-----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, QvB2V5/C2joW1Xc8dBf/yGP8zTBdFwvXmrmmXvLAKNK8Vio+XbdHjrvDNCXaIDyS OtitlxRqJfPmEZF5JPtmPQ== 0000891618-97-004556.txt : 19971114 0000891618-97-004556.hdr.sgml : 19971114 ACCESSION NUMBER: 0000891618-97-004556 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HMT TECHNOLOGY CORP CENTRAL INDEX KEY: 0001005967 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER STORAGE DEVICES [3572] IRS NUMBER: 943084354 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-27586 FILM NUMBER: 97714462 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 SEPTEMBER 30, 1997 1 ================================================================================ [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended September 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 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 October 26, 1997, 42,658,949 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 SEPTEMBER 30, 1997
PART I FINANCIAL INFORMATION Page Item 1. Financial Statements Condensed Consolidated Balance Sheets at September 30, 1997 and March 31, 1997............................................3 Condensed Consolidated Statements of Operations for the three and six month periods ended September 30, 1997 and 1996.................................................4 Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 1997 and 1996..................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 4. Submission of Matters to a Vote of Security Holders................10 Item 6. Exhibits and Reports on Form 8-K...................................11 Signatures.........................................................12
3 PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS HMT TECHNOLOGY CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Dollar amounts in thousands)
SEPTEMBER 30, MARCH 31, 1997 1997 ------------- --------- ASSETS (Unaudited) Current assets: Cash and cash equivalents .............................................. $ 38,460 $ 44,225 Short-term investments ................................................. -- 10,833 Receivables, net ....................................................... 51,420 35,794 Inventories ............................................................ 14,318 11,837 Deposits, prepaid expenses and other assets ............................ 880 474 Deferred income taxes .................................................. 6,532 6,532 --------- --------- Total current assets ........................................... 111,610 109,695 Construction in progress ................................................. 64,147 76,433 Property, plant and equipment, net ....................................... 244,134 178,875 Other assets ............................................................. 7,986 8,386 --------- --------- Total assets ................................................... $ 427,877 $ 373,389 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ....................................................... $ 15,559 $ 26,424 Accrued liabilities .................................................... 21,691 8,765 Obligations under capital leases -- current portion .................... 2,233 2,679 --------- --------- Total current liabilities ...................................... 39,483 37,868 Long-term liabilities .................................................... 8,615 3,562 Convertible subordinated promissory notes ................................ 230,000 230,000 Obligations under capital leases, net of current portion ................. 2,008 3,172 Deferred tax liability, long-term ........................................ 3,345 3,345 --------- --------- Total liabilities .............................................. 283,451 277,947 Common Stock ............................................................. 42 41 Additional paid-in capital ............................................... 106,632 92,084 Retained earnings ........................................................ 114,401 79,966 Distribution in excess of basis .......................................... (76,649) (76,649) --------- --------- Total stockholders' equity .......................................... 144,426 95,442 --------- --------- Total liabilities and stockholders' equity ..................... $ 427,877 $ 373,389 ========= =========
See accompanying notes 4 HMT TECHNOLOGY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)
THREE MONTHS ENDED SIX MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------- ------------------------ 1997 1996 1997 1996 -------------- ----------- ---------- --------- (Unaudited) (Unaudited) Net sales ....................................... $ 90,446 $ 62,080 $ 167,283 $ 138,500 Cost of sales ................................... 55,750 35,363 103,229 79,377 --------- --------- --------- --------- Gross profit .................................. 34,696 26,717 64,054 59,123 Operating expenses: Research and development ...................... 2,280 1,405 4,182 2,665 Selling, general and administrative ........... 3,293 2,604 7,110 5,640 --------- --------- --------- --------- Total operating expenses ................... 5,573 4,009 11,292 8,305 --------- --------- --------- --------- Operating income ...................... 29,123 22,708 52,762 50,818 Interest expense and other, net ................. 1,888 1,365 3,572 2,413 --------- --------- --------- --------- Income before income tax provision ............. 27,235 21,343 49,190 48,405 Income tax provision, net ....................... 8,171 3,842 14,757 14,126 --------- --------- --------- --------- Net income ................................. $ 19,064 $ 17,501 $ 34,433 $ 34,279 Accretion for dividends on Mandatorily Redeemable Series A Preferred Stock ...................... -- (896) -- (1,779) --------- --------- --------- --------- Net income available for common stockholders .... $ 19,064 $ 16,605 $ 34,433 $ 32,500 ========= ========= ========= ========= Net income available for common stockholders per share Primary .................................... $ 0.43 $ 0.38 $ 0.77 $ 0.74 ========= ========= ========= ========= Fully diluted .............................. $ 0.38 $ 0.38 $ 0.69 $ 0.74 ========= ========= ========= ========= Shares used in computing per share amounts Primary .................................... 44,796 44,205 44,459 44,110 ========= ========= ========= ========= Fully diluted .............................. 54,538 44,205 54,172 44,110 ========= ========= ========= =========
