<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended DECEMBER 28, 1997
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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
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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)
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(Former name, address or fiscal year, if changed since last report)
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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of January 30, 1998 the registrant had 19,661,323 shares of Common Stock
issued and outstanding.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
HUTCHINSON TECHNOLOGY INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
(Dollars in thousands)
December 28, September 28,
1997 1997
------------ -------------
ASSETS
Current assets:
Cash and cash equivalents $ 36,069 $ 98,340
Securities available for sale 19,421 20,211
Trade receivables, net 47,085 51,467
GE lease receivable 34,228 31,073
Other receivables 3,326 3,504
Inventories 35,389 27,189
Prepaid taxes and other expenses 13,278 11,562
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Total current assets 188,796 243,346
Property, plant and equipment, net 226,362 175,253
Other assets 12,021 11,240
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$427,179 $429,839
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------------ ------------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Current maturities of long-term debt $ 5,332 $ 5,332
Accounts payable and accrued expenses 51,619 39,373
Accrued compensation 21,913 19,407
Accrued income taxes 1,256 6,078
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Total current liabilities 80,120 70,190
Long-term debt, less current maturities 71,522 72,862
Other long-term liabilities 3,803 3,829
Shareholders' investment:
Common stock, $.01 par value, 45,000,000
shares authorized, 19,637,000 and 19,619,000
issued and outstanding 196 196
Additional paid-in capital 150,926 150,676
Retained earnings 120,612 132,086
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Total shareholders' investment 271,734 282,958
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$427,179 $429,839
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See accompanying notes to condensed consolidated financial statements.
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(In thousands, except per share data)
Thirteen Weeks Ended
-----------------------------
December 28, December 29,
1997 1996
------------ ------------
Net sales $88,982 $106,906
Cost of sales 89,478 75,794
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Gross profit (loss) (496) 31,112
Selling, general and
administrative expenses 10,269 10,918
Research and development
expenses 5,161 5,739
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Income (loss) from operations (15,926) 14,455
Other income, net 567 306
Interest expense (147) (858)
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Income (loss) before income taxes (15,506) 13,903
Provision (benefit) for income taxes (4,032) 2,786
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Net income (loss) ($11,474) $11,117
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Basic earnings (loss) per common share ($0.58) $0.68
Diluted earnings (loss) per common share ($0.58) $0.65
Weighted average common shares outstanding 19,629 16,361
Weighted average common and diluted shares
outstanding 19,629 17,120
See accompanying notes to condensed consolidated financial statements.
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(Dollars in thousands)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
-----------------------------
December 28, December 29,
1997 1996
------------ ------------
<S> <C> <C>
Operating activities:
Net income (loss) ($11,474) $11,117
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Depreciation and amortization 9,256 9,607
Deferred income taxes (1,938) (296)
Change in operating assets and liabilities (Note 4) 2,304 1,874
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Cash provided by (used for) operating activities (1,852) 22,302
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Investing activities:
Capital expenditures (56,794) (8,491)
Funding from GE lease receivable 5,468 -
Expenditures from GE lease receivable (8,623) (6,005)
Sales of marketable securities 3,111 -
Purchases of marketable securities (2,320) (105)
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Cash used for investing activities (59,158) (14,601)
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Financing activities:
Repayments of long-term debt (1,340) (1,339)
Proceeds from issuance of long-term debt - 25,000
Net proceeds from issuance of common stock 79 236
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Cash provided by (used for) financing activities (1,261) 23,897
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Net increase (decrease) in cash and cash equivalents (62,271) 31,598
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Cash and cash equivalents at beginning of period 98,340 22,884
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Cash and cash equivalents at end of period $36,069 $54,482
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(Dollars in thousands)
(1) ACCOUNTING POLICIES
The condensed consolidated financial statements have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. The information furnished in the condensed
consolidated financial statements include normal recurring adjustments and
reflect all adjustments which are, in the opinion of management, necessary for a
fair presentation of such financial statements. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. Although the Company believes that the
disclosures are adequate to make the information presented not misleading, it is
suggested that these condensed consolidated financial statements be read in
conjunction with the financial statements and the notes thereto included in the
Company's latest Annual Report on Form 10-K. The quarterly results are not
necessarily indicative of the actual results that may occur for the entire
fiscal year.
