HUTCHINSON TECHNOLOGY INC, 424B4, 1997-02-21

HUTCHINSON TECHNOLOGY INC
424B4, 1997-02-21
ELECTRONIC COMPONENTS, NEC

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<PAGE>
File Pursuant to Rule 424(b)(4)
Registration No. 333-21201

3,375,000 SHARES

[LOGO]

COMMON STOCK

OF THE 3,375,000 SHARES OF COMMON STOCK OFFERED HEREBY, 3,000,000 SHARES ARE
BEING SOLD BY HUTCHINSON TECHNOLOGY INCORPORATED (THE "COMPANY") AND 375,000
SHARES ARE BEING SOLD BY THE SELLING SHAREHOLDERS. THE COMPANY WILL NOT RECEIVE
ANY OF THE PROCEEDS FROM THE SALE OF SHARES BY THE SELLING SHAREHOLDERS. SEE
"PRINCIPAL AND SELLING SHAREHOLDERS." THE COMPANY'S COMMON STOCK IS TRADED ON
THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL HTCH. ON FEBRUARY 19, 1997, THE LAST
REPORTED SALE PRICE OF THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET WAS $37.25
PER SHARE. SEE "PRICE RANGE OF COMMON STOCK."

THE COMPANY'S BOARD OF DIRECTORS APPROVED A THREE-FOR-ONE STOCK SPLIT THAT
WAS DISTRIBUTED ON FEBRUARY 11, 1997 TO HOLDERS OF RECORD ON JANUARY 31, 1997
(THE "STOCK SPLIT"). SHARE AND PER SHARE DATA IN THIS PROSPECTUS HAVE BEEN
ADJUSTED TO REFLECT THE STOCK SPLIT.

SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
-----------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDERS
<S> <C> <C> <C> <C>
PER SHARE........... $36.00 $1.575 $34.425 $34.425
TOTAL(3)............ $121,500,000 $5,315,625 $103,275,000 $12,909,375
</TABLE>

(1) SEE "UNDERWRITING" FOR INFORMATION CONCERNING INDEMNIFICATION OF THE
UNDERWRITERS AND OTHER MATTERS.

(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $450,000.

(3) THE COMPANY HAS GRANTED THE UNDERWRITERS A 30-DAY OPTION TO PURCHASE UP TO
506,250 ADDITIONAL SHARES OF COMMON STOCK SOLELY TO COVER OVER-ALLOTMENTS,
IF ANY. IF THE UNDERWRITERS EXERCISE THIS OPTION IN FULL, THE PRICE TO
PUBLIC WILL TOTAL $139,725,000, THE UNDERWRITING DISCOUNT WILL TOTAL
$6,112,969, THE PROCEEDS TO COMPANY WILL TOTAL $120,702,656 AND THE PROCEEDS
TO SELLING SHAREHOLDERS WILL TOTAL $12,909,375. SEE "UNDERWRITING."

THE SHARES OF COMMON STOCK ARE OFFERED BY THE SEVERAL UNDERWRITERS NAMED
HEREIN, SUBJECT TO RECEIPT AND ACCEPTANCE BY THEM AND SUBJECT TO THEIR RIGHT TO
REJECT ANY ORDER IN WHOLE OR IN PART. IT IS EXPECTED THAT DELIVERY OF THE
CERTIFICATES REPRESENTING SUCH SHARES WILL BE MADE AGAINST PAYMENT THEREFOR AT
THE OFFICE OF MONTGOMERY SECURITIES ON OR ABOUT FEBRUARY 25, 1997.
-------------------

MONTGOMERY SECURITIES

HAMBRECHT & QUIST

DAIN BOSWORTH
INCORPORATED

FEBRUARY 19, 1997
<PAGE>
[LOGO]
HUTCHINSON TECHNOLOGY

THE COMPANY ESTIMATES THAT IT PRODUCES APPROXIMATELY 70 PERCENT OF THE WORLDWIDE
SUPPLY OF SUSPENSION ASSEMBLIES FOR ALL SIZES OF DISK DRIVES PRODUCED BY ALL THE
SIGNIFICANT DISK DRIVE MANUFACTURERS.

[Picture of suspension assemblies positioned over hard disks]

SUSPENSIONS IN A DISK DRIVE--
Suspension assemblies hold the recording
heads at microscopic distances above
the spinning magnetic disks in disk drives.

[Picture of conventional suspension assemblies]

CONVENTIONAL SUSPENSIONS--
The Company currently produces over 300 variations of suspension assemblies to
meet the varied and changing requirements of its individual customers.

[Picture of TSA-TM- suspension assemblies]

TSA-TM- SUSPENSIONS--
The Company is currently shipping qualified pre-production TSA-TM- suspensions
that integrate thin electrical conductors which connect directly with the
recording head.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK OF THE COMPANY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE
10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."

2
<PAGE>
PROSPECTUS SUMMARY

THIS PROSPECTUS CONTAINS CERTAIN STATEMENTS OF A FORWARD-LOOKING NATURE
RELATING TO FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF THE COMPANY.
PROSPECTIVE INVESTORS ARE CAUTIONED THAT SUCH STATEMENTS ARE ONLY PREDICTIONS
AND THAT ACTUAL EVENTS OR RESULTS COULD DIFFER MATERIALLY. IN EVALUATING SUCH
STATEMENTS, PROSPECTIVE INVESTORS SHOULD SPECIFICALLY CONSIDER THE VARIOUS
FACTORS IDENTIFIED IN THIS PROSPECTUS, INCLUDING THE MATTERS SET FORTH UNDER THE
CAPTIONS "RISK FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION" AND "BUSINESS," AS WELL AS THOSE DISCUSSED
ELSEWHERE IN THIS PROSPECTUS.

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING
ELSEWHERE IN THIS PROSPECTUS AND OTHER INFORMATION INCORPORATED BY REFERENCE
HEREIN. UNLESS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS (I) ASSUMES
NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION, AND (II) HAS BEEN
ADJUSTED TO REFLECT A THREE-FOR-ONE STOCK SPLIT THAT WAS DISTRIBUTED ON FEBRUARY
11, 1997 TO HOLDERS OF RECORD ON JANUARY 31, 1997 (THE "STOCK SPLIT").

THE COMPANY

Hutchinson Technology Incorporated is the world's leading supplier of
suspension assemblies for hard disk drives. Suspension assemblies are critical
components of hard disk drives that hold the recording heads in position above
the spinning magnetic disks. The Company's suspension assemblies are
manufactured with proprietary technology and processes to uniform and precise
specifications that are critical to maintaining the necessary microscopic
clearance between the head and disk. During the fiscal year ended September 29,
1996, the Company shipped approximately 539 million suspension assemblies. The
Company believes its sales to disk drive and recording head manufacturers
account for approximately 70% of the worldwide supply of suspension assemblies.
The Company is a supplier to nearly all domestic and many foreign-based users of
suspension assemblies, including Applied Magnetics, IBM, Maxtor, Quantum,
Read-Rite, SAE Magnetics/TDK, Seagate Technology, Toshiba, 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 hard disk drive industry. The Company's current
research and development efforts are principally focused on continuing the
development and prototype production of new high-precision conventional and
TSA-TM- suspension assemblies to meet changing market demands, performance
standards and electrical connectivity requirements. During the next several
years, the Company anticipates increasing acceptance by the disk drive industry
of its TSA-TM- suspensions, which integrate into the suspension thin electrical
conductors that connect directly with the recording head. The Company also is
evaluating product opportunities in the medical devices market but does not
expect any medical-related revenues in fiscal 1997.

The Company was incorporated under the laws of the State of Minnesota in
1965. The Company's principal office is located at 40 West Highland Park,
Hutchinson, Minnesota 55350 and its telephone number is (320) 587-3797.

3
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company..... 3,000,000 shares
Common Stock offered by the Selling
Shareholders.......................... 375,000 shares
Common Stock to be outstanding after the
offering.............................. 19,374,495 shares(1)
Use of Proceeds......................... General corporate purposes, primarily for
manufacturing and support equipment and
construction of a new photoetch facility. See "Use
of Proceeds."
Nasdaq National Market Symbol........... HTCH
</TABLE>

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
QUARTER ENDED FISCAL YEAR ENDED(2)
-------------------- -------------------------------
DEC. 29, DEC. 24, SEPT. 29, SEPT. 24, SEPT. 25,
1996 1995 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales........................................ $ 106,906 $ 83,332 $ 353,186 $ 299,998 $ 238,794
Income from operations........................... 14,455 3,828 18,203 28,921 7,780
Net income....................................... 11,117 2,862 13,802 21,078 5,880
Net income per common and common equivalent
share.......................................... $ 0.66 $ 0.17 $ 0.82 $ 1.28 $ 0.36
Weighted average common and common equivalent
shares outstanding............................. 16,887 16,869 16,806 16,479 16,338
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 29, 1996
----------------------
AS
ACTUAL ADJUSTED(3)
--------- -----------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital...................................................... $ 92,743 $ 195,568
Total assets......................................................... 289,532 392,357
Long-term debt....................................................... 76,845 76,845
Total shareholders' investment....................................... 145,037 247,862
</TABLE>

- ------------------------

(1) Based upon the number of shares outstanding as of December 29, 1996.
Excludes 2,037,126 shares issuable upon exercise of options outstanding
under the Company's employee benefit plans as of December 29, 1996. See Note
5 of Notes to Consolidated Financial Statements.

(2) The Company operates on a 52 or 53 week fiscal year ending on the last
Sunday in September in each year. Fiscal 1996 contained 53 weeks and fiscal
1995 and 1994 contained 52 weeks.

(3) Adjusted to give effect to the issuance and sale of the 3,000,000 shares of
Common Stock offered by the Company hereby and the application of the
estimated net proceeds therefrom. See "Use of Proceeds."

4
<PAGE>
RISK FACTORS

PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS,
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS AND
INCORPORATED HEREIN BY REFERENCE CONCERNING THE COMPANY AND ITS BUSINESS, BEFORE
PURCHASING THE SHARES OF COMMON STOCK OFFERED HEREBY. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934 THAT INVOLVE
CERTAIN RISKS AND UNCERTAINTIES. DISCUSSIONS CONTAINING SUCH FORWARD-LOOKING
STATEMENTS MAY BE FOUND IN THE MATERIAL SET FORTH UNDER "PROSPECTUS SUMMARY--THE
COMPANY," "RISK FACTORS," "USE OF PROCEEDS," "DIVIDEND POLICY," "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION--OVERVIEW," "--LIQUIDITY AND CAPITAL RESOURCES" AND THE INTRODUCTION
TO "BUSINESS," "BUSINESS--INDUSTRY BACKGROUND," "--STRATEGY," "--PRODUCTS,"
"--MANUFACTURING," "--RESEARCH AND DEVELOPMENT," "--CUSTOMERS AND MARKETING,"
"--COMPETITION," "--INTELLECTUAL PROPERTIES," "--LEGAL PROCEEDINGS" AND
"--EMPLOYEES," AS WELL AS IN THE PROSPECTUS GENERALLY, INCLUDING THE DOCUMENTS
INCORPORATED HEREIN BY REFERENCE. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN SUCH FORWARD-LOOKING STATEMENTS AS A RESULT
OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH IN THE FOLLOWING RISK FACTORS AND
ELSEWHERE IN THIS PROSPECTUS. THESE FORWARD-LOOKING STATEMENTS ARE MADE AS OF
THE DATE OF THIS PROSPECTUS AND THE COMPANY ASSUMES NO OBLIGATION TO UPDATE SUCH
FORWARD-LOOKING STATEMENTS, OR TO UPDATE THE REASONS WHY ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE ANTICIPATED IN SUCH FORWARD-LOOKING STATEMENTS.

FLUCTUATIONS IN OPERATING RESULTS

The Company's historical operating results have been and the Company expects
that its future quarterly and annual operating results will continue to be
subject to variations based upon a wide variety of factors, including: the
cyclical nature of the hard disk drive industry and the associated changes in
demand; the ability to develop and implement new manufacturing process
technologies; the ability to introduce new products and to achieve
cost-effective and timely high volume production; changes in product mix and
average selling prices; the availability and efficient utilization of the
Company's production capacity; manufacturing yields; prolonged disruptions of
operations at any of the Company's facilities for any reason; changes in the
cost of or limitations on availability of materials and labor; and increases in
production and engineering costs associated with initial production of new
suspension assembly products.

The Company typically allows its customers to change or cancel orders
without penalty up until approximately two weeks before scheduled production. In
the event that a major customer reduces, delays or cancels its orders, the
Company's results of operations could be materially adversely affected. Due to
the absence of substantial noncancellable backlog, the Company plans its
production and inventory based on forecasts of customer demand which often
fluctuate substantially. These factors, among others, create an environment
where demand can vary significantly from week to week. In the fourth quarter of
fiscal 1996, the Company experienced a sharp drop in net income compared to the
preceding quarter due to reduced demand for certain of its products.

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 begins with higher 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 mix and
product development and introduction.

