<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
Amendment No. 1 to Form 10-K
(Mark One)
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Fiscal Year Ended September 28, 1997
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition Period From _______________ to ________________.
Commission file number 0-14709
HUTCHINSON TECHNOLOGY INCORPORATED
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(Exact name of registrant as specified in its charter)
Minnesota 41-0901840
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
40 West Highland Park
Hutchinson, Minnesota 55350
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(Address of principal executive offices) (Zip code)
(320) 587-3797
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
par value $.01 per share
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes /X/
No / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. /X/
The aggregate market value of the Common Stock held by non-affiliates
of the registrant as of December 1, 1997 was $431,618,814, based on the
closing sale price for the Company's Common Stock on that date. For
purposes of determining this number, all officers and directors of the
registrant are considered to be affiliates of the registrant. This number
is provided only for the purpose of this report on Form 10-K and does not
represent an admission by either the registrant or any such person as to
the status of such person.
As of December 1, 1997 the registrant had 19,637,098 shares of
Common Stock issued and outstanding.
<PAGE>
This Amendment on Form 10-K/A is being filed for the purpose of amending and
restating Exhibit 13.1 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended September 28, 1997. Footnote 7 of the Notes to Consolidated
Financial Statements, included in Exhibit 13.1 to the Annual Report on Form
10-K, stated that accounts payable and accrued liabilities for fiscal year 1997
were $17,801 (in thousands). The stated dollar amount should be $17,081 (in
thousands).
The following amends and restates Exhibit 13.1 in its entirety:
<PAGE>
Hutchinson Technology Incorporated and Subsidiaries
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
The following table sets forth the Company's Consolidated Statements of
Operations as a percentage of net sales and the percentage change in the amount
of such items from period to period.
<TABLE>
<CAPTION>
Percentage of net sales Percentage change
--------------------------------------------------------------
1997 1996
1997 1996 1995 TO 1996 to 1995
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<S> <C> <C> <C> <C> <C>
Net sales 100% 100% 100% 28% 18%
Cost of sales 74 77 75 23 21
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Gross profit 26 23 25 47 8
Research and development expenses 4 8 5 (27) 84
Selling, general and administrative expenses 10 10 10 32 13
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Income from operations 12 5 10 190 (37)
Other income 1 -- -- 258 (21)
Interest expense (1) -- (1) 49 (20)
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Income before income taxes 12 5 9 211 (38)
Provision for income taxes 3 1 2 242 (48)
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Net income 9 4 7 204 (35)
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</TABLE>
MARKET TRENDS
The Company expects that the expanding use of personal computers, enterprise
computing and storage, increasingly complex software and the emergence of new
applications for disk storage that have contributed to the historical
year-to-year increases in disk drive production will continue for the
foreseeable future. The Company also believes demand for disk drives will
continue to be subject, as it has in the past, to rapid short-term changes
resulting from, among other things, changes in disk drive inventory levels,
responses to competitive price changes and unpredicted high or low market
acceptance of new drive models.
As in past years, disk drives continue to be the storage device of choice for
applications requiring low access times and higher capacities because of their
speed and low cost per megabyte of stored data. The cost of storing data on disk
drives continues to decrease primarily due to increasing areal density, the
amount of data which can be stored on magnetic disks. Improvements in areal
density have been attained by lowering the fly height of the read/write head,
using smaller read/write heads with advanced air bearing designs, improving
other components such as motors and media and using new read/write head types
such as those of magneto-resistive (MR) design. The move to MR heads, which
require more electrical leads, and the transition to smaller or pico-sized
heads, which are more sensitive to mechanical variation, may compel drive
manufacturers to use newer suspension technologies, such as the Company's TSA
suspension assemblies. Although customer demand for TSA suspensions is growing,
the Company expects that conventional suspensions will make up a majority of its
shipments for at least the next fiscal year.
21
<PAGE>
The continual pursuit of increasing areal density may lead to further
value-added features for TSA suspensions which incorporate a second stage
actuator on the suspension to improve head positioning over increasingly tighter
data tracks, or which mount preamplifiers near the head to improve data transfer
signals. These changes require the Company to develop the competencies of an
electromechanical system supplier so that multiple functions may be consolidated
on the suspension assembly.
The introduction of new types or sizes of read/write heads and new disk drive
designs tends to initially decrease customers' yields with the result that the
Company may experience temporary elevations of demand for some types of
suspension assemblies. The advent of new heads and new drive designs may require
rapid development and implementation of new suspension types which temporarily
may reduce the Company's manufacturing yields and efficiencies. There can be no
assurance that such changes will not continue to affect the Company.
The Company generally experiences fluctuating selling prices due to product
maturity, competitive pricing pressures and new product offerings. While many of
the Company's current products are reaching or are in the mature phase of their
life cycle and thus are experiencing declining selling prices, its newer
products, such as TSA suspensions, have initially much higher selling prices.
FISCAL 1997 OPERATIONS
Net sales for 1997 were $453,232,000, an increase of $100,046,000 or 28%
compared to 1996. This increase was primarily due to increased suspension
assembly volume.
Gross profit for 1997 was $117,279,000, an increase of $37,709,000 or 47%
compared to 1996, and gross profit as a percent of net sales increased from 23%
to 26%. This increase was primarily due to higher sales volume and improved
manufacturing efficiencies.
Research and development expenses for 1997 were $20,185,000 compared to
$27,651,000 for fiscal 1996. The prior year amount includes a $5,500,000 charge
related to a technology sharing agreement with IBM and higher development
expenses related to production of TSA prototype suspensions.
Selling, general and administrative expenses for 1997 were $44,378,000, an
increase of $10,662,000 or 32% compared to 1996. The increased expenses were due
primarily to increased profit sharing and other incentive compensation costs of
$7,443,000 and a $1,855,000 increase in labor expenses. As a percent of net
sales, selling, general and administrative expenses remained at 10%.