(2) RECENT ACCOUNTING PRONOUNCEMENT
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. Basic earnings per common share are computed by
dividing net income (loss) by the weighted average number of shares
outstanding during the year. Diluted earnings (loss) per common share for
the thirteen weeks ended December 28, 1997, and December 29, 1996, were
determined on the assumption that the stock options were exercised when the
grant price was below the market price. The Company adopted SFAS No. 128,
effective December 15, 1997. As a result, the Company's reported earnings
per share for the thirteen weeks ended December 29, 1996 were restated. The
effect of this accounting change on previously reported earnings per share
("EPS") data was as follows:
Thirteen Weeks Ended
December 29, 1996
---------------------
EPS as reported $0.66
Effect of SFAS No. 128 0.02
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Basic EPS as restated $0.68
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If the Company had been in a net income position, 656,000 shares would have been
included in the diluted earnings (loss) per share computation.
<PAGE>
(3) BUSINESS AND CUSTOMERS
The Company is the world's leading supplier of suspension assemblies for rigid
disk drives. Suspension assemblies hold the recording heads in position above
the spinning magnetic disks in the drive and are critical to maintaining the
necessary microscopic clearance between the head and disk. The Company
developed its leadership position in suspension assemblies through research,
development and design activities coupled with a substantial investment in
manufacturing technologies and equipment. The Company is focused on continuing
to develop suspension assemblies which address the rapidly changing requirements
of the rigid disk drive industry. The Company also is evaluating other product
opportunities in the medical devices market but does not expect any medical-
related revenues in fiscal 1998. A breakdown of customer sales is as follows:
Thirteen Weeks Ended
--------------------------------
December 28, December 29,
Percentage of Net Sales 1997 1996
- ----------------------- ------------ ------------
Five Largest Customers 87% 86%
SAE Magnetics, Ltd./TDK 27 13
Read-Rite Corporation 19 13
Seagate Technology Incorporated 17 36
IBM 12 10
Yamaha Corporation 12 14
(4) SUPPLEMENTARY CASH FLOW INFORMATION
Thirteen Weeks Ended
----------------------------
December 28, December 29,
1997 1996
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Changes in operating assets and liabilities:
Receivables, net $4,559 ($10,210)
Inventories (8,200) 1,852
Prepaid and other expenses (94) 139
Accounts payable and accrued liabilities 6,065 10,111
Other non-current liabilities (26) (18)
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$2,304 $ 1,874
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Cash paid for:
Interest (net of amount capitalized) $1,059 $ 116
Income taxes 2,548 1,569
Capitalized interest for the thirteen weeks ended December 28, 1997 was
$1,441,000 compared to $455,000 for the comparable period in fiscal 1997.
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED DECEMBER 28, 1997 VS. THIRTEEN WEEKS ENDED DECEMBER 29,
1996.
Net sales for the thirteen weeks ended December 28, 1997 were $88,982,000, a
decrease of $17,924,000 or 17% compared to the comparable period in fiscal 1997.
This decrease was primarily due to decreased suspension assembly sales.
Gross loss for the thirteen weeks ended December 28, 1997 was $496,000, compared
to a gross profit of $31,112,000 for the comparable period in fiscal 1997, and
gross profit (loss) as a percent of net sales decreased from 29% to (1)%,
primarily due to lower conventional suspension assembly sales volume and higher
costs associated with TSA suspension assembly capacity expansion.
Selling, general and administrative expenses for the thirteen weeks ended
December 28, 1997 were $10,269,000, a decrease of $649,000 or 6% compared to the
comparable period in fiscal 1997. The decreased expenses were due primarily to
decreased profit sharing and other incentive compensation costs of $2,744,000,
partially offset by an increase in labor expenses of $761,000, increased
recruitment and relocation of $560,000 and higher bad debt expense of $389,000.
As a percent of net sales, selling, general and administrative expenses
increased from 10% in the first quarter of fiscal 1997 to 12% in the first
quarter of fiscal 1998.
Research and development expenses for the thirteen weeks ended December 28, 1997
were $5,161,000 compared to $5,739,000 for the thirteen weeks ended December 29,
1996. The prior year amount includes development expenses related to production
of TSA prototype suspensions.
Other income for the thirteen weeks ended December 28, 1997 was $567,000, an
increase of $261,000 from the comparable period in fiscal 1997, primarily due to
an increase in interest income as a result of a higher average investment
balance.
Interest expense for the thirteen weeks ended December 28, 1997 decreased
$711,000 from the comparable period in fiscal 1997, primarily due to an increase
in capitalization of interest of $986,000, offset partially by higher average
outstanding debt.
The income tax benefit for the thirteen weeks ended December 28, 1997 was based
on an estimated effective tax rate for the fiscal year of 26% 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 loss for the thirteen weeks ended December 28, 1997 was $11,474,000,
compared to net income of $11,117,000 for the comparable period in fiscal 1997.
