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Hutchinson Technology, Inc. (HTCH)
F1Q2012 Earnings Conference Call
January 24, 2012 5:00 PM ET
Charles Ives – Director of Investor Relations and Treasurer
Wayne Fortun – President and Chief Executive Officer
Rick Penn – Senior Vice President and President of the Disk Drive Components Division
Dave Radloff – Vice President and Chief Financial Officer
Sherri Scribner – Deutsche Bank
Richard Kugele – Needham & Company
Matt Swope – Gleacher Securities
Tom Lewis – High Road Value Research
Mark Miller – Noble Financial
Shawn Boyd – Westcliff Capital Management
Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Hutchinson Technology first quarter results conference call.
Previous Statements by HTCH
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I would now like to turn the conference over to Mr. Charles Ives, Treasurer and Director of Investor Relations. Please go ahead.
Good afternoon, everyone. Welcome to our first 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, 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, product mix, pricing, production capabilities, assembly operations in Thailand, the impact of flooding in Thailand, capital spending, product costs, operating expenses, product commercialization and adoption, manufacturing, consolidation and restructuring 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 non-public information through any other means.
We issued our first quarter results announcement just after the market close 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. Our first quarter suspension assembly shipments were in line with our guidance we provided in our November 1st conference call. As we’ve reported at that time the historic flooding in Thailand has temporarily suppressed the overall production capacity of the hard disk drive supply chain. And this is resulted in material decrease in our suspension assembly demand. Thankfully, we have been able to offset the capacity that was damaged in our Thailand operation with the available capacity in our vertically integrated U.S. operations to meet customer’s requirements.
Our assembly operation in Thailand is dry now and repair and restoration work is underway. After reviewing the flood mitigation plans of the Thai government and of the industrial park where our plant is located we are proceeding with plans to restore our Thai operation and expect to resume operation by the end of June. Longer term we will closely monitor the implementation of the plant flood mitigation measures while we ramp the production capacity of our Thailand facility. We expected it will take until the middle of fiscal year 2013 to return the operation to pre flood output levels.
Now, I will turn the call over to Rick for a recap of the disk drive components division first quarter.
Thanks Wayne. During our fiscal 2012 first quarter we shipped $89.3 million to suspension assemblies, which was down 30% from $127.4 million in the preceding quarter and in line with our guidance. The decline resulted from flood related capacity constrains at our customers. We believe that our competitors also experienced declines in their volume and that we maintained our overall market share we had approximately 20%.
Thanks to the efforts of our employees here in the U.S. and abroad we’ve been able to leverage the existing capacity of our vertically integrated U.S. operations to meet customer’s needs. This available capacity also positions us well to respond to increased demand as the industry recovers.
For the fiscal 2012 first quarter our mix of product shift was as follows suspensions for 3.5- inch ATA applications decreased 56% sequentially and accounted for 35% of our shipments compared with 55% in the preceding quarter. Shipments from mobile applications increased 11% sequentially and accounted for 42% of our shipments up from 27% in the preceding quarter and shipments for enterprise applications decreased 9% sequentially and accounted for 23% of our shipments, compared to an 18% in the preceding quarter.
These changes in our product mix were a result of the flood related capacity constraints at our customers and caused our average selling price to increase from $0.58 in the preceding quarter to $0.60 in the fiscal 2012 first quarter. Our first quarter shipments TSA+ suspension assemblies decreased 39% sequentially to $47 million and accounted for 52% of our shipments, down from 60% in the preceding quarter.