Quarterly Report (10-q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended December 27, 2015

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 001-34838

Hutchinson Technology Incorporated

(Exact name of registrant as specified in its charter)

Minnesota		41-0901840
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

40 West Highland Park Drive N.E. Hutchinson, Minnesota		55350
(Address of principal executive offices)		(Zip Code)

(320) 587-3797

(Registrant’s telephone number, including area code)

(Former name, former address and former 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 þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)

Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨

Accelerated filer þ

Non-accelerated filer ¨

Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of February 1, 2016, the registrant had 33,904,128 shares of common stock issued and outstanding.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

HUTCHINSON TECHNOLOGY INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS – UNAUDITED

(In thousands, except shares and per share data)

	December 27, 2015			September 27, 2015
ASSETS
Current assets:
Cash and cash equivalents (Note 3)	$	48,497		$	39,454
Short-term investments restricted (Note 4)		506			965
Trade receivables, net		11,611			15,860
Other receivables		1,579			2,707
Inventories		37,880			40,148
Other current assets		2,934			3,588
Total current assets		103,007			102,722

Property, plant and equipment, net		129,335			134,509
Other assets		4,529			4,281
Total assets	$	236,871		$	241,512

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current debt, net of discount (Note 7)	$	12,750		$	3,000
Current portion of capital lease obligation		2,181			2,188
Accounts payable		18,593			19,877
Accrued compensation		9,896			9,388
Accrued expenses and other		5,288			4,239
Accrued interest		3,691			2,838
Total current liabilities		52,399			41,530

Long-term debt, net of discount (Note 7)		112,010			122,156
Capital lease obligation		3,788			4,220
Other long-term liabilities		2,589			2,731
Commitments and contingencies (Notes 7, 8, and 14)
Shareholders’ equity:
Common stock, $.01 par value, 100,000,000 shares authorized, 33,839,000 and 33,540,000 issued and outstanding		339			335
Additional paid-in capital (Note 7)		452,528			452,165
Accumulated other comprehensive loss		(4,169	)		(4,309	)
Accumulated loss		(382,613	)		(377,316	)
Total shareholders’ equity		66,085			70,875
Total liabilities and shareholders’ equity	$	236,871		$	241,512

See accompanying notes to condensed consolidated financial statements – unaudited.

HUTCHINSON TECHNOLOGY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – UNAUDITED

(In thousands, except per share data)

	Thirteen Weeks Ended
	December 27, 2015			December 28, 2014

Net sales	$	63,927		$	72,423
Cost of sales		52,206			60,959
Gross profit		11,721			11,464

Research and development expenses		5,857			6,042
Selling, general and administrative expenses		5,207			5,984
Merger related expenses		3,437			–
Severance and site consolidation expenses (Note 11)		–			159
Loss from operations		(2,780	)		(721	)

Other income (expense), net		151			(555	)
Loss on extinguishment of long-term debt (Note 7)		–			(4,318	)
Interest income		12			4
Interest expense		(3,283	)		(4,453	)
Loss before income taxes		(5,900	)		(10,043	)
Benefit for income taxes (Note 13)		(603	)		(145	)
Net loss	$	(5,297	)	$	(9,898	)
Basic loss per share	$	(0.16	)	$	(0.32	)
Diluted loss per share	$	(0.16	)	$	(0.32	)

Weighted-average common shares outstanding		33,674			30,548
Weighted-average diluted shares outstanding		33,674			30,548

HUTCHINSON TECHNOLOGY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS – UNAUDITED

(In thousands)

	Thirteen Weeks Ended
	December 27, 2015			December 28, 2014
Net loss	$	(5,297	)	$	(9,898	)
Other comprehensive gain (loss), net of tax:
Gain (loss) on foreign currency translation, net of income taxes of $0		140			(525	)
Other comprehensive gain (loss)		140			(525	)
Total comprehensive loss	$	(5,157	)	$	(10,423	)

See accompanying notes to condensed consolidated financial statements – unaudited.

HUTCHINSON TECHNOLOGY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED

(In thousands)

	Thirteen Weeks Ended
	December 27, 2015			December 28, 2014
OPERATING ACTIVITIES:
Net loss	$	(5,297	)	$	(9,898	)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization		6,708			8,201
Stock-based compensation		338			291
(Gain) loss on disposal of assets		(184	)		5
Non-cash interest expense		354			858
Loss on extinguishment of debt (Note 7)		–			4,318
Severance and site consolidation expenses (Note 11)		–			(27	)
Changes in operating assets and liabilities		8,717			(606	)
Cash provided by operating activities		10,636			3,142

INVESTING ACTIVITIES:
Capital expenditures		(1,363	)		(6,285	)
Proceeds from the sale and sale/leaseback of equipment		321			836
Change in restricted cash (Note 3)		48			(42,570	)
Purchases of marketable securities		(506	)		(965	)
Sales/maturities of marketable securities		965			965
Cash used for investing activities		(535	)		(48,019	)

FINANCING ACTIVITIES:
Proceeds from issuance of common stock		29			24
Repayments of capital lease		(602	)		(521	)
Repayments of revolving credit line		(17,471	)		(55,901	)
Proceeds from revolving credit line		17,471			46,368
Repayments of debt		(750	)		–
Proceeds from private placement of debt		–			37,500
Proceeds from term loan		–			15,000
Debt refinancing costs		–			(3,175	)
Cash (used for) provided by financing activities		(1,323	)		39,295

Effect of exchange rate changes on cash		265			1,199

Net increase (decrease) in cash and cash equivalents		9,043			(4,383	)

Cash and cash equivalents at beginning of period		39,454			37,939

Cash and cash equivalents at end of period	$	48,497		$	33,556

Supplemental cash flow disclosure:
Cash interest paid (net of amount capitalized)	$	1,826		$	474
Income taxes paid	$	20		$	3
Assets acquired through capital lease	$	131		$	647
Non-cash exchange of debt for equity (Note 7)	$	–		$	15,000

See accompanying notes to condensed consolidated financial statements – unaudited.

HUTCHINSON TECHNOLOGY INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Columnar dollar amounts in thousands, except per share amounts)

When we refer to “we,” “our,” “us,” the “company” or “HTI,” we mean Hutchinson Technology Incorporated and its subsidiaries. Unless otherwise indicated, references to “2016” mean our fiscal year ending September 25, 2016, references to “2015” mean our fiscal year ended September 27, 2015 and references to “2014” mean our fiscal year ended September 28, 2014.

(1) BASIS OF PRESENTATION

The condensed consolidated financial statements have been prepared by us, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The information furnished in the condensed consolidated financial statements includes normal recurring adjustments and reflects all adjustments which are, in the opinion of our management, necessary for a fair presentation of such financial statements. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. Although we believe that the disclosures are adequate to make the information presented not misleading, we suggest that these condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in our 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) ENTRY INTO MERGER AGREEMENT

On November 1, 2015, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Headway Technologies, Inc. (“Parent”) and Hydra Merger Sub, Inc., a wholly owned subsidiary of Parent (“Merger Subsidiary”). Pursuant to the Merger Agreement, Merger Subsidiary will merge with and into our company and our company will continue as the surviving corporation and as a wholly owned subsidiary of Parent (the “Merger”). Parent and Merger Subsidiary are each beneficially owned by TDK Corporation, a Japanese electronics company.

Pursuant to the Merger Agreement, at the effective time of the Merger, each issued and outstanding share of our capital stock (other than shares held (1) by Parent or Merger Subsidiary or any direct or indirect subsidiary of our company or Parent, and (2) by shareholders who have perfected and not withdrawn a demand for dissenters’ rights or who have not otherwise lost dissenters’ rights under Minnesota law with respect to such shares), will be cancelled and extinguished and automatically converted into the right to receive:

$3.62 in cash, without interest, plus

up to $0.38 in cash, without interest (the “Additional Consideration”).

The Additional Consideration will be determined prior to consummation of the Merger and will be an amount equal to approximately $0.01 per share for each $500,000 of our Net Cash (as defined in the Merger Agreement) over $17,500,000 as of a fiscal period end within 45 days prior to the consummation of the Merger. We cannot predict the amount of Additional Consideration, if any, that will be payable to shareholders. As of December 27, 2015, our Net Cash position was $49,900,000.

On January 28, 2016, at a special meeting of our shareholders, the Merger Agreement, and the Merger pursuant to that agreement, was approved by our shareholders. We expect to complete the transactions contemplated by the Merger Agreement either late in the first calendar quarter or during the second calendar quarter of 2016, subject to the termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the satisfaction or waiver of the other closing conditions specified in the Merger Agreement.

During the thirteen weeks ended December 27, 2015, we incurred $3,437,000 of expenses related to the pending Merger.

(3) CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of all highly liquid investments with original maturities of three months or less.

As of December 27, 2015, and September 27, 2015, we had $1,629,000 and $1,677,000, respectively, of cash and cash equivalents that were restricted in use, which are classified in other current assets. These amounts for both periods covered outstanding letters of credit and cash received and temporarily held in our senior secured credit facility collections account.

(4) INVESTMENTS

A summary of our investments is as follows:

December 27,

2015

September 27,
2015

Available-for-sale securities

U.S government debt securities

506

965

Our short-term investments are comprised of United States government debt securities. Unrealized gains and losses deemed to be temporary on available-for-sale securities are reported as other comprehensive gain or loss within shareholders’ equity.

As of December 27, 2015, our short-term investments were scheduled to mature within one year.

As of December 27, 2015, and September 27, 2015, we had $506,000 and $965,000, respectively, of short-term investments that were restricted in use. The amounts are required by the State of Minnesota to be held as security for our self-insured workers compensation programs.

(5) TRADE RECEIVABLES

We grant credit to our customers, but generally do not require collateral or any other security to support amounts due. Trade receivables of $11,611,000 at December 27, 2015, and $15,860,000 at September 27, 2015, are net of allowances for sales returns of $563,000 and $623,000, respectively.

During the thirteen weeks ended December 27, 2015, we entered into multiple independent bill of exchange discounting transactions under an uncommitted facility with Hongkong and Shanghai Banking Corporation Limited, Bangkok Branch (“HSBC”), under which our Thai subsidiary, Hutchinson Technology Operations (Thailand) Co. Ltd., sold, without recourse, an aggregate of $32,754,000 of its accounts receivable to HSBC and was paid 100% of the face value of the accounts receivable, less interest expense of LIBOR plus 1.75%. The balance remaining to be paid to our Thai subsidiary from HSBC as of September 27, 2015 was $1,228,000, included within the line item “Other receivables” on our consolidated balance sheet. As of December 27, 2015, there was no outstanding balance to be paid to our Thai subsidiary from HSBC.

We also entered into multiple independent bill of exchange discounting transactions under an uncommitted facility with Bank of America, N.A., Bangkok Branch (“Bank of America”), under which our Thai subsidiary can sell, without recourse, approximately 90% of its accounts receivable to Bank of America and be paid the full face value of that accounts receivable sold, less interest expense of LIBOR plus 1.50%. The approximately 10% remainder due on the receivable is included in our trade receivables balance until paid. During the thirteen weeks ended December 27, 2015, our Thai subsidiary sold $16,757,000 of its accounts receivable to Bank of America, which has been paid in full.

We generally warrant that the products sold by us will be free from defects in materials and workmanship for a period of one year or less following delivery to our customer. Upon determination that the products sold are defective, we typically accept the return of such products and refund the purchase price to our customer. We record a provision against revenue for estimated returns on sales of our products in the same period that the related revenues are recognized. We base the allowance on historical product returns, as well as existing product return authorizations. The following table reconciles the changes in our allowance for sales returns under warranties:

September 27,

2015

Increases in the

Allowance Related to

Warranties Issued

Reductions in the

Allowance for Returns

Under Warranties

December 27,

2015

623

275

(335

)

563

(6) INVENTORIES

Inventories are valued at the lower of cost (first-in, first-out method) or market by analyzing market conditions, current sales prices, inventory costs and inventory balances. Inventories consisted of the following at December 27, 2015, and September 27, 2015:

	December 27, 2015		September 27, 2015

Raw materials	$	17,301	$	19,236
Work in process		8,678		9,537
Finished goods		11,901		11,375
	$	37,880	$	40,148

(7) Debt

Debt consisted of the following at December 27, 2015, and September 27, 2015:

	December 27, 2015			September 27, 2015

8.50% Secured Notes	$	63,931		$	63,931
8.50% Secured Notes debt discount		(1,430	)		(1,742	)
10.875% Notes		12,200			12,200
10.875% Notes debt discount		(191	)		(233	)
8.50% New Convertible Notes		37,500			37,500
PNC Bank term loan		12,750			13,500
Total debt, net of discounts		124,760			125,156
Less: Current maturities, net of discounts		(12,750	)		(3,000	)
Total long-term debt, net of discounts	$	112,010		$	122,156

October 2014 Financing Transactions

On October 23, 2014, we issued $37,500,000 aggregate principal amount of 8.50% Convertible Senior Notes due 2019 (the “8.50% New Convertible Notes”). The 8.50% New Convertible Notes bear interest at a rate of 8.50% per annum, payable semi-annually in arrears on April 30 and October 31 of each year, beginning April 30, 2015. The 8.50% New Convertible Notes mature on October 31, 2019. Each $1,000 principal amount of the 8.50% New Convertible Notes is convertible into 266.6667 shares of our common stock (which is equal to an initial conversion price of approximately $3.75 per share), subject to adjustment under certain circumstances. The 8.50% New Convertible Notes rank pari passu in right of payment with all existing and future senior indebtedness of our company. Certain beneficial holders of the 8.50% New Convertible Notes had the right to require us to repurchase for cash up to $7,500,000 aggregate principal amount of the 8.50% New Convertible Notes, plus accrued and unpaid interest, if any, during the 120-day period commencing on October 23, 2014. Accordingly, $7,500,000 of the proceeds to us from the sale of the 8.50% New Convertible Notes were escrowed until the put right expired on February 20, 2015. Additionally, we were required to escrow at least $35,000,000 of cash that was restricted solely for the repayment, repurchase, redemption, defeasance or other acquisition for value of our 8.50% Convertible Senior Notes due 2026 (the “8.50% Convertible Notes”), plus accrued but unpaid interest thereon. We capitalized debt financing costs of $1,652,000 which are being amortized over five years or until the maturity date. The amortization expense is included in interest expense. On January 15, 2015, we completed a redemption of the existing $39,822,000 aggregate principal amount of 8.50% Convertible Notes. To fund this, we used the escrowed $35,000,000 and our existing cash.

