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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 December 28, 2008
 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
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year,
   þ 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 1. LEGAL PROCEEDINGSITEM 1A. RISK FACTORSITEM 6. EXHIBITSSIGNATURESINDEX TO EXHIBITSEX-10.1EX-10.2EX-10.3EX-31.1EX-31.2EX-32    Table of Contents  
 PART I. FINANCIAL INFORMATION
 
  HUTCHINSON TECHNOLOGY INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS  UNAUDITED
 December 28,
    
    
    September 28,2008
    
    
    2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    176,216
    
    
    $
    62,309Short-term investments (Note 4)
    
    
    28,651
    
    
    
    108,944Trade receivables, net
    
    
    58,565
    
    
    
    100,928Other receivables
    
    
    7,231
    
    
    
    8,847Inventories
    
    
    77,025
    
    
    
    76,459Other current assets
    
    
    5,988
    
    
    
    7,326Total current assets
    
    
    353,676
    
    
    
    364,813Long-term investments (Note 4)
    
    
    94,570
    
    
    
    92,166Property, plant and equipment, net
    
    
    371,573
    
    
    
    415,088Other assets
    
    
    8,171
    
    
    
    9,220$
    827,990
    
    
    $
    881,287LIABILITIES AND SHAREHOLDERS INVESTMENTCurrent liabilities:Current maturities of long-term debt
    
    $
    1,470
    
    
    $
    1,444Accounts payable
    
    
    17,896
    
    
    
    26,519Accrued expenses
    
    
    17,311
    
    
    
    14,537Accrued compensation
    
    
    38,747
    
    
    
    21,178Total current liabilities
    
    
    75,424
    
    
    
    63,678Convertible subordinated notes
    
    
    315,066
    
    
    
    375,000Long-term debt, less current maturities
    
    
    61,653
    
    
    
    2,498Other long-term liabilities
    
    
    1,301
    
    
    
    3,009Shareholders investment:Common stock, $.01 par value, 100,000,000
shares authorized, 22,996,000 and
22,941,000 issued and outstanding
    
    
    230
    
    
    
    229Additional paid-in capital
    
    
    374,062
    
    
    
    371,965Accumulated other comprehensive loss
    
    
    (1,446
    )
    
    
    (869
    )Accumulated earnings
    
    
    1,700
    
    
    
    65,777Total shareholders investment
    
    
    374,546
    
    
    
    437,102$
    827,990
    
    
    $
    881,287
  2




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HUTCHINSON TECHNOLOGY INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  UNAUDITED
 Thirteen Weeks EndedDecember 28,
    
    
    December 30,2008
    
    
    2007Net sales
    
    $
    119,671
    
    
    $
    173,077Cost of sales
    
    
    119,804
    
    
    
    140,160Gross (loss) profit
    
    
    (133
    )
    
    
    32,917Research and development expenses
    
    
    8,883
    
    
    
    10,410Selling, general and administrative expenses
    
    
    16,416
    
    
    
    18,363Severance and other expenses (Note 8)
    
    
    19,527
    
    
    
    Asset impairment charge (Note 9)
    
    
    32,280
    
    
    
    Litigation charge (Note 14)
    
    
    
    
    
    
    2,494(Loss) income from operations
    
    
    (77,239
    )
    
    
    1,650Other income, net
    
    
    2,727
    
    
    
    641Interest income
    
    
    1,259
    
    
    
    4,273Interest expense
    
    
    (2,734
    )
    
    
    (2,960
    )Gain on extinguishment of debt
    
    
    12,175
    
    
    
    (Loss) income before income taxes
    
    
    (63,812
    )
    
    
    3,604Provision for income taxes
    
    
    265
    
    
    
    1,314Net (loss) income
    
    $
    (64,077
    )
    
    $
    2,290Basic (loss) earnings per share
    
    $
    (2.79
    )
    
    $
    0.09Diluted (loss) earnings per share
    
    $
    (2.79
    )
    
    $
    0.09Weighted-average common shares outstanding
    
    
    22,996
    
    
    
    26,240Weighted-average common and diluted shares outstanding
    
    
    22,996
    
    
    
    26,404
  3




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HUTCHINSON TECHNOLOGY INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  UNAUDITED
 Thirteen Weeks EndedDecember 28,
    
    
    December 30,2008
    
    
    2007OPERATING ACTIVITIES:Net (loss) income
    
    $
    (64,077
    )
    