DEPENDENCE ON HARD DISK DRIVE INDUSTRY

Virtually all of the Company's sales are dependent on the hard disk drive
industry. Sales of suspension assemblies accounted for 99%, 98%, 97% and 97% of
net sales, respectively, for the thirteen weeks ended December 29, 1996 and for
fiscal 1996, 1995 and 1994. The hard disk drive industry is characterized by
intense competition, rapid technological change and significant fluctuations in
product demand. The hard

5
<PAGE>
disk drive industry is also highly cyclical and has experienced periods of
increased demand and rapid growth followed by periods of oversupply and
subsequent contraction. The impact of cyclical trends on suppliers to this
industry has been compounded by the tendency of hard disk drive manufacturers to
order components in excess of their needs during growth periods, followed by
sharp reductions in demand for components during periods of contraction. The
Company's results of operations have been adversely affected from time to time
during hard disk drive industry slowdowns and could be materially adversely
affected in the event of significant slowdowns in the industry in the future.

CUSTOMER CONCENTRATION

While the Company is a supplier to nearly all domestic and many
foreign-based manufacturers of hard disk drives and recording heads used in hard
disk drives, the Company's sales have remained concentrated within a small
customer base. Sales to the Company's five largest customers constituted 86% and
87% of net sales, respectively, for the thirteen weeks ended December 29, 1996
and for fiscal 1996. See "Business--Customers and Marketing." 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 loss of
one or more of the Company's major customers for any reason could have a
material adverse effect on the Company's results of operations.

CAPITAL EXPANSION AND MANAGEMENT OF GROWTH

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
in the future. 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 periodic underutilization of resources and decreased profitability. If the
Company is unable in the future to fund its capital expenditures from internally
generated funds or from other sources, its results of operations could be
materially adversely affected. See "Use of Proceeds," "Management's Discussion
and Analysis of Results of Operations and Financial Condition--Liquidity and
Capital Resources," "Business--Manufacturing" and "--Facilities."

The Company has recently been operating at a high level of production.
Growth in the Company's net sales depends, in part, on the successful expansion
by the Company of its manufacturing capacity, manufacturing workforce and
corporate infrastructure. The Company currently anticipates spending
approximately $100 million during fiscal 1997 for expansion of production
capacity, primarily for manufacturing and support equipment and construction of
the Company's Eau Claire, Wisconsin photoetch facility. The Company continues to
make substantial investments in its corporate infrastructure to support growth,
including investments in equipment and facilities, research and development,
selling, general and administrative support and manufacturing support. These
expansion plans involve a number of risks. The Company faces the task of
identifying, recruiting, training and integrating a large number of new
employees quickly enough to keep pace with its growth. The Company's growth also
may strain the Company's management, manufacturing, information systems,
financial and other resources. Any failure to expand these areas in an efficient
manner could have a material adverse effect on the Company. The Company has
significantly increased its operations to support increased revenues, including
the hiring of additional personnel, and has made and expects to continue to make
substantial investments in research, development and engineering and in sales
and marketing to support product development. There can be no assurance that the
Company will be able to achieve a rate of growth or level of sales in any future
period commensurate with its level of expenses.

6
<PAGE>
MANUFACTURING RISKS

The Company manufactures a wide variety of suspension assemblies having
different selling prices and manufacturing costs. The product mix varies from
week to week as market demand changes. Any substantial variation in product mix
can lead to changes in utilization of equipment and tooling, inventory
obsolescence and overstaffing in certain areas, all of which may adversely
impact Company profitability.

Rapid technological change within the disk drive industry has led to
numerous suspension assembly design changes and tighter performance
specifications. The resulting suspension assemblies initially are more difficult
to manufacture and can require additional capital expenditures and increased
development and support expenses. Manufacturing yields and efficiencies also
vary from product to product. Newer products typically have lower initial
manufacturing yields and efficiencies. 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 technological
complexity of the Company's products and processes limit the number of
satisfactory engineering and other candidates for key positions.

PRODUCT DEVELOPMENT AND INTRODUCTION

The Company's continued success depends upon 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, 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, new processes developed and equipment replaced, 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.

The Company has invested a substantial amount of financial, management,
engineering and manufacturing resources in the development of its new TSA-TM-
suspension assemblies. If the commercial acceptance and/or production of the
Company's TSA-TM- suspension assemblies were delayed for any reason or if
TSA-TM- suspension assemblies cannot be produced profitably in the quantities
and to the specifications required by customers, the Company's results of
operations could be materially adversely affected. In addition, there can be no
assurance that the Company's TSA-TM- suspensions will gain market acceptance in
lieu of alternative interconnection technologies such as conventional wiring,
deposition circuitry and flexible circuitry. See "Business--Competition." In the
event that the Company were to fail to introduce successfully new products on a
regular and timely basis, demand for the Company's existing products could
decline, which could have a material adverse effect on the Company's results of
operations. See "Business--Products."

If a competitor were to introduce a new suspension assembly design to which
the Company could not effectively respond, and such a new design gained wide
acceptance by the disk drive industry, the Company's results of operations could
be materially adversely affected.

7
<PAGE>
INTELLECTUAL PROPERTIES

Although the Company attempts to protect its intellectual property rights
through patents, copy-rights, trade secrets and other measures, there can be no
assurance that the Company will be able to protect its technology adequately or
that competitors will not be able to develop similar technology independently.
The Company believes that although the patents it holds and may obtain will be
of value, they will not independently determine the Company's success. Moreover,
patents may not be issued with respect to the Company's pending patent
applications, and its issued patents may not be sufficiently broad to protect
the Company's technology. There can be no assurance that any patent issued to
the Company will not be challenged, invalidated or circumvented or that the
rights granted thereunder will provide adequate protection to the Company's
technology. In addition, the Company has only limited patent rights outside the
United States, and the laws of certain foreign countries may not protect the
Company's intellectual property rights to the same extent as do the laws of the
United States.

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 to
date 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 that 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 results of operations could be adversely affected.
The Company expects that, as the number of patents issued continues to increase,
and as the Company grows, the volume of intellectual property claims could
increase. See "Business--Intellectual Properties."

AVAILABILITY OF CERTAIN MATERIALS

Certain types of photoresist, a liquid compound used in the photoetching
process, and the stainless steel, copper and polyamide materials that meet the
Company's strict specifications, are each currently 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
results of operations would be adversely affected. See
"Business--Manufacturing."

VOLATILITY OF STOCK PRICE

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 in the
future to raise additional capital.

8
<PAGE>
USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the
3,000,000 shares of Common Stock offered by it hereby are estimated to be $102.8
million ($120.3 million if the Underwriters over-allotment option is exercised
in full). The Company intends to use the net proceeds from the sale of the
shares offered hereby for general corporate purposes, primarily for
manufacturing and support equipment and construction of the Company's photoetch
facility at the Eau Claire, Wisconsin site. The Company anticipates fiscal 1997
expenditures of approximately $75 million for such equipment and approximately
$25 million for the photoetch facility. Pending such uses, the Company expects
to invest the net proceeds from the offering in short-term income-producing
investments. See "Management's Discussion and Analysis of Results of Operations
and Financial Condition--Liquidity and Capital Resources,"
"Business--Manufacturing" and "--Facilities."

The Company will not receive any of the proceeds from the sale of shares by
the Selling Shareholders.

DIVIDEND POLICY

The Company has never paid any cash dividends on its Common Stock. The
Company currently intends to retain all earnings for use in its business and
does not anticipate paying cash dividends in the foreseeable future. Certain of
the Company's financing agreements contain restrictive covenants which, among
other things, impose limitations on the payment of dividends. See Note 2 of
Notes to Consolidated Financial Statements.

PRICE RANGE OF COMMON STOCK

The Common Stock of the Company trades on the Nasdaq National Market under
the symbol HTCH. The following table sets forth for the periods indicated the
range of high and low closing sale prices of the Common Stock as reported on the
Nasdaq National Market, which prices reflect the Stock Split.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL 1995
Quarter ended December 25, 1994........................... $ 9.58 $ 7.67
Quarter ended March 26, 1995.............................. 10.58 8.08
Quarter ended June 25, 1995............................... 14.67 9.50
Quarter ended September 24, 1995.......................... 29.67 14.08

FISCAL 1996
Quarter ended December 24, 1995........................... 21.83 15.17
Quarter ended March 24, 1996.............................. 17.16 12.17
Quarter ended June 23, 1996............................... 19.46 12.75
Quarter ended September 29, 1996.......................... 14.38 10.25

FISCAL 1997
Quarter ended December 29, 1996........................... 26.79 12.75
Quarter ending March 30, 1997 (through February 19,
1997)................................................... 38.38 25.33
</TABLE>

On February 19, 1997, the last reported sale price of the Common Stock on
the Nasdaq National Market was $37.25 per share. As of February 18, 1997, there
were 695 holders of record of the Company's Common Stock.

9
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company as of
December 29, 1996 and as adjusted to reflect the sale of 3,000,000 shares of
Common Stock by the Company hereby and the application of the estimated net
proceeds therefrom. This table should be read in conjunction with the
Consolidated Financial Statements of the Company, including the related notes
thereto, appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
DECEMBER 29, 1996
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt................................................. $ 76,845 $ 76,845
--------- -----------
Shareholders' investment:
Common Stock, $.01 par value; 45,000,000 shares authorized;
16,374,495 shares issued and outstanding, actual; and
19,374,495 shares issued and outstanding, as adjusted(1)... 164 194
Additional paid-in capital................................... 43,579 146,374
Retained earnings............................................ 101,294 101,294
--------- -----------
Total shareholders' investment............................. 145,037 247,862
--------- -----------
Total capitalization..................................... $ 221,882 $ 324,707
--------- -----------
--------- -----------
</TABLE>

- ------------------------

(1) Excludes 2,037,126 shares issuable upon exercise of options outstanding
under the Company's employee benefit plans as of December 29, 1996.

10
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data as of September 29, 1996,
September 24, 1995, September 25, 1994, September 26, 1993 and September 27,
1992, and for the fiscal years then ended, has been derived from the Company's
Consolidated Financial Statements which have been audited by Arthur Andersen
LLP. The information as of December 29, 1996 and December 24, 1995, and for the
thirteen weeks then ended, is unaudited. However, in the opinion of management
of the Company, such unaudited financial data includes all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the Company's results of operations for the periods then ended and the Company's
financial position as of such dates. Operating results for the thirteen weeks
ended December 29, 1996 are not necessarily indicative of the results that may
be expected for the entire fiscal year. The selected consolidated financial data
should be read in conjunction with the Consolidated Financial Statements,
related notes and "Management's Discussion and Analysis of Results of Operations
and Financial Condition" included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
QUARTER ENDED FISCAL YEAR ENDED(1)
-------------------- ---------------------------------------------------------------
DEC. 29, DEC. 24, SEPT. 29, SEPT. 24, SEPT. 25, SEPT. 26, SEPT. 27,
1996 1995 1996 1995 1994 1993 1992
--------- --------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales.................................... $ 106,906 $ 83,332 $ 353,186 $ 299,998 $ 238,794 $ 198,734 $ 160,340
Cost of sales................................ 75,794 61,888 273,616 226,235 199,548 154,311 120,079
--------- --------- ----------- ----------- ----------- ----------- -----------
Gross profit............................... 31,112 21,444 79,570 73,763 39,246 44,423 40,261
Research and development expenses............ 5,739 9,053 27,651 15,041 8,626 9,846 5,770
Selling, general and administrative
expenses................................... 10,918 8,563 33,716 29,801 22,840 24,616 20,910
--------- --------- ----------- ----------- ----------- ----------- -----------
Income from operations..................... 14,455 3,828 18,203 28,921 7,780 9,961 13,581
Other income................................. 306 321 1,158 1,462 1,171 1,403 1,465
Interest expense............................. (858) (480) (2,108) (2,636) (995) (254) (1,216)
--------- --------- ----------- ----------- ----------- ----------- -----------
Income before income taxes................. 13,903 3,669 17,253 27,747 7,956 11,110 13,830
Provision for income taxes................... 2,786 807 3,451 6,669 2,076 2,556 981
--------- --------- ----------- ----------- ----------- ----------- -----------
Net income................................. $ 11,117 $ 2,862 $ 13,802 $ 21,078 $ 5,880 $ 8,554 $ 12,849
--------- --------- ----------- ----------- ----------- ----------- -----------
--------- --------- ----------- ----------- ----------- ----------- -----------
Net income per common and common equivalent
share...................................... $ 0.66 $ 0.17 $ 0.82 $ 1.28 $ 0.36 $ 0.53 $ 0.91
--------- --------- ----------- ----------- ----------- ----------- -----------
--------- --------- ----------- ----------- ----------- ----------- -----------
Weighted average common and common equivalent
shares outstanding......................... 16,887 16,869 16,806 16,479 16,338 16,227 14,163
</TABLE>

<TABLE>
<CAPTION>
DEC. 29, DEC. 24, SEPT. 29, SEPT. 24, SEPT. 25, SEPT. 26, SEPT. 27,
1996 1995 1996 1995 1994 1993 1992
--------- --------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.............................. $ 92,743 $ 51,395 $ 62,102 $ 54,284 $ 51,996 $ 26,238 $ 49,018
Total assets................................. 289,532 205,531 238,983 190,898 151,148 116,639 109,126
Current liabilities.......................... 62,117 44,298 46,563 36,208 18,829 17,870 18,287
Long-term debt............................... 76,845 32,105 53,185 33,445 37,700 10,080 12,995
Total shareholders' investment............... 145,037 122,628 133,684 119,745 94,619 88,689 77,025
</TABLE>

- ------------------------------

(1) The Company operates on a 52 or 53 week fiscal year ending on the last
Sunday in September in each year. Fiscal 1996 contained 53 weeks and fiscal
1995, 1994, 1993 and 1992 contained 52 weeks.

