Hutchinson Technology (HTCH) 8-K Hutchinson Technology First Quarter Net Earnings Total $6.0 Million, $0.22 Per Share, on 27 Percent Sales Growth

CONFIDENTIAL — FINAL — 1/18/2006 11:00 AM

MEDIA CONTACT:	INVESTOR CONTACT:
Connie Pautz	Darlene Polzin
Corporate Communications Director	Investor Relations Director
Hutchinson Technology	Hutchinson Technology
320-587-1823	320-587-1605

HUTCHINSON TECHNOLOGY FIRST QUARTER NET EARNINGS TOTAL
$6.0 MILLION, $0.22 PER SHARE, ON 27 PERCENT SALES GROWTH

Compared with Fiscal 2005 Fourth Quarter, Suspension Assembly Shipments Up 18%

HUTCHINSON, Minn., Jan. 18, 2006 -— Hutchinson Technology Incorporated (Nasdaq/NMS: HTCH) today reported net income of $6,046,000, or $0.22 per diluted share, on net sales of $184,627,000 for its fiscal 2006 first quarter ended December 25, 2005. The company’s fiscal 2006 first quarter results include non-cash stock-based compensation expenses of approximately $0.02 per diluted share resulting from its adoption in the quarter of the new accounting standard for stock-based compensation, SFAS No. 123(R). In the comparable fiscal 2005 period, the company reported net income of $13,444,000, or $0.47 per diluted share, on net sales of $145,616,000.

     The company shipped a record 207 million suspension assemblies during the quarter, up from 175 million in both the preceding fiscal quarter and in the fiscal 2005 first quarter. Overall average selling prices in the quarter were $0.85, compared with $0.86 in the preceding quarter and $0.82 in the fiscal 2005 first quarter. Compared with the fiscal 2005 first quarter, selling prices benefited from a richer mix of products incorporating value-added features.

     Wayne M. Fortun, Hutchinson Technology’s president and chief executive officer, said demand for the company’s suspension assemblies was strong during its first fiscal quarter. “Overall growth in storage demand and disk drive shipments and our share positions on customer disk drive programs currently ramping to volume resulted in record quarterly volume,” said Fortun.

     “During the quarter, our production output reached more than 18 million suspension assemblies per week, which enabled us to meet substantially all customer demand in the quarter,” said Fortun. “We continue to add capacity to attain, by the end of fiscal 2006, an improved level of flexibility to accommodate increased customer demand and expected shifts in product mix. We currently believe this requires equipment capacity that exceeds suspension assembly demand by 10 to 15 percent,” said Fortun.

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2—Hutchinson Technology Reports First Quarter Results

     Gross margin in the fiscal 2006 first quarter was 21%, compared with 22% in the preceding fiscal quarter and 28% in the fiscal 2005 first quarter. Gross margin was dampened by a product mix that included more advanced products that are typically more costly to produce in the ramp up to higher volume. Compared with fiscal 2005 first quarter, depreciation, material costs and labor expenses increased as a percentage of sales as a result of inefficiencies encountered while adding new manufacturing equipment and operating at very high equipment utilization.

     The company generated $26 million in cash from operations during the quarter. Cash, cash equivalents and securities held for sale totaled $161 million at quarter end, compared with $207 million at fiscal 2005 year end.

     During the fiscal 2006 first quarter, the company had $73 million in capital expenditures. For the full 2006 fiscal year, Hutchinson Technology currently expects capital spending to total approximately $280 million. Fortun said that capital expenditures may be adjusted during the year as the company responds to changes in demand, product mix and customer adoption of new technologies.

     Fortun noted that industry analysts continue to expect disk drive shipments for calendar 2006 to grow about 14% to 427 million units. The company expects the number of suspension assemblies per disk drive to remain about flat at 2.8 per drive and, as a result, industry-wide suspension assembly demand in 2006 is expected to track the anticipated growth in disk drive shipments. “Current demand trends are favorable for the industry overall and our company in particular,” said Fortun. “Activity in our development center is at record levels as we collaborate with customers on the design of new suspensions to meet specific disk drive performance criteria.”

     For its fiscal 2006 second quarter, the company currently expects suspension assembly shipments to range from 210 to 225 million units. Overall average selling prices are expected to range from $0.86 to $0.87, resulting in fiscal 2006 second quarter net sales of $190 to $205 million. The company is expecting fiscal second quarter gross margins of 21 to 23% resulting in expected net income per diluted share for the quarter of $0.15 to $0.30.

     Hutchinson Technology is the leading worldwide supplier of suspension assemblies for disk drives. Hutchinson Technology’s BioMeasurement Division provides health professionals with simple, accurate methods to measure the oxygen in tissue.

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3—Hutchinson Technology Reports First Quarter Results

     This announcement contains forward-looking statements regarding demand for and shipments of the company’s products, equipment capacity, production capacity utilization, developing designs and prototypes for new disk drive programs, industry-wide suspension assembly demand, suspensions per disk drive, the company’s share positions on customer disk drive programs, selling prices, capital expenditures, operating performance and results of operations. The company does not undertake to update its forward-looking statements. These statements involve risks and uncertainties. The company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of changes in market demand and market consumption of disk drives or suspension assemblies, the company’s ability to produce suspension assemblies at levels of precision, quality, volume and cost its customers require, changes in product mix, changes in customers yields, changes in required capacity and investment, changes in capital expenditures, changes in development center activity, changes in expected data density and other factors described from time to time in the company’s reports filed with the Securities and Exchange Commission.

