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for property, plant and equipment ... (39,760) (21,741) Maturities of short-term investments ............. 1,868 - Decrease in other assets ......................... 116 47 -------- -------- Net cash used in investing activities .... (37,776) (21,694) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on obligations under capital leases ........................................ (1,075) (1,013) Net proceeds from long-term borrowings ........... - - Proceeds from issuance of Common Stock ........... 1,079 12,194 -------- -------- Net cash provided by financing activities. 4 11,181 -------- -------- Net increase (decrease) in cash and cash equivalents ...................................... (6,834) 7,332 Cash and cash equivalents at beginning of period .. 44,225 35,843 -------- -------- Cash and cash equivalents at end of period ........ $ 37,391 $ 43,175 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest during the period ......... $ 783 $ 1,564 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 an 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, 1997. Operating results for the quarter ended June 30, 1997 may not necessarily be indicative of the results to be expected for any other interim period or for the full fiscal 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, 1997 1997 ------- ------- (IN THOUSANDS) Raw materials......................................... $6,231 $4,307 Work-in-process....................................... 6,298 5,843 Finished goods........................................ 4,205 1,687 ------- ------- $16,734 $11,837 ======= =======
2. SUBSEQUENT EVENT On July 24, 1997, the Company filed a registration statement with the Securities and Exchange Commission covering the proposed sale and issuance of 1,150,000 shares of the Company's common stock (including 150,000 shares subject to the underwriters' over-allotment option) and the sale of 10,350,000 shares of the Company's common stock on behalf of certain selling stockholders (including 1,350,000 shares subject to the underwriters' over-allotment option). 6 7 Item 2. 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 from the results discussed in the forward-looking statements. 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. 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 twelve disk drive products. RESULTS OF OPERATIONS NET SALES THREE MONTHS ENDED JUNE 30, 1996 AND 1997 Net sales increased 0.5% in the three months ended June 30, 1997 to $76.8 million, representing an increase of $417,000 compared to the three months ended June 30, 1996. Unit sales volume increased 32.9% during the three months ended June 30, 1997, while average selling prices declined 26.3%, compared to the three months ended June 30, 1996. The increase in unit sales volume during the three months ended June 30, 1997 was primarily attributable to an increase in manufacturing capacity, a result of the Company's facility expansion and the installation of additional sputtering lines. Five additional sputtering lines were brought into service during the nine months ended March 31, 1997, and two were brought into service during the three months ended June 30, 1997. Improved utilization of existing capacity, as well as improved manufacturing processes, also contributed to higher production volume and unit shipments. The ability to increase revenue will depend upon an increase in overall unit production volume. During the three months ended June 30, 1997, three customers individually accounted for at least ten percent of consolidated net sales: Iomega Corporation (32.1%), Samsung Electronics Company Limited (27.7%), and Western Digital Corporation (18.7%). During the three months ended June 30, 1996, three customers accounted for at least ten percent of consolidated net sales: Maxtor Corporation (43.3%), Western Digital (17.5%) and Iomega (15.6%). The Company expects that it will continue to derive a substantial portion of its sales from a relatively small number of customers, although the identity of such customers may change from period to period. Gross Profit. Gross margin was 38.2% for the three months ended June 30, 1997, compared with 42.4% for the three months ended June 30, 1996. The decline in gross margin during the three months ended June 30, 1997 was a result of the 26.3% decline in average selling prices versus the comparable period in fiscal 1997, offset in part by decreased unit production costs, improved utilization of manufacturing capacity, improved manufacturing processes, and the absorption of fixed costs over higher unit production 7 8 volume. Production of substrates at the Eugene, Oregon manufacturing facility (which was acquired during the three months ended June 30, 1996) and lower substrate and other raw material prices also contributed to decreases in unit costs in the three months ended June 30, 1997 compared to comparable three month period in fiscal 1997. Research and Development. Research and development expenses increased $642,000 in the three months ended June 30, 1997, compared to the same period in 1996. Research and development expenses increased primarily due to an increase in headcount related to the Company's new product introductions and expanded research efforts to support the Company's overall capacity expansion. Selling, General and Administrative. Selling, general and administrative expenses increased $782,000 in the three months ended June 30, 1997, compared to the same period in the prior fiscal year. The increase in selling, general and administrative expenses primarily reflected the increased headcount necessary to support higher production volume and unit shipments. The Company anticipates that operating expenses will continue to increase in absolute dollars as headcount is increased to support new product introductions, and anticipated higher levels of production volume and unit shipments, although, as a percentage of net sales, operating expenses may fluctuate from period to period. Interest Expense, Net. Net interest expense increased $637,000 during the three months ended June 30, 1997, compared to the same period in fiscal 1997, a result of the increased debt balance, partially offset by the $1.4 million in interest that was capitalized during the same period. Provision for Income Taxes. For the three months ended June 30, 1997, the Company recorded income taxes at its estimated annual effective tax rate of 30%. During the three months ended June 30, 1996, income taxes were recorded at a rate of 38%, reflecting the estimated annual rate at that time. 