Other income, net, for 1997 was $4,143,000, an increase of $2,985,000 compared
to 1996. The increase was primarily due to an increase of $3,631,000 in interest
income as a result of a higher average investment balance, partially offset by a
$443,000 increase in royalties paid under licensing agreements.
22
<PAGE>
Interest expense for 1997 was $3,143,000, an increase of $1,035,000 compared to
1996, primarily due to higher average outstanding debt, offset by higher
capitalization of interest of $1,740,000.
The income tax provision for 1997 was based on an effective tax rate for the
year of 22% which was below the statutory federal rate primarily due to the
large portion of sales that qualify for the benefit of the Company's Foreign
Sales Corporation.
Net income for 1997 was $41,909,000, an increase of $28,107,000 compared to
1996. As a percent of net sales, net income increased from 4% to 9% primarily
due to the higher sales volume and improved manufacturing efficiencies, noted
above.
FISCAL 1996 OPERATIONS
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 suspensions development efforts of approximately $7,100,000
and a charge of $5,500,000 related to a 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 percentage 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.
23
<PAGE>
FISCAL 1995 OPERATIONS
Net sales for 1995 were $299,998,000, an increase of $61,204,000 or 26% compared
to 1994. This increase was primarily attributable to the Company shipping
approximately 31% more suspension assemblies during 1995 than 1994.
Gross profit for 1995 was $73,763,000, an increase of $34,517,000 or 88%
compared to 1994, and gross profit as a percent of net sales increased from 16%
to 25%. The increase in gross profit and gross profit as a percent of net sales
was primarily due to improving manufacturing efficiencies and higher sales
volume, as noted above.
The majority of the research and development expenses are attributable to the
development of new suspension assembly types to meet customers' changing
requirements. Research and development expenses for 1995 were $15,041,000, an
increase of $6,415,000 or 74% compared to 1994. The higher expenses were
primarily due to a charge of $2,500,000 related to the technology sharing
agreement with IBM and increased labor expenses of $1,841,000.
Selling, general and administrative expenses for 1995 were $29,801,000, an
increase of $6,961,000 or 30% compared to 1994. The increased expenses were
primarily due to additional profit sharing expenses of $2,198,000 and increased
labor expenses of $2,197,000. As a percentage of net sales, selling, general and
administrative expenses increased from 9% to 10%.
Other income for 1995 was $1,462,000, an increase of $291,000 or 25% compared to
1994. The increase was primarily a result of a $1,324,000 increase in interest
income as a result of a higher average investment balance offset partially by a
$825,000 decrease in income derived from licensing agreements.
Interest expense for 1995 was $2,636,000, an increase of $1,641,000 as a result
of higher outstanding debt and lower capitalization of interest.
The income tax provision for 1995 was based on an effective tax rate for the
year of 24% which was below the statutory federal rate primarily due to the
large portion of sales that 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.
LIQUIDITY, CAPITAL RESOURCES AND OTHER MATTERS
The Company's cash and cash equivalents increased to $98,340,000 at September
28, 1997 compared to $22,884,000 at September 29, 1996. The increase is
primarily a result of the stock offering, noted below, and cash flow from
operating activities. The Company generated cash from operating activities of
$76,816,000 in fiscal 1997 compared to $39,904,000 in fiscal 1996 and
$57,814,000 in fiscal 1995.
24
<PAGE>
In February 1997, the Company issued 3,000,000 shares of its common stock
through a public offering. The Company received net proceeds of $102,900,000 and
is using the funds for general corporate purposes, primarily for expenditures
for manufacturing and support equipment, construction of the Company's Eau
Claire, Wisconsin and Sioux Falls, South Dakota plants and an expansion of the
Company's Hutchinson, Minnesota plant. Pending such uses, the Company has
invested the net proceeds from the offering in short-term debt securities.
Cash used for capital expenditures totaled $82,639,000 in fiscal 1997 compared
to $77,065,000 in fiscal 1996 and $44,472,000 in fiscal 1995. The expenditures
in fiscal 1997 were primarily for manufacturing and support equipment and
construction costs of the photoetch plant at the Company's Eau Claire site. The
Company anticipates, but is not contractually committed to, fiscal 1998
expenditures of approximately $200,000,000 primarily for manufacturing and
support equipment, construction of the Company's Sioux Falls, South Dakota plant
and construction of an expansion to the Company's Hutchinson, Minnesota plant.
Financing of these capital expenditures will be principally from internally
generated funds, cash balances and/or additional financing capacity. The Company
anticipates financing the Sioux Falls, South Dakota plant and the Hutchinson,
Minnesota expansion through sale-leaseback transactions and internal financing.
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
("GE"). The agreement provides for leasing of manufacturing equipment in fiscal
1997. During the fourth quarter of fiscal 1997, the Company signed an amendment
to the Master Lease Agreement with GE, providing for leasing of up to an
additional $30,000,000 of manufacturing equipment in fiscal 1998. The Company
serves as a purchasing agent on behalf of GE. As such, amounts expended on GE's
behalf, but not yet reimbursed, are included on the accompanying consolidated
balance sheet under GE lease receivable.
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 September
28, 1997 the Company had a letter of credit under this facility of $1,425,000 as
security for a variable rate demand note. No amounts were outstanding under the
credit facility or letter of credit at September 28, 1997.
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 28, 1997 are $5,332,000, $4,613,000, $3,995,000, $12,330,000, and
$16,499,000, respectively. The Company's financing agreements contain various
restrictive covenants. As of September 28, 1997, the Company was in compliance
with all such covenants.
25
<PAGE>
The Company believes that its cash and cash equivalents, cash to be generated
from operations, existing lending facilities and available financing capacity
will provide the Company with sufficient liquidity and capital resources for
working capital, debt maturities, capital expenditures and other needs.
