SCON

Superconductor Technologies Inc. (SCON)

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Superconductor Technologies (SCON)

Q4 2012 Earnings Call

March 07, 2013 11:00 am ET

Executives

Cathy Mattison - Assistant Vice President

Jeffrey A. Quiram - Chief Executive Officer, President, Director and Member of Stock Option Committee

William J. Buchanan - Chief Financial Officer, Principal Accounting Officer, Vice President, Controller and Assistant Secretary

Analysts

Bill Mahon

Presentation

Operator

Ladies and gentlemen, good morning, and welcome to the Superconductor Technologies STI's Fourth Quarter and Year-End 2012 Results Conference Call, held on the 7th of March, 2013. [Operator Instructions] I would now like to hand the conference over to your host, Cathy Mattison from LHA. Please go ahead, madam.

Cathy Mattison

Thank you, Marc. Good morning, everyone, and thank you for joining us for STI's Fourth Quarter Conference Call. By now, you should have received a copy of the press release. If you have not, please feel free to contact LHA at (415) 433-3777, and we will get that out to you right away.

With us from management today are Jeff Quiram, President and Chief Executive Officer; and Bill Buchanan, Chief Financial Officer. I will review the Safe Harbor provisions of this conference call, and then I will turn the call over to Jeff.

Various comments regarding management's beliefs, expectations and plans for the future are forward-looking statements, and are made in reliance upon the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are not guarantees of future performance and are subject to various risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ from those expressed in the forward-looking statements, and those differences could be material. Forward-looking statements can be affected by many other factors, including those described in the risk factors in the MD&A sections of STI's 2011 annual report on Form 10-K. These documents are available online at STI's website, www.suptech.com, or through the SEC's website, www.sec.gov.

Forward-looking statements are based on information presently available to senior management, and STI has not assumed any duty to update any forward-looking statements. And now I would like to turn the call over to Jeff.

Jeffrey A. Quiram

Thank you, Cathy, and thank you, all, for joining us today. I will provide an update of our Conductus wire program, and then Bill will review the year-end financials. During 2012, the STI team accomplished several major milestones enabling us to begin pilot production of Conductus HTS wire.

As 2012 began, STI had demonstrated our ability to achieve industry-leading performance with our Conductus HTS wire. During the first 2 quarters, we continued to improve on that performance, culminating with the announcement in May that we had achieved in testing with Nexans, a current carrying capacity in excess of 500 Amps per centimeter width on 2 micron HTS film at a temperature of 77 Kelvin. This key technical milestones enables several attractive applications, including our upcoming cable demonstration project.

In the early 2012, we also took possession of our Advanced Manufacturing Center of Excellence facility in Austin. This Class A facility provides STI with a state-of-the-art setting for our new production equipment and enabled us to deploy all of our HTS wire manufacturing processes under one roof. We immediately began preparing for the arrival of our new machines and completed the clean room construction in the first quarter.

We were also attracted to Austin by the availability of the additional world-class engineering and material sciences expertise that STI needed as we launched our Conductus wire manufacturing operation. While we fully expected that over time Austin will become the primary home of our technical team, the combination of the relocation of several key technical personnel from Santa Barbara and our success in hiring exceptional talent has accelerated the transition.

The delivery and installation of our manufacturing equipment suite was the remaining objective in our 2012 plan. Throughout the year, we made significant progress on each of these machines.

I'll quickly review the equipment suite and the process STI uses to make the Conductus wire. First, the commercial grade stainless steel template is passed through the Solution Deposition Planarization, or SDP system, delivering a smooth ceramic starting surface. And then the template runs through Ion Beam Assisted Deposition, or IBAD system, which creates the ideal surface condition for STI's commercially proven and proprietary HTS manufacturing material deposition process.

In the final step, the Reacted Co-Evaporation, or RCE system, deposits the HTS materials. We have received and installed each of these machines in Austin.

The IBAD system, which was delivered in April 2012, has completed process implementation. It is now being used in full production, and we are consistently producing world-class results on that machine.

The SDP system, delivered in November of 2012, has completed initial process implementation. The initial pilot production runs on 50-meter lengths at a width of 10 centimeters were completed in early February of 2013.

We continue to refine this process with a focus on improving throughput by streamlining the deposition process. These 2 machines were both designed to produce kilometer lengths of wire template at a width of 10 centimeters.

The RCE system, delivered in October of 2012, has been installed with our first process runs completed last month. We have completed several production runs on our new 100-meter RCE tool, as we strive to transfer our proven deposition process to this machine.

Recently, we reached an exciting milestone by shipping customer samples of Conductus wire completely fabricated in our new Austin facility for the first time. As we discussed on our last call, we've experienced capacity challenges with our R&D equipment in Santa Barbara that has delayed the delivery of the high-performance wire needed for the power cable demonstration project.

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