0001162893-12-000009.txt : 20121113 0001162893-12-000009.hdr.sgml : 20121112 20121113084620 ACCESSION NUMBER: 0001162893-12-000009 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20121113 DATE AS OF CHANGE: 20121113 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: STABOSZ TIMOTHY J CENTRAL INDEX KEY: 0001162893 FILING VALUES: FORM TYPE: SC 13D MAIL ADDRESS: STREET 1: 1307 MONROE STREET CITY: LA PORTE STATE: IN ZIP: 46350 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: HUTCHINSON TECHNOLOGY INC CENTRAL INDEX KEY: 0000772897 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 410901840 STATE OF INCORPORATION: MN FISCAL YEAR END: 0924 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-37228 FILM NUMBER: 121195935 BUSINESS ADDRESS: STREET 1: 40 W HIGHLAND PARK CITY: HUTCHINSON STATE: MN ZIP: 55350 BUSINESS PHONE: 3205873797 MAIL ADDRESS: STREET 1: 40 W HIGHLAND PARK STREET 2: 40 W HIGHLAND PARK CITY: HUTCHINSON STATE: MN ZIP: 55350 SC 13D 1 htch13d.txt SCHEDULE 13 D UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 HUTCHINSON TECHNOLOGY, INC. ------------------------------------------------------------------------------- (Name of issuer) COMMON STOCK ------------------------------------------------------------------------------- (Title of class of securities) 448407106 -------------------------------------------------------- (CUSIP number) TIMOTHY J. STABOSZ, 1307 MONROE STREET, LAPORTE, IN 46350 (219) 324-5087 ------------------------------------------------------------------------------- (Name, address and telephone number of person authorized to receive notices and communications) NOVEMBER 1, 2012 -------------------------------------------------------- (Date of event which requires filing of this statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. [_] The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). CUSIP No. 448407106 -------------------------------------------------------------------------------- 1. Name of Reporting Person TIMOTHY JOHN STABOSZ -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (See Instructions) (a) [_] NOT APPLICABLE (b) [_] -------------------------------------------------------------------------------- 3. SEC Use Only -------------------------------------------------------------------------------- 4. Source of Funds (See Instructions) PF -------------------------------------------------------------------------------- 5. Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [_] -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization UNITED STATES -------------------------------------------------------------------------------- Number of (7) Sole Voting Power 1,323,075 Shares ____________________________________________ Beneficially (8) Shared Voting Power 0 Owned by ____________________________________________ Each (9) Sole Dispositive Power 1,323,075 Reporting ____________________________________________ Person With (10) Shared Dispositive Power 0 -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned 1,323,075 by each Reporting Person -------------------------------------------------------------------------------- 12. Check if the Aggregate Amount in Row (11) Excludes [_] Certain Shares -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 5.5% -------------------------------------------------------------------------------- 14. Type of Reporting Person (See Instructions) IN -------------------------------------------------------------------------------- ITEM 1. Security and Issuer Common stock of Hutchinson Technology, Inc. ("the company"), 40 West Highland Park Drive N.E., Hutchinson, MN 55350. ITEM 2. Identity and Background The reporting person, Timothy J. Stabosz, 1307 Monroe Street, LaPorte, IN 46350, a natural person and United States citizen, is engaged as a private investor. He has not been convicted in a criminal proceeding (excluding traffic violations or other similar misdemeanors) in the last 5 years, and has not been a party to any proceedings, or subject to any judgements, enjoinments, decrees, et al., related to violations of state or federal securities laws, in his lifetime. ITEM 3. Source and Amount of Funds or Other Consideration Personal funds in the aggregate amount of $2,832,522.95 have been used to effect the purchases. No part of the purchase price represents borrowed funds. ITEM 4. Purpose of Transaction The reporting person has acquired the shares for investment purposes. The reporting person characterizes himself as a "deep value" investor, and often looks for investment opportunities in what he sees as the most "unloved," neglected, and distressed areas of the marketplace. The reporting person considers himself a "contrarian" investor. He believes Hutchinson's stock price is significantly undervalued based primarily upon, as he sees it: 1) a misunderstanding in the marketplace about the very real potential for growth in unit volumes, for years to come, in hard disk drives/HDDs (based primarily upon expansion of "the cloud"), and the potential for suspension assembly unit growth to exceed that of the HDD market (based primarily upon the expectation of an ever increasing number of heads per drive). Such growth is expected, by many industry observers, to materially exceed the growth in the broader economy. 