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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended JUNE 26, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 0-14709
 HUTCHINSON TECHNOLOGY INCORPORATED
  MINNESOTA
    
    41-0901840(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 40 WEST HIGHLAND PARK DRIVE N.E., HUTCHINSON, MINNESOTA
    
    55350(Address of principal executive offices)
    
    (Zip code)
 (320) 587-3797
  
   þ o
  þ o




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TABLE OF CONTENTS  PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESITEM 6. EXHIBITS AND REPORTS ON FORM 8-KSIGNATURESINDEX TO EXHIBITSRule 13a-14(a)/15d-14(a) Certifications of CEORule 13a-14(a)/15d-14(a) Certifications of CFOSection 1350 Certifications    Table of Contents  
 PART I. FINANCIAL INFORMATION
 
  HUTCHINSON TECHNOLOGY INCORPORATED
 CONDENSED CONSOLIDATED BALANCE SHEETS
 June 26, 2005
    
    September 26,(Unaudited)
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    47,749
    
    
    $
    33,704Securities available for sale
    
    
    216,567
    
    
    
    224,356Trade receivables, net
    
    
    91,484
    
    
    
    69,073Other receivables
    
    
    11,611
    
    
    
    7,272Inventories
    
    
    42,611
    
    
    
    35,319Deferred tax assets (Note 7)
    
    
    6,928
    
    
    
    9,415Other current assets (Note 8)
    
    
    5,588
    
    
    
    5,657Total current assets
    
    
    422,538
    
    
    
    384,796Property, plant and equipment, net
    
    
    305,608
    
    
    
    213,761Deferred tax assets (Note 7)
    
    
    61,657
    
    
    
    68,211Other assets (Note 8)
    
    
    19,574
    
    
    
    21,624$
    809,377
    
    
    $
    688,392LIABILITIES AND SHAREHOLDERS INVESTMENTCurrent liabilities:Accounts payable
    
    $
    67,862
    
    
    $
    29,310Accrued expenses
    
    
    14,338
    
    
    
    12,759Accrued compensation
    
    
    26,497
    
    
    
    19,816Total current liabilities
    
    
    108,697
    
    
    
    61,885Convertible subordinated notes
    
    
    150,000
    
    
    
    150,000Other long-term liabilities
    
    
    2,670
    
    
    
    2,955Shareholders investment:Common stock, $.01 par value,
100,000,000 shares authorized,
25,491,000 and 24,394,000 issued and
outstanding
    
    
    255
    
    
    
    244Additional paid-in capital
    
    
    390,110
    
    
    
    363,786Accumulated other comprehensive loss
    
    
    (689
    )
    
    
    (588
    )Accumulated earnings
    
    
    158,334
    
    
    
    110,110Total shareholders investment
    
    
    548,010
    
    
    
    473,552$
    809,377
    
    
    $
    688,392
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HUTCHINSON TECHNOLOGY INCORPORATED
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  UNAUDITED
 Thirteen Weeks Ended
    
    Thirty-Nine Weeks EndedJune 26,
    
    June 27,
    
    June 26,
    
    June 27,2005
    
    2004
    
    2005
    
    2004Net sales
    
    $
    169,676
    
    
    $
    100,400
    
    
    $
    473,336
    
    
    $
    347,390Cost of sales
    
    
    118,242
    
    
    
    76,520
    
    
    
    333,264
    
    
    
    246,435Gross profit
    
    
    51,434
    
    
    
    23,880
    
    
    
    140,072
    
    
    
    100,955Research and development expenses
    
    
    9,571
    
    
    
    7,441
    
    
    
    25,488
    
    
    
    19,115Selling, general and administrative expenses
    
    
    21,150
    
    
    
    15,121
    
    
    
    61,133
    
    
    
    48,239Income from operations
    
    
    20,713
    
    
    
    1,318
    
    
    
    53,451
    
    
    
    33,601Interest and other income, net
    
    
    4,303
    
    
    
    2,312
    
    
    
    9,310
    
    
    
    6,179Interest expense
    
    
    (395
    )
    
