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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 JUNE 30, 2002
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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
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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 August 2, 2002 the registrant had 25,350,077 shares of Common Stock issued
and outstanding.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
HUTCHINSON TECHNOLOGY INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
(Dollars in thousands)
June 30, September 30,
2002 2001
---------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 95,982 $ 113,313
Securities available for sale 140,611 131,454
Trade receivables, net 41,653 43,747
Other receivables 3,768 2,878
Inventories 30,916 21,193
Prepaid taxes and other (Note 8) 13,004 9,615
-------- ---------
Total current assets 325,934 322,200
Property, plant and equipment, net 189,739 211,262
Deferred tax assets 49,035 51,410
Other assets (Note 8) 30,407 10,068
-------- ---------
$595,115 $ 594,940
======== =========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Current portion of capital lease obligation $ 8,437 $ 10,808
Current maturities of long-term debt 17,793 17,791
Accounts payable and accrued expenses 34,802 30,168
Accrued compensation 20,262 16,359
-------- ---------
Total current liabilities 81,294 75,126
Capital lease obligation, less current portion 13 2,608
Long-term debt, less current maturities 12,051 25,693
Convertible subordinated notes 150,000 150,000
Other long-term liabilities 1,812 3,247
Shareholders' investment:
Common stock, $.01 par value, 45,000,000 shares
authorized, 25,329,000 and 25,171,000 issued and
outstanding 253 252
Additional paid-in capital 369,320 366,590
Accumulated deficit (19,628) (28,576)
-------- ---------
Total shareholders' investment 349,945 338,266
-------- ---------
$595,115 $ 594,940
======== =========
See accompanying notes to condensed consolidated financial statements.
HUTCHINSON TECHNOLOGY INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(In thousands, except per share data)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
---------------------------- ---------------------------
June 30, June 24, June 30, June 24,
2002 2001 2002 2001
--------- --------- --------- ---------
Net sales $ 97,356 $ 91,507 $ 281,572 $ 306,158
Cost of sales 73,627 86,670 218,428 275,624
--------- --------- --------- ---------
Gross profit 23,729 4,837 63,144 30,534
Research and development expenses 4,530 5,554 13,315 17,555
Selling, general and
administrative expenses 13,857 12,318 37,606 37,846
Restructuring charges (Note 2) -- -- -- 2,364
Legal expense reimbursement (Note 10) -- -- (2,632) --
--------- --------- --------- ---------
Income (loss) from operations 5,342 (13,035) 14,855 (27,231)
Interest expense (3,259) (3,890) (10,380) (11,855)
Other income, net 1,791 3,384 6,054 11,195
--------- --------- --------- ---------
Income (loss) before income taxes 3,874 (13,541) 10,529 (27,891)
Provision (benefit) for income taxes 583 (2,749) 1,581 (4,184)
--------- --------- --------- ---------
Net income (loss) $ 3,291 $ (10,792) $ 8,948 $ (23,707)
========= ========= ========= =========
Basic earnings (loss) per share $ 0.13 $ (0.43) $ 0.35 $ (0.95)
Diluted earnings (loss) per share $ 0.13 $ (0.43) $ 0.35 $ (0.95)
Weighted average common shares
outstanding 25,328 24,966 25,285 24,895
Weighted average common and diluted
shares outstanding 25,480 24,966 25,556 24,895
See accompanying notes to condensed consolidated financial statements.
HUTCHINSON TECHNOLOGY INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(Dollars in thousands)
Thirty-Nine Weeks Ended
-------------------------
June 30, June 24,
2002 2001
--------- ----------
Operating activities:
Net income (loss) $ 8,948 $ (23,707)
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Depreciation and amortization 46,697 66,987
Deferred taxes 2,395 (4,965)
Change in operating assets and
liabilities (Note 9) (25,253) 18,044
--------- ----------
Cash provided by operating
activities 32,787 56,359
--------- ----------
Investing activities:
Capital expenditures (25,086) (23,362)
Purchases of marketable securities (196,366) (127,929)
Sales of marketable securities 187,209 105,723
--------- ----------
Cash used for investing
activities (34,243) (45,568)
--------- ----------
Financing activities:
Repayments of long-term debt (13,640) (16,182)
Repayments of capital lease obligation (4,966) (3,894)
Net proceeds from issuance of common stock 2,731 1,237
--------- ----------
Cash used for financing
activities (15,875) (18,839)
--------- ----------
Net decrease in cash and cash equivalents (17,331) (8,048)
Cash and cash equivalents at beginning of
period 113,313 129,314
--------- ----------
Cash and cash equivalents at end of period $ 95,982 $ 121,266
========= ==========
See accompanying notes to condensed consolidated financial statements.
HUTCHINSON TECHNOLOGY INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(Columnar dollar amounts in thousands except per share amounts)
Unless otherwise indicated, references to "2002" mean HTI's fiscal year ending
September 29, 2002 and references to "2001" mean HTI's fiscal year ended
September 30, 2001.
(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 accounting principles generally accepted in the United States 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) RESTRUCTURING CHARGES
In the Company's second quarter of 2001, lingering effects of slower holiday
season sales of personal computers, concerns about a weak economy, and previous
overbuying by businesses, resulted in lower drive demand. This led to the
Company's unit shipments for the second quarter of 2001 declining significantly
from first quarter levels. In an effort to reduce costs, the Company eliminated
approximately 350 positions in manufacturing, development and manufacturing
support at all plant sites, resulting in a $2,364,000 charge for severance
costs.
(3) BUSINESS AND CUSTOMERS
The Company is the world's leading supplier of suspension assemblies for hard
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
hard disk drive industry. The Company also is engaged in the development and
production of products for the medical device market, but does not expect to
generate significant revenue during 2002.
