##### Table of Contents



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 December 26, 2010
 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 001-34838
 Hutchinson Technology Incorporated
  Minnesota
    
    41-0901840(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 40 West Highland Park Drive N.E.Hutchinson, Minnesota
    
    55350(Address of principal executive offices)
    
    (Zip Code)
 (320) 587-3797
 
 
  þ o
  o o
  Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o  o þ




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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 PROCEDURESPART II. OTHER INFORMATIONITEM 1A. RISK FACTORSITEM 6. EXHIBITSSIGNATURESINDEX TO EXHIBITSEX-10.3EX-10.4EX-12.1EX-31.1EX-31.2EX-32    Table of Contents  
 PART I. FINANCIAL INFORMATION
 
  HUTCHINSON TECHNOLOGY INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS  UNAUDITED
 December 26,
    
    
    September 26,2010
    
    
    2010ASSETSCurrent assets:Cash and cash equivalents
    
    $
    64,904
    
    
    $
    55,639Short-term investments including
$4,976 and $4,174 restricted (Note 3)
    
    
    36,278
    
    
    
    48,899Trade receivables, net
    
    
    40,301
    
    
    
    47,629Other receivables
    
    
    6,558
    
    
    
    7,849Inventories
    
    
    60,841
    
    
    
    53,568Other current assets
    
    
    1,815
    
    
    
    2,353Total current assets
    
    
    210,697
    
    
    
    215,937Property, plant and equipment, net
    
    
    250,032
    
    
    
    258,233Other assets
    
    
    5,351
    
    
    
    5,542$
    466,080
    
    
    $
    479,712LIABILITIES AND SHAREHOLDERS INVESTMENTCurrent liabilities:Current maturities of long-term debt
    
    $
    876
    
    
    $
    1,280Accounts payable
    
    
    17,407
    
    
    
    15,788Accrued expenses
    
    
    8,239
    
    
    
    8,593Accrued compensation
    
    
    11,810
    
    
    
    12,911Total current liabilities
    
    
    38,332
    
    
    
    38,572Convertible subordinated notes
    
    
    177,158
    
    
    
    174,920Long-term debt, less current maturities
    
    
    190
    
    
    
    271Other long-term liabilities
    
    
    1,721
    
    
    
    1,271Shareholders equity:Common stock, $.01 par value,
100,000,000 shares authorized,
23,371,000 and 23,371,000 issued and
outstanding
    
    
    234
    
    
    
    234Additional paid-in capital
    
    
    422,839
    
    
    
    422,089Accumulated other comprehensive income
    
    
    1,077
    
    
    
    876Accumulated loss
    
    
    (175,471
    )
    
    
    (158,521
    )Total shareholders equity
    
    
    248,679
    
    
    
    264,678$
    466,080
    
    
    $
    479,712
  2




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##### Table of Contents



HUTCHINSON TECHNOLOGY INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  UNAUDITED
 Thirteen Weeks EndedDecember 26,
    
    
    December 27,2010
    
    
    2009Net sales
    
    $
    68,244
    
    
    $
    108,256Cost of sales
    
    
    64,920
    
    
    
    87,479Gross profit
    
    
    3,324
    
    
    
    20,777Research and development expenses
    
    
    4,049
    
    
    
    5,147Selling, general and administrative expenses
    
    
    13,634
    
    
    
    12,501(Loss) income from operations
    
    
    (14,359
    )
    
    
    3,129Other income, net
    
    
    831
    
    
    
    558Interest income
    
    
    55
    
    
    
    409Gain on extinguishment of debt
    
    
    
    
    
    
    5Interest expense
    
    
    (3,844
    )
    
    
    (4,197
    )Gain on short- and long-term investments
    
    
    364
    
    
    
    64Loss before income taxes
    
    
    (16,953
    )
    
    
    (32
    )Benefit for income taxes
    
    
    (3
    )
    
    
    (2,252
    )Net (loss) income
    
    $
    (16,950
    )
    
    $
    2,220Basic (loss) earnings per share
    
    $
    (0.73
    )
    
    $
    0.10Diluted (loss) earnings per share
    
    $
    (0.73
    )
    
    $
    0.09Weighted-average common shares outstanding
    
    
    23,371
    
    
    
    23,359Weighted-average common and diluted shares outstanding
    
    
    23,371
    
    
    
    23,609
  3




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##### Table of Contents



HUTCHINSON TECHNOLOGY INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  UNAUDITED
 Thirteen Weeks EndedDecember 26,
    