On October 23, 2014, we entered into an agreement providing for the private exchange of $15,000,000 aggregate principal amount of our 8.50% Senior Secured Second Lien Notes due 2017 (the “8.50% Secured Notes”) held by a certain holder for 2,500,000 shares of our common stock and warrants to purchase an additional 2,500,000 shares of our common stock on a cashless basis at an exercise price of $0.01 per share. On November 25, 2014, 1,250,000 warrants were exercised which resulted in the issuance of 1,246,493 shares of common stock. On January 15, 2015, subsequent to the end of the first quarter of 2015, the remaining 1,250,000 warrants were exercised which resulted in the issuance of 1,246,428 shares of common stock and there were no warrants remaining outstanding. The fair value of the common stock and warrants was recorded in additional paid-in capital in the amount of $17,388,000. Applying debt extinguishment accounting, we recorded a loss on extinguishment of debt of $4,318,000 in our first quarter of 2015. The loss also included $1,232,000 of broker, legal and accounting fees related to the exchange transaction.

To accommodate the October 2014 debt transactions described above, on October 20, 2014, we entered into supplemental indentures relating to our 8.50% Secured Notes and to our 10.875% Senior Secured Second Lien Notes due 2017 (the “10.875% Notes”). Additionally, on October 20, 2014, we entered into an amendment to our senior secured credit agreement, dated as of September 16, 2011, as previously amended, with PNC Bank, National Association (“PNC Bank”). Under the amendment, PNC Bank consented to the transactions contemplated by the 8.50% New Convertible Notes and the exchange transaction, referred to above.

8.50% Secured Notes

We currently have outstanding $63,931,000 aggregate principal amount of 8.50% Secured Notes. The 8.50% Secured Notes were originally issued in March 2012 in the aggregate principal amount of $78,931,000. Of that total amount, $38,931,000 aggregate principal amount of 8.50% Secured Notes was issued pursuant to an effective registration statement relating to an offer to purchase for cash or exchange for new securities any and all of our outstanding 3.25% Convertible Subordinated Notes due 2026. The remaining $40,000,000 aggregate principal amount of 8.50% Secured Notes was issued in a private placement that included the issuance of warrants to purchase 3,869,000 shares of our common stock. The warrants were exercisable on a cashless basis for $.01 per share for ten years after their issuance. The total purchase price for the 8.50% Secured Notes and warrants issued in the private placement was $39,400,000. The fair value of the warrants was recorded in additional paid-in capital in the amount of $8,489,000. As of May 2013, all 3,869,000 warrants had been exercised and there were no warrants outstanding.

The 8.50% Secured Notes bear interest at a rate of 8.50% per annum, payable semi-annually in arrears on January 15 and July 15 of each year, beginning July 15, 2012, and mature on January 15, 2017, unless redeemed or repurchased in accordance with their terms. The 8.50% Secured Notes are secured by liens on all assets securing our existing or future senior secured credit facilities (other than certain excluded assets), which liens rank junior in priority to any liens securing our senior secured credit facilities and other permitted priority liens.

We may redeem all or part of the 8.50% Secured Notes at any time by paying 100% of the principal amount redeemed, plus a make-whole premium (and accrued and unpaid interest on the principal amount redeemed to) as of the date of redemption (subject to the rights of holders of the 8.50% Secured Notes on the relevant record date to receive interest due on the relevant interest payment date as and to the extent provided in the indenture). The indenture governing the 8.50% Secured Notes contains certain covenants that, among other things, will limit our and our restricted subsidiaries’ ability to incur additional indebtedness, pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments, enter into agreements that restrict distributions from restricted subsidiaries, sell or otherwise dispose of assets, including capital stock of restricted subsidiaries, enter into transactions with affiliates, create or incur liens and enter into operating leases.

As described previously, on October 23, 2014, we entered into an agreement for the private exchange of $15,000,000 aggregate principal amount of our 8.50% Secured Notes held by a certain holder for 2,500,000 shares of our common stock and warrants to purchase an additional 2,500,000 shares of our common stock on a cashless basis at an exercise price of $0.01 per share. On November 25, 2014, 1,250,000 warrants were exercised which resulted in the issuance of 1,246,493 shares of common stock. On January 15, 2015, subsequent to the end of the first quarter of 2015, the remaining 1,250,000 warrants were exercised which resulted in the issuance of 1,246,428 shares of common stock and there were no warrants remaining outstanding.

10.875% Notes

On January 22, 2013, we issued $12,200,000 aggregate principal amount of the 10.875% Notes for a total purchase price of $11,590,000. The 10.875% Notes were issued in a private placement pursuant to an indenture dated as of January 22, 2013, and bear interest at a rate of 10.875% per annum, payable semi-annually in arrears on January 15 and July 15 of each year, beginning July 15, 2013. The 10.875% Notes are secured by liens on all assets securing our senior secured credit facilities (other than capital stock of subsidiaries of our company to the extent that inclusion of such capital stock would require the filing of separate financial statements for such subsidiaries with the SEC), which liens rank junior in priority to the liens securing our senior secured credit facilities and other permitted priority liens and on an equal and ratable basis with the liens securing our 8.50% Secured Notes. The 10.875% Notes are scheduled to mature on January 15, 2017, unless redeemed or repurchased in accordance with their terms. We may redeem all or a portion of the 10.875% Notes at any time by paying 100% of the principal amount redeemed, plus a make-whole premium as of, and accrued and unpaid interest to, the date of redemption.

To accommodate the January 2013 debt transactions, on January 22, 2013, we entered into (i) a first supplemental indenture to the indenture dated as of March 30, 2012, which governs the 8.50% Secured Notes, and (ii) a consent and third amendment to our senior secured credit agreement.

Debt refinancing costs of $359,000 were capitalized and are being amortized over four years or until the maturity date. The amortization expense is included in interest expense.

Senior Secured Credit Facility

We are party to a revolving credit and security agreement with PNC Bank dated as of September 15, 2011, as amended from time to time (the “Credit Agreement”). On September 22, 2014, we amended the Credit Agreement to reduce the maximum principal amount of the revolving credit facility provided by the Credit Agreement (the “Senior Secured Credit Facility”) from $35,000,000 to $20,000,000, extend the maturity date of the Senior Secured Credit Facility from October 1, 2014 to December 1, 2016, reduce the cash balance we are required to maintain in an account at PNC Bank from $15,000,000 to $2,500,000, and modify the fixed charge coverage covenant by eliminating the requirement for the four fiscal quarters ending September 28, 2014 and changing the measurement periods thereafter for the fixed charge coverage covenant by excluding from such measurement periods all fiscal quarters ended on or prior to September 28, 2014.

Our credit agreement with PNC Bank and the indentures governing the 8.50% Secured Notes and the 10.875% Notes each contain certain covenants that, among other things, limit our and our restricted subsidiaries’ ability to incur additional indebtedness; pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments; enter into agreements that restrict distributions from restricted subsidiaries; sell or otherwise dispose of assets, including capital stock of restricted subsidiaries; enter into transactions with affiliates; create or incur liens; enter into operating leases; merge, consolidate or sell substantially all of our assets; make capital expenditures; change the nature of our business; and expend the assets or free cash flow of certain subsidiaries. The indentures also limit the amount of our consolidated total assets and free cash flow that can be attributable to subsidiaries that have not guaranteed the 8.50% Secured Notes or, in certain cases, have not pledged their stock to secure the 8.50% Secured Notes.

On April 30, 2015, we further amended the Credit Agreement to maintain compliance with a preexisting financial covenant. This amendment modified the fixed charge coverage covenant under the Credit Agreement to eliminate the requirement for our quarters ended March 29, 2015, June 28, 2015 and September 27, 2015 and to change the measurement periods starting with our quarter ending December 27, 2015 by excluding from such measurement periods all quarters ended before September 27, 2015, and implemented an additional earnings before interest, taxes, depreciation and amortization (“EBITDA”) covenant for our quarters ended March 29, 2015, June 28, 2015 and September 27, 2015.

On December 10, 2015, we entered into a ninth amendment to our Credit Agreement with PNC Bank. The amendment modified the Credit Agreement to defer application of the fixed charge coverage covenant until December 25, 2016, and impose a minimum EBITDA requirement and a new minimum liability requirement for 2016.

From time to time, we borrow funds under the Senior Secured Credit Facility. As of December 27, 2015, we had no outstanding balance. Our average outstanding balance in the thirteen weeks ended December 27, 2015 was $238,000. Amounts borrowed under the Senior Secured Credit Facility bear cash interest at a reduced rate equal to, at our election, either (i) PNC Bank’s alternate base rate (as defined in the Credit Agreement) plus 1.0% per annum, or (ii) LIBOR plus 3.5% per annum if no defaults or events of default exist under the Credit Agreement.

If we are unable to generate sufficient operating results in future quarters, we may not be able to comply with financial covenants in the Credit Agreement in future quarters. If necessary, we intend to negotiate a waiver of any noncompliance or an amendment of the financial covenant specific to the applicable period. As of December 27, 2015, we were in compliance with the financial covenants set forth in the Credit Agreement.

PNC Bank Term Loan

On December 23, 2014, we entered into an amendment to our existing senior secured credit facility dated as of September 16, 2011, as previously amended, with PNC Bank as agent and lender.

Pursuant to the amendment, a term loan was made to us in the amount of $15,000,000. The covenants in the Credit Agreement also apply to this term loan. The term loan may consist of domestic rate loans, with a per annum interest rate equal to PNC Bank’s alternate base rate (as defined in the Credit Agreement) plus 2.50%, or LIBOR rate loans, with a per annum interest rate equal to 3.50% plus the greater of the LIBOR rate (as defined in the Credit Agreement) or 1.00%, or a combination thereof. As a result, our interest rate for the first quarter of 2015 was 4.5%. The principal balance of the term loan is payable in quarterly installments of $750,000 on the first day of each calendar quarter, commencing on April 1, 2015 and continuing through January 1, 2020. In the event that the Credit Agreement is not extended beyond December 1, 2016, the balance due on the term loan will also become due on December 1, 2016. Accordingly, the term loan has been classified as current debt in our consolidated balance sheet. Once repaid, amounts borrowed under the term loan may not be reborrowed. As of December 27, 2015, we had $12,750,000 outstanding.

(8) COMMITMENTS AND CONTINGENCIES

Lease Commitments

We have commitments under various capital and operating lease agreements. Assets acquired under capital leases are depreciated over the useful life of the asset.

The future minimum lease payments for all capital and operating leases as of December 27, 2015, are as follows:

	Capital Leases			Operating Leases
2016	$	1,978		$	704
2017		2,395			320
2018		1,402			249
2019		605			218
Thereafter		19			72
Total future minimum lease payments		6,399			1,563
Less: Interest		(430	)		–
Total future minimum lease payments excluding interest	$	5,969		$	1,563

Legal Proceedings

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. 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 was 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.

In November and December 2015, following the announcement of the Merger, four actions were filed by purported shareholders of the company in the United States District Court for the District of Minnesota. The actions are captioned David Erickson v. Hutchinson Technology Incorporated, et al., Case No. 0:15-cv-04261-DSD-LIB, Stephen M. Harnik v. Hutchinson Technology Incorporated, et al., Case No. 0:15-cv-04321, Jesse Hendricks v. Richard J.Penn, et al., Case No. 0:15-cv-04338, and Matthew Ridler and Lori Ridler v. Hutchinson Technology Incorporated, Case No. 0:15-cv-04356-MJD-TNL. The plaintiffs each purport to bring their action as a class action on behalf of the company’s public shareholders. All four complaints name the company and its directors as defendants, and allege that they have violated Sections 14(a) and 20(a) of, and Rule 14a-9 under, the Securities Exchange Act of 1934 by filing a preliminary proxy statement that contains materially incomplete and misleading statements and omissions. The Hendricks complaint also names Parent and Merger Subsisiaryas defendants, and includes claims under state law for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, and equitable relief under the Minnesota Business Corporation Act. The Hendricks complaint alleges that the company’s directors breached their fiduciary duties to the company by operating an inadequate sale process, agreeing to a merger with Parent and Merger Subsidiary at an unfair price, and agreeing to deal protection provisions that are unfavorable to the company and its shareholders. All of the federal complaints seek injunctive and equitable relief, including an order enjoining the closing of the Merger until the alleged deficiencies in the preliminary proxy statement have been corrected; damages in an unspecified amount; and an award of plaintiffs’ attorneys’ fees, costs, and disbursements. The defendants have not yet responded to any of the complaints, but intend to move to dismiss the actions.We believe that the actions are without merit, and intend to vigorously defend against all claims asserted

We are a party from time to time to ordinary routine litigation incidental to our business. The outcome of such claims, if, any, is not expected to materially affect our current or future financial position or results of operations.

(9) ACCUMULATED OTHER COMPREHENSIVE LOSS

Other comprehensive gain (loss) refers to revenue, expenses, gains and losses that are recorded as an element of shareholders’ equity but are excluded from net income. Our other comprehensive gain (loss) is comprised of unrealized gains and losses on foreign translation adjustments.

Accumulated other comprehensive gain (loss), net of tax (see Note 13 for a discussion of income taxes), was as follows:

	Foreign Currency Translation Adjustments
Balance as of September 27, 2015	$	(4,309	)
Other comprehensive gain		140
Balance as of December 27, 2015	$	(4,169	)

Balance as of September 28, 2014	$	(543	)
Other comprehensive loss		(525	)
Balance as of December 28, 2014	$	(1,068	)

(10) ASSET IMPAIRMENT

When indicators of impairment exist and assets are held for use, we estimate future undiscounted cash flows attributable to the assets. In the event such cash flows are not expected to be sufficient to recover the recorded value of the assets, the assets are written down to their estimated fair values based on the expected discounted future cash flows attributable to the assets or based on appraisals. Factors affecting impairment of assets held for use include the ability of the specific assets to generate positive cash flows. Changes in any of these factors or changes in our forecast model estimates could necessitate impairment recognition in future periods for other assets held for use.

(11) SEVERANCE AND SITE CONSOLIDATION EXPENSES

A summary of our severance and site consolidation expenses as of December 28, 2014, is as follows:

	Severance			Site Consolidation Expenses			Total
Accrual balances, September 28, 2014	$	27		$	–		$	27
Restructuring charges		(19	)		178			159
Cash payments		(8	)		(178	)		(186	)
Accrual balances, December 28, 2014		–			–			–

In recent years, we had multiple severance and manufacturing consolidation and restructuring plans in place to support efforts to improve operating results and liquidity through improved utilization of our facilities in both the U.S. and Thailand.

In connection with the consolidation of our operations, we incurred site consolidation expenses of $178,000 during the thirteen weeks ended December 28, 2014. The site consolidation expenses consisted primarily of internal labor and contractors.

All severance and benefits amounts owed have been paid in full.