A breakdown of customer sales is as follows:
Thirteen Weeks Ended Thirty-Nine Weeks Ended
--------------------------- --------------------------
June 30, June 24, June 30, June 24,
Percentage of Net Sales 2002 2001 2002 2001
- ----------------------- ---------- ---------- --------- ----------
Five Largest Customers 86% 94% 80% 93%
Alps Electric Co., Ltd. 26 10 19 11
SAE Magnetics, Ltd./TDK 24 31 24 27
IBM and affiliates 14 15 14 15
Seagate Technology LLC 14 12 13 13
Read-Rite Corporation 8 26 10 27
(4) TRADE RECEIVABLES
The Company grants credit to customers, but generally does not require
collateral or any other security to support amounts due. Trade receivables of
$41,653,000 at June 30, 2002 and $43,747,000 at September 30, 2001 are net of
allowances of $3,814,000 and $3,679,000, respectively.
(5) INVENTORIES
All inventories are stated at the lower of first-in, first-out cost or market.
Inventories consisted of the following:
June 30, September 30,
2002 2001
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Raw materials $ 6,638 $ 5,965
Work in process 5,464 5,836
Finished goods 18,814 9,392
-------- ---------
$ 30,916 $ 21,193
======== =========
(6) EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing net income (loss)
available for common shareholders by the weighted average number of common
shares outstanding during the year. Diluted earnings (loss) per share is
computed under the treasury stock method and is calculated to compute the
dilutive effect of potential common shares. A reconciliation of these amounts is
as follows:
Thirty-Nine Weeks Ended
-----------------------
June 30, June 24,
2002 2001
-------- ---------
Net income (loss) available for common shareholders $ 8,948 $ (23,707)
-------- ---------
Weighted average common shares outstanding 25,285 24,895
Dilutive potential common shares 271 --
-------- ---------
Weighted average common and diluted shares outstanding 25,556 24,895
======== =========
Basic earnings (loss) per share $ 0.35 $ (0.95)
Diluted earnings (loss) per share $ 0.35 $ (0.95)
Potential common shares of 5,291,000, relating to the Company's outstanding
convertible subordinated notes, were excluded from the computation of diluted
earnings per share for the thirty-nine weeks ended June 30, 2002 and June 24,
2001, as inclusion of these shares would have been antidilutive. Potential
common shares of 242,000, relating to the Company's outstanding stock options,
were excluded from the computation of diluted loss per share for the thirty-nine
weeks ended June 24, 2001, as inclusion of these shares would have been
antidilutive.
(7) INCOME TAXES
The following table details the significant components of the Company's deferred
tax assets:
June 30, September 30,
2002 2001
------------ ------------
Current deferred tax assets:
Receivable reserves $ 1,384 $ 1,334
Inventories 5,425 6,714
Accruals and other reserves 6,629 5,804
Valuation allowance (5,330) (5,724)
------------ ------------
Total current deferred tax assets 8,108 8,128
------------ ------------
Long-term deferred tax assets:
Property, plant and equipment 15,888 16,115
Other 161 --
Tax credits 14,684 14,316
Net operating loss carryforwards 70,167 72,237
Valuation allowance (51,865) (51,258)
------------ ------------
Total long-term deferred tax assets 49,035 51,410
------------ ------------
Total deferred tax assets $ 57,143 $ 59,538
============ ============
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 June 30, 2002, the
Company had unused tax credits and net operating loss carryforwards of
$84,851,000, of which $5,525,000 can be carried forward indefinitely and
$79,326,000 which expire at various dates through 2021. A valuation allowance of
$57,195,000 has been recorded for certain of these deferred tax assets due to
the uncertainty of realizing the benefit of certain tax credits and net
operating loss carryforwards.
(8) OTHER ASSETS
During the second quarter of 2002, the Company prepaid $26,000,000 related to a
technology and development agreement. As of June 30, 2002, the unamortized
portion of the prepayment was $24,413,000, of which $3,174,000 was included in
"Prepaid taxes and other" and $21,239,000 was included in "Other assets" on the
accompanying balance sheet. The unamortized portion will be amortized on a
straightline basis through the remaining term of the agreement which ends in
2010.
(9) SUPPLEMENTARY CASH FLOW INFORMATION
Thirty-Nine Weeks Ended
----------------------------
June 30, June 24,
2002 2001
------------ ------------
Changes in operating assets and liabilities:
Receivables, net $ 1,204 $ 16,730
Inventories (9,723) 6,294
Prepaid and other (24,586) 717
Accounts payable and accrued liabilities 9,287 (4,981)
Other non-current liabilities (1,435) (716)
------------ ------------
$ (25,253) $ 18,044
============ ============
Cash paid (refunded) for:
Interest (net of amount capitalized) $ 7,553 $ 10,094
Income taxes $ (2,731) $ 192
Capitalized interest for the thirty-nine weeks ended June 30, 2002 was $781,000
compared to $730,000 for the comparable period in 2001.
(10) LEGAL EXPENSE REIMBURSEMENT
During the first quarter of 2002, the Company recorded a one-time increase to
operating income of $2,632,000 as a result of a reimbursement of legal expenses
from a third party and insurance proceeds related to litigation defense costs.
The reimbursement of legal expenses is to be paid in installments through 2006
and is recorded at the net present value of the remaining payments.
(11) LEGAL CONTINGENCIES
On October 10, 2001, Ronald A. Smith & Associates commenced a lawsuit against
the Company in the United States District Court for the Northern District of
California. The lawsuit alleges that certain manufacturing systems the Company
uses infringe one patent. The lawsuit requests damages, including treble
damages, attorneys' fees and an injunction against the Company. Management of
the Company is unable to estimate at this time the possible loss that
potentially could result from this lawsuit.
