Hutchinson Technology, (
Q1 2011 Earnings Conference Call
January 25, 2011 04:58 pm ET
Chuck Ives – Director of Investor Relations and Treasurer
Kathleen S. Skarvan – President of Disk Drive Components Division
David Radloff – Chief Financial Officer
Richard Penn – Biomeasurement Division
Wayne Fortun – Chief Executive Officer
Sherri Scribner – Deutsche Bank
(Rich Coogle) – Needham and Company
(Matt Swill) – Gleacher Securities
Mark Miller – Novell Capital
Eric Reubel – MTR Securities
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Good morning ladies and gentlemen, thank you for standing by and welcome to the Hutchinson Technology First Quarter Results Conference Call. During today’s presentation all parties will be in a listen only mode. Following the presentation, the conference will be open for questions, if you have a question please press the star followed by the one on your touchtone phone. If you would like to withdraw your question please press the star followed by the two and if you’re using speaker equipment please lift the handset before making your selection.
This conference is being recorded today, Tuesday, January 25 of 2011. I’d now like to turn the conference over to Director of Investor Relations and Treasurer, Mr. Chuck Ives, please go ahead sir.
Good afternoon everyone, welcome to our first quarter results conference call. On the call with me today are Wayne Fortun our Chief Executive Officer, Kathleen Skarvan, President of our Disk Drive Components Division, Rick Penn, President of our Biomeasurement Division and Dave Radloff our Chief Financial Officer.
As a reminder we will be providing forward-looking information on-demand for and shipments of the company’s products, our market position, pricing, customer mix, production capabilities and capacity, capacity utilization, our assembly operations in Thailand, capital spending, product costs, operating expenses, our biomeasurement division’s revenue, clinical evidence, product commercialization and adoption, and the company’s 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 FDC. In connection with the adoption of FDC rules governing fair disclosure, the company provides financial information and projections only through means that are designed to provide broad distribution of information to the public.
The company will not make projections or provide material non-public information through any other means. We issued our first quarter results announcement just after the market closed this afternoon and it is now posted on our website at
. 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. In our fiscal 2011 first quarter we substantially reduced our net loss compared with the preceding quarter despite lower volume and revenue. The smaller loss resulted from benefits from our recent costs reductions and a significant improvement in our TSA plus yield and output. We have reduced our annual costs by $25 million inline with the plans we discussed on our previous earnings call.
During the quarter we also demonstrated that we can attain levels of TSA plus yields, out put and capacity utilization that eliminate the cost burden that has been associated with TSA plus production. Looking ahead our cost position on suspension assemblies will continue to benefit from further improvement in our TSA plus yield and out put as well as a steady increase in volume produced at our Thailand assembly operation.
During the quarter our Thailand site was qualified by a customer and we’re now shipping volume product from this site. Continued TSA plus improvements and the ramp to higher volume at our Thailand facility will move us steadily closer to our goal of being the industries lowest cost producer of suspension assemblies.
Our biomeasurement division has significantly reduced its operating loss. As a result of previously mentioned cost reduction. In addition, the division has initiated sales of the newly introduced InSpectra St02 spot check product in countries that recognize the CE mark. I’ll turn the call over to Kathleen now for a recap of the disk drive components division for first quarter.
Thanks, Wayne. During our fiscal 2011 first quarter we shipped 16.5 million suspension assemblies, down 3.5% from 110.4 million in the first quarter and 155.2 million in last years first quarter. The sequential decline was inline with our guidance, which included one customer managing down their existing inventory. For the quarter, our mix of products shipped was as following.
Suspensions for 3.5-inch ATA applications increased 5% sequentially and accounted for 58% of our shipments up from 53% in the preceding quarter. Shipments for mobile applications declined 27% sequentially and accounted for 17% of our shipments, down from 23% in the preceding quarter.
Shipments for enterprise applications were flat with the preceding quarter and accounted for 25% of our shipments compared with 24% in the preceding quarter. Average selling price in the fiscal 2011 first quarter was $0.62 compared with $0.66 in the preceding quarter and $0.68 in last year’s first quarter.
The sequential quarter decline in ASP reflects the continuation of a competitive pricing environment and a change in the mix of our products and customers. So revenue percentages for our top customers in the quarter were as follows: Western Digital 57%, SAETDK 16%, Hitachi 13%, Seagate 12%.
Some of the suspension assemblies we sell, including, suspensions produced for the vertically integrated hard disk drive OEM’s are shipped to SAE. During the first quarter however we shipped a greater percentage of suspensions directly to HGD OEM. This accounted for nine percentage points or half of the sequential quarter change in revenue, from SAETDK. In addition, as we mentioned in our fourth quarter conference call, one of our customers pulled extra suspension assemblies in the last week of the fourth quarter to honor a volume commitment.