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Technology Stocks : Applied Magnetics Corp -- Ignore unavailable to you. Want to Upgrade?

To: Don Earl who wrote (11086)	12/20/1997 7:59:00 AM
From: Jonathan Bird	Read Replies (2) \| Respond to of 12298

This suggests that there was about $2 million in foreign currency in the bank during the drop in exchange rates. Note that it does not seem to be counted as a loss but a reduction in cash balances. Don and everyone, thought maybe I could step in here and help translate some of this accounting mumbo jumbo. Unless the reduction in cash ballances is offset by a reduction in liabilities then it always results in an operating loss in the period in which it occurs. That's just the way that GAAP crap works. Look at the next paragraph you quoted: The effect of reporting assets and liabilities stated in foreign currency is included as a component of "Other Income, net" in the Consolidated Statements of Operations. This means that changes in both the cash ballances and the debit balances in foreign currencies are counted as 'Other Income(Expense)' on the income statement. And since it is the "Income Statement", it has everything to do with showing profits and losses. Malaysian debt maturities are not currently hedged, as the credit facilities are held in U.S. dollars. As a result, there is no current foreign transaction exposure associated with the Malaysian debt. I know Don has talked a lot about how APM might show an unexpected gain from the currency exchage rates. But this clearly states that APM was not borrowing Ringits, they were borrowing dollars. Hence, no profit, or loss, is posible due to currency fluctuations in connection with the Malaysian debt. In May 1995, the Company and the Malaysian bank amended this credit facility to include a security interest in the Company's real property holdings in Malaysia and to include certain covenants which preclude the Company from granting liens and security interests in other assets in Malaysia. This basically means that they had to morgage the farm to secure the Malaysian credit facilities back in 1995. That was a tuff year and this was a higher risk manuever from a desparate company. Since these debts are callable on demand, that means that at any time the banks can call the loans back, and if APM doesn't have cash, they will reposess the farm. The borrowings under the new facilities are callable on demand, have no termination date and are unsecured It is good that this additional line of credit is unsecured. In boom times banks are willing to do this. But APM really had no choice. Due to the above mentioned covenants in the 1985 arrangement they cannot secure any more debt with the Maylaysian properties. But if times get tuff again, the lenders will want security for the debt. And since APM can't offer any, the banks will simply close the credit lines. If APM has the cash then that is OK, but if not then they will be forced to raise some cash. The last sentence is interesting. Do they take out a new loan to pay off the old loan every so often? That's exactly right. But as I said above, the risk is that if APM starts to show losses they will not be able to get any more unsecured loans. The total amount available to borrow under all the credit facilities was approximately $81.3 million of which $50.2 million was outstanding at September 27, 1997. So APM has 162.3 million cash or equivilents in the bank. They have 31.1 mil left available for borrowing. And they expect to spend 170.0 million on new stuff this year. 162.3+31.1-170.0=23.4 mil. If APM were to have a breakeven year they would only have 23.4 million in reserves. This is simply too close for comfort. Not enough cushin here. For pete's sake they have a 162 mil cushin at the moment and yet they still feel the need to cary 50 million in Notes Payable to the Maylaysian credit facilities and another 49 million that they currently owe suppliers. The only way that APM is going to be able to stay liquid(not run out of opperating capital) this year AND complete the planned and absoluelty cruicial 170 mil expansion is if either they earn at least 2 dollars a share(diluted, 62 mil dol), or offer more shares, bonds or debentitures. During fiscal 1998, the Company believes it will have sufficient cash flows from existing cash balances, operations, existing credit facilities and equipment lease financing alternatives to meet its operating and capital expenditure requirements as the Company transitions from thin film disk head production to MR disk head production. I honestly don't know how APM can say this. I thought you had to be honest with the shareholders in the SEC fillings. But the numbers just don't add up unless APM is expecting another very profitable year. And you know my opinion on that. Jon Bird

To: Don Earl who wrote (11086)	12/20/1997 9:45:00 AM
From: T Bowl	Read Replies (2) \| Respond to of 12298

Don Earl <<Also the APM and WDC transition to MR seem to be pretty much in sync.>> They'd better be. WDC is their only customer. But the timing has changed in the last few months: "The Company is actively engaged in qualifying on twelve MR programs with four different customers that should position the Company well for increasing MR production in the latter half of fiscal 1997 and in fiscal 1998" APM 10Q MarQ97 Increasing MR production in the latter half of 1997? It didn't happen. Why? "Initial evaluation units of the Company's 2.1 gigabyte per 3.5" disk MR product have been shipped and qualifications are underway on customer programs, with volume production scheduled for the first quarter of fiscal 1998" APM 10Q MarQ97 This was not mentioned in the JunQ 10q or SepQ 10k. I am not aware of ANY 2.1GB MR APM pgm. Also, SEG is qualing currently for a supplier to their 2.1GB pgm. Where is APM? "MR shipments are currently planned to represent approximately 40% of total revenue by FQ398, by which time the Company anticipates that MR products will become more commonly used in the desktop market." APM 10Q JunQ97 And now they are saying 1.7GB will stop shipping in that Q. Does that mean the 1.3 will still be shipping, or has the timing changed since June on how quickly MR will come on the scene. They did not anticipate the timing of the desktop transition very well. "Samples of inductive thin film products with 2.1 gigabytes per 3.5" disk, in conjunction with media that has been optimized for inductive thin film head characteristics, are expected to be provided to several customers for evaluation in the fourth quarter of fiscal 1997. The Company has targeted these products for volume production in the second quarter of fiscal 1998"APM 10Q JunQ97 In June, they still believed the 2.1GB TFI was viable. I'm telling you these guys have missed the boat. Maybe they were mislead by WDC, but they are WAY behind. todd