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 that
include the Company's products as a component. The Company is currently a party
to the litigation described above. In addition, certain of the Company's
customers have been sued on patents having claims closely related to products
sold by the Company. If any third party makes a valid infringement claim and a
license were not available on terms acceptable to the Company, the Company's
operating results could be adversely affected. The Company expects that, as the
number of patents issued continues to increase, and as the Company grows, the
volume of intellectual property claims could increase. The Company may need to
engage in litigation to enforce patents issued or licensed to it, protect trade
secrets or know-how owned by it or determine the enforceability, scope and
validity of the intellectual property rights of others. The Company could incur
substantial costs in such litigation or other similar legal actions, which could
have a material adverse effect on its results of operations.
The Company is a 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.
(12) OTHER MATTERS
Over the course of the last two years, the World Trade Organization ("WTO") has
ruled that the Foreign Sales Corporation ("FSC") provisions of the United States
Internal Revenue Code ("IRC"), and the FSC's replacement provisions contained in
The Extraterritorial Income Exclusion Act of 2002 ("ETI") are prohibited export
subsidies under the rules of the WTO. Federal legislation recently has been
proposed that includes a provision to repeal the ETI. Until the proposed
legislation repealing ETI is signed into law, the Company expects to earn a net
ETI benefit similar to that previously earned under the FSC provisions of the
IRC.
HUTCHINSON TECHNOLOGY INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Unless otherwise indicated, references to "2003" mean HTI's fiscal year ending
September 28, 2003, references to "2002" mean HTI's fiscal year ending September
29, 2002, references to "2001" mean HTI's fiscal year ended September 30, 2001,
references to "2000" mean HTI's fiscal year ended September 24, 2000, and
references to "1999" mean HTI's fiscal year ended September 26, 1999.
GENERAL
Since the late 1980's, we have derived virtually all of our revenue from the
sale of suspension assemblies to a small number of customers. We currently sell
a variety of suspension assemblies and suspension assembly components based on
several standard designs to manufacturers of hard disk drives ("disk drives")
and manufacturers of disk drive components (including Alps, Fujitsu, IBM,
Innovex, KRP, Read-Rite, SAE, Seagate). Suspension assemblies are a critical
component of disk drives and our results of operations are highly dependent on
the disk drive industry. The disk drive industry is intensely competitive and
volatile and our results of operations have been adversely affected from time to
time due to disk drive industry slowdowns, technological changes that impact
suspension assembly demand, shifts in our market share and our customers' market
share, production yields and our own product transitions.
Since 1999, improvements in data density of disk drives, which outpaced disk
drive storage capacity requirements, have enabled disk drive manufacturers to
reduce their costs by using fewer components, including suspensions, in each
drive. Shifts in our position in the marketplace had also, to a lesser extent,
decreased demand for our products. Slower growth of disk drive storage demand
and a weaker global economy also decreased demand for our products in 2001.
Consequently, unit shipments declined from 583 million in 1999 to 420 million in
2001. Our unit shipments of suspension assemblies for the third quarter of 2002
were 100 million, slightly higher than the levels we saw in the five preceding
quarters.
In our fourth quarter of 2001, our long-term forecast of suspension assembly
demand decreased significantly due to long-term industry forecasts reflecting
slower growth projections for disk drive storage demand. We believe this is due
to a weaker global economy, consumer uncertainty, and a trend toward higher
utilization of current storage capacity. We continue to have limited visibility
for future demand.
Our selling prices are subject to pricing pressure from our customers and market
pressure from our competitors. Our selling prices also are affected by changes
in overall demand for our products, changes in the specific products our
customers buy and a product's life cycle. A typical life cycle for our products
begins with higher pricing when a product is introduced, decreasing prices when
it is mature, and slightly increasing pricing as it is phased out. To offset
price decreases during a product's life, we rely primarily on higher sales
volume and improving our manufacturing yield and productivity to reduce its
cost. If we cannot reduce our manufacturing costs as prices decline during our
products' life cycles, or at all, our business, financial condition and results
of operations could be materially adversely affected.
Our gross margins have fluctuated and will continue to fluctuate based upon a
variety of factors such as
- - changes in demand or customer requirements
- - product mix
- - selling prices
- - the level of utilization of our production capacity
- - increases in production and engineering costs associated with production of
new products
- - manufacturing yields and production efficiency
- - changes in the cost of raw materials
Our ability to respond to our customers' needs for new products and product
features on a timely basis is an important factor in our success. Our dedicated
development center enables us to shorten development cycles and achieve high
volume output per manufacturing unit more quickly. New products have lower
manufacturing yields and are produced in smaller quantities than more mature
products. Manufacturing yields generally improve as the product matures and
production volumes increase. Manufacturing yields also vary depending on the
complexity and uniqueness of product specifications. Because our business is
capital intensive and requires a high level of fixed costs, gross margins are
also extremely sensitive to changes in volume. Small variations in capacity
utilization or manufacturing yields generally have a significant impact on gross
margins.
We typically allow customers to change or cancel orders on short notice. We plan
our production and inventory based primarily on forecasts of customer demand,
including forecasts of customer pulls of product out of our "just-in-time"
inventory hubs, rather than on order backlog. Customers typically prefer a dual
source supply and, therefore, they allocate their demand among suppliers. Both
customer demand and the resulting forecasts often fluctuate substantially. These
factors, among others, create an environment where scheduled production and
capacity utilization can vary significantly from week to week, leading to
variability in gross margins and difficulty in estimating our position in the
marketplace.
In addition to increases in suspension assembly demand, improvements to our
operating margins depend, in part, on the successful management of our corporate
infrastructure, our suspension assembly production capacity and our workforce.
During the past three years, we consolidated some of our manufacturing
operations to make better use of existing equipment and support staff across all
of our plants and to reduce costs. As part of our efforts to improve our
operating margins through reduced costs and improved efficiency, we reduced our
overall employment level from 7,701 at the end of 1999 to 3,391 at the end of
the third quarter of 2002, through workforce reductions and managed attrition.