As a percent of net sales, net income (loss) decreased from 10% to (13)%
primarily due to the lower sales volume and higher fixed costs, noted above.
<PAGE>
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 decreased to $36,069,000 at December 28, 1997 compared to
$98,340,000 at September 28, 1997. The Company used cash from operating
activities of $1,852,000 for the thirteen weeks ended December 28, 1997.
Cash used for capital expenditures totaled $56,794,000 for the thirteen weeks
ended December 28, 1997, an increase of $48,303,000 from the comparable
period in fiscal 1997. The expenditures for the first quarter of fiscal 1998
were primarily for manufacturing and support equipment and construction costs
for the Company's Sioux Falls, South Dakota plant and construction of an
expansion to the Company's Hutchinson, Minnesota plant.
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 provided 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 December
28, 1997, the Company had a letter of credit under this facility of $1,425,000
as security for its variable rate demand note. No other amounts were
outstanding under the credit facility or letter of credit at December 28,1997.
The Company's financing agreements contain various restrictive covenants. As of
December 28, 1997, the Company was in compliance with all such covenants.
The Company anticipates fiscal 1998 expenditures of approximately
$200,000,000 primarily for manufacturing and support equipment and
construction of the Company's Sioux Falls plant and the expansion of the
Company's Hutchinson plant. These capital expenditures will support the
Company's continued development of, and capacity expansion for, TSA
suspension assemblies. Due to changes in market conditions, the Company
currently does not anticipate financing plant construction with
sale-leaseback transactions, as previously reported. The Company believes
that its existing and available capital resources, including funds currently
available under its credit facility, additional financing capacity, existing
cash balances, cash equivalents and marketable securities, and any cash
generated from operations, will be sufficient to meet its operating and
capital expenditure requirements for fiscal 1998, as the Company transitions
from conventional suspension assembly production to TSA suspension assembly
production. However, if forecasted operating results do not meet the
Company's expectations or if the Company is unable to obtain adequate
financing at such time or times as such financing is required, the Company's
future financial results and liquidity could be materially adversely
affected.
The Company uses technology throughout its operations that will be affected
by Year 2000 issues. During fiscal 1997, the Company implemented remediation
steps to make the core business systems which are part of the Company's
mid-range computer systems Year 2000 compliant. The Company also has
initiated a company-wide project, to be completed in fiscal year 1998, to
identify and assess the Year 2000 compliance of other Company systems and the
Year 2000 compliance status of its critical suppliers. The expenses relating
to Year 2000 compliance incurred in fiscal 1997 and for the thirteen weeks
ended December 28, 1997 were not material, and the Company believes the
amounts that may be
<PAGE>
required to be expensed in the future for such compliance will not have a
material impact on its results of operations, liquidity and capital resources.
MARKET TRENDS AND CERTAIN CONTINGENCIES
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 the current fiscal year.
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 prices, its newer products,
such as TSA suspensions, have initially much higher selling prices.
The statements above under the heading "Market Trends and Certain
Contingencies" about demand for disk drives and suspension assemblies,
including TSA suspensions, manufacturing yields and selling prices, and the
statements above under the heading "Liquidity and Capital Resources" about
anticipated capital expenditures, capital resources, and Year 2000 compliance
expenditures, are forward-looking statements based on current expectations.
These statements are subject to risks and uncertainties, including
<PAGE>
fluctuating order rates and product mix, slower or faster customer acceptance of
its new products, difficulties in producing its TSA suspensions, difficulties in
financing and expanding capacity, changes in manufacturing efficiencies,
difficulties in implementing Year 2000 compliance 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. Additional discussion of these and other factors may be
found in the Company's Annual Report on Form 10-K for the year ended September
28, 1997 under the heading "Risk Factors".
The Company and certain users of the Company's products have from time to time
received, and may in the future receive, communications from third parties
asserting patents against the Company or its customers which may relate to
certain of the Company's manufacturing equipment or products or to products
which include the Company's products as a component. Although the Company has
not been a party to any material intellectual property litigation, certain of
its customers have been sued on patents having claims closely related to
products sold by the Company. In the event any third party were to make a valid
infringement claim and a license were not available on terms acceptable to the
Company, the Company's operating results could be adversely affected.
The Company is party to certain other claims arising in the ordinary course of
business. In the opinion of management, the outcome of such claims will not
materially affect the Company's current or future financial position or results
of operations.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) EXHIBITS.
