<PAGE> FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
(X) Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1994
( ) Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from _________ to ________
Commission File No. 1-6635
APPLIED MAGNETICS CORPORATION
(Exact name of registrant as specified in its charter)
A Delaware Corporation 95-1950506
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
75 Robin Hill Road, Goleta, California 93117
(Address of principal executive offices)
Registrant's telephone number, including area code: (805) 683-5353
(No Change)
- - ---------------------------------------------------------------------
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
ninety days. Yes X No
--- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock: 22,163,812 $.10 par value common stock as of
August 10, 1994.
-1-
<PAGE>
PART 1. FINANCIAL INFORMATION
- - -----------------------------
Item 1. Financial Statements
--------------------
The unaudited condensed consolidated financial statements included
herein have been prepared by Applied Magnetics Corporation and its
subsidiaries (the "Company") pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations.
The unaudited condensed consolidated financial statements and selected
notes included therein should be read in conjunction with the audited
consolidated financial statements and the notes thereto included in
the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1993.
The following unaudited condensed consolidated financial statements
reflect all adjustments, consisting only of normal and recurring
adjustments, which, in the opinion of management, are necessary to
present fairly the consolidated financial position and results of
operations for the periods presented.
-2-
<PAGE>
APPLIED MAGNETICS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations - Unaudited
(in thousands except share and per share data)
<TABLE>
<CAPTION>
For the three months For the nine months
ended June 30, ended June 30,
-------------------- --------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 70,289 $ 97,351 $ 211,367 $ 258,778
Cost of sales 71,552 77,803 205,541 208,072
----------- ----------- ---------- ---------
Gross profit
(loss) (1,263) 19,548 5,826 50,706
----------- ----------- ---------- --------
Research and
development
expenses, net 7,953 4,590 18,747 12,195
Selling, general and
administrative expenses 5,665 6,493 16,086 19,821
---------- ---------- ---------- --------
Total operating
expenses 13,618 11,083 34,833 32,016
---------- ---------- ---------- ---------
Income (Loss) from
operations (14,881) 8,465 (29,007) 18,690
Interest income 159 201 664 561
Interest expense (1,275) (847) (3,155) (4,890)
Other income (expense),
net (293) 126 96 1,000
---------- ---------- --------- ---------
Income (Loss) before
taxes (16,290) 7,945 (31,402) 15,361
Provision for income
taxes 215 635 723 2,304
---------- ---------- --------- ---------
Net income (loss) $ (16,505) $ 7,310 $ (32,125) $ 13,057
=========== ========== ========== =========
Net income (loss)
per share:
Primary $ (0.75) $ 0.33 $ (1.45) $ 0.65
=========== ========== ========== ========
Fully diluted $ (0.75) $ 0.32 $ (1.45) $ 0.64
=========== ========== ========== ========
Weighted average
common and dilutive
equivalent shares
outstanding:
Primary 22,081,043 22,486,074 22,082,451 22,037,361
=========== =========== =========== ==========
Fully diluted 22,081,043 23,365,332 22,082,451 20,775,101
=========== =========== =========== ==========
</TABLE>
The accompanying Selected Notes to Condensed Consolidated Financial
Statements are an integral part of these consolidated statements.