    $
    2,290Adjustments to reconcile net (loss) income to cash
provided by operating activities:Depreciation and amortization
    
    
    23,698
    
    
    
    27,811Stock-based compensation
    
    
    1,557
    
    
    
    1,224Provision for deferred taxes (Note 10)
    
    
    
    
    
    
    1,198Severance and other expenses (Note 8)
    
    
    19,527
    
    
    
    Asset impairment charge (Note 9)
    
    
    32,280
    
    
    
    Gain on long-term investments
    
    
    (2,404
    )
    
    
    Gain on extinguishment of debt, net
    
    
    (12,175
    )
    
    
    Loss (gain) on disposal of assets
    
    
    47
    
    
    
    (14
    )Litigation charge (Note 14)
    
    
    
    
    
    
    2,494Changes in operating assets and liabilities
    
    
    35,178
    
    
    
    181Cash provided by operating activities
    
    
    33,631
    
    
    
    35,184INVESTING ACTIVITIES:Capital expenditures
    
    
    (11,846
    )
    
    
    (18,417
    )Purchases of marketable securities
    
    
    (1,652
    )
    
    
    (492,276
    )Sales/maturities of marketable securities
    
    
    81,811
    
    
    
    487,777Cash provided by (used for) investing activities
    
    
    68,313
    
    
    
    (22,916
    )FINANCING ACTIVITIES:Net proceeds from issuance of common stock
    
    
    541
    
    
    
    6,512Borrowings on credit line
    
    
    59,532
    
    
    
    Repayment of long-term debt
    
    
    (48,110
    )
    
    
    (438
    )Cash provided by financing activities
    
    
    11,963
    
    
    
    6,074Net increase in cash and cash equivalents
    
    
    113,907
    
    
    
    18,342Cash and cash equivalents at beginning of period
    
    
    62,309
    
    
    
    64,509Cash and cash equivalents at end of period
    
    $
    176,216
    
    
    $
    82,851Supplemental cash flow disclosure:Interest (net of amount capitalized)
    
    $
    127
    
    
    $
    
  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 2010 mean our fiscal
year ending September 26, 2010, references to 2009 mean our fiscal year ending September 27,
2009, references to 2008 mean our fiscal year ended September 28, 2008, references to 2007 mean
our fiscal year ended September 30, 2007, and references to 2006 mean our fiscal year ended
September 24, 2006.
 (1) BASIS OF PRESENTATION
 Form 10-K
 (2) ACCOUNTING PRONOUNCEMENTS
    5




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(3) 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 at
    
    Fair Value Measurements atDecember 28,
    
    December 28, 20082008
    
    Level 1
    
    Level 2
    
    Level 3AssetsTrading securitiesMarketable securities  ARS
    
    $
    58,864
    
    
    
    
    
    
    
    
    
    
    
    XAvailable-for-saleMarketable securities
    
    
    28,651
    
    
    
    XMarketable securities  ARS
    
    
    27,129
    
    
    
    
    
    
    
    
    
    
    
    XRights Offering (described in Note 4 below)
    
    
    8,577
    
    
    
    
    
    
    
    
    
    
    
    XDerivatives
    
    
    231
    
    
    
    
    
    
    
    XLiabilitiesDerivatives
    
    
    (1,639
    )
    
    
    
    
    
    
    X
  RightsARS
    
    
    Offering
    
    
    TotalBalances at September 28, 2008
    
    $
    92,166
    
    
    $
    
    
    
    $
    92,166Net realized (loss) gain
included in Other income
    
    
    (6,173
    )
    
    
    8,577
    
    
    
    2,404Balances at December 28, 2008
    
    $
    85,993
    
    
    $
    8,577
    
    
    $
    94,570
 (4) INVESTMENTS
  7




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Cost
    
    
    Realized
    
    
    Gross Unrealized
    
    
    RecordedBasis
    
    
    Gains
    
    
    Losses
    
    
    Gains
    
    
    Losses
    
    
    BasisAvailable-for-sale securitiesShort-term investmentsGovernment securities
    
    $
    28,616
    
    
    $
    
    
    
    $
    
    
    
    $
    35
    
    
    $
    
    
    
    $
    28,651Long-term investmentsARS
    
    
    30,950
    
    
    
    
    
    
    
    3,821
    
    
    
    
    
    
    
    
    
    
    
    27,129Total available-for-sale
securities
    
    
    59,566
    
    
    
    
    
    
    
    3,821
    
    
    
    35
    
    
    
    
    
    
    