3.1 Restated Articles of Incorporation of the Company, as amended by
Articles of Amendment dated January 27, 1988 and as amended by Articles
of Amendment dated January 21, 1997 (incorporated by reference to
Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 29, 1997, File No. 0-14709).
.
3.2 Restated By-Laws of the Company (incorporated by reference to Exhibit
3.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended
December 29, 1996, File No. 0-14709).
4.1 Instruments defining the rights of security holders, including an
indenture. The Registrant agrees to furnish the Securities and Exchange
Commission upon request copies of instruments with respect to long-term
debt.
4.2 Note Purchase Agreement dated as of April 20, 1994, providing for the
placement of $20,000,000 of senior unsecured notes with Teachers
Insurance and Annuity Association of America (incorporated by reference
to Exhibit 4.10 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 27, 1994, File No. 0-14709), Amendment dated as of
March 15, 1996 (incorporated by reference to Exhibit 4.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 24,
1996, File No. 0-14709), and Amendment dated as of February 24, 1997
(incorporated by reference to Exhibit 4.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 30, 1997, File No.
0-14709).
4.3 Note Purchase Agreement dated as of April 20, 1994, providing for the
placement of $5,000,000 of senior unsecured notes with Central Life
Assurance Company (incorporated by reference to Exhibit 4.11 to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 27,
1994, File No. 0-14709), Amendment dated as of March 15, 1996
(incorporated by reference to Exhibit 4.3 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 24, 1996, File No.
0-14709), and Amendment dated as of February 24, 1997 (incorporated by
reference to Exhibit 4.3 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 30, 1997, File No. 0-14709).
4.4 Note Purchase Agreement dated as of April 20, 1994, providing for the
placement of $5,000,000 of senior unsecured notes with Modern Woodmen of
America (incorporated by reference to Exhibit 4.12 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 27, 1994, File
No. 0-14709), Amendment dated as of March 15, 1996 (incorporated by
reference to Exhibit 4.4 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 24, 1996, File No. 0-14709), and Amendment
dated as of February 24, 1997 (incorporated by reference to Exhibit 4.4
to the Company's Quarterly Report on Form 10-Q for the quarter ended
March 30, 1997, File No. 0-14709).
4.5 Credit Agreement between the Company and The First National Bank of
Chicago, dated as of December 8, 1995 (incorporated by reference to
Exhibit 4.5 to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 24, 1995, File No. 0-14709), First Amendment
dated as of June 22, 1996 (incorporated by reference to
<PAGE>
Exhibit 4.5 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 23, 1996, File No. 0-14709), and Second Amendment
dated as of February 24, 1997 (incorporated by reference to Exhibit 4.5
to the Company's Quarterly Report on Form 10-Q for the quarter ended
March 30, 1997, File No. 0-14709).
4.6 Note Purchase Agreement dated as of July 26, 1996, providing for the
placement of $15,000,000 of senior unsecured notes with Metropolitan
Insurance and Annuity Company (incorporated by reference to Exhibit 4.6
to the Company's Annual Report on Form 10-K for the fiscal year ended
September 29, 1996, File No. 0-14709), and Amendment dated as of
February 24, 1997 (incorporated by reference to Exhibit 4.6 to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 30,
1997, File No. 0-14709).
4.7 Note Purchase Agreement dated as of July 26, 1996, providing for the
placement of $10,000,000 of senior unsecured notes with Metropolitan
Life Insurance Company (incorporated by reference to Exhibit 4.7 to the
Company's Annual Report on Form 10-K for the fiscal year ended September
29, 1996, File No. 0-14709), and Amendment dated as of February 24, 1997
(incorporated by reference to Exhibit 4.7 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 30, 1997, File No.
0-14709).
4.8 Note Purchase Agreement dated as of July 26, 1996, providing for the
placement of $25,000,000 of senior unsecured notes with Teachers
Insurance and Annuity Association of America (incorporated by reference
to Exhibit 4.8 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 29, 1996, File No. 0-14709), and Amendment
dated as of February 24, 1997 (incorporated by reference to Exhibit 4.8
to the Company's Quarterly Report on Form 10-Q for the quarter ended
March 30, 1997, File No. 0-14709).
10.1 Lease with Right of Refusal between Donald Wendorff and Laura Wendorff,
Lessors, and the Company, Lessee, dated September 6, 1995 (incorporated
by reference to Exhibit 10.2 to the Company's Annual Report on Form 10-K
for the fiscal year ended September 24, 1995, File No. 0-14709).
