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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission File
September 24, 1995 Number 0-14709
HUTCHINSON TECHNOLOGY INCORPORATED
---------------------------------------------
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0901840
------------------------------- ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
40 West Highland Park
Hutchinson, Minnesota 55350
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612)587-3797
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.02 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the Common Stock held by non-affiliates of
the registrant as of November 28, 1995 was $268,279,525, based on the closing
sale price for the Company's Common Stock on that date. For purposes of
determining this number, all officers and directors of the registrant are
considered to be affiliates of the registrant. This number is provided only for
the purposes of this report on Form 10-K and does not represent an admission by
either the registrant or any such person as to the status of such person.
As of November 28, 1995, the registrant had 5,447,300 shares of Common
Stock issued and outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Shareholders for the fiscal
year ended September 24, 1995 are incorporated by reference in Part II.
Portions of the registrant's Proxy Statement for the annual meeting of
shareholders to be held January 24, 1996 are incorporated by reference in Part
III.
<PAGE>
PART I
ITEM 1. BUSINESS
Hutchinson Technology Incorporated (the "Company") was incorporated in 1965
in Minnesota. The Company is the world's leading supplier of suspension
assemblies for rigid magnetic disk drives. Suspension assemblies hold the
recording heads in position above the spinning magnetic disks in the drive and
are critical to maintaining the necessary microscopic clearance between the
head and disk. The Company is a supplier to nearly all domestic and many
foreign-based users of suspension assemblies, including Applied Magnetics,
Conner Peripherals, IBM, Maxtor, Quantum, Read-Rite, SAE Magnetics, Seagate
Technology, Western Digital and Yamaha. The Company developed its leadership
position in suspension assemblies through research, development and design
activities coupled with a substantial investment in manufacturing technologies
and equipment. The Company is focused on continuing to develop suspension
assemblies which address the rapidly changing requirements of the rigid magnetic
disk drive industry. The Company also is evaluating other product opportunities
in the medical market and does not expect any significant medical revenues in
fiscal 1996.
PRODUCTS
The Company's current products can be categorized as follows:
- suspension assemblies, and
- other, consisting primarily of etched and stamped components.
The following table shows for each of fiscal 1995, 1994 and 1993 the
relative contribution to net sales in millions of dollars and percentages of
each of such product categories:
<TABLE>
<CAPTION>
Fiscal 1995 Fiscal 1994 Fiscal 1993
----------- ----------- -----------
Amount % Amount % Amount %
------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C>
Suspension
assemblies. . . . . . . . . . . . $292.1 97% $231.1 97% $186.5 94%
Other. . . . . . . . . . . . . . . 7.9 3 7.7 3 12.2 6
------ --- ------ --- ------ ---
Total Net Sales. . . . . . . $300.0 100% $238.8 100% $198.7 100%
------ --- ------ --- ------ ---
------ --- ------ --- ------ ---
</TABLE>
SUSPENSION ASSEMBLIES
The growing complexity of computer applications requires more data or
software program steps than can be economically stored in the computer's
semiconductor main memory. The additional required data storage capacity is
provided primarily by rigid magnetic disk drives which are the most cost-
effective devices for storing large amounts of data that must be retrieved
quickly. A typical 3.5" disk drive contains two rigid disks attached to a motor
assembly which rotates the disks at high speeds in extremely close proximity to
four magnetic recording heads, each of which is attached to a suspension
assembly.
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Suspension assemblies are a critical component of disk drive performance
and reliability, with nearly all performance improvements in storage capacity
sought by disk drive manufacturers requiring corresponding advances in
suspension assemblies. One of the major determinants of disk drive data storage
capacity is the microscopic height at which the magnetic head "flies" above the
disk. Suspension assemblies hold the magnetic recording heads in position and
are a significant factor in controlling the critical flying height of the head
above the disk. A typical nominal flying height is less than two millionths of
an inch (a sheet of paper is approximately 3,000 millionths of an inch thick or
more than 1,500 times the typical nominal flying height). Flying height is to a
large extent determined by the magnitude of the force exerted by the suspension
assembly on the recording head and by the location of the point on the recording
head at which the assembly imposes the force.
A suspension assembly consists of two or three components that are laser
welded together. Alignment, adjustment, and freedom from imperfections and
contaminants are of critical importance, and therefore the photoetching of the
components, the laser-welding operations which fuse the components together, and
subsequent processing steps are subject to stringent specifications and
controls. See "Production Processes" below.
The design of suspension assemblies is driven by the increasing performance
requirements of new disk drives, principally reduced data access time, increased
data storage density, and smaller form factors. Technologically advanced drives
generally require suspension assemblies with specialized design and greater
precision. The Company has developed significant proprietary capabilities in
the design and production of suspension assemblies for both current and emerging
disk drive designs.
OTHER
The Company also manufactures etched and stamped components. Presently the
Company is engaged in the development of certain medical devices; however, there
can be no assurance that the Company's efforts will result in a marketable
product or that such products will ever generate significant revenues.
PRODUCTION PROCESSES
The Company's products require several manufacturing processes, each
dependent on different technical disciplines, to ensure the high degree of
precision and process control necessary to meet strict customer tolerance and
other requirements. The Company has developed sophisticated manufacturing
processes and controls, and related equipment, which are essential to the
precision and reliability of its products. The manufacturing processes employed
by the Company include photoetching, stamping, precision forming, laser-welding
and proprietary cleaning. The Company monitors and controls these processes
through real-time statistical process analysis, and continuously tracks critical
parameters and takes corrective action as needed.
The Company's production processes require the storage, use, and disposal
of a variety of chemicals which are considered hazardous under applicable
federal and state laws. Accordingly, the Company is subject to a variety of
regulatory requirements for the handling of such materials. If an accident were
to result in significant personal injury or environmental damage, the Company's
operations and financial performance could be adversely affected.
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RAW MATERIALS AND SOURCES OF SUPPLY
The Company's critical raw material needs are available through multiple
sources of supply, with one exception. Certain types of photoresist, a liquid
compound used in the photoetching process, are available from only one supplier.
To protect against the adverse effect of a short-term supply disruption, the
Company maintains several weeks' supply of photoresist. If for any reason the
Company were unable to continue to obtain photoresist in the necessary
quantities, production would be adversely affected.
CUSTOMERS AND MARKETING
The Company's products are sold principally through its own ten-member
sales force operating primarily from its headquarters in Hutchinson, Minnesota.
The Company has one technical representative in Europe serving its European
customers, and, through a subsidiary, four technical representatives in
Singapore serving its southern Pacific Rim customers. The Company's products
are sold to original equipment manufacturers for use in their products and to
subassemblers who sell to original equipment manufacturers. The Company's sales
force is organized by customer. Company salespeople typically initiate contacts
with both the customer's purchasing agent and its engineers. The Company's
engineers and sales force actively participate in the selling process and in
maintaining customer relationships.
The Company is a supplier to nearly all domestic and many foreign-based
manufacturers of rigid magnetic disk drives and recording heads used in such
drives. The following table shows the Company's five largest customers for
fiscal 1995 as a percentage of net sales.
Seagate Technology Incorporated . . . 36 %
Read-Rite Corporation . . . . . . . . 19
Yamaha Corporation. . . . . . . . . . 13
SAE Magnetics, Ltd. . . . . . . . . . 9
IBM . . . . . . . . . . . . . . . . . 9
Sales to the Company's five largest customers constituted 86%, 75% and 69% of
net sales for fiscal 1995, 1994, and 1993, respectively. Significant portions
of the Company's revenue may be indirectly attributable to large manufacturers
of disk drives, such as Conner Peripherals, Quantum, and Western Digital, which
purchase recording head assemblies from recording head manufacturers utilizing
the Company's suspension assemblies.
The Company expects to continue to depend upon a limited number of
customers for a majority of its sales, given the relatively small number of
rigid magnetic disk drive and recording head manufacturers. The Company's
financial performance could be adversely affected by reduced requirements of its
major customers.
Sales to foreign-based enterprises totalled $46,075,000 in fiscal 1995,
$29,394,000 in fiscal 1994 and $29,281,000 in fiscal 1993. Sales to foreign
subsidiaries of U.S. corporations totalled $54,398,000 in fiscal 1995,
$14,126,000 in fiscal 1994 and $4,375,000 in fiscal 1993. The majority of these
foreign location sales were to the Pacific Rim region. In addition, the Company
had significant sales to U.S. corporations which used the Company's products in
their offshore manufacturing sites.
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BACKLOG
The Company's sales are generally made pursuant to purchase orders rather
than long-term contracts. The Company's backlog of purchase orders was
approximately $55,200,000 at September 24, 1995, as compared to $41,200,000 at
September 25, 1994. Such purchase orders may be changed or cancelled by
customers on short notice without penalty. In addition, the Company believes
that it is a common practice for disk drive manufacturers to place orders in
excess of their needs during growth periods. Accordingly, the Company does not
believe that backlog should be considered indicative of sales for any future
period.
COMPETITION
The Company believes that the principal factors of competition in the
suspension assembly market include time-to-market, product quality, design
expertise, reliability of supply and price. The Company estimates that in
fiscal 1995 it produced a majority of all suspension assemblies sold to rigid
magnetic disk drive manufacturers and their suppliers, including recording head
manufacturers, worldwide. The Company's competitors include Magnacomp
Corporation, K.R. Precision Co. and Nippon Hatsujo Kogyo Co. Certain users of
suspension assemblies, such as Applied Magnetics, also may have or may develop
the ability to fabricate their own suspension assemblies. Although there can be
no assurance that the number of competitors will not increase in the future or
that users of suspension assemblies will not develop internal capabilities to
manufacture suspension assemblies, management of the Company believes that the
number of entities that have the technical capability and capacity for producing
suspension assemblies in large volumes will remain small.
Other types of computer memory systems, such as semiconductor memories and
optical memories, may become competitive with certain rigid magnetic disk drive
applications, and thereby affect the demand for certain of the Company's
products. However, semiconductor memories are not expected to be price
competitive with disk drives and optical memories are inherently much slower
than rigid magnetic disk drives. Accordingly, the Company believes that such
technologies will not materially impact the market for rigid magnetic disk
drives in the near future.
ENGINEERING AND PROCESS DEVELOPMENT
As of September 24, 1995, the Company employed 620 engineers and
technicians who are responsible for the implementation of new technologies as
well as process and product development and improvements. Expenditures for
these activities in fiscal 1995, 1994 and 1993 amounted to approximately
$32,567,000, $25,663,000 and $24,552,000, respectively. Of those amounts, the
Company classified approximately $15,041,000, $8,626,000 and $9,846,000,
respectively, as research and development expenditures.
The Company's current research and development efforts are principally
directed to continuing the development and prototype production of new high
precision suspension assemblies to meet the changing form factor and performance
standards required for disk drives. The Company has entered into a Technology
Transfer and Development Agreement (the "Development Agreement") and a Patent
License Agreement with IBM. Under the Development Agreement, IBM will make
available to the Company the results of many years of research by IBM into a new
type of suspension, called an integrated lead suspension. The Company and IBM
will pursue joint research and development efforts to complete the
commercialization of integrated lead suspension designs. The Company itself
already has devoted substantial efforts independent of IBM to the research and
development of "TRACE-TM-
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suspension assemblies", or "TSA-TM- suspension assemblies", and will contribute
its existing TSA technology to the joint effort. Under the Development
Agreement, the Company is required to make periodic payments over the next four
fiscal years totalling $2,500,000, all of which was reflected as a one-time
expense during the third quarter of fiscal 1995. Upon shipment of a specified
cumulative quantity of integrated lead suspensions, the Company will be required
to pay additional fixed sums totalling $5,500,000 over four fiscal years. This
sum will be charged as a one-time expense in the period the specified quantity
of integrated lead suspensions are shipped, which may occur in fiscal 1996.