    55,780Trading securitiesLong-term investmentsARS  secured
    
    
    69,700
    
    
    
    
    
    
    
    10,836
    
    
    
    
    
    
    
    
    
    
    
    58,864OtherRights offering
    
    
    
    
    
    
    8,577
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,577$
    129,266
    
    
    $
    8,577
    
    
    $
    14,657
    
    
    $
    35
    
    
    $
    
    
    
    $
    123,221
     8




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(5) TRADE RECEIVABLES
   Increases in the
    
    Reductions in theAllowance Related
    
    Allowance forSeptember 28,
    
    to Warranties
    
    Returns Under
    
    December 28,2008
    
    Issued
    
    Warranties
    
    2008$699
    
    $1,301
    
    $(1,424)
    
    $576
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(6) INVENTORIES
  December 28,
    
    
    September 28,2008
    
    
    2008Raw materials
    
    $
    25,646
    
    
    $
    26,290Work in process
    
    
    16,238
    
    
    
    15,847Finished goods
    
    
    35,141
    
    
    
    34,322$
    77,025
    
    
    $
    76,459
 (7) EARNINGS (LOSS) PER SHARE
   Thirteen Weeks EndedDecember 28,
    
    
    December 30,2008
    
    
    2007Net (loss) income
    
    $
    (64,077
    )
    
    $
    2,290Plus: interest expense on convertible subordinated notes
    
    
    
    
    
    
    Less: additional profit-sharing expense and income tax provision
    
    
    
    
    
    
    Net (loss) income available to common shareholders
    
    $
    (64,077
    )
    
    $
    2,290Weighted-average common shares outstanding
    
    
    22,996
    
    
    
    26,240Dilutive potential common shares
    
    
    
    
    
    
    164Weighted-average common and diluted shares outstanding
    
    
    22,996
    
    
    
    26,404Basic (loss) earnings per share
    
    $
    (2.79
    )
    
    $
    0.09Diluted (loss) earnings per share
    
    $
    (2.79
    )
    
    $
    0.09
  10




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(8) SEVERANCE AND OTHER EXPENSES
  (9) ASSET IMPAIRMENT
  (10) INCOME TAXES
   (11) LONG-TERM DEBT
  11




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(12) DERIVATIVES
   12




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Thirteen Weeks EndedDecember 28,
    
    
    December 30,2008
    
    
    2007Beginning of period unrealized loss in
accumulated OCI
    
    $
    1,037
    
    
    $
    Decrease in fair value of derivative instruments
    
    
    853
    
    
    
    Gains reclassified from OCI, offsetting the
cost of sales
    
    
    (831
    )
    
    
    Decrease in fair value of derivatives
dedesignated from hedges
    
    
    422
    
    
    
    End of period unrealized loss in accumulated OCI
    
    $
    1,481
    
    
    $
    
  (13) STOCK-BASED COMPENSATION
     Thirteen Weeks EndedDecember 28,
    
    December 30,2008
    
    2007Risk-free interest rate
    
    
    1.8
    %
    
    
    3.7
    %Expected volatility
    
    
    60.0
    %
    
    
    40.0
    %Expected life (in years)
    
    
    7.6
    
    
    
    7.6Dividend yield
    
    
    
    
    
    
    
  13




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Weighted-AverageRemainingWeighted-Average
    
    Contractual
    
    AggregateNumber of Shares
    
    Exercise Price ($)
    
    Life (yrs.)
    
    Intrinsic Value ($)Outstanding at September 28, 2008
    
    
    3,394,388
    
    
    
    25.37
    
    
    
    5.4
    
    
    
    Granted
    
    
    690,650
    
    
    
    3.03Exercised
    
    
    
    
    
    
    Expired
    
    
    (224,110
    )
    
    
    28.62Outstanding at December 28, 2008
    
    
    3,860,928
    
    
    
    21.18
    
    
    
    6.3
    
    
    
    Options vested or expected to vest
at December 28, 2008
    
    
    3,800,717
    
    
    
    21.51
    
    
    
    6.2
    
    
    
    Options exercisable at December 28, 2008
    
    
    2,381,753
    
    
    
    25.27
    
    
    
    4.4
    
    
    
    
  Options Outstanding
    
    Options ExercisableWeighted-AverageRemainingRange of
    
    Number
    
    Contractual
    
    Weighted-Average
    
    Number
    
    Weighted-AverageExercise Prices ($)
    
    Outstanding
    
    Life (yrs.)
    