The Company is involved in certain legal matters which may result in additional
future cash requirements. See the discussion of these matters in Note 6,
"Commitments and Contingencies," in the notes to the consolidated financial
statements.
The Company will be subject to certain recent accounting pronouncements. See the
discussion of these matters in Note 1, "Summary of Significant Accounting
Policies," in the notes to the consolidated financial statements.
INFLATION
Management believes inflation has not had a material effect on the Company's
operations or on its financial condition. There can be no assurance, however,
that the Company's business will not be affected by inflation in the future.
FORWARD-LOOKING STATEMENTS
The statements on pages 3 through 6 of this Annual Report about demand for
suspension assemblies, including TSA suspensions, anticipated capital
expenditures, TSA suspension development and production and medical product
introduction and expenditures, the statements under the heading "Market Trends"
about demand for disk drives and suspension assemblies, including TSA
suspensions, manufacturing yields and selling prices and the statements under
the heading "Liquidity, Capital Resources and Other Matters" about anticipated
capital expenditures and capital resources, are forward-looking statements based
on current expectations. These statements are subject to risks and
uncertainties, including slower or faster acceptance of its new products,
difficulties in producing its TSA suspensions, difficulties in expanding
capacity, difficulties or uncertainties about developing new products and those
discussed above. These factors may cause the Company's actual future results to
differ materially from historical earnings and from the financial performance of
the Company presently anticipated.
26
<PAGE>
<TABLE>
<CAPTION>
Hutchinson Technology Incorporated and Subsidiaries In thousands, except per share data
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CONSOLIDATED STATEMENTS OF OPERATIONS Fiscal years ended
SEPTEMBER 28, 1997 September 29, 1996 September 24, 1995
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<S> <C> <C> <C>
Net sales $453,232 $353,186 $299,998
Cost of sales 335,953 273,616 226,235
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Gross profit 117,279 79,570 73,763
Research and development expenses 20,185 27,651 15,041
Selling, general and administrative expenses 44,378 33,716 29,801
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Income from operations 52,716 18,203 28,921
Other income, net 4,143 1,158 1,462
Interest expense (3,143) (2,108) (2,636)
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Income before income taxes 53,716 17,253 27,747
Provision for income taxes 11,807 3,451 6,669
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Net income $ 41,909 $ 13,802 $ 21,078
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Net income per common and
common equivalent shares $ 2.21 $ 0.82 $ 1.28
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Weighted average common and
common equivalent shares outstanding 18,978 16,806 16,479
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</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
27
<PAGE>
<TABLE>
<CAPTION>
Hutchinson Technology Incorporated and Subsidiaries Dollars in thousands
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CONSOLIDATED BALANCE SHEETS
ASSETS SEPTEMBER 28, 1997 September 29, 1996
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 98,340 $ 22,884
Securities available for sale 20,211 3,064
Trade receivables, net 51,467 46,803
GE lease receivable 31,073 5,242
Other receivables 3,504 4,233
Inventories 27,189 17,235
Prepaid taxes and expenses 11,562 9,204
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Total current assets 243,346 108,665
Property, plant and equipment, at cost:
Land, buildings and improvements 45,437 39,888
Equipment 218,289 189,989
Construction in progress 84,345 34,801
Less: accumulated depreciation (172,818) (142,972)
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Net property, plant and equipment 175,253 121,706
Other assets 11,240 8,612
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$ 429,839 $ 238,983
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LIABILITIES AND SHAREHOLDERS' INVESTMENT
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Current liabilities:
Current maturities of long-term debt $ 5,332 $ 5,760
Accounts payable and accrued expenses 39,373 23,008
Accrued compensation 19,407 12,187
Accrued income taxes 6,078 5,608
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Total current liabilities 70,190 46,563
Long-term debt, less current maturities 72,862 53,185
Other long-term liabilities 3,829 5,551
Commitments and contingencies (Notes 5 and 6)
Shareholders' investment:
Common stock, $.01 par value, 45,000,000 shares authorized,
19,619,000 and 16,356,000 issued and outstanding 196 164
Additional paid-in capital 150,676 43,343
Retained earnings 132,086 90,177
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Total shareholders' investment 282,958 133,684
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$ 429,839 $ 238,983
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</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
28
<PAGE>
<TABLE>
<CAPTION>
Hutchinson Technology Incorporated and Subsidiaries In thousands
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CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal years ended
SEPTEMBER 28, 1997 September 29, 1996 September 24, 1995
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<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 41,909 $ 13,802 $ 21,078
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 38,299 33,565 28,174
Deferred tax benefit (2,608) (6,085) (2,498)
Loss on disposal of assets 266 344 403
Changes in operating assets and
liabilities (Note 7) (1,050) (1,722) 10,657
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Cash provided by operating activities 76,816 39,904 57,814
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INVESTING ACTIVITIES:
Capital expenditures (82,639) (77,065) (44,472)
Funding from GE lease receivable 9,915 -- --
Expenditures from GE lease receivable (35,746) (5,242) --
Proceeds from the sale of assets -- 15,300 --
Purchases of marketable securities (31,343) (4,944) (3,080)
Sales of marketable securities 14,196 3,070 1,890
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Cash used for investing activities (125,617) (68,881) (45,662)
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FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 25,000 25,500 --
Repayments of long-term debt (5,751) (4,255) (2,380)
Net proceeds from issuance of common stock 105,008 137 2,137
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Cash provided by (used for)
financing activities 124,257 21,382 (243)
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Net increase (decrease) in cash and
cash equivalents 75,456 (7,595) 11,909
Cash and cash equivalents at
beginning of year 22,884 30,479 18,570
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Cash and cash equivalents at end of year $ 98,340 $ 22,884 $ 30,479
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</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
29
<PAGE>
<TABLE>
<CAPTION>
Hutchinson Technology Incorporated and Subsidiaries In thousands
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
Common stock
-------------------------- Additional
Shares Amount Paid-in capital Retained earnings
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<S> <C> <C> <C> <C>
Balance, September 25, 1994 15,999 $160 $ 39,162 $ 55,297
Exercise of stock options 345 3 4,066 --
Issuance of common stock -- -- 12 --
Retirements of common stock (3) -- (33) --
Net income -- -- -- 21,078
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Balance, September 24, 1995 16,341 163 43,207 76,375
Exercise of stock options 15 1 127 --
Issuance of common stock -- -- 9 --
Net income -- -- -- 13,802
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Balance, September 29, 1996 16,356 164 43,343 90,177
Exercise of stock options 268 2 4,711 --
Issuance of common stock 3,001 30 102,877 --
Retirements of common stock (6) -- (255) --
Net income -- -- -- 41,909
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BALANCE, SEPTEMBER 28, 1997 19,619 $196 $150,676 $132,086
- ------------------------------------------------------------------------------------------------------------------------
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</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
30
<PAGE>
Hutchinson Technology Incorporated Columnar dollar amounts in thousands,
and Subsidiaries except per share amounts
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 1996 and
1995 financial statements to conform with the 1997 presentation. Such
reclassifications had no effect on previously reported 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
the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Ultimate results could differ from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS - During March 1997, the Financial Accounting
Standards Board ("FASB") released Statement of Financial Accounting Standards
No. 128, "Earnings per Share" ("SFAS 128"), which requires the disclosure of
basic earnings per share and diluted earnings per share. The Company expects to
adopt SFAS 128 in fiscal 1998 and anticipates that the effect of adopting SFAS
128 will not be significant.