The Company also is engaged in the development of certain medical devices,
including a probe for the measurement of tissue vitality. In view of the early
stage of development of these devices, there can be no assurance that the
Company's efforts will result in a marketable product or that such products will
ever generate significant revenues.
INTELLECTUAL PROPERTY
Certain equipment, processes, information, and knowledge generated by the
Company and utilized in the manufacture of its products are regarded as
proprietary by the Company and are protectable under applicable trade secret,
copyright, and unfair competition laws. In addition, where the Company believes
it has made inventions in manufacturing equipment, products and processes for
making products where patents might enhance the Company's position, patents have
been and will continue to be sought and obtained in the U.S. and abroad. The
Company currently holds twenty-one U.S. patents, and has more than thirty patent
applications pending in the U.S., relating to its proprietary suspension
assembly products and manufacturing equipment and processes relating to their
manufacture. The Company believes that although the patents it holds and may
obtain will continue to be of value, they will not independently determine the
Company's success, which depends principally upon its engineering and
manufacturing skills.
Within the Company, intellectual property protection of trade secrets is
achieved through physical security measures at the Company's facilities as well
as through nondisclosure/noncompete agreements with all employees and
confidentiality agreements with consultants, strategic suppliers, and customers.
In the absence of judicial determination, there can be no certainty as to the
degree of protection afforded by these practices and laws.
In addition to the Development Agreement and the Patent License Agreement
with IBM discussed in "Engineering and Process Development" above, the Company
also has entered into licensing and cross-licensing agreements under the
Company's patents and patent applications allowing certain competitors to
produce certain of the Company's products in return for either royalty payments
or cross-license rights.
The Company and certain users of the Company's products have from time to
time received, and may in the future receive, communications from third parties
asserting patents against the Company or its customers which may relate to
certain of the Company's manufacturing equipment or products or to products
which include the Company's products as a component. Although the Company has
not been a party to any material intellectual property litigation, certain of
its customers have been sued on patents having claims closely related to
products sold by the Company. In the event any third party were to make a valid
infringement claim and a license were not available on terms acceptable to the
Company, the Company's operating results could be adversely affected.
<PAGE>
EMPLOYEES
As of September 24, 1995, the Company had 4,858 regular employees, 3,269 of
whom were working at the Company's Hutchinson, Minnesota facility, 1,578 of whom
were working at the Company's Sioux Falls, South Dakota facility, three of whom
were working in Eau Claire, Wisconsin and eight of whom were working overseas.
The Company's ability to conduct its business would be impaired if a significant
number of its specialized employees were to leave and could not be replaced by
comparable personnel. However, turnover of specialized employees, including key
management personnel, historically has been low. The locations of the Company's
facilities and the broad span and complexity of technology encompassed by the
Company's products and processes limit the number of qualified engineering and
other candidates for key positions. The Company expects that internal training
will continue to be the primary avenue for the development of key employees.
None of the Company's employees is subject to a collective bargaining
agreement, and the Company has experienced no work stoppages. The Company
believes that its employee relations are good.
ITEM 2. PROPERTIES
The Company's executive offices, primary manufacturing facilities and
training center are located in four buildings on a 163-acre site in Hutchinson,
Minnesota, the largest of which has floor area of approximately 450,000 square
feet. The Company also leases a 20,000 square foot warehouse and a 7,000 square
foot fabrication shop near the Hutchinson site.
The Company also operates a manufacturing facility in Sioux Falls, South
Dakota, in connection with which it leases a building of approximately 94,000
square feet and a training center of approximately 5,000 square feet.
A portion of a building in Minnetonka, Minnesota, located near Minneapolis,
is leased by the Company and used for office space. The Company also leases
sales offices in Singapore and the Netherlands. The Company is negotiating a
lease for a portion of a building of approximately 80,000 square feet located in
Plymouth, Minnesota which will be used for office space, manufacturing space and
a logistics center.
The Company is in the process of constructing a manufacturing facility of
approximately 156,000 square feet in Eau Claire, Wisconsin, and anticipates
beginning construction of a photoetching facility in Eau Claire in fiscal 1996.
ITEM 3. LEGAL PROCEEDINGS
In August of 1988, the Company and hundreds of other corporations were
informed that they are "potentially responsible parties" under the Comprehensive
Environmental Response Compensation and Liability Act (CERCLA) as generators of
hazardous waste disposed of at a waste site in Gary, Indiana. In December of
1989, the Company settled its potential liability under a cost recovery action
by paying $9,000 of the surface cleanup costs (estimated to have been more than
$2,000,000 in the aggregate). The settlement did not resolve the potential
liability, if any, of the Company for future cleanup costs relating to soil and
ground water contamination.
The United States Environmental Protection Agency (USEPA) notified the
Company in September 1993 of its further potential liability for reimbursement
of the cost of future
<PAGE>
additional cleanup of the Gary, Indiana site, in connection with the Company's
status as a "potentially responsible party" under CERCLA. The Company responded
to the USEPA that it is willing to cooperate with the agency in resolving its
potential liability regarding this site, and informing the USEPA that the
Company previously had entered into a settlement agreement with other
potentially responsible parties, under which the Company may be entitled to
indemnification for some or all of the liabilities referred to in the USEPA
notice. The Company and a number of other parties currently are negotiating
with the USEPA regarding the terms of a proposed further settlement of all
remaining potential site liabilities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are:
Name Age Position
---- --- --------
Jeffrey W. Green 55 Chairman, Chief Executive
Officer and Director
Wayne M. Fortun 46 President, Chief Operating
Officer and Director
John A. Ingleman 49 Vice President, Chief
Financial Officer,
Treasurer and Secretary
Richard C. Myers 55 Vice President of Administration
Beatrice A. Graczyk 47 Vice President of
Disk Drive Components
Operations
Larry G. Moehring 46 Vice President of
Disk Drive Components
Assembly Operations
LeRoy E. Olson 59 Vice President of
Disk Drive Components
Operations Development
R. Scott Schaefer 42 Vice President of
Disk Drive Components
Business Development
Rebecca A. Albrecht 42 Vice President of
Human Resources
Executive officers are elected annually by the Board of Directors and serve
a one-year period or until their successors are elected.
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Mr. Green is a co-founder of the Company and has served as a director since
the Company's formation in 1965. He was elected to his present position in
January 1983.
Mr. Fortun was elected a director in 1983. He has been with the Company
since 1975 and was elected President in January 1983 and Chief Operating Officer
in January 1985.
Mr. Ingleman was elected Vice President and Treasurer in January 1982,
Chief Financial Officer in January 1988, and Secretary in January 1992. Mr.
Ingleman has been with the Company since 1977.
Mr. Myers was elected Vice President of Sales and Marketing in January
1988. In January 1995, he was elected Vice President of Administration. Mr.
Myers has been with the Company since 1977.
Ms. Graczyk was elected Vice President in May 1990 and is now responsible
for Disk Drive Components Operations. Ms. Graczyk has been with the Company
since 1970.
Mr. Moehring was elected Vice President in May 1990 and is now responsible
for Disk Drive Components Assembly Operations. Mr. Moehring has been with the
Company since 1978.
Mr. Olson was elected Vice President in May 1990 and is now responsible for
Disk Drive Components Operations Development. Mr. Olson has been with the
Company since 1988.
Mr. Schaefer was elected Vice President in May 1990 and is now responsible
for Disk Drive Components Business Development. Mr. Schaefer has been with the
Company since 1977.
Ms. Albrecht was elected Vice President in January 1995 and is responsible
for Human Resources. Ms. Albrecht has been with the Company since 1983.
None of the above executive officers is related to each other or to any
director of the Company, except that Richard N. Rosett, a director, is married
to Mr. Green's first cousin.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Incorporated herein by reference is the Company's Annual Report to
Shareholders for the fiscal year ended September 24, 1995, pages 25, 31 and 34.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated herein by reference is the Company's Annual Report to
Shareholders for the fiscal year ended September 24, 1995, pages 32 and 33.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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Incorporated herein by reference is the Company's Annual Report to
Shareholders for the fiscal year ended September 24, 1995, pages 15-18.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated herein by reference is the Company's Annual Report to
Shareholders for the fiscal year ended September 24, 1995, pages 19-31.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference is the information appearing under the
heading "Election of Directors" and "Compliance with Section 16(a) of The
Securities Exchange Act of 1934", pages 3, 4 and 13, in the Company's Proxy
Statement dated December 8, 1995. See also Part I hereof under the heading
"Item X. Executive Officers of the Registrant".
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference is the information appearing under the
headings "Summary Compensation Table" and "Option Tables", pages 9-11, in the
Company's Proxy Statement dated December 8, 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference is the information appearing under the
heading "Security Ownership of Principal Shareholders and Management", page 2,
and the information appearing in the tables and notes on pages 9-11 in the
Company's Proxy Statement dated December 8, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
a) 1. Consolidated Financial Statements:
Report of Independent Public Accountants
Consolidated Statements of Operations for the fiscal years 1995,
1994 and 1993
<PAGE>
Consolidated Balance Sheets as of September 24, 1995 and September
25, 1994
Consolidated Statements of Cash Flows for the fiscal years 1995,
1994 and 1993
Consolidated Statements of Shareholders' Investment for the fiscal
years 1995, 1994 and 1993
Notes to Consolidated Financial Statements
(Incorporated by reference to pages 19-31 of the Company's Annual
Report to Shareholders for the fiscal year ended September 24,
1995.)
2. Schedule:
Report of Independent Public Accountants on Schedule
Valuation and Qualifying Accounts...Schedule II
3. Exhibits:
3.1 Restated Articles of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to Registration Statement No. 2-98270), as
amended by Articles of Amendment dated January 27, 1988
(incorporated by reference to Exhibit 4.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended December 27, 1987, File
No. 0-14709).
3.2 Restated By-Laws of the Company (incorporated by reference to
Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 27, 1988, File No. 0-14709), and amendment
adopted on March 5, 1991 (incorporated by reference to Exhibit 4.2
to the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1991, File No. 0-14709).
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 Note Purchase Agreement dated as of April 20, 1994, providing for
the placement of $20,000,000 of senior unsecured notes with Teachers
Insurance and Annuity Association of America (incorporated by
reference to Exhibit 4.10 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 27, 1994, File No. 0-14709).
4.3 Note Purchase Agreement dated as of April 20, 1994, providing for
the placement of $5,000,000 of senior unsecured notes with Central
Life Assurance Company (incorporated by reference to Exhibit 4.11 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
March 27, 1994, File No. 0-14709).
4.4 Note Purchase Agreement dated as of April 20, 1994, providing for
the placement of $5,000,000 of senior unsecured notes with Modern
Woodmen of America
<PAGE>
(incorporated by reference to Exhibit 4.12 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 27, 1994,
File No. 0-14709).
10.1 Employment Agreement between the Company and Wayne M. Fortun, dated
as of April 7, 1986 (incorporated by reference to Exhibit 19.1 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
March 16, 1986, File No. 0-14709).
10.2 Lease with Right of Refusal between Donald Wendorff and
Laura Wendorff, Lessors, and the Company, Lessee, dated
September 6, 1995.
