-----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, O2s4dYAwNAGyi+d9OoYoKM8z4+e/ckLZ17GLP1ryB7YJSfztoSL0ulsk1JEMcNtx EMCJdYdB3ZNF151wDVgnHg== 0001005967-98-000002.txt : 19980211 0001005967-98-000002.hdr.sgml : 19980211 ACCESSION NUMBER: 0001005967-98-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980210 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: 98527576 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 ================================================================================ 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 December 31, 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 January 26, 1998, 43,030,928 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. ================================================================================ PART I FINANCIAL INFORMATION ITEM 1. Financial Statements HMT TECHNOLOGY CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
December 31, March 31, 1997 1997 ------------ ---------- (Unaudited) (Audited) ASSETS Current assets: Cash and cash equivalents........................ $46,682 $44,225 Short-term investments........................... -- 10,833 Receivables, net................................. 50,634 35,794 Inventories...................................... 16,796 11,837 Deposits, prepaid expenses and other assets...... 1,053 474 Deferred income taxes............................ 6,532 6,532 ------------ ---------- Total current assets..................... 121,697 109,695 Construction in progress........................... 67,591 76,433 Property, plant and equipment, net................. 264,454 178,875 Other assets....................................... 7,822 8,386 ------------ ---------- Total assets................................ $461,564 $373,389 ============ ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable................................. $25,547 $26,424 Accrued liabilities.............................. 22,110 8,765 Obligations under capital leases -- current portion................................ 3,013 2,679 ------------ ---------- Total current liabilities................ 50,670 37,868 Long-term liabilities.............................. 8,315 3,562 Convertible subordinated promissory notes.......... 230,000 230,000 Obligations under capital leases, net of current portion............................. 697 3,172 Deferred tax liability, long term.................. 3,345 3,345 ------------ ---------- Total liabilities........................ 293,027 277,947 Stockholders' equity: Common Stock..................................... 43 41 Additional paid-in capital....................... 110,271 92,084 Retained earnings ............................... 134,872 79,966 Distribution in excess of basis.................. (76,649) (76,649) ------------ ---------- Total stockholders' equity............... 168,537 95,442 ------------ ---------- Total liabilities and stockholders' equity.. $461,564 $373,389 ============ ==========
See accompanying notes HMT TECHNOLOGY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)
Three Months Ended Nine Months Ended December 31, December 31, --------------------- --------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- (Unaudited) (Unaudited) Net sales ........................................ $98,556 $61,243 $265,839 $199,743 Cost of sales .................................... 61,538 36,371 164,764 115,748 ---------- ---------- ---------- ---------- Gross profit ................................... 37,018 24,872 101,075 83,995 ---------- ---------- ---------- ---------- Operating expenses: Research and development ....................... 2,229 1,527 6,411 4,192 Selling, general and administrative ............ 3,408 3,020 10,519 8,660 ---------- ---------- ---------- ---------- Total operating expenses .................... 5,637 4,547 16,930 12,852 ---------- ---------- ---------- ---------- Operating income ................................. 31,381 20,325 84,145 71,143 Interest expense, net ............................ 2,138 349 5,711 2,762 ---------- ---------- ---------- ---------- Income before income tax provision ............... 29,243 19,976 78,434 68,381 Income tax provision ............................. 8,773 5,993 23,531 20,119 ---------- ---------- ---------- ---------- Net income .................................. $20,470 $13,983 $54,903 $48,262 Accretion for dividends on Mandatorily Redeemable Series A Preferred Stock ............ -- (909) -- (2,688) ---------- ---------- ---------- ---------- Net income available for common stockholders ..... $20,470 $13,074 $54,903 $45,574 ========== ========== ========== ========== Net income available for common stockholders per share: Basic ....................................... $0.48 $0.30 $1.31 $1.03 ========== ========== ========== ========== Diluted ..................................... $0.40 $0.30 $1.09 $1.03 ========== ========== ========== ========== Shares used in computing per share amounts: Basic ....................................... 42,768 44,229 41,912 44,150 ========== ========== ========== ========== Diluted ..................................... 55,099 44,229 54,481 44,150 ========== ========== ========== ==========