11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS AND RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS
PROSPECTUS. THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE
TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED ABOVE IN
"RISK FACTORS," AND ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

The Company derives virtually all of its revenue from the sale of suspension
assemblies to a small number of customers. Suspension assemblies are a critical
component of hard disk drives and the Company's results of operations are highly
dependent on the hard disk drive industry. The hard disk drive industry is
intensely competitive and highly cyclical and the Company's results of
operations have been adversely affected from time to time during hard drive
industry slowdowns.

The Company's gross margins have fluctuated and will continue to fluctuate
quarterly and annually based upon a variety of factors such as the level of
utilization of the Company's production capacity, changes in demand, product
mix, average selling prices and manufacturing yields, increases in production
and engineering costs associated with initial production of new products and
changes in the cost of or limitations on availability of materials. The
Company's ability to introduce new products on a timely basis is an important
factor in its continued success. New products initially have lower manufacturing
yields and are produced in lower quantities than more mature products.
Manufacturing yields generally improve as the product matures and production
volumes increase. Manufacturing yields also vary depending on the complexity and
uniqueness of product specifications. Because the Company's business is capital
intensive and requires a high level of fixed costs, gross margins are also
extremely sensitive to changes in volume. Assuming fixed product prices, small
variations in capacity utilization or manufacturing yields generally have a
significant impact on gross margins. The Company typically allows its customers
to change or cancel orders without penalty up until approximately two weeks
before scheduled production. Due to the absence of substantial noncancellable
backlog, the Company plans its production and inventory based on forecasts of
customer demands, which often fluctuate substantially. These factors, among
others, create an environment where demand can vary significantly from week to
week.

The Company has recently been operating at a high level of production and is
currently expanding its operations at its Eau Claire, Wisconsin facility. Growth
in the Company's net sales depends, in part, on the successful expansion by the
Company of its manufacturing capacity, manufacturing workforce and corporate
infrastructure. If the Company is not able to complete its current expansion
plans in a timely manner and within acceptable budgets, its quarterly and annual
results of operations will be materially and adversely affected.

The Company expends significant resources on research and development in an
effort to anticipate and respond to changing technologies, performance standards
and electrical connectivity required for hard disk drives. The Company's current
research and development efforts are principally directed to high-precision
conventional and TSA-TM- suspension assemblies. In fiscal 1995, the Company
entered into a Technology Transfer and Development Agreement (the "Technology
Sharing Agreement") and a Patent License Agreement with IBM related to the
Company's TSA-TM- suspension development efforts. As of December 29, 1996, the
Company had made payments totalling $1,500,000 to IBM and will make additional
payments over the next three fiscal years totalling $6,500,000, all of which
have been expensed and a related liability has been recorded by the Company.
Certain royalties have been paid and may be payable in the future by the Company
to IBM under the Technology Sharing Agreement. See "Business-- Research and
Development."

12
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth the Company's consolidated statements of
operations as a percentage of net sales for the periods indicated.

<TABLE>
<CAPTION>
QUARTER ENDED FISCAL YEAR ENDED
------------------------ -------------------------------------
DEC. 29, DEC. 24, SEPT. 29, SEPT. 24, SEPT. 25,
1996 1995 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales......................................... 100% 100% 100% 100% 100%
Cost of sales..................................... 71 74 77 75 84
--- --- --- --- ---
Gross profit.................................... 29 26 23 25 16
Research and development expenses................. 5 11 8 5 4
Selling, general and administrative expenses...... 10 10 10 10 9
--- --- --- --- ---
Income from operations.......................... 14 5 5 10 3
Other income...................................... -- -- -- -- --
Interest expense.................................. (1) (1) -- (1) --
--- --- --- --- ---
Income before income taxes...................... 13 4 5 9 3
Provision for income taxes........................ 3 1 1 2 1
--- --- --- --- ---
Net income...................................... 10% 3% 4% 7% 2%
--- --- --- --- ---
--- --- --- --- ---
</TABLE>

COMPARISON OF QUARTERS ENDED DECEMBER 29, 1996 AND DECEMBER 24, 1995

Net sales for the thirteen weeks ended December 29, 1996 were $106,906,000,
an increase of $23,574,000 or 28% compared to the comparable period in fiscal
1996. This increase was attributable primarily to increased suspension assembly
volume.

Gross profit for the thirteen weeks ended December 29, 1996 was $31,112,000,
an increase of $9,668,000 or 45% compared to the comparable period in fiscal
1996, and gross profit as a percent of net sales increased from 26% to 29%,
primarily due to higher sales volume and improved manufacturing efficiencies.

Research and development expenses for the thirteen weeks ended December 29,
1996 were $5,739,000 compared to $9,053,000 for the thirteen weeks ended
December 24, 1995. The expenses for the first quarter of fiscal 1996 included a
$5,500,000 charge related to the Technology Sharing Agreement with IBM.
Excluding the charge, research and development expenses for the fiscal 1997
period increased mainly due to increased development efforts on TSA-TM-
suspensions.

Selling, general and administrative expenses for the thirteen weeks ended
December 29, 1996 were $10,918,000, an increase of $2,355,000 or 28% compared to
the comparable period in fiscal 1996. The increased expenses were due primarily
to a $1,451,000 increase in labor expenses and increased profit sharing expenses
of $1,136,000. As a percent of net sales, selling, general and administrative
expenses remained at 10%.

Interest expense for the thirteen weeks ended December 29, 1996 increased
$378,000 from the comparable period in fiscal 1996, primarily due to higher
average outstanding debt.

The income tax provision for the thirteen weeks ended December 29, 1996 was
based on an estimated effective tax rate for the fiscal year of 20% which was
below the statutory federal rate primarily due to the large portion of sales
that qualifies for the benefit of the Company's Foreign Sales Corporation.

Net income for the thirteen weeks ended December 29, 1996 was $11,117,000,
an increase of $8,255,000 compared to the comparable period in fiscal 1996. As a
percent of net sales, net income

13
<PAGE>
increased from 3% to 10% primarily due to the higher sales volume, improved
manufacturing efficiencies and decreased research and development expenses,
noted above.

COMPARISON OF FISCAL YEARS 1996 AND 1995

Net sales for 1996 were $353,186,000, an increase of $53,188,000 or 18%
compared to 1995. This increase was attributable primarily to the Company
shipping approximately 36% more suspension assemblies during 1996 than 1995,
partially offset by a lower average selling price due to selling higher volumes
of lower-priced suspensions.

Gross profit for 1996 was $79,570,000, an increase of $5,807,000 or 8%
compared to 1995, and gross profit as a percent of net sales decreased from 25%
to 23%. In addition to the sales volumes of lower-priced suspensions noted
above, the decrease in gross profit as a percent of net sales was also due to
reduced shipments during the fourth quarter resulting in an increase in fixed
costs as a percent of sales.

Research and development expenses for 1996 were $27,651,000, an increase of
$12,610,000 or 84% compared to 1995. The majority of the higher expenses were
due to increased TSA-TM- suspensions development efforts of approximately
$7,100,000 and a charge of $5,500,000 related to the Technology Sharing
Agreement with IBM, compared to a $2,500,000 charge for the Technology Sharing
Agreement during 1995.

Selling, general and administrative expenses for 1996 were $33,716,000, an
increase of $3,915,000 or 13% compared to 1995. The increased expenses were due
primarily to an increase in recruitment and relocation expenses of $1,722,000,
mainly related to the start-up of the Eau Claire assembly manufacturing
facility, increases in professional services of $1,418,000 and labor of
$1,141,000, partially offset by reduced profit sharing expenses of $1,167,000.
As a percent of net sales, selling, general and administrative expenses remained
at 10%.

The income tax provision for 1996 was based on an effective tax rate for the
year of 20% which was below the statutory federal rate primarily due to the
large portion of sales that qualifies for the benefit of the Company's Foreign
Sales Corporation.

Net income for 1996 was $13,802,000, a decrease of $7,276,000 compared to
1995. As a percent of net sales, net income decreased from 7% to 4% primarily
due to lower gross profit margins, noted above, and increased research and
development efforts.

COMPARISON OF FISCAL YEARS 1995 AND 1994

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 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

14
<PAGE>
$2,198,000 and increased labor expenses of $2,197,000. As a percent 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 qualifies 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.

15
<PAGE>
QUARTERLY RESULTS OF OPERATIONS

The following tables set forth unaudited consolidated quarterly financial
data for the periods indicated. This data is derived from unaudited consolidated
financial statements and, in the opinion of management, includes all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the financial results for such periods. Results of operations for any previous
fiscal quarter are not necessarily indicative of results for any future period.

<TABLE>
<CAPTION>
QUARTER ENDED(1)
-----------------------------------------------------
DEC. 29, SEPT. 29, JUNE 23, MAR. 24, DEC. 24
1996 1996 1996 1996 1995
--------- --------- --------- --------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales..................................... $ 106,906 $ 91,890 $ 91,418 $ 86,546 $ 83,332
Cost of sales................................. 75,794 73,429 69,632 68,667 61,888
--------- --------- --------- --------- ---------
Gross profit................................ 31,112 18,461 21,786 17,879 21,444
Research and development expenses............. 5,739 8,609 6,239 3,750 9,053
Selling, general and administrative
expenses.................................... 10,918 7,947 8,669 8,537 8,563
--------- --------- --------- --------- ---------
Income from operations...................... 14,455 1,905 6,878 5,592 3,828
Other income.................................. 306 202 267 368 321
Interest expense.............................. (858) (739) (482) (407) (480)
--------- --------- --------- --------- ---------
Income before income taxes.................. 13,903 1,368 6,663 5,553 3,669
Provision (benefit) for income taxes.......... 2,786 (41) 1,464 1,221 807
--------- --------- --------- --------- ---------
Net income.................................. $ 11,117 $ 1,409 $ 5,199 $ 4,332 $ 2,862
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income per common and common equivalent
share....................................... $ 0.66 $ 0.08 $ 0.31 $ 0.26 $ 0.17
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average common and common equivalent
shares outstanding.......................... 16,887 16,746 16,818 16,788 16,869

AS A PERCENTAGE OF NET SALES:
Net sales..................................... 100% 100% 100% 100% 100%
Cost of sales................................. 71 80 76 79 74
--------- --------- --------- --------- ---------
Gross profit................................ 29 20 24 21 26
Research and development expenses............. 5 9 7 4 11
Selling, general and administrative
expenses.................................... 10 9 9 10 10
--------- --------- --------- --------- ---------
Income from operations...................... 14 2 8 6 5
Other income.................................. -- -- -- -- --
Interest expense.............................. (1) -- (1) -- (1)
--------- --------- --------- --------- ---------
Income before income taxes.................. 13 2 7 6 4
Provision (benefit) for income taxes.......... 3 -- 1 1 1
--------- --------- --------- --------- ---------
Net income.................................. 10% 2% 6% 5% 3%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

- ------------------------

(1) The fiscal quarter ended September 29, 1996 contained 14 weeks. The fiscal
quarters ended December 29, 1996, June 23, 1996, March 24, 1996 and December
24, 1995 contained 13 weeks.

16
<PAGE>
The increase in net sales from the quarter ended September 29, 1996 to the
quarter ended December 29, 1996 was due to stronger orders for the Company's
suspension assemblies. Over these two periods, gross margins also increased from
20% to 29% due to improved capacity utilization, substantially improved yields
and operating efficiencies. Due to the Company's relatively high level of fixed
costs, gross margins are extremely sensitive to changes in volume. Net sales
were relatively flat in the quarter ended September 29, 1996 compared to the
quarter ended June 23, 1996. Over these two periods, net income declined from
$5,199,000 to $1,409,000 due to the combined effect of reduced demand, increased
overhead resulting from additions to manufacturing capacity and increased costs
related to development of the Company's TSA-TM- suspension assemblies. The
Company's research and development expenses for the quarter ended September 29,
1996 increased due to development efforts on TSA-TM- suspensions, and the
quarter ended December 24, 1995 included the recognition of a $5,500,000 expense
for the Technology Sharing Agreement with IBM.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal sources of liquidity are cash flow from operations,
cash balances and additional financing capacity. The Company's cash and cash
equivalents increased to $54,482,000 at December 29, 1996 compared to
$22,884,000 at September 29, 1996 and $30,479,000 at September 24, 1995. The
Company generated cash from operating activities of $22,302,000 for the thirteen
weeks ended December 29, 1996 compared to $39,904,000 in fiscal 1996,
$57,814,000 in fiscal 1995 and $11,967,000 in fiscal 1994.