10.5 1988 Stock Option Plan (incorporated by reference to Exhibit 10.8 to
the Company's Annual Report on Form 10-K for the fiscal year ended
September 25, 1988, File No. 0-14709), Amendment to the 1988 Stock
Option Plan (incorporated by reference to Exhibit 10.5 to the
Company's Annual Report on Form 10-K for the fiscal year ended
September 26, 1993, File No. 0-14709), and Amendment to the 1988
Stock Option Plan (incorporated by reference to Exhibit 10.5 to the
Company's Quarterly Report on Form 10-Q for the quarter ended March
26, 1995, File No. 0-14709).
10.6 Building Lease dated April 1988 and Amendment to Building Lease
dated August 29, 1988 (incorporated by reference to Exhibit 10.9 to
the Company's Annual Report on Form 10-K for the fiscal year ended
September 25, 1988, File No. 0-14709), Second Amendment to Building
Lease dated as of September 18, 1989, relating to the Company's
Sioux Falls, South Dakota facility (incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1990, File No. 0-14709), Third
Amendment to Building Lease dated September 19, 1991, relating to
the Company's Sioux Falls, South Dakota facility (incorporated by
reference to Exhibit 10.9 to the Company's Annual Report on Form 10-
K for the fiscal year ended September 29, 1991, File No. 0-14709),
Fourth Amendment to Commercial Lease dated September 29, 1992,
relating to the Company's Sioux Falls, South Dakota facility
(incorporated by reference to Exhibit 10.10 to the Company's Annual
Report on Form 10-K for the fiscal year ended September 27, 1992,
File No. 0-14709), Fifth Amendment to Commercial Lease dated
February 11, 1993, relating to the Company's Sioux Falls, South
Dakota facility, Sixth Amendment to Commercial Lease dated February
17, 1995, relating to the Compay's Sioux Falls, South Dakota
facility, and Seventh Amendment to Commercial Lease dated April 1,
1995, relating to the Company's Sioux Falls, South Dakota facility.
10.7 Hutchinson Technology Incorporated 401-K Plan and related 401-K
Trust (incorporated by reference to Exhibit 10.10 to the Company's
Annual Report on Form 10-K for the fiscal year ended September 30,
1990, File No. 0-14709).
10.8 Directors' Retirement Plan effective as of January 1, 1992
(incorporated by reference to Exhibit 10.12 to the Company's Annual
Report on Form 10-K for the fiscal year ended September 27, 1992,
File No. 0-14709).
10.9 Description of Bonus Program for Key Employees of Hutchinson
Technology Incorporated (incorporated by reference to Exhibit 10.13
to the Company's Annual Report on Form 10-K for the fiscal year
ended September 27, 1992, File No. 0-14709).
<PAGE>
*10.10 Technology Transfer and Development Agreement, effective as of
September 1, 1994, between Hutchinson Technology Incorporated and
International Business Machines Corporation (incorporated by
reference to Exhibit 10.10 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 25, 1995, File No. 0-14709).
*10.11 Patent License Agreement, effective as of September 1, 1994, between
Hutchinson Technology Incorporated and International Business
Machines Corporation (incorporated by reference to Exhibit 10.11 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
June 25, 1995, File No. 0-14709).
11.1 Statement Regarding Computation of Net Income Per Share.
13.1 Annual Report to Shareholders for the fiscal year ended September
24, 1995 (only those portions specifically incorporated by reference
herein shall be deemed filed with the Securities and Exchange
Commission).
21.1 List of Significant Subsidiaries.
23.1 Consent of Independent Public Accountants.
27.1 Financial Data Schedule.
b) Reports on Form 8-K
No reports were filed during the fourth quarter of the fiscal year ended
September 24, 1995.
* Exhibits 10.10 and 10.11 contain portions for which confidential treatment has
been requested by the registrant.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To Hutchinson Technology Incorporated:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in Hutchinson Technology
Incorporated and Subsidiaries 1995 annual report to shareholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated October
26, 1995. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The schedule listed in Item 14(a)(2) is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected
to the auditing procedures applied in the audit of the basic consolidated
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
October 26, 1995
<PAGE>
SCHEDULE II
HUTCHINSON TECHNOLOGY INCORPORATED AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance at Additions Charged Other Balance at
Beginning to Costs Changes End of
of Period and Expenses Add (Deduct) Period
------------ ----------------- ------------ ------------
<S> <C> <C> <C> <C>
1993:
Deducted from asset accounts-
Allowance for doubtful
accounts receivable. . . . . $1,350 $180 ($5)(1) $1,525
Reserve for sales returns
and allowances . . . . . . . 273 2,920 (2,902)(2) 291
------------ ------------ ------------ ------------
$1,623 $3,100 ($2,907) $1,816
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
1994:
Deducted from asset accounts-
Allowance for doubtful
accounts receivable. . . . . $1,525 $199 ($327)(1) $1,397
Reserve for sales returns
and allowances . . . . . . . 291 2,849 (2,651)(2) 489
------------ ------------ ------------ ------------
$1,816 $3,048 ($2,978) $1,886
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
1995:
Deducted from asset accounts-
Allowance for doubtful
accounts receivable. . . . . $1,397 $248 ($106)(1) $1,539
Reserve for sales returns
and allowances . . . . . . . 489 1,797 (1,901)(2) 385
------------ ------------ ------------ ------------
$1,886 $2,045 ($2,007) $1,924
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
(1) Uncollectible accounts receivable written off, net of recoveries.
(2) Returns honored and credit memos issued.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: December 11, 1995 HUTCHINSON TECHNOLOGY INCORPORATED
By /s/ Jeffrey W. Green
-------------------------------------
Jeffrey W. Green
Chairman and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date: December 11, 1995 /s/ Jeffrey W. Green
----------------------------------------
Jeffrey W. Green, Chairman and Chief
Executive Officer (Principal Executive
Officer) and Director
Date: December 11, 1995 /s/ John A. Ingleman
----------------------------------------
John A. Ingleman, Vice President, Chief
Financial Officer and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Date: December 11, 1995 /s/ W. Thomas Brunberg
----------------------------------------
W. Thomas Brunberg, Director
Date: December 11, 1995 /s/ James E. Donaghy
----------------------------------------
James E. Donaghy, Director
Date: December 11, 1995 /s/ Harry C. Ervin Jr.
----------------------------------------
Harry C. Ervin, Jr., Director
Date: December 11, 1995 /s/ Wayne M. Fortun
----------------------------------------
Wayne M. Fortun, Director
Date: December 11, 1995 /s/ Richard N. Rosett
----------------------------------------
Richard N. Rosett, Director
<PAGE>
LEASE WITH RIGHT OF REFUSAL
THIS AGREEMENT, Made this 6th day of September 1995 by and between
Donald Wendorff and Laura Wendorff, husband and wife, Lessors, and Hutchinson
Technology, a Minnesota corporation, Lessee;
WITNESSETH:
1. GRANTING AND TERM: That Lessors, in consideration of the rents and
covenants hereinafter mentioned, do hereby Demise, Lease and Let unto Lessee,
and Lessee does hereby lease and rent from Lessors, the following described
premises situated in the County of McLeod and State of Minnesota, towit:
That part of Lot 1, block 1, HUTCHINSON INDUSTRIAL CORPORATION PLAT,
according to the plat on file in the office of the County Recorder,
McLeod County, Minnesota described as follows:
Commencing at the Northwest corner of said Lot 1, Block 1; thence
South 00 degrees 08 minutes 00 seconds West, assumed bearing along the
West line of said Lot 1, Block 1 a distance of 896.00 feet; thence
South 00 degrees 14 minutes 00 seconds East 197.16 feet to the point
of beginning of the tract to be described; thence continuing South 00
degrees 14 minutes 00 seconds East 193.44 feet along the West line of
said Lot 1, to the Southerly line of said Lot 1; thence North 87
degrees 22 minutes 45 seconds East 66.00 feet; thence South 00 degrees
23 minutes 00 seconds West 33.00 feet; thence North 85 degrees 50
minutes 36 seconds East 132.00 feet; thence on a bearing of South
90.82 feet to the South line of said Lot 1; thence North 86 degrees 14
minutes 20 seconds East 7.93 feet along the South line of said lot 1;
thence on a bearing of North 124.62 feet; thence South 89 degrees 14
minutes 00 seconds East 120.00 feet to the East line of said Lot 1;
thence on a bearing of North 182.13 feet; thence South 89 degrees 49
minutes 26 seconds West 326.05 feet to the point of beginning.
Containing 1.51 acres.
TO HAVE AND TO HOLD, the premises just as they are, without any liability or
obligation on the part of the Lessors, except that Lessors shall be responsible
for upkeep and major structural repairs, if any, to any of the buildings located
on the above described premises, for the Term of (5) years from October 1, 1995
to September 30, 2000 for the purpose of operating and maintaining all of the
business purposes of the Lessee. But not subject to maintenance of heating,
cooling, electrical, plumbing, etc. for operations of Lessee's business.
2. RENT: That the Lessee shall pay as rent for said premises
$1,675.00 per month, commencing October 1, 1995, and on the first of each
month thereafter.
.1 09-05-95
<PAGE>
In addition to the above mentioned monthly rental, Lessee shall pay
any and all real estate taxes on the premises payable during the term of this
Lease when said taxes are due. Lessors shall promptly deliver the tax
statements to Lessee when they are received and Lessee, at its expense, shall
have all right and interest in connection with any negotiation, appeal or the
like relative to said taxes and Lessors shall do all those things necessary to
assure Lessee's rights in this regard. Finally Lessee agrees to assume and pay
any and all installments of special assessments pro rata during the Lease
against the above leased property including, but not limited to, assessments for
City sewer and water now due or hereafter due during the term of this Lease.
3. CARE OF PREMISES: That except as provided in Paragraph 1 hereof,
Lessee will keep and maintain the said premises during the aforesaid term, and
quit and deliver up the said premises to the said Lessors peaceably and quietly
at the end of the aforesaid term or at any previous termination thereof for any
cause, in its present condition and state of repair, reasonable use and wearing
thereof and damage by fire or other casualties or by inevitable accidents
expected.
That Lessee will keep said premises continually in a neat, clean and
respectable condition, and will keep the sidewalks in front and along said
premises cleared of ice and snow, or other obstructions or objectionable thing,
if such clearing shall be ordered or required by municipal authority. Also all
ashes, garbage and refuse of any kind to be removed at said Lessee's expense.
That said Lessee will not allow any gambling nor other immoral practices on said
premises.
4. Notice: Lessee further agrees to give Lessors written notice
thirty (30) days before the expiration of this Lease of its intention to vacate
at the end of this Lease, otherwise Lessors will have the option of continuing
this Lease for one (1) year from such expiration upon notice in writing to
Lessee prior to the expiration of the Lease, otherwise the Lease shall continue
month-to-month, until notice of termination from either party.
5. UTILITIES AND REPAIR: Lessee will not assign or underlet said
premises or any part thereof without the written consent of said Lessors, such
consent not to be unreasonably withheld. Said Lessee also agrees to replace all
glass broken on said premises during said term, and pay for all City water,
light, heat and any other utilities used thereon during the same time.