    
    (815
    )
    
    
    (1,636
    )
    
    
    (2,621
    )Income before income taxes
    
    
    24,621
    
    
    
    2,815
    
    
    
    61,125
    
    
    
    37,159Provision (benefit) for income taxes (Note 7)
    
    
    4,979
    
    
    
    (37,525
    )
    
    
    12,901
    
    
    
    (31,000
    )Net income
    
    $
    19,642
    
    
    $
    40,340
    
    
    $
    48,224
    
    
    $
    68,159Basic earnings per share
    
    $
    0.77
    
    
    $
    1.55
    
    
    $
    1.92
    
    
    $
    2.62Diluted earnings per share
    
    $
    0.65
    
    
    $
    1.30
    
    
    $
    1.63
    
    
    $
    2.22Weighted average common shares outstanding
    
    
    25,378
    
    
    
    26,073
    
    
    
    25,107
    
    
    
    26,016Weighted average common and diluted shares
outstanding
    
    
    31,103
    
    
    
    31,599
    
    
    
    30,724
    
    
    
    31,712
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HUTCHINSON TECHNOLOGY INCORPORATED
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  UNAUDITED
 Thirty-Nine Weeks EndedJune 26,
    
    June 27,2005
    
    2004OPERATING ACTIVITIES:Net income
    
    $
    48,224
    
    
    $
    68,159Adjustments to reconcile net income to cash
provided by operating activities:Depreciation and amortization
    
    
    49,057
    
    
    
    43,245Deferred income taxes
    
    
    14,301
    
    
    
    (36,426
    )Loss on disposal of assets
    
    
    52
    
    
    
    186Changes in operating assets and liabilities (Note 10)
    
    
    10,569
    
    
    
    408Cash provided by operating activities
    
    
    122,203
    
    
    
    75,572INVESTING ACTIVITIES:Capital expenditures
    
    
    (137,182
    )
    
    
    (59,726
    )Purchases of marketable securities
    
    
    (413,983
    )
    
    
    (335,367
    )Sales and maturities of marketable securities
    
    
    422,370
    
    
    
    315,933Cash used in investing activities
    
    
    (128,795
    )
    
    
    (79,160
    )FINANCING ACTIVITIES:Net proceeds from issuance of common stock
    
    
    20,637
    
    
    
    8,552Cash provided by financing activities
    
    
    20,637
    
    
    
    8,552Net increase in cash and cash equivalents
    
    
    14,045
    
    
    
    4,964Cash and cash equivalents at beginning of period
    
    
    33,704
    
    
    
    67,505Cash and cash equivalents at end of period
    
    $
    47,749
    
    
    $
    72,469
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HUTCHINSON TECHNOLOGY INCORPORATED
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  UNAUDITED
 Reference to the Company means Hutchinson Technology Incorporated and its subsidiaries. Unless
otherwise indicated, references to 2006 mean the Companys fiscal year ending September 24, 2006,
references to 2005 mean the Companys fiscal year ending September 25, 2005, references to 2004
mean the Companys fiscal year ended September 26, 2004, references to 2003 mean the Companys
fiscal year ended September 28, 2003 and references to 2002 mean the Companys fiscal year ended
September 29, 2002.
 (1) ACCOUNTING POLICIES
  (2) ACCOUNTING PRONOUNCEMENTS
  (3) BUSINESS AND CUSTOMERS
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Thirteen Weeks Ended
    
    Thirty-Nine Weeks EndedJune 26,
    
    June 27,
    
    June 26,
    
    June 27,Percentage of Net Sales
    
    2005
    
    2004
    
    2005
    
    2004Five Largest Customers
    
    
    89
    %
    
    
    89
    %
    
    
    88
    %
    
    
    82
    %Sales to
Major CustomersSAE Magnetics, Ltd./TDK
    
    
    30
    %
    
    
    36
    %
    
    
    29
    %
    
    
    34
    %Alps Electric Co., Ltd.
    
