Applied Magnetics Corp. Announces Unaudited Third-Quarter Fiscal Year 1999 Results and Production Order for MR Heads.

GOLETA, Calif.--(BUSINESS WIRE)--July 22, 1999--

Applied Magnetics Corp. (NYSE:APM) Thursday reported a net loss of $38.0 million, or 92 cents per share, for the third quarter of fiscal 1999, compared with a net loss of $35.8 million, or $1.50 per share, for the same period last year.

The fiscal 1999 loss includes a non-recurring net gain from discontinued operations of $25.9 million related to the sale of its subsidiary, Magnetic Data Technologies LLC, to Dubilier & Co. that was announced on April 12, 1999. The fiscal 1999 net loss also includes a charge of $12.0 million in connection with the closure of its facility in Milpitas, Calif. and workforce reductions in Goleta, as announced on May 12, 1999.

Sales for the quarter declined 84 percent to $5.3 million, compared with sales of $33.6 million for the same period last year and declined 34 percent from sales of $8.0 million reported in the second quarter of fiscal 1999. Gross deficit in the third quarter of fiscal 1999 was $17.6 million, decreasing from $1.9 million reported in the same period last year.

The company continues to incur operating losses and declining revenue due to soft demand experienced by component suppliers to the disk drive industry as well as the company's lack of production orders in the third fiscal quarter for 4.3 gigabyte per 3.5-inch disk heads.

After quarter-end, the company received a production order for delivery of 4.3 gigabyte heads in the fourth fiscal quarter and is currently ramping up production while completing final qualification requirements. Additionally, the company is proceeding with its GMR qualifications at capacities up to 8.6 gigabytes per 3.5-inch disk, and production is anticipated to begin during the second half of calendar year 1999.

"We are pleased to have secured a production order for our 4.3 gigabyte heads as it represents the first step on our road to recovery," said Craig Crisman, chairman and CEO of the company.

Research and development ("R&D") expenses of $25.1 million in the third quarter of fiscal 1999 decreased from $30.5 million in the same period last year. The company is shifting its R&D resources exclusively to GMR technology and products as the company ramps up production of its MR technology.

Cash and equivalents at July 3, 1999, were $6.0 million, a decrease from the $20.2 million reported on April 3, 1999. Since the quarter-end, the company received $25.0 million from a transaction with Kennilworth Partners II LP. The completion of this transaction and a pending rights offering were announced on July 15, 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 more than 3,000 people around the world, with facilities in Malaysia, Korea, Singapore and China. The company's World Wide 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 that 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. -0-

               APPLIED MAGNETICS CORP. AND SUBSIDIARIES
     Condensed Consolidated Summary of Operations - Unaudited
           (In thousands, except share and per share data)

                          Three months ended       Nine months ended
                          July 3,     July 4,      July 3,    July 4,
                           1999        1998         1999       1998

Net sales               $   5,320   $  33,579    $  36,839  $ 166,834
Gross deficit             (17,600)     (1,935)     (42,775)    (5,292)
Research and
 development expenses      25,108      30,513       86,607     82,263
Selling, general &
 administrative expenses    1,861       1,504        5,304      5,079
Writedown of assets and
 restructuring charges (a) 11,977          --       16,477      8,400
Amortization (c)            4,240          --        6,257         --
Purchased in-process
 technology (d)                --          --       28,700         --
Total operating expenses   43,186      32,017      143,345     95,742
Loss from operations      (60,786)    (33,952)    (186,120)  (101,034)
Interest expense, net      (3,251)     (1,959)      (9,202)    (4,825)
Other income (expense)         55         309       (1,230)    (1,146)
Loss from continuing
 operations before taxes  (63,982)    (35,602)    (196,552)  (107,005)
Provision for
 income taxes                  --         240          514        517
Discontinued operations,
 net (b)                   25,941          --       25,941         --
Net loss                $ (38,041)  $ (35,842)   $(171,125) $(107,522)

Net loss per share: (e)
 Loss from continuing
  operations per common
  share                 $   (1.54)  $   (1.50)  $   (5.90)  $   (4.50)
 Discontinued
  operations, net            0.63          --        0.78          --
  Loss per common share $   (0.92)  $   (1.50)  $   (5.13)  $   (4.50)
  Loss per common share
   - assuming dilution  $   (0.92)  $   (1.50)  $   (5.13)  $   (4.50)