See accompanying notes 5 HMT TECHNOLOGY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
SIX MONTHS ENDED SEPTEMBER 30, ------------------------- 1997 1996 --------- --------- (Unaudited) Cash flows from operating activities: Net income ...................................... $ 34,433 $ 34,279 Adjustments to reconcile net income to net cash used in operations: Depreciation and amortization ................ 17,696 9,433 Loss on disposal of assets ................... -- 2,988 Changes in operating assets and liabilities: Receivables ................................ (15,626) (16,666) Inventories ................................ (2,481) (7,495) Deposits, prepaid expenses and other assets (406) 141 Accounts payable ........................... (10,865) 5,808 Accrued liabilities ........................ 12,926 (9,629) Long term liabilities ...................... 5,053 -- -------- -------- Net cash provided by operating activities ............................ 40,730 18,859 -------- -------- Cash flows from investing activities: Expenditures for property, plant and equipment .. (70,639) (60,033) Decrease (increase) in other assets ............. 370 182 -------- -------- Net cash used in investing activities .... (70,269) (59,851) -------- -------- Cash flows from financing activities: Principal payments on obligations under capital leases ....................................... (1,610) (2,061) Other ........................................... -- 172 Repayments on short-term borrowings ................................... -- -- Proceeds from issuance of Common Stock .......... 14,551 12,194 -------- -------- Net cash provided by (used in) financing activities ............................ 12,941 10,305 Net decrease in cash and cash equivalents ......... (16,598) (30,687) Cash and cash equivalents at beginning of period .. 55,058 35,843 -------- -------- Cash and cash equivalents at end of period ........ $ 38,460 $ 5,156 ======== ======== Supplemental disclosure of cash flow information: Cash paid for interest during the period ........ $ 6,392 $ 3,197 Cash paid for income taxes during the period .... $ 4,550 $ 24,210 Supplemental disclosure of noncash investing and financing activities: Accretion for dividends on mandatorily redeemable Series A Preferred Stock ..................... $ -- $ 1,779
See accompanying notes 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, 1997. Operating results for the quarter ended September 30, 1997 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. 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.
SEPTEMBER 30, MARCH 31, 1997 1997 ----- ---- (IN THOUSANDS) Raw materials .......... $ 5,469 $ 4,307 Work-in-process......... 2,513 5,843 Finished goods.......... 6,336 1,687 ------- ------- $14,318 $11,837 ======= =======
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 for the fiscal year ended March 31, 1997, which has been filed with the Securities and Exchange Commission. Actual results may differ materially from the results discussed in the forward-looking statements. 7 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 work-stations. The Company also supplies high-performance thin film disks for removable hard disk drives. 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. Net sales increased 45.6% in the second quarter of fiscal 1998 to $90.4 million, up $28.4 million over the second quarter of fiscal 1997. For the first six months of fiscal 1998 net sales of $167.3 million were $28.8 million or 20.7% higher than the same period in fiscal 1997. The increase in net sales during fiscal 1998 was primarily attributable to an increase in manufacturing capacity from continued expansion of the Company's production facilities, including the addition of two new sputtering lines during the second fiscal quarter of 1998. 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. Gross margin was 38.4% and 38.3% for the three and six months ended September 30, 1997, respectively, compared with 43.0% and 42.7% for the three and six months ended September 30, 1996, respectively. The decrease in gross margin for the three and six months ended September 30, 1997 was primarily a result of a decline in average selling prices versus the comparable periods in the prior year, partially offset by decreased unit production costs, a result of the absorption of fixed costs over higher unit production volume, improved utilization of manufacturing capacity, and improved manufacturing processes. Operating Expenses. Research and development expenses increased 62.3% and 56.9% in the three- and six-month periods ending September 30, 1997, respectively, compared to the same periods in 1996. Research and development expenses increased due to an increase in headcount related to the Company's new product introductions. Selling, general and administrative expenses increased $0.7 million and $1.5 million in the second quarter and first half of fiscal 1998, respectively, compared to the same periods in the prior year. The increase in selling, general and administrative expenses 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. Provision for Income Taxes. For the six months ended September 30, 1997, the Company recorded income taxes at its estimated annual effective tax rate of 30%. During the six months ended September 30, 1996, the Company revised its estimated annual effective