2 09-05-95
<PAGE>
6. DEFAULT: And if said monthly payments or any of them, whether the
same be demanded or not, are not paid when they become due; or if said leased
premises shall be appropriated to or used for any other purpose or use than is
hereinbefore specified; or if gambling or any other immoral practices
continually allowed on said premises, or any intentional damage or waste shall
be made thereon; or if any part of said premises shall be underlet or this Lease
be assigned without the above provided consent of said Lessors; of if any term,
condition or covenant of this Lease to be performed by Lessee shall be violated
or neglected, then and in either of said cases the Lessee does hereby authorize
Lessors or their agent to cancel and annul this Lease on reasonable notice and
to re-enter and take possession of said premises immediately and by force if
necessary, and remove all persons and their property therefrom, and to use such
force and assistance in effecting and perfecting such removal as said Lessors
may deem advisable to recover at once full and exclusive possession of all said
remised premises, whether in possession of said Lessee or of third persons, or
vacant, without such re-entering working a forfeiture of the rents to be paid
and the covenants to be kept by said Lessee for the full term of this Lease.
7. At termination of Lease, either by choice or default, Lessee
relinquishes all rights to use the right of way through property described
herein.
8. CONSTRUCTIVE EVICTION: That in case the buildings on said remised
premises shall be destroyed, or be so injured by the elements or any cause, as
to be untenantable and unfit for occupancy, then, Lessee may, at its option,
terminate this Lease and all rights and obligations thereunder. Lessors shall
be required to maintain fire and extended coverage insurance in an amount equal
to the replacement value and public liability insurance in the amount of at
least $3,000,000 per occurrence on the leased property during the term of the
Lease. Each party hereby releases the other from any claim for recovery for
any loss or damage to any of its property which is insured under valid and
collectible insurance policies to the extent of any recovery collectible under
such insurance. It is further agreed that this waiver shall apply when
permitted by the applicable policy of insurance. In the event of destruction,
such insurance proceeds shall be used to restore the property unless in Lessors
reasonable judgment, such property cannot be restored within 90 days. During
the period of restoration, Lessee's rental hereunder shall abate.
3 09-05-95
<PAGE>
9. RIGHT OF REFUSAL: Lessors agree that, at any time during the term
of this Lease and for one year thereafter, prior to their entry into any
agreement to sell the premises referred to herein, they shall first (in writing)
offer the same to Lessee at a price and on terms the same as those received in a
bona fide offer to purchase, and that Lessee shall have twenty (20) days from
its receipt of such an offer to accept it or this right of refusal shall
terminate.
HUTCHINSON TECHNOLOGY INCORPORATED /s/ Donald H. Wendorff
----------------------
Donald Wendorff
By /s/ Deb Rannow /s/ Laura Wendorff
----------------------- ----------------------
Deb Rannow Laura Wendorff
PURCHASING SUPERVISOR
4 09-05-95
<PAGE>
FIFTH AMENDMENT TO COMMERCIAL LEASE
This Fifth Amendment is made this 11th day of February, 1993, by and
between INVESTORS REAL ESTATE TRUST, a North Dakota Business Trust, 12 South
Main, Minot, North Dakota, as Landlord, and HUTCHINSON TECHNOLOGY, INC. a
Minnesota Corporation, 3401 4th Avenue N., Sioux Falls, South Dakota, as Tenant,
to that certain building lease dated on April 26, 1988, between Landlord's
predecessor in title, Empire Associates, a Minnesota General Partnership, and
Tenant.
WHEREAS Tenant and Landlord have agreed that an addition shall be
constructed to the building located on the leased premises of approximately
17,640 sq. ft.
NOW, THEREFORE, it is agreed between the parties that said lease agreement
shall be amended as follows:
1. CONSTRUCTION OF ADDITION. Tenant shall arrange for the construction
of the addition pursuant to plans and specifications prepared by it and approved
by Landlord. Landlord shall pay for all expenses incurred by Tenant in
connection with said construction, provided that the total cost shall not exceed
$1,300,000.00.
2. REVISED RENT. Beginning with the occupancy of the addition by
Tenant, the monthly rent shall be increased by the following amount: the total
cost of the addition paid by Landlord, including all of its out-of-pocket costs
in connection with this project and also including construction interest of
11.64% computed on each advance from the date of advance to the occupancy date
shall be multiplied by 11.64% and divided by 12.
EXAMPLE: If the total cost of the addition is $900,000, the
additional monthly rent will be: $900,000 x 11.64% / 12 = $8,730.00.
3. RATIFICATION. Except as herein above expressly amended, said building
lease and the four prior amendments thereto are hereby ratified and confirmed.
LANDLORD: TENANT:
INVESTORS REAL ESTATE TRUST HUTCHINSON TECHNOLOGY, INC.
By /s/ Thomas A. Wentz By /s/ John A. Ingleman
------------------------- --------------------------
Thomas A. Wentz
Vice-President Its CFO
--------------------------
<PAGE>
SIXTH AMENDMENT TO COMMERCIAL LEASE
This Sixth Amendment is made this 17 day of February, 1995, by and between
INVESTORS REAL ESTATE TRUST, a North Dakota Business Trust, 12 South Main,
Minot, North Dakota, as Landlord, and HUTCHINSON TECHNOLOGY, INC., a Minnesota
Corporation, 3401 4th Avenue N., Sioux Falls, South Dakota, as Tenant, to that
certain building lease dated on April 26, 1988, between Landlord's predecessor
in title, Empire Associates, a Minnesota General Partnership, and Tenant.
WHEREAS Tenant and Landlord have agreed that Landlord shall reimburse
Tenant for the expense of a parking lot which has been constructed on the leased
premises;
NOW, THEREFORE, it is agreed between the parties that said lease
agreement shall be amended as follows:
1. REIMBURSEMENT. Tenant has arranged for the construction of the
parking lot. Landlord shall pay for all expenses incurred by Tenant in
connection with said construction in the amount of $153,740.15.
2. REVISED RENT. Beginning March 1, 1995, the monthly rent shall be
$43,306.19 per month.
3. REVISED ESCROW AGREEMENT. Beginning March 1, 1995, Landlord
hereby agrees to allow Tenant to pay the real estate taxes and insurance
premiums directly when due, versus paying monthly into a escrow account as
previously agreed to.
4. RATIFICATION. Except as herein above expressly amended, said
building lease and the five prior amendments thereto are hereby ratified and
confirmed.
LANDLORD: TENANT:
INVESTORS REAL ESTATE TRUST HUTCHINSON TECHNOLOGY, INC.
By /s/ Thomas A. Wentz By /s/ Richard C. Meyer
------------------------- --------------------------
Thomas A. Wentz
Vice-President Its V.P. Administration
--------------------------
<PAGE>
SEVENTH AMENDMENT TO COMMERCIAL LEASE
This Seventh Amendment is made this 1st day of April, 1995, by and
between INVESTORS REAL ESTATE TRUST, a North Dakota Business Trust, 12 South
Main, Minot, North Dakota as Landlord, and HUTCHINSON TECHNOLOGY, INC., a
Minnesota Corporation, 3401 4th Avenue N, Sioux Falls, South Dakota, as Tenant,
to that certain building lease dated on April 26, 1988, between Landlords
predecessor in title, Empire Associates, a Minnesota General Partnership, and
Tenant.
WHEREAS Tenant and Landlord have agreed that Tenant shall, from this
time forward and at its expense, maintain a policy or policies of insurance
meeting the terms and conditions as defined in Paragraph 15 (a) of the lease
agreement
NOW, THEREFORE, it is agreed between the parties that said lease
agreement shall be amended as follows;
1. PREMISES INSURANCE. The term "Lessor" in the first line of
paragraph (a) of clause 15 of the lease agreement shall be changed to "Lessee".
2. PREMIUM INCREASES. The first sentence of Paragraph (d) of
clause 15 of the lease agreement is deleted in its entirety
3. RATIFICATION. Except as herein above expressly amended,
said building lease and the six prior amendments thereto are hereby ratified and
confirmed.
LANDLORD, TENANT;
INVESTORS REAL ESTATE TRUST HUTCHINSON TECHNOLOGY INC.
by /s/ Thomas A. Wentz by /s/ John A. Ingleman
------------------------- -------------------------
Thomas A. Wentz John A. Ingleman
Vice President Vice President of Finance
<PAGE>
EXHIBIT 11.1
HUTCHINSON TECHNOLOGY INCORPORATED
STATEMENT REGARDING COMPUTATION
OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
(In thousands, except per share data)
For the Fiscal Year Ended
--------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
NET INCOME $21,078 $5,880 $8,554
------------ ------------ ------------
------------ ------------ ------------
NET INCOME PER SHARE - PRIMARY:
Weighted average common
shares outstanding 5,358 5,332 5,290
Dilutive effect of stock
options outstanding after
application of treasury
stock method 135 114 119
------------ ------------ ------------
5,493 5,446 5,409
------------ ------------ ------------
------------ ------------ ------------
PRIMARY NET INCOME
PER SHARE $3.84 $1.08 $1.58
------------ ------------ ------------
------------ ------------ ------------
NET INCOME PER SHARE - FULLY DILUTED:
Weighted average common
shares outstanding 5,358 5,332 5,290
Dilutive effect of stock
options outstanding after
application of treasury
stock method 181 114 119
------------ ------------ ------------
5,539 5,446 5,409
------------ ------------ ------------
------------ ------------ ------------
FULLY DILUTED NET INCOME
PER SHARE $3.81 $1.08 $1.58
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following table sets forth the Company's Consolidated Statements
of Operations as a percentage of net sales and the percentage change
in the amount of such items from period to period.
<TABLE>
<CAPTION>
Percentage of Net Sales Percentage Change
------------------------- ----------------------------
1995 1994 1993 1995 to 1994 1994 to 1993
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES 100% 100% 100% 26% 20%
COST OF SALES 75 84 78 13 29
------------------------------------------------------------------------------------------------------------
GROSS PROFIT 25 16 22 88 (12)
RESEARCH AND DEVELOPMENT EXPENSE 5 4 5 74 (12)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE 10 9 12 30 (7)
------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS 10 3 5 272 (22)
OTHER INCOME - - 1 25 (17)
INTEREST EXPENSE (1) - - 165 292
------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 9 3 6 249 (28)
PROVISION FOR INCOME TAXES 2 1 2 212 (19)
------------------------------------------------------------------------------------------------------------
NET INCOME 7 2 4 258 (31)
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
</TABLE>
MARKET TRENDS - The Company expects that the expanding use of smaller computers,
increasingly complex software and the emergence of new applications
for disk storage, all of which have contributed to the historical
year-to-year increases in disk drive production will continue for the
foreseeable future. As heads become still smaller, as with pico-sized
heads, or require more leads, as with those of magneto-resistive (MR)
design, the Company believes "TRACE-TM- suspension assemblies",
suspensions integrated with electrical leads, will be of increasing
importance. The Company believes demand for disk drives will continue
to be subject, as it has in the past, to rapid short-term changes
resulting from, among other things, changes in disk drive inventory
levels, responses to competitive price changes and unpredicted high or
low market acceptance of new disk drive models.
Due to the dynamic nature of the disk drive industry, the
Company has historically experienced significant unforeseen
fluctuations in demand for certain or all of its components. Also, the
introduction of new types or sizes of read/write heads and new disk
drive designs tends to decrease customers' yields with the result that
the Company may experience a temporary elevation of demand for some
types of suspension assemblies. The advent of new heads and new disk
drive designs may require rapid development and implementation of new
suspension types which may temporarily reduce the Company's
manufacturing yields and efficiencies. There can be no assurance that
such changes will not continue to affect the Company.
The Company has experienced continually declining selling prices
due to product maturity and competitive pricing pressures. These
forces are often temporarily offset when new products, having
initially higher selling prices, enter the market.
15
--------
<PAGE>
FISCAL 1995 OPERATIONS - Net sales for 1995 were $299,998,000, an increase of
$61,204,000 or 26% compared to 1994. This increase was primarily
attributable to the Company shipping approximately 31% more suspension
assemblies during 1995 than 1994.
