APM is doomed....toast............finished.............
This report is pathetic, to say the least. Twice the historic declines in pricing??? Significant decrease in shipments to largest customer??? How about no contracts to ship on?? Flat into 2Q??? this company is toast. No one will buy them, no one needs to expand productoin capacity. I would be pissed if i were a shareholder, and i can see shareholder lawsuit already in the future. Long RDRT, and hoping that they reap some of the market share left by the APM vacuum.
Mike
Monday January 12, 6:51 pm Eastern Time
Company Press Release
Applied Magnetics Corp. Announces Unaudited First-Quarter Fiscal Year 1998 Results
GOLETA, Calif.--(BUSINESS WIRE)--Jan. 12, 1998--Applied Magnetics Corp. (NYSE:APM - news) Monday reported a net loss of $39.7 million, or $1.67 per share, including special charges, for the first quarter of fiscal 1998 on sales of $74.4 million, compared with net income of $31.9 million, or $1.10 per share fully diluted, on sales of $121.6 million for the same period last year.
The net loss for the first quarter of fiscal 1998 includes a pretax restructuring charge of $8.4 million. The restructuring charge relates to costs associated with the company's plan to consolidate manufacturing operations with the shutdown of its production facility in Ireland and to write down production assets related to thin-film inductive technology as the company accelerates its transition to MR technology products.
Excluding the restructuring charge, the loss per share was $1.31.
Operating losses were due primarily to a significant decrease in FQ198 shipments to the company's largest customer, which had sharply reduced production schedules as a reaction to the current hard disk drive oversupply in the industry's distribution channel and increasingly competitive pricing pressure.
As announced on Dec. 8, 1997, the company was notified of these changes, which resulted in significant cancellations, reschedules and price reductions during the quarter. Pricing declines for FQ198 were twice the historical rate of decline for the company's products.
Also, because of continued hard disk drive market oversupply, the company no longer anticipates a revenue rebound in FQ298, as was previously announced. The company anticipates that revenue for FQ298 will remain flat from FQ198.
In response to reductions in production schedules, the company has taken several measures to reduce expenditures, including capital spending, in order to realign costs to the current level of business. This includes the planned shutdown of the company's manufacturing facility in Ireland.
Net sales for the first quarter of fiscal 1998 decreased 38.8 percent compared with the same quarter in the prior year and decreased 39.4 percent from net sales of $122.8 million in the fourth quarter of fiscal 1997.
Because of significantly lower sales volumes, pricing declines and lower yields, the gross margin in the first quarter of fiscal 1998 was a negative 9.5 percent, compared with a gross margin of 38.3 percent for the same period last year and 26.7 percent in the fourth quarter of fiscal 1997.
Research and development (R&D) expenses of $23.3 million in the first quarter of fiscal 1998 increased from $11.1 million in the first quarter of the previous fiscal year. The company is anticipating an earlier-than-expected end-of-life date for its existing thin-film inductive products and has been accelerating its new program qualification efforts utilizing MR technology, resulting in the significant increase in R&D expense.
Sales revenue beyond FQ298 will be heavily dependent on the successful qualification and production ramp of new MR programs that are currently under evaluation by the company and its customers. Operating and financial results for FY98 will continue to be impacted as the company works toward qualification status on new MR programs.
Implementation of timely production ramps and improvement of process and production yields on its new programs are critical to the company's future profitability. As a result, FQ398 projected revenue may be significantly lower than FQ298 revenue as the company transitions to MR technology products.
Cash and equivalents at Dec. 27, 1997, decreased to $130.8 million from $162.3 million at Sept. 27, 1997. Additional credit available under the company's existing credit facilities was $42.4 million. Capital expenditures for the quarter ended Dec. 27, 1997, were $30.7 million.
In addition, the company entered into $14.4 million of operating leases for manufacturing equipment. The company believes it will have sufficient cash flows from existing cash reserves and available credit facilities to support the company's transition to MR production during fiscal 1998.
Applied Magnetics is a leading independent manufacturer of magnetic recording heads, head-gimbal assemblies (''HGAs'') and headstack assemblies (''HSAs'') for computer hard disk drives. Founded in 1957, Applied Magnetics is the oldest independent U.S.-based supplier of disk heads to the merchant market.