10.2 Office/Warehouse Lease between OPUS Corporation, Lessor, and the
Company, Lessee, dated December 29, 1995 (incorporated by reference to
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 24, 1996, File No. 0-14709), and First Amendment to
Office/Warehouse Lease dated April 30, 1996 (incorporated by reference
to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 23, 1996, File No. 0-14709).
10.3 Building Lease dated April 1988 and Amendment to Building Lease dated
August 29, 1988 (incorporated by reference to Exhibit 10.9 to the
Company's Annual Report on Form 10-K for the fiscal year ended September
25, 1988, File No. 0-14709), Second Amendment to Building Lease dated as
of September 18, 1989, relating to the Company's Sioux Falls, South
Dakota facility (incorporated by reference to Exhibit 10.9 to the
Company's Annual Report on Form 10-K for the fiscal year ended September
30, 1990, File No. 0-14709), Third Amendment to Building Lease dated
September 19, 1991, relating to the Company's Sioux Falls, South
Dakota facility (incorporated by reference to Exhibit 10.9 to the
Company's Annual Report on Form 10-K for the fiscal year ended September
29, 1991, File No. 0-14709), Fourth Amendment to Commercial Lease dated
<PAGE>
September 29, 1992, relating to the Company's Sioux Falls, South Dakota
facility (incorporated by reference to Exhibit 10.10 to the Company's
Annual Report on Form 10-K for the fiscal year ended September 27, 1992,
File No. 0-14709), Fifth Amendment to Commercial Lease dated February
11, 1993, relating to the Company's Sioux Falls, South Dakota facility
(incorporated by reference to Exhibit 10.6 to the Company's Annual
Report on Form 10-K for the fiscal year ended September 24, 1995, File
No. 0-14709), Sixth Amendment to Commercial Lease dated February 17,
1995, relating to the Company's Sioux Falls, South Dakota facility
(incorporated by reference to Exhibit 10.6 to the Company's Annual
Report on Form 10-K for the fiscal year ended September 24, 1995, File
No. 0-14709), and Seventh Amendment to Commercial Lease dated April 1,
1995, relating to the Company's Sioux Falls, South Dakota facility
(incorporated by reference to Exhibit 10.6 to the Company's Annual
Report on Form 10-K for the fiscal year ended September 24, 1995, File
No. 0-14709).
10.4 Hutchinson Technology Incorporated 401-K Plan and related 401-K Trust
(incorporated by reference to Exhibit 10.10 to the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1990, File
No. 0-14709), and Amendment effective April 1, 1995 (incorporated by
reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 24, 1996, File No. 0-14709), and Amendment
effective April 1, 1996 (incorporated by reference to Exhibit 10.4 to
the Company's Quarterly Report on Form 10-Q for the quarter ended June
23, 1996, File No. 0-14709).
.
10.5 Directors' Retirement Plan effective as of January 1, 1992 (incorporated
by reference to Exhibit 10.12 to the Company's Annual Report on Form
10-K for the fiscal year ended September 27, 1992, File No. 0-14709),
and Amendment to Directors' Retirement Plan effective as of November 19,
1997.
10.6 Description of Bonus Program for Key Employees of Hutchinson Technology
Incorporated (incorporated by reference to Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the fiscal year ended September
27, 1992, File No. 0-14709).
10.7 1988 Stock Option Plan (incorporated by reference to Exhibit 10.8 to the
Company's Annual Report on Form 10-K for the fiscal year ended September
25, 1988, File No. 0-14709), Amendment to the 1988 Stock Option Plan
(incorporated by reference to Exhibit 10.5 to the Company's Annual
Report on Form 10-K for the fiscal year ended September 26, 1993, File
No. 0-14709), and Amendment to the 1988 Stock Option Plan (incorporated
by reference to Exhibit 10.5 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 26, 1995, File No. 0-14709).
*10.8 Technology Transfer and Development Agreement, effective as of September
1, 1994, between Hutchinson Technology Incorporated and International
Business Machines Corporation (incorporated by reference to Exhibit
10.10 to the Company's Quarterly Report on Form 10-Q/A for the quarter
ended June 25, 1995, File No. 0-14709), and Amendment dated December 11,
1995 to the Technology Transfer and Development Agreement between
International Business Machines Corporation and Hutchinson Technology
Incorporated executed June 15, 1995 (incorporated by reference to
Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 24, 1995, File No. 0-14709).
<PAGE>
*10.9 Patent License Agreement, effective as of September 1, 1994, between
Hutchinson Technology Incorporated and International Business Machines
Corporation (incorporated by reference to Exhibit 10.11 to the Company's
Quarterly Report on Form 10-Q/A for the quarter ended June 25, 1995,
File No. 0-14709).