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED JUNE 30, 2002 VS. THIRTEEN WEEKS ENDED JUNE 24, 2001.
Net sales for the thirteen weeks ended June 30, 2002 were $97,356,000, an
increase of $5,849,000 or 6% from the comparable period in 2001. Suspension
assembly component sales increased $3,929,000 compared to the thirteen weeks
ended June 24, 2001. Additionally, suspension assembly sales increased
$1,406,000, primarily due to a slight increase in suspension assembly sales
volume. These increases were partially offset by a decline in average selling
prices for suspension assemblies.
Gross profit for the thirteen weeks ended June 30, 2002 was $23,729,000,
compared to $4,837,000 for the comparable period in 2001. Gross profit as a
percent of net sales increased from 5% to 24%, primarily due to a $13,043,000
reduction in costs of goods sold. Productivity improvements generated a
$5,189,000 reduction in cost of goods sold, manufacturing labor and benefits
expense was lowered by $3,989,000 as a result of workforce reductions, and
depreciation expense was reduced by $3,519,000 as a result of the asset
impairment charges recorded in 2001 and lower capital expenditures in 2001 and
2002.
Research and development expenses for the thirteen weeks ended June 30, 2002
were $4,530,000 compared to $5,554,000 for the thirteen weeks ended June 24,
2001. The majority of the decrease was due to customer funding of a portion of
advanced suspension assembly development costs. As a percent of net sales,
research and development expenses decreased from 6% in the third quarter of 2001
to 5% in the third quarter of 2002.
Selling, general and administrative expenses for the thirteen weeks ended June
30, 2002 were $13,857,000, an increase of $1,539,000 or 12% from the comparable
period in 2001. The increase was due primarily to a $1,768,000 increase in
incentive compensation costs and a $709,000 increase in bad debt expenses,
partially offset by a $539,000 reduction in legal fees. Selling, general and
administrative expenses as a percent of net sales increased from 13% in the
third quarter of 2001 to 14% in the third quarter of 2002.
Interest expense for the thirteen weeks ended June 30, 2002 was $3,259,000, a
decrease of $631,000 from the comparable period in 2001, primarily due to
reduced interest expense on a lower amount of outstanding debt and fewer
capitalized leases.
Other income, net, for the thirteen weeks ended June 30, 2002 was $1,791,000, a
decrease of $1,593,000 from the comparable period in 2001. The decrease was
primarily due to a decrease in interest income as a result of lower investment
yields.
The income tax benefit for the thirteen weeks ended June 30, 2002 was based on
an estimated effective tax rate for the fiscal year of 15%, which is below the
statutory federal rate primarily due to the benefit derived from the
Extraterritorial Income Exclusion provisions related to export of U.S. products.
Net income for the thirteen weeks ended June 30, 2002 was $3,291,000, compared
to a net loss of $10,792,000 for the comparable period in 2001. Our improved
profitability was primarily due to cost reduction efforts completed during 2001
and productivity improvements in 2002. Net income as a percent of net sales
increased from (12)% for the thirteen weeks ended June 24, 2001 to 3% for the
thirteen weeks ended June 30, 2002.
THIRTY-NINE WEEKS ENDED JUNE 30, 2002 VS. THIRTY-NINE WEEKS ENDED JUNE 24, 2001.
Net sales for the thirty-nine weeks ended June 30, 2002 were $281,572,000, a
decrease of $24,586,000 or 8% from the comparable period in 2001. Suspension
assembly sales decreased $37,646,000 compared to the thirty-nine weeks ended
June 24, 2001, primarily due to a 10% decrease in suspension assembly sales
volume and declining average selling prices for suspension assemblies. These
decreases were partially offset by a $12,425,000 increase in suspension assembly
component sales.
Gross profit for the thirty-nine weeks ended June 30, 2002 was $63,144,000,
compared to $30,534,000 for the comparable period in 2001, and gross profit as a
percent of net sales increased from 10% to 22%, primarily due to a $57,196,000
reduction in costs of goods sold. Depreciation expense was lowered by
$19,596,000 as a result of the asset impairment charges recorded in 2001 and
lower capital expenditures in 2001 and 2002. Manufacturing labor and benefits
expenses were reduced by $17,640,000 as a result of workforce reductions and
productivity improvements, manufacturing support expenses were lowered
by $6,926,000 as a result of workforce reductions and decreased depreciation,
and yield improvements generated a $6,376,000 reduction in inventory scrap
costs. These improvements were offset partially by the lower net sales noted
above.
Research and development expenses for the thirty-nine weeks ended June 30, 2002
were $13,315,000 compared to $17,555,000 for the thirty-nine weeks ended June
24, 2001. The decrease was primarily due to customer funding of a portion of
advanced suspension assembly development costs. As a percent of net sales,
research and development expenses decreased from 6% for the thirty-nine weeks
ended June 24, 2001 to 5% for the thirty-nine weeks ended June 30, 2002.
Selling, general and administrative expenses for the thirty-nine weeks ended
June 30, 2002 were $37,606,000, a decrease of $240,000 or 1% from the comparable
period in 2001. The decrease was due primarily to a $1,315,000 reduction in
professional services fees and a $812,000 reduction in labor and benefits
expenses and, to a lesser extent, lower depreciation and lease expenses, reduced
travel and training expenses and lower recruitment and relocation expenses.
These decreases were partially offset by a $3,428,000 increase in incentive
compensation costs. Selling, general and administrative expenses as a percent of
net sales increased from 13% for the thirty-nine weeks ended June 24, 2001 to
14% for the thirty-nine weeks ended June 30, 2002.