Cash used for capital expenditures totaled $8,491,000 for the thirteen weeks
ended December 29, 1996, a decrease of $6,103,000 from the comparable period in
fiscal 1996, and was $77,065,000 in fiscal 1996, $44,472,000 in fiscal 1995 and
$29,540,000 in fiscal 1994. The expenditures for the first quarter of fiscal
1997 were primarily for manufacturing and support equipment and construction
costs of a photoetch facility at the Company's Eau Claire site. The expenditures
in fiscal 1996 were primarily for manufacturing and support equipment, the
completion of an assembly manufacturing facility and initial construction costs
of the Eau Claire photoetch facility. The Company anticipates, but is not
contractually committed to, fiscal 1997 expenditures of approximately
$100,000,000 primarily for manufacturing and support equipment and construction
of the Company's Eau Claire photoetch facility. Financing of these capital
expenditures will be principally from cash generated from operations, cash and
cash equivalents and the proceeds of this offering.

The Company established a $25,000,000 unsecured credit facility with The
First National Bank of Chicago during the first quarter of fiscal 1996. At
December 29, 1996, the Company had a letter of credit under this facility of
$1,625,000 as security for its variable rate demand note with the City of
Hutchinson. During the second quarter of fiscal 1996, the Company obtained
$15,300,000 from a sale/leaseback transaction of its Eau Claire, Wisconsin
suspension assembly manufacturing building, with a term of 15 years.

17
<PAGE>
During the fourth quarter of fiscal 1996, the Company completed a
$50,000,000 private debt placement, of which $25,000,000 was issued in July 1996
as senior unsecured notes having a fixed rate of 7.85%, annual principal
payments of $8,333,000 beginning on July 26, 2001 and maturing in July 2003. The
Company issued the remaining $25,000,000 during the first quarter of fiscal 1997
as a senior unsecured note having a fixed rate of 8.07%, annual principal
payments of $4,167,000 beginning on November 26, 2001 and maturing in November
2006. The Company's maturities of long-term debt for the five years subsequent
to September 29, 1996 are $5,760,000, $5,340,000, $4,620,000, $4,000,000 and
$12,333,000, respectively. The Company's financing agreements contain various
restrictive covenants. As of December 29, 1996, the Company was in compliance
with all such covenants.

During the first quarter of fiscal 1997, the Company signed a Master Lease
Agreement for up to $25,000,000 with General Electric Capital Corporation. The
agreement provides for leasing of various manufacturing equipment in fiscal 1997
for a noncancellable term of four years with various alternatives at the end of
the lease term.

The Company believes that the net proceeds from this offering, and cash
generated from operations, cash and cash equivalents, existing lending
facilities and available financing capacity, will provide adequate liquidity to
meet the Company's planned capital and operating requirements for at least the
twelve-month period following this offering. If the Company's spending plans
change, the Company may find it necessary to seek to obtain additional sources
of financing to support its capital needs, but there can be no assurance that
such financing will be available on commercially reasonable terms, if at all.

18
<PAGE>
BUSINESS

INDUSTRY BACKGROUND

The market for disk drives has grown rapidly in recent years, driven by such
factors as the growing use of desktop PCs, workstations, portable computers and
network servers, the increasing amount of memory required for software program
storage and the continuing accumulation of data. Additionally, the increasing
use of disk drives for non-computer applications such as voice mail and video
data, the expansion of storage-intensive data warehousing, Internet and intranet
applications, and the simultaneous use of multiple small disk drives, such as
systems using Redundant Arrays of Inexpensive Disks ("RAID"), have contributed
to the rapid growth of the disk drive industry. International Data Corporation
("IDC") estimates that approximately 109 million hard disk drives were shipped
in 1996, up approximately 22% from those shipped in 1995, and projects an
increase of approximately 21% for 1997. According to IDC, shipments of hard disk
drives increased by an average of approximately 28% per year during the five
years ended December 31, 1996.

Hard disk drives incorporate the same basic technology. The principal
components of a hard disk drive are recording disk media, a motor assembly, the
control electronics and a head stack assembly. A head stack assembly consists of
multiple magnetic recording heads attached by suspension assemblies to the
actuator arm. Each disk drive contains one or more (up to thirteen) hard disks
attached to a motor assembly which rotates the disks at high speeds in extremely
close proximity to the magnetic recording heads, each of which is attached to a
suspension assembly. Typically two recording heads (one for each side of the
disk), and therefore two suspension assemblies, are used with each disk in the
disk drive.

An average of five suspension assemblies currently are contained in every
disk drive that is produced. In recent years, the growth of unit demand for
suspension assemblies has exceeded the growth in disk drive shipments for
several reasons. First, the growth in demand for storage in PCs, workstations
and network servers has exceeded the rate of increase in the areal density of
storage capacity on disks. Therefore, to satisfy the increasing demand for
storage capacity, there has been an increase in the average number of disks,
recording heads and suspension assemblies shipped per disk drive. Second, the
demand for very high capacity disk drives, such as those used in network
servers, has been growing faster than the overall

19
<PAGE>
demand for disk drives. Drives for such network servers each typically contain
four to ten disks, and therefore eight to twenty recording heads and suspension
assemblies. Third, industry transitions from thin film inductive recording heads
to magneto-resistive (MR) heads, and from nano heads to the smaller pico heads,
have reduced initial production yields of the head and disk drive manufacturers.
Because a significant portion of head yield reduction is ascertained after the
head is bonded onto the suspension assembly, low yields often result in
increased demand for suspension assemblies in order to achieve desired disk
drive shipment levels.

Suspension assemblies are critical to disk drive performance and
reliability. 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, smaller recording heads and technology
incorporated in the type of recording head used. Technological advances in disk
drives generally require suspension assemblies with specialized design, expanded
functionality and greater precision. 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 and maintaining the position of the head on
the tracks of data. A typical nominal flying height is about one millionth of an
inch (a sheet of paper is approximately 3,000 millionths of an inch thick).
Excessive flying height impairs the ability of the head to read or write data.
Insufficient flying height causes the head to hit the disk surface which
destroys the magnetic coating and the data on the disk. 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.

STRATEGY

The Company's strategy is focused primarily on developing suspension
assemblies which address the technological advances and rapidly changing
requirements of the hard disk drive industry. The Company designs and develops
suspension assemblies which meet the increasingly higher performance
specifications of disk drive manufacturers, and is committed to reliably
producing its suspension assemblies in high volume, with specialized design,
expanded functionality and greater precision. The Company's strategy has
increasingly emphasized assisting disk drive manufacturers in reducing their
time to market for new drives by developing suspension assemblies and the
processes to manufacture them in advance of market needs. Key elements of the
Company's strategy include:

DESIGN SUCCESS THROUGH CUSTOMER-FOCUSED ENGINEERING. The Company's
engineers and sales force work closely with the engineering staffs of its
customers to design and develop both standard and customer-specific suspension
assemblies that address individual customer requirements. These relationships
provide the Company with important insights into industry trends and the product
development needs of its customers. Through its customer relationships and
advanced product designs, the Company seeks to have its suspension assemblies
designed into future generations of disk drives.

HIGH VOLUME PRECISION MANUFACTURING. In addition to its design expertise
and volume production capability, the Company believes its leadership position
is based on the precision of its suspension assemblies. In order to provide
assemblies in high volumes and with the precision required by its customers, the
Company has increasingly invested in developing advanced process and measurement
systems in connection with the design of its automated production equipment. The
Company also has adopted an integrated manufacturing approach that closely
couples design, tooling and manufacturing. This integrated approach has
facilitated the rapid development, implementation and high volume production of
new suspension assembly products.

TECHNOLOGICAL ADVANCES TO MEET MARKET NEEDS. The Company believes that the
ongoing technological changes in the disk drive market, particularly the trends
toward smaller magnetic heads, increased data

20
<PAGE>
storage capacity, greater precision and expanded functionality, will provide
additional product development opportunities. In anticipation of these market
trends, the Company focuses its resources on the manufacture of suspension
assemblies, including suspensions for use with smaller recording heads,
suspensions which have integral thin electrical conductors that connect directly
with the recording head, and suspensions for low profile drives.

EXPERTISE APPLIED TO NEW OPPORTUNITIES. The Company believes that the
experience gained from designing and manufacturing products requiring a high
degree of precision, quality and miniaturization for the disk drive market also
can be applied to other market opportunities. In this regard, the Company is
evaluating the development of certain devices for the medical market, including
a probe for the measurement of tissue oxygen saturation and tissue vitality
during surgery. See "Research and Development" below.

PRODUCTS

The Company has developed significant proprietary capabilities in the design
and production of suspension assemblies for both current and emerging disk drive
designs. The Company has developed improved suspension assemblies in
anticipation of several market shifts to new generations of smaller magnetic
heads (mini-to-micro, micro-to-nano, and nano-to-pico). The Company currently
produces over 300 variations of suspension assemblies for the nano and pico
platforms to meet the varied and changing requirements of individual customers.
In total, the Company shipped approximately 539 million suspension assemblies of
all types during the fiscal year ended September 29, 1996.

For customer-specific suspension assemblies, the Company has developed the
ability to assist customers' design efforts and to modify rapidly the Company's
standard designs to address specific customer needs. Because of its integrated
manufacturing approach that closely couples design, tooling and manufacturing,
the Company believes that it has a competitive advantage in quickly supplying
prototypes and commencing volume manufacturing.

In order to help develop both standard and customer-specific suspensions,
the Company maintains a test laboratory and computerized systems to simulate and
analyze suspension designs. The ability to predict and modify suspension
assembly performance is especially important in developing suspensions for high
capacity drives and drives with low access times.

TSA-TM- SUSPENSION ASSEMBLIES. During the next several years, the Company
anticipates increasing acceptance by the disk drive industry of its TSA-TM-
suspensions, which integrate into the suspension thin electrical conductors that
connect directly with the recording head. The integral etched copper leads of
the TSA-TM- suspension are pre-positioned on the suspension assembly from the
head region through the length of the suspension and, in some cases, along the
actuator. The Company believes that this electrical integration will be a key
feature of suspension assemblies as disk drive manufacturers make the transition
to smaller and more complex recording heads and the process of attaching the
smaller head to the rest of the drive's electronics becomes more difficult and
costly, involving greater risk of handling damage as well as interference by the
electrical wires with the head's performance.

The Company believes that electrical integration will reduce the manual
labor required to attach the heads to suspensions and will ease automated
assembly. TSA-TM- suspensions also increase the consistency of head flying by
eliminating certain wires that can impart forces which adversely affect the
recording head's flying attitude. The Company believes that similar benefits
throughout the head gimbal assembly and head stack assembly processes will
result in improved yields and increased throughput for its customers, which
should translate into lower capital investment, reduced labor and lower overall
costs for such customers. TSA-TM- suspensions are particularly suited for
magneto-resistive (MR) heads, which constitute a major portion of the new and
smaller types of recording heads that allow increased data storage density and
require at least twice as many electrical leads as conventional recording heads.

21
<PAGE>
The Company introduced TSA-TM- suspension assemblies to customers and began
shipping electrically functional engineering samples in the first half of fiscal
1996. In response to growing customer interest, the Company accelerated its
development efforts and began shipping qualified pre-production TSA-TM-
suspensions to four of the major disk drive manufacturers during the first
quarter of fiscal 1997.

MANUFACTURING

The Company's manufacturing strategy focuses on enhancing its ability to
reliably produce suspension assemblies in high volume and with the precision
required by its customers, by investing in the development of advanced process
and measurement systems and the design of its automated production equipment, as
well as in additional manufacturing facilities and equipment. The Company also
has adopted an integrated manufacturing approach that closely couples design,
tooling and manufacturing. This integrated approach has facilitated the rapid
development, implementation and high-volume production of new suspension
assembly products. Effective use of this integrated approach, together with the
Company's equipment, has increased production yields and efficiency, and has
been an important factor in the reduction of manufacturing costs.

A suspension assembly consists of two or three components that are laser
welded together. Certain suspension assemblies also incorporate electrical leads
which provide electrical connection from the recording head to the disk drive's
circuitry. Alignment, adjustment and freedom from imperfections and contaminants
are of critical importance. 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
proprietary 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,
plasma etching, plating, precision forming, laser welding and ultra-cleaning.
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. The Company monitors and controls these processes
through real-time statistical process analysis, and continuously tracks critical
parameters and takes corrective action as required.

The Company's critical raw material needs are available through multiple
sources of supply, with the following exceptions. Certain types of photoresist,
a liquid compound used in the photoetching process, and the stainless steel,
copper and polyamide materials that meet the Company's strict specifications,
are each currently available from only one supplier. To protect against the
adverse effect of a short-term supply disruption, the Company maintains several
weeks' supply of these materials. 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 results of operations would be materially adversely
affected. See "Risk Factors-- Availability of Certain Materials."

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 results of
operations could be materially adversely affected.

RESEARCH AND DEVELOPMENT

The Company participates in an industry that is subject to rapid
technological change, and its ability to remain competitive depends on, among
other things, its ability to anticipate such change and, in that regard, to
continue its close working relationships with the engineering staffs of its
customers. As a result, the Company has devoted and will continue to devote
substantial resources to product development and process engineering efforts.
For the first thirteen weeks of fiscal 1997 and for fiscal 1996, 1995 and 1994,

22
<PAGE>
the Company's research and development expenses were approximately $5,739,000,
$27,651,000, $15,041,000 and $8,626,000, respectively. As of December 29, 1996,
the Company employed approximately 694 engineers and technicians who are
responsible for the implementation of new technologies as well as process and
product development and improvements.