    
    December 27,2010
    
    
    2009OPERATING ACTIVITIES:Net (loss) income
    
    $
    (16,950
    )
    
    $
    2,220Adjustments to reconcile net (loss) income to cash provided by
operating activities:Depreciation and amortization
    
    
    11,797
    
    
    
    14,836Stock-based compensation
    
    
    750
    
    
    
    997Gain on short- and long-term investments
    
    
    (364
    )
    
    
    (64
    )Loss on disposal of assets
    
    
    227
    
    
    
    147Severance and other expenses (Note 8)
    
    
    290
    
    
    
    Non-cash interest expense
    
    
    2,238
    
    
    
    2,051Gain on extinguishment of debt
    
    
    
    
    
    
    (5
    )Changes in operating assets and liabilities
    
    
    3,416
    
    
    
    3,798Cash provided by operating activities
    
    
    1,404
    
    
    
    23,980INVESTING ACTIVITIES:Capital expenditures
    
    
    (4,686
    )
    
    
    (4,098
    )Purchases of marketable securities
    
    
    (5,700
    )
    
    
    (11,629
    )Sales/maturities of marketable securities
    
    
    18,732
    
    
    
    9,077Cash provided by (used for) investing activities
    
    
    8,346
    
    
    
    (6,650
    )FINANCING ACTIVITIES:Repayment of short- and long-term debt
    
    
    (485
    )
    
    
    (5,260
    )Cash used for financing activities
    
    
    (485
    )
    
    
    (5,260
    )Net increase in cash and cash equivalents
    
    
    9,265
    
    
    
    12,070Cash and cash equivalents at beginning of period
    
    
    55,639
    
    
    
    106,391Cash and cash equivalents at end of period
    
    $
    64,904
    
    
    $
    118,461Supplemental cash flow disclosure:Cash interest paid (net of amount capitalized)
    
    $
    
    
    
    $
    48Income taxes paid
    
    $
    261
    
    
    $
    123
  4




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HUTCHINSON TECHNOLOGY INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  UNAUDITED
 When we refer to we, our, us, the company or HTI, we mean Hutchinson Technology
Incorporated and its subsidiaries. Unless otherwise indicated, references to 2011 mean our fiscal
year ending September 25, 2011, references to 2010 mean our fiscal year ended September 26, 2010,
and references to 2009 mean our fiscal year ended September 27, 2009.
 (1) BASIS OF PRESENTATION
  (2) FAIR VALUE MEASUREMENTS
   Level 1 
    
    Unadjusted quoted prices in an active market for the identical assets or liabilities at the measurement date.Level 2 
    
    Other observable inputs available at the measurement date, other than quoted prices included in Level 1,
either directly or indirectly, including:
 
    
    Quoted prices for similar assets or liabilities in active markets;
    
    Quoted prices for identical or similar assets in nonactive markets;
    
    Inputs other than quoted prices that are observable for the asset or liability; and
    
    Inputs that are derived principally from or corroborated by other observable market data.
 Level 3 
    
    Unobservable inputs that reflect the use of significant management judgment. These values are generally
determined using pricing models for which assumptions utilize managements estimates of market participant
assumptions.
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Fair Value Measurements atDecember 26, 2010Level 1
    
    
    Level 2
    
    
    Level 3AssetsAvailable-for-sale securitiesU.S. government debt securities
    
    $
    15,439
    
    
    $
    
    
    
    $
    Corporate notes
    
    
    14,367
    
    
    
    
    
    
    
    Certificates of deposit
    
    
    5,473
    
    
    
    
    
    
    
    Commercial paper
    
    
    999
    
    
    
    
    
    
    
    Total assets
    
    $
    36,278
    
    
    $
    
    
    
    $
    
 Fair Value Measurements atSeptember 26, 2010Level 1
    
    
    Level 2
    
    
    Level 3AssetsAvailable-for-sale securitiesCorporate notes
    
    $
    17,869
    
    
    $
    
    
    
    $
    U.S. government debt securities
    
    
    15,894
    
    
    
    
    
    
    
    Certificates of deposit
    
    
    11,539
    
    
    
    
    
    
    
    Commercial paper
    
    
    3,597
    
    
    
    
    
    
    
    Total assets
    
    $
    48,899
    
    
    $
    
    
    
    $
    
 (3) INVESTMENTS
  6




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Gross Realized
    
    Gross UnrealizedCost Basis
    
    Gains
    
    Losses
    
    Gains
    
    Losses
    
    Recorded BasisAvailable-for-sale securitiesShort-term investmentsMarketable securities
    