-3-
<PAGE>
APPLIED MAGNETICS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets - Unaudited
(In thousands except share and par value data)
<TABLE>
<CAPTION>
ASSETS
June 30, September 30,
1994 1993
----------- ------------
<S> <C> <C>
Current assets:
Cash and equivalents $ 25,247 $ 49,371
Accounts receivable, net 27,898 37,873
Inventories 43,184 42,426
Receivable due from
Hitachi Metals, Ltd. 1,074 5,170
Prepaid expenses and other 7,954 7,528
-------- --------
105,357 142,368
-------- --------
Property, plant and equipment,
at cost 288,863 271,432
-------- -------
Less-accumulated depreciation (160,961) (152,024)
-------- -------
127,902 119,408
-------- -------
Notes receivable, net 8,498 9,630
Other assets 13,295 7,110
-------- -------
$255,052 $278,516
======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Current portion of
long-term debt $ 21,726 $ 10,435
Notes payable 45,215 35,198
Accounts payable 31,594 28,287
Accrued payroll and
benefits 12,226 12,145
Unearned revenue - 3,383
Other current liabilities 17,325 19,000
-------- --------
128,086 108,448
-------- --------
Long-term debt, net 856 11,550
-------- --------
Other liabilities 6,766 7,423
-------- --------
Shareholders' investment:
Preferred stock, $.10 par value,
authorized 5,000,000 shares,
none issued and outstanding - -
Common stock, $.10 par value,
authorized 40,000,000 shares,
issued 22,163,812 as of
June 30, 1994, and 22,153,742
as of September 30, 1993 2,216 2,215
Paid-in capital 178,566 178,533
Retained deficit (60,234) (28,109)
------- -------
120,548 152,639
Treasury stock, at cost
(88,368 shares as of
June 30, 1994, and
79,328 as of September 30,
1993) (787) (736)
Unearned restricted stock
compensation (417) (808)
-------- -------
119,344 151,095
-------- -------
$255,052 $278,516
======== ========
</TABLE>
The accompanying Selected Notes to Condensed Consolidated Financial
Statements are an integral part of these consolidated balance sheets.
-4-
<PAGE>
APPLIED MAGNETICS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows - Unaudited
(In thousands)
<TABLE>
<CAPTION>
For the nine months ended
June 30,
-------------------------
1994 1993
----- ----
<S> <C> <C>
Cash Flows from Operating
Activities:
Net income (loss) $ (32,125) $ 13,057
Adjustments to derive
cash flows:
Depreciation and amortization 16,881 22,105
Provision for receivable
allowances and related costs 100 400
Deferred tax provision - 491
Amortization of unearned
restricted stock
compensation 197 785
Other assets (4,621) (3,634)
Other liabilities (657) (42)
Net assets of discontinued
operations - (501)
Other, net 578 809
Working capital changes
affecting cash flows
from operations:
License fee receivable - 9,000
Receivable from broker - 7,070
Accounts receivable 9,875 (28,953)
Receivable due from Hitachi Metals, Ltd. 4,096 -
Inventories (758) (13,704)
Prepaid expenses and other (1,228) (2,765)
Accounts payable 3,307 5,353
Accrued payroll and benefits 81 2,605
Unearned revenue (3,383) 5,037
Other current liabilities (1,818) (1,077)
--------- --------
Net cash flows (used in) provided
by operating activities (9,475) 16,036
--------- --------
Cash Flows from Investing Activities:
Additions to property, plant and
equipment (27,870) (48,880)
Proceeds from sale of businesses - 10,449
Notes receivable 1,958 646
Other 516 625
-------- --------
Net cash flows used in investing
activities (25,396) (37,160)
-------- --------
Cash Flows from Financing Activities:
Proceeds from debt 116,832 85,860
Repayment of debt (107,045) (105,076)
Proceeds from sale of common stock - 66,421
Reduction (Purchase) of treasury stock (51) (47)
Net cash flows provided by financing
activities 228 1,224
-------- --------
9,964 48,382
-------- --------
Effect of Exchange Rate Changes
on Cash and Equivalents 783 (1,092)
-------- --------
Net (Decrease) Increase in Cash
and Equivalents (24,124) 26,166
-------- --------
Cash and Equivalents at
Beginning of Period 49,371 11,473
-------- --------
Cash and Equivalents at
End of Period $ 25,247 $ 37,639
========= ========
</TABLE>
-5-
<PAGE>
APPLIED MAGNETICS CORPORATION AND SUBSIDIARIES
Selected Notes to Condensed Consolidated Financial Statements
Unaudited
Note A: Inventories
- - --------------------
Inventories are stated at the lower of cost (first-in, first-out) or
market. Inventory costs consist of purchased materials and services,
direct production labor and manufacturing overhead expense. The
components of inventory are as follows (in thousands):
<TABLE>
<CAPTION>
June 30, 1994 September 30, 1993
------------- ------------------
<S> <C> <C>
Purchased parts
and manufacturing
supplies $15,604 $13,810
Work in process 24,172 23,541
Finished goods 3,408 5,075
------- -------
$43,184 $42,426
======= =======
</TABLE>
Note B: Capitalized Interest
- - -----------------------------
The cost of buildings and equipment includes interest expense incurred
prior to the time such assets are placed in service. Interest expense
is net of interest capitalized of $266,000 for the three months ended
June 30, 1993, and $147,000 and $792,000 for the nine months ended
June 30, 1994, and 1993, respectively. The Company has discontinued
capitalizing interest due to immateriality.
