At the end of October, GT Advanced Technologies Inc of Nashua, NH, USA (a provider of polysilicon production technology as well as sapphire and silicon crystalline growth systems and materials for the solar, LED and other specialty markets) said that it is streamlining global operations to better align its cost structure with current market conditions and enhance its ability to pursue strategic growth initiatives, including the consolidation of existing business units into a single Crystal Growth Systems (CGS) group and cost-reduction actions including a reduction in staffing of about 25%. When fully implemented, the workforce reduction is expected to cut annualized expenses by about $13m. GT expects to record associated restructuring charges of about $4.2m in the December quarter.
“Some of our Asian customers are experiencing severe financial difficulties brought on by a number of economic- and trade-related challenges,” said president & CEO Tom Gutierrez. “We are not immune to these headwinds and we are taking actions to prepare for what is likely to be a challenging 2013 in our core markets by lowering our cost structure and at the same time improving our ability and flexibility to make strategic investments in R&D, next-generation technology and diversification initiatives that we believe will drive future growth,” he added.
“In the long term, we continue to expect renewed growth in the LED market as general lighting adoption accelerates and a turn-around in the solar industry driven in large part by the adoption of new technologies that provide critical cost reductions,” Gutierrez continued. “We also remain optimistic about the opportunities in our sapphire business for emerging applications such as the mobile cover and touch-screen markets.”
Under the new business structure, Dan Squiller has taken on the role of president of the new CGS business group, reporting directly to Gutierrez. The CGS group combines the PV, Polysilicon and Sapphire business units, as well as worldwide operations. David Keck assumes the role of executive VP & general manager of the PV and polysilicon unit. Cheryl Diuguid continues to lead the sapphire business unit as executive VP & general manager. David Gray (chief strategy officer), Vikram Singh (executive VP of advanced systems development and R&D) and Jeff Ford (VP & general manager of DSS business development) will report directly to Gutierrez to drive business development, diversification and next-generation technology initiatives.
“It remains our strategy to invest through these challenging times,” said Gutierrez. “Combined with our healthy balance sheet with nearly $480m of cash and cash equivalents*, the actions we announced today solidly position GT to execute on this growth strategy, laying the groundwork for us to emerge as a stronger, more diversified global technology leader.”
GT’s revenue falls 34% in Q3, but sapphire orders rebounding
For third-quarter 2012, GT Advanced Technologies reported revenue of $110.1m, down 34% on $167.3m last quarter and 49% on $217.7m a year ago (and at the low end of the $110-140m guidance).
Revenue by business segment was $95.9m in polysilicon (down from $121.5m last quarter), $1.6m in photovoltaic (down from $9.4m last quarter), and $12.6m in sapphire (down from $36.3m last quarter). Operating expenses have been cut from $41.3m a year ago and $35.6m last quarter to $30m. However, operating margin has still fallen further, from 24.7% a year ago and 14.7% last quarter to just 4.6%.
Non-GAAP net income is down from $45.8m a year ago and $19.3m last quarter to $0.7m. During the quarter, cash and cash equivalents rose from $332.4m (including $145m of total debt) to $479.2m (although this includes $298.1m of debt).
However, new orders have rebounded from just $13.8m last quarter to $49.2m. This included $11.1m for polysilicon (recovering from just $0.4m), $5.2m for PV (down from $8.5m) and $33m for sapphire (rebounding from $4.9m).
The firm had $56.3m of negative adjustments to order backlog, related primarily to the termination of a polysilicon contract with a startup Chinese firm that GT had previously indicated was at risk due to the customer’s failure to perform. During the quarter, total order backlog fell from $1.6bn to $1.5bn. This included $617.7m for polysilicon (down from $758.6m), $141.4m for PV (up slightly from $137.8m) and $717.6m in sapphire (up from $697.5m), as well as $93.2m of deferred revenue.
“We remained profitable and achieved the upper end of our EPS guidance in Q3 in spite of the softer demand environment in our core markets, demonstrating the resilience of our business model,” said president & CEO Tom Gutierrez.
