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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 1, 1996
HUTCHINSON TECHNOLOGY INCORPORATED
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(Exact name of registrant as specified in its charter)
MINNESOTA 0-14709 41-0901840
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(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
40 WEST HIGHLAND PARK, HUTCHINSON, MINNESOTA 55350-9784
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(Address of principal executive offices) (Zip Code)
(320) 587-3797
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(Registrant's telephone number)
Exhibit Index located at page 3
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Item 5. OTHER EVENTS.
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, Hutchinson Technology Incorporated
(the "Company") is filing cautionary statements identifying important factors
which could cause the Company's actual results to differ materially from those
projected in forward-looking statements of the Company made by, or on behalf of,
the Company.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following is filed as an Exhibit to this Report.
Exhibit No. Description of Exhibit
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99 Cautionary Statement for Purposes of the
"Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995.
SIGNATURES
Pursuant to the requirements 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.
HUTCHINSON TECHNOLOGY INCORPORATED
Date: October 1, 1996 By: /s/ John A. Ingleman
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John A. Ingleman
Its: Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Page
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99 Cautionary Statement for Purposes of the
"Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995. . . . . . . . . . 4
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EXHIBIT 99
CAUTIONARY STATEMENT FOR PURPOSES OF THE
"SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Hutchinson Technology Incorporated (the "Company"), or persons acting
on behalf of the Company, from time to time make, in writing or orally,
"forward-looking statements" as defined under the Private Securities Litigation
Reform Act of 1995 (the "Act"). The following cautionary statements are
intended to accompany statements so identified as forward-looking for the
purpose of qualifying for the "safe harbor" provisions of the Act, and
identifies important factors which could cause the Company's actual results to
differ materially from those projected in any such forward-looking statement
made by, or on behalf of, the Company. These factors are in addition to any
other cautionary statements, written or oral, which may be made or referred to
in connection with any such forward-looking statement. Reference to the
cautionary statements set forth below in connection with any such forward-
looking statement shall be deemed to be a statement that any one or more of the
following factors may cause the Company's actual results to differ materially
from those projected in any such forward-looking statement.
The Company operates in a rapidly changing environment that involves a
number of risks. The following discussion highlights some of these risks.
DISK DRIVE INDUSTRY
The disk drive industry is characterized by intense competition, rapid
technological change and significant fluctuations in product demand.
The Company's primary competition currently comes from K.R. Precision
Public Co., Ltd., Magnecomp Corporation and Nippon Hatsujo Kogyo Co. In
addition, at times certain users of suspension assemblies may have or may
develop the ability to fabricate their own suspension assemblies. This
competition has increased pricing pressure on the Company's suspension
assemblies.
Other computer data storage devices that currently compete with disk
drives include semiconductor memories, optical memories and tape storage
devices. New types of data storage devices may be developed and eventually
become competitive with certain disk drive applications, thereby affecting
demand for disk drives.
Rapid technological change within the disk drive industry has led to
numerous suspension assembly design changes and tighter performance
specifications. The resulting
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suspension assemblies initially are more difficult to manufacture and can
require additional capital expenditures and increased development and support
expenses.
Demand for the Company's suspension assemblies can be impacted
significantly by overall personal computer and disk drive demand and customer
inventory levels; the timing of new drive programs introduced by disk drive
manufacturers; qualification delays by the Company, head gimbal assemblers or
disk drive manufacturers; and changes in yields at head gimbal assembly or disk
drive companies.
The disk drive industry historically has been highly cyclical and has
experienced periods of increased demand and rapid growth followed by periods of
oversupply and subsequent contraction. The impact on the Company has been
compounded by the tendency of disk drive manufacturers to order suspension
assemblies in excess of their needs during growth periods, followed by sharp
reductions in demand for suspension assemblies during periods of contraction.
In an effort to enable the Company's business to grow with the market, the
Company has at times invested in additional capacity and infrastructure to
support anticipated market demand. Anticipated demand, however, has not always
materialized as rapidly as expected, which has resulted in underutilization of
resources and decreased profitability.
PRODUCT DEVELOPMENT AND INTRODUCTION
The Company's continued success depends on its ability to develop and
rapidly bring to volume production new product platforms or suspension
assemblies having increasingly higher performance specifications. A number of
risks are inherent in this process.
Increasingly higher or tighter performance specifications, as well as
transitions to new product platforms, such as micro- to nano- suspension
assemblies, initially can have the effect of lowering the Company's overall
yields and manufacturing efficiencies. This in turn can cause product shipments
to be delayed or missed. Higher manufacturing costs also may be incurred.
Manufacturing processes may need to be changed or new processes developed and
equipment may have to be replaced or modified, or designed, built and installed,
thus requiring additional capital. Increased research and development and
engineering expenses also may be required to support technological advances and
the introduction and manufacture of new product platforms.
If the introduction of a new suspension assembly design were to be
effected by a competitor without the Company's involvement, and were such a new
design to gain wide acceptance by the disk drive industry, the Company's
profitability could be adversely affected.