Note C: License and Technology Development Agreements
- - ------------------------------------------------------
In December 1992, the Company received a $10.0 million payment from
Hitachi Metals, Ltd. ("HML") associated with inductive thin-film
development efforts under a license and technology agreement entered
into in September 1992 (the "HML Agreement") to further the
development and manufacturing of advanced thin-film and
magnetoresistive ("MR") thin-film magnetic recording disk head
technologies and products. The Company recognized $3.4 million and
$5.0 million for the nine months ended June 30, 1994 and 1993,
respectively, as offsets against development costs incurred during
these respective periods. The performance schedule relating to the
inductive thin-film development efforts was substantially completed as
of March 31, 1994.
-6-
<PAGE>
In March and June 1994, the Company received payments of $7.5 million
and $3.8 million, respectively, from HML associated with the MR
development efforts under the HML Agreement. The Company recognized
as offsets against costs incurred for MR development efforts, $7.2
million and $3.5 million for the nine months ended June 30, 1994 and
1993, respectively. The excess of cost offsets recognized to date
over actual payments received from HML is $1.1 million which has been
recorded as a Receivable due from Hitachi Metals, Ltd. on the
unaudited Condensed Consolidated Balance Sheet at June 30, 1994.
Management believes that the remaining MR development efforts required
for payment of the final $3.7 million will be substantially completed
by September 1994 pursuant to the performance schedule relating to
this development activity.
During fiscal year 1993, the Company entered into additional
technology development agreements (the "Development Agreements") with
four major domestic disk drive companies relating to the development
of MR disk head products. Under these Development Agreements, funding
of an aggregate of $4.0 million is to be paid to the Company of which
$3.1 million has been received at June 30, 1994. Approximately $2.6
million of this funding was recognized as an offset to development
costs in accordance with the contractual billing schedules, of which
$.6 million and $1.5 million were recognized as offsets in the nine
months ended June 30, 1994 and 1993, respectively. This completes the
cost offsets available under the Development Agreements. An aggregate
of $1.4 million, which is based on MR disk head deliveries, will be
recognized as sales when the products are shipped.
The $3.1 million in funding received by the Company under the
Development Agreements includes complete payment, by three of the four
disk drive companies, of their respective funding commitments. The
balance of the $4.0 million is due from one of the Company's major
customers. Because of certain program changes and modifications
relating to the Development Agreement with this customer, there are no
assurances that the remaining balance will be paid by this customer or
that, if paid, it will be paid without delay.
Note D: Restructuring Reserve
- - ------------------------------
In April 1994, the Company announced plans to transfer the
manufacturing operations of its subsidiary, Applied Magnetics
Singapore Pte. Ltd. ("AMS"), to the Company's Malaysian facility and
to make AMS its primary customer support center for Southeast Asia.