    $
    36,032
    
    
    $
    
    
    
    $
    
    
    
    $
    246
    
    
    $
    
    
    
    $
    36,278
  Gross Realized
    
    Gross UnrealizedCost Basis
    
    Gains
    
    Losses
    
    Gains
    
    Losses
    
    Recorded BasisAvailable-for-sale securitiesShort-term investmentsMarketable securities
    
    $
    48,690
    
    
    $
    
    
    
    $
    
    
    
    $
    209
    
    
    $
    
    
    
    $
    48,899
   (4) TRADE RECEIVABLES
   Increases in the
    
    Reductions in theAllowance
    
    Allowance forRelated to
    
    Returns UnderSeptember 26, 2010
    
    Warranties Issued
    
    Warranties
    
    December 26, 2010$253
    
    $2
    
    $(81)
    
    $174
 7




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(5) INVENTORIES
  December 26,
    
    
    September 26,2010
    
    
    2010Raw materials
    
    $
    29,520
    
    
    $
    24,559Work in process
    
    
    13,552
    
    
    
    10,601Finished goods
    
    
    17,769
    
    
    
    18,408$
    60,841
    
    
    $
    53,568
 (6) SHORT- AND LONG-TERM DEBT
  December 26,
    
    
    September 26,2010
    
    
    20103.25% Notes
    
    $
    197,500
    
    
    $
    197,500Debt discount
    
    
    (20,342
    )
    
    
    (22,580
    )Eau Claire building mortgage
    
    
    541
    
    
    
    945Capital lease obligations
    
    
    525
    
    
    
    606Total debt
    
    
    178,224
    
    
    
    176,471Less: Current maturities
    
    
    (876
    )
    
    
    (1,280
    )$
    177,348
    
    
    $
    175,191
     8




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December 26,
    
    
    September 26,2010
    
    
    2010Principal balance
    
    $
    197,500
    
    
    $
    197,500Debt discount
    
    
    (20,342
    )
    
    
    (22,580
    )Convertible subordinated notes, net
    
    $
    177,158
    
    
    $
    174,920
  Thirteen Weeks EndedDecember 26,
    
    
    December 27,2010
    
    
    2009Coupon rate of interest (cash interest)
    
    $
    1,605
    
    
    $
    1,605Debt discount amortization (non-cash
interest)
    
    
    2,238
    
    
    
    2,051Net interest expense for the 3.25% Notes
    
    $
    3,843
    
    
    $
    3,656
   9




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(7) OTHER COMPREHENSIVE INCOME
  December 26,
    
    
    September 26,2010
    
    
    2010Available-for-sale securities
    
    $
    246
    
    
    $
    209Foreign currency translation
    
    
    831
    
    
    
    667Total accumulated OCI
    
    $
    1,077
    
    
    $
    876
 Foreign Currency Translation
   (8) SEVERANCE AND OTHER EXPENSES
  (9) INCOME TAXES
   10




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(10) STOCK-BASED COMPENSATION
    Thirteen Weeks EndedDecember 26,
    
    December 27,2010
    
    2009Risk-free interest rate
    
    
    2.2
    %
    
    
    2.6
    %Expected volatility
    
    
    80.0
    %
    
    
    80.0
    %Expected life (in years)
    
    
    7.3
    
    
    
    7.3Dividend yield
    
    
    
    
    
    
    
   Weighted-AverageWeighted-Average
    
    Remaining
    
    AggregateNumber of Shares
    
    Exercise Price ($)
    
    Contractual Life (yrs.)
    
    Intrinsic Value ($)Outstanding at September 26, 2010
    
    
    3,910,909
    
    
    
    18.39
    
    
    
    5.8
    
    
    
    197,000Granted
    
    
    803,831
    
    
    
    3.03Exercised
    
    
    
    
    
    
    Expired/Canceled
    
    
    (485,924
    )
    
    
    20.68Outstanding at December 26, 2010
    
    
    4,228,816
    
    
    
    15.20
    
    
    
    6.7
    
    
    
    820,000Options exercisable at December 26, 2010
    
    
    2,296,438
    
    
    
    23.81
    
    
    
    4.7
    
    
    
    156,000
 11




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##### Table of Contents



Weighted-AverageGrant Date FairNumber of Shares
    
    Value ($)Non-vested at September 26, 2010
    
    
    1,638,907
    
    
    
    5.13Granted
    
    
    803,831
    
    
    
    2.22Vested
    
    
    (422,091
    )
    
    
    6.24Canceled
    
    
    (88,269
    )
    
    
    6.85Non-vested at December 26, 2010
    
    
    1,932,378
    
    
    
    3.60
  Options Outstanding
    
    Options ExercisableWeighted-AverageRemainingRange of
    
    Number
    
    Contractual
    
    Weighted-Average
    
    Number
    
    Weighted-AverageExercise Prices ($)
    
    Outstanding
    
    Life (yrs.)
    