(12) OTHER INCOME (EXPENSE)

Transaction gains and losses that arise from the exchange rate changes on transactions denominated in a currency other than the local currency are included in “Other income (expense), net” in our condensed consolidated statements of operations. For the thirteen weeks ended December 27, 2015, and December 28, 2014, we recognized a foreign currency gain of $33,000 and a foreign currency loss of $640,000, respectively. These were primarily related to U.S. dollar-denominated inter-company liabilities owed to us by our Thai subsidiary.

(13) INCOME TAXES

As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These temporary differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheets. We must then assess the likelihood that our deferred tax assets will be realized based on future taxable income, and to the extent we believe that recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or change this allowance in a period, we must include an expense or a benefit within the tax provision in our consolidated statements of operations.

Significant judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our deferred tax assets. Valuation allowances arise due to the uncertainty of realizing deferred tax assets. At September 27, 2015, we had a valuation allowance of $239,912,000. We assess whether valuation allowances should be established against our deferred tax assets based on the consideration of all available evidence, using a “more likely than not” standard. In making such assessments, significant weight is to be given to evidence that can be objectively verified. Our current or previous losses are given more weight than our future outlook. Our three-year historical cumulative loss was a significant negative factor. This loss, combined with uncertain near-term market and economic conditions, reduced our ability to rely on our projections of future taxable income in determining whether a valuation allowance was appropriate. Accordingly, we concluded that a full valuation allowance was appropriate. We will continue to assess the likelihood that our deferred tax assets will be realizable, and our valuation allowance will be adjusted accordingly, which could materially impact our financial position and results of operations.

The income tax benefit for the thirteen weeks ended December 27, 2015 was $603,000, compared to the income tax benefit of $145,000 for the thirteen weeks ended December 28, 2014. For the thirteen weeks ended December 27, 2015, the net benefit of $603,000 was made up of credits for the expected future refunds of previously paid U.S. Federal Alternative Minimum Tax, as provided by the Protecting Americans from Tax Hike legislation enacted on December 18, 2015, offset primarily by various foreign withholding and income taxes we incur. For the thirteen weeks ended December 28, 2014, we recognized a $145,000 benefit due to reserves for certain tax refunds that were released due to the expiration of the applicable statute of limitations.

(14) STOCK-BASED COMPENSATION

Our 2011 Equity Incentive Plan has been approved by shareholders and authorizes the issuance of 1,200,000 shares of our common stock (plus any shares that remained available on that date for future grants under our 1996 Incentive Plan) for equity-based awards (no further awards will be made under our 1996 Incentive Plan). Under the equity incentive plans, stock options have been granted to employees, including our officers, and to our directors, at an exercise price not less than the fair market value of our common stock at the date the options are granted. The options granted generally expire ten years from the date of grant or at an earlier date as determined by the committee of our board of directors that administers the plans. Options granted under the plans prior to November 2005 generally were exercisable one year from the date of grant. Options granted under the plans from November 2005 to October 2011 are exercisable two to three years from the date of grant. Options granted under the plans since November 2011 are exercisable one to three years from the date of grant.

Under our equity incentive plan, we also have issued restricted stock units (“RSUs”) to employees, including our officers. RSUs generally vest over three years in annual installments commencing one year after the date of grant. We recognize compensation expense for the RSUs over the service period equal to the fair market value of the RSUs on the date of issuance. Upon vesting, RSUs convert to shares in accordance with the terms of the equity incentive plan under which they were issued.

We recorded stock-based compensation expense related to our stock options, RSUs and common stock, included in selling, general and administrative expenses, of $338,000 and $291,000 for the thirteen weeks ended December 27, 2015, and December 28, 2014, respectively. As of December 27, 2015, $1,775,000 of unrecognized compensation expense related to non-vested awards is expected to be recognized over a weighted-average period of approximately 18 months.

We use the Black-Scholes option pricing model to determine the weighted-average fair value of options. The weighted-average fair value of options granted during the thirteen weeks ended December 28, 2014, was $2.65. Pursuant to the terms of the Merger Agreement, there were no options granted during the thirteen weeks ended December 27, 2015. The fair value of options at the date of grant and the weighted-average assumptions utilized to determine such values are indicated in the following table:

	Thirteen Weeks Ended
	December 28, 2014
Risk-free interest rate		2.9	%
Expected volatility		80.0	%
Expected life (in years)		8.0
Dividend yield		–

The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of our stock options. We considered historical data in projecting expected stock price volatility. We estimated the expected life of stock options and stock option forfeitures based on historical experience.

Option transactions during the thirteen weeks ended December 27, 2015, are summarized as follows:

	Number of Shares			Weighted-Average Exercise Price ($)		Weighted-Average Remaining Contractual Life (yrs.)
Outstanding at September 27, 2015		3,338,717			9.52		4.2
Granted		–			–
Exercised		(8,300	)		3.03
Expired/Canceled		(196,885	)		25.12
Outstanding at December 27, 2015		3,133,532			7.10		5.1
Options exercisable at December 27, 2015		2,728,344			7.66		4.6

The aggregate intrinsic value at December 27, 2015, of our stock options (the amount by which the market price of the stock on the date of exercise exceeded the exercise price of the option) outstanding was $1,820,000. The aggregate intrinsic value of our stock options exercisable at December 27, 2015, was $1,711,000.

The following table summarizes the status of options that remain subject to vesting:

	Number of Shares			Weighted- Average Grant Date Fair Value ($)		Weighted- Average Remaining Contractual Life (yrs.)
Non-vested at September 27, 2015		706,020			2.22		8.6
Granted		–			–
Vested		(300,832	)		1.97
Canceled		–			–
Non-vested at December 27, 2015		405,188			2.40		8.6

The following table summarizes information concerning currently outstanding and exercisable stock options:

	Options Outstanding						Options Exercisable
Range of Exercise Prices ($)	Number Outstanding		Weighted-Average Remaining Contractual Life (yrs.)		Weighted-Average Price ($)		Number Exercisable		Weighted-Average Exercise Price ($)
1.45 - 3.00		912,387		7.1		2.12		793,867		1.99
3.01 - 5.00		1,200,627		5.8		3.18		913,959		3.09
5.01 - 10.00		490,383		3.9		7.33		490,383		7.33
10.01 - 37.95		530,135		1.4		24.33		530,135		24.33
Total		3,133,532		5.1		7.10		2,728,344		7.66

RSU transactions during the thirteen weeks ended December 27, 2015, are summarized as follows:

	Number of RSUs			Weighted- Average Grant Date Fair Value ($)
Non-vested at September 27, 2015		691,899			2.90
Granted		–			–
Vested		(355,769	)		2.53
Canceled		–			–
Non-vested at December 27, 2015		336,130			3.30

(15) LOSS PER SHARE

Basic loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the year. Diluted loss per share identifies the dilutive effect of potential common shares using net loss available to common shareholders and is computed using the treasury stock method for outstanding stock options and the if-converted method for the 8.50% Convertible Notes and the 8.50% New Convertible Notes.

A reconciliation of these amounts is as follows:

	Thirteen Weeks Ended
	December 27, 2015			December 28, 2014
Net loss	$	(5,297	)	$	(9,898	)

Weighted-average common shares outstanding		33,674			30,548
Dilutive potential common shares		–			–
Weighted-average common and diluted shares outstanding		33,674			30,548

Basic loss per share	$	(0.16	)	$	(0.32	)

Diluted loss per share	$	(0.16	)	$	(0.32	)

Diluted loss per share for the thirteen weeks ended December 27, 2015, excludes potential common shares of 168,000 using the treasury stock method, and 14,630,000 using the if-converted method for the 8.50% New Convertible Notes, as they were anti-dilutive. Diluted loss per share for the thirteen weeks ended December 28, 2014, excludes potential common shares of 1,217,000 using the treasury stock method. Diluted loss per share for the thirteen weeks ended December 28, 2014, excludes potential common shares of 11,993,000 using the if-converted method for the 8.50% Convertible Notes, as they were anti-dilutive.

As discussed in Note 7, on October 23, 2014, we issued 2,500,000 shares of common stock and warrants to purchase 2,500,000 shares of our common stock as part of an exchange transaction. On November 25, 2014, 1,250,000 warrants were exercised, which resulted in the issuance of 1,246,493 shares of common stock. On January 15, 2015, the remaining 1,250,000 warrants were exercised, which resulted in the issuance of 1,246,428 shares of common stock. No warrants remain outstanding.

(16) FAIR VALUE MEASUREMENTS

Financial assets and liabilities that are remeasured and reported at fair value at each reporting period are classified and disclosed in one of the following three levels:

Level 1 –	Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 –	Quoted prices for identical assets and liabilities in markets that are inactive; quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; or

Level 3 –	Inputs that are unobservable for the asset or liability and that are significant to the fair value of the assets or liabilities.

The following tables present our assets that are measured at fair value on a recurring basis at December 27, 2015, and September 27, 2015:

	Fair Value Measurements at December 27, 2015
	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities	$	506	$	–	$	–	$	506

	Fair Value Measurements at September 27, 2015
	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities	$	965	$	–	$	–	$	965

Available-for-Sale Securities

Our available-for-sale securities are comprised of United States government debt securities. The fair value is based on quoted market prices in active markets.

Debt

The fair values of our 8.50% Convertible Notes and our 8.50% Secured Notes were determined based on the closing market price of the respective Notes as of the end of the fiscal quarter. The fair value of the 8.50% Convertible Notes and the 8.50% Secured Notes were classified in Level 1 of the fair value hierarchy.

Our 10.875% Notes have not experienced trading activity; therefore the fair value estimate was based on the closing market prices of comparable debt as of the end of the fiscal quarter. Our 8.50% New Convertible Notes have not experienced trading activity; therefore the fair value estimate was based on market variables combined with variables specific to the 8.50% New Convertible Notes to determine the theoretical value. The fair values of the 10.875% Notes and the 8.50% New Convertible Notes were classified in Level 2 of the fair value hierarchy.

The fair value of the PNC Bank credit facility and term loan’s carrying values are a reasonable estimate of fair value because of their short-term nature. The fair value measurement for the credit facility and term loan was classified in Level 2 of the fair value hierarchy.

The estimated fair values of our debt were as follows on each of the indicated dates:

	December 27, 2015				September 27, 2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
8.50% Secured Notes	$	63,931	$	64,011	$	63,931	$	64,011
10.875% Notes		12,200		12,972		12,200		12,972
8.50% New Convertible Notes		37,500		51,184		37,500		32,404
PNC Bank term loan		12,750		12,750		13,500		13,500

Other

Our financial instruments other than those presented in the disclosures above, include accounts receivable, accounts payable, and other payables. The carrying value of accounts receivable, accounts payable, and other payables approximate fair value because of the short-term nature of these instruments. The fair values of these items were classified in Level 1 of the fair value hierarchy.

(17) SUBSEQUENT EVENTS

We evaluated subsequent events after the balance sheet date through the date the condensed consolidated financial statements were issued. We did not identify any additional material events or transactions occurring during this subsequent event reporting period that required further recognition or disclosure in these condensed consolidated financial statements.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

When we refer to “we,” “our,” “us,” the “company” or “HTI,” we mean Hutchinson Technology Incorporated and its subsidiaries. Unless otherwise indicated, references to “2016” mean our fiscal year ending September 25, 2016, references to “2015” mean our fiscal year ended September 27, 2015, and references to “2014” mean our fiscal year ended September 28, 2014.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the MD&A included in our Annual Report on Form 10-K for the year ended September 27, 2015.

GENERAL

Our Company

We are a global supplier of critical precision component technologies. As a key supplier of suspension assemblies for disk drives, we help customers improve overall disk drive performance and meet the demands of an ever-expanding digital universe. Through our new business development initiatives, we focus on leveraging our unique precision manufacturing capabilities in new markets to improve product performance, reduce size, lower cost and reduce time to market.

Entry into Merger Agreement

•

$3.62 in cash, without interest, plus

•

up to $0.38 in cash, without interest (the “Additional Consideration”).

General Business

The majority of our revenue is derived from the sale of suspension assemblies to a small number of manufacturers. Suspension assemblies are precise electro-mechanical components that hold a disk drive’s read/write head at microscopic distances above the drive’s disks.

Sales to our three largest customers constituted 96% of net sales for the thirteen weeks ended December 27, 2015, as shown in the following table.

Customer	Percentage of Sales
Western Digital Corporation		58	%
Seagate Technology, LLC		30	%
SAE Magnetics, Ltd/TDK		8	%

Significant portions of our revenue may be indirectly attributable to large manufacturers of disk drives, such as Western Digital Corporation, Seagate Technology, LLC and Toshiba Corporation, which may purchase read/write head assemblies that utilize our suspension assemblies from SAE Magnetics, Ltd/TDK. We expect to continue to depend on a limited number of customers for our sales, given the small number of disk drive manufacturers and head-gimbal assemblers. Our results of operations could be adversely affected by reduced demand from any one disk drive industry customer.

The following table sets forth our recent quarterly suspension assembly shipment quantities in millions for the periods indicated:

Suspension Assembly Shipments by Quarter
	2015								2016
	First		Second		Third		Fourth		First
Suspension assembly shipment quantities		122		101		87		105		107

Our suspension assembly shipments totaled 107 million in the first quarter of 2016, up 1% compared with 105 million in the fourth quarter of 2015. Demand weakened near the end of the quarter.

Average selling price remained at $0.57 for the first quarter of 2016, flat with the fourth quarter of 2015, and down from $0.58 in the first quarter of 2015.

Gross profit in the first quarter of 2016 was $11,721,000, or 18% of net sales, compared with $7,477,000 in the fourth quarter of 2015, or 12% of net sales. The sequential increase in gross profit was due to our continued efforts to reduce costs and a favorable product mix including suspensions using lower cost, internally-produced TSA+ flexures.

As part of our new business development efforts, we have been developing an optical image stabilization (“OIS”) actuator for smartphone cameras. Our new shape memory alloy (“SMA”) OIS actuator is currently undergoing testing and evaluation in prototype camera modules with a smartphone maker. The results from performance and reliability tests continue to be encouraging and we are continuing to work with companies in the smartphone camera supply chain on evaluations of our SMA OIS actuator.

During the first quarter of 2016, all of the costs of our SMA OIS initiative were classified as research and development expenses. Research and development expenses for the quarter increased to $5,857,000, compared to $3,796,000 in the fourth quarter of 2015 which was reduced by $1,520,000 of previously deferred income related to a former cost-sharing agreement for development of our SMA OIS actuator.

Outlook

We expect suspension assembly shipments in the second quarter of 2016 to range from 85 million to 95 million, in what is typically a seasonally slower period for suspension assembly shipments. Our average selling price is expected to be relatively flat on a sequential basis. The lower volume is expected to reduce our gross profit.