In June 1997, the FASB released Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130"), which requires presentation
of comprehensive income on the face of the financial statements. Comprehensive
income would include such items as unrealized holding gains/losses on securities
available for sale, foreign currency translation adjustments and minimum pension
liability adjustments. SFAS 130 is effective for fiscal years beginning after
December 15, 1997. The Company expects to adopt SFAS 130 in fiscal 1999 and
anticipates that the effect of adopting SFAS 130 will not be significant.
In June 1997, the FASB released Statement of Financial Accounting Standards No.
131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS 131"), which requires reported segments to be those used by management to
disaggregate a company. SFAS 131 is effective for fiscal years beginning after
December 15, 1997. The Company expects to adopt SFAS 131 in fiscal 1999 and
anticipates that the effect of adopting SFAS 131 will not be significant.
31
<PAGE>
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 28, 1997
is a fifty-two week period, the fiscal year ended September 29, 1996 is a
fifty-three week period and the fiscal year ended September 24, 1995 is a
fifty-two week period.
REVENUE RECOGNITION AND CUSTOMERS - The Company recognizes revenue upon the
shipment of completed products. Sales to customers in excess of 10% of net sales
is as follows:
1997 1996 1995
- --------------------------------------------------------------------------------
Seagate Technology Incorporated 33% 35% 36%
Read-Rite Corporation 14 13 19
Yamaha Corporation 14 16 13
SAE Magnetics, Ltd/TDK 13 14 9
IBM 12 9 9
- --------------------------------------------------------------------------------
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Sales to the Company's five largest customers constituted 86%, 87% and 86% of
net sales for fiscal 1997, 1996 and 1995, respectively.
Sales to foreign locations were as follows:
1997 1996 1995
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Foreign-based enterprises $ 88,471 $ 63,898 $ 46,075
Foreign subsidiaries of U.S. corporations 83,753 51,564 54,398
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$172,224 $115,462 $100,473
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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 of
investments with original maturities greater than 90 days which are intended to
be held less than one year. Securities available for sale at September 28, 1997
and September 29, 1996 consisted of U.S. government securities with a market
value and cost of $20,211,000 and $3,064,000, respectively.
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 $2,182,000 at September 28, 1997 and
$2,148,000 at September 29, 1996.
INVENTORIES - All inventories are stated at the lower of last-in, first-out
(LIFO) cost or market. Inventories consist of the following at September 28,
1997 and September 29, 1996:
1997 1996
- -------------------------------------------------------------------
Raw materials $10,560 $ 4,137
Work in process 5,950 5,558
Finished goods 10,919 7,830
LIFO reserve (240) (290)
- -------------------------------------------------------------------
$27,189 $17,235
- -------------------------------------------------------------------
- -------------------------------------------------------------------
32
<PAGE>
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 over the estimated useful life on a straight-line basis
for financial reporting purposes and is depreciated using primarily accelerated
methods for tax reporting purposes. Estimated useful lives for financial
reporting purposes are as follows:
Buildings 25 to 35 years
Leasehold improvements 5 to 10 years
Equipment 3 to 8 years
ENGINEERING AND PROCESS DEVELOPMENT - The Company's engineers and technicians
are responsible for the implementation of new technologies as well as process
and product development and improvements. Expenditures related to these
activities totaled $48,204,000 in 1997, $51,212,000 in 1996 and $32,567,000 in
1995. Of these amounts, approximately $20,185,000 in 1997, $27,651,000 in 1996
and $15,041,000 in 1995 are classified as research and development expenses.
INCOME TAXES - Deferred taxes are provided at currently enacted tax rates on all
significant temporary differences.
NET INCOME PER SHARE - Net income per share, which is approximately equivalent
on both a primary and fully diluted basis, is based, to the extent dilutive, on
the weighted average number of common and common equivalent shares outstanding.
2. FINANCING ARRANGEMENTS
LONG-TERM DEBT 1997 1996
- --------------------------------------------------------------------------------
Senior unsecured notes, 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 notes, 7.46%, payable in varying
semi-annual installments through February 2004 24,375 28,125
Other long-term debt 3,819 5,820
- --------------------------------------------------------------------------------
78,194 58,945
Less: current maturities (5,332) (5,760)
- --------------------------------------------------------------------------------
$72,862 $53,185
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Company has a $25,000,000 unsecured credit facility expiring in December
1998 with an effective interest rate of the CD or LIBOR plus a variable spread
(6.0% to 6.2% at September 28, 1997). At September 28, 1997, the Company had a
letter of credit under this facility of $1,425,000 as security for a variable
rate demand note included above in other long-term debt. No amounts were
outstanding under the credit facility or letter of credit at September 28, 1997.