    Exercise Price ($)
    
    Exercisable
    
    Exercise Price ($)3.03-5.00
    
    
    1,344,131
    
    
    
    9.1
    
    
    
    3.03
    
    
    
    255,900
    
    
    
    3.035.01-10.00
    
    
    829,147
    
    
    
    9.0
    
    
    
    7.34
    
    
    
    
    
    
    
    10.01-20.00
    
    
    39,000
    
    
    
    5.5
    
    
    
    15.78
    
    
    
    24,000
    
    
    
    15.7220.01-25.00
    
    
    886,112
    
    
    
    3.4
    
    
    
    23.19
    
    
    
    886,112
    
    
    
    23.1925.01-30.00
    
    
    661,816
    
    
    
    6.0
    
    
    
    26.79
    
    
    
    661,816
    
    
    
    26.7930.01-45.06
    
    
    468,610
    
    
    
    3.4
    
    
    
    32.52
    
    
    
    468,610
    
    
    
    32.52Total
    
    
    4,228,816
    
    
    
    6.7
    
    
    
    15.20
    
    
    
    2,296,438
    
    
    
    23.81
 (11) EARNINGS (LOSS) PER SHARE
  Thirteen Weeks EndedDecember 26,
    
    
    December 27,2010
    
    
    2009Net (loss) income
    
    $
    (16,950
    )
    
    $
    2,220Weighted-average common shares outstanding
    
    
    23,371
    
    
    
    23,359Dilutive potential common shares
    
    
    
    
    
    
    250Weighted-average common and diluted shares outstanding
    
    
    23,371
    
    
    
    23,609Basic (loss) earnings per share
    
    $
    (0.73
    )
    
    $
    0.10Diluted (loss) earnings per share
    
    $
    (0.73
    )
    
    $
    0.09
   12




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##### Table of Contents



(12) SEGMENT REPORTING
    Thirteen Weeks EndedDecember 26, 2010
    
    
    December 27, 2009Net sales:Disk Drive Components Division:Suspension assemblies
    
    $
    66,240
    
    
    $
    105,600Other products
    
    
    1,462
    
    
    
    2,147Total Disk Drive Components Division
    
    
    67,702
    
    
    
    107,747BioMeasurement Division
    
    
    542
    
    
    
    509$
    68,244
    
    
    $
    108,256(Loss) income from operations:Disk Drive Components Division
    
    $
    (11,448
    )
    
    $
    8,020BioMeasurement Division
    
    
    (2,911
    )
    
    
    (4,891
    )$
    (14,359
    )
    
    $
    3,129
 (13) SUBSEQUENT EVENTS
  (1)
    
    $1,000 principal amount of a new series of 8.50% Convertible Senior Notes due
2026 (the New Notes), provided that if the amount of the 3.25% Notes tendered exceeds
$40,000,000 in aggregate principal amount, we will accept the 3.25% Notes tendered for
exchange on a pro rata basis;(2)
    
    a cash payment of $850, provided that if the cash required to purchase all of
the 3.25% Notes tendered exceeds $30,000,000, we will accept the 3.25% Notes tendered
for purchase on a pro rata basis, and any 3.25% Notes not accepted for purchase will be
exchanged for New Notes, subject to the $40,000,000 limit described above, as if such
holders had elected to exchange their 3.25% Notes for New Notes; or(3)
    
    a combination of the first two options, subject to the $40,000,000 aggregate principal amount
limit and the $30,000,000 cash payment limit.
 13




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##### Table of Contents



When we refer to we, our, us, the company or HTI, we mean Hutchinson Technology
Incorporated and its subsidiaries. Unless otherwise indicated, references to 2011 mean our fiscal
year ending September 25, 2011, references to 2010 mean our fiscal year ended September 26, 2010,
references to 2009 mean our fiscal year ended September 27, 2009, and references to 2008 mean
our fiscal year ended September 28, 2008.
  GENERAL
   InSpectra
StO 2
  Western Digital Corporation
    