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FLUCTUATIONS IN REVENUE LEVELS
The Company's revenues are dependent on sales of suspension
assemblies, which currently account for nearly all of the Company's sales. Over
the years, the disk drive industry has experienced numerous consolidations.
This has resulted in fewer, but larger, customers for the Company's products.
The Company's five largest customers accounted for 86% of net sales for fiscal
1995. To date, the Company's operating results have not been materially
affected by an inability to collect receivables and the Company's major
customers currently are paying their account balances on a timely basis.
However, in the event a major customer were to fail to pay its balance owing to
the Company or reduce, delay or cancel its orders, the Company's results of
operations could be materially and adversely affected.
The Company continues to make substantial investments in its corporate
infrastructure to support growth, including investments in equipment and
facilities, research and development areas, selling, general and administrative
organizations and manufacturing support areas. This plan involves a number of
risks, including a higher level of operating expenses, the potential difficulty
of attracting and assimilating a large number of new employees and the
complexities associated with managing a growing organization.
As the Company has improved its delivery time to its customers, it
also has experienced a reduction in the average order lead time, approaching a
"turns" environment in which customers place orders for immediate delivery. In
a turns environment, individual customer order patterns are inherently difficult
to predict, backlog amounts tend to decrease, and near-term market demand
becomes increasingly difficult to forecast. The Company typically allows its
customers to change or cancel orders without penalty up until approximately two
weeks before scheduled production. These factors create an environment where
demand can fluctuate significantly from week to week.
The selling prices for the Company's products are subject to pricing
pressure from its customers, market pressure from its competitors, pricing
strategies of the Company, and product life cycle influences. A typical life
cycle for the Company's products starts out with high pricing in the
introduction stage, decreasing prices during maturity and slightly increasing
pricing during phase out. Selling prices also are affected by overall demand,
product demand mix and product development and introduction. Fluctuating
selling prices have an impact on Company revenues. See "Disk Drive Industry"
and "Product Development and Introduction" above.
MANUFACTURING
The Company manufactures a wide variety of suspension assemblies
having different selling prices and manufacturing costs. The product mix making
up the market demand can vary significantly, which can lead to changes in
utilization of equipment and
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tooling, inventory obsolescence and overstaffing in certain areas, all of which
result in changes to Company profitability.
Manufacturing yields and efficiencies also vary from product to
product. Newer products typically have lower initial manufacturing yields and
efficiencies. See "Product Development and Introduction" above. As the Company
grows, production of certain suspension assemblies may need to be transferred
from one manufacturing site to another. At times, this transfer has lowered
initial yields and/or manufacturing efficiencies, resulting in higher
manufacturing costs.
The Company's manufacturing facilities are located in Minnesota, South
Dakota and Wisconsin, all of which can experience severe weather. Severe
weather has at times resulted in lower production and decreased Company
profitability.
The Company's ability to conduct business would be impaired if its
work force were to be unionized or if a significant number of its specialized
employees were to leave and could not be replaced by comparable personnel. 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 satisfactory engineering and other candidates for key positions.
The Company's business is highly capital intensive. The Company has
made a substantial investment in sophisticated manufacturing technologies and
automated production equipment, and anticipates continued substantial capital
expenditures. If the Company is unable to fund its future capital needs from
internally generated funds or from other sources, its operating results would be
adversely affected.
BUSINESS DISRUPTION
Certain materials used in the Company's manufacturing processes have
limited availability. Certain types of photoresist, a liquid compound used in
the photoetching process, are available from only one supplier. Most of
the stainless steel which meets the Company's strict specifications is
available from only one supplier. If for any reason the Company were unable to
continue to obtain these materials in the necessary quantities and at reasonable
prices, the Company's operating results would be adversely affected.
INTELLECTUAL PROPERTY
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
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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 expects that, as the number of patents issued
continues to increase, and as the Company's business grows, the volume of these
intellectual property claims will also increase.
The Company is party to certain other claims arising in the ordinary
course of business, such as employment proceedings.
OTHER MATTERS
The Company's selling, general and administrative expenses are
budgeted and are relatively fixed in the short-term. Large changes at the gross
profit level may have a significant impact on the Company's financial results.
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 financing ratios,
and also impose limitations on capital expenditures, additional indebtedness,
leases, guarantees and the payment of dividends.
A large portion of the Company's products are shipped overseas,
specifically to the Pacific Rim region, and qualify for the benefit of the
Company's Foreign Sales Corporation. Should the Company stop shipping
products overseas or should the tax laws be changed to eliminate the benefit
of having a Foreign Sales Corporation, the Company's financial results could
be adversely affected.
The Company's stock price, like that of other companies in the disk
drive industry, is subject to significant volatility. If revenues or earnings
in any quarter fail to meet the investment community's expectations for any
reason, there could be an immediate adverse impact on the Company's stock price.
The stock price also may be affected by broader market trends unrelated to the
Company's performance. Such volatility may limit the Company's ability to raise
capital through equity financing.
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