RESULTS OF OPERATIONS

Thirteen Weeks Ended December 27, 2015 vs. Thirteen Weeks Ended December 28, 2014

Net sales for the thirteen weeks ended December 27, 2015, were $63,927,000, compared to $72,423,000 for the thirteen weeks ended December 28, 2014, a decrease of $8,496,000. The decrease was due to a 12% decrease in suspension assembly unit shipments and a decrease in average selling price.

Gross profit for the thirteen weeks ended December 27, 2015, was $11,721,000, compared to gross profit of $11,464,000 for the thirteen weeks ended December 28, 2014, an increase of $257,000. Gross profit was 18% of net sales for the thirteen weeks ended December 27, 2015, compared to 16% of net sales for the thirteen weeks ended December 28, 2014. The increase in gross profit was primarily due to continued efforts to reduce costs and a favorable product mix including suspensions using lower cost, internally-produced TSA+ flexures. This was partially offset by decreased net sales.

Research and development expenses for the thirteen weeks ended December 27, 2015, were $5,857,000 compared to $6,042,000 for the thirteen weeks ended December 28, 2014, a decrease of $185,000. We continue to invest in our new business development activity related to the development of SMA OIS actuators for smartphone cameras.

Selling, general and administrative expenses for the thirteen weeks ended December 27, 2015, were $5,207,000, compared to $5,984,000 for the thirteen weeks ended December 28, 2014, a decrease of $777,000. The decrease was primarily due to lower professional services and supplies expense.

During the thirteen weeks ended December 27, 2015, we incurred $3,437,000 of expenses related to the pending Merger with TDK.

During the thirteen weeks ended December 28, 2014, as part of our continued focus on overall cost reductions, we recognized $159,000 of severance and site consolidation expenses. The site consolidation expenses were primarily supplies and internal labor related to the consolidation. All severance and benefits amounts owed have been paid in full.

Other expense, net, for the thirteen weeks ended December 27, 2015, included a foreign currency gain of $33,000, compared to a foreign currency loss of $640,000 for the thirteen weeks ended December 28, 2014. The foreign currency activity was primarily related to U.S. dollar-denominated inter-company liabilities owed to us by our Thai subsidiary.

Interest expense for the thirteen weeks ended December 27, 2015, was $3,283,000, compared to $4,453,000 for the thirteen weeks ended December 28, 2014, a decrease of $1,170,000. The decrease in interest expense was primarily due to a reduction in our outstanding debt amounts.

The income tax benefit for the thirteen weeks ended December 27, 2015, was $603,000, compared to the income tax benefit of $145,000 for the thirteen weeks ended December 28, 2014. For the thirteen weeks ended December 27, 2015, the net benefit of $603,000 was made up of credits for the expected future refunds of previously paid U.S. Federal Alternative Minimum Tax, as provided by the Protecting Americans from Tax Hike legislation enacted on December 18, 2015, offset primarily by various foreign withholding and income taxes we incur. For the thirteen weeks ended December 28, 2014, the net benefit of $145,000 was made up of a credit for the expected refund of previously paid U.S. Federal Alternative Minimum Tax, offset primarily by various foreign withholding and income taxes we incur.

Liquidity and Capital Resources

We continue to incur net losses which have dampened our ability to generate cash from operations. We currently believe that our cash and cash equivalents, restricted cash, short-term investments, cash flow from operations, credit facility and term loan, bill of exchange transactions, and additional financing, if needed and as available given contractual restrictions, current credit market conditions and our operating performance, will be sufficient to meet our forecasted operating expenses, debt service and capital expenditures through 2016. As of December 27, 2015, we had outstanding $63,931,000 aggregate principal amount of our 8.50% Secured Notes, $12,200,000 aggregate principal amount of our 10.875% Senior Secured Second Lien Notes due 2017 (the “10.875% Notes”), and $37,500,000 of our 8.50% Convertible Senior Notes due 2019 (the “8.50% New Convertible Notes”). Our 8.50% Secured Notes and our 10.875% Notes mature on January 15, 2017. Our 8.50% New Convertible Notes mature on October 31, 2019.

During the first quarter of 2015, we obtained a $15,000,000 term loan from PNC Bank, National Association (“PNC Bank”). The principal balance of the term loan is payable in quarterly installments of $750,000 on the first day of each calendar quarter, commencing on April 1, 2015 and continuing through January 1, 2020. As of December 27, 2015, we had $12,750,000 outstanding. See below for additional details.

In October 2014, we sold $37,500,000 aggregate principal amount of 8.50% New Convertible Notes. We exchanged $15,000,000 aggregate principal amount of 8.50% Secured Notes for 2,500,000 shares of common stock and warrants to purchase an additional 2,500,000 shares, of which 1,250,000 warrants were exercised in November 2014 and the remaining 1,250,000 were exercised in January 2015. On January 15, 2015, we completed a redemption of the existing $39,822,000 of 8.50% Convertible Senior Notes due 2026 (the “8.50% Convertible Notes”).

The Merger Agreement, our credit agreement with PNC Bank and the indentures governing the 8.50% Secured Notes and the 10.875% Notes each contain certain covenants that, among other things, limit our and our restricted subsidiaries’ ability to: incur additional indebtedness; pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments; enter into agreements that restrict distributions from restricted subsidiaries; sell or otherwise dispose of assets, including capital stock of restricted subsidiaries; enter into transactions with affiliates; create or incur liens; enter into operating leases; merge, consolidate or sell substantially all of our assets; make capital expenditures; change the nature of our business; and expend the assets or free cash flow of certain subsidiaries. The indentures also limit the amount of our consolidated total assets and free cash flow that can be attributable to subsidiaries that have not guaranteed the 8.50% Secured Notes or, in certain cases, have not pledged their stock to secure the 8.50% Secured Notes.

Subject to applicable contractual limitations, we may from time to time seek to prepay or retire our outstanding debt through cash purchases in open market or privately negotiated transactions or otherwise. These transactions, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. Our ability to obtain additional financing will depend upon a number of factors, including our future and historical performance and financial results, contractual restrictions and general economic and capital market conditions. We cannot be certain that we will be able to raise additional financing on terms acceptable to us, including covenants that we will be able to comply with in the short term, or at all, if needed. We have a facility in Hutchinson, Minnesota currently offered for sale or lease, which may provide an additional source of cash.

Our principal sources of liquidity are cash and cash equivalents, short-term investments, cash flow from operations, our senior secured credit facility and term loan, leasing, bill of exchange transactions, and additional financing capacity, if available given current credit market conditions and our operating performance. Our cash and cash equivalents increased from $39,454,000 at September 27, 2015, to $48,497,000 at December 27, 2015. Our short-term investments decreased from $965,000 at September 27, 2015, to $506,000 at December 27, 2015 and are restricted in use. In total, our cash and cash equivalents and short-term investments increased by $9,043,000.

Cash Provided by Operating Activities

Cash provided by operating activities for the thirteen weeks ended December 27, 2015, was $10,636,000, compared to $3,142,000 for the thirteen weeks ended December 28, 2014. The increase in operating cash flows was primarily due to favorable changes in working capital, including a reduction in our accounts receivables and inventory.

Cash Used for Investing Activities

For the thirteen weeks ended December 27, 2015, cash used for investing activities was $535,000, compared to $48,019,000 for the thirteen weeks ended December 28, 2014. The cash used for the thirteen weeks ended December 27, 2015, was primarily due to $1,363,000 of capital expenditures for product tooling and manufacturing equipment for new process technology and capability improvements, partially offset by $459,000 from the sale of marketable securities, $131,000 of equipment sale/leaseback transactions and $190,000 of equipment sale proceeds. The cash used for the thirteen weeks ended December 28, 2014, was primarily due to $42,500,000 of restricted cash related to our escrow requirements, $2,129,000 of restricted cash that covered outstanding letters of credit and cash received and temporarily held in our senior secured credit facility collections account, and $6,285,000 of capital expenditures for manufacturing equipment for new process technology and capability improvements and product tooling, partially offset by $836,000 of equipment sale/leaseback transactions.

Our suspension assembly business is capital intensive. The disk drive industry experiences rapid technology changes that require us to make substantial ongoing capital expenditures in product and process improvements to maintain our competitiveness. Significant industry technology transitions often result in increasing our capital expenditures. The disk drive industry also experiences periods of increased demand and rapid growth followed by periods of oversupply and subsequent contraction, which also results in fluctuations in our capital expenditures. We anticipate capital expenditures will be approximately $10,000,000 to $15,000,000 in 2016, primarily for product tooling and manufacturing equipment for new process technology and capability improvements, such as dual-stage actuated suspension assemblies and SMA OIS actuators. Financing of these capital expenditures will be principally from operations, our current cash, cash equivalents, our senior secured credit facility, leasing, or additional financing, if available given current credit market conditions and our financial performance.

Cash (Used for) Provided by Financing Activities

Cash used for financing activities for the thirteen weeks ended December 27, 2015, was $1,323,000, compared to cash provided by financing activities of $39,295,000 for the thirteen weeks ended December 28, 2014. The cash used in the thirteen weeks ended December 27, 2015, was primarily due to a $750,000 repayment of our PNC Bank term loan and $602,000 of capital lease payments. The cash provided by financing activities for the thirteen weeks ended December 28, 2014, was primarily due to $37,500,000 in proceeds from the private placement of our 8.50% New Convertible Notes and $15,000,000 in proceeds from the PNC Bank term loan, partially offset by $9,533,000 in repayments of our senior secured credit facility, $3,175,000 of debt refinancing costs, and $521,000 of capital lease payments.

Bill of Exchange

Debt

October 2014 Financing Transactions - On October 23, 2014, we issued $37,500,000 aggregate principal amount of 8.50% New Convertible Notes. The 8.50% New Convertible Notes bear interest at a rate of 8.50% per annum, payable semi-annually in arrears on April 30 and October 31 of each year, beginning April 30, 2015. The 8.50% New Convertible Notes mature on October 31, 2019. Each $1,000 principal amount of the 8.50% New Convertible Notes is convertible into 266.6667 shares of our common stock (which is equal to an initial conversion price of approximately $3.75 per share), subject to adjustment under certain circumstances. The 8.50% New Convertible Notes rank pari passu in right of payment with all existing and future senior indebtedness of our company. Certain beneficial holders of the 8.50% New Convertible Notes had the right to require us to repurchase for cash up to $7,500,000 aggregate principal amount of the 8.50% New Convertible Notes, plus accrued and unpaid interest, if any, during the 120-day period commencing on October 23, 2014. Accordingly, $7,500,000 of the proceeds to us from the sale of the 8.50% New Convertible Notes were escrowed until the put right expired on February 20, 2015. Additionally, we were required to escrow at least $35,000,000 of cash that was restricted solely for the repayment, repurchase, redemption, defeasance or other acquisition for value of our 8.50% Convertible Notes, plus accrued but unpaid interest thereon. We capitalized debt financing costs of $1,652,000 which are being amortized over five years or until the maturity date. The amortization expense is included in interest expense. On January 15, 2015, we completed a redemption of the existing $39,822,000 aggregate principal amount of 8.50% Convertible Notes. To fund this, we used the escrowed $35,000,000 and our existing cash.

On October 23, 2014, we entered into an agreement providing for the private exchange of $15,000,000 aggregate principal amount of our 8.50% Secured Notes held by a certain holder for 2,500,000 shares of our common stock and warrants to purchase an additional 2,500,000 shares of our common stock on a cashless basis at an exercise price of $0.01 per share. On November 25, 2014, 1,250,000 warrants were exercised which resulted in the issuance of 1,246,493 shares of common stock. On January 15, 2015, subsequent to the end of the first quarter of 2015, the remaining 1,250,000 warrants were exercised which resulted in the issuance of 1,246,428 shares of common stock and there were no warrants remaining outstanding. The fair value of the common stock and warrants was recorded in additional paid-in capital in the amount of $17,388,000. Applying debt extinguishment accounting, we recorded a loss on extinguishment of debt of $4,318,000 in our first quarter of 2015. The loss also included $1,232,000 of broker, legal and accounting fees related to the exchange transaction.

To accommodate the October 2014 debt transactions described above, on October 20, 2014, we entered into supplemental indentures relating to our 8.50% Secured Notes and to our 10.875% Notes. Additionally, on October 20, 2014, we entered into an amendment to our senior secured credit agreement, dated as of September 16, 2011, as previously amended, with PNC Bank. Under the amendment, PNC Bank consented to the transactions contemplated by the 8.50% New Convertible Notes and the exchange transaction, referred to above.

Senior Secured Credit Facility - We are party to a revolving credit and security agreement with PNC Bank dated as of September 15, 2011, as amended from time to time (the “Credit Agreement”). On September 22, 2014, we amended the Credit Agreement to reduce the maximum principal amount of the revolving credit facility provided by the Credit Agreement (the “Senior Secured Credit Facility”) from $35,000,000 to $20,000,000, extend the maturity date of the Senior Secured Credit Facility from October 1, 2014 to December 1, 2016, reduce the cash balance we are required to maintain in an account at PNC Bank from $15,000,000 to $2,500,000, and modify the fixed charge coverage covenant by eliminating the requirement for the four fiscal quarters ended September 28, 2014 and changing the measurement periods thereafter for the fixed charge coverage covenant by excluding from such measurement periods all fiscal quarters ended on or prior to September 28, 2014.

In April 2015, we further amended the Credit Agreement to maintain compliance with a preexisting financial covenant. This amendment modified the fixed charge coverage covenant under our Credit Agreement to eliminate the requirement for our quarters ended March 29, 2015, June 28, 2015 and September 27, 2015 and to change the measurement periods starting with our quarter ending December 27, 2015 by excluding from such measurement periods all quarters ended before September 27, 2015, and implemented an additional earnings before interest, taxes, and depreciation and amortization (“EBITDA”) covenant for our quarters ended March 29, 2015, June 28, 2015 and September 27, 2015.

On December 10, 2015, we entered into a ninth amendment to our Credit Agreement with PNC Bank. The amendment modifies the Credit Agreement to defer application of the fixed charge coverage covenant until December 25, 2016, and impose a minimum EBITDA requirement and a new minimum liability requirement for 2016.

From time to time, we borrow funds under the Senior Secured Credit Facility. As of December 27, 2015, we had no outstanding borrowings. Our average outstanding balance in the thirteen weeks ended December 27, 2015, was $238,000. Amounts borrowed under the Senior Secured Credit Facility bear cash interest at a reduced rate equal to, at our election, either (i) PNC Bank’s alternate base rate (as defined in the Credit Agreement) plus 1.0% per annum, or (ii) LIBOR plus 3.5% per annum if no defaults or events of default exist under the Credit Agreement.