33
<PAGE>
On July 26, 1996, the Company completed a $50,000,000 private debt placement, of
which $25,000,000 was issued 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 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 as of September 28, 1997.
Maturities of long-term debt for the five years subsequent to September 28, 1997
are as follows:
- -----------------------------------------------------
1998 $ 5,332
1999 4,613
2000 3,995
2001 12,330
2002 16,499
Thereafter 35,425
- -----------------------------------------------------
$78,194
- -----------------------------------------------------
- -----------------------------------------------------
3. INCOME TAXES
The provision for income taxes consists of the following:
1997 1996 1995
- --------------------------------------------------------------------------------
Current:
Federal $12,795 $ 8,204 $ 8,142
State 1,620 1,332 1,025
Deferred (2,608) (6,085) (2,498)
- --------------------------------------------------------------------------------
$11,807 $ 3,451 $ 6,669
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The deferred benefit is composed of the following:
1997 1996 1995
- --------------------------------------------------------------------------------
Asset bases, lives and depreciation methods $(1,206) $ (895) $ (552)
Reserves and accruals not currently
deductible (1,402) (5,888) (1,534)
Tax credits 133 2,195 (1,041)
Valuation allowance and other (133) (1,497) 629
- --------------------------------------------------------------------------------
$(2,608) $(6,085) $(2,498)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A reconciliation of the federal statutory tax rate to the effective tax rate is
as follows:
1997 1996 1995
- --------------------------------------------------------------------------------
Statutory federal income tax rate 35% 35% 35%
Effect of:
State income taxes, net of federal
income tax benefits 2% 3% 2%
Tax benefits of the Foreign Sales
Corporation (11) (15) (14)
Other (primarily tax credits) (4) (3) 1%
- --------------------------------------------------------------------------------
22% 20% 24%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
34
<PAGE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. At September 28, 1997,
the Company had unused tax credits of $2,605,000, all of which can be carried
forward indefinitely. A valuation allowance of $605,000 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:
SEPTEMBER 28, September 29,
DEFERRED TAX ASSETS 1997 1996
- --------------------------------------------------------------------
Current deferred tax assets:
Receivable reserves $ 855 $ 873
Inventories 7,179 5,419
Accruals and other reserves 2,557 2,367
- --------------------------------------------------------------------
Total current deferred tax assets $10,591 $ 8,659
Long-term deferred tax assets (liabilities):
Property, plant and equipment 4,959 3,753
Accruals and other reserves 1,616 2,146
Tax credits 2,605 2,738
Valuation allowance (605) (738)
- --------------------------------------------------------------------
Total long-term deferred tax
assets $ 8,575 $ 7,899
- --------------------------------------------------------------------
Total deferred tax assets $19,166 $16,558
- --------------------------------------------------------------------
- --------------------------------------------------------------------
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 fair value is based on quoted market prices.
SECURITIES AVAILABLE FOR SALE - The fair value of these instruments is based on
quoted market prices.
LONG-TERM DEBT - The fair value of the Company's long-term debt is estimated
based on the discounted value of the future cash flows expected to be paid on
the loans. The discount rate used to estimate the fair value of the loans is the
rate currently available to the Company for loans with similar terms and
maturities.
The estimated fair values of the Company's financial instruments are as follows:
1997 1996
- --------------------------------------------------------------------------------
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
- --------------------------------------------------------------------------------
Cash and cash equivalents $98,340 $98,340 $22,884 $22,884
Securities available for sale 20,211 20,211 3,064 3,064
Long-term debt 78,194 78,368 58,945 59,619
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
35
<PAGE>
5. EMPLOYEE BENEFITS
STOCK OPTIONS - The Company has two stock option plans, under which up to
6,000,000 common shares are reserved for issuance and of which options
representing 2,894,045 common shares have been granted as of September 28, 1997.
Options may be granted to any employee, including officers and directors of the
Company, and certain non-employees, at a price not less than the fair market
value of the Company's common stock at the date the options are granted. 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
plans. Options granted under the plans generally are exercisable one year from
the date of grant.
1988 Plan 1996 Plan
- --------------------------------------------------------------------------------
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 --
Granted at $29.38 to $36.67 -- 18,500
Exercised at $4.25 to $16.33 (267,630) --
Expired (8,235) --
- --------------------------------------------------------------------------------
BALANCE, SEPTEMBER 28, 1997 1,786,761 18,500
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Company follows Accounting Principles Board Opinion No. 25, under which no
compensation cost has been recognized in connection with stock option grants
pursuant to the stock option plans. Had compensation cost been determined
consistent with Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123"), the Company's pro forma net income
and pro forma earnings per share would have been as follows (in thousands):
1997 1996
- --------------------------------------------------------------------------------
Net income:
As reported $41,909 $13,802
Pro forma 36,020 9,363
- --------------------------------------------------------------------------------
Net income per common and common equivalent shares:
As reported $ 2.21 $ 0.82
Pro forma 1.90 0.56
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In determining compensation cost pursuant to SFAS 123, the fair value of each
option grant is estimated on the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions used for grants
during 1997: risk-free interest rates of 5.85% to 6.25%; expected life of six
years; and expected volatility of 68% to 71%. The following weighted average
assumptions were used for grants in 1996: risk-free interest rate of 5.6%;
expected life of six years; and expected volatility of 73%.
36
<PAGE>
EMPLOYEE BENEFIT PLANS - The Company has a defined contribution plan covering
its employees. The Company's contributions to the plan were $7,762,000 in 1997,
$6,463,000 in 1996 and $3,979,000 in 1995.