    Exercise Price ($)
    
    Exercisable
    
    Exercise Price ($)3.0320.00
    
    
    1,263,380
    
    
    
    6.3
    
    
    
    10.12
    
    
    
    537,730
    
    
    
    18.8420.0125.00
    
    
    1,124,972
    
    
    
    5.4
    
    
    
    23.19
    
    
    
    870,197
    
    
    
    23.2625.0130.00
    
    
    877,641
    
    
    
    8.0
    
    
    
    26.77
    
    
    
    380,391
    
    
    
    27.4730.0145.06
    
    
    594,935
    
    
    
    5.3
    
    
    
    32.63
    
    
    
    593,435
    
    
    
    32.64Total
    
    
    3,860,928
    
    
    
    6.3
    
    
    
    21.18
    
    
    
    2,381,753
    
    
    
    25.27
 (14) LEGAL CONTINGENCIES
 Other Litigation and Proceedings
    14




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know-how
  (15) SEGMENT REPORTING
   15




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Thirteen Weeks EndedDecember 28,
    
    
    December 30,2008
    
    
    2007Net sales:Disk Drive Components Division:Suspension assemblies
    
    $
    117,267
    
    
    $
    171,564Other products
    
    
    2,139
    
    
    
    1,332Total Disk Drive Components Division
    
    
    119,406
    
    
    
    172,896BioMeasurement Division
    
    
    265
    
    
    
    181$
    119,671
    
    
    $
    173,077(Loss) income from operations:Disk Drive Components Division
    
    $
    (71,659
    )
    
    $
    6,821BioMeasurement Division
    
    
    (5,580
    )
    
    
    (5,171
    )$
    (77,239
    )
    
    $
    1,650
  (16) SUBSEQUENT EVENT
  16




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When we refer to we, our, us, the company or HTI, we mean Hutchinson Technology
Incorporated and its subsidiaries. Unless otherwise indicated, references to 2009 mean our fiscal
year ending September 27, 2009, references to 2008 mean our fiscal year ended September 28, 2008,
references to 2007 mean our fiscal year ended September 30, 2007, and references to 2006 mean
our fiscal year ended September 24, 2006.
  GENERAL
   InSpectra ® StO 2 2 2
    Suspension Assembly Shipments by Quarter2008
    
    2009First
    
    Second
    
    Third
    
    Fourth
    
    FirstSuspension assembly
shipment quantities
    
    
    213
    
    
    
    179
    
    
    
    189
    
    
    
    209
    
    
    
    155
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RESULTS OF OPERATIONS
 Thirteen Weeks Ended December 28, 2008, vs. Thirteen Weeks Ended December 30, 2007
     19




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LIQUIDITY AND CAPITAL RESOURCES
   20




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CRITICAL ACCOUNTING POLICIES
  RECENT ACCOUNTING PRONOUNCEMENTS
  FORWARD-LOOKING STATEMENTS
  23




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24




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EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
  CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
  25




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PART II. OTHER INFORMATION
 
       
   26




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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 Exchange Act, 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, as amended December 3, 2008 (incorporated by reference to
Exhibit 3.1 to HTIs Current Report on Form 8-K filed 12/9/08).10.1
    
    Credit Line Account Application and Agreement for Organizations and Business,
dated December 19, 2008, by and between HTI and UBS Credit Corp.10.2
    
    Addendum to Credit Line Account Application and Agreement, dated December 19, 2008.10.3
    
    Addendum to Credit Line Agreement, dated December 19, 2008.31.1
    
    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.
 27




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SIGNATURES
  HUTCHINSON TECHNOLOGY INCORPORATEDDate: February 5, 2009
    
    By
    
    /s/ Wayne M. Fortun

Wayne M. FortunPresident and Chief Executive OfficerDate: February 5, 2009
    
    By
    
    /s/ John A. InglemanJohn A. InglemanSenior Vice 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 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, as amended December 3, 2008
(incorporated by reference to Exhibit 3.1 to HTIs Current Report
on Form 8-K filed 12/9/08).
    
    Incorporated by Reference10.1
    
    Credit Line Account Application and Agreement for Organizations
and Business, dated December 19, 2008, by and between HTI and UBS
Credit Corp.
    
    Filed Electronically10.2
    
    Addendum to Credit Line Account Application and Agreement, dated
December 19, 2008.
    
    Filed Electronically10.3
    
    Addendum to Credit Line Agreement, dated December 19, 2008.
    
    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
 29