The Company's current research and development efforts are principally
directed to continuing the development and prototype production of new
high-precision conventional and TSA-TM- suspension assemblies to meet changing
head size, performance standards and electrical connectivity requirements for
disk drives.

The Company entered into the Technology Sharing Agreement and a Patent
License Agreement with IBM during fiscal 1995. Under the Technology Sharing
Agreement, IBM made 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 itself had devoted substantial efforts independent of
IBM to the research and development of TSA-TM- suspensions, and contributed its
existing TSA-TM- suspension technology to the joint effort. The Company and IBM
will continue to pursue joint research and development efforts to complete the
commercialization of integrated lead suspension designs. As of December 29,
1996, the Company had made payments totalling $1,500,000 to IBM and will make
additional payments over the next three fiscal years totalling $6,500,000, all
of which have been expensed and a related liability has been recorded by the
Company. Certain royalties have been paid and may be payable in the future by
the Company to IBM under the Technology Sharing Agreement.

The Company also is engaged in the development of certain devices for the
medical market, including a probe for the measurement of tissue oxygen
saturation and tissue vitality during surgery. For the first thirteen weeks of
fiscal 1997 and for fiscal 1996, research and development expenses allocated to
such devices were $502,000 and $1,990,000, respectively. 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.

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 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 individual 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 hard disk drives and recording heads used in such drives. The
following table shows the Company's major customer sales as a percentage of net
sales.

<TABLE>
<CAPTION>
QUARTER ENDED FISCAL YEAR ENDED
------------------------ -------------------------------------------
DEC. 29, DEC. 24, SEPT. 29, SEPT. 24, SEPT. 25,
1996 1995 1996 1995 1994
----------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Seagate Technology Incorporated................... 36% 33% 35% 36% 31%
Yamaha Corporation................................ 14 15 16 13 9
SAE Magnetics, Ltd./TDK........................... 13 16 14 9 7
Read-Rite Corporation............................. 13 19 13 19 23
IBM............................................... 10 7 9 9 5
</TABLE>

Sales to the Company's five largest customers constituted 86% and 87% of net
sales, respectively, for the thirteen weeks ended December 29, 1996 and for
fiscal 1996. Significant portions of the Company's

23
<PAGE>
revenue may be indirectly attributable to large manufacturers of disk drives,
such as Quantum Corporation, Toshiba Corporation and Western Digital
Corporation, which may purchase recording head assemblies from several different
recording head manufacturers that utilize the Company's suspension assemblies.

The Company expects to continue to depend upon a limited number of customers
for a substantial majority of its sales, given the relatively small number of
hard disk drive and recording head manufacturers. The Company's results of
operations could be adversely affected by reduced requirements of its major
customers. See "Risk Factors--Customer Concentration."

Sales to foreign-based enterprises totaled $18,016,000 for the first
thirteen weeks of fiscal 1997, $63,898,000 in fiscal 1996, $46,075,000 in fiscal
1995 and $29,394,000 in fiscal 1994. Sales to foreign subsidiaries of domestic
corporations totaled $18,734,000 for the first thirteen weeks of fiscal 1997,
$51,564,000 in fiscal 1996, $54,398,000 in fiscal 1995 and $14,126,000 in fiscal
1994. The majority of these sales were to the Pacific Rim region. In addition,
the Company has significant sales to domestic corporations which use the
Company's products in their offshore manufacturing sites.

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 $92,200,000 at December 29, 1996, compared to $58,500,000 at
September 29, 1996 and $56,200,000 at December 24, 1995. 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. See "Risk Factors--Dependence on Hard
Disk Drive Industry."

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 volume supply and price. The Company estimates that in
fiscal 1996 it produced approximately 70% of all suspension assemblies sold to
disk drive manufacturers and their suppliers, including recording head
manufacturers, worldwide. The Company's principal competitors are K. R.
Precision Co., Magnecomp Corporation and Nippon Hatsujo Kogyo Co. Certain users
of suspension assemblies also may have or may develop the ability to fabricate
their own suspension assemblies. In addition to competition in the conventional
suspension assembly market, the electrical interconnect features of the
Company's new TSA-TM- suspensions face competition from alternative
interconnection technologies such as conventional wiring, deposition circuitry
and flexible circuitry. 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, the Company believes that the number of entities that have the
technical capability and capacity for producing precision suspension assemblies
in large volumes will remain small.

Other types of computer memory systems, such as semiconductor memories
(flash memory) and tape and laser (optical and CD) drives, may become
competitive with certain hard disk drive applications, and thereby affect the
demand for certain of the Company's products. However, given the current state
of the technologies, semiconductor memories are not expected to be price
competitive with disk drives and optical memories are inherently much slower
than disk drives. Accordingly, the Company believes that such technologies will
not materially impact the market for hard disk drives in the near future.

24
<PAGE>
INTELLECTUAL PROPERTIES

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, if 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 pursued in the U.S. and in other countries. The
Company currently holds 19 U.S. patents, and has more than 50 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 be of value, they will not independently determine the Company's
success, which depends principally upon its engineering and manufacturing
skills. There can be no assurance that any patent issued to the Company will not
be challenged, invalidated or circumvented or that the rights granted thereunder
will provide adequate protection to the Company's technology. Within the
Company, intellectual property protection of trade secrets is achieved through
physical security measures at the Company's facilities as well as through
non-disclosure and non-competition agreements with all employees and
confidentiality agreements with consultants, strategic suppliers and customers.
There can be no assurance as to the degree of protection afforded by these
practices and laws.

In addition to the Technology Sharing Agreement and the Patent License
Agreement with IBM, 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.

LEGAL PROCEEDINGS

The Company is a party to certain 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.

EMPLOYEES

As of December 29, 1996, the Company had approximately 5,600 employees. 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.

25
<PAGE>
FACILITIES

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 building 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 operates a manufacturing facility in Sioux Falls, South Dakota,
in connection with which it leases a building of approximately 94,000 square
feet, a training center of 5,500 square feet and a warehouse of 4,800 square
feet.

The Company also operates a manufacturing facility in Eau Claire, Wisconsin,
in connection with which it leases a building of approximately 156,000 square
feet. The Company is in the process of constructing a photoetching facility of
approximately 320,000 square feet in Eau Claire.

The Company is leasing a building of approximately 100,000 square feet
located in Plymouth, Minnesota for stamping operations, office space and a
logistic center. The Company also leases sales offices in Singapore and the
Netherlands.

The Company believes that its existing facilities, including the facility
under construction in Eau Claire, Wisconsin, will be adequate to meet its
currently anticipated requirements.

26
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
Jeffrey W. Green.......................... 56 Chairman of the Board and Director

Wayne M. Fortun........................... 47 President, Chief Executive Officer and Chief Operating Officer
and Director

John A. Ingleman.......................... 51 Vice President, Chief Financial Officer and Secretary

Rebecca A. Albrecht....................... 43 Vice President of Human Resources

Beatrice A. Graczyk....................... 48 Vice President of Disk Drive Components Operations

Larry G. Moehring......................... 47 Vice President of Disk Drive Components Assembly Operations

Richard C. Myers.......................... 56 Vice President of Administration

LeRoy E. Olson............................ 60 Vice President of Disk Drive Components Operations Development

Richard J. Penn........................... 40 Vice President of Sales and Marketing

R. Scott Schaefer......................... 43 Vice President and Chief Technical Officer

W. Thomas Brunberg(1)..................... 56 Director

Archibald Cox, Jr.(2)..................... 56 Director

James E. Donaghy(1)(2).................... 62 Director

Harry C. Ervin(2)......................... 68 Director

Richard N. Rosett(1)...................... 68 Director
</TABLE>

- ------------------------

(1) Member of Audit Committee.

(2) Member of Compensation Committee.

Mr. Green is a co-founder of the Company and has served as a director since
the Company's formation in 1965. Mr. Green has been Chairman of the Board since
January 1983, and served as the Company's Chief Executive Officer from January
1983 to May 1996.

Mr. Fortun was elected a director in 1983. He has been with the Company
since 1975 and was elected President and Chief Operating Officer in January 1983
and Chief Executive Officer in May 1996.

Mr. Ingleman was elected Vice President in January 1982, Chief Financial
Officer in January 1988, and Secretary in January 1992. Mr. Ingleman served as
the Company's Treasurer from January 1982 through January 1996. Mr. Ingleman has
been with the Company since 1977.

Ms. Albrecht was elected Vice President in January 1995 and is now Vice
President of Human Resources. Previously she had been Director of Human
Resources since 1988. Ms. Albrecht has been with the Company since 1983.

27
<PAGE>
Ms. Graczyk was elected Vice President in May 1990 and is now Vice President
of Disk Drive Components Operations. She had been Director of Component
Operations since 1988. Ms. Graczyk has been with the Company since 1970.

Mr. Moehring was elected Vice President in May 1990 and is now Vice
President of Disk Drive Components Assembly Operations. He had been Director of
Assembly Operations since 1988. Mr. Moehring has been with the Company since
1978.

Mr. Myers was elected Vice President in January 1988 and is now Vice
President of Administration. In January 1995, he was elected Vice President of
Administration. Mr. Myers has been with the Company since 1977.

Mr. Olson was elected Vice President in May 1990 and is now Vice President
of Disk Drive Components Operations Development. He had been Director of Sioux
Falls Operations since April 1988 when he joined the Company.

Mr. Penn was elected Vice President in January 1996 and is now Vice
President of Sales and Marketing. Previously he had been Director of Sales and
Marketing since December 1994, Senior Manager responsible for Medical Business
Development from January 1994 to December 1994 and Marketing Manager since June
1990. Mr. Penn has been with the Company since 1981.

Mr. Schaefer was elected Vice President in May 1990 and is now Vice
President and Chief Technical Officer. He had been Vice President of Medical
Business Development since 1990 and Director of Engineering since 1988. Mr.
Schaefer has been with the Company since 1979.

Mr. Brunberg became a director of the Company in 1975. He is a certified
public accountant and has been a shareholder in the Minneapolis accounting firm
of Brunberg, Thoresen & Associates, Ltd. since March 1991. He was a partner in
the Minneapolis office of the accounting firm of Pannell Kerr Forster from 1987
through January 1991, which firm filed a petition under the Federal bankruptcy
laws in 1993.

Mr. Cox became a director of the Company in May 1996. Mr. Cox has been Vice
Chairman and President of Magnequench International, Inc., a manufacturer of
magnets and magnetic material, since October 1995. He has been Chairman of
Sextant Group, Inc., a financial advisory firm, since August 1993. Mr. Cox
served as President and Chief Executive Officer of The First Boston Corporation,
an investment banking firm, from July 1990 to August 1993, and as a Managing
Director of Tiger Management Company, an investment fund, from November 1993 to
June 1994. Mr. Cox is a director of Harris Chemical Group, Inc.

Mr. Donaghy became a director of the Company in 1992. Since January 1991,
Mr. Donaghy has been the Chief Executive Officer and President and a director of
Sheldahl, Inc., a manufacturer of laminates, composite materials and flexible
electronic interconnects.

Mr. Ervin became a director of the Company in 1969. Mr. Ervin, who is now
retired, was a Vice President of Dain Bosworth Incorporated, an investment
banking firm, from April 1988 through June 1996.

Mr. Rosett became a director of the Company in 1986. He has been a Professor
of Economics at the Rochester Institute of Technology ("RIT") since July 1990,
and Director of Quality Cup Programs at RIT since July 1995. Mr. Rosett was Dean
of the College of Business of RIT from July 1990 to July 1996.

28
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth, as of November 27, 1996 and as adjusted to
reflect the sale of 3,375,000 shares offered by this Prospectus, information
with respect to the beneficial ownership of the Common Stock of the Company by
(i) each person known to the Company to own 5% or more of the outstanding shares
of Common Stock, (ii) each of the Company's directors, (iii) each of the
Company's five most highly compensated executive officers, (iv) all of the
directors and executive officers as a group and (v) the Selling Shareholders.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1) OFFERING(1)
----------------------- SHARES -----------------------
NAME NUMBER PERCENT BEING OFFERED NUMBER PERCENT
- ---------------------------------------------- ---------- ----------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
FMR Corp.(2).................................. 1,695,900 10.4% -- 1,695,900 8.8%
82 Devonshire Street
Boston, Massachusetts 02109

Jeffrey W. Green(3)........................... 1,415,466 8.4 300,000 1,115,466 5.6
3401 Fourth Avenue North
Sioux Falls, South Dakota 57104

VGH Partners, L.L.C.(4)....................... 1,095,300 6.7 -- 1,095,300 5.7
260 Franklin Street
Boston, Massachusetts 02110

Wayne M. Fortun(5)............................ 640,818 3.8 75,000 565,818 2.9

Richard C. Myers(6)........................... 152,745 * -- 152,745 *

John A. Ingleman(7)........................... 138,570 * -- 138,570 *

R. Scott Schaefer(8).......................... 52,320 * -- 52,320 *

Archibald Cox, Jr............................. 30,000 * -- 30,000 *

Harry C. Ervin, Jr............................ 13,500 * -- 13,500 *

Richard N. Rosett(9).......................... 12,435 * -- 12,435 *

W. Thomas Brunberg(10)........................ 1,650 * -- 1,650 *

James E. Donaghy(11).......................... 1,200 * -- 1,200 *

Executive officers and directors as a group
(15 persons)(12)............................ 2,651,688 15.1 375,000 2,276,688 11.1
</TABLE>

- ------------------------

* Less than 1%

(1) Based on 16,357,230 shares outstanding as of November 27, 1996 and
19,357,230 shares to be outstanding after this offering, except that shares
underlying options exercisable within 60 days of November 27, 1996 are
deemed to be outstanding for purposes of calculating the percentage owned by
the holder of such options. Unless otherwise indicated in the footnotes to
this table, the listed beneficial owner has sole voting power and investment
power with respect to such shares.