2) the expectation that Hutchinson will regain considerable market share over the fiscal year that just recently began, and that the volumes associated with those market share gains will allow the company to better cover its fixed costs, dramatically improving the company's gross margins 3) the expectation that Hutchinson will achieve improved financial results, as the market makes a major shift to the dual stage actuated (DSA) suspension assembly (a higher value-added offering, in which the company maintains a notable competitive edge), and the company gradually restores output at its lower cost Thai facility (which flooded in Sept. 2011) 4) the belief that the company has sufficient financial strength to provide the "runway" that will allow it to ramp up item #'s 2 and 3 above, allowing for the funding of current operating losses, in the mean time, as the company works toward profitability 5) the belief in management's long repeated statement that the company expects to be the lowest cost producer, globally, of suspension assemblies, with its strategic and operational moves of the last few years (Thai facility, TSA+, significant cost reductions) 6) the common stock's steep trading discount to: 1) book value, 2) historical earnings, and 3) historical trading prices...along with the reporting person's specifically anticipated timing of the current "new product" and "new program" cycle ramp up 7) the quality, caliber, continuity, and stability of the company's executive management, the intellectual and intangible assets of the company, its proprietary "know-how"...and a nearly 50 year history of being the technology leader in its field. (The reporting person believes that the company would be very difficult for a third party to recreate, from "whole cloth," which provides significant "barriers to entry.") 8) the broad based insider open market buying of common stock over the last year or so, including two key management figures who increased their holdings by a factor of roughly 3 or 4 times over. The reporting person believes Hutchinson is in a position where the significant losses of the last several years could be staunched, before long, and the company could realize a major turnaround. The reporting person believes that the next 4 or so quarters will be a "major test" for the company, and its management. That is, while the reporting person has a high level of confidence in management, and wishes to see its plans for the suspension assembly division unfold...should the outsized improvements that the reporting person expects somehow NOT materialize, average selling prices (ASPs) for suspension assemblies NOT materially increase, and the company NOT return to a bottom line quarterly profit by no later than the 4th quarter of fiscal 2013, the reporting person believes the company will need to, at that time, explore any and all alternatives for maximizing shareholder value. Finally, the reporting person believes the company should explore a sale of the BioMeasurement division. He believes that the division would be more valuable to a firm specializing in marketing developmental stage medical products. The reporting person believes that the division damages the company's overall image in the investment community, because, 1) the company has been trying to market the division's InSpectra product for 10 years now, with sales aggregating a miniscule $11.4 million over that entire time period, 2) the division has lost a staggering $154 million from operations, in aggregate, since 2000, and, even with recent cost reductions, still lost an unacceptable $5 million in fiscal 2012, 3) rightly or wrongly, the impression is created on "the Street" that management doesn't know how to "let go of its baby," and 4) the division has been a distraction from management's need to focus on the company's core suspension assembly business, in which it has lost a significant amount of market share, over the last decade or more. The reporting person intends to review his investment in the company on a continual basis and engage in discussions with management and the Board of Directors concerning the business, operations, and future plans of the company. Depending on various factors, including, without limitation, the company's financial position and investment strategy, the price levels of the common stock, conditions in the securities markets, and general economic and industry conditions, the reporting person may, in the future, take such actions with respect to his investment in the company as he deems appropriate including, without limitation, communicating with other stockholders, seeking Board representation, making proposals to the company concerning the capitalization and operations of the issuer, purchasing additional shares of common stock or selling some or all of his shares, or changing his intention with respect to any and all matters referred to in Item 4. Other than as indicated above, the reporting person has no plans or proposals which relate to, or could result in, any matters referred to in subsections (a) through (j) of Item 4 of Schedule 13D. ITEM 5. Interest in Securities of the Issuer As of the close of business on November 12, 2012, the reporting person has sole voting and dispositive power over 1,323,075 shares of the company's common stock. According to the company's most recently filed Form 10-Q, as of July 30, 2012, there