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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended DECEMBER 30, 2007
 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
  o þ o 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 5. OTHER INFORMATIONITEM 6. EXHIBITSSIGNATURESINDEX TO EXHIBITSForm of Non-Statutory Stock Option AgreementCertificationCertificationCertifications    Table of Contents  
 PART I. FINANCIAL INFORMATION
 
  HUTCHINSON TECHNOLOGY INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS  UNAUDITED
 December 30,
    
    
    September 30,2007
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    82,851
    
    
    $
    64,509Securities available for sale
    
    
    237,515
    
    
    
    233,043Trade receivables, net
    
    
    99,141
    
    
    
    101,997Other receivables
    
    
    20,451
    
    
    
    20,529Inventories
    
    
    68,749
    
    
    
    61,183Deferred tax assets (Note 7)
    
    
    7,606
    
    
    
    8,582Other current assets (Note 8)
    
    
    8,031
    
    
    
    7,444Total current assets
    
    
    524,344
    
    
    
    497,287Property, plant and equipment, net
    
    
    450,339
    
    
    
    457,883Deferred tax assets (Note 7)
    
    
    78,804
    
    
    
    79,008Other assets (Note 8)
    
    
    13,821
    
    
    
    15,811$
    1,067,308
    
    
    $
    1,049,989LIABILITIES AND SHAREHOLDERS INVESTMENTCurrent liabilities:Current maturities of long-term debt
    
    $
    1,377
    
    
    $
    1,344Accounts payable
    
    
    29,849
    
    
    
    29,528Accrued expenses
    
    
    18,527
    
    
    
    16,535Accrued compensation
    
    
    21,921
    
    
    
    21,257Total current liabilities
    
    
    71,674
    
    
    
    68,664Convertible subordinated notes
    
    
    375,000
    
    
    
    375,000Long-term debt, less current portion
    
    
    3,473
    
    
    
    3,944Uncertain tax positions (Note 7)
    
    
    6,072
    
    
    
    Other long-term liabilities
    
    
    1,416
    
    
    
    2,834Shareholders investment:Common stock, $.01 par value, 100,000,000 shares authorized,
26,363,000 and 26,074,000 issued and outstanding
    
    
    264
    
    
    
    261Additional paid-in capital
    
    
    419,228
    
    
    
    411,349Accumulated other comprehensive (loss) gain
    
    
    (17
    )
    
    
    29Accumulated earnings
    
    
    190,198
    
    
    
    187,908Total shareholders investment
    
    
    609,673
    
    
    
    599,547$
    1,067,308
    
    
    $
    1,049,989
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HUTCHINSON TECHNOLOGY INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  UNAUDITED
 Thirteen Weeks EndedDecember 30,
    
    
    December 24,2007
    
    
    2006Net sales
    
    $
    173,077
    
    
    $
    188,882Cost of sales
    
    
    140,160
    
    
    
    153,272Gross profit
    
    
    32,917
    
    
    
    35,610Research and development expenses
    
    
    10,410
    
    
    
    14,109Selling, general and administrative expenses
    
    
    18,363
    
    
    
    19,517Litigation charge (Note 12)
    
    
    2,494
    
    
    
    Income from operations
    
    
    1,650
    
    
    
    1,984Other income, net
    
    
    641
    
    
    
    1,810Interest income
    
    
    4,273
    
    
    
    3,689Interest expense
    
    
    (2,960
    )
    
    
    (2,309
    )Income before income taxes
    
    
    3,604
    
    
    
    5,174Provision (benefit) for income taxes
    
    
    1,314
    
    
    
    (639
    )Net income
    
    $
    2,290
    
    
    $
    5,813Basic earnings per share
    
    $
    0.09
    
    
    $
    0.22Diluted earnings per share
    
    $
    0.09
    
    
    $
    0.22Weighted-average common shares outstanding
    
    
    26,240
    
    
    
    25,869Weighted-average common and diluted shares outstanding
    
    
    26,404
    
    
    
    30,974
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HUTCHINSON TECHNOLOGY INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  UNAUDITED
 Thirteen Weeks EndedDecember 30,
    
    
    December 24,2007
    
    
    2006OPERATING ACTIVITIES:Net income
    
    $
    2,290
    
    
    $
    5,813Adjustments to reconcile net income to cash
provided by operating activities:Depreciation and amortization
    
    
    27,811
    
    
    
    28,158Stock-based compensation
    
    
    1,224
    
    
    
    916Provision (benefit) for deferred taxes (Note 7)
    