The Company sponsors a comprehensive medical and a 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
$15,377,000 in 1997, $13,439,000 in 1996 and $10,427,000 in 1995.
6. COMMITMENTS AND CONTINGENCIES
The Company is committed under various operating lease agreements. Total rent
expense under these operating leases was $12,487,000 in 1997, $7,502,000 in 1996
and $4,866,000 in 1995. Future minimum payments for all operating leases with
initial or remaining terms of one year or more subsequent to September 28, 1997
are as follows:
- -------------------------------------------------------------
1998 $13,946
1999 11,390
2000 9,075
2001 7,568
2002 and thereafter 42,288
- ------------------------------------------------------------
- ------------------------------------------------------------
On May 1, 1996, the Company received $15,300,000 in a sale-leaseback transaction
relating to its Eau Claire, Wisconsin assembly manufacturing building. The lease
has a term of 15 years.
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
("GE"). The agreement provides for leasing of manufacturing equipment in fiscal
1997. During the fourth quarter of fiscal 1997, the Company signed an amendment
to the Master Lease Agreement with GE, providing for leasing of up to an
additional $30,000,000 of manufacturing equipment in fiscal 1998. The Company
serves as a purchasing agent on behalf of GE. As such, amounts expended on GE's
behalf, but not yet reimbursed, are included on the accompanying consolidated
balance sheets under GE lease receivable.
The Company entered into a Technology Transfer and Development Agreement (the
"Technology Sharing Agreement") and a Patent License Agreement with IBM during
fiscal 1995. As of September 28, 1997, the Company had made payments totaling
$3,500,000 to IBM and will make additional payments over the next two fiscal
years totaling $4,500,000, all of which have been recorded as an expense and a
related liability 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.
37
<PAGE>
The Company and certain users of the Company's products have from time to
time received, and may in the future receive, communications from third parties
asserting patents against the Company or its customers which may relate to
certain of the Company's manufacturing equipment or products or to products
which include the Company's products as a component. Although the Company
has not been a party to any material intellectual property litigation,
certain of its customers have been sued on patents having claims closely related
to products sold by the Company. In the event 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 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
1997 1996 1995
- ------------------------------------------------------------------------------
Changes in operating assets and liabilities:
Receivables, net $(3,934) $(10,353) $(1,568)
Inventories (9,954) (3,937) (3,769)
Prepaid and other expenses (2,520) (334) (1,231)
Accounts payable and accrued liabilities 17,081 8,850 15,725
Other non-current liabilities (1,723) 4,052 1,500
$(1,050) $ (1,722) $10,657
- ------------------------------------------------------------------------------
Cash paid for:
Interest (net of amount capitalized) $ 2,520 $ 1,703 $ 2,655
Income taxes 13,891 8,405 7,792
- ------------------------------------------------------------------------------
Capitalized interest was $2,946,000 in 1997, $1,206,000 in 1996 and $512,000
in 1995.
8. SALE OF COMMON STOCK
In February 1997, the Company issued 3,000,000 shares of its common stock
through a public offering. The Company received net proceeds of $102,900,000
and is using the funds for general corporate purposes, primarily
expenditures for manufacturing and support equipment, construction of the
Company's Eau Claire, Wisconsin and Sioux Falls, South Dakota plants and an
expansion of the Company's Hutchinson, Minnesota plant. Pending such uses,
the Company has invested the net proceeds from the offering in short-term
debt securities.
9. STOCK SPLIT
On January 20, 1997, the Company announced that its Board of Directors
approved a three-for-one stock split of the Company's common stock, effective
at the close of business on February 11, 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 statements have been
retroactively adjusted to reflect the stock split and par value change.
38
<PAGE>
10. SUMMARY OF QUARTERLY INFORMATION (UNAUDITED)
The following table summarizes unaudited financial data for fiscal years 1997
and 1996.
<TABLE>
<CAPTION>
1997 by Quarter 1996 by Quarter
- -------------------------------------------------------------------------------------------------------------
First Second Third Fourth First Second Third Fourth
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $106,906 $124,259 $121,713 $100,354 $83,332 $86,546 $91,418 $91,890
Gross profit 31,112 38,680 33,179 14,308 21,444 17,879 21,786 18,461
Income (loss)
from operations 14,455 21,885 16,553 (177) 3,828 5,592 6,878 1,905
Income before
income taxes 13,903 21,737 17,553 523 3,669 5,553 6,663 1,368
Net income 11,117 16,683 13,698 411 2,862 4,332 5,199 1,409
Net income per share 0.66 0.91 0.68 0.02 0.17 0.26 0.31 0.08
Price range per share
High 26.79 38.38 35.00 35.88 21.83 17.16 19.46 14.37
Low 12.75 25.17 23.44 24.00 15.17 12.17 12.75 10.25
- -------------------------------------------------------------------------------------------------------------
</TABLE>
The price range per share, reflected above, is the highest and lowest closing
prices as quoted on The Nasdaq National Market during each quarter. Net income
per share and price range per share for fiscal year 1996 have been restated
to relect the stock split noted above.