During the second quarter of 2001, we recorded a charge of $2,364,000 to record
severance costs for approximately 350 employees terminated during the quarter.
See Note 2, "Restructuring Charges", in the notes to the condensed consolidated
financial statements.
During the first quarter of 2002, we recorded a one-time increase to operating
income of $2,632,000 as a result of a reimbursement of legal expenses from a
third party and insurance proceeds related to litigation defense costs. See Note
10, "Legal Expense Reimbursement," in the notes to the condensed consolidated
financial statements.
Interest expense for the thirty-nine weeks ended June 30, 2002 was $10,380,000,
a decrease of $1,475,000 from the comparable period in 2001, primarily due to
reduced interest expense on fewer capitalized leases and a lower amount of
outstanding debt.
Other income, net, for the thirty-nine weeks ended June 30, 2002 was $6,054,000,
a decrease of $5,141,000 from the comparable period in 2001. This decrease was
primarily due to a decrease in interest income as a result of lower investment
yields.
The income tax benefit for the thirty-nine weeks ended June 30, 2002 was based
on an estimated effective tax rate for the fiscal year of 15%, which is below
the statutory federal rate primarily due to the benefit derived from the
Extraterritorial Income Exclusion provisions related to export of U.S. products.
Net income for the thirty-nine weeks ended June 30, 2002 was $8,948,000,
compared to a net loss of $23,707,000 for the comparable period in 2001. Our
improved profitability was primarily due to cost reduction efforts completed
during 2001, productivity improvements in 2002, and the one-time increase to
operating income discussed above. Excluding the one-time increase to operating
income in the first quarter of 2002 and the severance costs in the second
quarter of 2001, net income as a percent of net sales, increased from (7)% for
the thirty-nine weeks ended June 24, 2001 to 2% for the thirty-nine weeks ended
June 30, 2002.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of liquidity are cash and cash equivalents, securities
available for sale, cash flow from operations and additional financing capacity.
Our cash and cash equivalents decreased from $113,313,000 at September 30, 2001
to $95,982,000 at June 30, 2002. Our securities available for sale increased
from $131,454,000 to $140,611,000 during the same period. Overall, this reflects
a $8,174,000 decrease in our cash and cash equivalents and securities available
for sale, primarily due to a prepayment of certain expenses made in the second
quarter of 2002 related to a technology and development agreement. We generated
cash from operating activities of $32,787,000 for the thirty-nine weeks ended
June 30, 2002.
As of June 30, 2002, our $50,000,000 credit facility had a borrowing base of
$42,898,000, secured by our accounts receivable and inventory. Letters of credit
outstanding under this facility totaled $6,215,000 as of such date, including
$5,109,000 issued in connection with obligations under equipment leases. The
amount we can borrow under this credit facility is limited by the levels of our
accounts receivable and inventory balances. As of June 30, 2002, $36,665,000 of
borrowing capacity remained available to us.
Cash used for capital expenditures totaled $25,086,000 for the thirty-nine weeks
ended June 30, 2002. We expect total capital expenditures to be approximately
$30,000,000 for 2002, to be spent primarily for new program tooling, process
capability improvements and new manufacturing technology. Financing of these
capital expenditures will be principally from internally generated funds, cash
and cash equivalents and securities available for sale.
Certain of our existing financing agreements contain financial covenants and
covenants which may restrict our ability to enter into certain types of
financing. As of June 30, 2002, we were in compliance with all such covenants.
If, however, we are not in compliance with financial covenants in our financing
agreements at the end of any future quarter and cannot obtain amendments on
terms acceptable to us, our future financial results and liquidity could be
materially adversely affected.
We currently believe that our cash and cash equivalents, securities available
for sale, cash generated from operations and credit facility will be sufficient
to meet our operating expenses, debt service requirements and capital
expenditures through 2003. We will pursue additional debt or equity financing to
supplement our current capital resources if needed beyond 2003. Our ability to
obtain additional financing will depend upon a number of factors, including our
future performance and financial results and general economic and capital market
conditions. We cannot be sure that we will be able to raise additional capital
on reasonable terms or at all, if needed.
MARKET TRENDS AND CERTAIN CONTINGENCIES
(a) MARKET TRENDS
We expect the expanding use of enterprise computing and storage, personal
computers, increasingly complex software and the emergence of new applications
for disk storage, such as digital video recording, gaming consoles, digital
cameras and other consumer applications, will increase disk drive demand and
therefore, suspension demand, in the future. We also believe demand for disk
drives will continue to be subject, as it has in the past, to rapid or
unforeseen changes resulting from, among other things, changes in disk drive
inventory levels, technological advances, responses to competitive price changes
and unpredicted high or low market acceptance of new drive models. Improvements
in data density of disk drives, extending from the desktop market to server
drives, have reduced unit shipments of suspension assemblies since the third
quarter of 1999. We expect that our suspension assembly shipments will remain
relatively flat for the foreseeable future until some combination of the
following
events occurs: average suspension assembly counts within disk drives stabilize
or increase, or overall disk drive demand growth increases, or our share of
certain drive programs increases, or our share at certain customers increases.
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 data density, the
amount of data which can be stored on magnetic disks, thereby increasing storage
capacity in disk drives or reducing the number of components, including
suspension assemblies, required in a disk drive.
The continual pursuit of increasing data density and lower storage costs are
leading to further adoption of value-added features for TSA suspensions, such as
extended arms, headlifts, limiters, static dissipative coating and switch
shunts. TSA suspensions also allow for dual stage actuation, which incorporates
a second stage actuator on a suspension to improve head positioning over
increasingly tighter data tracks. Additionally, TSA suspensions can be
configured to allow for attachment of preamplifiers near the head to improve
data transfer signals.
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 we
may experience temporary elevations of demand for some types of suspension
assemblies. Likewise, as programs mature, higher customer yields decrease the
demand for 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 our manufacturing yields and efficiencies. We cannot be
sure that we will not continue to be affected by such changes.