The transfer is part of the Company's restructuring plan which was
announced in September 1993 and which provides for consolidation of
worldwide manufacturing resources. In June 1994, the Company
announced plans for a reduction in force of approximately 125
employees, in non-production functions, at its Goleta, California
facilities. This reduction in force was substantially completed in
July 1994. Anticipated costs associated with these actions were
provided for in the fiscal year 1993 restructuring charge. During the
nine months ended June 30, 1994, costs of approximately $3.2 million
were charged to the 1993 restructuring reserve related to
consolidation of manufacturing resources and workforce reductions.
-7-
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
------------------------------------------------------------
In September 1993, the Company announced a restructuring charge of
approximately $50 million in response to significant order
cancellations and reschedules, anticipated product life cycle changes
and related product and technology transitions, and a loss for the
fiscal year ended September 30, 1993. It also announced that it
expected to incur operating losses during the first half of fiscal
1994.
During 1994, the Company began to make volume production shipments for
a number of new disk drive programs, some of which utilize thin-film
nanoslider (50%) products. The Company is also attempting to qualify
on other new drive programs.
The Company has achieved some successes in obtaining "design in"
positions on a number of new programs and has made important progress
in the design and production of new, advanced thin-film disk heads.
However, it has also experienced, in connection with some of these
programs, manufacturing difficulties and production yield problems
which have adversely affected its ability to quickly ramp production
of thin-film disk heads to achieve desired levels of volume shipments
of these products in response to the current strong market demand.
These problems and difficulties have resulted in continued operating
losses and negative cash flows. Future financial results are not
likely to be profitable until the Company is successful in solving its
manufacturing and yield problems.
Actions have been, and are being taken to identify and correct the
production problems mentioned above. However, there are no assurances
that current production problems will be corrected timely or
adequately, that other quality or production problems will not arise,
that the Company will successfully obtain design-in positions on a
sufficient number of new programs that it is currently pursuing or
that it expects to pursue or that the Company will have the cash
resources necessary to sustain it during the period in which it is
attempting to correct these problems. Further, if the Company is
unable, for these or other reasons, to ramp production and delivery
of thin-film disk heads for those disk drive programs on which it has
achieved a design-in position, alternate sources of high volume
production supply may be selected by certain customers for certain
programs.
-8-
<PAGE>
If the Company is not able to solve these manufacturing problems,
successfully increase production, reduce costs or obtain
additional financing, it may not have sufficient cash to fund
continuing operations and may experience decreased revenues,
continuing operating losses and severe cash limitations during the
fourth quarter of fiscal 1994 and succeeding quarters in fiscal 1995.
See "Liquidity and Capital Resources."
In June 1994, the Company announced and in the future will continue
to consider a number of actions in response to recent losses and its
deteriorating financial condition including layoffs and severe restrictions
on capital expenditures. The Company also announced the retention of
Lehman Brothers Inc. as financial advisors to assist the Company in
exploring a number of strategic options to maximize shareholder value.
In August 1994 the Company also announced that it had engaged a crisis
management consulting firm to provide additional assistance to the
Company to develop and implement plans to conserve and increase cash
resources and return the Company to profitability. As part of this
engagement the Company also appointed Mr. Craig Crisman, a partner in
the consulting firm, as Chief Executive Officer.
The disk head industry is intensively competitive and largely
dependent on sales to a limited number of disk drive manufacturers and
systems companies. The market for the Company's disk head products
could be adversely affected if one or more disk drive manufacturers
were to experience severe financial difficulties, enter into a
transaction or combination in which it becomes vertically integrated
with a company that has disk head manufacturing capability or undergo
a significant loss of market share as a result of the technological
innovations of their Competitors or various other factors.
A significant reduction in orders from, or loss of a customer, which
could occur for any of these circumstances or other reasons, could
have a material adverse effect on the Company's operations and
financial condition, including collection of accounts receivable and
realization of inventories relating to that customer.
-9-
<PAGE>
The Company conducts manufacturing operations and has significant
production facilities in the Republic of Korea. Diplomatic and other
efforts appear to have brought near term stability to the region. If
the regional political situation worsens such that actual or threatened
military action or trade restraints develop, the Company's operating
results could be adversely affected.