(2) The number of shares noted above is based upon information reported to the
Securities and Exchange Commission (the "Commission") in a Schedule 13G
filed by FMR Corp. ("FMR") on December 12, 1996, a copy of which was
provided to the Company by FMR, and reflects beneficial ownership by FMR as
of December 9, 1996.

29
<PAGE>
(3) Of these shares, 660 are held by Mr. Green in joint tenancy with his wife
and 133,800 shares are held in an IRA for Mr. Green. Includes 411,300 shares
covered by options exercisable within 60 days granted to Mr. Green.

(4) The number of shares noted above is based upon information reported to the
Commission in a Schedule 13D filed by VGH Partners, L.L.C. ("VGH") on
January 9, 1997, a copy of which was provided to the Company by VGH, and
reflects beneficial ownership by VGH as of December 30, 1996.

(5) Of these shares, 16,725 are held by Mr. Fortun in joint tenancy with his
wife. Includes 409,170 shares covered by options exercisable within 60 days
granted to Mr. Fortun.

(6) Of these shares, 31,200 are held by Mr. Myers in joint tenancy with his wife
and 30,000 shares are held by Mr. Myers' wife. Includes 89,910 shares
covered by options exercisable within 60 days granted to Mr. Myers.

(7) Of these shares, 71,700 are held by Mr. Ingleman in joint tenancy with his
wife and 300 are held by Mr. Ingleman as custodian for his son under the
Minnesota Uniform Transfers to Minors Act. Includes 66,570 shares covered by
options exercisable within 60 days granted to Mr. Ingleman.

(8) All of these shares are covered by options exercisable within 60 days
granted to Mr. Schaefer.

(9) Includes 300 shares held in an IRA for Mr. Rosett's wife.

(10) Of these shares, 750 are held in trusts, 600 are held in an IRA for Mr.
Brunberg and 300 are held in an IRA for Mr. Brunberg's wife.

(11) Of these shares, 900 are held by Mr. Donaghy's wife and 300 shares are held
in a living trust of which Mr. Donaghy is settlor, beneficiary and
co-trustee, and over which he exercises both investment control and the
power to revoke the trust.

(12) Includes 1,147,611 shares covered by options exercisable within 60 days
granted to ten executive officers of the Company, and the spouse of one such
officer who is an employee of the Company.

30
<PAGE>
UNDERWRITING

Montgomery Securities, Hambrecht & Quist LLC and Dain Bosworth Incorporated
(the "Underwriters") have severally agreed, subject to the terms and conditions
contained in the Underwriting Agreement (the "Underwriting Agreement"), by and
among the Company, the Selling Shareholders and the Underwriters, to purchase
from the Company and the Selling Shareholders the number of shares of Common
Stock indicated below opposite their respective names, at the public offering
price less the underwriting discount set forth on the cover page of this
Prospectus. The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters are committed to purchase all of such shares of Common Stock, if
any are purchased.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ------------------------------------------------------------ ----------
<S> <C>
Montgomery Securities....................................... 1,687,500
Hambrecht & Quist LLC....................................... 1,012,500
Dain Bosworth Incorporated.................................. 675,000
----------
Total..................................................... 3,375,000
----------
----------
</TABLE>

The Underwriters have advised the Company and the Selling Shareholders that
the Underwriters propose initially to offer the Common Stock to the public on
the terms set forth on the cover page of this Prospectus. The Underwriters may
allow selected dealers a concession of not more than $0.93 per share; and the
Underwriters may allow, and such dealers may reallow, a concession of not more
than $0.10 per share to certain other dealers. After the offering, the public
offering price and other selling terms may be changed by the Underwriters. The
Common Stock is offered subject to receipt and acceptance by the Underwriters,
and to certain other conditions, including the right to reject orders in whole
or in part.

The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a maximum
of 506,250 additional shares of Common Stock to cover over-allotments, if any,
at the same price per share as the initial 3,375,000 shares to be purchased by
the Underwriters. To the extent that the Underwriters exercise such
over-allotment option, the Underwriters will be committed, subject to certain
conditions, to purchase such additional shares in approximately the same
proportion as set forth in the above table. The Underwriters may purchase such
shares only to cover over-allotments made in connection with the offering.

The Underwriting Agreement provides that the Company and the Selling
Shareholders will indemnify the Underwriters against certain liabilities,
including civil liabilities under the Securities Act of 1933, as amended (the
"Securities Act"), or will contribute to payments the Underwriters may be
required to make in respect thereof.

The Selling Shareholders and all of the Company's other executive officers
and directors, who immediately following the offering will beneficially own an
aggregate of approximately 2,277,000 shares of Common Stock, have agreed that,
for a period of 90 days after the date of this Prospectus, they will not,
without the prior written consent of Montgomery Securities, directly or
indirectly offer for sale, sell, solicit an offer to sell, contract or grant an
option to sell, pledge, transfer, establish an open put equivalent position or
otherwise dispose of any shares of Common Stock (except for the shares offered
hereby by the Selling Shareholders and an aggregate of up to 120,000 shares held
by certain executive officers or issuable upon the exercise of stock options
held by certain executive officers) or any securities convertible or
exchangeable for shares of Common Stock. In addition, the Company has agreed
that for a period of 90 days after the date of this Prospectus, it will not,
without the prior written consent of Montgomery Securities, directly or
indirectly offer to sell, issue, distribute or otherwise dispose of any equity
securities or securities convertible into or exchangeable for equity securities
or any options, rights or warrants with respect to any equity securities except
(i) for the shares of Common Stock offered by the Company hereby

31
<PAGE>
or (ii) for options issued pursuant to the Company's employee benefit plans and
shares of Common Stock issued upon exercise thereof.

In connection with this offering, certain Underwriters and selling group
members (if any) who are qualifying registered market makers on the Nasdaq
National Market may engage in passive market making transactions in the Common
Stock of the Company on the Nasdaq National Market in accordance with Rule
10b-6A under the Exchange Act, during the two business day period before
commencement of offers or sales of the Common Stock. The passive market making
transactions must comply with applicable volume and price limits and be
identified as such. In general, a passive market maker may display its bid at a
price not in excess of the highest independent bid for the security; if all
independent bids are lowered below the passive market makers' bid, however, such
bid must then be lowered when certain purchase limits are exceeded.

LEGAL MATTERS

The validity of the issuance of the Common Stock offered hereby is being
passed upon for the Company by Faegre & Benson LLP, 2200 Norwest Center, 90
South Seventh Street, Minneapolis, Minnesota 55402. Certain legal matters for
the Underwriters will be passed upon by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, 650 Page Mill Road, Palo Alto, California 94304, who
may rely on the opinion of Faegre & Benson LLP as to certain matters relating to
the laws of the State of Minnesota.

EXPERTS

The audited consolidated financial statements and schedules included or
incorporated by reference in this Prospectus and elsewhere in this Registration
Statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included and incorporated by reference herein in reliance upon the authority of
such firm as experts in giving said reports.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, as well
as at the following regional offices: 7 World Trade Center, Suite 1300, New
York, New York 10048, and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web site
that contains reports, proxy statements and other information filed by the
Company at (http://www.sec.gov). The Company's Common Stock is traded on the
Nasdaq National Market. The foregoing materials also should be available for
inspection at the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.

The Company has also filed with the Commission a Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the shares offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information, reference
is made to the Registration Statement, copies of which may be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates.

32
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents, filed by the Company with the Commission under the
Exchange Act, are incorporated in this Prospectus by reference:

(a) The Company's Annual Report on Form 10-K for the fiscal year ended
September 29, 1996 (which incorporates by reference certain portions of the
Company's 1996 Annual Report to Shareholders, including financial statements
and accompanying information, and certain portions of the Company's
definitive notice and proxy statement for the Company's 1997 Annual Meeting
of Shareholders).

(b) The Company's Quarterly Report on Form 10-Q for the thirteen weeks
ended December 29, 1996.

(c) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed with the Commission on
June 9, 1986.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the shares offered hereby shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.

The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits to such documents which are not specifically incorporated by reference
in such documents). Written requests for such copies should be directed to Mr.
John A. Ingleman, Secretary, Hutchinson Technology Incorporated, 40 West
Highland Park, Hutchinson, Minnesota 55350. Telephone requests may be directed
to Mr. Ingleman at (320) 587-3797.

33
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................................. F-2

Consolidated Statements of Operations for the quarters ended December 29,
1996 (unaudited) and December 24, 1995 (unaudited) and for the fiscal
years ended September 29, 1996, September 24, 1995 and September 25,
1994.................................................................... F-3

Consolidated Balance Sheets as of December 29, 1996 (unaudited) and as of
September 29, 1996 and September 24, 1995............................... F-4

Consolidated Statements of Cash Flows for the quarters ended December 29,
1996 (unaudited) and December 24, 1995 (unaudited) and for the fiscal
years ended September 29, 1996, September 24, 1995 and September 25,
1994.................................................................... F-5

Consolidated Statements of Shareholders' Investment for the quarter ended
December 29, 1996 (unaudited) and for the fiscal years ended September
29, 1996, September 24, 1995 and September 25, 1994..................... F-6

Notes to Consolidated Financial Statements................................ F-7
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Hutchinson Technology Incorporated:

We have audited the accompanying consolidated balance sheets of Hutchinson
Technology Incorporated (a Minnesota corporation) and Subsidiaries as of
September 29, 1996 and September 24, 1995, and the related consolidated
statements of operations, shareholders' investment and cash flows for each of
the three years in the period ended September 29, 1996. 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 29, 1996 and September 24, 1995,
and the results of their operations and their cash flows for each of the three
years in the period ended September 29, 1996 in conformity with generally
accepted accounting principles.

ARTHUR ANDERSEN LLP

Minneapolis, Minnesota,
October 31, 1996
(except with respect to the matters
discussed in Note 9, as to which
the date is January 20, 1997)

F-2
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
QUARTER ENDED FISCAL YEAR ENDED
--------------------- ----------------------------------
DEC. 29, DEC. 24, SEPT. 29, SEPT. 24, SEPT. 25,
1996 1995 1996 1995 1994
---------- --------- ---------- ---------- ----------
(UNAUDITED)

<S> <C> <C> <C> <C> <C>
Net sales......................................................... $ 106,906 $ 83,332 $ 353,186 $ 299,998 $ 238,794
Cost of sales..................................................... 75,794 61,888 273,616 226,235 199,548
---------- --------- ---------- ---------- ----------
Gross profit.................................................... 31,112 21,444 79,570 73,763 39,246
Research and development expenses................................. 5,739 9,053 27,651 15,041 8,626
Selling, general and administrative expenses...................... 10,918 8,563 33,716 29,801 22,840
---------- --------- ---------- ---------- ----------
Income from operations.......................................... 14,455 3,828 18,203 28,921 7,780
Other income...................................................... 306 321 1,158 1,462 1,171
Interest expense.................................................. (858) (480) (2,108) (2,636) (995)
---------- --------- ---------- ---------- ----------
Income before income taxes...................................... 13,903 3,669 17,253 27,747 7,956
Provision for income taxes........................................ 2,786 807 3,451 6,669 2,076
---------- --------- ---------- ---------- ----------
Net income...................................................... $ 11,117 $ 2,862 $ 13,802 $ 21,078 $ 5,880
---------- --------- ---------- ---------- ----------
---------- --------- ---------- ---------- ----------
Net income per common and common equivalent share................. $ 0.66 $ 0.17 $ 0.82 $ 1.28 $ 0.36
---------- --------- ---------- ---------- ----------
---------- --------- ---------- ---------- ----------
Weighted average common and common equivalent shares
outstanding..................................................... 16,887 16,869 16,806 16,479 16,338
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-3
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
DEC. 29, SEPT. 29, SEPT. 24,
1996 1996 1995
--------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents................................. $ 54,482 $ 22,884 $ 30,479
Securities available for sale............................. 3,169 3,064 1,190
Trade receivables, net.................................... 58,672 46,803 37,058
Other receivables......................................... 13,821 9,475 3,625
Inventories............................................... 15,383 17,235 13,298
Prepaid taxes and other expenses.......................... 9,333 9,204 4,842
--------- --------- ---------
Total current assets.................................. 154,860 108,665 90,492

Property, plant and equipment, at cost:
Land, buildings and improvements.......................... 40,163 39,888 35,371
Equipment................................................. 197,210 189,989 150,866
Construction in progress.................................. 38,721 34,801 22,804
Less: accumulated depreciation............................ (150,225) (142,972) (115,225)
--------- --------- ---------
Net property, plant and equipment..................... 125,869 121,706 93,816