10.10 Lease Agreement between Meridian Eau Claire LLC and Hutchinson
Technology Incorporated, dated May 1, 1996 (incorporated by reference to
Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 23, 1996, File No. 0-14709).
10.11 Master Lease Agreement dated as of December 19, 1996 between General
Electric Capital Corporation, as Lessor, and Hutchinson Technology
Incorporated, as Lessee (incorporated by reference to Exhibit 10.11 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
December 29, 1996, File No. 014709), and Amendment dated June 30, 1997
to the Master Lease Agreement between General Electric Capital
Corporation and Hutchinson Technology Incorporated.
10.12 Hutchinson Technology Incorporated 1996 Incentive Plan (incorporated by
reference to Exhibit 10.12 to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 29, 1996, File No. 0-14709).
10.13 Hutchinson Technology Incorporated Incentive Bonus Plan.
11.1 Statement Regarding Computation of Net Income Per Share.
27.1 Financial Data Schedule.
* Exhibits 10.8 and 10.9 contain portions for which confidential treatment
has been granted by the Securities and Exchange Commission.
b) REPORTS ON FORM 8-K.
No Current Reports on Form 8-K were filed during the thirteen weeks
ended December 28, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUTCHINSON TECHNOLOGY INCORPORATED
Date: February 4, 1998 By /s/Wayne M. Fortun
-------------------------- -------------------------------------
Wayne M. Fortun
President, Chief Executive Officer and
Chief Operating Officer
Date: February 4, 1998 By /s/John A. Ingleman
-------------------------- -------------------------------------
John A. Ingleman
Vice President, Chief Financial Officer
and Secretary
<PAGE>
INDEX TO EXHIBITS
Exhibit
No. Page
- ----------- -------------
10.5 Amendment to Directors' Retirement Plan dated Electronically
November 19, 1997 Filed
10.11 Amendment to Master Lease Agreement dated June 30, Electronically
1997 Filed
10.13 Hutchinson Technology Incorporated Incentive Bonus Electronically
Plan Filed
11.1 Statement Regarding Computation of Net Income Per Electronically
Share Filed
27.1 Financial Data Schedule Electronically
Filed
<PAGE>
EXHIBIT 10.5
AMENDMENT TO HUTCHINSON TECHNOLOGY INCORPORATED
DIRECTORS' RETIREMENT PLAN,
ADOPTED BY THE BOARD OF DIRECTORS OF
HUTCHINSON TECHNOLOGY INCORPORATED ON
NOVEMBER 19, 1997
RESOLVED, that the Hutchinson Technology Incorporated Directors'
Retirement Plan (the "RETIREMENT PLAN") be amended by deleting Section
2 of the Retirement Plan in its entirety and inserting in lieu thereof
the following:
"2. RETIREMENT. No Non-Employee Director shall be a
nominee for election to the Board to serve a term that
begins after the Non-Employee Director reaches age 70."
The Retirement Plan shall remain in full force and effect without
amendment or modification in any respect except as set forth above.
<PAGE>
EXHIBIT 10.11
[General Electric Capital Corporation Letterhead]
June 30, 1997
Hutchinson Technology Incorporated
40 West Highland Park
Hutchinson, Minnesota 55350-9784
Re: MASTER LEASE AGREEMENT DATED AS OF DECEMBER 19, 1996
Gentlemen:
This will confirm the collateral understanding which has been reached between us
with respect to the above-referenced Master Lease Agreement (the "Lease"),
between General Electric Capital Corporation ("Lessor") and Hutchinson
Technology Incorporated ("Lessee").
In consideration of the sum of Ten Dollars ($10.00) in hand paid, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1.1. Section I(b)(i) is amended by adding the following language to the end
of the first sentence: "and having an aggregate Capitalized Lessor's
Cost not in excess of Thirty Million Dollars ($30,000,000) during the
period commencing on October 1, 1997, through and including
September 30, 1998; provided, however, that it is acknowledged and
agreed that Lessor shall have no continuing obligation with respect to
amounts allocated for the Initial Commitment Period which are not
funded during the Initial Commitment Period."
2. Except as expressly set forth herein, the terms and conditions of the
Lease remain unmodified and in full force and effect.
If the foregoing accurately sets forth our understanding with respect to the
subject matter hereof, please sign and return the enclosed copy of this letter
and it will constitute an amendment of the Lease pursuant to Section XX(f)
thereof.