Weighted average number
 of common and common
 equivalent shares
 outstanding:
  Common shares            41,427      23,968      33,378      23,917
  Common shares
   - assuming dilution     41,427      23,968      33,378      23,917

(a) For the three and nine months ended July 3, 1999, the company
recorded a pre-tax charge of approximately $12 million for the
writedown of assets and severance payments associated with the closure
of its production facility in Milpitas and workforce reductions in
Goleta. For the nine months ended July 3, 1999, the company recorded a
$4.5 million pre-tax charge in connection with the writedown of
obsolete assets and assets associated with the discontinuation of an
in-house suspension assembly operation. For the nine months ended
July 4, 1998, the company recorded a pre-tax restructuring charge of
approximately $8.4 million, primarily in connection with the shut down
of its production facility in Ireland and writedown of assets related
to thin film inductive technology.

(b) For the three and nine months ended July 3, 1999, discontinued
operations, net, represents an after-tax gain of $25.9 million,
related to the sale of Magnetic Data Technologies LLC.

(c) The excess of the purchase price plus related transaction costs
over the fair value of tangible and intangible assets acquired and
liabilities assumed through the merger with DAS Devices Inc. has been
allocated to (1) goodwill (including a value of $1.6 million
associated with assembled workforce), which is amortized on a straight
line basis over 7 years and (2) developed technology and know-how,
which is amortized on a straight line basis over 3 years and (3) a
covenant not to compete, which is amortized over the terms of the
covenants. For the three and nine months ended July 3, 1999, the
amortization of goodwill was $1,536 and $2,201, respectively; the
amortization of developed technology and know-how was $2,508 and
$3,762, respectively; and the amortization of the covenants was $196
and $294, respectively.

(d) Purchased in-process technology of $28.7 million represents
technology that has not reached technological feasibility and has no
alternative future use. This amount is an allocation of the purchase
price from the merger with DAS Devices Inc.

(e) Loss per common share is computed by dividing net loss by the
weighted average number of shares of common stock outstanding during
the period. Loss per common share - assuming dilution is computed
based on the weighted average number of shares of common stock and
common stock equivalents outstanding during the period and as if the
company's Convertible Subordinated Debentures ("Convertible
Debentures") were converted into common stock at the beginning of the
period after giving retroactive effect to the elimination of interest
expense, net of income tax effect, applicable to the Convertible
Debentures. Common share equivalents were not considered as they would
be anti-dilutive and had no impact on earnings per share for the
periods presented.


               APPLIED MAGNETICS CORP. AND SUBSIDIARIES
           Condensed Consolidated Balance Sheets - Unaudited
                 (In thousands, except per share data)


                                            July 3,        Oct. 3,
                                             1999           1998
Current assets:
 Cash and equivalents                     $   6,046     $  71,674
 Accounts receivable, net                     1,223         7,291
 Inventories                                  1,773        13,054
 Prepaid expenses and other                  11,828        15,590
Total current assets                         20,870       107,609
Property, plant and equipment, at cost      365,153       365,469
Less: accumulated depreciation             (209,310)     (188,022)
Property, plant and equipment, net          155,843       177,447
Cost in excess of net assets of
 business acquired, net                      65,488            --
Other assets                                 12,385        14,462
Total assets                              $ 254,586     $ 299,518

LIABILITIES AND SHAREHOLDERS' INVESTMENT

Current liabilities:
 Current portion of long-term debt        $   1,640     $   1,610
 Bank notes payable                          59,268        58,468
 Accounts payable                            21,235        16,409
 Accrued payroll and benefits                10,514         8,070
 Other current liabilities                   16,455         9,653
Total current liabilities                   109,112        94,210
Long-term debt, net                         115,371       116,767
Other liabilities                             2,820         2,581

Shareholders' investment:
 Common stock, $.10 par value, authorized
  120,000,000 shares, issued 41,557,887
  shares at July 3, 1999, and 24,103,294
  shares at Oct. 3, 1998                      4,156         2,410
  Paid-in capital                           301,931       191,225
  Retained deficit                         (277,190)     (106,065)
 Treasury stock, at cost (130,552 shares
  as of July 3, 1999, and 130,233 shares
  at Oct. 3, 1998)                           (1,581)       (1,577)
 Unearned restricted stock compensation         (33)          (33)
Total shareholders' investment               27,283        85,960
Total liabilities and
 shareholders' investment                 $ 254,586     $ 299,518