Net Sales.
- - ---------
Total net sales in the third quarter of fiscal 1994 were generally
level with the second quarter of fiscal 1994 and decreased 27.8% from
the third quarter of fiscal 1993. For the third quarter as compared
to the second quarter of fiscal 1994, sales of thin-film products
increased 5.3%. However, the increase in thin-film sales was offset
by a decline of mature ferrite disk head products of 5.0%. The
decrease in total net sales in the third quarter of fiscal 1994 from
the third quarter of fiscal 1993 was due to a 28.8% decrease in
thin-film sales and a 30.6% decline in ferrite sales. The decline in
thin-film sales from the prior year's third quarter is primarily
attributable to a slower than expected ramp-up of sales of new
thin-film products and lower average unit prices.
The decline in ferrite sales reflects the continuing maturation of the
Company's older ferrite programs as well as unit price erosion and
increased supplies of competitively priced thin-film disk heads with
equal or superior performance characteristics. The Company
anticipates that market demand for ferrite disk heads will continue to
decline for these reasons. Further, the Company has determined that
obtaining sales in thin-film disk head products generally represents
more attractive opportunities for revenue growth and profit
improvement than ferrite disk head business. Accordingly, the Company
expects that its sales of ferrite disk head products will continue to
decline significantly.
The following table sets forth for the periods indicated, net sales by
product line.
<TABLE>
<CAPTION>
For the three months ended
----------------------------------------
June 30, March 31, June 30,
1994 1994 1993
-------- --------- --------
<S> <C> <C> <C>
Thin-film disk head
products
Net sales $32,499 $30,868 $45,664
Percentage of total 46.2% 44.2% 46.9%
Ferrite disk head
products
Net sales $32,458 $34,172 $46,737
Percentage of total 46.2% 48.9% 48.0%
Tape head products
Net sales $ 5,332 $ 4,794 $ 4,950
Percentage of total 7.6% 6.9% 5.1%
Total net sales $70,289 $69,834 $97,351
</TABLE>
-9-
<PAGE>
Gross Profit.
- - ------------
The gross margin (loss) was (1.8%), 4.8% and 20.1% for the third and
second quarters of fiscal 1994 and the third quarter of fiscal 1993,
respectively. The continued decline in the gross margin percentage
during the three months ended June 30, 1994, as compared to the third
quarter of fiscal 1993, was primarily due to lower sales volume, lower
average unit prices and manufacturing difficulties and production
yield problems experienced during the third quarter of fiscal 1994.
Research and Development.
- - ------------------------
Research and development expenses as a percent of net sales were
11.3%, 9.6%, and 4.7% for the third and second quarters of fiscal 1994
and the third quarter of fiscal 1993, respectively. The increase as a
percent of net sales in the third quarter of fiscal 1994 from the
second quarter of fiscal 1994 and from the third quarter of fiscal
1993, respectively, is primarily a result of lower net sales In the
third quarter and second quarter of fiscal 1994, and higher research
and development costs (net of cost offsets from various MR disk head
development agreements) as the Company continues its investment in
advanced technology products and processes.
In connection with the HML Agreement and other MR development
agreements, the Company recognized as cost offsets to research and
development expenses, an aggregate of $2.8 million, $3.9 million, and
$3.8 million for the third and second quarters of fiscal 1994 and the
third quarter of fiscal 1993, respectively. Prior to giving effect to
such funding, research and development expenses as a percent of net
sales were 15.2%, 15.2% and 8.7% for the third and second quarters of
fiscal 1994 and the second quarter of fiscal 1993, respectively.
Selling, General and Administrative Expenses.
- - --------------------------------------------
Selling, general and administrative expenses as a percent of net sales
were 8.1%, 7.3% and 6.7% for the third and second quarters of fiscal
1994, and the third quarter of fiscal 1993, respectively. The
increase during the third and second quarters of fiscal 1994, as
compared to the third quarter of fiscal 1993 was due to lower sales
volume.