Gross profit for 1995 was $73,763,000, an increase of
$34,517,000 or 88% compared to 1994, and gross profit as a percent of
net sales increased from 16% to 25%. The increase in gross profit and
gross profit as a percent of net sales was primarily due to improving
manufacturing efficiencies and higher sales volume, as noted above.
The majority of the research and development expenses are
attributable to the development of new suspension assembly types to
meet customers' changing requirements. Research and development
expenses for 1995 were $15,041,000, an increase of $6,415,000 or 74%
compared to 1994. The higher expenses were primarily due to a charge
of $2,500,000 related to the technology sharing agreement with IBM
(see Liquidity, Capital Resources and Other Matters below) and
increased labor expenses of $1,841,000.
Selling, general and administrative expenses for 1995 were
$29,801,000, an increase of $6,961,000 or 30% compared to 1994. The
increased expenses were primarily due to additional profit sharing
expenses of $2,198,000 and increased labor expenses of $2,197,000. As
a percentage of net sales, selling, general and administrative
expenses increased from 9% to 10%.
Other income for 1995 was $1,462,000, an increase of $291,000 or
25% compared to 1994. The increase was primarily a result of a
$1,324,000 increase in interest income as a result of a higher average
investment balance offset partially by a $825,000 decrease in income
derived from licensing agreements.
Interest expense for 1995 was $2,636,000, an increase of
$1,641,000 as a result of higher outstanding debt and lower
capitalization of interest.
The income tax provision for 1995 was based on an effective tax
rate for the year of 24% which was below the statutory federal rate
primarily due to the large portion of sales that qualify for the
benefit of the Company's Foreign Sales Corporation.
Net income for 1995 was $21,078,000, an increase of $15,198,000
compared to 1994. The increase was primarily due to improving
manufacturing efficiencies and higher sales volume, as noted above.
FISCAL 1994 OPERATIONS - Net sales for 1994 were $238,794,000, an increase
of $40,060,000 or 20% compared to 1993. This increase was primarily
attributable to the Company shipping approximately 35% more suspension
assemblies during 1994 than 1993, offset somewhat by a lower average
selling price due to shifts in product mix.
Gross profit for 1994 was $39,246,000, a decrease of $5,177,000
or 12% compared to 1993, and gross profit as a percent of net sales
decreased from 22% to 16%. The decrease in gross profit and gross
profit as a percent of net sales was primarily due to an $18,232,000
increase in labor expenses, a $7,328,000 increase in depreciation
expense and lower production yields and efficiencies on newer
suspension assembly types.
Research and development expenses for 1994 were $8,626,000, a
decrease of $1,220,000 or 12% compared to 1993. The lower expenses
were primarily in medical products development as a result of a
narrower product focus.
Selling, general and administrative expenses for 1994 were
$22,840,000, a decrease of $1,776,000 or 7% compared to 1993. The
decreased expenses were primarily due to decreased profit sharing
expense. As a percentage of net sales, selling, general and
administrative expenses decreased from 12% to 9%.
16
- --------
<PAGE>
Other income for 1994 was $1,171,000, a decrease of $232,000 or
17% compared to 1993. The decrease was primarily a result of a
$959,000 decrease in interest income as a result of a lower average
investment balance offset in part by $712,000 in income derived from
licensing agreements.
Interest expense for 1994 was $995,000, an increase of $741,000
as a result of additional outstanding debt.
The income tax provision for 1994 was based on an effective tax
rate for the year of 26% which was below the statutory federal rate
primarily due to the large amount of sales that qualify for the
benefit of the Company's Foreign Sales Corporation.
Net income for 1994 was $5,880,000, a decrease of $2,674,000
compared to 1993. The decrease was primarily due to higher labor and
depreciation expenses and lower production yields and efficiencies, as
noted above.
FISCAL 1993 OPERATIONS - Net sales for 1993 were $198,734,000, an increase of
$38,394,000 or 24% compared to 1992. This increase was primarily
attributable to the Company shipping approximately 27% more suspension
assemblies during 1993 than 1992. To a lesser extent, sales also
increased due to a shift in the suspension assembly sales mix towards
more precise, higher value products.
Gross profit for 1993 was $44,423,000, an increase of $4,162,000
or 10% compared to 1992. The increase was primarily a result of the
higher sales volume noted above. Gross profit as a percent of net
sales decreased from 25% in 1992 to 22% in 1993 as a result of reduced
and fluctuating demand for older suspension assembly types and a rapid
shift toward newer types. This rapid shift during the second half of
the fiscal year reduced the Company's manufacturing efficiencies.
Research and development expenses for 1993 were $9,846,000, an
increase of $4,076,000 or 71% compared to 1992. This increase was
attributable to the development of new suspension assembly types to
meet customers' changing demand and medical products development. The
Company spent $2,945,000 and $1,949,000 for medical products
development in 1993 and 1992, respectively.
Selling, general and administrative expenses for 1993 were
$24,616,000, an increase of $3,706,000 or 18% compared to 1992. The
higher spending was attributable to increased salaries, supplies and
lease expenses.
Interest expense decreased $962,000 as a result of lower
outstanding debt, increased capitalization of interest expense and a
lower average interest rate due to an interest rate swap agreement.
The income tax provision for 1993 represents an overall
effective tax rate of 23%. This was lower than the federal statutory
rate primarily due to the tax benefit derived from the Company's
Foreign Sales Corporation.
Net income for 1993 was $8,554,000, a decrease of $4,295,000
compared to 1992. Decreased manufacturing efficiencies, noted above,
along with the increased research and development and selling, general
and administrative expenses contributed to the decrease in net income.
LIQUIDITY, CAPITAL RESOURCES AND OTHER MATTERS - Principal sources of liquidity
are cash flow from operations, cash balances and additional financing
capacity. The Company's cash and cash equivalents increased to
$30,479,000 at September 24, 1995 compared to $18,570,000 at September
25, 1994. The Company generated cash from operating activities of
$57,814,000 in fiscal 1995 compared to $11,967,000 in fiscal 1994 and
$22,449,000 in fiscal 1993.
17
--------
<PAGE>
Cash used for capital expenditures totaled $44,472,000 in fiscal
1995 compared to $29,540,000 in fiscal 1994 and $46,768,000 in fiscal
1993. The expenditures in fiscal 1995 were primarily for manufacturing
and support equipment at the Company's manufacturing facilities,
initial construction of the Eau Claire suspension assembly
manufacturing facility and for office space at the Hutchinson site.
The Company anticipates, but is not contractually committed to, fiscal
1996 expenditures of approximately $120,000,000 primarily for
manufacturing and support equipment, the completion of the Eau Claire
suspension assembly manufacturing facility and the initial
construction of the Company's second photoetch facility at the Eau
Claire site. Financing of these capital expenditures will be
principally from internally generated funds, cash balances and/or
additional financing capacity.
The Company maintains a $15,000,000 unsecured working capital
line of credit agreement with Harris Trust and Savings Bank and
Norwest Bank Minnesota, National Association. At September 24, 1995
the Company had no borrowings under this agreement. The Company's
maturities of long-term debt for the five years subsequent to
September 24, 1995 are $4,255,000, $5,710,000, $5,290,000, $4,570,000,
and $3,950,000, respectively. The Company's debt agreements contain
various restrictive covenants. The Company is in compliance with all
such covenants.
The Company has entered into a Technology Transfer and
Development Agreement (the "Development Agreement") and a Patent
License Agreement with IBM. Under the Development Agreement, IBM will
make available to the Company the results of many years of research by
IBM into a new type of suspension, called an integrated lead
suspension. The Company and IBM will pursue joint research and
development efforts to complete the commercialization of integrated
lead suspension designs. The Company itself already has devoted
substantial efforts independent of IBM to the research and development
of "TRACE-TM- suspension assemblies", or "TSA-TM- suspension
assemblies", and will contribute its existing TSA-TM- technology to
the joint effort. Under the Development Agreement, the Company is
required to make periodic payments over the next four fiscal years
totaling $2,500,000, all of which was reflected as a one-time expense
during the third quarter of fiscal 1995. Upon shipment of a specified
cumulative quantity of integrated lead suspensions, the Company will
be required to pay additional fixed sums totaling $5,500,000 over four
fiscal years. This sum will be charged as a one-time expense in the
period the specified quantity of integrated lead suspensions are
shipped, which may occur in fiscal 1996.
The Company is involved in certain environmental and legal
matters which may result in additional future cash requirements. See
the discussion of these matters in Note 6, "Commitments and
Contingencies", to the consolidated financial statements.
The Company believes that its cash and cash equivalents,
additional cash to be generated from operations, its existing bank
facilities and additional financing capacity will be sufficient to
meet the Company's current and long-term liquidity, debt installments,
and capital requirements.
During fiscal 1995, the Company adopted Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS 121"), requires impairment losses on long-lived assets to be
recognized when an asset's book value exceeds its expected future cash
flows (undiscounted). The effect of adoption of SFAS 121 did not have
a material impact on the financial position or results of operations
of the Company.
INFLATION - Management believes inflation has not had a material effect on the
Company's operations or on its financial condition. There can be no
assurance, however, that the Company's business will not be affected
by inflation in the future.