    
    1,198
    
    
    
    (3,875
    )Gain on disposal of assets
    
    
    (14
    )
    
    
    Litigation charge (Note 12)
    
    
    2,494
    
    
    
    Changes in operating assets and liabilities (Note 10)
    
    
    181
    
    
    
    5,224Cash provided by operating activities
    
    
    35,184
    
    
    
    36,236INVESTING ACTIVITIES:Capital expenditures
    
    
    (18,417
    )
    
    
    (36,875
    )Purchases of marketable securities
    
    
    (492,276
    )
    
    
    (437,166
    )Sales/maturities of marketable securities
    
    
    487,777
    
    
    
    413,534Cash used for investing activities
    
    
    (22,916
    )
    
    
    (60,507
    )FINANCING ACTIVITIES:Net proceeds from issuance of common stock
    
    
    6,512
    
    
    
    5,358Repayment of long-term debt
    
    
    (438
    )
    
    
    (307
    )Cash provided by financing activities
    
    
    6,074
    
    
    
    5,051Net increase (decrease) in cash and cash equivalents
    
    
    18,342
    
    
    
    (19,220
    )Cash and cash equivalents at beginning of period
    
    
    64,509
    
    
    
    40,331Cash and cash equivalents at end of period
    
    $
    82,851
    
    
    $
    21,111
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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 2008 mean our fiscal
year ending September 28, 2008, references to 2007 mean our fiscal year ended September 30, 2007,
references to 2006 mean our fiscal year ended September 24, 2006, references to 2005 mean our
fiscal year ended September 25, 2005, references to 2004 mean our fiscal year ended September 26,
2004, references to 2003 mean our fiscal year ended September 28, 2003 and references to 2002
mean our fiscal year ended September 29, 2002 .
 (1) BASIS OF PRESENTATION
 
 (2) ACCOUNTING PRONOUNCEMENTS
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(3) BUSINESS AND CUSTOMERS
   Percentage of Net SalesThirteen Weeks EndedDecember 30,
    
    December 24,2007
    
    2006Five Largest Customers
    
    
    96
    %
    
    
    87
    %Sales to Major Customers:Seagate Technology LLC
    
    
    31
    %
    
    
    23
    %SAE Magnetics, Ltd./TDK
    
    
    31
    %
    
    
    28
    %Western Digital Corporation
    
    
    25
    %
    
    
    17
    %Fujitsu Limited
    
    
    7
    %
    
    
    7
    %Innovex, Inc.
    
    
    2
    %
    
    
    6
    %Alps Electric Co., Ltd.
    
    
    2
    %
    
    
    12
    %
 (4) TRADE RECEIVABLES
   Increases in the
    
    Reductions in theAllowance Related
    
    Allowance forSeptember 30,
    
    to Warranties
    
    Returns Under
    
    December 30,2007
    
    Issued
    
    Warranties
    
    2007$397
    
    $
    857
    
    
    $
    (878
    )
    
    $
    376
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(5) INVENTORIES
  December 30,
    
    
    September 30,2007
    
    
    2007Raw materials
    
    $
    29,376
    
    
    $
    21,108Work in process
    
    
    10,901
    
    
    
    11,980Finished goods
    
    
    28,472
    
    
    
    28,095$
    68,749
    
    
    $
    61,183
 (6) EARNINGS PER SHARE
  Thirteen Weeks EndedDecember 30,
    
    
    December 24,2007
    
    
    2006Net income
    
    $
    2,290
    
    
    $
    5,813Plus: interest expense on convertible subordinated notes
    
    
    
    
    
    
    1,008Less: additional profit-sharing expense and income tax provisions
    
    
    
    
    
    
    (150
    )Net income available to common shareholders
    
    $
    2,290
    
    
    $
    6,671Weighted-average common shares outstanding
    
    
    26,240
    
    
    
    25,869Dilutive potential common shares
    
    
    164
    
    
    
    5,105Weighted-average common and diluted shares outstanding
    
    
    26,404
    
    
    
    30,974Basic earnings per share
    
    $
    0.09
    
    
    $
    0.22Diluted earnings per share
    
    $
    0.09
    
    
    $
    0.22
  7




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(7) INCOME TAXES
  December 30,
    
    
    September 30,2007
    
    
    2007Current deferred tax assets:Receivable allowance
    
    $
    140
    
    
    $
    152Inventories
    
    
    3,437
    
    
    
    4,857Accruals and other reserves
    
    
    4,029
    
    
    