Interest Income and Expense.
- - ---------------------------
Interest income in the third quarter of fiscal 1994 was slightly less
than the second quarter of fiscal 1994 and the third quarter of fiscal
1993, primarily due to lower invested cash balances. Interest expense
in the third quarter of fiscal 1994 increased $.4 million from the
second quarter of fiscal 1994 primarily as a result of discontinuance
of capitalizing interest (see Note B), and increased $.4 million from
the same quarter of the prior year primarily as a result of higher
debt outstanding and discontinuance of capitalizing interest.
-10-
<PAGE>
Provision for Income Taxes.
- - --------------------------
The Company's provision for income taxes for the nine months ended
June 30, 1994, consisted primarily of foreign taxes due on
intercompany royalties paid to the Company during the nine months
ended June 30, 1994, and a ratable portion of minimum state taxes that
are expected to be incurred during fiscal year 1994.
Liquidity and Capital Resources
- - -------------------------------
At June 30, 1994, the Company's cash and equivalents were $25.2
million as compared to $49.4 million at September 30, 1993. During the
nine months ended June 30, 1994, the primary sources of cash were
$10.0 million provided by financing activities. Available cash flows
during the nine months ended June 30, 1994 were used for $27.9 million
of capital expenditures, primarily for MR and thin-film disk head
production capacities, and $9.5 million for operating activities.
At June 30, 1994, total debt, including notes payable, amounted to
$67.8 million, an increase of $10.6 million from the balance
outstanding at September 30, 1993. At June 30, 1994, the Company had
fully drawn down its unsecured Malaysian credit facility which has no
stated maturity but is callable on demand from a bank in Malaysia
where the Company has substantial manufacturing operations. Should all or
any significant portion of the Malaysian Credit Facility become unavailable
for any reason, the Company would need to pursue alternative financing
sources.
At June 30, 1994, the Company also had outstanding $10.0 million under
a revolving credit facility with a commercial bank. The credit
facility provides for up to $10.0 million in aggregate commitments and
is supported by a letter of credit issued for the account of HML,
subject to reimbursement by the Company. This credit facility was
recently amended to extend the maturity for one year and now expires
on March 15, 1995. All other terms of the credit facility remain
unchanged. At June 30, 1994, the Company also had outstanding a $10.0
million note held by Conner Peripherals, Inc. ("Conner"), pursuant to
a Note Purchase Agreement, which is secured by accounts receivable
arising from sales to Conner and by certain capital equipment. The
note, which matures in December 1994, is convertible at Conner's
election at any time into shares of the Company's Common Stock at a
conversion price of $10.25 per share. Interest expense on the note
was prepaid at issuance, resulting in net proceeds to the Company of
approximately $8.6 million. For the quarter ended June 30, 1994, the
Company's sales to Conner amounted to approximately 54% of its total
sales for the quarter.
The Company's recent operating losses and deteriorating financial
condition have severely limited the availability of cash and
liquidity. As a result, management has taken immediate steps to
conserve cash and to obtain additional sources of capital in order to
continue operations and to fund both the production ramp-up of thin
film disk head products and the research, development and capital
expenditures required for its MR and advanced thin-film disk head
technologies for future programs.
-11-
<PAGE>
The Company plans approximately $9.0 million in capital expenditures
relating primarily to its thin-film and MR disk head products and
technology in the fourth quarter of fiscal 1994. In addition to its
pursuit of strategic partnering arrangements as a means to obtain
additional capital resources, the Company has implemented and is
considering a number of other actions to conserve cash and increase
liquidity.
Arrangements have been made with one of the Company's largest
customers for accelerated payment terms on product shipments. If, for
any reason, this customer were to discontinue its accelerated payments
for product shipments before the Company is able to satisfactorily
implement other efforts to increase its cash resources, there would be
a significant adverse impact on liquidity. The Company is also pursuing
other arrangements with other customers for accelerated payment terms on
product shipments.