were 23,868,499 common shares outstanding. The reporting person is therefore deemed to own 5.5% of the company's common stock. Transactions effected by the reporting person, in the 60 days prior to the November 1, 2012 "trigger" date, were performed in ordinary brokerage transactions, and are indicated as follows: 09/04/12 bought 5000 shares @ $1.63 09/04/12 sold 5000 shares @ $1.68 09/05/12 bought 200 shares @ $1.63 09/06/12 bought 25,000 shares @ $1.70 09/10/12 bought 10,000 shares @ $1.675 09/11/12 bought 45,399 shares @ $1.70 09/12/12 bought 14,300 shares @ $1.733 09/13/12 bought 11,800 shares @ $1.719 09/14/12 bought 50,243 shares @ $1.716 09/18/12 bought 91,985 shares @ $1.628 09/20/12 bought 5000 shares @ $1.63 09/21/12 bought 7100 shares @ $1.649 09/24/12 bought 900 shares @ $1.64 09/25/12 bought 6152 shares @ $1.64 09/26/12 bought 3717 shares @ $1.637 09/27/12 bought 9008 shares @ $1.63 09/28/12 sold 20,200 shares @ $1.763 10/02/12 bought 25,000 shares @ $1.709 10/03/12 bought 6800 shares @ $1.716 10/05/12 bought 11,935 shares @ $1.71 10/08/12 bought 15,000 shares @ $1.739 10/09/12 bought 14,800 shares @ $1.737 10/10/12 bought 24,320 shares @ $1.654 10/11/12 bought 10,000 shares @ $1.615 10/12/12 bought 21,620 shares @ $1.537 10/15/12 bought 600 shares @ $1.52 10/16/12 bought 47,230 shares @ $1.514 10/17/12 bought 8400 shares @ $1.541 10/18/12 bought 26,339 shares @ $1.551 10/19/12 bought 25,400 shares @ $1.536 10/22/12 sold 5000 shares @ $1.479* *trade placed in error--was meant to be placed as a buy order 10/25/12 bought 13,800 shares @ $1.451 10/26/12 bought 5000 shares @ $1.41 10/31/12 bought 5000 shares @ $1.37 11/01/12 bought 39,750 shares @ $1.445 11/02/12 bought 38,600 shares @ $1.464 11/06/12 bought 44,164 shares @ $1.449 11/12/12 bought 11,100 shares @ $1.488 ITEM 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer Not Applicable ITEM 7. Material to be Filed as Exhibits Exhibit #1: Letter dated November 12, 2012 to the Board of Directors. SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date 11/12/12 Signature Timothy J. Stabosz Name/Title Timothy J. Stabosz, Private Investor EX-1 2 htchltr.txt LETTER TO THE HUTCHINSON BOARD OF DIRECTORS DATED 11/12/12 Timothy J. Stabosz 1307 Monroe Street LaPorte, IN 46350 Board of Directors Hutchinson Technology, Inc. 40 West Highland Park Drive N.E. Hutchinson, MN 55350 Wayne M. Fortun Richard J. Penn Russell Huffner William T. Monahan Thomas R. VerHage Mark A. Augusti Martha Goldberg Aronson Frank P. Russomanno Phillip E. Soran November 12, 2012 Dear Members of the Hutchinson Technology Board: I'm pleased to report to you that I am now the owner of 5.5% of our company's currently outstanding common shares. This makes me the 2nd largest shareholder of Hutchinson Technology (after Dimensional Fund Advisors). You could say that the source of my satisfaction is that of an unrepentant contrarian, who feels that HTI has gotten no respect on Wall Street, for what I view as management's accomplishments in "remaking" the company, over the last several years. I guess I just feel that few major investors believe in you, and the importance of our company's history of technological prowess, over the last 47 years...except me. Management projections of market share gains, new programs, pending major ramp up of DSA suspensions, general awareness in the industry that our DSA product is the best and most reliable in the business, and the re-ramp of our low cost Thai facility, seem to go totally ignored by Wall Street, even though, to me, we seem to have sufficient liquidity to reach our end goal. It fascinates and intrigues me...as I maintain the steadfastness of my own convictions. Such is the ongoing internal dialogue of a disciplined value investor. It is my hope that management appreciates that you have had a believer, and a supporter, in me, the last few years, even through the difficult times and "hiccups" (shipment of defective product in 2010, Thai flood, demand "lumpiness," heightened fears of a hastened HDD "demise" based on recent declines in PC demand, etc.). Through all of this, I have taken your public statements at face value...that we fully expect to become the lowest cost producer of suspension assemblies...because I have found you to be straightforward, honest, and credible. Just as importantly, I have taken at face value the projections of those both inside, and outside, the HDD industry that, despite all the hand-wringing and despair over the rise of the solid state drive (SSD), hard disk drives (HDDs) will remain, by far, the lowest cost way to store information, for years to come. Credible observers also believe that there remains a very long life on tap, and arguably, growth exceeding that of the broader economy, for the traditional HDD, and (probably even more so, because of ever increasing heads per drive) for the suspension assembly makers. That having been said, management must acknowledge that the last several years have been incredibly painful for Hutchinson Technology's shareholders. The long road from 70%+ market share, in the late 1990's, to 20%, currently, has been most vexatious...and longtime shareholders have paid a monstrous price. While I am fortunate to have an average cost of $2.14 for my shares...other shareholders have not been so lucky, with a precipitous decline in price, of