18
- --------
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
HUTCHINSON TECHNOLOGY INCORPORATED AND SUBSIDIARIES
<TABLE>
<CAPTION>
(In thousands, except per share data) 1995 1994 1993
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $299,998 $238,794 $198,734
COST OF SALES 226,235 199,548 154,311
---------------------------------------------------------------------------------------------------
GROSS PROFIT 73,763 39,246 44,423
RESEARCH AND DEVELOPMENT EXPENSE 15,041 8,626 9,846
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE 29,801 22,840 24,616
---------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS 28,921 7,780 9,961
OTHER INCOME 1,462 1,171 1,403
INTEREST EXPENSE (2,636) (995) (254)
---------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 27,747 7,956 11,110
PROVISION FOR INCOME TAXES 6,669 2,076 2,556
---------------------------------------------------------------------------------------------------
NET INCOME $ 21,078 $ 5,880 $ 8,554
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $ 3.84 $ 1.08 $ 1.58
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 5,493 5,446 5,409
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 19
--------
<PAGE>
CONSOLIDATED BALANCE SHEETS
HUTCHINSON TECHNOLOGY INCORPORATED AND SUBSIDIARIES
<TABLE>
<CAPTION>
SEPTEMBER 24, September 25,
(In thousands) 1995 1994
--------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 30,479 $ 18,570
SECURITIES AVAILABLE FOR SALE 1,190 -
RECEIVABLES, NET 40,683 39,115
INVENTORIES 13,298 9,529
PREPAID TAXES AND OTHER EXPENSES 4,842 3,611
--------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 90,492 70,825
--------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
LAND, BUILDINGS AND IMPROVEMENTS 35,371 32,885
EQUIPMENT 150,866 132,137
CONSTRUCTION IN PROGRESS 22,804 11,123
LESS: ACCUMULATED DEPRECIATION (115,225) (98,258)
--------------------------------------------------------------------------------------------------
NET PROPERTY, PLANT AND EQUIPMENT 93,816 77,887
--------------------------------------------------------------------------------------------------
OTHER ASSETS 6,590 2,436
--------------------------------------------------------------------------------------------------
$ 190,898 $151,148
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
CURRENT MATURITIES OF LONG-TERM DEBT $ 4,255 $ 2,380
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 13,907 7,327
ACCRUED COMPENSATION 13,628 8,686
ACCRUED INCOME TAXES 4,418 436
--------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 36,208 18,829
--------------------------------------------------------------------------------------------------
LONG-TERM DEBT AND OTHER 34,945 37,700
--------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTE 6)
SHAREHOLDERS' INVESTMENT:
COMMON STOCK, $.02 PAR VALUE, 15,000,000 SHARES AUTHORIZED,
5,447,000 AND 5,333,000 ISSUED AND OUTSTANDING 109 107
ADDITIONAL PAID-IN CAPITAL 43,261 39,215
RETAINED EARNINGS 76,375 55,297
--------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' INVESTMENT 119,745 94,619
--------------------------------------------------------------------------------------------------
$ 190,898 $151,148
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
</TABLE>
20 SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
- --------
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
HUTCHINSON TECHNOLOGY INCORPORATED AND SUBSIDIARIES
<TABLE>
<CAPTION>
(IN THOUSANDS) 1995 1994 1993
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 21,078 $ 5,880 $ 8,554
ADJUSTMENTS TO RECONCILE NET INCOME
TO CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 28,174 23,974 15,737
DEFERRED TAX BENEFIT (2,498) (1,493) (1,591)
LOSS ON DISPOSAL OF ASSETS 403 49 150
CHANGES IN OPERATING ASSETS AND
LIABILITIES (NOTE 7) 10,657 (16,443) (401)
------------------------------------------------------------------------------------------------------
CASH PROVIDED BY OPERATING ACTIVITIES 57,814 11,967 22,449
------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
CAPITAL EXPENDITURES (44,472) (29,540) (46,768)
PROCEEDS FROM THE SALE OF EQUIPMENT - 66 40
PURCHASES OF MARKETABLE SECURITIES (3,080) - (18,052)
SALES OF MARKETABLE SECURITIES 1,890 3,547 31,267
------------------------------------------------------------------------------------------------------
CASH USED FOR INVESTING ACTIVITIES (45,662) (25,927) (33,513)
------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM ISSUANCE OF LONG-TERM DEBT - 43,500 2,000
REPAYMENTS OF LONG-TERM DEBT (2,380) (15,880) (6,164)
NET PROCEEDS FROM ISSUANCE
OF COMMON STOCK 2,137 50 3,110
------------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (243) 27,670 (1,054)
------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 11,909 13,710 (12,118)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 18,570 4,860 16,978
------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 30,479 $ 18,570 $ 4,860
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 21
--------
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
HUTCHINSON TECHNOLOGY INCORPORATED AND SUBSIDIARIES
<TABLE>
<CAPTION>
Common Stock Additional
-------------------- Paid-In Retained
(In thousands) Shares Amount Capital Earnings
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, September 27, 1992 5,173 $103 $36,059 $40,863
Exercise of stock options 175 4 3,810 -
Common stock issuance 1 - 31 -
Common stock retirements (18) - (735) -
Net income - - - 8,554
--------------------------------------------------------------------------------------------------
Balance, September 26, 1993 5,331 107 39,165 49,417
Exercise of stock options 2 - 50 -
Net income - - - 5,880
--------------------------------------------------------------------------------------------------
Balance, September 25, 1994 5,333 107 39,215 55,297
Exercise of stock options 115 2 4,067 -
Common stock issuance - - 12 -
Common stock retirements (1) - (33) -
Net income - - - 21,078
--------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 24, 1995 5,447 $109 $43,261 $76,375
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
</TABLE>
22 SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
- --------
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HUTCHINSON TECHNOLOGY INCORPORATED AND SUBSIDIARIES
(COLUMNAR DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of Hutchinson Technology Incorporated and its
subsidiaries (the Company), all of which are wholly owned. All
significant intercompany accounts and transactions have been
eliminated in consolidation.
RECLASSIFICATIONS - Certain 1994 amounts in the accompanying
consolidated financial statements have been reclassified to conform to
the 1995 presentation. These reclassifications had no effect on
previously reported net income or shareholders' investment.
FISCAL YEAR - The Company's fiscal year is the fifty-two/fifty-three
week period ending on the last Sunday in September. The fiscal years
ended September 24, 1995, September 25, 1994 and September 26, 1993
are fifty-two week periods.
NEW ACCOUNTING PRONOUNCEMENT - Statement of Financial Accounting
Standards No. 121 "Accounting for the Impairment of Long-Lived Assets
to Be Disposed Of" ("SFAS 121"), requires impairment losses on long-
lived assets to be recognized when an asset's book value exceeds its
expected future cash flows (undiscounted). The Company adopted SFAS
121 in fiscal 1995 and it did not have a material impact on the
financial position or results of operations of the Company.
Statement of Financial Accounting Standards No. 123 "Accounting
for Stock-Based Compensation" ("SFAS 123"), requires pro forma
disclosure of net income and earnings per share as if the fair value
based method of accounting had been applied. The Company expects to
adopt SFAS 123 in fiscal 1996 and anticipates it will not have a
material impact on the financial position or results of operations of
the Company.
REVENUE RECOGNITION AND CUSTOMERS - The Company recognizes revenue
upon the shipment of completed products. An analysis of customer sales
is as follows:
Percentage of Net Sales 1995 1994 1993
----------------------------------------------------------------------
SEAGATE TECHNOLOGY INCORPORATED 36% 31% 25%
READ-RITE CORPORATION 19 23 21
YAMAHA CORPORATION 13 9 6
SAE MAGNETICS, LTD. 9 7 8
IBM 9 5 8
----------------------------------------------------------------------
----------------------------------------------------------------------
Sales to the Company's five largest customers constituted 86%,
75% and 69% of net sales for fiscal 1995, 1994 and 1993, respectively.
23
--------
<PAGE>
Sales to foreign locations were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------------------------------------------------
<S> <C> <C> <C>
FOREIGN-BASED ENTERPRISES $ 46,075 $29,394 $29,281
FOREIGN SUBSIDIARIES OF
U.S. CORPORATIONS 54,398 14,126 4,375
----------------------------------------------------------------------
$100,473 $43,520 $33,656
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
The majority of these foreign location sales were to the Pacific
Rim region. In addition, the Company had significant sales to U.S.
corporations which used the Company's products in their offshore
manufacturing sites.
CASH, CASH EQUIVALENTS - Cash equivalents consist of all highly liquid
investments with original maturities of ninety days or less.
SECURITIES AVAILABLE FOR SALE - Securities available for sale consist
of U.S. Treasury bills. The Company follows the provisions of
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." The securities
available for sale have been pledged for certain self-insured
reserves. The pledged amounts totaled $1,190,000 at September 24, 1995
and none at September 25, 1994.
RECEIVABLES - The Company grants credit to customers, but generally
does not require collateral or any other security to support amounts
due. Receivables are net of allowances of $1,924,000 at September 24,
1995 and $1,886,000 at September 25, 1994.
INVENTORIES - All inventories are stated at the lower of last-in,
first-out (LIFO) cost or market. Inventories consist of the following
at September 24, 1995 and September 25, 1994:
<TABLE>
<CAPTION>
1995 1994
----------------------------------------------------------
<S> <C> <C>
RAW MATERIALS $ 3,019 $4,339
WORK IN PROCESS 3,159 3,139
FINISHED GOODS 7,455 2,581
LIFO RESERVE (335) (530)
----------------------------------------------------------
$ 13,298 $9,529
----------------------------------------------------------
----------------------------------------------------------
</TABLE>
PROPERTY AND DEPRECIATION - Property, plant and equipment are stated
at cost. Costs of renewals and betterments are capitalized and
depreciated. Maintenance and repairs are charged to expense as
incurred.
Property is depreciated using primarily accelerated methods for
both financial and tax reporting purposes. Estimated useful lives for
financial reporting purposes are as follows:
Buildings and improvements 4 to 25 years
Equipment 3 to 5 years
ENGINEERING AND PROCESS DEVELOPMENT - The Company's engineers and
technicians are responsible for the development of new products and
process technologies and implementation of process improvements.
Expenditures related to these activities totaled $32,567,000 in 1995,
$25,663,000 in 1994 and $24,552,000 in 1993. Of these amounts,
approximately $15,041,000 in 1995, $8,626,000 in 1994 and $9,846,000
in 1993 are classified as research and development expense.
24
- --------
<PAGE>
INCOME TAXES - Deferred taxes are provided at currently enacted tax
rates on all significant temporary differences.
NET INCOME PER SHARE - Net income per share, which is approximately
equivalent on both a primary and fully diluted basis, is based, to the
extent dilutive, on the weighted average number of common and common
equivalent shares outstanding.
2 FINANCING ARRANGEMENTS
<TABLE>
<CAPTION>
Long-term Debt 1995 1994
----------------------------------------------------------------------
<S> <C> <C>
SENIOR UNSECURED NOTES, 7.46%, PAYABLE IN
VARYING SEMI-ANNUAL INSTALLMENTS THROUGH
FEBRUARY 2004 $30,000 $30,000
SENIOR UNSECURED NOTES, 10.3%, PAYABLE IN
VARYING ANNUAL INSTALLMENTS THROUGH
OCTOBER 1998 4,640 5,980
VARIABLE RATE DEMAND NOTE, CITY OF HUTCHINSON,
PAYABLE IN VARYING ANNUAL INSTALLMENTS
THROUGH JUNE 2004 1,700 1,800
SENIOR UNSECURED NOTES, 10.1%, PAYABLE IN
VARYING ANNUAL INSTALLMENTS THROUGH
JULY 1997 1,360 2,300
----------------------------------------------------------------------
37,700 40,080
LESS-CURRENT MATURITIES (4,255) (2,380)
----------------------------------------------------------------------
$33,445 $37,700
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
The Company maintains a $15,000,000 unsecured working capital
line of credit agreement with Harris Trust and Savings Bank and
Norwest Bank Minnesota, National Association. At September 24, 1995
the Company had no borrowings under this agreement.
The Company's financing agreements contain certain restrictive
covenants which require the Company, among other things, to maintain
specified levels of net income, working capital, tangible net worth
and financial ratios, and also impose limitations on capital
expenditures, additional indebtedness, leases, guarantees, and the
payment of dividends. The Company is in compliance with all such
covenants of the above agreements. In addition, certain equipment is
pledged as collateral for the variable rate demand note.
Maturities of long-term debt for the five years subsequent to
September 24, 1995 are as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------
<S> <C>
1996 $ 4,255
1997 5,710
1998 5,290
1999 4,570
2000 3,950
THEREAFTER 13,925
------------------------------------------------------------
$37,700
------------------------------------------------------------
------------------------------------------------------------
</TABLE>
--------
25
<PAGE>
Effective March 30, 1992, the Company entered into an interest
rate swap agreement with Harris Trust and Savings Bank (Harris) in an
effort to reduce overall interest cost on its 10.3% fixed rate notes
due October 28, 1998. The agreement effectively changes the Company's
interest rate on $4,640,000 of these notes to a floating rate of 10.3%
less the difference between 6.0% and the LIBOR. The Company has
purchased a cap on the LIBOR rate at 6%. The interest rate swap
agreement matures on October 28, 1996. The Company is exposed to
credit loss in the event of nonperformance by Harris; however, the
Company does not anticipate such nonperformance.