(b) CONTINGENCIES
On October 10, 2001, Ronald A. Smith & Associates commenced a lawsuit against us
in the United States District Court for the Northern District of California. The
lawsuit alleges that certain manufacturing systems we use infringe one patent.
The lawsuit requests damages, including treble damages, attorneys' fees and an
injunction against us. We are unable to estimate at this time the possible loss
that potentially could result from this lawsuit.
We and certain users of our products have from time to time received, and may in
the future receive, communications from third parties asserting patents against
us or our customers which may relate to certain of our manufacturing equipment
or products or to products that include our products as a component. We are
currently a party to the litigation described above. In addition, certain of our
customers have been sued on patents having claims closely related to products
sold by us. If any third party makes a valid infringement claim and a license
were not available on terms acceptable to us, our operating results could be
adversely affected. We expect that, as the number of patents issued continues to
increase, and as we grow, the volume of intellectual property claims could
increase. We may need to engage in litigation to enforce patents issued or
licensed to us, protect trade secrets or know-how owned by us or determine the
enforceability, scope and validity of the intellectual property rights of
others. We could incur substantial costs in such litigation or other similar
legal actions, which could have a material adverse effect on our results of
operations.
We are a 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 our current or future financial position or results of
operations.
(c) OTHER MATTERS
Over the course of the last two years, the World Trade Organization ("WTO") has
ruled that the Foreign Sales Corporation ("FSC") provisions of the United States
Internal Revenue Code ("IRC"), and the FSC's replacement provisions contained in
The Extraterritorial Income Exclusion Act of 2002 ("ETI") are prohibited export
subsidies under the rules of the WTO. Federal legislation recently has been
proposed that includes a provision to repeal the ETI. Until the proposed
legislation repealing ETI is signed into law, we expect to earn a net ETI
benefit similar to that previously earned under the FSC provisions of the IRC.
FORWARD-LOOKING STATEMENTS
The statements above, under the headings "General" and "Market Trends and
Certain Contingencies", about demand for and shipments of disk drives and
suspension assemblies, including TSA suspensions, manufacturing capacity and
yields, selling prices and adoption of new product features, and the statements
above, under the heading "Liquidity and Capital Resources", about 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 customer acceptance and adoption of new product
features, fluctuating order rates, faster or slower improvements in disk drive
data densities which affect suspension assembly demand, changes in market
consumption of disk drives or suspension assemblies, difficulties in producing
our TSA suspensions, difficulties in managing capacity, changes in manufacturing
efficiencies and the other risks and uncertainties discussed above. These
factors may cause our actual future results to differ materially from historical
earnings and from the financial performance we presently anticipate.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our credit facility with The CIT Group/Business Credit, Inc. carries interest
rate risk, in connection with certain borrowings under the working capital line
it provides, that is generally related to either LIBOR or the prime rate. If
either of these rates were to change while we had such borrowings outstanding
under the working capital line provided by the credit facility, interest expense
would increase or decrease accordingly. At June 30, 2002, there were $18,000 in
outstanding borrowings under the working capital line provided by the credit
facility. Our variable rate demand note ("Note") also carries interest rate risk
that is generally related to the 91-day U.S. treasury bill interest rate. At
June 30, 2002, the outstanding principal amount of the Note was $400,000 which
was subject to an interest rate of 1.25%.
We have no earnings or cash flow exposure due to market risk on our other debt
obligations which are subject to fixed interest rates. Interest rate changes,
however, would affect the fair market value of this fixed rate debt. At June 30,
2002, we had fixed rate debt of $179,444,000.
We do not enter into derivative or other financial instruments or hedging
transactions for trading or speculative purposes. All of our sales transactions
are denominated in United States dollars and thus are not subject to risk due to
currency exchange fluctuations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS:
Unless otherwise indicated, all documents incorporated herein by reference to a
document filed with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended, are located under SEC file number
0-14709.
3.1 Restated Articles of Incorporation of HTI, as amended by Articles of
Amendment dated 1/27/88 and as amended by Articles of Amendment dated
1/21/97 (incorporated by reference to Exhibit 3.1 to HTI's Quarterly
Report on Form 10-Q for the quarter ended 6/29/97).
3.2 Restated By-Laws of HTI (incorporated by reference to Exhibit 3.2 to
HTI's Quarterly Report on Form 10-Q for the quarter ended 12/29/96) and
Amendments to Restated By-Laws of HTI dated 7/19/00 (incorporated by
reference to Exhibit 3.2 to HTI's Quarterly Report on Form 10-Q for the
quarter ended 6/25/00).
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 Indenture dated as of 3/18/98 between HTI and U.S. Bank National
Association, as Trustee (incorporated by reference to Exhibit 4.6 to
HTI's Registration Statement on Form S-3, Registration No. 333-50143).
4.3 Purchase Agreement dated 3/12/98 by and among HTI, NationsBanc
Montgomery Securities LLC and First Chicago Capital Markets, Inc.
(incorporated by reference to Exhibit 4.7 to HTI's Registration
Statement on Form S-3, Registration No. 333-50143).
4.4 Shelf Registration Agreement dated as of 3/18/98 by and among HTI,
NationsBanc Montgomery Securities LLC and First Chicago Capital
Markets, Inc. (incorporated by reference to Exhibit 4.8 to HTI's
Registration Statement on Form S-3, Registration No. 333-50143).
10.1 Office/Warehouse Lease between OPUS Corporation, Lessor, and HTI,
Lessee, dated 12/29/95 (incorporated by reference to Exhibit 10.2 to
HTI's Quarterly Report on Form 10-Q for the quarter ended 3/24/96), and
First Amendment to Office/Warehouse Lease dated 4/30/96 (incorporated
by reference to Exhibit 10.2 to HTI's Quarterly Report on Form 10-Q for
the quarter ended 6/23/96).