See accompanying notes HMT TECHNOLOGY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Nine Months Ended December 31, ------------------- 1997 1996 --------- --------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income ....................................... $54,903 $48,262 Adjustments to reconcile net income to net cash used in operations: Depreciation and amortization ................. 28,846 14,709 Deferred income taxes ......................... -- 3,703 Loss on disposal of assets .................... -- 2,988 Changes in operating assets and liabilities: Receivables.................................. (14,840) (11,669) Inventories.................................. (4,959) (4,874) Deoposis, prepaid expenses and other assets.. (579) 115 Accounts payable............................. (877) 3,209 Accrued liabilities.......................... 13,346 (4,837) Lomg term liabilities........................ 4,753 -- --------- --------- Net cash provided by operating activities. 80,593 51,606 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for property, plant and equipment ... (105,538) (126,155) Decrease in other assets ......................... 519 323 --------- --------- Net cash used in investing activities .... (105,019) (125,832) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on obligations under capital leases ........................................ (2,141) (2,460) Other............................................. -- 1,184 Repayments on short-term borrowings............... -- -- Net proceeds from long-term borrowings ........... -- 31,000 Proceeds from issuance of Common Stock ........... 18,191 12,817 --------- --------- Net cash provided by financing activities. 16,050 42,541 --------- --------- Net increase (decrease) in cash and cash equivalents ...................................... (8,376) (31,685) Cash and cash equivalents at beginning of period .. 55,058 35,843 --------- --------- Cash and cash equivalents at end of period ........ $46,682 $4,158 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest during the period ......... $6,392 $3,646 Cash paid for income taxes during the period ..... $13,050 $24,820 SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Accretion for dividends on Mandatorily Redeemable Series A Preferred Stock ...................... $ -- $2,688
See accompanying notes 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 December 31, 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. ------------ ------------ (in thousands) Raw materials..................... $3,849 $4,307 Work-in-process................... 5,276 5,843 Finished goods.................... 7,671 1,687 ------------ ------------ $16,796 $11,837 ============ ============
Recent Accounting Pronouncements In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings per Share," which specifies the computation, presentation and disclosure requirements for earnings per share. SFAS No. 128 supersedes Accounting Principles Board Opinion No. 15, is effective for financial statements issued for periods ending after December 15, 1997, and requires that prior periods be restated. The provisions of SFAS No. 128 have been adopted in the quarter ended December 31, 1997. In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130 ("SFAS No. 130"), "Reporting Comprehensive Income," which will require the reporting of additional financial information in a complete set of financial statements. SFAS No. 130 is effective for fiscal years beginning after December 15, 1997 and will require earlier periods to be restated to reflect application of the provisions of SFAS No. 130. The impact of the adoption of SFAS No. 130 on the financial statements of the Company has not yet been determined. In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131 ("SFAS No. 131,") "Disclosures About Segments of an Enterprise and Related Information," which specifies disclosure requirements for segment reporting. SFAS No. 131 supersedes SFAS No. 14 and SFAS No. 18 and is effective for fiscal years beginning after December 15, 1997, and requires earlier years to be restated if practicable. The impact of the adoption of SFAS No. 131 on the financial statements of the Company has not yet been determined. 