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 rescheduling; 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 effected. 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 Cash and cash equivalents decreased by $6.8 million to $37.4 million at June 30, 1997 from March 31, 1997. Cash flows from operations were $30.9 million for the three-month period ended June 30, 1997 as compared to $17.8 million in the comparable period of 1996. Cash generated during the three months ended June 30, 1997 reflected net income plus depreciation and amortization, as well as an increase in accounts payable and current and long-term 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 three months ended June 30, 1998. 8 9 The Company invested $39.8 million and $21.7 million in property, plant and equipment during the first three months ended June 30, 1997 and 1996, respectively. The Company currently expects to spend in excess of $200 million during calendar 1998 for expansion of production capacity, a substantial majority of which will be spent on the Company's Fremont, California facility. Cash provided by financing activities for the first three months of fiscal 1998 reflected $1.1 million in cash received for employee stock purchases options, offset by $1.1 million in principal payments on capital leases. As of June 30, 1997, the Company's principal sources of liquidity consisted of cash, cash equivalents and short-term investments, as well as the full balance of the unsecured $50 million revolving credit facility. 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 and ongoing facility expansion through the end of fiscal 1998. If it were to accelerate or increase the scope of its facilities expansion, the Company could require additional capital prior to that time. The Company will continue to have significant future obligations and expects that it could require additional capital to support future growth, if any. The Company may not be able to obtain additional financing as needed on acceptable terms or at all. If the Company is unable to obtain sufficient capital, it could be required to modify its planned capital expenditures and research and development expenditures, which could materially adversely affect the Company's future operations and competitive position. Moreover, the Company's need to raise additional capital through the issuance of securities may result in additional dilution to earnings per share. 9 10 PART II OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits:
Exhibit No. - - ----------- 11.1 Statement Regarding Computation of Net Income per Share. 27.1 Financial Data Schedule.
(b) Reports on Form 8-K: No reports on Form 8-K were filed by the Company during the quarter ended June 30, 1997. 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: July 29, 1997 BY: /s/ Peter S. Norris ----------------- ------------------------------------ Peter S. Norris Vice President, Finance and Chief Financial Officer Date: July 29, 1997 BY: /s/ Ronald L. Schauer ----------------- ------------------------------------ Ronald L. Schauer President and Chief Executive Officer 11 12 EXHIBIT INDEX
Exhibit No. Description - - ----------- ----------- 11.1 Statement Regarding Computation of Net Income per Share. 27.1 Financial Data Schedule
EX-11.1 2 COMPUTATION OF NET INCOME PER SHARE 1 EXHIBIT 11.1 HMT TECHNOLOGY CORPORATION STATEMENT REGARDING COMPUTATION OF NET INCOME PER SHARE (in thousands, except per share data)
THREE MONTHS ENDED JUNE 30, ---------------------- 1997 1996 ------- ------- Primary: (Unaudited) Weighted average shares outstanding for the period .......... 41,135 39,965 Net effect of dilutive stock options-based on the treasury stock method using average market price .......... 2,986 4,050 ------- ------- Shares used in computing per share amounts .................. 44,121 44,015 ------- ------- Net income available for common stockholders ................ $15,369 $15,895 ======= ======= Net income available for common stockholders per share ...... $ 0.35 $ 0.36 ======= ======= Fully Diluted: Weighted average shares outstanding for the period .......... 41,135 39,965 Net effect of dilutive stock options-based on the treasury stock method using the average market price ...... 2,986 4,050 Assumed conversion of 5 3/4% convertible subordinated notes . 9,684 - ------- ------- Shares used in computing per share amounts .................. 53,805 44,015 ======= ======= Net income available for common stockholders ................ $15,369 $15,895 ======= ======= Add 5 3/4% convertible subordinated note interest, net of interest capitalized and income tax effect ............. 1,389 - ======= ======= Net income available for common stockholders ................ $16,758 $15,895 ======= ======= Net income available for common stockholders per share ...... $ 0.31 $ 0.36 ======= =======
EX-27.1 3 FINANCIAL DATA SCHEDULE
5 1,000 DOLLAR (OR US DOLLAR) 3-MOS MAR-31-1998 APR-01-1997 JUN-30-1997 1,000 37,391 8,965 41,351 (1,070) 16,734 110,994 346,539 (59,536) 406,252 49,481 230,000 0 0 93,202 18,656 406,252 76,837 76,837 47,476 47,476 5,720 15 1,685 21,956 6,587 15,369 0 0 0 15,369 .35 .31
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