    
    57
    %SAE Magnetics, Ltd/TDK Corporation
    
    
    16
    %Hitachi and affiliates
    
    
    13
    %Seagate Technology, LLC
    
    
    12
    %
  14




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##### Table of Contents



Suspension Assembly Shipments by Quarter2010
    
    2011First
    
    Second
    
    Third
    
    Fourth
    
    FirstSuspension
assembly shipment
quantities
    
    
    155
    
    
    
    130
    
    
    
    117
    
    
    
    110
    
    
    
    107
      InSpectra StO 2 InSpectra StO 2
 15




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RESULTS OF OPERATIONS
 Thirteen Weeks Ended December 26, 2010 vs. Thirteen Weeks Ended December 27, 2009
      16




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LIQUIDITY AND CAPITAL RESOURCES
       17




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(1)
    
    $1,000 principal amount of a new series of 8.50% Convertible Senior Notes due
2026 (the New Notes), provided that if the amount of the 3.25% Notes tendered exceeds
$40,000,000 in aggregate principal amount, we will accept the 3.25% Notes tendered for
exchange on a pro rata basis;(2)
    
    a cash payment of $850, provided that if the cash required to purchase all of
the 3.25% Notes tendered exceeds $30,000,000, we will accept the 3.25% Notes tendered
for purchase on a pro rata basis, and any 3.25% Notes not accepted for purchase will be
exchanged for New Notes, subject to the $40,000,000 limit described above, as if such
holders had elected to exchange their 3.25% Notes for New Notes; or(3)
    
    a combination of the first two options, subject to the $40,000,000 aggregate
principal amount limit and the $30,000,000 cash payment limit.
     InSpectra ® StO 2
 18




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CRITICAL ACCOUNTING POLICIES
  RECENT ACCOUNTING PRONOUNCEMENTS
  FORWARD-LOOKING STATEMENTS
  19




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EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
  CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
  20




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PART II. OTHER INFORMATION
 
   
  (a) Exhibits :
 Unless otherwise indicated, all documents incorporated herein by reference to a document filed with
the SEC pursuant to the Exchange Act, are located under SEC file number 001-34838.
 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 12/29/2002; File No. 0-14709).3.2
    
    Restated By-Laws of HTI, as amended December 3, 2008 (incorporated by
reference to Exhibit 3.1 to HTIs Current Report on Form 8-K filed
12/9/2008; File No. 0-14709).10.1
    
    Form of Severance and Change in Control Agreement for Senior Executives
(incorporated by reference to Exhibit 10.1 to HTIs Current Report on
Form 8-K/A filed 10/14/2010).10.2
    
    Description of Fiscal Year 2011 Annual Cash Incentive Plan of Hutchinson
Technology Incorporated (incorporated by reference to Exhibit 10.1 to
HTIs Current Report on Form 8-K filed on 10/14/2010).10.3
    
    Hutchinson Technology Incorporated 2011 Equity Incentive Plan.10.4
    
    Form of Director Stock Option Agreement under 2011 Equity Incentive Plan.12.1
    
    Computation of Ratio of Earnings to Fixed Charges.31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.32
    
    Section 1350 Certifications.
 21




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SIGNATURES
  HUTCHINSON TECHNOLOGY INCORPORATEDDate:      February 2, 2011
    By
    /s/ Wayne M. FortunWayne M. FortunPresident and Chief Executive OfficerDate:      February 2, 2011
    By
    /s/ David P. RadloffDavid P. RadloffVice President and Chief Financial Officer




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INDEX TO EXHIBITS
 Exhibit No.
    
    
    
    Page3.1
    
    
    Amended and Restated Articles of Incorporation of HTI.
    
    Incorporated by Reference3.2
    
    
    Restated By-Laws of HTI, as amended December 3, 2008.
    
    Incorporated by Reference10.1
    
    
    Form of Severance and Change in Control Agreement for Senior
    
    Incorporated by ReferenceExecutives.10.2
    
    
    Description of Fiscal Year 2011 Annual Cash Incentive Plan of
    
    Incorporated by ReferenceHutchinson Technology Incorporated.10.3
    
    
    Hutchinson Technology Incorporated 2011 Equity Incentive Plan.
    
    Filed Electronically10.4
    
    
    Form of Director Stock Option Agreement under 2011 Equity
    
    Filed ElectronicallyIncentive Plan.12.1
    
    
    Computation of Ratio of Earnings to Fixed Charges.
    
    Filed Electronically31.1
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
    
    Filed Electronically31.2
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
    
    Filed Electronically32
    
    
    Section 1350 Certifications.
    
    Filed Electronically