If these efforts to conserve and increase cash and liquidity are not
successful and if the Company is unable to increase its sales and improve
yields in executing customer orders during the fourth quarter of 1994, there
could be a significant adverse impact on liquidity, such that the Company
would not have sufficient cash to fund normal, continuing operations in the
fourth quarter of fiscal 1994 and succeeding quarters in fiscal 1995.
PART II. OTHER INFORMATION
- - ---------------------------
Item 1. Legal Proceedings.
-----------------
The Company has been named a potentially responsible party pursuant to
a Clean Up or Abatement Order (the "Order") and Monitoring and
Reporting Program ("Program") issued by the State of California
Regional Water Quality Control Board (the "Regional Board"). The
Order alleges that the Company is responsible for certain soil and
ground water contamination in connection with a facility previously
occupied by the Company, during a period of approximately 14 years
ending in 1983, as a lessee and used by it to conduct certain
manufacturing operations. While the Company is in the earliest stages
of evaluating the Order and Program, it believes that it has
meritorious defenses to the allegations and that the disposition or
resolution of the claims made and remedies sought by the Order and
Program will not have a materially adverse effect on the financial
condition of the Company.
-12-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
-------- -----------
<S> <C>
11 Statement re computation of per share
Information.
</TABLE>
(b) Reports on Form 8-K. A report on Form 8-K dated June 20,
1994 was filed by the Company with respect to the quarter
ended June 30, 1994.
SIGNATURE
- - ---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
APPLIED MAGNETICS CORPORATION
/s/Kathryn E. Gehrke
--------------------
Kathryn E. Gehrke
Vice President and Chief Financial
Officer
(Principal Financial Officer)
Dated: August 15, 1994 /s/Scott O. Davis
--------------------
Scott O. Davis
Corporate Controller
(Principal Accounting Officer)
<PAGE>
Exhibit 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the three months For the nine months
ended June 30, ended June 30,
-------------------- -------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary Earnings
Per Share:
Net income (loss) $(16,505) $ 7,310 $(32,125) $13,057
======== ======= ======== =======
Weighted average
common shares
outstanding 22,081 22,038 22,082 19,523
Dilutive effect of
stock options - 448 - 514
-------- ------ -------- -------
Primary weighted
average common
and common equivalent
shares 22,081 22,486 22,082 20,037
======== ====== ======== =======
Primary earnings per
share:
Net income (loss) $ (0.75) $ 0.33 $ (1.45) $ 0.65
======== ======= ======== =======
Fully Diluted Earnings
Per Share:
Net income (loss) $(16,505) $ 7,310 $(32,125) $13,057
-------- ------- -------- -------
Interest expense, net
of tax on convertible
note - 132 - 291
-------- ------- -------- -------
Net income (loss) $(16,505) $ 7,442 $(32,125) $13,348
======== ======= ======== =======
Weighted average common
shares outstanding 22,081 22,038 22,082 19,523
Dilutive effect of stock
options - 448 - 563
Dilutive effect of
convertible note - 879 - 689
------- ------ ------- ------
Fully diluted weighted
average and common
equivalent shares 22,081 23,365 22,082 20,775
======= ====== ======= ======
Fully diluted earnings
per share:
Net income (loss) $ (0.75) $ 0.32 $ (1.45) $ 0.64
======== ======= ======== =======
</TABLE>
<PAGE>
APPLIED MAGNETICS CORPORATION
75 ROBIN HILL ROAD
GOLETA, CALIFORNIA 93117
August 15, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Form 10-Q/Applied Magnetics Corporation
Gentlemen:
On behalf of Applied Magnetics Corporation (the "Company"),
transmitted herewith is the Company's Form 10-Q for the quarter ended
June 30, 1994, including financial statements, schedules and exhibits.
This report is being filed electronically pursuant to Regulation S-T.
Yours very truly,
Raymond P. Le Blanc
Vice President,
Secretary and General Counsel
Enclosures