#10.2 Directors' Retirement Plan effective as of 1/1/92 (incorporated by
reference to Exhibit 10.12 to HTI's Annual Report on Form 10-K for the
fiscal year ended 9/27/92) and Amendment effective as of 11/19/97
(incorporated by reference to Exhibit 10.5 to HTI's Quarterly Report on
Form 10-Q for the quarter ended 12/28/97).
#10.3 1988 Stock Option Plan (incorporated by reference to Exhibit 10.8 to
HTI's Annual Report on Form 10-K for the fiscal year ended 9/25/88),
Amendment to the 1988 Stock Option Plan (incorporated by reference to
Exhibit 10.5 to HTI's Annual Report on Form 10-K for the fiscal year
ended 9/26/93), and Amendment to the 1988 Stock Option Plan
(incorporated by reference to Exhibit 10.5 to HTI's Quarterly Report on
Form 10-Q for the quarter ended 3/26/95).
10.4 Patent License Agreement, effective as of 9/1/94, between HTI and
International Business Machines Corporation (incorporated by reference
to Exhibit 10.11 to HTI's Quarterly Report on Form 10-Q/A for the
quarter ended 6/25/95).
10.5 Lease Agreement between Meridian Eau Claire LLC and HTI, dated 5/1/96
(incorporated by reference to Exhibit 10.10 to HTI's Quarterly Report
on Form 10-Q for the quarter ended 6/23/96) and First Amendment to
Lease (incorporated by reference to Exhibit 10.6 to HTI's Annual Report
on Form 10-K for the fiscal year ended 9/24/00).
10.6 Master Lease Agreement dated as of 12/19/96 between General Electric
Capital Corporation, as Lessor ("GE"), and HTI, as Lessee (incorporated
by reference to Exhibit 10.11 to HTI's Quarterly Report on Form 10-Q
for the quarter ended 12/29/96), Amendment dated 6/30/97 to the Master
Lease Agreement between GE and HTI (incorporated by reference to
Exhibit 10.11 to HTI's Quarterly Report on Form 10-Q for the quarter
ended 12/28/97), letter amendment dated 3/5/98 to the Master Lease
Agreement between GE and HTI (incorporated by reference to Exhibit
10.11 to HTI's Quarterly Report on Form 10-Q for the quarter ended
3/29/98), letter amendment dated 9/25/98 to the Master Lease Agreement
between GE and HTI (incorporated by reference to Exhibit 10.11 to HTI's
Annual Report on Form 10-K for the fiscal year ended 9/27/98), letter
amendment dated 1/11/00, effective as of 12/22/99, to the Master Lease
Agreement between GE and HTI (incorporated by reference to Exhibit 10.1
to HTI's Quarterly Report on Form 10-Q for the quarter ended 12/26/99),
and letter amendment dated 8/31/00 to the Master Lease Agreement
between GE and HTI (incorporated by reference to Exhibit 10.7 to HTI's
Annual Report on Form 10-K for the fiscal year ended 9/24/00).
#10.7 Hutchinson Technology Incorporated 1996 Incentive Plan (incorporated by
reference to Exhibit 10.12 to HTI's Quarterly Report on Form 10-Q for
the quarter ended 12/29/96).
#10.8 Hutchinson Technology Incorporated Incentive Bonus Plan (incorporated
by reference to Exhibit 10.13 to HTI's Quarterly Report on Form 10-Q
for the quarter ended 12/28/97).
#10.9 Description of Fiscal Year 2002 Management Bonus Plan of Hutchinson
Technology Incorporated (incorporated by reference to Exhibit 10.9 to
HTI's Quarterly Report on Form 10-Q for the quarter ended 12/30/01).
#10.10 Description of Fiscal Year 2002 BioMeasurement Division Bonus Plan of
Hutchinson Technology Incorporated (incorporated by reference to
Exhibit 10.10 to HTI's Quarterly Report on Form 10-Q for the quarter
ended 12/30/01).
99 Certification under Section 906 of the Sarbanes-Oxley Act of 2002
# Management contract, compensatory plan or arrangement required to be filed as
an exhibit to this Quarterly Report on Form 10-Q.
(B) REPORTS ON FORM 8-K:
We filed a Current Report on Form 8-K dated June 13, 2002 reporting, under Item
4 ("Changes in Registrant's Certifying Accountant") of Form 8-K, the
discontinuation of the engagement of Arthur Andersen LLP as our independent
auditors and the engagement of Deloitte & Touche LLP as our independent auditors
for the fiscal year ending September 29, 2002.
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: August 6, 2002 By /s/Wayne M. Fortun
--------------------------- --------------------------------------
Wayne M. Fortun
President and Chief Executive Officer
Date: August 6, 2002 By /s/John A. Ingleman
--------------------------- --------------------------------------
John A. Ingleman
Vice President, Chief Financial Officer
and Secretary
INDEX TO EXHIBITS
Exhibit
No. Page
- ------- --------
3.1 Restated Articles of Incorporation of HTI, as Incorporated by
amended by Articles of Amendment dated 1/27/88 and Reference
as amended by Articles of Amendment dated 1/21/97
(incorporated by reference to Exhibit 3.1 to HTI's
Quarterly Report on Form 10-Q for the quarter ended
6/29/97).
3.2 Restated By-Laws of HTI (incorporated by reference Incorporated by
to Exhibit 3.2 to HTI's Quarterly Report on Form Reference
10-Q for the quarter ended 12/29/96) and Amendments
to Restated By-Laws of HTI dated 7/19/00
(incorporated by reference to Exhibit 3.2 to HTI's
Quarterly Report on Form 10-Q for the quarter ended
6/25/00).