Other assets................................................ 8,803 8,612 6,590
--------- --------- ---------
$ 289,532 $ 238,983 $ 190,898
--------- --------- ---------
--------- --------- ---------

LIABILITIES AND SHAREHOLDERS' INVESTMENT

Current liabilities:
Current maturities of long-term debt...................... $ 5,760 $ 5,760 $ 4,255
Accounts payable and accrued expenses..................... 28,488 23,008 13,907
Accrued compensation...................................... 20,654 12,187 13,628
Accrued income taxes...................................... 7,215 5,608 4,418
--------- --------- ---------
Total current liabilities............................. 62,117 46,563 36,208

Long-term debt.............................................. 76,845 53,185 33,445

Other long-term liabilities................................. 5,533 5,551 1,500

Commitments and contingencies (Note 6)

Shareholders' investment:
Common stock, $.01 par value, 45,000,000 shares
authorized, 16,374,000, 16,356,000 and 16,341,000 issued
and outstanding......................................... 164 164 163
Additional paid-in capital................................ 43,579 43,343 43,207
Retained earnings......................................... 101,294 90,177 76,375
--------- --------- ---------
Total shareholders' investment........................ 145,037 133,684 119,745
--------- --------- ---------
$ 289,532 $ 238,983 $ 190,898
--------- --------- ---------
--------- --------- ---------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
QUARTER ENDED FISCAL YEAR ENDED
----------------------- ----------------------------------
DEC. 29, DEC. 24, SEPT. 29, SEPT. 24, SEPT. 25,
1996 1995 1996 1995 1994
----------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income..................................................... $ 11,117 $ 2,862 $ 13,802 $ 21,078 $ 5,880
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization................................ 9,559 7,435 33,565 28,174 23,974
Deferred tax benefit......................................... (296) (2,911) (6,085) (2,498) (1,493)
Loss on disposal of assets................................... 48 103 344 403 49
Changes in operating assets and liabilities (Note 7)......... 1,874 5,429 (1,722) 10,657 (16,443)
----------- ---------- ---------- ---------- ----------
Cash provided by operating activities.......................... 22,302 12,918 39,904 57,814 11,967
----------- ---------- ---------- ---------- ----------

Investing activities:
Capital expenditures........................................... (8,491) (14,594) (77,065) (44,472) (29,540)
Increase in other receivables.................................. (6,005) -- (5,242) -- --
Proceeds from the sale of building/equipment................... -- -- 15,300 -- 66
Purchases of marketable securities............................. (105) (1,814) (4,944) (3,080) --
Sales of marketable securities................................. -- 964 3,070 1,890 3,547
----------- ---------- ---------- ---------- ----------
Cash used for investing activities............................. (14,601) (15,444) (68,881) (45,662) (25,927)
----------- ---------- ---------- ---------- ----------

Financing activities:
Proceeds from issuance of long-term debt....................... 25,000 -- 25,500 -- 43,500
Repayments of long-term debt................................... (1,339) (1,340) (4,255) (2,380) (15,880)
Net proceeds from issuance of common stock..................... 236 21 137 2,137 50
----------- ---------- ---------- ---------- ----------
Cash provided by (used for) financing activities............... 23,897 (1,319) 21,382 (243) 27,670
----------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents............. 31,598 (3,845) (7,595) 11,909 13,710
Cash and cash equivalents at beginning of period................. 22,884 30,479 30,479 18,570 4,860
----------- ---------- ---------- ---------- ----------
Cash and cash equivalents at end of period....................... $ 54,482 $ 26,634 $ 22,884 $ 30,479 $ 18,570
----------- ---------- ---------- ---------- ----------
----------- ---------- ---------- ---------- ----------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT

(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
---------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
--------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Balance, September 26, 1993........................................... 15,993 $ 160 $ 39,112 $ 49,417
Exercise of stock options........................................... 6 -- 50 --
Net income.......................................................... -- -- -- 5,880
--------- ----- ----------- ----------
Balance, September 25, 1994........................................... 15,999 160 39,162 55,297
Exercise of stock options........................................... 345 3 4,066 --
Common stock issuance............................................... -- -- 12 --
Common stock retirements............................................ (3) -- (33) --
Net income.......................................................... -- -- -- 21,078
--------- ----- ----------- ----------
Balance, September 24, 1995........................................... 16,341 163 43,207 76,375
Exercise of stock options........................................... 15 1 127 --
Common stock issuance............................................... -- -- 9 --
Net income.......................................................... -- -- -- 13,802
--------- ----- ----------- ----------
Balance, September 29, 1996........................................... 16,356 164 43,343 90,177
Exercise of stock options (unaudited)............................... 18 -- 236
Net income (unaudited).............................................. -- -- -- 11,117
--------- ----- ----------- ----------
Balance, December 29, 1996 (unaudited)................................ 16,374 $ 164 $ 43,579 $ 101,294
--------- ----- ----------- ----------
--------- ----- ----------- ----------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-6
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION AS OF DECEMBER 29, 1996 IS UNAUDITED
(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 reclassifications have been made in the 1995 and
1994 financial statements to conform with 1996 and thirteen weeks ended December
29, 1996 presentation. Such reclassifications had no effect on 1996 or thirteen
weeks ended December 29, 1996 results of operations or shareholders' investment.

USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Ultimate results could differ from those estimates.

FISCAL YEAR--The Company's fiscal year is the fifty-two/fifty-three week
period ending on the last Sunday in September. The fiscal year ended September
29, 1996 is a fifty-three week period and fiscal years ended September 24, 1995
and September 25, 1994 are fifty-two week periods.

REVENUE RECOGNITION AND CUSTOMERS--The Company recognizes revenue upon the
shipment of completed products. An analysis of customer sales is as follows:

<TABLE>
<CAPTION>
QUARTER ENDED
-------------------
DEC. 29, DEC. 24, FISCAL FISCAL FISCAL
1996 1995 1996 1995 1994
-------- -------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Seagate Technology Incorporated............................. 36% 33% 35% 36% 31%
Yamaha Corporation.......................................... 14 15 16 13 9
SAE Magnetics, Ltd./TDK..................................... 13 16 14 9 7
Read-Rite Corporation....................................... 13 19 13 19 23
IBM......................................................... 10 7 9 9 5
</TABLE>

Sales to the Company's five largest customers constituted 86% and 90% for
the thirteen weeks ended December 29, 1996 and December 24, 1995, respectively,
and 87%, 86% and 75% of net sales for fiscal 1996, 1995 and 1994, respectively.

Sales to foreign locations were as follows:

<TABLE>
<CAPTION>
QUARTER ENDED
--------------------
DEC. 29, DEC. 24, FISCAL FISCAL FISCAL
1996 1995 1996 1995 1994
--------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Foreign-based enterprises..................... $ 18,016 $ 16,691 $ 63,898 $ 46,075 $ 29,394
Foreign subsidiaries of U.S. corporations..... 18,734 14,189 51,564 54,398 14,126
--------- --------- ---------- ---------- ---------
$ 36,750 $ 30,880 $ 115,462 $ 100,473 $ 43,520
--------- --------- ---------- ---------- ---------
--------- --------- ---------- ---------- ---------
</TABLE>

F-7
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 AND 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
primarily 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.

TRADE RECEIVABLES--The Company grants credit to customers, but generally
does not require collateral or any other security to support amounts due. Trade
receivables are net of allowances of $2,781,000 at December 29, 1996, $2,148,000
at September 29, 1996 and $1,924,000 at September 24, 1995.

INVENTORIES--All inventories are stated at the lower of last-in, first-out
(LIFO) cost or market. Inventories consist of the following:

<TABLE>
<CAPTION>
DEC. 29, SEPT. 29, SEPT. 24,
1996 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
Raw materials.............................................. $ 4,064 $ 4,137 $ 3,019
Work in process............................................ 6,178 5,558 3,159
Finished goods............................................. 5,431 7,830 7,455
LIFO Reserve............................................... (290) (290) (335)
----------- --------- ---------
$ 15,383 $ 17,235 $ 13,298
----------- --------- ---------
----------- --------- ---------
</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:

<TABLE>
<S> <C>
20 to 25
Buildings.................................................... years
Leasehold improvements....................................... 5 to 10 years
Equipment.................................................... 3 to 8 years
</TABLE>

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 $11,540,000 in the first thirteen weeks of fiscal 1997, $14,490,000 in
the first thirteen weeks of fiscal 1996, $51,212,000 in fiscal 1996, $32,567,000
in fiscal 1995 and $25,663,000 in fiscal 1994. Of these amounts, approximately
$5,739,000 in the first thirteen weeks of fiscal 1997, $9,053,000 in the first
thirteen weeks of fiscal 1996, $27,651,000 in fiscal 1996, $15,041,000 in fiscal
1995 and $8,626,000 in fiscal 1994 are classified as research and development
expenses.

INCOME TAXES--Deferred taxes are provided at currently enacted tax rates on
all significant temporary differences.

F-8
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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>
DEC. 29, SEPT. 29, SEPT. 24,
LONG-TERM DEBT 1996 1996 1995
- ------------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Senior unsecured note, 7.46%, payable in varying semi-annual installments
through February 2004........................................................ $ 28,125 $ 28,125 $ 30,000
Senior unsecured note, 7.85%, payable in varying annual installments through
July 2003.................................................................... 25,000 25,000 --
Senior unsecured note, 8.07%, payable in varying annual installments through
November 2006................................................................ 25,000 -- --
Senior unsecured note, 10.3% payable in varying annual installments through
October 1998................................................................. 1,960 3,300 4,640
Variable rate demand note, City of Hutchinson, payable in varying annual
installments through June 2004............................................... 1,600 1,600 1,700
Major Economic Development Fund Agreement, 4%, payable in varying annual
installments through March 2006.............................................. 500 500 --
Senior unsecured note, 10.1%, payable in varying annual installments through
July 1997.................................................................... 420 420 1,360
------------- ------------- -------------
82,605 58,945 37,700
Less-current maturities........................................................ (5,760) (5,760) (4,255)
------------- ------------- -------------
$ 76,845 $ 53,185 $ 33,445
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

The Company established a $25,000,000 unsecured credit facility with The
First National Bank of Chicago during the first quarter of fiscal 1996 which has
an effective interest rate of the CD or LIBOR plus a variable spread based on
the Company's financial position, maturing on December 8, 1998. At December 29,
1996, the Company had a letter of credit under this facility of $1,625,000 as
security for its variable rate demand note with the City of Hutchinson. As of
December 29, 1996, there were no amounts outstanding under this facility.

On July 26, 1996, the Company completed a $50,000,000 private debt
placement, of which $25,000,000 was issued as a senior unsecured note having a
fixed rate of 7.85%, annual principal payments of $8,333,000 beginning on July
26, 2001 and maturing July 26, 2003. The Company issued the remaining
$25,000,000 on November 26, 1996 as a senior unsecured note having a fixed rate
of 8.07%, annual principal payments of $4,167,000 beginning on November 26, 2001
and maturing November 26, 2006. 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 was in compliance with all such covenants of the above agreements as of
September 29, 1996 and December 29, 1996.

F-9
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2--FINANCING ARRANGEMENTS (CONTINUED)
Maturities of long-term debt for the five years subsequent to December 29,
1996 and September 29, 1996 are as follows:

<TABLE>
<CAPTION>
DEC. 29, SEPT. 29,
1996 1996
------------- -------------
<S> <C> <C>
1997.................................................................. $ 5,760 $ 5,760
1998.................................................................. 4,620 5,340
1999.................................................................. 4,000 4,620
2000.................................................................. 4,000 4,000
2001.................................................................. 12,333 12,333
Thereafter............................................................ 51,892 26,892
------------- -------------
$ 82,605 $ 58,945
------------- -------------
------------- -------------
</TABLE>

3--INCOME TAXES

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------
DEC. 29, DEC. 24, FISCAL FISCAL FISCAL
1996 1995 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Current:
Federal.......................................... $ 2,485 $ 3,277 $ 8,204 $ 8,142 $ 3,123
State............................................ 597 441 1,332 1,025 446
Deferred........................................... (296) (2,911) (6,085) (2,498) (1,493)
----------- ----------- ----------- ----------- -----------
$ 2,786 $ 807 $ 3,451 $ 6,669 $ 2,076
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>

The deferred benefit is composed of the following:

<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------
DEC. 29, DEC. 24, FISCAL FISCAL FISCAL
1996 1995 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Asset bases, lives and depreciation methods........ $ (284) $ (167) $ (895) $ (552) $ (1,002)
Reserves and accruals not currently deductible..... (118) (2,743) (5,888) (1,534) (60)
Tax credits........................................ 106 (1) 698 (407) (427)
Other, net......................................... -- -- -- (5) (4)
----- ----------- ----------- ----------- -----------
$ (296) $ (2,911) $ (6,085) $ (2,498) $ (1,493)
----- ----------- ----------- ----------- -----------
----- ----------- ----------- ----------- -----------
</TABLE>

F-10
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3--INCOME TAXES (CONTINUED)
A reconciliation of the federal statutory tax rate to the effective tax rate
is as follows:

<TABLE>
<CAPTION>
QUARTER ENDED
------------------------
DEC. 29, DEC. 24, FISCAL FISCAL FISCAL
1996 1995 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Statutory federal income tax rate........................... 35% 35% 35% 35% 34%
Effect of:
State income taxes, net of federal income tax benefits.... 2 2 3 2 4
Tax benefits of the Foreign Sales Corporation............. (14) (15) (19) (12) (12)
Other, net................................................ (3) -- 1 (1) --
-- -- -- -- --
20% 22% 20% 24% 26%
-- -- -- -- --
-- -- -- -- --
</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 December 29, 1996, the
Company had unused tax credits of $2,657,000, all of which can be carried
forward indefinitely. A valuation allowance of $657,000 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:

<TABLE>
<CAPTION>
DEC. 29, SEPT. 29, SEPT. 24,
DEFERRED TAX ASSETS 1996 1996 1995
- ----------------------------------------------------------- ------------ ------------- -------------
<S> <C> <C> <C>
Current deferred tax assets:
Sales and accounts receivables........................... $ 1,107 $ 873 $ 702
Inventories.............................................. 5,339 5,419 1,830
Accruals and other reserves.............................. 2,481 2,367 1,783
------------ ------------- -------------
Total current deferred tax assets........................ 8,927 8,659 4,315

Long-term deferred tax assets (liabilities):
Property, plant and equipment............................ 4,037 3,753 2,858
Accruals and other reserves.............................. 2,050 2,146 602
Tax credits.............................................. 2,657 2,738 4,933
Valuation allowance...................................... (657) (738) (2,235)
------------ ------------- -------------
Total long-term deferred tax assets...................... 8,087 7,899 6,158
------------ ------------- -------------
Total deferred tax assets.................................. $ 17,014 $ 16,558 $ 10,473
------------ ------------- -------------
------------ ------------- -------------
</TABLE>

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.