    3,573Total current deferred tax assets
    
    
    7,606
    
    
    
    8,582Long-term deferred tax assets:Property, plant and equipment
    
    
    35,531
    
    
    
    36,678Deferred income
    
    
    2,357
    
    
    
    2,428Tax credits
    
    
    35,829
    
    
    
    35,485Net operating loss carryforwards
    
    
    12,010
    
    
    
    11,244Valuation allowance
    
    
    (6,923
    )
    
    
    (6,827
    )Total long-term deferred tax assets
    
    
    78,804
    
    
    
    79,008Total deferred tax assets
    
    $
    86,410
    
    
    $
    87,590
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(8) OTHER ASSETS
  (9) LONG-TERM DEBT
    9




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(10) SUPPLEMENTARY CASH FLOW INFORMATION
 Thirteen Weeks EndedDecember 30,
    
    
    December 24,2007
    
    
    2006Changes in operating assets and liabilities:Receivables, net
    
    $
    2,934
    
    
    $
    (4,410
    )Inventories
    
    
    (7,566
    )
    
    
    5,075Other assets
    
    
    (355
    )
    
    
    175Accounts payable and accrued expenses
    
    
    515
    
    
    
    4,907Other long-term liabilities
    
    
    4,653
    
    
    
    (523
    )$
    181
    
    
    $
    5,224Cash paid for:Interest (net of amount capitalized)
    
    $
    
    
    
    $
    150Income taxes
    
    
    
    
    
    
    902Non-cash investing activities:Capital expenditures in accounts payable
    
    $
    5,308
    
    
    $
    5,853
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(11) STOCK-BASED COMPENSATION
      Thirteen Weeks EndedDecember 30,
    
    December 24,2007
    
    2006Risk-free interest rate
    
    
    3.7
    %
    
    
    4.7
    %Expected volatility
    
    
    40.0
    %
    
    
    45.0
    %Expected life (in years)
    
    
    7.6
    
    
    
    7.6Dividend yield
    
    
    
    
    
    
    
  11




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Weighted-AverageRemainingNumber of
    
    Weighted-Average
    
    Contractual
    
    AggregateShares
    
    Exercise Price ($)
    
    Life (yrs.)
    
    Intrinsic Value ($)Outstanding at September 30, 2007
    
    
    3,262,467
    
    
    
    25.27
    
    
    
    5.4
    
    
    $
    5,265,000Granted
    
    
    521,400
    
    
    
    26.21
    
    
    
    
    
    
    
    Exercised
    
    
    (252,035
    )
    
    
    23.58
    
    
    
    
    
    
    
    Expired
    
    
    (52,880
    )
    
    
    28.68
    
    
    
    
    
    
    
    Outstanding at December 30, 2007
    
    
    3,478,952
    
    
    
    25.48
    
    
    
    6.2
    
    
    $
    8,954,000Options exercisable at December 30, 2007
    
    
    2,236,840
    
    
    
    25.67
    
    
    
    4.5
    
    
    $
    6,760,000
  Options Outstanding
    
    Options ExercisableWeighted-AverageRemainingRange of
    
    Number
    
    Contractual
    
    Weighted-Average
    
    Number
    
    Weighted-AverageExercise Prices ($)
    
    Outstanding
    
    Life (yrs.)
    
    Exercise Price ($)
    
    Exercisable
    
    Exercise Price ($)14.81-20.00
    
    
    561,260
    
    
    
    2.4
    
    
    
    18.85
    
    
    
    561,260
    
    
    
    18.8520.01-25.00
    
    
    1,183,804
    
    
    
    6.4
    
    
    
    23.19
    
    
    
    675,292
    
    
    
    23.3325.01-30.00
    
    
    1,098,743
    
    
    
    7.8
    
    
    
    27.19
    
    
    
    368,143
    
    
    
    28.4230.01-45.06
    
    
    635,145
    
    
    
    6.3
    
    
    
    32.63
    
    
    
    632,145
    
    
    
    32.64Total
    
    
    3,478,952
    
    
    
    6.2
    
    
    
    25.48
    
    
    
    2,236,840
    
    
    
    25.67
 (12) LEGAL CONTINGENCIES
 Securities Litigation
    12




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Other Litigation and Proceedings
     (13) SEGMENT REPORTING
   13




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Thirteen Weeks EndedDecember 30,
    
    
    December 24,2007
    
    
    2006Net sales:Disk Drive
Components Division:Suspension assemblies
    
    $
    171,564
    
    
    $
    178,951Other products
    
    
    1,332
    
    
    