With headquarters in Goleta (near Santa Barbara, Calif.), the company employs more than 7,800 around the world, with facilities in Malaysia, Korea, Singapore and China. The company's World Wide Web site can be found at www.appmag.com .
Certain statements included in this release are forward-looking and involve risks and uncertainties, and actual results may differ materially. Factors that could cause results to differ include, but are not limited to, the company's successful transition to volume production of MR disk head products with profitable yields; short qualification and product lifecycles and process yields related to its new MR products; the limited number of customers and changes in short- and long-range plans; dependence on continued customer demand for the company's pico form factor inductive thin-film products; competitive pricing pressures due to current industry oversupply conditions; the company's ability to manage inventory levels; domestic and international competition in the company's product areas; risks related to international transactions; general economic risks and uncertainties and other risks disclosed in the company's periodic reports filed with the Securities and Exchange Commission.
APPLIED MAGNETICS CORP. AND SUBSIDIARIES
Condensed Consolidated Summary of Operations -- Unaudited
(In thousands, except per-share data)
Three months ended
Dec. 27, Dec. 28,
1997 1996
Net sales $ 74,412 $121,627
Gross profit (loss) (7,078) 46,597
Research and development
expenses 23,309 11,148
Selling, general and
administrative expenses 1,785 2,044
Restructuring charge (a) 8,400 --
Total operating expenses 33,494 13,192
Income (loss) from
operations (40,572) 33,405
Interest expense, net (772) (1,289)
Other income, net 1,625 279
Income (loss) before
income taxes (39,719) 32,395
Provision for income taxes 30 523
Net income (loss) $(39,749) $ 31,872
Net income (loss) per share: (b)
Earnings per common share $ (1.67) $ 1.37
Earnings per common share --
assuming dilution $ (1.67) $ 1.10
Weighted average number of
common and common equivalent
shares outstanding:
Common shares 23,858 23,267
Common shares -- assuming dilution 23,858 30,861
(a) For the quarter ended Dec. 27, 1997, the company recorded
pretax restructuring charge of approximately $8.4 million,
primarily in connection with planned shutdown of its production
facility in Ireland and writedown of assets related to thin-film
inductive technology.
(b) Earnings per common share is computed by dividing net income
by the weighted average number of shares of common stock
outstanding during the period. Earnings per common share --
assuming dilution is computed based on the weighted average number
of shares of common stock and common stock equivalents outstanding
during the period and as if the company's convertible subordinated
debentures were converted into common stock at the beginning of the
period after giving retroactive effect to the elimination of
interest expense, net of income tax effect, applicable to the
convertible subordinated debentures.
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APPLIED MAGNETICS CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets -- Unaudited
(In thousands, except share and par-value data)
Dec. 27, Sept. 27,
1997 1997
ASSETS
Current assets:
Cash and equivalents $130,767 $162,302
Accounts receivable, net 31,729 52,924
Inventories 46,949 51,438
Prepaid expenses and other 12,690 11,420
Total current assets 222,135 278,084
Property, plant and
equipment, at cost 390,595 371,224
Less: accumulated depreciation (182,545) (181,732)
Property, plant and equipment, net 208,050 189,492
Other assets 11,857 10,412
Total assets $442,042 $477,988
LIABILITIES AND
SHAREHOLDERS' INVESTMENT
Current liabilities:
Current portion of long-term debt $ 495 $ 513
Bank notes payable 50,080 50,188
Accounts payable 46,017 49,103
Accrued payroll and benefits 9,118 11,287
Other current liabilities 16,501 5,829
Total current liabilities 122,211 116,920
Long-term debt, net 115,808 116,030
Other liabilities 2,724 4,257
Shareholders' investment:
Common stock, $.10 par value,
authorized 40 million shares;
issued 23,991,739 shares at
Dec. 27, 1997, and 23,976,711
shares at Sept. 27, 1997 2,399 2,398
Paid-in capital 191,301 191,185
Retained earnings 9,554 49,303
Treasury stock, at cost
(128,384 shares at Dec. 27,
1997, and Sept. 27, 1997) (1,554) (1,554)
Unearned restricted stock
compensation (401) (551)
Total shareholders' investment 201,299 240,781
Total liabilities and
shareholders' investment $442,042 $477,988
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