     The company will conduct a conference call and webcast for investors beginning at 5:00 p.m. Central Standard Time (CST) on January 18, 2006. Individual investors and news media may participate in the conference call via the live webcast. The webcast will be available through the Investor Relations page on Hutchinson Technology’s web site atwww.htch.com. Webcast participants will need to complete a brief registration form and should allot extra time before the webcast begins to register and, if necessary, download and install audio software. A replay of the call will be available beginning at approximately 8:00 p.m. CST on January 18 until midnight on January 20. To access the replay, dial 800-405-2236 and enter 11050338# at the reservation number prompt.

Hutchinson Technology Incorporated
(Nasdaq/NMS: HTCH)

	First Quarter Ended
	Dec. 25, 2005		Dec. 26, 2004
Net sales	$	184,627,000	$	145,616,000
Gross profit	$	39,667,000	$	40,950,000
Income from operations	$	4,407,000	$	14,525,000
Net income	$	6,046,000	$	13,444,000
Net income per common share:
Basic	$	0.24	$	0.54
Diluted	$	0.22	$	0.47
Weighted average common and common equivalent shares outstanding:
Basic		25,535,000		24,757,000
Diluted		30,798,000		30,345,000

	At Dec. 25, 2005		At Sept. 25, 2005
Total assets	$	816,246,000	$	799,538,000
Cash and cash equivalents	$	21,816,000	$	33,733,000
Securities available for sale	$	139,061,000	$	172,778,000
Total shareholders’ investment	$	562,085,000	$	552,539,000

(Financial statements follow)

Hutchinson Technology Incorporated
Condensed Consolidated Statements of Operations — Unaudited
(In thousands, except per share data)

	Thirteen Weeks Ended
	December 25,			December 26,
	2005			2004
Net sales	$	184,627		$	145,616
Cost of sales		144,960			104,666
Gross profit		39,667			40,950
Research and development expenses		12,747			7,616
			��
Selling, general and administrative expenses		22,513			18,809
Income from operations		4,407			14,525
Interest expense		(501	)		(654	)
Interest Income		2,065			1,222
Other income, net		1,252			1,228
Income before income taxes		7,223			16,321
Provision (benefit) for income taxes		1,177			2,877
Net income	$	6,046		$	13,444
Basic earnings per share	$	0.24		$	0.54
Diluted earnings per share	$	0.22		$	0.47
Weighted average common shares outstanding		25,535			24,757
Weighted average common and diluted shares outstanding		30,798			30,345

Hutchinson Technology Incorporated
Condensed Consolidated Balance Sheets — Unaudited
(In thousands, except shares data)

	December 25,			September 25,
ASSETS	2005			2005
Current assets:
Cash and cash equivalents	$	21,816		$	33,733
Securities available for sale		139,061			172,778
Trade receivables, net		104,464			85,019
Other receivables		9,909			11,181
Inventories		57,691			54,780
Deferred tax assets		6,676			7,206
Prepaid taxes and other		7,186			5,430
Total current assets		346,803			370,127
Property, plant and equipment, net		392,856			350,520
Deferred tax assets		61,184			61,078
Other assets		15,403			17,813
	$	816,246		$	799,538
LIABILITIES AND SHAREHOLDERS’ INVESTMENT
Current liabilities:
Current portion of long-term debt	$	1,187		$	—
Accounts payable		57,650			56,128
Accrued expenses		14,026			13,238
Accrued compensation		22,521			24,873
Total current liabilities		95,384			94,239
Convertible subordinated notes		150,000			150,000
Long-term debt, net of current portion		6,239			—
Other long-term liabilities		2,538			2,760
Shareholders’ investment:
Common stock $.01 par value, 100,000,000 shares authorized, 25,576,000 and 25,450,000 issued and outstanding		256			254
Additional paid-in capital		394,146			390,680
Accumulated other comprehensive income		(680	)		(712	)
Accumulated earnings		168,363			162,317
Total shareholders’ investment		562,085			552,539
	$	816,246		$	799,538

Hutchinson Technology Incorporated
Condensed Consolidated Statements of Cash Flows — Unaudited
(Dollars in thousands)

	Thirteen Weeks Ended
	December 25,			December 26,
	2005			2004
Operating activities:
Net income	$	6,046		$	13,444
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		27,526			12,644
Stock-based compensation		1,140			—
Provision (benefit) for deferred taxes		405			5,637
(Gain) loss on disposal of assets		61			(17	)
Changes in operating assets and liabilities		(9,365	)		(19,937	)
Cash provided by (used for) operating activities		25,813			11,771
Investing activities:
Capital expenditures		(73,397	)		(26,759	)
Purchases of marketable securities		(148,583	)		(1,920	)
Sales of marketable securities		182,351			29,495
Cash provided by (used for) investing activities		(39,629	)		816
Financing activities:
Repayments of long-term debt		(429	)		—
Net proceeds from issuance of common stock		2,328			11,158
Cash provided by (used for) financing activities		1,899			11,158
Net increase (decrease) in cash and cash equivalents		(11,917	)		23,745
Cash and cash equivalents at beginning of period		33,733			33,704
Cash and cash equivalents at end of period	$	21,816		$	57,449

Hutchinson Technology Incorporated
Earnings Per Share Calculation — Unaudited
(In thousands, except per share data)

	Thirteen Weeks Ended
	December 25,			December 26,
	2005			2004
Net income (A)	$	6,046		$	13,444
Plus: interest expense on convertible subordinated notes		1,008			1,008
Less: additional profit sharing expense and income tax provision		(342	)		(261	)
Net income available to common shareholders (B)	$	6,712		$	14,191
Weighted average common shares outstanding (C)		25,535			24,757
Dilutive potential common shares		5,263			5,588
Weighted average common and diluted shares
outstanding (D)		30,798			30,345
Basic earnings per share [(A)/(C)]	$	0.24		$	0.54
Diluted earnings per share [(B)/(D)]	$	0.22		$	0.47