GENERAL ELECTRIC CAPITAL CORPORATION
/s/ David Avigdor
David Avigdor
Senior Syndication Manager
HUTCHINSON TECHNOLOGY INCORPORATED
By: /s/ John A. Ingleman 7/24/97
--------------------------------------
Name: John A. Ingleman
--------------------------------------
Title: CFO
-------------------------------------
<PAGE>
EXHIBIT 10.13
HUTCHINSON TECHNOLOGY INCORPORATED
INCENTIVE BONUS PLAN
1. PURPOSE. The purpose of the Hutchinson Technology Incorporated
Incentive Bonus Plan (the "Plan") is to provide incentives to the executive
officers of Hutchinson Technology Incorporated (the "Company") and its
subsidiaries to produce a superior return to the shareholders of the Company and
to encourage such executive officers to remain in the employ of the Company and
its subsidiaries. Amounts paid pursuant to the Plan are intended to qualify as
performance-based compensation within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code").
2. DEFINITIONS. The terms defined in this section are used (and
capitalized) elsewhere in the Plan.
a. "Award" means an award payable to a Participant pursuant to Section
4 hereof.
b. "Board" means the Board of Directors of the Company.
c. "Committee" means the Compensation Committee of the Board or such
other Board committee as may be designated by the Board to administer the
Plan.
d. "Effective Date" means the date specified in Section 5.
e. "Eligible Employee" means any executive officer of the Company or a
subsidiary thereof.
f. "Participant" means an Eligible Employee designated by the Committee
to participate in the Plan for a designated Performance Period.
g. "Performance Period" means the Company's fiscal year.
3. ADMINISTRATION.
3.1 AUTHORITY OF COMMITTEE. The Committee shall administer the Plan.
The Committee's interpretation of the Plan and of any Awards made under the Plan
shall be final and binding on all persons with an interest therein. The
Committee shall have the power to establish rules to administer the Plan and to
change such rules.
3.2 INDEMNIFICATION. To the full extent permitted by law, (i) no member
of the Committee shall be liable for any action or determination taken or made
in good faith with respect to the Plan or any Award made under the Plan, and
(ii) the members of the Committee shall be entitled to indemnification by the
Company against and from any loss incurred by such members by reason of any such
actions and determinations.
4. AWARDS.
4.1 ALLOCATION OF AWARDS. Within 90 days following the commencement of
each Performance Period, the Committee may select such Eligible Employees as it
deems appropriate for participation in the Plan. Eligible Employees selected for
participation will be entitled to receive an award of bonus compensation based
on the attainment of performance targets selected by the Committee and
consisting of one or any combination of two or more of net earnings before or
after income taxes; gross revenues; operating expenses; operating income; total
shareholder return; or return on assets. As appropriate, any such targets may be
expressed in absolute amounts, on a per share basis, or as a percentage change
from preceding
1
<PAGE>
Performance Periods. In addition, such targets may relate to one or any
combination of two or more of corporate, group, unit, division, affiliate or
individual performance.
4.2 MAXIMUM AMOUNT OF AWARDS. No Participant shall be entitled to
receive an Award for any Performance Period that exceeds 2% of income from
operations, as reported on a pre-income tax basis in the Company's Consolidated
Statements of Operations for such Performance Period.
4.3 ADJUSTMENTS. The Committee is authorized at any time during or
after a Performance Period, in its sole and absolute discretion, to reduce or
eliminate an Award payable to any Participant for any reason, including changes
in the position or duties of any Participant with the Company or any subsidiary
of the Company during the Performance Period, whether due to any termination of
employment (including death, disability, retirement, or termination with or
without cause) or otherwise. No reduction in an Award made to any Participant
shall increase the amount of the Award to any other Participant.
4.4 PAYMENT OF AWARDS. Following the completion of each Performance
Period, the Committee shall certify in writing the degree to which the
performance targets were attained and the Awards payable to Participants. Each
Participant shall receive payment in cash of the Award as soon as practicable
following the determination in respect thereof made pursuant to this Section
4.4.
5. EFFECTIVE DATE OF THE PLAN. The Plan shall become effective as of
September 29, 1997; provided that this Plan is approved and ratified by the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock of the Company present or represented and entitled to vote in
person or by proxy at a meeting of the shareholders of the Company no later than
March 1, 1998. The Plan shall remain in effect until it has been terminated
pursuant to Section 8. If the Plan is not so approved by the shareholders of the
Company, the Plan and any Awards granted under the Plan subject to such approval
shall be null and void.
