Applied Magnetics Corp. Announces $25 Million in Additional Financing and Reductions in Workforce.

GOLETA, Calif.--(BUSINESS WIRE)--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.

"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.