3 INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT
FEDERAL $ 8,142 $ 3,123 $ 3,343
STATE 1,025 446 804
DEFERRED (2,498) (1,493) (1,591)
----------------------------------------------------------------------
$ 6,669 $ 2,076 $ 2,556
----------------------------------------------------------------------
----------------------------------------------------------------------
<CAPTION>
The deferred benefit is composed of the following:
1995 1994 1993
----------------------------------------------------------------------
ASSET BASES, LIVES AND DEPRECIATION
METHODS $ (552) $(1,002) $ (677)
RESERVES AND ACCRUALS NOT CURRENTLY
DEDUCTIBLE (1,534) (60) (910)
TAX CREDITS (407) (427) -
OTHER, NET (5) (4) (4)
----------------------------------------------------------------------
$(2,498) $(1,493) $(1,591)
----------------------------------------------------------------------
----------------------------------------------------------------------
<CAPTION>
A reconciliation of the federal statutory tax rate to the effective
tax rate is as follows:
1995 1994 1993
----------------------------------------------------------------------
STATUTORY FEDERAL INCOME TAX RATE 35% 34% 34%
EFFECT OF:
STATE INCOME TAXES, NET OF FEDERAL
INCOME TAX BENEFITS 2 4 3
TAX BENEFITS OF THE FOREIGN SALES
CORPORATION (12) (12) (15)
OTHER, NET (1) - 1
----------------------------------------------------------------------
24% 26% 23%
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. At September 24, 1995, the Company had unused tax credits of
$4,933,000, of which $3,538,000 can be carried forward indefinitely,
and unused tax credits of $1,395,000 which expire at
- --------
26
<PAGE>
various dates through 2010. A valuation allowance of $2,235,000 has been
recognized to offset the related deferred tax assets due to the uncertainty of
realizing the benefit of certain tax credits.
The following is a table of the significant components of the Company's deferred
tax assets as of September 24, 1995:
<TABLE>
<CAPTION>
Deferred Tax Assets SEPTEMBER 24, 1995 September 25, 1994
-----------------------------------------------------------------------------------
<S> <C> <C>
CURRENT DEFERRED TAX ASSETS
SALES AND ACCOUNTS RECEIVABLES $ 702 $ 687
INVENTORIES 1,830 1,568
ACCRUALS AND OTHER RESERVES 1,783 935
-----------------------------------------------------------------------------------
TOTAL CURRENT DEFERRED TAX ASSETS 4,315 3,190
LONG-TERM DEFERRED TAX ASSETS (LIABILITIES)
PROPERTY, PLANT AND EQUIPMENT 2,858 (105)
ACCRUALS AND OTHER RESERVES 602 -
TAX CREDITS 4,933 3,875
VALUATION ALLOWANCE (2,235) (1,601)
-----------------------------------------------------------------------------------
TOTAL LONG-TERM DEFERRED TAX ASSETS 6,158 2,169
-----------------------------------------------------------------------------------
TOTAL DEFERRED TAX ASSETS $10,473 $ 5,359
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
</TABLE>
The Internal Revenue Service is currently examining the Company's
fiscal 1991, 1992 and 1993 income tax returns. The Company anticipates
that the results of the examination will not significantly impact the
Company's financial position.
4 FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is
practicable to estimate that value:
CASH AND CASH EQUIVALENTS -- The carrying amount approximates fair
value because of the short maturity of these instruments.
SECURITIES AVAILABLE FOR SALE -- The fair value of these instruments
is based on quoted market prices.
LONG-TERM DEBT -- The fair value of the Company's long-term debt is
estimated based on the discounted value of the future cash flows
expected to be paid on the loans. The discount rate used to estimate
the fair value of the loans is the rate currently available to the
Company for loans with similar terms and maturities.
The estimated fair values of the Company's financial instruments
are as follows:
<TABLE>
<CAPTION>
1995 1994
-----------------------------------------------------------
CARRYING AMOUNT FAIR VALUE Carrying Amount Fair Value
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH AND CASH EQUIVALENTS $30,479 $30,479 $18,570 $18,570
SECURITIES AVAILABLE FOR SALE 1,190 1,190 - -
LONG-TERM DEBT 37,700 37,593 40,080 40,282
---------------------------------------------------------------------------------------------
</TABLE>
--------
27
<PAGE>
5 EMPLOYEE BENEFITS
STOCK OPTIONS - In January 1995, the shareholders approved an
amendment to the 1988 Stock Option Plan under which up to 1,000,000
common shares are reserved for issuance of which options representing
631,345 common shares have been granted as of September 24, 1995.
Options may be granted to any employee, including officers and
directors of the Company, prior to May 31, 1998, at a price not less
than the fair market value of the Company's common stock at the date
the options are granted. The plan limits the number of shares for
which any single employee may be granted options in any one calendar
year to 100,000 and options generally expire ten years from the date
of grant or at an earlier date as determined by the committee of the
Board of Directors that administers the Plan.
Options granted under the 1988 Stock Option Plan may not be
exercised for at least six months from the date of grant.
<TABLE>
<CAPTION>
1988 Stock Stock Option
Option Plan Agreement
------------------------------------------------------------
<S> <C> <C>
Balance, September 27, 1992 339,225 87,500
Granted at $21.50 50,000 -
Exercised at $5.20 to $12.75 (87,375) (87,500)
------------------------------------------------------------
Balance, September 26, 1993 301,850 -
Granted at $31.00 53,800 -
Exercised at $7.75 to $24.50 (2,400) -
Expired (25) -
------------------------------------------------------------
Balance, September 25, 1994 353,225 -
Granted at $23.25 127,420 -
Exercised at $6.00 to $31.00 (115,003) -
------------------------------------------------------------
BALANCE, SEPTEMBER 24, 1995 365,642 -
------------------------------------------------------------
</TABLE>
EMPLOYEE BENEFIT PLANS - The Company has a defined contribution plan
covering its employees. The Company's contributions to the plan were
$3,979,000 in 1995, $2,241,000 in 1994 and $1,790,000 in 1993.
The Company sponsors a comprehensive medical and dental plan for
qualified employees that is funded by contributions from both the
Company and plan participants. Contributions are made through a
Voluntary Employee's Benefit Association Trust. The Company recognized
expense related to these plans of $10,427,000 in 1995, $10,001,000 in
1994 and $5,592,000 in 1993.
28
- ------
<PAGE>
6 COMMITMENTS AND CONTINGENCIES
The Company is committed under various operating lease agreements.
Total rent expense under these operating leases was $4,866,000 in
1995, $4,199,000 in 1994 and $3,760,000 in 1993. Future minimum
payments for all operating leases with initial or remaining terms of
one year or more subsequent to September 24, 1995 are as follows:
-----------------------------------
1996 $4,222
1997 3,445
1998 2,570
1999 1,442
2000 AND THEREAFTER 1,751
-----------------------------------
The Company has entered into a Technology Transfer and
Development Agreement (the "Development Agreement") and a Patent
License Agreement with IBM. Under the Development Agreement, IBM will
make available to the Company the results of many years of research by
IBM into a new type of suspension, called an integrated lead
suspension. The Company and IBM will pursue joint research and
development efforts to complete the commercialization of integrated
lead suspension designs. The Company itself already has devoted
substantial efforts independent of IBM to the research and development
of "TRACE-TM- suspension assemblies", or "TSA-TM- suspension
assemblies", and will contribute its existing TSA-TM- technology to
the joint effort. Under the Development Agreement, the Company is
required to make periodic payments over the next four fiscal years
totaling $2,500,000, all of which was reflected as a one-time expense
during the third quarter of fiscal 1995. Upon shipment of a specified
cumulative quantity of integrated lead suspensions, the Company will
be required to pay additional fixed sums totaling $5,500,000 over four
fiscal years. This sum will be charged as a one-time expense in the
period the specified quantity of integrated lead suspensions are
shipped, which may occur in fiscal 1996.
In August of 1988, the Company and hundreds of other corporations
were informed that they are "potentially responsible parties" under
the Comprehensive Environmental Response Compensation and Liability
Act (CERCLA) as generators of hazardous waste disposed of at a waste
site in Gary, Indiana. In December of 1989, the Company settled its
potential liability under a cost recovery action by paying $9,000 of
the surface cleanup costs (estimated to have been more than $2,000,000
in the aggregate). The settlement did not resolve the potential
liability, if any, of the Company for future cleanup costs relating to
soil and ground water contamination.
The United States Environmental Protection Agency (USEPA)
notified the Company in September 1993 of its further potential
liability for reimbursement of the cost of future additional cleanup
of the Gary, Indiana site, in connection with the Company's status as
a "potentially responsible party" under CERCLA. The Company responded
to the USEPA that it is willing to cooperate with the agency in
resolving its potential liability regarding this site, and informing
the USEPA that the Company previously had entered into a settlement
agreement with other potentially responsible parties, under which the
Company may be entitled to indemnification for some or all of the
liabilities referred to in the USEPA notice.
29
-----
<PAGE>
The Company and a number of other parties currently are
negotiating with the USEPA regarding the terms of a proposed further
settlement of all remaining potential site liabilities.
The Company and certain users of the Company's products have from
time to time received, and may in the future receive, communications
from third parties asserting patents against the Company or its
customers which may relate to certain of the Company's manufacturing
equipment or products or to products which include the Company's
products as a component. Although the Company has not been a party to
any material intellectual property litigation, certain of its
customers have been sued on patents having claims closely related to
products sold by the Company. In the event any third party were to
make a valid infringement claim and a license were not available on
terms acceptable to the Company, the Company's operating results could
be adversely affected.
The Company is party to certain other claims arising in the
ordinary course of business. In the opinion of management, the outcome
of such claims will not materially affect the Company's current or
future financial position or results of operations.
7 SUPPLEMENTARY CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
CHANGES IN OPERATING ASSETS AND LIABILITIES:
RECEIVABLES, NET $(1,568) $(16,795) $ 3,134
INVENTORIES (3,769) (1,630) (2,261)
PREPAID TAXES AND OTHER EXPENSES (1,231) 1,023 (2,237)
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 15,725 959 963
OTHER NON-CURRENT LIABILITIES 1,500 -- --
-----------------------------------------------------------------------------------------
$10,657 $(16,443) $ (401)
-----------------------------------------------------------------------------------------
CASH PAID FOR:
INTEREST (NET OF AMOUNT CAPITALIZED) $ 2,655 $ 767 $ 326
INCOME TAXES 7,792 6,055 4,503
-----------------------------------------------------------------------------------------
Capitalized interest was $512,000 in 1995, $1,142,000 in 1994 and $932,000 in 1993.
</TABLE>
30
- -----
<PAGE>
8 SUMMARY OF QUARTERLY INFORMATION (unaudited)
The following table summarizes unaudited financial data for fiscal
years 1995 and 1994.
