-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HTBdCNRE0AzgBwiCV1SReeUyGnRCjqqX93nRDy57vo3JGQNNVshCVoJiYsHKok9L i28V27nK9CBPWFeX2GrDkg== 0000889810-96-000015.txt : 19960216 0000889810-96-000015.hdr.sgml : 19960216 ACCESSION NUMBER: 0000889810-96-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951230 FILED AS OF DATE: 19960213 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: APPLIED MAGNETICS CORP CENTRAL INDEX KEY: 0000006948 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 951950506 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06635 FILM NUMBER: 96517766 BUSINESS ADDRESS: STREET 1: 75 ROBIN HILL RD CITY: GOLETA STATE: CA ZIP: 93117 BUSINESS PHONE: 8056835353 MAIL ADDRESS: STREET 1: 75 ROBIN HILL ROAD CITY: GOLETA STATE: CA ZIP: 93117 10-Q 1 APPLIED MAGNETICS 10-Q 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 December 30, 1995 ( ) 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 of (I.R.S. Employer 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: 22,915,400 $.10 par value common stock as of February 12, 1996. Exhibit Index on Page 13 PART I. 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 30,1995. 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- APPLIED MAGNETICS CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Operations - Unaudited (In thousands except share and per share data) For the three months ended December 30, December 31, ------------ ------------ 1995 1994 ---- ---- Net sales $ 94,709 $ 55,373 Cost of sales 71,195 56,167 ---------- ---------- Gross profit (loss) 23,514 (794) ---------- ---------- Research and development expenses 13,315 7,782 Selling, general and administrative expenses 1,671 2,195 ---------- ---------- Total operating expenses 14,986 9,977 ---------- ---------- Profit (loss) from operations 8,528 (10,771) Interest income 538 271 Interest expense (1,426) (994) Other income (expense), net 1,489 (4) ---------- ---------- Profit (loss) before taxes 9,129 (11,498) Provision for income taxes 101 216 ---------- ---------- Net income (loss) $ 9,028 $ (11,714) ========== ========== Net income (loss) per share: $0.38 ($0.53) ========== ========== Weighted average common and dilutive equivalent shares outstanding: 23,774,471 22,074,285 ========== ========== The accompanying Selected Notes to Condensed Consolidated Financial Statements are an integral part of these consolidated statements. -3- APPLIED MAGNETICS CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets - Unaudited (In thousands except share and par value data) December 30, September 30, ASSETS 1995 1995 Current Assets: ---- ---- Cash and equivalents $ 55,668 $ 48,236 Accounts receivable, net 53,433 36,571 Inventories 28,540 32,727 Prepaid expenses and other 8,152 10,411 --------- --------- 145,793 127,945 --------- --------- Property, plant and equipment, at cost 251,785 252,953 Less-accumulated depreciation (148,446) (148,636) --------- --------- 103,339 104,317 --------- --------- Other assets 13,781 14,555 --------- --------- $ 262,913 $ 246,817 ========= ========= LIABILITIES AND SHAREHOLDERS' INVESTMENT Current Liabilities: Current portion of long-term debt $ 11,909 $ 12,004 Bank notes payable 62,078 54,371 Accounts payable 42,715 44,535 Accrued payroll and benefits 9,033 9,361 Other current liabilities 14,313 13,637 --------- --------- 140,048 133,908 --------- --------- Long-term debt, net 2,790 3,254 --------- --------- Other liabilities 6,196 6,063 --------- --------- 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 22,872,580 and 22,619,205 shares at December 30, 1995 and September 30, 1995, respectively 2,287 2,262 Paid-in capital 182,425 181,191 Retained deficit (70,003) (79,031) --------- --------- 114,709 104,422 Treasury stock, at cost (96,603 shares at December 30, 1995 and September 30, 1995) (830) (830) --------- --------- 113,879 103,592 --------- --------- $ 262,913 $ 246,817 ========= ========= The accompanying Selected Notes to Condensed Consolidated Financial Statements are an integral part of these consolidated balance sheets. -4- APPLIED MAGNETICS CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows - Unaudited (In thousands) For the three months ended December 30, December 31, 1995 1994 ---- ---- Cash Flows from Operating Activities: Net income (loss) $ 9,028 $ (11,714) Adjustments to derive cash flows: Depreciation and amortization 7,385 6,544 Provision for receivable allowances and related costs - 50 Amortization of unearned restricted stock compensation - 244 Other assets 119 186 Other liabilities 133 41 Other, net 230 (14) Working capital changes affecting cash flows from operations: Accounts receivable (16,862) (1,952) Inventories 4,187 5,435 Prepaid expenses and other 1,313 395 Accounts payable (1,820) (1,905) Accrued payroll and benefits (263) (1,645) Other current liabilities 676 (778) Net cash flows provided by (used in) --------- --------- operating activities 4,126 (5,113) --------- --------- Cash Flows from Investing Activities: Additions to property, plant and equipment (6,034) (6,274) Proceeds from sale of businesses and real estate - 18,858 Notes receivable 1,010 470 --------- --------- Net cash flows provided by (used in) (5,024) 13,054 investing activities --------- --------- Cash Flows from Financing Activities: Proceeds from debt 45,946 36,481 Repayment of debt (38,553) (36,102) Proceeds from stock options exercised 1,194 72 --------- --------- Net cash flows provided by financing activities 8,587 451 --------- --------- Effect of Exchange rate Changes on Cash and Equivalents (257) (92) --------- --------- Net Increase in Cash and Equivalents 7,432 8,300 --------- --------- Cash and Equivalents at Beginning of Period 48,236 20,761 --------- --------- Cash and Equivalents at End of Period $ 55,668 $ 29,061 ========= ========= The accompanying Selected Notes to Condensed Consolidated Financial Statements are an integral part of these consolidated statements. -5- 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): December 30, September 30, 1995 1995 ------------ ------------- Purchased parts and manufacturing supplies $ 9,140 $ 13,036 Work in process 16,477 17,589 Finished goods 2,923 2,102 ------- -------- $ 28,540 $ 32,727 Note B: Restructuring Reserve ----------------------------- During the three months ended December 30, 1995 and December 31, 1994, expenditures of approximately $0.1 million and $0.6 million, respectively, were charged to the 1993 restructuring reserve, which related to the consolidation of certain of the Company's manufacturing resources. Note C: Sale of Assets ---------------------- During the three months ended December 30, 1995, the Company received final payment of $1.3 million related to the completion of certain milestones and release of the escrow holdback in connection with the sale of the Company's Tape Head business unit to Seagate Technology, Inc. ("Seagate") in December 1994. This completes the sale to Seagate. -6- Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations ------------------------------------------------- During fiscal 1995, in response to market demands, the Company furthered its technological development of the nanoslider form factor thin film disk head products, made substantial progress in thin film production process improvements and increased production capacity for thin film disk heads. This resulted in quarterly improvements in net sales, unit shipments and profit margins for fiscal 1995 and the first quarter of fiscal 1996. The Company's revenue base will transition towards more advanced inductive head technologies and it is working closely with its customers to qualify on the next generation of thin film disk heads. The Company is currently in production of magnetoresistive ("MR") disk heads and continues development efforts to increase production capabilities. Three Months Ended December 30, 1995 ------------------------------------ NET SALES. Net sales in the first quarter of fiscal 1996 increased 71.0% from the first quarter of fiscal 1995. Thin film disk head net sales increased 69.3% for the comparable period primarily due to the Company's continued volume production on qualified customer programs. Ferrite disk head net sales increased 77.3% for the comparable period, but continue to be a small portion of total revenues as the Company focuses its resources on its thin film business. Other net sales primarily include tape head products and disk head products for which the Company only performs head stack assembly ("HSA") functions using thin film and MR disk heads purchased from other manufacturers. Other net sales increased primarily due to assembly of thin film and MR HSA's. The following table sets forth, for the periods indicated, net sales by product line. For the three months ended ---------------------------------- December 30, December 31, 1995 1994 ------------- ------------ Thin film disk head products Net sales $64,617 $38,164 Percentage of total 68.2% 68.9% Ferrite disk head products Net sales $13,505 $ 7,616 Percentage of total 14.3% 13.8% Other products Net sales $16,587 $ 9,593 Percentage of total 17.5% 17.3% Total net sales $94,709 $55,373 -7- GROSS PROFIT. As a percentage of net sales, gross profit was 24.8% and (1.4%) for the first quarter of fiscal 1996 and the first quarter of fiscal 1995, respectively. The increase in gross profit was primarily due to higher sales volumes and production process improvements in thin film disk head shipments. RESEARCH AND DEVELOPMENT. Research and development expenses as a percent of net sales was 14.1% for the first quarter of fiscal 1996 and the first quarter of fiscal 1995. Expenses in dollars during the first quarter of fiscal 1996 increased $5.5 million from the first quarter of fiscal 1995 as the Company focused on next generation thin film inductive technology and MR prototype development. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses as a percent of net sales were 1.8% and 4.0% for the first quarter of fiscal 1996 and the first quarter of fiscal 1995, respectively. Expenses in dollars for the first quarter of fiscal 1996 decreased $0.5 million from the first quarter of fiscal 1995 as the Company benefited from significant staff and cost reductions experienced in fiscal 1995. INTEREST INCOME AND EXPENSE. Interest income in the first quarter of fiscal 1996 increased $0.3 million compared to the first quarter of fiscal 1995 due to higher average cash balances and favorable investment management results. Interest expense in the first quarter of fiscal 1996 increased $0.4 million compared to the first quarter of fiscal 1995 due to higher average debt outstanding and higher average interest rates on the Malaysian bank loans. OTHER INCOME AND EXPENSE. Other income, net, of $1.5 million for the first quarter of fiscal 1996 included $1.3 million related to the completion of certain milestones and release of the escrow holdback in connection with the sale of the Company's Tape Head business unit to Seagate in December 1994. See Note C to the Financial Statements for further discussion of sale of assets. PROVISION FOR INCOME TAXES. The