PNC Bank Term Loan - On December 23, 2014, we amended the Credit Agreement to establish a $15,000,000 term loan with PNC. The covenants in the Credit Agreement also apply to this term loan. The amount borrowed under the term loan may consist of domestic rate loans, with a per annum interest rate equal to PNC Bank’s alternate base rate (as defined in the Credit Agreement) plus 2.50%, or LIBOR rate loans, with a per annum interest rate equal to 3.50% plus the greater of the LIBOR rate (as defined in the Credit Agreement) or 1.00%, or a combination thereof. As a result, our interest rate for the term loan has been 4.5%. The principal balance of the term loan is payable in quarterly installments of $750,000 on the first day of each calendar quarter, commencing on April 1, 2015 and continuing through January 1, 2020. In the event that the Credit Agreement is not extended beyond December 1, 2016, the balance due on the term loan will also become due on December 1, 2016. Accordingly, the term loan has been classified as current debt in our consolidated balance sheet. Once repaid, amounts borrowed under the term loan may not be reborrowed. As of December 27, 2015, we had $12,750,000 outstanding.

Capital Leases – As of December 27, 2015, we have remaining capital lease payment obligations of $5,969,000. We expect to enter into more leasing transactions throughout 2016.

CRITICAL ACCOUNTING POLICIES

There have been no material changes in our critical accounting policies from those disclosed in our Annual Report on Form 10-K for the fiscal year ended September 27, 2015.

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued authoritative guidance related to revenue from contracts with customers. The guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. It also requires entities to disclose both quantitative and qualitative information that enable financial statements users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In July 2015, the FASB confirmed a one-year deferral of the effective date of the new revenue standard and allowed early adoption as of the original effective date. The updated guidance will be effective for our first quarter of 2019. We are in the process of assessing the impact, if any, this guidance will have on our consolidated financial statements.

In April 2015, the FASB issued authoritative guidance related to simplifying the presentation of debt issuance costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability. The standard is effective for our first quarter of 2017. Early adoption is permitted for financial statements that have not been previously issued. The new guidance will be applied on a retrospective basis. We are in the process of assessing the impact this guidance will have on our consolidated financial statements..

FORWARD-LOOKING STATEMENTS

Statements contained in this Quarterly Report on Form 10-Q that are not statements of historical fact should be considered forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include, but are not limited to, statements regarding the following: the pending merger transaction, demand for and shipments of our products, our market position, technology, development, program ramps, product mix, pricing, production capabilities and volumes, product costs, inventory levels, our operations in Thailand and the United States, site consolidation efforts, capital spending, repayment of debt, additional liquidity, operating expenses, cost reductions, market adoption and our production of optical image stabilization actuators and our business model, operating performance financial results. Words such as “believe,” “anticipate,” “expect,” “intend,” “estimate,” “approximate,” “plan,” “goal” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Although we believe these statements are reasonable, forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those projected by such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to, those discussed under the heading “Risk Factors” in our most recent Annual Report on Form 10-K for the fiscal year ended September 27, 2015. This list of factors is not exhaustive, however, and these or other factors, many of which are outside of our control, could have a material adverse effect on us and our results of operations. Therefore, you should consider these risk factors with caution and form your own critical and independent conclusions about the likely effect of these risk factors on our future performance. Except as otherwise required by law, we undertake no obligation to update any forward-looking statement for any reason. You should carefully review the disclosures and the risk factors described in this and other documents we file from time to time with the SEC, including our latest Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth herein.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Except as noted in this Item 3, there have been no material changes in our exposure to market risk or to our quantitative and qualitative disclosures about market risk as disclosed in our Annual Report on Form 10-K for the fiscal year ended September 27, 2015.

As of December 27, 2015, we had $113,631,000 carrying value of fixed rate debt which had a fair market value of approximately $128,167,000. We used trading activity to determine the fair market value of the 8.50% Secured Notes. The 10.875% Notes and the 8.50% New Convertible Notes have not had trading activity, therefore the fair market value estimate for these notes was based on the closing market price of comparable debt as of the end of the fiscal quarter.

As of September 27, 2015 we had no outstanding borrowings under our Senior Secured Credit Facility. Such borrowings, if any, are eligible to bear cash interest at a reduced rate equal to, at our election, either (i) PNC Bank’s alternate base rate (as defined in the Credit Agreement) plus 1.0% per annum, or (ii) LIBOR plus 3.5% per annum if no defaults or events of default exist under the Credit Agreement.

The amount borrowed under the term loan may consist of domestic rate loans, with a per annum interest rate equal to PNC Bank’s alternate base rate (as defined in the Credit Agreement) plus 2.50%, or LIBOR rate loans, with a per annum interest rate equal to 3.50% plus the greater of the LIBOR rate (as defined in the Credit Agreement) or 1.00%, or a combination thereof. As a result, our interest rate for the term loan has been 4.5%.Our investing activities are guided by an investment policy, which is reviewed at least annually by our board of directors, and whose objectives are preservation and safety of capital, maintenance of necessary liquidity and maximizing of the rate of return within the stated guidelines. Our policy provides guidelines as to the maturity, concentration limits and credit quality of our investments, as well as guidelines for communication, authorized securities and other policies and procedures in connection with our investing activities.

We are exposed to various market risks and potential loss arising from changes in interest rates and foreign currency exchange rates in connection with our cash, cash equivalents and marketable securities held in investment accounts.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

As of the end of the period covered by this Quarterly Report on Form 10-Q, we conducted an evaluation, under the supervision and with the participation of our management, including our principal executive and principal financial officers, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

We have not identified any change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The disclosure under the heading “Legal Proceedings” in Note 8 to the Condensed Consolidated Financial Statements in Part I, Item 1, of this Quarterly Report on Form 10-Q is incorporated herein by reference.

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended September 27, 2015.

ITEM 6. EXHIBITS

(a) Exhibits:

Unless otherwise indicated, all documents incorporated herein by reference to a document filed with the SEC pursuant to the Exchange Act, are located under SEC file number 001-34838.

2.1		Agreement and Plan of Merger, dated November 1, 2015, by and among Hutchinson Technology Incorporated, Headway Technologies, Inc., and Hydra Merger Sub, Inc. (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed 11/2/2015).
3.1		Amended and Restated Articles of Incorporation of Hutchinson Technology Incorporated (incorporated by reference to Exhibit 3.1 to Quarterly Report on Form 10-Q for the quarter ended 12/29/2002; File No. 0-14709).
3.2		Amended and Restated By-Laws of Hutchinson Technology Incorporated (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed 11/2/2015).
4.1		Fifth Amendment to Rights Agreement, dated as of November 1, 2015, between Hutchinson Technology Incorporated and Wells Fargo Bank, N.A., as Rights Agent (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed 11/2/2015).
10.1*		Fiscal Year 2016 Executive Annual Cash Incentive Plan (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed 10/13/2015).
10.2		Amendment No. 9 to Revolving Credit and Security Agreement, dated as of December 10, 2015, with PNC Bank, National Association, as agent and lender (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed 12/14/2015).
31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
32		Section 1350 Certifications.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase

* Management contract, compensatory plan or arrangement required to be filed as an exhibit to this Quarterly Report on Form 10-Q.

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 3, 2016	By	/s/ Richard J. Penn
			Richard J. Penn
			President and Chief Executive Officer

Date:	February 3, 2016	By	/s/ David P. Radloff
			David P. Radloff
			Vice President and Chief Financial Officer

INDEX TO EXHIBITS

Exhibit No.	Description	Method of Filing
2.1	Agreement and Plan of Merger, dated November 1, 2015, by and among Hutchinson Technology Incorporated, Headway Technologies, Inc., and Hydra Merger Sub, Inc.	Incorporated by Reference
3.1	Amended and Restated Articles of Incorporation of HTI	Incorporated by Reference
3.2	Restated By-Laws of HTI, as amended December 16, 2013	Incorporated by Reference
10.1	Fiscal Year 2016 Executive Annual Cash Incentive Plan.	Incorporated by Reference
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.	Filed Electronically
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.	Filed Electronically
32	Section 1350 Certifications.	Filed Electronically
101.INS	XBRL Instance Document	Filed Electronically
101.SCH	XBRL Taxonomy Extension Schema	Filed Electronically
101.CAL	XBRL Taxonomy Extension Calculation Linkbase	Filed Electronically
101.DEF	XBRL Taxonomy Extension Definition Linkbase	Filed Electronically
101.LAB	XBRL Taxonomy Extension Label Linkbase	Filed Electronically
101.PRE	XBRL Taxonomy Extension Presentation Linkbase	Filed Electronically

EXHIBIT 31.1

CERTIFICATIONS

I, Richard J. Penn, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Hutchinson Technology Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:

February 3, 2016

	/s/ Richard J. Penn
	Richard J. Penn
	President and Chief Executive Officer

EXHIBIT 31.2

CERTIFICATIONS

I, David P. Radloff, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Hutchinson Technology Incorporated;

2 Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:

February 3, 2016

	/s/ David P. Radloff
	David P. Radloff
	Vice President and Chief Financial Officer

EXHIBIT 32

CERTIFICATIONS UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned officers, Richard J. Penn, Chief Executive Officer of Hutchinson Technology Incorporated, a Minnesota corporation (the “Company”), and David P. Radloff, Chief Financial Officer of the Company, hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(i) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended December 27, 2015 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 3, 2016	/s/ Richard J. Penn
	Richard J. Penn
	Chief Executive Officer

Date: February 3, 2016	/s/ David P. Radloff
	David P. Radloff
	Chief Financial Officer

Document And Entity Information - shares	3 Months Ended
Document And Entity Information - shares	Dec. 27, 2015	Feb. 01, 2016
Document Information [Line Items]
Entity Registrant Name	HUTCHINSON TECHNOLOGY INC
Document Type	10-Q
Current Fiscal Year End Date	--09-27
Entity Common Stock, Shares Outstanding		33,904,128
Amendment Flag	false
Entity Central Index Key	0000772897
Entity Filer Category	Accelerated Filer
Document Period End Date	Dec. 27, 2015
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2016
Trading Symbol	HTCH

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 27, 2015	Sep. 27, 2015
Current assets:
Cash and cash equivalents (Note 3)	$ 48,497	$ 39,454
Short-term investments restricted (Note 4)	506	965
Trade receivables, net	11,611	15,860
Other receivables	1,579	2,707
Inventories	37,880	40,148
Other current assets	2,934	3,588
Total current assets	103,007	102,722
Property, plant and equipment, net
Property, plant and equipment, net	129,335	134,509
Other assets	4,529	4,281
Total assets	236,871	241,512
Current liabilities:
Current debt, net of discount (Note 7)	12,750	3,000
Current portion of capital lease obligation	2,181	2,188
Accounts payable	18,593	19,877
Accrued compensation	9,896	9,388
Accrued expenses and other	5,288	4,239
Accrued interest	3,691	2,838
Total current liabilities	52,399	41,530
Long-term debt, net of discount (Note 7)	112,010	122,156
Capital lease obligation	3,788	4,220
Other long-term liabilities	$ 2,589	$ 2,731
Commitments and contingencies (Notes 7, 8, and 14)
Shareholders’ equity:
Common stock, $.01 par value, 100,000,000 shares authorized, 33,839,000 and 33,540,000 issued and outstanding	$ 339	$ 335
Additional paid-in capital (Note 7)	452,528	452,165
Accumulated other comprehensive loss	(4,169)	(4,309)
Accumulated loss	(382,613)	(377,316)
Total shareholders’ equity	66,085	70,875
Total liabilities and shareholders’ equity	$ 236,871	$ 241,512

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 27, 2015	Sep. 27, 2015
Common Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Common Stock, Shares Authorized	100,000,000	100,000,000
Common Stock, Shares, Issued	33,839,000	33,540,000
Common Stock, Shares, Outstanding	33,839,000	33,540,000

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Dec. 27, 2015	Dec. 28, 2014
Net sales	$ 63,927	$ 72,423
Cost of sales	52,206	60,959
Gross profit	11,721	11,464
Research and development expenses	5,857	6,042
Selling, general and administrative expenses	5,207	5,984
Merger related expenses	3,437	0
Severance and site consolidation expenses (Note 11)	0	159
Loss from operations	(2,780)	(721)
Other income (expense), net	151	(555)
Loss on extinguishment of long-term debt (Note 7)	0	(4,318)
Interest income	12	4
Interest expense	(3,283)	(4,453)
Loss before income taxes	(5,900)	(10,043)
Benefit for income taxes (Note 13)	(603)	(145)
Net loss	$ (5,297)	$ (9,898)
Basic loss per share (in Dollars per share)	$ (0.16)	$ (0.32)
Diluted loss per share (in Dollars per share)	$ (0.16)	$ (0.32)
Weighted-average common shares outstanding (in shares)	33,674	30,548
Weighted-average diluted shares outstanding (in shares)	33,674	30,548

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended
	Dec. 27, 2015	Dec. 28, 2014
Net loss	$ (5,297)	$ (9,898)
Other comprehensive gain (loss), net of tax:
Gain (loss) on foreign currency translation, net of income taxes of $0	140	(525)
Other comprehensive gain (loss)	140	(525)
Total comprehensive loss	$ (5,157)	$ (10,423)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Dec. 27, 2015	Dec. 28, 2014
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Tax	$ 0	$ 0

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Dec. 27, 2015	Dec. 28, 2014
OPERATING ACTIVITIES:
Net loss	$ (5,297)	$ (9,898)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization	6,708	8,201
Stock-based compensation	338	291
(Gain) loss on disposal of assets	(184)	5
Non-cash interest expense	354	858
Loss on extinguishment of debt (Note 7)	0	4,318
Severance and site consolidation expenses (Note 11)	0	(27)
Changes in operating assets and liabilities	8,717	(606)
Cash provided by operating activities	10,636	3,142
INVESTING ACTIVITIES:
Capital expenditures	(1,363)	(6,285)
Proceeds from the sale and sale/leaseback of equipment	321	836
Change in restricted cash (Note 3)	48	(42,570)
Purchases of marketable securities	(506)	(965)
Sales/maturities of marketable securities	965	965
Cash used for investing activities	(535)	(48,019)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock	29	24
Repayments of capital lease	(602)	(521)
Repayments of revolving credit line	(17,471)	(55,901)
Proceeds from revolving credit line	17,471	46,368
Repayments of debt	(750)	0
Proceeds from private placement of debt	0	37,500
Proceeds from term loan	0	15,000
Debt refinancing costs	0	(3,175)
Cash (used for) provided by financing activities	(1,323)	39,295
Effect of exchange rate changes on cash	265	1,199
Net increase (decrease) in cash and cash equivalents	9,043	(4,383)
Cash and cash equivalents at beginning of period	39,454	37,939
Cash and cash equivalents at end of period	48,497	33,556
Supplemental cash flow disclosure:
Cash interest paid (net of amount capitalized)	1,826	474
Income taxes paid	20	3
Assets acquired through capital lease	131	647
Non-cash exchange of debt for equity (Note 7)	$ 0	$ 15,000

BASIS OF PRESENTATION

3 Months Ended

Dec. 27, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Accounting [Text Block]

(1) BASIS OF PRESENTATION

ENTRY INTO MERGER AGREEMENT

3 Months Ended

Dec. 27, 2015

Entry into Merger Agreement [Abstract]

Entry into Merger Agreement [Text Block]

(2) ENTRY INTO MERGER AGREEMENT

	·	$3.62 in cash, without interest, plus
	·	up to $0.38 in cash, without interest (the “Additional Consideration”).