<TABLE>
<CAPTION>
1995 BY QUARTER 1994 by Quarter
-----------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH First Second Third Fourth
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET SALES $63,495 $67,889 $81,892 $86,722 $46,957 $58,636 $62,787 $70,414
GROSS PROFIT 12,988 15,239 21,895 23,641 4,250 9,707 11,345 13,944
INCOME (LOSS) FROM
OPERATIONS 3,474 5,678 8,113 11,656 (3,403) 2,067 3,318 5,798
INCOME (LOSS) BEFORE
INCOME TAXES 3,178 5,282 7,886 11,401 (3,039) 2,317 3,119 5,559
NET INCOME (LOSS) 2,345 4,084 5,988 8,661 (2,341) 1,804 2,308 4,109
NET INCOME (LOSS)
PER SHARE $ .43 $ .75 $ 1.09 $ 1.55 $ (.44) $ .33 $ .42 $ .76
PRICE RANGE PER SHARE
HIGH $28.750 $31.750 $44.000 $89.000 $33.250 $39.875 $38.000 $34.250
LOW $23.000 $24.250 $28.500 $42.250 $22.375 $24.500 $21.750 $22.750
----------------------------------------------------------------------------------------------------
</TABLE>
The price range per share, reflected above, is the highest and
lowest closing prices as quoted on The NASDAQ National Market during
each quarter.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF HUTCHINSON TECHNOLOGY
INCORPORATED:
We have audited the accompanying consolidated balance sheets of
Hutchinson Technology Incorporated (a Minnesota corporation) and
Subsidiaries as of September 24, 1995 and September 25, 1994, and the
related consolidated statements of operations, shareholders'
investment and cash flows for each of the three years in the period
ended September 24, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
Hutchinson Technology Incorporated and Subsidiaries as of September
24, 1995 and September 25, 1994, and the results of their operations
and their cash flows for each of the three years in the period ended
September 24, 1995 in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
October 26, 1995
31
-----
<PAGE>
ELEVEN-YEAR SELECTED FINANCIAL DATA
HUTCHINSON TECHNOLOGY INCORPORATED AND SUBSIDIARIES
<TABLE>
<CAPTION>
Annual Growth (In thousands, except per share data
5-year 10-year and number of employees) 1995 1994 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
20% 19% NET SALES $299,998 $238,794 $198,734 $160,340 $143,260 $122,444 $92,321
23 17 GROSS PROFIT 73,763 39,246 44,423 40,261 27,920 26,107 7,696
PERCENT OF NET SALES 25% 16% 22% 25% 19% 21% 8%
28 16 INCOME (LOSS) FROM OPERATIONS $ 28,921 $ 7,780 $ 9,961 $ 13,581 $ 7,265 $ 8,528 $(7,221)
PERCENT OF NET SALES 10% 3% 5% 8% 5% 7% (8)%
32 18 NET INCOME (LOSS) $ 21,078 $ 5,880 $ 8,554 $ 12,849 $ 4,499 $ 5,338 $(5,693)
PERCENT OF NET SALES 7% 2% 4% 8% 3% 4% (6)%
46 16 CAPITAL EXPENDITURES $ 44,472 $ 29,540 $ 46,768 $ 20,492 $ 17,747 $ 6,794 $ 9,568
31 26 RESEARCH AND DEVELOPMENT EXPENSE 15,041 8,626 9,846 5,770 4,208 3,959 4,065
24 25 DEPRECIATION EXPENSE 28,174 23,974 15,737 12,908 11,253 9,719 12,305
31 28 CASH FLOW FROM OPERATING ACTIVITIES 57,814 11,967 22,449 19,397 16,944 15,174 6,871
AT YEAR END:
15% 18% RECEIVABLES, NET $ 40,683 $ 39,115 $ 22,320 $ 25,454 $ 18,499 $ 20,216 $15,932
18 10 INVENTORIES 13,298 9,529 7,899 5,638 4,580 5,913 3,898
19 23 WORKING CAPITAL 54,284 51,996 26,238 49,018 18,083 22,768 15,767
28 18 NET PROPERTY, PLANT AND EQUIPMENT 93,816 77,887 72,419 41,513 34,304 27,618 30,419
24 19 TOTAL ASSETS 190,898 151,148 116,639 109,126 65,992 64,669 55,775
13 16 TOTAL DEBT 37,700 40,080 12,460 16,755 19,354 20,550 21,756
TOTAL DEBT AS A PERCENTAGE OF TOTAL
CAPITALIZATION 24% 30% 12% 18% 37% 42% 48%
33 22 SHAREHOLDERS' INVESTMENT $119,745 $ 94,619 $ 88,689 $ 77,025 $ 33,512 $ 28,834 $23,426
RETURN ON SHAREHOLDERS' INVESTMENT 20% 6% 10% 23% 14% 20% (22)%
13 13 NUMBER OF EMPLOYEES 4,858 4,600 4,108 3,332 2,798 2,648 2,327
7 4 SHARES OF STOCK OUTSTANDING 5,447 5,333 5,331 5,173 3,969 3,948 3,941
PER COMMON SHARE:
23% 13% NET INCOME (LOSS) $ 3.84 $ 1.08 $ 1.58 $ 2.72 $ 1.12 $ 1.34 $ (1.44)
25 17 SHAREHOLDERS' INVESTMENT (BOOK VALUE) 21.98 17.74 16.64 14.88 8.44 7.30 5.94
PRICE RANGE
46 24 HIGH 89.000 39.875 49.750 32.000 13.750 13.500 15.250
36 12 LOW 23.000 21.750 20.500 9.500 6.125 5.000 6.250
<CAPTION>
Annual Growth (In thousands, except per share data
5-year 10-year and number of employees) 1988 1987 1986 1985
- ----------------------------------------------------------------------------------------------
FOR THE YEAR:
<S> <C> <C> <C> <C> <C> <C> <C>
20% 19% NET SALES $113,714 $77,756 $47,166 $52,668
23 17 GROSS PROFIT 19,329 15,673 9,422 15,396
PERCENT OF NET SALES 17% 20% 20% 29%
28 16 INCOME (LOSS) FROM OPERATIONS $ 6,540 $ 6,400 $ 2,139 $ 6,793
PERCENT OF NET SALES 6% 8% 5% 13%
32 18 NET INCOME (LOSS) $ 4,267 $ 4,665 $ 2,710 $ 3,909
PERCENT OF NET SALES 4% 6% 6% 7%
46 16 CAPITAL EXPENDITURES $ 18,820 $10,955 $ 5,346 $10,121
31 26 RESEARCH AND DEVELOPMENT EXPENSE 2,774 1,396 998 1,478
24 25 DEPRECIATION EXPENSE 8,047 5,650 3,958 3,032
31 28 CASH FLOW FROM OPERATING ACTIVITIES 7,291 6,996 7,395 5,034
AT YEAR END:
15% 18% RECEIVABLES, NET $ 19,166 $11,759 $ 6,997 $ 7,733
18 10 INVENTORIES 5,119 4,205 3,044 5,136
19 23 WORKING CAPITAL 13,716 10,210 6,322 6,976
28 18 NET PROPERTY, PLANT AND EQUIPMENT 36,494 25,315 18,026 17,977
24 19 TOTAL ASSETS 63,095 45,577 29,056 33,715
13 16 TOTAL DEBT 19,469 10,899 4,125 8,378
TOTAL DEBT AS A PERCENTAGE OF TOTAL
CAPITALIZATION 40% 31% 17% 33%
33 22 SHAREHOLDERS' INVESTMENT $ 28,888 $24,392 $19,695 $16,855
RETURN ON SHAREHOLDERS' INVESTMENT 16% 21% 15% 29%
13 13 NUMBER OF EMPLOYEES 2,830 2,074 1,208 1,417
7 4 SHARES OF STOCK OUTSTANDING 3,878 3,812 3,810 3,779
PER COMMON SHARE:
23% 13% NET INCOME (LOSS) $ 1.08 $ 1.20 $ 0.71 $ 1.12
25 17 SHAREHOLDERS' INVESTMENT (BOOK VALUE) 7.45 6.40 5.17 4.46
PRICE RANGE
46 24 HIGH 22.000 24.500 13.000 10.125
36 12 LOW 9.000 7.875 5.125 7.375
</TABLE>
32
- -------
<PAGE>
<TABLE>
<S> <C>
SHAREHOLDERS' INFORMATION DIRECTORS
ANNUAL SHAREHOLDERS' MEETING Jeffrey W. Green
Wednesday, January 24, 1996, at 3:00 p.m. CHAIRMAN AND CHIEF EXECUTIVE OFFICER
The Minneapolis Marriott City Center Hotel HUTCHINSON TECHNOLOGY INCORPORATED
30 South Seventh Street
Minneapolis, Minnesota Wayne M. Fortun
PRESIDENT AND CHIEF OPERATING OFFICER
COMMON STOCK LISTING HUTCHINSON TECHNOLOGY INCORPORATED
Traded in The NASDAQ National Market
Trading symbol: HTCH W. Thomas Brunberg*+
Shareholders of record as of PARTNER
November 28, 1995: 645 BRUNBERG, THORESEN & ASSOCIATES, LTD.
(ACCOUNTING FIRM)
DIVIDEND POLICY
The Company has never paid any cash dividends James E. Donaghy+
on its common stock. The Company currently PRESIDENT AND CHIEF EXECUTIVE OFFICER
intends to retain all earnings for use in its SHELDAHL INCORPORATED
business and does not anticipate paying (ELECTRONICS AND LAMINATES MANUFACTURING)
cash dividends in the foreseeable future.
Any future determination as to payment of Harry C. Ervin*+
dividends will depend upon the financial VICE PRESIDENT & INVESTMENT OFFICER
condition and results of operations of the DAIN BOSWORTH INCORPORATED
Company and such other factors as are deemed (INVESTMENT BANKING FIRM)
relevant by the Board of Directors.
Richard N. Rosett*
LEGAL COUNSEL DEAN, COLLEGE OF BUSINESS
Faegre & Benson ROCHESTER INSTITUTE OF TECHNOLOGY
Professional Limited Liability Partnership
Minneapolis, Minnesota * DENOTES MEMBERS OF THE AUDIT COMMITTEE
+ DENOTES MEMBERS OF THE COMPENSATION COMMITTEE
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
Minneapolis, Minnesota
TRANSFER AGENT
Norwest Bank Minnesota, National Association
161 North Concord Exchange
P.O. Box 738
South St. Paul, Minnesota 55075-0738
(612) 450-4064
SUPPLEMENTAL INFORMATION
Shareholder Information
Todd J. Bradley
Hutchinson Technology Incorporated
40 West Highland Park
Hutchinson, Minnesota 55350
(800) 689-0755
</TABLE>
<PAGE>
Exhibit 21.1
SUBSIDIARIES
Name Jurisdiction
---- ------------
HTT Export Ltd. Barbados
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included or incorporated by
reference in this Form 10-K, into the Company's previously filed
Registration Statement File No. 33-26145.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
December 7, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS OF
HUTCHINSON TECHNOLOGY INCORPORATED FOR THE FIFTY-TWO WEEKS ENDED
SEPTEMBER 24, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-24-1995
<PERIOD-START> SEP-26-1994
<PERIOD-END> SEP-24-1995
<CASH> 30,479,000
<SECURITIES> 1,190,000
<RECEIVABLES> 42,607,000
<ALLOWANCES> 1,924,000
<INVENTORY> 13,298,000
<CURRENT-ASSETS> 90,492,000
<PP&E> 209,041,000
<DEPRECIATION> 115,225,000
<TOTAL-ASSETS> 190,898,000
<CURRENT-LIABILITIES> 36,208,000
<BONDS> 33,445,000
<COMMON> 109,000
0
0
<OTHER-SE> 119,636,000
<TOTAL-LIABILITY-AND-EQUITY> 190,898,000
<SALES> 299,998,000
<TOTAL-REVENUES> 299,998,000
<CGS> 226,235,000
<TOTAL-COSTS> 226,235,000
<OTHER-EXPENSES> 15,041,000<F1>
<LOSS-PROVISION> 1,799,000
<INTEREST-EXPENSE> 2,636,000
<INCOME-PRETAX> 27,747,000
<INCOME-TAX> 6,669,000
<INCOME-CONTINUING> 21,078,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,078,000
<EPS-PRIMARY> 3.84
<EPS-DILUTED> 3.81
<FN>
<F1>OTHER EXPENSES INCLUDES RESEARCH AND DEVELOPMENT EXPENSES
</FN>
</TABLE>