rate from 38% to 30%, reflecting the effects of available tax planning strategies and state tax credits 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 8 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 Cash and cash equivalents decreased by $16.6 million to $38.5 million at September 30, 1997 from the end of the prior fiscal year. Cash flows from operations were $40.7 million for the six-month period ended September 30, 1997 as compared to $18.9 million in the comparable period of 1996. Cash generated during the first six months of fiscal 1998 reflected net income plus depreciation and amortization, as well as an increase in accrued liabilities, partially offset by increases in receivables and inventories and a decrease in accounts payable. Increased sales contributed to the increase in positive cash flow provided by operations during the first half of fiscal 1998. The Company invested $70.6 million and $60.0 million in property, plant and equipment during the first half of fiscal 1998 and 1997, respectively. 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 half of fiscal 1998 reflected the $13.9 million in cash generated from the sale of the Company's common stock during the second quarter of fiscal 1998. As of September 30, 1997, the Company's principal sources of liquidity consisted of cash and cash equivalents, and an unsecured $50.0 million revolving credit facility under which there were no borrowings. 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 next twelve months. While operating activities are expected to provide cash in certain future periods, continued expansion of the Company's manufacturing capacity may require the Company to obtain additional sources of financing. 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 PART II OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The Annual Meeting of Stockholders was held on August 14, 1997. (b) The following individuals, each of whom served as directors of the Company prior to the annual meeting, were elected to serve as Directors until the next annual meeting: Ronald L. Schauer Bruce C. Edwards Neil M. Garfinkel Walter G. Kortschak Robert G. Teal The Stockholders voted to ratify the selection of Coopers & Lybrand L.L.P. as the Company's Independent Auditors for the fiscal year ended March 31, 1998. Shares of Common Stock voted were as follows: Item No. 1 (Election of Board of Directors)
Total Vote For Total Vote Withheld Each Director From Each Director ------------- ------------------ Ronald L. Schauer......... 37,242,906 77,105 Bruce C. Edwards.......... 37,248,937 71,074 Neil M. Garfinkel......... 37,242,681 77,330 Walter G. Kortschak....... 37,247,142 72,869 Robert G. Teal............ 37,248,642 71,369
Item No. 2
Total Vote For Total Vote Against Abstain -------------- ------------------ ------- (Selection of independent auditors)...... 37,234,070 48,416 37,525
(d) Not applicable 10 Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit No. - ----------- 11.1 Calculation of earnings per share. 27.1 Financial Data Schedule. (b) Reports on Form 8-K: During the quarter ended September 30, 1997, there were no reports on Form 8-K filed by the Company. 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: November 12, 1997 BY: /s/ PETER S. NORRIS ------------------------ ------------------------------ Peter S. Norris Vice President and Chief Financial Officer Date: November 12, 1997 BY: /s/ RONALD L. SCHAUER ------------------------ ------------------------------- Ronald L. Schauer President and Chief Executive Officer 12 EXHIBIT INDEX Exhibit # Description - --------- ----------- 11.1 Statement Regarding Computation of Per-Share Earnings 27.1 Financial Data Schedule EX-11.1 2 STATEMENT REGARDING EARNINGS 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 SIX MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------- ------------------- 1997 1996 1997 1996 ------- ------- ------- ------- (Unaudited) (Unaudited) Primary: Weighted average shares outstanding for the period .................................... 41,832 40,399 41,484 40,182 Net effect of dilutive stock options-based on the treasury stock method using average market price... 2,964 3,806 2,975 3,928 ------- ------- ------- ------- Shares used in computing per share amounts........... 44,796 44,205 44,459 44,110 ======= ======= ======= ======= Net income available for common stockholders ........ $19,064 $16,605 $34,433 $32,500 ======= ======= ======= ======= Net income available for common stockholders per share ......................................... $ 0.43 $ 0.38 $ 0.77 $ 0.74 ======= ======= ======= ======= Fully Diluted: Weighted average shares outstanding for the period... 41,832 40,399 41,484 40,182 Net effect of dilutive stock options-based on the treasury stock method using average market price... 3,021 3,806 3,004 3,928 Assumed conversion of 53/4% convertible subordinated notes ............................................. 9,684 -- 9,684 -- Shares used in computing per share amounts .......... 54,538 44,205 54,172 44,110 Net income available for common stockholders ........ $19,064 $16,605 $34,433 $32,500 ------- ------- ------- ------- Add 5 3/4% convertible subordinated note interest, net of interest capitalized and income tax effect ............................................ 1,541 -- 2,876 -- ======= ======= ======= ======= Net income available for common stockholders ........ $20,705 $16,605 $37,309 $32,500 Net income available for common stockholders per share ......................................... $ 0.38 $ 0.38 $ 0.69 $ 0.74 ======= ======= ======= =======
EX-27.1 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS MAR-31-1998 JUL-01-1997 SEP-30-1997 38,460 0 52,505 1,085 14,318 111,610 376,942 68,661 427,877 39,483 230,000 0 0 42 144,384 427,877 90,446 90,446 55,750 55,750 5,573 15 1,888 27,235 8,171 19,064 0 0 0 19,064 0.43 0.38
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