6. RIGHT TO TERMINATE EMPLOYMENT. Nothing in the Plan shall confer upon
any Participant the right to continue in the employment of the Company or any
subsidiary or affect any right which the Company or any subsidiary may have to
terminate the employment of a Participant with or without cause.
7. TAX WITHHOLDING. The Company shall have the right to withhold from cash
payments under the Plan to a Participant or other person an amount sufficient to
cover any required withholding taxes.
8. AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN. The Board may at
any time terminate, suspend or modify the Plan and the terms and provisions of
any Award to any Participant which has not been paid. Amendments are subject to
approval of the shareholders of the Company only if such approval is necessary
to maintain the Plan in compliance with the requirements of Section 162(m) of
the Code, its successor provisions or any other applicable law or regulation. No
Award may be granted during any suspension of the Plan or after its termination.
9. UNFUNDED PLAN. The Plan shall be unfunded, and the Company shall not be
required to segregate any assets that may at any time be represented by Awards
under the Plan.
10. OTHER BENEFIT AND COMPENSATION PROGRAMS. Neither the adoption of the
Plan by the Board nor its submission to the shareholders of the Company shall be
construed as creating any limitation on the power of the Board to adopt such
other incentive arrangements as it may deem appropriate. Payments received by a
Participant under an Award made pursuant to the Plan shall not be deemed a part
of a Participant's regular recurring compensation for purposes of the
termination, indemnity or severance pay law of any state and shall not be
included in, nor have any effect on, the determination of benefits under any
other
2
<PAGE>
employee benefit plan, contract or similar arrangement provided by the Company
or any subsidiary unless expressly so provided by such other plan, contract or
arrangement, or unless the Committee expressly determines otherwise.
11. GOVERNING LAW. To the extent that Federal laws do not otherwise
control, the Plan and all determinations made and actions taken pursuant to the
Plan shall be governed by the laws of the State of Minnesota and construed
accordingly.
3
<PAGE>
EXHIBIT 11.1
HUTCHINSON TECHNOLOGY INCORPORATED
STATEMENT REGARDING COMPUTATION
OF NET INCOME PER SHARE - UNAUDITED
(In thousands, except per share data)
Thirteen Weeks Ended
-------------------------------
December 28, December 29,
1997 1996
------------- ------------
NET INCOME (LOSS) ($11,474) $11,117
------------- ------------
------------- ------------
NET INCOME (LOSS) PER SHARE -
BASIC:
Weighted average common
shares outstanding 19,629 16,361
------------- ------------
BASIC
NET INCOME (LOSS) PER SHARE ($0.58) $0.68
------------- ------------
------------- ------------
NET INCOME (LOSS) PER SHARE -
DILUTED:
Weighted average common
shares outstanding 19,629 16,361
Dilutive effect of stock options
outstanding after application
of treasury stock method - 759
------------- ------------
19,629 17,120
------------- ------------
------------- ------------
DILUTED
NET INCOME (LOSS) PER SHARE ($0.58) $0.65
------------- ------------
------------- ------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS OF
HUTCHINSON TECHNOLOGY INCORPORATED FOR THE THIRTEEN WEEKS ENDED
DECEMBER 28, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-27-1998
<PERIOD-START> SEP-29-1997
<PERIOD-END> DEC-28-1997
<CASH> 36,069,000
<SECURITIES> 19,421,000
<RECEIVABLES> 47,085,000
<ALLOWANCES> 2,852,000
<INVENTORY> 35,389,000
<CURRENT-ASSETS> 188,796,000
<PP&E> 406,996,000
<DEPRECIATION> 180,634,000
<TOTAL-ASSETS> 427,179,000
<CURRENT-LIABILITIES> 80,120,000
<BONDS> 71,522,000
0
0
<COMMON> 196,000
<OTHER-SE> 271,538,000
<TOTAL-LIABILITY-AND-EQUITY> 427,179,000
<SALES> 88,982,000
<TOTAL-REVENUES> 88,982,000
<CGS> 89,478,000
<TOTAL-COSTS> 89,478,000
<OTHER-EXPENSES> 5,161,000<F1>
<LOSS-PROVISION> 671,000
<INTEREST-EXPENSE> 147,000
<INCOME-PRETAX> (15,506,000)
<INCOME-TAX> (4,032,000)
<INCOME-CONTINUING> (11,474,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,474,000)
<EPS-PRIMARY> (0.58)
<EPS-DILUTED> (0.58)
<FN>
<F1>OTHER EXPENSES REFLECT RESEARCH AND DEVELOPMENT EXPENSES.
</FN>
</TABLE>