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 28, 1997 and September 29, 1996, and the related consolidated
statements of operations, shareholders' investment and cash flows for each of
the three years in the period ended September 28, 1997. 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 28, 1997 and September 29,
1996, and the results of their operations and their cash flows for each of
the three years in the period ended September 28, 1997 in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Minneapolis, Minnesota
October 29, 1997
39
<PAGE>
<TABLE>
<CAPTION>
Hutchinson Technology Incorporated and Subsidiaries In thousands, except per share data and number of employees
- -------------------------------------------------------------------------------------------------------------------
ELEVEN-YEAR SELECTED FINANCIAL DATA
Annual Growth 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
5-year 10-year FOR THE YEAR:
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
23% 19% Net sales $453,232 $353,186 $299,998
24 22 Gross profit 117,279 79,570 73,763
Percent of net sales 26% 23% 25%
31 23 Income (loss) from operations $ 52,716 $ 18,203 $ 28,921
Percent of net sales 12% 5% 10%
27 25 Net income (loss) $ 41,909 $ 13,802 $ 21,078
Percent of net sales 9% 4% 7%
32 22 Capital expenditures $ 82,639 $ 77,065 $ 44,472
28 31 Research and development expenses 20,185 27,651 15,041
24 21 Depreciation expense 38,299 33,565 28,174
32 27 Cash flow from operating activities 76,816 39,904 57,814
- -------------------------------------------------------------------------------------------------------------------
AT YEAR END:
- -------------------------------------------------------------------------------------------------------------------
28% 22% Receivables $ 86,044 $ 56,278 $ 40,683
37 21 Inventories 27,189 17,235 13,298
29 33 Working capital 173,156 62,102 54,284
33 21 Net property, plant and equipment 175,253 121,706 93,816
32 25 Total assets 429,839 238,983 190,898
36 22 Total debt 78,194 58,945 37,700
Total debt as a percentage of total capitalization 22% 31% 24%
30 28 Shareholders' investment $282,958 $133,684 $119,745
Return on shareholders' investment 20% 11% 20%
17 13 Number of employees 7,181 5,479 4,858
5 6 Shares of stock outstanding 19,619 16,356 16,341
- -------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE:
- -------------------------------------------------------------------------------------------------------------------
19% 19% Net income (loss) $ 2.21 $ 0.82 $ 1.28
24 21 Shareholders' investment (book value) 14.42 8.17 7.33
Price range
29 17 High 38.38 21.83 29.67
32 17 Low 12.75 10.25 7.67
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
Hutchinson Technology Incorporated and Subsidiaries In thousands, except per share data and number of employees
- -----------------------------------------------------------------------------------------------------------------------------
ELEVEN-YEAR SELECTED FINANCIAL DATA
Annual Growth 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------
5-year 10-year FOR THE YEAR:
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
23% 19% Net sales $238,794 $198,734 $160,340 $143,260
24 22 Gross profit 39,246 44,423 40,261 27,920
Percent of net sales 16% 22% 25% 19%
31 23 Income (loss) from operations $ 7,780 $ 9,961 $ 13,581 $ 7,265
Percent of net sales 3% 5% 8% 5%
27 25 Net income (loss) $ 5,880 $ 8,554 $ 12,849 $ 4,499
Percent of net sales 2% 4% 8% 3%
32 22 Capital expenditures $ 29,540 $ 46,768 $ 20,492 $ 17,747
28 31 Research and development expenses 8,626 9,846 5,770 4,208
24 21 Depreciation expense 23,974 15,737 12,908 11,253
32 27 Cash flow from operating activities 11,967 22,449 19,397 16,944
- -----------------------------------------------------------------------------------------------------------------------------
AT YEAR END:
- -----------------------------------------------------------------------------------------------------------------------------
28% 22% Receivables $ 39,115 $ 22,320 $ 25,454 $ 18,499
37 21 Inventories 9,529 7,899 5,638 4,580
29 33 Working capital 51,996 26,238 49,018 18,083
33 21 Net property, plant and equipment 77,887 72,419 41,513 34,304
32 25 Total assets 151,148 116,639 109,126 65,992
36 22 Total debt 40,080 12,460 16,755 19,354
Total debt as a percentage of total capitalization 30% 12% 18% 37%
30 28 Shareholders' investment $ 94,619 $ 88,689 $ 77,025 $ 33,512
Return on shareholders' investment 6% 10% 23% 14%
17 13 Number of employees 4,600 4,108 3,332 2,798
5 6 Shares of stock outstanding 15,999 15,993 15,519 11,907
- -----------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE:
- -----------------------------------------------------------------------------------------------------------------------------
19% 19% Net income (loss) $ 0.36 $ 0.53 $ 0.91 $ 0.37
24 21 Shareholders' investment (book value) 5.91 5.55 4.96 2.81
Price range
29 17 High 13.29 16.58 10.67 4.58
32 17 Low 7.25 6.83 3.17 2.04
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Hutchinson Technology Incorporated and Subsidiaries In thousands, except per share data and number of employees
- -----------------------------------------------------------------------------------------------------------------------------
ELEVEN-YEAR SELECTED FINANCIAL DATA
Annual Growth 1990 1989 1988 1987
- -----------------------------------------------------------------------------------------------------------------------------
5-year 10-year FOR THE YEAR:
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
23% 19% Net sales $122,444 $ 92,321 $113,714 $77,756
24 22 Gross profit 26,107 7,696 19,329 15,673
Percent of net sales 21% 8% 17% 20%
31 23 Income (loss) from operations $ 8,528 $ (7,221) $ 6,540 $ 6,400
Percent of net sales 7% (8%) 6% 8%
27 25 Net income (loss) $ 5,338 $ (5,693) $ 4,267 $ 4,665
Percent of net sales 4% (6%) 4% 6%
32 22 Capital expenditures $ 6,794 $ 9,568 $ 18,820 $10,955
28 31 Research and development expenses 3,959 4,065 2,774 1,396
24 21 Depreciation expense 9,719 12,305 8,047 5,650
32 27 Cash flow from operating activities 15,174 6,871 7,291 6,996
- -----------------------------------------------------------------------------------------------------------------------------
AT YEAR END:
- -----------------------------------------------------------------------------------------------------------------------------
28% 22% Receivables $ 20,216 $ 15,932 $ 19,166 $11,759
37 21 Inventories 5,913 3,898 5,119 4,205
29 33 Working capital 22,768 15,767 13,716 10,210
33 21 Net property, plant and equipment 27,618 30,419 36,494 25,315
32 25 Total assets 64,669 55,775 63,095 45,577
36 22 Total debt 20,550 21,756 19,469 10,899
Total debt as a percentage of total capitalization 42% 48% 40% 31%
30 28 Shareholders' investment $ 28,834 $ 23,426 $ 28,888 $24,392
Return on shareholders' investment 20% (22%) 16% 21%
17 13 Number of employees 2,648 2,327 2,830 2,074
5 6 Shares of stock outstanding 11,844 11,823 11,634 11,436
- -----------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE:
- -----------------------------------------------------------------------------------------------------------------------------
19% 19% Net income (loss) $ 0.45 $ (0.48) $ 0.36 $ 0.40
24 21 Shareholders' investment (book value) 2.43 1.98 2.48 2.13
Price range
29 17 High 4.50 5.08 7.33 8.17
32 17 Low 1.67 2.08 3.00 2.63
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
DIRECTORS EXECUTIVE MANAGEMENT TEAM
<S> <C>
JEFFREY W. GREEN WAYNE M. FORTUN
Chairman of the Board President, Chief Executive Officer
Hutchinson Technology Incorporated and Chief Operating Officer
DIRECTOR SINCE 1965. JOINED HTCH IN 1975.