    
    21
    
    
    
    22
    
    
    
    21
    
    
    
    23Western Digital Corporation
    
    
    16
    
    
    
    13
    
    
    
    19
    
    
    
    13Innovex, Inc.
    
    
    13
    
    
    
    9
    
    
    
    11
    
    
    
    7Seagate Technology LLC
    
    
    9
    
    
    
    4
    
    
    
    8
    
    
    
    6Fujitsu Limited
    
    
    5
    
    
    
    9
    
    
    
    7
    
    
    
    5
 (4) TRADE RECEIVABLES
   Increases in the
    
    Reductions in theallowance related
    
    allowance forSeptember 26,
    
    to warranties
    
    returns under
    
    June 26,2004
    
    issued
    
    warranties
    
    2005$779
    
    $
    1,084
    
    
    $
    (1,395
    )
    
    $
    468
 (5) INVENTORIES
  June 26,
    
    September 26,2005
    
    2004Raw materials
    
    $
    12,890
    
    
    $
    9,144Work in process
    
    
    11,945
    
    
    
    9,546Finished goods
    
    
    17,776
    
    
    
    16,629$
    42,611
    
    
    $
    35,319
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(6) EARNINGS PER SHARE
  Thirteen Weeks Ended
    
    Thirty-Nine Weeks EndedJune 26,
    
    June 27,
    
    June 26,
    
    June 27,2005
    
    2004
    
    2005
    
    2004Net income
    
    $
    19,642
    
    
    $
    40,340
    
    
    $
    48,224
    
    
    $
    68,159Plus: interest expense on convertible
subordinated notes
    
    
    1,008
    
    
    
    1,008
    
    
    
    3,025
    
    
    
    3,022Less: additional profit-sharing expense
and income tax provision
    
    
    358
    
    
    
    228
    
    
    
    1,046
    
    
    
    683Net income available to common shareholders
    
    $
    20,292
    
    
    $
    41,120
    
    
    $
    50,203
    
    
    $
    70,498Weighted average common shares outstanding
    
    
    25,378
    
    
    
    26,073
    
    
    
    25,107
    
    
    
    26,016Dilutive potential common shares
    
    
    5,725
    
    
    
    5,526
    
    
    
    5,617
    
    
    
    5,696Weighted average common and diluted shares
outstanding
    
    
    31,103
    
    
    
    31,599
    
    
    
    30,724
    
    
    
    31,712Basic earnings per share
    
    $
    0.77
    
    
    $
    1.55
    
    
    $
    1.92
    
    
    $
    2.62Diluted earnings per share
    
    $
    0.65
    
    
    $
    1.30
    
    
    $
    1.63
    
    
    $
    2.22
 (7) INCOME TAXES
  June 26,
    
    September 26,2005
    
    2004Current deferred tax assets:Receivable allowance
    
    $
    530
    
    
    $
    535Inventories
    
    
    3,044
    
    
    
    5,167Accruals and other reserves
    
    
    3,354
    
    
    
    3,713Total current deferred tax assets
    
    
    6,928
    
    
    
    9,415Long-term deferred tax assets:Property, plant and equipment
    
    
    20,583
    
    
    
    12,762Deferred income
    
    
    825
    
    
    
    924Tax credits
    
    
    18,098
    
    
    
    15,628Net operating loss carryforwards
    
    
    27,192
    
    
    
    44,539Valuation allowance
    
    
    (5,041
    )
    
    
    (5,642
    )Total long-term deferred tax assets
    
    
    61,657
    
    
    
    68,211Total deferred tax assets
    
    $
    68,585
    
    
    $
    77,626
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(8) OTHER ASSETS
  (9) SHAREHOLDERS EQUITY
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(10) SUPPLEMENTARY CASH FLOW INFORMATION
 Thirty-Nine Weeks EndedJune 26,
    
    June 27,2005
    
    2004Changes in operating assets and liabilities:Receivables, net
    
    $
    (26,750
    )
    
    $
    10,142Inventories
    
    
    (7,292
    )
    
    
    (14,854
    )Other assets
    
    
    1,345
    
    
    
    636Accounts payable and accrued expenses
    
    
    43,551
    
    
    
