SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 10, 1999
Applied Magnetics Corporation
(Exact name of registrant as specified in its charter)
Delaware 1-6635
(State or other jurisdiction of (Commission file number)
incorporation or organization)
95-1950506
(I.R.S. Employer Identification No.)
75 Robin Hill Road, Goleta, CA 93117
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (805) 683-5353
Page 1 of 6
Exhibit Index on Page 4
<PAGE>
Item 5. Other Events.
On May 12, 1999, Applied Magnetics Corporation (the "Company")
announced that it had entered into an Exchange Agreement, dated May 10, 1999, by
and between the Company and Kenilworth Partners II, LP (the "Exchange
Agreement"), pursuant to which through a private placement the Company will
raise $25 million in cash through the issuance of a new convertible preferred
stock (the "Preferred Stock"). Under the terms of the Exchange Agreement, the
Company will exchange 6,000,000 shares of newly-issued common stock for $24
million principal amount of the Company's 7% Convertible Subordinated Debentures
(the "Debentures"). The Company will then retire the Debentures. The Preferred
Stock will carry a 14% dividend rate, payable initially in shares, and will be
convertible into common shares at a fixed price of $5.375 per share.
The Company also announced that it is embarking upon a significant
cost reduction program in order to realign expenses in response to reduced
projections in revenue and cash flow from operations for the balance of the 1999
calendar year. The reduced projections result in part from recent industry
softness in demand for recording heads and from the Company's being late to
market with certain key products. As part of the Company's cost reduction
program, the Company will reduce its California workforce by approximately 35%
by closing its Milpitas, California facility and by reducing its workforce in
Goleta, California. The Company will take a charge of approximately $12 million
in the current quarter in connection with the associated severance costs and the
write off of certain assets in Milpitas.
Item 7. Financial Statements and Exhibits.
---------------------------------
(c) Exhibits
99.1 Press Release dated May 12, 1999, Relating to $25 Million in
Additional Financing and Reductions in Workforce.
Page 2 of 6
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereto duly authorized.
APPLIED MAGNETICS CORPORATION
By: /s/ Peter T. Altavilla
-------------------------
Name: Peter T. Altavilla
Title: Secretary and Controller
Date: June 2, 1999
Page 3 of 6
<PAGE>
EXHIBIT INDEX
Exhibit Description Page
------- ----------- ----
99.1 Press Release dated May 12, 1999, Relating to $25 Million in 5
Additional Financing and Reductions in Workforce.
Page 4 of 6
<PAGE>
Exhibit 99.1
------------
May 12, 1999, Wednesday
Applied Magnetics Corp. Announces $ 25 Million in Additional Financing and
Reductions in Workforce
GOLETA, Calif.
May 12, 1999--Applied Magnetics Corp. (NYSE:APM) Wednesday announced that
it has entered into an agreement under which the Company will raise $ 25 million
of cash through the issuance of a new convertible preferred stock.
Also under the agreement, the Company will exchange 6.0 million shares of
newly-issued common stock for $ 24 million principal amount of the Company's 7%
Convertible Subordinated Debentures. The Company will retire the 7% Convertible
Subordinated Debentures which it will receive in the exchange.
The newly-issued preferred stock will carry a 14% dividend rate, payable
initially in shares, and will be convertible into common shares at a fixed price
of $ 5.375 per share, a premium to Wednesday's closing price of 76%.
"This additional funding along with a continued focus on lowering our
costs will help us to bridge the gap until we complete qualification on 4.3 and
6.4 gigabyte per 3.5 inch disk programs and begin to ramp production," said
Craig Crisman, Chairman and CEO.
The Company also announced that in response to reduced projections in
revenue and cash flow from operations for the balance of calendar 1999, the
Company is embarking on a significant cost reduction program in order to realign
expenses to adapt to the new environment.
The change in forecast comes in part due to the recent industry softness
in demand for recording heads and in part due to the Company being late to
market with certain key products. As a result, the Company is reducing its
California workforce approximately 35% by closing its facility in Milpitas as
well as making additional reductions at its headquarters in Goleta.
Total savings from these cost reductions will be approximately $ 14
million per quarter. Wafer development, which had been centered in the Milpitas
facility, will be consolidated into the Goleta location.
Page 5 of 6
<PAGE>
"Significant cost savings will be realized by the operation of a single
wafer fab facility. This move is also expected to allow the Company to more
rapidly integrate new designs into production," added Crisman.
The Company will take a charge of approximately $ 12 million in the
current quarter in connection with associated severance costs and the write off
of certain assets in Milpitas.
The Company also announced that directors Bert Zaccaria and Phil Micciche,
who were formerly associated with DAS Devices Inc., previously acquired by the
Company, elected to resign from the Board of Directors of the Company effective
May 7, 1999.
Applied Magnetics is an 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, the Company employs over 3,400 people around
the world, with facilities in Malaysia, Korea, Singapore and China. The
Company's worldwide web site can be found at www.appmag.com.
Forward-looking statements included in this release are based on estimates
and assumptions made by management of the Company, which, although believed to
be reasonable, are inherently uncertain and difficult to predict. Therefore,
undue reliance should not be placed upon such estimates. Such statements are
subject to certain risks and uncertainties inherent in the Company's business
that could cause actual results to differ materially from those projected. These
factors include, but are not limited to: successful transition to volume
production of MR and GMR disk head products with profitable yields; the limited
number of customers and customer changes in short range and long range plans;
competitive pricing pressures; changes in business conditions affecting the
Company's financial position or results of operations which significantly
increase the Company's working capital needs; the Company's inability to
generate or obtain sufficient capital to fund its working capital needs; the
Company's ability to control inventory levels; domestic and international
competition in the Company's product areas; risks related to international
transactions; and general economic risks and uncertainties.
CONTACT: Applied Magnetics Corp., Goleta
Craig D. Crisman, 805/683-5353
Page 6 of 6