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 Indenture dated as of 3/18/98 between HTI and U.S. Incorporated by
Bank National Association, as Trustee (incorporated Reference
by reference to Exhibit 4.6 to HTI's Registration
Statement on Form S-3, Registration No. 333-50143).
4.3 Purchase Agreement dated 3/12/98 by and among HTI, Incorporated by
NationsBanc Montgomery Securities LLC and First Reference
Chicago Capital Markets, Inc. (incorporated by
reference to Exhibit 4.7 to HTI's Registration
Statement on Form S-3, Registration No. 333-50143).
4.4 Shelf Registration Agreement dated as of 3/18/98 by Incorporated by
and among HTI, NationsBanc Montgomery Securities LLC Reference
and First Chicago Capital Markets, Inc.
(incorporated by reference to Exhibit 4.8 to HTI's
Registration Statement on Form S-3, Registration No.
333-50143).
10.1 Office/Warehouse Lease between OPUS Corporation, Incorporated by
Lessor, and HTI, Lessee, Incorporated by dated Reference
12/29/95 incorporated by reference to Exhibit 10.2
to HTI's Quarterly Reference Report on Form 10-Q for
the quarter ended 3/24/96), and First Amendment to
Office/Warehouse Lease dated 4/30/96 (incorporated
by reference to Exhibit 10.2 to HTI's Quarterly
Report on Form 10-Q for the quarter ended 6/23/96).
10.2 Directors' Retirement Plan effective as of 1/1/92 Incorporated by
(incorporated by reference Incorporated by 10.2 to Reference
Exhibit 10.12 to HTI's Annual Report on Form 10-K
for the fiscal year ended Reference 9/27/92) and
Amendment effective as of 11/19/97 (incorporated by
reference to Exhibit 10.5 to HTI's Quarterly Report
on Form 10-Q for the quarter ended 12/28/97).
10.3 1988 Stock Option Plan (incorporated by reference to Incorporated by
Exhibit 10.8 to HTI's Incorporated by Annual Report Reference
on Form 10-K for the fiscal year ended 9/25/88),
Amendment to Reference the 1988 Stock Option Plan
(incorporated by reference to Exhibit 10.5 to HTI's
Annual Report on Form 10-K for the fiscal year ended
9/26/93), and Amendment to the 1988 Stock Option
Plan (incorporated by reference to Exhibit 10.5 to
HTI's Quarterly Report on Form 10-Q for the quarter
ended 3/26/95).
10.4 Patent License Agreement, effective as of 9/1/94, Incorporated by
between HTI and Incorporated by International Reference
Business Machines Corporation (incorporated by
reference to Reference Exhibit 10.11 to HTI's
Quarterly Report on Form 10-Q/A for the quarter
ended 6/25/95).
10.5 Lease Agreement between Meridian Eau Claire LLC and Incorporated by
HTI, dated 5/1/96 Incorporated by (incorporated by Reference
reference to Exhibit 10.10 to HTI's Quarterly Report
on Form Reference 10-Q for the quarter ended
6/23/96) and First Amendment to Lease (incorporated
by reference to Exhibit 10.6 to HTI's Annual Report
on Form 10-K for the fiscal year ended 9/24/00).
10.6 Master Lease Agreement dated as of 12/19/96 between Incorporated by
General Electric Capital Corporation, as Lessor Reference
("GE"), and HTI, as Lessee (incorporated by
reference to Exhibit 10.11 to HTI's Quarterly Report
on Form 10-Q for the quarter ended 12/29/96),
Amendment dated 6/30/97 to the Master Lease
Agreement between GE and HTI (incorporated by
reference to Exhibit 10.11 to HTI's Quarterly Report
on Form 10-Q for the quarter ended 12/28/97), letter
amendment dated 3/5/98 to the Master Lease Agreement
between GE and HTI (incorporated by reference to
Exhibit 10.11 to HTI's Quarterly Report on Form 10-Q
for the quarter ended 3/29/98), letter amendment
dated 9/25/98 to the Master Lease Agreement between
GE and HTI (incorporated by reference to Exhibit
10.11 to HTI's Annual Report on Form 10-K for the
fiscal year ended 9/27/98), letter amendment dated
1/11/00, effective as of 12/22/99, to the Master
Lease Agreement between GE and HTI (incorporated by
reference to Exhibit 10.1 to HTI's Quarterly Report
on Form 10-Q for the quarter ended 12/26/99), and
letter amendment dated 8/31/00 to the Master Lease
Agreement between GE and HTI (incorporated by
reference to Exhibit 10.7 to HTI's Annual Report on
Form 10-K for the fiscal year ended 9/24/00).
10.7 Hutchinson Technology Incorporated 1996 Incentive Incorporated by
Plan (incorporated by reference to Exhibit 10.12 to Reference
HTI's Quarterly Report on Form 10-Q for the quarter
ended 12/29/96).
10.8 Hutchinson Technology Incorporated Incentive Bonus Incorporated by
Plan (incorporated by Incorporated by reference to Reference
Exhibit 10.13 to HTI's Quarterly Report on Form 10-Q
for the Reference quarter ended 12/28/97).
10.9 Description of Fiscal Year 2002 Management Bonus Incorporated by
Plan of Hutchinson Technology Incorporated by Reference
Incorporated (incorporated by reference to Exhibit
10.9 to HTI's Quarterly Reference Report on Form
10-Q for the quarter ended 12/30/01).
10.10 Description of Fiscal Year 2002 BioMeasurement Incorporated by
Division Bonus Plan of Hutchinson Technology Reference
Incorporated (incorporated by reference to Exhibit
10.10 to HTI's Quarterly Report on Form 10-Q for the
quarter ended 12/30/01).
99 Certification under Section 906 of the Filed
Sarbanes-Oxley Act of 2002 Electronically