a stock that more commonly traded in the double digits for the better part of the last 20 years. THE SHAREHOLDERS DESERVE TO BE REWARDED; AND AFTER 5 YEARS OF SIZABLE LOSSES, THEY DESERVE TO HAVE A COMPANY THAT RETURNS TO GROWTH AND PROFITABILITY, SOONER RATHER THAN LATER. I hope the board realizes that the company is ultimately OWNED by its shareholders, and that what those shareholders WANT, collectively and as a majority is, generally speaking, what should be respected and honored. Please take that seriously, as you consider your fiduciary responsibilities, with regard to a whole host of options that might present themselves to you, at any time. Specific to me, as I state in my 13D filing, I am a deep value investor, and hold the shares in Hutchinson for investment purposes. I have a record of outsized annualized returns in the stock market, over the last 20 years. I fully intend to make money on my investments, and, with Hutchinson being my largest holding, by far...I fully expect you to "come through" for me, and the entire shareholder base, over the coming quarters. If, for some reason, you do NOT come through, I am convinced that the value of our company as a whole, its proprietary technology, and our intellectual "know-how," is much higher than the current stock price would suggest, and I will personally be looking, with singular focus, at what we can do, strategically, to preserve, protect, and unlock the value of the company. My hope, again, is that all shareholders will be rewarded, in the coming quarters, for the hard work of the entire HTI team to "re-burnish and restore" the company's once vaunted reputation as the technological AND value-added leader in suspension assemblies... ....But, if we do not find ourself on the road to profitability by fiscal Q4 of 2013, I think the board will need to confront these fundamental questions, at that time: 1) Is the continual decline in ASPs (average selling prices) of suspension assemblies, for years on end, indicative of a "commoditization problem" in the industry? 2) Is there too much capacity amongst the 3 suspension assembly makers? 3) Are 3 suspension assembly makers too many? 4) Should Hutchinson seek to sell itself to one of its competitors or a disk drive maker? One thing is for sure, we can't go on losing the kind of money we have the last 5 years and survive. If we don't perform, impendingly, I believe we will be in a position where the above 4 questions will need to be at the top of the agenda. While Hutchinson has a glorious history as an independent company, there is absolutely nothing that says that has to continue. With the consolidation in the disk drive manufacturers, the world is a much different place, and our customer-based risk is now greater, should we lose one of them. And while I'm convinced that we now have, or will have, the 1) lowest costs, and 2) best technology, that puts us in the strongest position to compete that we've seen in years, it is also true that, as of now, we are STILL losing significant amounts of money...which is probably why HTI's common stock is languishing at $1.50. Even if we should return to profitability, I personally have to wonder whether we can earn, in the long run, a low double digit return on equity, which would, in my view, be the kind of return that would justify our remaining independent. (Does management have internalized goals for what returns shareholders should reasonably be able to expect?) I would ask you to please read my 13D filing carefully, and consider all of my points, especially with regard to the BioMeasurement division. Rather than embarrass the board, I'm going to respectfully ask you to make the case in private with me, on why we need to continue to support this division, which is responsible for a staggering $154 million in aggregate losses since 2000. I want to do my due diligence, and hear you out on what the reasonable prospects are for InSpectra, a product which, after all, was introduced 10 years ago! I truly hope you will have convincing answers for me, on why this division would not be better off in the hands of a company specializing in medical products development and marketing, and why this isn't simply a case of management wistfully refusing to "let go of its baby," and let someone else run with it. Finally, on a personal level, I wish to thank you, the members of the board, for the support you have shown the company, not just in your service, but for the affirmation of faith in our future that is inherent in your multiple rounds of open market buying of the common stock, the last few quarters. As an investor, I like to know that "my" board members are aligned with me, and I have felt that to be true of you, throughout these otherwise difficult quarters, since the Thai flood. Finally, I also wish to affirm and acknowledge the value of a corporate culture at Hutchinson that I believe to be not only conducive to research, creativity, and the open inquiry that is the genesis of value-added, proprietary, cutting-edge technology...but that also meets its employees' needs by providing a values-centered place for people to engage in productive work. As a major shareholder, observer, and "student" of HTI, I'm proud to be associated with a company, in the way I am, that I believe reflects my own values. Very truly yours, Timothy Stabosz