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 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 60.9% in the third quarter of fiscal 1998 to $98.6 million, up $37.4 million over the third quarter of fiscal 1997. For the first nine months of fiscal 1998 net sales of $265.8 million were $66.1 million or 33.1% higher than the same period in fiscal 1997. The increase in net sales during the three and nine month periods ending December 31, 1997 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 third 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 37.6 % and 38.0 % for the three and nine months ended December 31, 1997, respectively, compared with 40.6 % and 42.1 % for the three and nine months ended December 31, 1996, respectively. The decrease in gross margin for the three and nine months ended December 31, 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 $702,000 and $2.2 million in the three- and nine-month periods ending December 31, 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 $0.4 million and $1.9 million in the third quarter and first nine months of fiscal 1998, respectively, compared to 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 nine months ended December 31, 1997 and 1996, the Company recorded income taxes at its estimated annual effective tax rate of 30%. 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 Cash and cash equivalents decreased by $8.4 million to $46.7 million at December 31, 1997 from the end of the prior fiscal year. Cash flows from operations were $80.6 million for the nine-month period ended December 31, 1997 as compared to $51.6 million in the same period of 1996. Cash generated during the first nine 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 nine months of fiscal 1998. The Company invested $105.5 million and $126.2 million in property, plant and equipment during the first nine months 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 nine months of fiscal 1998 reflected the $13.9 million generated from a public offering of the Company's common stock during the second quarter of fiscal 1998. As of December 31, 1997, the Company's principal sources of liquidity consisted of cash and cash equivalents, and an unsecured $100.0 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 at least through fiscal 1999. Further 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 any needed alternative sources of financing on favorable terms, if at all, at such time or times as the Company may require such capital. 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 December 31, 1997. 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: February 10, 1998 BY: /s/ Peter S. Norris ----------------- ------------------------------------ Peter S. Norris Vice President, Finance and Chief Financial Officer Date: February 10, 1998 BY: /s/ Ronald L. Schauer ----------------- ------------------------------------ Ronald L. Schauer President and Chief Executive Officer EXHIBIT INDEX
Exhibit No. Description - - - ----------- ----------- 11.1 Statement Regarding Computation of Net Income per Share. 27.1 Financial Data Schedule
EX-11.1 2 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS [MULTIPLIER] 1,000 Part II. Other information, Item 6a. Exhibit 11.1 EXHIBIT 11.1 HMT TECHNOLOGY CORPORATION STATEMENT REGARDING COMPUTATION OF NET INCOME PER SHARE (in thousands, except per share data) (Unaudited)
Three Months Ended Nine Months Ended December 31, December 31, ------------------- ------------------- 1997 1996 1997 1996 --------- --------- --------- --------- Basic: Weighted average shares outstanding for the period ...................... 42,768 40,673 41,912 40,346 --------- --------- --------- --------- Shares used in computing per share amounts ....................... 42,768 44,229 41,912 44,150 ========= ========= ========= ========= Net income available for common stockholders ........................ $20,470 $13,074 $54,903 $45,574 ========= ========= ========= ========= Net income available for common stockholders per share .............. $0.48 $0.30 $1.31 $1.03 ========= ========= ========= ========= Diluted: Weighted average shares outstanding for the period ...................... 42,768 40,673 41,912 40,346 Net effect of dilutive stock options based on the treasury stock method using average market price .......... 2,647 3,556 2,885 3,804 Assumed conversion of 5 3/4% convertible subordinated notes ...... 9,684 -- 9,684 -- --------- --------- --------- --------- Shares used in computing per share amounts ............................. 55,099 44,229 54,481 44,150 ========= ========= ========= ========= Net income available for common stockholders ........................ 20,470 13,074 54,903 45,574 Add 5 3/4% convertible subordinated note interest, net of interest capitalized and income tax effect ... 1,841 -- 4,717 -- --------- --------- --------- --------- Net income available for common stockholders ........................ $22,311 $13,074 $59,620 $45,574 ========= ========= ========= ========= Net income available for common stockholders per share .............. $0.40 $0.30 $1.09 $1.03 ========= ========= ========= =========
EX-27.1 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS INCLUDED IN THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS MAR-31-1998 OCT-01-1997 DEC-31-1997 46,682 0 50,634 0 16,796 121,697 264,454 0 461,564 50,670 230,000 0 0 43 168,494 461,564 98,556 98,556 61,538 61,538 5,637 0 2,138 29,243 8,773 20,470 0 0 0 20,470 $0.48 $0.40
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