Hutchinson Technology Incorporated (HTCH)
F2Q 2011 Earnings Conference Call
April 26, 2011 5:00 PM EST
Chuck Ives – Treasurer and Director of IR
Wayne Fortun – CEO
Rick Penn – President, Disk Drive Components Division
Dave Radloff – CFO
Sherri Scribner – Deutsche Bank
Eric Reubel – MTR Securities
Tom Lewis – High Road Value Research
Mark Miller – Noble Financial Capital Markets
David Epstein – CRT
Jeremy Skrezyna [ph] – Andalusia Capital Partners
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At this time, all participants are in a listen-only mode. And following the presentation, instructions will be given for the question-and-answer session. (Operator Instructions).
And as a reminder, this conference is being recorded today, April 26th, 2011.
I would now like to turn the conference over to Chuck Ives. Please go ahead.
Good afternoon, everyone. Welcome to our second quarter results conference call. On the call with me today are Wayne Fortun, our Chief Executive Officer; Rick Penn, President of our Disk Drive Components Division; and Dave Radloff, our Chief Financial Officer.
Wayne will provide an overview of the business as well as a brief update on our BioMeasurement Division; Rick will provide an update on our Disk Drive Components Division; and Dave will speak to our financial results and guidance.
As a reminder we will be providing forward-looking information on-demand for and shipments of disk drives and the company’s products, market position, product mix, pricing, production capabilities and capacity, capacity utilization, assembly operations in Thailand, capital spending, product costs, manufacturing consolidation and restructuring, operating expenses, our BioMeasurement Division’s revenue and expenses, clinical evidence, product commercialization and adoption, and the company’s cost structure, operating performance and financial results.
These forward-looking statements involve risks and uncertainties as they are based on our current expectations. Our actual results could differ materially as a result of several factors that are described in our periodic reports on file with the SEC. In connection with the adoption of SEC rules governing fair disclosure, the company provides financial information and projections only through means that are designed to provide broad distribution of the information to the public. The company will not make projections or provide material non-public information through any other means.
We issued our second quarter results announcement just after the market closed this afternoon and it is now posted on our website at www.htch.com.
I’ll turn the call over to Wayne now for his opening remarks.
Thanks, Chuck. Good afternoon, everyone, and thank you for joining us today. As you know, in early March, we announced a manufacturing consolidation and restructuring plan. The actions we are taking under this plan combined with the cost reductions achieved through our TSA+ and Thailand assembly initiatives should position us as the industry’s lowest cost producer of suspension assemblies and strengthen our competitive position.
Under the plan, which we are implanting over the next nine months, we are consolidating our Hutchinson component operations into our Eau Claire operations and resizing the company to reduced costs and improved cash flow. Our Hutchinson site will remain our headquarters in center for research and development and other specialized operations. In addition to these structural changes in our business, operating efficiency improvements are contributing to the progress we’re making in reducing our cost structure.
For example, during our second quarter, we continued to improve both yields and outputs for our TSA+ suspension assemblies and to reduce our TSA+ cost per part. We are also steadily increasing volume at our assembly operation in Thailand, enabling us to lower our global cost structure. As a part of our restructuring plan, we are also minimizing the cost in our BioMeasurement Division, as we shift more of our sales to a distribution model and focus on two initiatives we believe can improve the Division’s revenue growth and shareholder value.
The two initiatives include supporting the global introduction of our InSpectra StO2 Spot Check, which received marketing clearance from the US Food and Drug Administration in March. This new product enables clinicians to quickly and cost effectively experience the clinical and economic benefits of using StO2 to identify at-risk patients in a wide variety of clinical settings, and we believe could lead to wider adoption of StO2 monitoring.
In addition, an independent randomized multi-site outcomes based study is being conducted to research the possible benefits of using StO2 to guide resuscitation of shock patients. And initial studies show that using StO2 to guide patient treatment resulted in improved outcomes in the form of shorter ICU and hospital stays. If the multi-site outcome study demonstrates these results in a larger patient population, it could add significantly to the growing body of evidence that supports wider adoption of StO2 monitoring. All together, our consolidation and restructuring effort should result in a $50 million to $55 million reduction in our costs on an annualized basis by the start of fiscal 2012 second quarter.
We believe we have the right plans in place to provide compelling combination of cost, technology, service, and supply assurance to our customers, and profitable growth to our shareholders.
I’ll turn it over to Rick now for a recap of the Disk Drive Component Division second quarter.
Thanks Wayne. During our fiscal 2011 second quarter, we shipped 102.3 million suspension assemblies, down 4% from a 106.5 million in the preceding quarter. This decline was in line with our revised guidance as well as the estimated reduction in the overall hard disk drive and suspension assembly TAM or total available market.