During the thirteen weeks ended December 27, 2015, we incurred $3,437,000 of expenses related to the pending Merger.

CASH AND CASH EQUIVALENTS

3 Months Ended

Dec. 27, 2015

Cash and Cash Equivalents [Abstract]

Cash and Cash Equivalents Disclosure [Text Block]

(3) CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of all highly liquid investments with original maturities of three months or less.

INVESTMENTS

3 Months Ended

Dec. 27, 2015

Investments, Debt and Equity Securities [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

(4) INVESTMENTS

A summary of our investments is as follows:

	December 27, 2015		September 27, 2015
Available-for-sale securities
U.S government debt securities	$	506	$	965

As of December 27, 2015, our short-term investments were scheduled to mature within one year.

TRADE RECEIVABLES

3 Months Ended

Dec. 27, 2015

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

(5) TRADE RECEIVABLES

September 27, 2015			Increases in the Allowance Related to Warranties Issued			Reductions in the Allowance for Returns Under Warranties			December 27, 2015
$	623		$	275		$	(335)		$	563

INVENTORIES

3 Months Ended

Dec. 27, 2015

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

(6) INVENTORIES

	December 27, 2015		September 27, 2015

Raw materials	$	17,301	$	19,236
Work in process		8,678		9,537
Finished goods		11,901		11,375
	$	37,880	$	40,148

DEBT

3 Months Ended

Dec. 27, 2015

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

(7) Debt

Debt consisted of the following at December 27, 2015, and September 27, 2015:

	December 27, 2015		September 27, 2015

8.50% Secured Notes	$	63,931	$	63,931
8.50% Secured Notes debt discount		(1,430)		(1,742)
10.875% Notes		12,200		12,200
10.875% Notes debt discount		(191)		(233)
8.50% New Convertible Notes		37,500		37,500
PNC Bank term loan		12,750		13,500
Total debt, net of discounts		124,760		125,156
Less: Current maturities, net of discounts		(12,750)		(3,000)
Total long-term debt, net of discounts	$	112,010	$	122,156

October 2014 Financing Transactions

8.50% Secured Notes

10.875% Notes

Debt refinancing costs of $359,000 were capitalized and are being amortized over four years or until the maturity date. The amortization expense is included in interest expense.

Senior Secured Credit Facility

PNC Bank Term Loan

On December 23, 2014, we entered into an amendment to our existing senior secured credit facility dated as of September 16, 2011, as previously amended, with PNC Bank as agent and lender.

Pursuant to the amendment, a term loan was made to us in the amount of $15,000,000. The covenants in the Credit Agreement also apply to this term loan.The term loan may consist of domestic rate loans, with a per annum interest rate equal to PNC Bank’s alternate base rate (as defined in the Credit Agreement) plus 2.50%, or LIBOR rate loans, with a per annum interest rate equal to 3.50% plus the greater of the LIBOR rate (as defined in the Credit Agreement) or 1.00%, or a combination thereof. As a result, our interest rate for the first quarter of 2015 was 4.5%. The principal balance of the term loan is payable in quarterly installments of $750,000 on the first day of each calendar quarter, commencing on April 1, 2015 and continuing through January 1, 2020. In the event that the Credit Agreement is not extended beyond December 1, 2016, the balance due on the term loan will also become due on December 1, 2016. Accordingly, the term loan has been classified as current debt in our consolidated balance sheet. Once repaid, amounts borrowed under the term loan may not be reborrowed. As of December 27, 2015, we had $12,750,000 outstanding.

COMMITMENTS AND CONTINGENCIES

3 Months Ended

Dec. 27, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

(8) COMMITMENTS AND CONTINGENCIES

Lease Commitments

We have commitments under various capital and operating lease agreements. Assets acquired under capital leases are depreciated over the useful life of the asset.

The future minimum lease payments for all capital and operating leases as of December 27, 2015, are as follows:

	Capital Leases		Operating Leases
2016	$	1,978	$	704
2017		2,395		320
2018		1,402		249
2019		605		218
Thereafter		19		72
Total future minimum lease payments		6,399		1,563
Less: Interest		(430)		–
Total future minimum lease payments excluding interest	$	5,969	$	1,563

Legal Proceedings

In November and December 2015, following the announcement of the Merger, four actions were filed by purported shareholders of the company in the United States District Court for the District of Minnesota. The actions are captioned David Erickson v. Hutchinson Technology Incorporated, et al., Case No. 0:15-cv-04261-DSD-LIB, Stephen M. Harnik v. Hutchinson Technology Incorporated, et al., Case No. 0:15-cv-04321, Jesse Hendricks v. Richard J.Penn, et al., Case No. 0:15-cv-04338, and Matthew Ridler and Lori Ridler v. Hutchinson Technology Incorporated, Case No. 0:15-cv-04356-MJD-TNL. The plaintiffs each purport to bring their action as a class action on behalf of the company’s public shareholders. All four complaints name the company and its directors as defendants, and allege that they have violated Sections 14(a) and 20(a) of, and Rule 14a-9 under, the Securities Exchange Act of 1934 by filing a preliminary proxy statement that contains materially incomplete and misleading statements and omissions. The Hendricks complaint also names Parent and Merger Subsisiaryas defendants, and includes claims under state law for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, and equitable relief under the Minnesota Business Corporation Act. The Hendricks complaint alleges that the company’s directors breached their fiduciary duties to the company by operating an inadequate sale process, agreeing to a merger with Parent and Merger Subsidiary at an unfair price, and agreeing to deal protection provisions that are unfavorable to the company and its shareholders. All of the federal complaints seek injunctive and equitable relief, including an order enjoining the closing of the Merger until the alleged deficiencies in the preliminary proxy statement have been corrected; damages in an unspecified amount; and an award of plaintiffs’ attorneys’ fees, costs, and disbursements. The defendants have not yet responded to any of the complaints, but intend to move to dismiss the actions. We believe that the actions are without merit, and intend to vigorously defend against all claims asserted

ACCUMULATED OTHER COMPREHENSIVE LOSS

3 Months Ended

Dec. 27, 2015

Stockholders' Equity Note [Abstract]

Comprehensive Income (Loss) Note [Text Block]

(9) ACCUMULATED OTHER COMPREHENSIVE LOSS

Accumulated other comprehensive gain (loss), net of tax (see Note 13 for a discussion of income taxes), was as follows:

	Foreign Currency Translation Adjustments
Balance as of September 27, 2015	$	(4,309)
Other comprehensive gain		140
Balance as of December 27, 2015	$	(4,169)

Balance as of September 28, 2014	$	(543)
Other comprehensive loss		(525)
Balance as of December 28, 2014	$	(1,068)

ASSET IMPAIRMENT

3 Months Ended

Dec. 27, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Asset Impairment Charges [Text Block]

(10) ASSET IMPAIRMENT

SEVERANCE AND SITE CONSOLIDATION EXPENSES

3 Months Ended

Dec. 27, 2015

Restructuring and Related Activities [Abstract]

Restructuring and Related Activities Disclosure [Text Block]

(11) SEVERANCE AND SITE CONSOLIDATION EXPENSES

A summary of our severance and site consolidation expenses as of December 28, 2014, is as follows:

	Severance		Site Consolidation Expenses		Total
Accrual balances, September 28, 2014	$	27	$	–	$	27
Restructuring charges		(19)		178		159
Cash payments		(8)		(178)		(186)
Accrual balances, December 28, 2014		–		–		–

All severance and benefits amounts owed have been paid in full.

OTHER INCOME (EXPENSE)

3 Months Ended

Dec. 27, 2015

Other Income and Expenses [Abstract]

Other Income and Other Expense Disclosure [Text Block]

(12) OTHER INCOME (EXPENSE)

INCOME TAXES

3 Months Ended

Dec. 27, 2015

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

(13) INCOME TAXES

The income tax benefit for the thirteen weeks ended December 27, 2015, was $603,000, compared to the income tax benefit of $145,000 for the thirteen weeks ended December 28, 2014. For the thirteen weeks ended December 27, 2015, the net benefit of $603,000 was made up of credits for the expected future refunds of previously paid U.S. Federal Alternative Minimum Tax, as provided by the Protecting Americans from Tax Hike legislation enacted on December 18, 2015, offset primarily by various foreign withholding and income taxes we incur. For the thirteen weeks ended December 28, 2014, we recognized a $145,000 benefit due to reserves for certain tax refunds that were released due to the expiration of the applicable statute of limitations.

STOCK-BASED COMPENSATION

3 Months Ended

Dec. 27, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Compensation and Employee Benefit Plans [Text Block]

(14) STOCK-BASED COMPENSATION

	Thirteen Weeks Ended
	December 28, 2014
Risk-free interest rate		2.9	%
Expected volatility		80.0	%
Expected life (in years)		8.0
Dividend yield		–

Option transactions during the thirteen weeks ended December 27, 2015, are summarized as follows:

	Number of Shares		Weighted-Average Exercise Price ($)		Weighted-Average Remaining Contractual Life (yrs.)
Outstanding at September 27, 2015		3,338,717		9.52		4.2
Granted		–		–
Exercised		(8,300)		3.03
Expired/Canceled		(196,885)		25.12
Outstanding at December 27, 2015		3,133,532		7.10		5.1
Options exercisable at December 27, 2015		2,728,344		7.66		4.6

The following table summarizes the status of options that remain subject to vesting:

	Number of Shares		Weighted- Average Grant Date Fair Value ($)	Weighted-Average Remaining Contractual Life (yrs.)
Non-vested at September 27, 2015		706,020	2.22	8.6
Granted		–	–
Vested		(300,832)	1.97
Canceled		–	–
Non-vested at December 27, 2015		405,188	2.40	8.6

The following table summarizes information concerning currently outstanding and exercisable stock options:

	Options Outstanding						Options Exercisable
Range of Exercise Prices ($)	Number Outstanding		Weighted-Average Remaining Contractual Life (yrs.)		Weighted-Average Price ($)		Number Exercisable		Weighted-Average Exercise Price ($)
1.45 - 3.00		912,387		7.1		2.12		793,867		1.99
3.01 - 5.00		1,200,627		5.8		3.18		913,959		3.09
5.01 - 10.00		490,383		3.9		7.33		490,383		7.33
10.01 - 37.95		530,135		1.4		24.33		530,135		24.33
Total		3,133,532		5.1		7.10		2,728,344		7.66

RSU transactions during the thirteen weeks ended December 27, 2015, are summarized as follows:

	Number of RSUs		Weighted- Average Grant Date Fair Value ($)
Non-vested at September 27, 2015		691,899		2.90
Granted		–		–
Vested		(355,769)		2.53
Canceled		–		–
Non-vested at December 27, 2015		336,130		3.30

LOSS PER SHARE

3 Months Ended

Dec. 27, 2015

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

(15) LOSS PER SHARE

A reconciliation of these amounts is as follows:

	Thirteen Weeks Ended
	December 27, 2015		December 28, 2014
Net loss	$	(5,297)	$	(9,898)

Weighted-average common shares outstanding		33,674		30,548
Dilutive potential common shares		–		–
Weighted-average common and diluted shares outstanding		33,674		30,548

Basic loss per share	$	(0.16)	$	(0.32)

Diluted loss per share	$	(0.16)	$	(0.32)

FAIR VALUE MEASUREMENTS

3 Months Ended

Dec. 27, 2015

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

(16) FAIR VALUE MEASUREMENTS

Financial assets and liabilities that are remeasured and reported at fair value at each reporting period are classified and disclosed in one of the following three levels:

Level 1 –	Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 –	Quoted prices for identical assets and liabilities in markets that are inactive; quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; or
Level 3 –	Inputs that are unobservable for the asset or liability and that are significant to the fair value of the assets or liabilities.

The following tables present our assets that are measured at fair value on a recurring basis at December 27, 2015, and September 27, 2015:

	Fair Value Measurements at December 27, 2015
	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities	$	506	$	–	$	–	$	506

	Fair Value Measurements at September 27, 2015
	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities	$	965	$	–	$	–	$	965

Available-for-Sale Securities

Our available-for-sale securities are comprised of United States government debt securities. The fair value is based on quoted market prices in active markets.