WAYNE M. FORTUN JEFFREY W. GREEN
President, Chief Executive Officer Chairman of the Board
and Chief Operating Officer JOINED HTCH IN 1965.
Hutchinson Technology Incorporated
DIRECTOR SINCE 1983.
JOHN A. INGLEMAN
Vice President, Chief Financial Officer
W. THOMAS BRUNBERG* and Secretary
Partner JOINED HTCH IN 1977
Brunberg Thoresen Diaby & Associates, Ltd.
(Accounting Firm)
DIRECTOR SINCE 1975. REBECCA A. ALBRECHT
Vice President, Human Resources
JOINED HTCH IN 1983.
ARCHIBALD COX, JR.+
Chairman
Sextant Group, Inc. RICHARD C. MYERS
(Financial Advisory Firm) Vice President, Administration
Vice Chairman and President JOINED HTCH IN 1977.
Magnequench International, Inc.
(Magnetic Material Manufacturing)
DIRECTOR SINCE 1996. BEATRICE A. GRACZYK
Vice President,
Disk Drive Components Operations
JAMES E. DONAGHY* JOINED HTCH IN 1970.
President and Chief Executive Officer
Sheldahl, Inc.
(Electronics and Laminates Manufacturing) R. SCOTT SCHAEFER
DIRECTOR SINCE 1992. Vice President,
Chief Technical Officer
JOINED HTCH IN 1979.
HARRY C. ERVIN+
Formerly Vice President and Investment Officer
Dain Bosworth Incorporated RICHARD J. PENN
(Investment Banking Firm) Vice President, Sales and Marketing
DIRECTOR SINCE 1969. JOINED HTCH IN 1981.
STEVEN E. LANDSBURG+ PEGGY J. LIETZAU
Professor of Economics Corporate Planning Director
University of Rochester JOINED HTCH IN 1977.
DIRECTOR SINCE 1997.
RICHARD N. ROSETT*
Professor of Economics
Rochester Institute of Technology
DIRECTOR SINCE 1986.
* Members of the Audit Committee
+ Members of the Compensation Committee
</TABLE>
<PAGE>
SHAREHOLDERS' INFORMATION
ANNUAL SHAREHOLDERS' MEETING
Wednesday, January 28, 1998, at 10:30 a.m.
Minneapolis Marriott City Center Hotel
30 South Seventh Street
Minneapolis, Minnesota
COMMON STOCK LISTING
Traded in The Nasdaq National Market
Trading symbol: HTCH
Shareholders of record as of
December 2, 1997: 979
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. Any future determination as to payment of dividends
will depend upon the financial condition and results of
operations of the Company and such other factors as are
deemed relevant by the Board of Directors.
LEGAL COUNSEL
Faegre & Benson LLP
Minneapolis, Minnesota
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Anderson LLP
Minneapolis, Minnesota
TRANSFER AGENT
Norwest Bank Minnesota, National Association
161 North Concord Exchange
P.O. Box 738
South St. Paul, Minnesota 55075-0738
(800) 468-9716
SUPPLEMENTAL INFORMATION
Shareholder Information
Todd J. Bradley
Hutchinson Technology Incorporated
40 West Highland Park
Hutchinson, Minnesota 55350
(800) 689-0755
World Wide Web:www.htch.com
E-Mail:[email protected]
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Amendment to be signed on its
behalf by the undersigned, thereunto duly authorized, on January 12, 1998.
HUTCHINSON TECHNOLOGY
INCORPORATED
By /s/ Wayne M. Fortun
---------------------------------
Wayne M. Fortun
President, Chief Operating Officer
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Amendment has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on January 12, 1998.
/s/ Wayne M. Fortun
-----------------------------------
Wayne M. Fortun, President, Chief
Operating Officer, Chief Executive
Officer (Principal Executive Officer)
and Director
/s/ John A. Ingleman
-----------------------------------
John A. Ingleman, Vice President, Chief
Financial Officer (Principal Financial
Officer and Principal Accounting
Officer)
/s/ W. Thomas Brunberg
-----------------------------------
W. Thomas Brunberg, Director
/s/ Archibald Cox, Jr.
-----------------------------------
Archibald Cox, Jr., Director
/s/ James E. Donaghy
-----------------------------------
James E. Donaghy, Director
/s/ Harry C. Ervin, Jr.
-----------------------------------
Harry C. Ervin, Jr., Director
/s/ Jeffrey W. Green
-----------------------------------
Jeffrey W. Green, Director
/s/ Steven E. Landsburg
-----------------------------------
Steven E. Landsburg, Director
/s/ Richard N. Rosett
-----------------------------------
Richard N. Rosett, Director
25