    2,512Other non-current liabilities
    
    
    (285
    )
    
    
    1,972$
    10,569
    
    
    $
    408Cash paid for:Interest (net of amount capitalized)
    
    $
    1,242
    
    
    $
    2,938Income taxes
    
    $
    962
    
    
    $
    833
  (11) STOCK-BASED COMPENSATION
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Thirteen Weeks Ended
    
    Thirty-Nine Weeks EndedJune 26,
    
    June 27,
    
    June 26,
    
    June 27,2005
    
    2004
    
    2005
    
    2004Net income, as reported
    
    $
    19,642
    
    
    $
    40,340
    
    
    $
    48,224
    
    
    $
    68,159Deduct: Total stock-based
employee compensation expense
determined under fair value
based method for all awards,
net of related tax effects
    
    
    945
    
    
    
    1,197
    
    
    
    3,033
    
    
    
    3,796Pro forma net income
    
    $
    18,697
    
    
    $
    39,143
    
    
    $
    45,191
    
    
    $
    64,363Earnings per share:Basic  as reported
    
    $
    0.77
    
    
    $
    1.55
    
    
    $
    1.92
    
    
    $
    2.62Basic  pro forma
    
    $
    0.74
    
    
    $
    1.50
    
    
    $
    1.80
    
    
    $
    2.47Diluted  as reported
    
    $
    0.65
    
    
    $
    1.30
    
    
    $
    1.63
    
    
    $
    2.22Diluted  pro forma
    
    $
    0.62
    
    
    $
    1.26
    
    
    $
    1.54
    
    
    $
    2.10
  (12) LEGAL CONTINGENCIES
   (13) OTHER MATTERS
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(14) SEGMENT REPORTING
    Thirteen Weeks Ended
    
    Thirty-Nine Weeks EndedJune 26,
    
    June 27,
    
    June 26,
    
    June 27,2005
    
    2004
    
    2005
    
    2004Net sales:Disk Drive Division
    
    $
    169,500
    
    
    $
    100,307
    
    
    $
    472,917
    
    
    $
    347,107BioMeasurement Division
    
    
    176
    
    
    
    93
    
    
    
    419
    
    
    
    283$
    169,676
    
    
    $
    100,400
    
    
    $
    473,336
    
    
    $
    347,390Income (loss) from operations:Disk Drive Division
    
    $
    22,842
    
    
    $
    3,204
    
    
    $
    59,201
    
    
    $
    38,832BioMeasurement Division
    
    
    (2,129
    )
    
    
    (1,886
    )
    
    
    (5,750
    )
    
    
    (5,231
    )$
    20,713
    
    
    $
    1,318
    
    
    $
    53,451
    
    
    $
    33,601
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HUTCHINSON TECHNOLOGY INCORPORATED
 
  When we refer to we, us, our and HTI, we mean Hutchinson Technology Incorporated and its
subsidiaries. Unless otherwise indicated, references to 2006 mean HTIs fiscal year ending
September 24, 2006, references to 2005 mean HTIs fiscal year ending September 25, 2005,
references to 2004 mean HTIs fiscal year ended September 26, 2004, references to 2003 mean
HTIs fiscal year ended September 28, 2003, references to 2002 mean HTIs fiscal year ended
September 29, 2002, references to 2001 mean HTIs fiscal year ended September 30, 2001, and
references to 2000 mean HTIs fiscal year ended September 24, 2000.
 GENERAL
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
    
    demand or customer requirements;
    
    utilization of our production capacity;
    
    product and feature mix;
    
    selling prices;
    
    depreciation expense associated with adding production capacity;
    
    infrastructure and expedited production and shipping costs;
    
    production and engineering costs associated with production of new products and features;
    
    manufacturing yields or efficiencies; and
    
    costs of materials.
    13




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RESULTS OF OPERATIONS
 Thirteen Weeks Ended June 26, 2005 vs. Thirteen Weeks Ended June 27, 2004.
  14




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Thirty-Nine Weeks Ended June 26, 2005 vs. Thirty-Nine Weeks Ended June 27, 2004.
      16