Debt

The estimated fair values of our debt were as follows on each of the indicated dates:

	December 27, 2015				September 27, 2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
8.50% Secured Notes	$	63,931	$	64,011	$	63,931	$	64,011
10.875% Notes		12,200		12,972		12,200		12,972
8.50% New Convertible Notes		37,500		51,184		37,500		32,404
PNC Bank term loan		12,750		12,750		13,500		13,500

Other

SUBSEQUENT EVENTS

3 Months Ended

Dec. 27, 2015

Subsequent Events [Abstract]

Subsequent Events [Text Block]

(17) SUBSEQUENT EVENTS

INVESTMENTS (Tables)

3 Months Ended

Dec. 27, 2015

Investments, Debt and Equity Securities [Abstract]

Schedule of Available-for-sale Securities Reconciliation [Table Text Block]

A summary of our investments is as follows:

	December 27, 2015		September 27, 2015
Available-for-sale securities
U.S government debt securities	$	506	$	965

TRADE RECEIVABLES (Tables)

3 Months Ended

Dec. 27, 2015

Receivables [Abstract]

Summary of Valuation Allowance [Table Text Block]

The following table reconciles the changes in our allowance for sales returns under warranties:

September 27, 2015			Increases in the Allowance Related to Warranties Issued			Reductions in the Allowance for Returns Under Warranties			December 27, 2015
$	623		$	275		$	(335)		$	563

INVENTORIES (Tables)

3 Months Ended

Dec. 27, 2015

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

Inventories consisted of the following at December 27, 2015, and September 27, 2015:

	December 27, 2015		September 27, 2015

Raw materials	$	17,301	$	19,236
Work in process		8,678		9,537
Finished goods		11,901		11,375
	$	37,880	$	40,148

DEBT (Tables)

3 Months Ended

Dec. 27, 2015

Debt Disclosure [Abstract]

Schedule of Debt [Table Text Block]

Debt consisted of the following at December 27, 2015, and September 27, 2015:

	December 27, 2015		September 27, 2015

8.50% Secured Notes	$	63,931	$	63,931
8.50% Secured Notes debt discount		(1,430)		(1,742)
10.875% Notes		12,200		12,200
10.875% Notes debt discount		(191)		(233)
8.50% New Convertible Notes		37,500		37,500
PNC Bank term loan		12,750		13,500
Total debt, net of discounts		124,760		125,156
Less: Current maturities, net of discounts		(12,750)		(3,000)
Total long-term debt, net of discounts	$	112,010	$	122,156

COMMITMENTS AND CONTINGENCIES (Tables)

3 Months Ended

Dec. 27, 2015

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Lease Payments for Capital and Operating Leases [Table Text Block]

The future minimum lease payments for all capital and operating leases as of December 27, 2015, are as follows:

	Capital Leases		Operating Leases
2016	$	1,978	$	704
2017		2,395		320
2018		1,402		249
2019		605		218
Thereafter		19		72
Total future minimum lease payments		6,399		1,563
Less: Interest		(430)		–
Total future minimum lease payments excluding interest	$	5,969	$	1,563

ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables)

3 Months Ended

Dec. 27, 2015

Stockholders' Equity Note [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

Accumulated other comprehensive gain (loss), net of tax (see Note 13 for a discussion of income taxes), was as follows:

	Foreign Currency Translation Adjustments
Balance as of September 27, 2015	$	(4,309)
Other comprehensive gain		140
Balance as of December 27, 2015	$	(4,169)

Balance as of September 28, 2014	$	(543)
Other comprehensive loss		(525)
Balance as of December 28, 2014	$	(1,068)

SEVERANCE AND SITE CONSOLIDATION EXPENSES (Tables)

3 Months Ended

Dec. 27, 2015

Restructuring and Related Activities [Abstract]

Restructuring and Related Costs [Table Text Block]

A summary of our severance and site consolidation expenses as of December 28, 2014, is as follows:

	Severance		Site Consolidation Expenses		Total
Accrual balances, September 28, 2014	$	27	$	–	$	27
Restructuring charges		(19)		178		159
Cash payments		(8)		(178)		(186)
Accrual balances, December 28, 2014		–		–		–

STOCK-BASED COMPENSATION (Tables)

3 Months Ended

Dec. 27, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

The fair value of options at the date of grant and the weighted-average assumptions utilized to determine such values are indicated in the following table:

	Thirteen Weeks Ended
	December 28, 2014
Risk-free interest rate		2.9	%
Expected volatility		80.0	%
Expected life (in years)		8.0
Dividend yield		–

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

Option transactions during the thirteen weeks ended December 27, 2015, are summarized as follows:

	Number of Shares		Weighted-Average Exercise Price ($)		Weighted-Average Remaining Contractual Life (yrs.)
Outstanding at September 27, 2015		3,338,717		9.52		4.2
Granted		–		–
Exercised		(8,300)		3.03
Expired/Canceled		(196,885)		25.12
Outstanding at December 27, 2015		3,133,532		7.10		5.1
Options exercisable at December 27, 2015		2,728,344		7.66		4.6

Schedule of Share-based Compensation, Activity [Table Text Block]

The following table summarizes the status of options that remain subject to vesting:

	Number of Shares		Weighted- Average Grant Date Fair Value ($)	Weighted-Average Remaining Contractual Life (yrs.)
Non-vested at September 27, 2015		706,020	2.22	8.6
Granted		–	–
Vested		(300,832)	1.97
Canceled		–	–
Non-vested at December 27, 2015		405,188	2.40	8.6

Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range [Table Text Block]

The following table summarizes information concerning currently outstanding and exercisable stock options:

	Options Outstanding						Options Exercisable
Range of Exercise Prices ($)	Number Outstanding		Weighted-Average Remaining Contractual Life (yrs.)		Weighted-Average Price ($)		Number Exercisable		Weighted-Average Exercise Price ($)
1.45 - 3.00		912,387		7.1		2.12		793,867		1.99
3.01 - 5.00		1,200,627		5.8		3.18		913,959		3.09
5.01 - 10.00		490,383		3.9		7.33		490,383		7.33
10.01 - 37.95		530,135		1.4		24.33		530,135		24.33
Total		3,133,532		5.1		7.10		2,728,344		7.66

Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block]

RSU transactions during the thirteen weeks ended December 27, 2015, are summarized as follows:

	Number of RSUs		Weighted- Average Grant Date Fair Value ($)
Non-vested at September 27, 2015		691,899		2.90
Granted		–		–
Vested		(355,769)		2.53
Canceled		–		–
Non-vested at December 27, 2015		336,130		3.30

LOSS PER SHARE (Tables)

3 Months Ended

Dec. 27, 2015

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

A reconciliation of these amounts is as follows:

	Thirteen Weeks Ended
	December 27, 2015		December 28, 2014
Net loss	$	(5,297)	$	(9,898)

Weighted-average common shares outstanding		33,674		30,548
Dilutive potential common shares		–		–
Weighted-average common and diluted shares outstanding		33,674		30,548

Basic loss per share	$	(0.16)	$	(0.32)

Diluted loss per share	$	(0.16)	$	(0.32)

FAIR VALUE MEASUREMENTS (Tables)

3 Months Ended

Dec. 27, 2015

Fair Value Disclosures [Abstract]

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

The following tables present our assets that are measured at fair value on a recurring basis at December 27, 2015, and September 27, 2015:

	Fair Value Measurements at December 27, 2015
	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities	$	506	$	–	$	–	$	506

	Fair Value Measurements at September 27, 2015
	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities	$	965	$	–	$	–	$	965

Schedule of Carrying Values and Estimated Fair Values of Debt Instruments [Table Text Block]

The estimated fair values of our debt were as follows on each of the indicated dates:

	December 27, 2015				September 27, 2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
8.50% Secured Notes	$	63,931	$	64,011	$	63,931	$	64,011
10.875% Notes		12,200		12,972		12,200		12,972
8.50% New Convertible Notes		37,500		51,184		37,500		32,404
PNC Bank term loan		12,750		12,750		13,500		13,500

ENTRY INTO MERGER AGREEMENT (Details Textual) - USD ($)	1 Months Ended	3 Months Ended
ENTRY INTO MERGER AGREEMENT (Details Textual) - USD ($)	Nov. 01, 2015	Dec. 27, 2015	Dec. 28, 2014
Entry into Merger Agreement [Line Items]
Cash Acquired from Acquisition	$ 3,620
Additional Cash Acquired From Acquisition	$ 380
Business Acquisition, Share Price	$ 0.01
Payments to Acquire Businesses, Net of Cash Acquired, Total	$ 500,000
Business Combination, Consideration Transferred, Other	$ 17,500,000
Cash		$ 49,900,000
Business Combination, Acquisition Related Costs		$ 3,437,000	$ 0

CASH AND CASH EQUIVALENTS (Details Textual) - USD ($)	Dec. 27, 2015	Sep. 27, 2015
Cash and Cash Equivalents [Line Items]
Restricted Cash and Cash Equivalents, Current	$ 1,629,000	$ 1,677,000

INVESTMENTS (Details) - USD ($) $ in Thousands	Dec. 27, 2015	Sep. 27, 2015
US Government Agencies Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	$ 506	$ 965

INVESTMENTS (Details Textual) - USD ($)	Dec. 27, 2015	Sep. 27, 2015
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Restricted, Current	$ 506,000	$ 965,000

TRADE RECEIVABLES (Details)	3 Months Ended
TRADE RECEIVABLES (Details)	Dec. 27, 2015 USD ($)
Valuation Allowance [Line Items]
Beginning Balance	$ 623,000
Ending Balance	563,000
Increases In The Allowance Related To Warranties Issues [Member]
Valuation Allowance [Line Items]
Increases (Reductions) in the Allowance Related to Warranties Issued	275,000
Decreases In The Allowance Related To Warranties Issued [Member]
Valuation Allowance [Line Items]
Increases (Reductions) in the Allowance Related to Warranties Issued	(335,000)
Allowance for Sales Returns [Member]
Valuation Allowance [Line Items]
Beginning Balance	623,000
Ending Balance	$ 563,000

TRADE RECEIVABLES (Details Textual) - USD ($)	3 Months Ended
TRADE RECEIVABLES (Details Textual) - USD ($)	Dec. 27, 2015	Sep. 27, 2015
Valuation Allowance [Line Items]
Accounts Receivable, Net, Current, Total	$ 11,611,000	$ 15,860,000
Allowance for Doubtful Accounts Receivable, Current	563,000	623,000
Other Receivables, Net, Current, Total	1,579,000	2,707,000
Thai Subsidiary [Member]
Valuation Allowance [Line Items]
Other Receivables	$ 0	$ 1,228,000
HSBC [Member]
Valuation Allowance [Line Items]
Percentage of Early Payment Accounts Receivable Face Value	100.00%
Proceeds from Sale and Collection of Other Receivables	$ 32,754,000
Loans Receivable, Basis Spread on Variable Rate, During Period	1.75%
Bank of America [Member]
Valuation Allowance [Line Items]
Percentage of Early Payment Accounts Receivable Face Value	90.00%
Percentage Of Remaining Payment Accounts Receivable	10.00%
Loans Receivable, Basis Spread on Variable Rate, During Period	1.50%
Other Receivables, Net, Current, Total	$ 16,757,000

INVENTORIES (Details) - USD ($) $ in Thousands	Dec. 27, 2015	Sep. 27, 2015
Inventory [Line Items]
Raw materials	$ 17,301	$ 19,236
Work in process	8,678	9,537
Finished goods	11,901	11,375
Inventory, Net	$ 37,880	$ 40,148

DEBT (Details) - USD ($) $ in Thousands	Dec. 27, 2015	Sep. 27, 2015	Dec. 23, 2014
Debt Instrument [Line Items]
Total debt, net of discounts	$ 124,760	$ 125,156
Less: Current maturities, net of discounts	(12,750)	(3,000)
Total long-term debt, net of discounts	112,010	122,156
8.50% Secured Notes [Member]
Debt Instrument [Line Items]
Notes payable	63,931	63,931
Debt discount	(1,430)	(1,742)
10.875% Secured Notes[Member]
Debt Instrument [Line Items]
Notes payable	12,200	12,200
Debt discount	(191)	(233)
8.50% New Convertible Notes [Member]
Debt Instrument [Line Items]
Notes payable	37,500	37,500
PNC Bank Term Loan [Member]
Debt Instrument [Line Items]
Notes payable	$ 12,750	$ 13,500	$ 15,000

DEBT (Details Textual)		1 Months Ended								3 Months Ended
DEBT (Details Textual)	Jan. 15, 2015 USD ($) shares	Apr. 01, 2015 USD ($)	Dec. 23, 2014 USD ($)	Nov. 25, 2014 USD ($) shares	Oct. 23, 2014 USD ($) $ / shares shares	Sep. 22, 2014 USD ($)	May. 31, 2013 shares	Jan. 22, 2013 USD ($)	Mar. 31, 2012 USD ($) $ / shares shares	Dec. 27, 2015 USD ($)	Dec. 28, 2014 USD ($)	Sep. 27, 2015 USD ($)
Debt Instrument [Line Items]
Restricted Cash and Cash Equivalents, Current										$ 1,629,000		$ 1,677,000
Gains (Losses) on Extinguishment of Debt										0	$ (4,318,000)
Proceeds from Issuance of Debt										0	15,000,000
Revolving Credit Facility [Member] \| PNC Bank [Member]
Debt Instrument [Line Items]
Line of Credit Facility, Average Outstanding Amount										$ 238,000
Revolving Credit Facility [Member] \| PNC Bank [Member] \| London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate										1.00%
Cash and Cash Equivalents Restriced to 8.50% Convertible Notes Related Payments [Member]
Debt Instrument [Line Items]
Restricted Cash and Cash Equivalents, Current					$ 35,000,000
8.50% New Convertible Notes [Member]
Debt Instrument [Line Items]
Debt Instrument, Face Amount					$ 37,500,000
Debt Instrument, Interest Rate, Stated Percentage					8.50%					8.50%		8.50%
Debt Instrument, Convertible, Conversion Ratio Denominator					$ 1,000
Debt Instrument, Convertible, Conversion Ratio Numerator (In Shares) \| shares					266.6667
Number of Days Until the Put Right Expires					120
Debt Instrument, Convertible, Conversion Price \| $ / shares					$ 3.75
Debt Instrument, Repurchase Amount					$ 7,500,000
Long-term Debt, Gross										$ 37,500,000		$ 37,500,000
Debt Instrument, Maturity Date					Oct. 31, 2019
8.50% Convertible Senior Notes [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage					8.50%					8.50%		8.50%
Debt Instrument, Redemption of Convertible Notes	$ 39,822,000
Debt Issuance Cost					$ 1,652,000
Repayments of Convertible Debt	$ 35,000,000
8.50% Senior Secured Second Lien Notes [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage										8.50%		8.50%
Class of Warrant or Right, Exercised During Period \| shares	1,250,000			1,250,000
Class of Warrant or Right, Shares Issued in Warrant Exercise	$ 1,246,428			$ 1,246,493
Debt Conversion, Original Debt, Amount					$ 15,000,000
Debt Conversion, Converted Instrument, Shares Issued \| shares					2,500,000
Debt Conversion, Converted Instrument, Warrants or Options Issued \| shares					2,500,000
Class of Warrant or Right, Exercise Price of Warrants or Rights \| $ / shares					$ 0.01
Adjustments to Additional Paid in Capital, Warrant Issued	$ 17,388,000
Gains (Losses) on Extinguishment of Debt											4,318,000
Adjustments to Additional Paid in Capital, Stock Issued, Own-share Lending Arrangement, Issuance Costs											$ 1,232,000
10.875% Secured Notes [Member]
Debt Instrument [Line Items]
Debt Instrument, Face Amount								$ 12,200,000
Debt Instrument, Interest Rate, Stated Percentage										10.875%		10.875%
Debt Issuance Cost								$ 359,000
Long-term Debt, Gross										$ 12,200,000		$ 12,200,000
Debt Instrument, Redemption Price, Percentage								100.00%
Proceeds from Issuance of Debt								$ 11,590,000
Debt Instrument, Maturity Date								Jan. 15, 2017
PNC Bank Term Loan [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage			3.50%
Long-term Debt, Gross			$ 15,000,000							12,750,000		13,500,000
Minimum LIBOR Rate			1.00%
Debt Instrument, Basis Spread on Variable Rate			2.50%
PNC Bank Term Loan [Member] \| PNC Bank [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Effective Percentage			4.50%
Debt Instrument, Periodic Payment, Principal		$ 750,000
PNC Bank Term Loan [Member] \| Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Line of Credit Facility, Expiration Date						Dec. 01, 2016
PNC Bank Term Loan [Member] \| Revolving Credit Facility [Member] \| Maximum [Member]
Debt Instrument [Line Items]
Line Of Credit Facility, Minimum Bank Balance						$ 15,000,000
Line of Credit Facility, Maximum Borrowing Capacity						35,000,000
PNC Bank Term Loan [Member] \| Revolving Credit Facility [Member] \| Minimum [Member]
Debt Instrument [Line Items]
Line Of Credit Facility, Minimum Bank Balance						2,500,000
Line of Credit Facility, Maximum Borrowing Capacity						$ 20,000,000
8.50% Secured Notes [Member]
Debt Instrument [Line Items]
Debt Instrument, Face Amount									$ 78,931,000
Debt Instrument, Interest Rate, Stated Percentage									8.50%
Class of Warrant or Right, Exercised During Period \| shares	1,250,000			1,250,000			3,869,000
Class of Warrant or Right, Shares Issued in Warrant Exercise	$ 1,246,428			$ 1,246,493
Debt Conversion, Original Debt, Amount					$ 15,000,000
Debt Conversion, Converted Instrument, Shares Issued \| shares					2,500,000
Debt Conversion, Converted Instrument, Warrants or Options Issued \| shares					2,500,000
Class of Warrant or Right, Exercise Price of Warrants or Rights \| $ / shares					$ 0.01				$ 0.01
Adjustments to Additional Paid in Capital, Warrant Issued									$ 8,489,000
Debt Instrument, Face Amount, Registration Statement									38,931,000
Debt Instrument, Face Amount, Private Placement									40,000,000
Debt Instrument, Purchase Price, Private Placement									$ 39,400,000
Long-term Debt, Gross										$ 63,931,000		$ 63,931,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights \| shares									3,869,000
Debt Instrument, Redemption Price, Percentage										100.00%

COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands	Dec. 27, 2015 USD ($)
Capital Leases, Future Minimum Payments Due
Capital Leases, 2016	$ 1,978
Capital Leases, 2017	2,395
Capital Leases, 2018	1,402
Capital Leases, 2019	605
Capital Leases, Thereafter	19
Total future minimum lease payments	6,399
Less: Interest	(430)
Total future minimum lease payments excluding interest	5,969
Operating Leases, Future Minimum Payments Due
Operating Leases, 2016	704
Operating Leases, 2017	320
Operating Leases, 2018	249
Operating Leases, 2019	218
Operating Leases, Thereafter	72
Total future minimum lease payments	1,563
Less: Interest	0
Total future minimum lease payments excluding interest	$ 1,563

ACCUMULATED OTHER COMPREHENSIVE LOSS (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 27, 2015	Dec. 28, 2014
Schedule of Capitalization [Line Items]
Balance as per Beginning Balance	$ (4,309)	$ (543)
Other comprehensive gain (loss)	140	(525)
Balance as per Ending Balance	$ (4,169)	$ (1,068)

SEVERANCE AND SITE CONSOLIDATION EXPENSES (Details) $ in Thousands	3 Months Ended
	Dec. 28, 2014 USD ($)
Restructuring Cost and Reserve [Line Items]
Accrual balances, Beginning balance	$ 27
Restructuring charges	159
Cash payments	(186)
Accrual balances, Ending balance	0
Employee Severance [Member]
Restructuring Cost and Reserve [Line Items]
Accrual balances, Beginning balance	27
Restructuring charges	(19)
Cash payments	(8)
Accrual balances, Ending balance	0
Site Consolidation Expenses [Member]
Restructuring Cost and Reserve [Line Items]
Accrual balances, Beginning balance	0
Restructuring charges	178
Cash payments	(178)
Accrual balances, Ending balance	$ 0

SEVERANCE AND SITE CONSOLIDATION EXPENSES (Details Textual) $ in Thousands	3 Months Ended
	Dec. 28, 2014 USD ($)
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	$ 159

OTHER INCOME (EXPENSE) (Details Textual) - USD ($)	3 Months Ended
OTHER INCOME (EXPENSE) (Details Textual) - USD ($)	Dec. 27, 2015	Dec. 28, 2014
Other (Expense) Income, Net [Member]
Other Income Expense [Line Items]
Foreign Currency Transaction Gain (Loss), before Tax	$ 33,000	$ 640,000

INCOME TAXES (Details Textual) - USD ($)	3 Months Ended
INCOME TAXES (Details Textual) - USD ($)	Dec. 27, 2015	Dec. 28, 2014	Sep. 27, 2015
Income Taxes [Line Items]
Deferred Tax Assets, Valuation Allowance			$ 239,912,000
Income Tax Expense (Benefit)	$ (603,000)	$ (145,000)
Other Tax Expense (Benefit)		$ 145,000

STOCK-BASED COMPENSATION (Details)	3 Months Ended
STOCK-BASED COMPENSATION (Details)	Dec. 28, 2014
Fair Value of Options at the Date of Grant and the Weighted Average Assumptions Utilized to Determine Such Values [Abstract]
Risk-free interest rate	2.90%
Expected volatility	80.00%
Expected life (in years)	8 years
Dividend yield	0.00%

STOCK-BASED COMPENSATION (Details 1) - $ / shares	3 Months Ended	12 Months Ended
STOCK-BASED COMPENSATION (Details 1) - $ / shares	Dec. 27, 2015	Sep. 27, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Outstanding	3,338,717
Number of Shares, Granted	0
Number of Shares, Exercised	(8,300)
Number of Shares, Expired/Canceled	(196,885)
Number of Shares, Outstanding	3,133,532	3,338,717
Number of Shares, Options exercisable	2,728,344
Weighted-Average Exercise Price, Outstanding	$ 9.52
Weighted-Average Exercise Price, Granted	0
Weighted-Average Exercise Price, Exercised	3.03
Weighted-Average Exercise Price, Expired/Canceled	25.12
Weighted-Average Exercise Price, Outstanding	7.10	$ 9.52
Weighted-Average Exercise Price, Options exercisable	$ 7.66
Weighted-Average Remaining Contractual Life, Outstanding	5 years 1 month 6 days	4 years 2 months 12 days
Weighted-Average Remaining Contractual Life, Options exercisable	4 years 7 months 6 days

STOCK-BASED COMPENSATION (Details 2) - $ / shares	3 Months Ended		12 Months Ended
STOCK-BASED COMPENSATION (Details 2) - $ / shares	Dec. 27, 2015	Dec. 28, 2014	Sep. 27, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Non-vested	706,020
Number of Shares, Granted	0
Number of Shares, Vested	(300,832)
Number of Shares, Canceled	0
Number of Shares, Non-vested	405,188		706,020
Weighted-Average Grant Date Fair Value, Non-vested	$ 2.22
Weighted-Average Grant Date Fair Value, Granted	0	$ 2.65
Weighted-Average Grant Date Fair Value, Canceled	1.97
Weighted-Average Grant Date Fair Value, Vested	0
Weighted-Average Grant Date Fair Value, Non-vested	$ 2.4		$ 2.22
Weighted-Average Remaining Contractual Life, Non-vested (yrs.)	8 years 7 months 6 days		8 years 7 months 6 days

STOCK-BASED COMPENSATION (Details 3)	3 Months Ended
STOCK-BASED COMPENSATION (Details 3)	Dec. 27, 2015 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number Outstanding (in Shares) \| shares	3,133,532
Options Outstanding Weighted-Average Remaining Contractual Life (yrs.)	5 years 1 month 6 days
Options Outstanding Weighted-Average Price ($)	$ 7.1
Options Exercisable Number Exercisable (in Shares) \| shares	2,728,344
Options Exercisable Weighted-Average Exercise Price ($)	$ 7.66
Range 01 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Range of Exercise Prices, Minimum	1.45
Range of Exercise Prices, Maximum	$ 3.00
Number Outstanding (in Shares) \| shares	912,387
Options Outstanding Weighted-Average Remaining Contractual Life (yrs.)	7 years 1 month 6 days
Options Outstanding Weighted-Average Price ($)	$ 2.12
Options Exercisable Number Exercisable (in Shares) \| shares	793,867
Options Exercisable Weighted-Average Exercise Price ($)	$ 1.99
Range 02 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Range of Exercise Prices, Minimum	3.01
Range of Exercise Prices, Maximum	$ 5.00
Number Outstanding (in Shares) \| shares	1,200,627
Options Outstanding Weighted-Average Remaining Contractual Life (yrs.)	5 years 9 months 18 days
Options Outstanding Weighted-Average Price ($)	$ 3.18
Options Exercisable Number Exercisable (in Shares) \| shares	913,959
Options Exercisable Weighted-Average Exercise Price ($)	$ 3.09
Range 03 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Range of Exercise Prices, Minimum	5.01
Range of Exercise Prices, Maximum	$ 10.00
Number Outstanding (in Shares) \| shares	490,383
Options Outstanding Weighted-Average Remaining Contractual Life (yrs.)	3 years 10 months 24 days
Options Outstanding Weighted-Average Price ($)	$ 7.33
Options Exercisable Number Exercisable (in Shares) \| shares	490,383
Options Exercisable Weighted-Average Exercise Price ($)	$ 7.33
Range 04 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Range of Exercise Prices, Minimum	10.01
Range of Exercise Prices, Maximum	$ 37.95
Number Outstanding (in Shares) \| shares	530,135
Options Outstanding Weighted-Average Remaining Contractual Life (yrs.)	1 year 4 months 24 days
Options Outstanding Weighted-Average Price ($)	$ 24.33
Options Exercisable Number Exercisable (in Shares) \| shares	530,135
Options Exercisable Weighted-Average Exercise Price ($)	$ 24.33

STOCK-BASED COMPENSATION (Details 4) - Restricted Stock Units (RSUs) [Member]	3 Months Ended
	Dec. 27, 2015 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of RSUs, Beginning Balance \| shares	691,899
Granted \| shares	0
Vested \| shares	(355,769)
Canceled \| shares	0
Number of RSUs, Ending Balance \| shares	336,130
Weighted-Average Grant Date Fair Value, Beginning \| $ / shares	$ 2.9
Granted \| $ / shares	0
Vested \| $ / shares	2.53
Canceled \| $ / shares	0
Weighted-Average Grant Date Fair Value, Ending \| $ / shares	$ 3.3

STOCK-BASED COMPENSATION (Details Textual) - USD ($)	3 Months Ended
STOCK-BASED COMPENSATION (Details Textual) - USD ($)	Dec. 27, 2015	Dec. 28, 2014	Jan. 20, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized Share Based Compensation Expenses	$ 1,775,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Aggregate Intrinsic Value	1,820,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Aggregate Intrinsic Value	$ 1,711,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	18 months
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 0	$ 2.65
Selling, General and Administrative Expenses [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated Share-based Compensation Expense	$ 338,000	$ 291,000
2011 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized			1,200,000

LOSS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Dec. 27, 2015	Dec. 28, 2014
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Net loss	$ (5,297)	$ (9,898)
Weighted-average common shares outstanding	33,674	30,548
Dilutive potential common shares	0	0
Weighted-average diluted shares outstanding	33,674	30,548
Basic loss per share	$ (0.16)	$ (0.32)
Diluted loss per share	$ (0.16)	$ (0.32)

LOSS PER SHARE (Details Textual) - USD ($)		1 Months Ended		3 Months Ended
LOSS PER SHARE (Details Textual) - USD ($)	Jan. 15, 2015	Nov. 25, 2014	Oct. 23, 2014	Dec. 27, 2015	Dec. 28, 2014	Sep. 27, 2015
8.50% Convertible Senior Notes [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Debt Instrument, Interest Rate, Stated Percentage			8.50%	8.50%		8.50%
8.50% Senior Secured Second Lien Notes [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Debt Conversion, Converted Instrument, Shares Issued			2,500,000
Debt Conversion, Converted Instrument, Warrants or Options Issued			2,500,000
Class of Warrant or Right, Exercised During Period	1,250,000	1,250,000
Class of Warrant or Right, Shares Issued in Warrant Exercise	$ 1,246,428	$ 1,246,493
Debt Instrument, Interest Rate, Stated Percentage				8.50%		8.50%
8.50% New Convertible Notes [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Debt Instrument, Interest Rate, Stated Percentage			8.50%	8.50%		8.50%
Treasury Stock Method [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount				168,000	1,217,000
If Converted Method [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount				14,630,000	11,993,000
If Converted Method [Member] \| 8.50% Convertible Senior Notes [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Debt Instrument, Interest Rate, Stated Percentage				8.50%	8.50%

FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Thousands	Dec. 27, 2015	Sep. 27, 2015
Assets:
Available-for-sale securities	$ 506	$ 965
Fair Value, Inputs, Level 1 [Member]
Assets:
Available-for-sale securities	506	965
Fair Value, Inputs, Level 2 [Member]
Assets:
Available-for-sale securities	0	0
Fair Value, Inputs, Level 3 [Member]
Assets:
Available-for-sale securities	$ 0	$ 0

FAIR VALUE MEASUREMENTS (Details 1) - USD ($) $ in Thousands	Dec. 27, 2015	Sep. 27, 2015
8.50% Secured Notes [Member]
Carrying Values And Estimated Fair Values Of Debt Instruments [Line Items]
Carrying Amount	$ 63,931	$ 63,931
Fair Value	64,011	64,011
10.875% Notes [Member]
Carrying Values And Estimated Fair Values Of Debt Instruments [Line Items]
Carrying Amount	12,200	12,200
Fair Value	12,972	12,972
8.50% New Convertible Notes [Member]
Carrying Values And Estimated Fair Values Of Debt Instruments [Line Items]
Carrying Amount	37,500	37,500
Fair Value	51,184	32,404
PNC Bank Term Loan [Member]
Carrying Values And Estimated Fair Values Of Debt Instruments [Line Items]
Carrying Amount	12,750	13,500
Fair Value	$ 12,750	$ 13,500

FAIR VALUE MEASUREMENTS (Details Textual)	Dec. 27, 2015	Sep. 27, 2015	Oct. 23, 2014
8.50% Convertible Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	8.50%	8.50%	8.50%
8.50% Secured Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	8.50%	8.50%
10.875% Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	10.875%	10.875%
8.50% New Convertible Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	8.50%	8.50%	8.50%

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