Company's provision for income taxes for the three months ended December 30, 1995, primarily related to federal alternative minimum taxes, state minimum taxes and foreign taxes. Liquidity and Capital Resources ------------------------------- At December 30, 1995, the Company's cash and equivalents increased to $55.7 million from $48.2 million at September 30, 1995. During the first quarter of fiscal 1996 the Company generated $4.1 million from operating activities, comprised of $9.0 million from net income which included $7.4 million of non- cash depreciation and amortization charges and $4.2 million from -8- reduced inventories, offset by $16.9 million in increased accounts receivable as a result of higher sales levels and discontinuance of accelerated payment terms with some of the Company's customers. At December 30, 1995, total debt, including notes payable, amounted to $76.8 million, an increase of $7.1 million from the balance outstanding at September 30, 1995, primarily due to an increase in borrowings on the CIT credit facility. The balance available for additional borrowings under this line of credit was approximately $4.5 million. At December 30, 1995, 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. In May 1995, the Company obtained an extension until March 1996 of the maturity date on a $10.0 million revolving credit facility from a commercial bank. This facility is secured by a letter of credit issued for the account of HML, subject to reimbursement by the Company. The Company's reimbursement obligation to HML is secured by a security interest in and lien on certain machinery and equipment. The Company no longer has accelerated payment terms with any of its customers. However, the liquidity risk associated with the discontinuance of these arrangements is partially ameliorated by the credit available under the CIT credit facility under which available loan proceeds would generally increase as the Company's trade accounts receivable increase. Capital expenditures for the three months ended December 30, 1995, were $6.0 million. In addition, the Company leased $9.7 million of production equipment through operating leases. The Company plans a total of approximately $125 million in new capital expenditures, including equipment to be obtained through operating leases, during fiscal 1996 primarily to continue to improve thin film production processes, increase thin film production volumes and continue development and production of MR technologies and products. The Company's objective is to provide sufficient cash flows from operations and to continue to pursue other financing alternatives in order to meet its operating and capital expenditure requirements. Market and customer demand continues to be strong for the Company's thin film disk heads. In the event that demand for the Company's products declines, management believes that it will be able to reduce its funding requirements for planned, but not committed, capital expenditures. However, if the Company were unable to continue to maintain production yields at acceptable levels in order to permit it to execute customer orders for new drive programs in a timely manner, there could be a significant adverse impact on liquidity. This would require the Company to -9- either obtain additional capital from external sources or to curtail its capital, research and development or working capital expenditures. Such curtailment could adversely affect the Company's future years' operations and competitive position. -10- PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits Exhibit Number Description ------- ----------- 11 Statement re computation of per share information. 27 Financial Data Schedule (b) Reports on Form 8-K. None -11- 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 Dated: February 13, 1996 /s/Craig D. Crisman -------------------------------- Craig D. Crisman Chairman of the Board and Chief Executive Officer (Principal Financial Officer) Dated: February 13, 1996 /s/Peter T. Altavilla -------------------------------- Peter T. Altavilla Corporate Controller (Principal Accounting Officer) -12- EXHIBIT INDEX ------------- Exhibit Number Description Page ------- ----------- ----- 11 Statement re computation of per share information. 14 27 Financial Data Schedule 15 -13- EXHIBIT 11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (in thousands except per share data) For the three months ended December 30, 1995 (Unaudited) --------------------------------------- Primary earnings Fully diluted per share earnings per share Net income $ 9,028 $ 9,028 ======= ======= Weighted average common shares outstanding 22,698 22,698 Dilutive common stock equivalents 1,076 1,175 ------- ------- Total weighted average common shares outstanding 23,774 23,873 ======= ======= Net income per share $ 0.38 $ 0.38 ======= ======= Since fully diluted earnings per share does not reduce the Company's earnings per share by more than 3% of primary earnings per share, the Company has reflected primary earnings per share on the Consolidated Statement of Operations for the three months ended December 30, 1995. -14- EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 30, 1995 AND THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED AS OF DECEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS SEP-28-1996 DEC-30-1995 55,668 0 53,433 0 28,540 145,793 251,785 (148,446) 262,913 140,048 0 0 0 2,287 111,592 262,913 94,709 94,709 71,195 71,195 14,986 0 1,426 9,129 101 0 0 0 0 9,028 0.38 0.38
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