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LIQUIDITY AND CAPITAL RESOURCES
    17




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CRITICAL ACCOUNTING POLICIES
  Revenue Recognition
   18




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Accounts Receivable
   Inventory Valuation
   Long-Lived Assets
  Income Taxes
  19




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MARKET TRENDS AND CERTAIN CONTINGENCIES
 Market Trends
     20




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Contingencies
   Other Matters
   21




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Forward-Looking Statements
 .
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Evaluation of Disclosure Controls and Procedures.
  Changes in Internal Control Over Financial Reporting.
  Risks Regarding Controls and Procedures.
  24




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(A) EXHIBITS :
 Unless otherwise indicated, all documents incorporated herein by reference to a document filed with
the SEC pursuant to the Securities Exchange Act of 1934, as amended, are located under SEC file
number 0-14709.
 3.1
    
    Amended and Restated Articles of Incorporation of HTI (incorporated by reference to Exhibit
3.1 to HTIs Quarterly Report on Form 10-Q for the quarter ended 12/29/02).3.2
    
    Restated By-Laws of HTI (incorporated by reference to Exhibit 3.2 to HTIs Quarterly Report
on Form 10-Q for the quarter ended 6/27/04).4.1
    
    Instruments defining the rights of security holders, including an indenture. The Registrant
agrees to furnish the Securities and Exchange Commission upon request copies of instruments
with respect to long-term debt.4.2
    
    Share Rights Agreement dated as of 7/19/00, between HTI and Wells Fargo Bank Minnesota, N.A.,
as Rights Agent (incorporated by reference to Exhibit 1 to HTIs Registration Statement on
Form 8-A, dated 7/24/00).4.3
    
    Indenture dated as of 2/24/03 between HTI and LaSalle Bank National Association, as Trustee
(incorporated by reference to Exhibit 4.5 to HTIs Registration Statement on Form S-3,
Registration No. 333-104074).31.1
    
    Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer.31.2
    
    Rule 13a-14(a)/15d-14(a) Certifications of Chief Financial Officer.32
    
    Section 1350 Certifications.
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SIGNATURES
  HUTCHINSON TECHNOLOGY INCORPORATEDDate: August 4, 2005
    
    By
    
    /s/ Wayne M. FortunWayne M. FortunPresident and Chief Executive OfficerDate: August 4, 2005
    
    By
    
    /s/ John A. InglemanJohn A. InglemanVice President and Chief Financial Officer
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INDEX TO EXHIBITS
 ExhibitNo.
    
    
    
    Page3.1
    
    Amended and Restated Articles of Incorporation of HTI
(incorporated by reference to Exhibit 3.1 to HTIs Quarterly
Report on Form 10-Q for the quarter ended 12/29/02).
    
    Incorporated by
Reference3.2
    
    Restated By-Laws of HTI (incorporated by reference to Exhibit 3.2
to HTIs Quarterly Report on Form 10-Q for the quarter ended
6/27/04).
    
    Incorporated by
Reference4.1
    
    Instruments defining the rights of security holders, including an
indenture. The Registrant agrees to furnish the Securities and
Exchange Commission upon request copies of instruments with
respect to long-term debt.4.2
    
    Share Rights Agreement dated as of 7/19/00, between HTI and Wells
Fargo Bank Minnesota, N.A., as Rights Agent (incorporated by
reference to Exhibit 1 to HTIs Registration Statement on Form
8-A, dated 7/24/00).
    
    Incorporated by
Reference4.3
    
    Indenture dated as of 2/24/03 between HTI and LaSalle Bank
National Association, as Trustee (incorporated by reference to
Exhibit 4.5 to HTIs Registration Statement on Form S-3,
Registration No. 333-104074).
    
    Incorporated by
Reference31.1
    
    Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer.
    
    Filed Electronically31.2
    
    Rule 13a-14(a)/15d-14(a) Certifications of Chief Financial Officer.
    
    Filed Electronically32
    
    Section 1350 Certifications.
    
    Filed Electronically
 27