    9,849Total Disk Drive Components Division
    
    
    172,896
    
    
    
    188,800BioMeasurement Division
    
    
    181
    
    
    
    82$
    173,077
    
    
    $
    188,882Income (loss) from operations:Disk Drive Components Division
    
    $
    6,821
    
    
    $
    5,665BioMeasurement Division
    
    
    (5,171
    )
    
    
    (3,681
    )$
    1,650
    
    
    $
    1,984
  (14) SUBSEQUENT
EVENT
  14




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When we refer to we, our, us, HTI or the company, we mean Hutchinson Technology
Incorporated and its subsidiaries. Unless otherwise indicated, references to 2008 mean our fiscal
year ending September 28, 2008, references to 2007 mean our fiscal year ended September 30, 2007,
references to 2006 mean our fiscal year ended September 24, 2006, references to 2005 mean our
fiscal year ended September 25, 2005, references to 2004 mean our fiscal year ended September 26,
2004, references to 2003 mean our fiscal year ended September 28, 2003 and references to 2002
mean our fiscal year ended September 29, 2002.
 GENERAL
  InSpectra StO 2
    2007
by QuarterFirst
    
    
    225Second
    
    
    205Third
    
    
    190Fourth
    
    
    246
 2008
by QuarterFirst
    
    
    213
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
    
    demand or customer requirements;
    
    utilization of existing or newly added production capacity;
    
    manufacturing yields or efficiencies;
 16




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
    
    product and feature mix;
    
    selling prices;
    
    production and engineering costs associated with production of new products and
features; and
    
    costs of materials, including gold salts.
      17




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RESULTS OF OPERATIONS
 Thirteen Weeks Ended December 30, 2007 vs. Thirteen Weeks Ended December 24, 2006
  18




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LIQUIDITY AND CAPITAL RESOURCES
     20




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CONTRACTUAL OBLIGATIONS
  CRITICAL ACCOUNTING POLICIES
  RECENT ACCOUNTING PRONOUNCEMENTS
    MARKET TRENDS
   22




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FORWARD-LOOKING STATEMENTS
  23




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EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
  CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
   
    
    improved procedures for the calculation and reconciliation process of our deferred
income tax assets and liabilities, including validation of underlying supporting data; and
    
    enhanced quarterly management review of the calculation of the deferred income tax
assets and liabilities and underlying support data.
  25




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PART II. OTHER INFORMATION
 
  SECURITIES LITIGATION
    OTHER LITIGATION AND PROCEEDINGS
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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 (incorporated by reference to Exhibit 3.2 to HTIs Quarterly Report
on Form 10-Q for the quarter ended 6/27/04).10.1
    
    Hutchinson Technology Incorporated 1996 Incentive Plan (As Amended and Restated January 30,
2008) (incorporated by reference to Appendix A to HTIs Definitive Proxy Statement filed
12/17/07).10.2
    
    Form of Non-Statutory Stock Option Agreement (Director) under the Hutchinson Technology
Incorporated 1996 Incentive Plan (As Amended and Restated January 30, 2008).10.3
    
    Second Amended and Restated Loan Agreement, dated as of December 21, 2007, by and among
Hutchinson Technology Incorporated, Hutchinson Technology Asia, Inc., and LaSalle Bank
National Association (incorporated by reference to Exhibit 10 to HTIs Current Report on Form
8-K filed 12/28/07).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: February 5, 2008
    By
    /s/ Wayne M. FortunWayne M. FortunPresident and Chief Executive OfficerDate: February 5, 2008
    By
    /s/ John A. InglemanJohn A. InglemanSenior Vice President and Chief Financial Officer 31




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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
(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 Reference10.1
    
    Hutchinson Technology
Incorporated 1996 Incentive
Plan (As Amended and Restated
January 30, 2008) (incorporated
by reference to Appendix A to
HTIs Definitive Proxy
Statement filed 12/17/07).
    
    Incorporated by Reference10.2
    
    Form of Non-Statutory Stock
Option Agreement (Director)
under the Hutchinson Technology
Incorporated 1996 Incentive
Plan (As Amended and Restated
January 30, 2008).
    
    Filed Electronically10.3
    
    Second Amended and Restated
Loan Agreement, dated as of
December 21, 2007, by and among
Hutchinson Technology
Incorporated, Hutchinson
Technology Asia, Inc., and
LaSalle Bank National
Association (incorporated by
reference to Exhibit 10 to
HTIs Current Report on Form
8-K filed 12/28/07).
    
    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
 32