F-11
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4--FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
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>
DEC. 29, 1996 SEPT. 29, 1996 SEPT. 24, 1995
-------------------- -------------------- --------------------
CARRYING FAIR CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents........................... $ 54,482 $ 54,482 $ 22,884 $ 22,884 $ 30,479 $ 30,479
Securities available for sale....................... 3,169 3,169 3,064 3,064 1,190 1,190
Long-term debt...................................... 82,605 81,556 58,945 59,619 37,700 37,593
</TABLE>

5--EMPLOYEE BENEFITS

STOCK OPTIONS--In January 1995, the shareholders approved an amendment to
the 1988 Stock Option Plan under which up to 3,000,000 common shares are
reserved for issuance, of which options representing 2,875,545 common shares and
2,332,545 common shares have been granted as of December 29, 1996 and September
29, 1996, respectively. 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 300,000 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 OPTION
PLAN
---------------------
<S> <C>
Balance, September 26, 1993............................................ 905,550
Granted at $10.33.................................................... 161,400
Exercised at $2.58 to $8.17.......................................... (7,200)
Expired.............................................................. (75)
----------
Balance, September 25, 1994............................................ 1,059,675
Granted at $7.75..................................................... 382,260
Exercised at $2.00 to $10.33......................................... (345,009)
----------
Balance, September 24, 1995............................................ 1,096,926
Granted at $16.33.................................................... 438,510
Exercised at $3.92 to $7.75.......................................... (15,810)
----------
Balance, September 29, 1996............................................ 1,519,626
Granted at $17.33.................................................... 543,000
Excercised at $3.92 to $16.33........................................ (17,265)
Expired.............................................................. (8,235)
----------
Balance, December 29, 1996............................................. 2,037,126
----------
----------
</TABLE>

F-12
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5--EMPLOYEE BENEFITS (CONTINUED)
EMPLOYEE BENEFIT PLANS--The Company has a defined contribution plan covering
its employees. The Company's contributions to the plan were $1,574,000 in the
first thirteen weeks of fiscal 1997, $1,501,000 in the first thirteen weeks of
fiscal 1996, $6,463,000 in fiscal 1996, $3,979,000 in fiscal 1995 and $2,241,000
in fiscal 1994.

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
$3,205,000 in the first thirteen weeks of fiscal 1997, $2,775,000 in the first
thirteen weeks of fiscal 1996, $13,439,000 in fiscal 1996, $10,427,000 in fiscal
1995 and $10,001,000 in fiscal 1994.

6--COMMITMENTS AND CONTINGENCIES

The Company is committed under various operating lease agreements. Total
rent expense under these operating leases was $2,477,000 in the first thirteen
weeks of fiscal 1997, $1,414,000 in the first thirteen weeks of fiscal 1996,
$7,502,000 in fiscal 1996, $4,866,000 in fiscal 1995 and $4,199,000 in fiscal
1994. Future minimum payments for all operating leases with initial or remaining
terms of one year or more subsequent to September 29, 1996 are as follows:

<TABLE>
<S> <C>
1997............................................................... $ 8,573
1998............................................................... 7,381
1999............................................................... 5,199
2000............................................................... 3,540
2001 and thereafter................................................ 22,119
</TABLE>

On May 1, 1996, the Company obtained $15,300,000 from a sale/leaseback
transaction of its Eau Claire, Wisconsin assembly manufacturing building, which
has a term of 15 years.

The Company entered into a Technology Transfer and Development Agreement
(the "Technology Sharing Agreement") and a Patent License Agreement with IBM
during fiscal 1995. Under the Technology Sharing Agreement, IBM made 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 itself had devoted
substantial efforts independent of IBM to the research and development of
TSA-TM- suspensions, and contributed its existing TSA-TM- suspension technology
to the joint effort. The Company and IBM will continue to pursue joint research
and development efforts to complete the commercialization of integrated lead
suspension designs. As of December 29, 1996, the Company had made payments to
IBM totalling $1,500,000 and will make additional payments over the next three
fiscal years totalling $6,500,000, all of which has been reflected as an
expense, $2,500,000 during the third quarter of fiscal 1995 and $5,500,000
resulting from an amendment during the first quarter of fiscal 1996.

F-13
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6--COMMITMENTS AND CONTINGENCIES (CONTINUED)
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>
QUARTER ENDED
---------------------
DEC. 29, DEC. 24, FISCAL FISCAL FISCAL
1996 1995 1996 1995 1994
---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Changes in operating assets and liabilities:
Receivables, net...................................... $ (10,210) $ (5,144) $ (10,353) $ (1,568) $ (16,795)
Inventories........................................... 1,852 (2,766) (3,937) (3,769) (1,630)
Prepaid taxes and other expenses...................... 139 249 (334) (1,231) 1,023
Accounts payable and accrued liabilities.............. 10,111 8,090 8,850 15,725 959
Other noncurrent liabilities.......................... (18) 5,000 4,052 1,500 --
---------- --------- ---------- --------- ----------
$ 1,874 $ 5,429 $ (1,722) $ 10,657 $ (16,443)
---------- --------- ---------- --------- ----------
---------- --------- ---------- --------- ----------

Cash paid for:
Interest (net of amount capitalized).................. $ 116 $ 191 $ 1,703 $ 2,655 $ 767
Income taxes.......................................... 1,569 1,236 8,405 7,792 6,055
</TABLE>

Capitalized interest was $455,000 in the first thirteen weeks of fiscal
1997, $258,000 in the first thirteen weeks of fiscal 1996, $1,206,000 in fiscal
1996, $512,000 in fiscal 1995 and $1,142,000 in fiscal 1994.

8--SUMMARY OF QUARTERLY INFORMATION (UNAUDITED)

The following table summarizes unaudited financial data for the thirteen
weeks ended December 29, 1996 and for fiscal years 1996 and 1995:
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1996 BY QUARTER FISCAL 1995 BY QUARTER
----------- ------------------------------------------ -------------------------------
FIRST
QUARTER FIRST SECOND THIRD FOURTH FIRST SECOND THIRD
----------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............................... $ 106,906 $ 83,332 $ 86,546 $ 91,418 $ 91,890 $ 63,495 $ 67,889 $ 81,892
Gross profit............................ 31,112 21,444 17,879 21,786 18,461 12,988 15,239 21,895
Income from operations.................. 14,455 3,828 5,592 6,878 1,905 3,474 5,678 8,113
Income before income taxes.............. 13,903 3,669 5,553 6,663 1,368 3,178 5,282 7,886
Net income.............................. 11,117 2,862 4,332 5,199 1,409 2,345 4,084 5,988
Net income per share.................... $ 0.66 $ 0.17 $ 0.26 $ 0.31 $ 0.08 $ 0.14 $ 0.25 $ 0.36

Price range per share:
High.................................. $ 26.79 $ 21.83 $ 17.16 $ 19.46 $ 14.38 $ 9.58 $ 10.58 $ 14.67
Low................................... 12.75 15.17 12.17 12.75 10.25 7.67 8.08 9.50

FOURTH
---------
<S> <C>
Net sales............................... $ 86,722
Gross profit............................ 23,641
Income from operations.................. 11,656
Income before income taxes.............. 11,401
Net income.............................. 8,661
Net income per share.................... $ 0.52
Price range per share:
High.................................. $ 29.67
Low................................... 14.08
</TABLE>

F-14
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8--SUMMARY OF QUARTERLY INFORMATION (UNAUDITED) (CONTINUED)
The price range per share, reflected above, is the highest and lowest
closing prices as quoted on the Nasdaq National Market during each quarter.

9--SUBSEQUENT EVENT

On January 20, 1997, the Company announced that the Board of Directors
declared a three-for-one stock split of the Company's common stock, effective at
the close of business on February 11, 1997, for shareholders of record at the
close of business on January 31, 1997. The Company also changed the par value of
its common stock to $.01 per share. Common share and earnings per share amounts
in the accompanying consolidated financial statements have been retroactively
adjusted to reflect the stock split and par value change.

F-15
<PAGE>

[Picture of suspension [Picture of recording [Picture showing force
assemblies] head flying over disk] applied to recording
head by suspension
assembly]
SUSPENSION ASSEMBLIES HEADS FLY ON THIN AIR CRITICAL LOCATION OF
ACTUAL SIZE FILM FORCE

IMPORTANCE OF SUSPENSION ASSEMBLIES--The Company's suspension assemblies are
critical to the performance of disk drives.

Disk drive heads do not touch the surface of the spinning disk but instead fly
at a critical microscopic distance above the disk. Excessive flying height
impairs the ability of the head to read or write data; insufficient flying
height causes the head to hit the disk surface which destroys the magnetic
coating (and the data) on the disk.

The head stays at the correct flying height because of the equilibrium of the
downward force applied by the suspension assembly and the upward force of the
air driven under the head by the spinning disk.

The applied suspension force is not the only factor that controls flying height.
The suspension must apply the force at precisely the right point on the head,
the suspension must hold the head at the correct angles in two axes
simultaneously and the suspension must accommodate motions of the head due to
undulations in the disk and irregularities in rotation.

While all parts of the suspension are important in drive performance, of
greatest concern is the design and precision of the gimbal or flexure. The
Company's customers attach the head to the gimbal or flexure which must hold
smaller and smaller heads at lower and lower flying heights. Some suspensions
incorporate a gimbal etched and formed from the same material as the load beam.
Other suspensions terminate in a flexure that is laser welded to the load beam
and allows the head to pivot on a precisely located dimple.

Because head size is such an important factor in determining the head's flying
characteristics and because smaller heads require special considerations in the
designs of the suspension assemblies, the Company organizes its suspension
designs around platforms based on the size of the head (micro, nano and pico).

Most of the heads now in production are of inductive type and are made with thin
film deposition techniques. Magneto-resistive heads (MR), a more complex variant
of inductive types, are being used in increasing numbers because they offer
higher data densities in some applications. MR heads have several more leads
connected to them and therefore are likely candidates for the Company's TSA-TM-
suspensions.

ANGLES ARE CRITICAL TO COMPLIANCE ACCOMMODATES COMPONENTS OF SUSPENSION
FLIGHT DISK IMPERFECTIONS ASSEMBLY
[Picture showing pitch [Picture showing [Picture of suspension
and roll of recording recording head flying assembly components]
head over disk] over irregular disk
surface]
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------

NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING
SHAREHOLDERS OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SHARES OF COMMON STOCK TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF,
ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

----------------------

TABLE OF CONTENTS

----------------------

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY........................................................ 3
RISK FACTORS.............................................................. 5
USE OF PROCEEDS........................................................... 9
DIVIDEND POLICY........................................................... 9
PRICE RANGE OF COMMON STOCK............................................... 9
CAPITALIZATION............................................................ 10
SELECTED CONSOLIDATED FINANCIAL DATA...................................... 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION...................................................... 12
BUSINESS.................................................................. 19
MANAGEMENT................................................................ 27
PRINCIPAL AND SELLING SHAREHOLDERS........................................ 29
UNDERWRITING.............................................................. 31
LEGAL MATTERS............................................................. 32
EXPERTS................................................................... 32
AVAILABLE INFORMATION..................................................... 32
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 33
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS................................ F-1
</TABLE>

3,375,000 SHARES

[LOGO]

COMMON STOCK

------------

PROSPECTUS
------------

MONTGOMERY SECURITIES

HAMBRECHT & QUIST

DAIN BOSWORTH
INCORPORATED

FEBRUARY 19, 1997

- -------------------------------------------
-------------------------------------------
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