Applied Magnetics Corp. announces unaudited second-quarter and first half of fiscal 1997 results.

GOLETA, Calif.--(BUSINESS WIRE)--April 21, 1997--Applied Magnetics Corp. (NYSE:APM) Monday reported net income of $31.1 million, or primary earnings per share of $1.24, for the second quarter of fiscal 1997, a 258 percent increase over the net income of $8.7 million, or primary earnings per share of 36 cents, for the same quarter last year.

Fully diluted earnings per share of $1.06 and 30 cents for the second quarter of fiscal 1997 and 1996, respectively, assume that the company's convertible subordinated debentures, issued in March 1996, were converted at the beginning of fiscal 1996 and net income was adjusted for elimination of interest expense, net of income tax effect.

Net income was a record $34 million, excluding costs of $2.9 million related to the terminated Read-Rite merger proposal, and primary and fully diluted earnings per share for the second quarter of fiscal 1997 would have been $1.36 and $1.16, respectively, without those costs. Total net sales were $126.3 million for the second quarter of fiscal 1997, an increase of 46 percent from net sales of $86.7 million for the same period last year.

For the first half of fiscal 1997, the company posted net income of $63 million, or primary earnings per share of $2.54, as compared with net income of $17.7 million, or primary earnings per share of 74 cents, for the same period last year. Fully diluted earnings per share were $2.16 and 60 cents for the first half of fiscal 1997 and 1996, respectively.

Total net sales were $247.9 million for the first half of fiscal 1997, as compared with net sales of $181.4 million for the same period last year.

Advanced inductive thin film demand continues to be strong and reflects both the performance and cost effectiveness of this technology. During the second quarter of fiscal 1997, approximately 63 percent of advanced inductive thin film revenue was at the 1 gigabyte per 3.5-inch disk capacity point and 32 percent was at the 1.3 gigabyte per 3.5-inch disk products.

Revenue for the quarter was constrained by the availability of certain head stack assembly (hsa) components and lower yields associated with the transition to 1.3 gigabyte per 3.5-inch disk advanced thin film products. These constraints have subsequently been resolved.

Magnetoresistive (MR) volume production continued for the fourth consecutive quarter and is planned to grow significantly in the second half of fiscal 1997. The company is in final qualification stages on new MR customer programs, including an advanced portable/mobile product and a high-end workstation product. Initial production of these new offerings is planned for later in the third quarter of fiscal 1997.

Initial evaluation units of the company's 2.1 gigabyte per 3.5-inch disk MR product have been shipped and qualifications are underway on customer programs, with volume production scheduled to begin in the fourth calendar quarter of this year. The company is actively engaged in qualifying on 12 MR programs with four different customers, which should position the company well for increasing MR production in the latter half of fiscal 1997 and in fiscal 1998.

Research and development (R&D) expenses in the second quarter of fiscal 1997 were $3.2 million lower than the second quarter of fiscal 1996, primarily due to the transition of MR manufacturing expenses from R&D status in fiscal 1996 to production in fiscal 1997. The company continues to invest heavily in the development of MR and advanced thin film technology products.

Capital expenditures for the second quarter of fiscal 1997, including manufacturing equipment under operating leases, were approximately $37.1 million, which included the completion of an additional expansion of the MR wafer fab. Further MR wafer fab expansion is now underway and is scheduled for completion in September 1997. This expansion, coupled with existing inductive thin film capacity, will provide additional capacity to continue significant growth in fiscal 1998.

Cash and equivalents on March 29, 1997 increased to $155.3 million from $127.4 million at Sept. 28, 1996.

The company remains on target with its plan to double volume production rates in the fourth quarter of fiscal 1997, as compared with the fourth quarter of fiscal 1996. The company believes it continues to lead the industry in offering the most competitive cost-effective solutions to its customers.

Certain statements included in this release are forward looking and involve risks and uncertainties, and actual results may differ materially. Factors that could cause results to differ include, but are not limited to, successful performance of internal plans, inventory control, changes in customer plans, the impact of competitive services and pricing, product development and acceptance, general economic risks and uncertainties and other risks disclosed in the company's periodic reports filed with the Securities and Exchange Commission. -0-

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

                           Three months ended       Six months ended
                       March 29,    March 30,    March 29,    March 30,
                         1997         1996         1997         1996

Net sales              $126,311      $86,706     $247,939     $181,415
Gross profit             48,549       25,297       95,146       48,811
Research and
 development expenses    10,815       13,972       21,963       27,287
Selling, general and
 administrative           2,288        1,890        4,332        3,561
Terminated merger costs   2,906           --        2,906           --
Total operating
 expenses                16,009       15,862       29,201       30,848
Income from operations   32,540        9,435       65,945       17,963
Interest expense, net    (1,091)        (724)      (2,380)      (1,612)
Other income                158          167          437        1,656
Income before taxes      31,607        8,878       64,002       18,007
Provision for income
 taxes                      516          182        1,039          283
Net income              $31,091       $8,696      $62,963      $17,724
Net income per share:
  Primary                 $1.24        $0.36        $2.54        $0.74
  Fully diluted           $1.06        $0.30        $2.16        $0.60

Weighted average number
 of common shares
 outstanding:

  Primary             24,991,769   23,893,592   24,761,753   23,834,031
  Fully diluted       31,178,345   30,077,009   31,019,823   30,066,409


Note 1:  Merger costs for the three and six months ended March 29,
1997, include legal and accounting fees, financial advisory fees and
miscellaneous other expenses related to the February 1997 proposed
business combination between the company and Read-Rite Corp.  On
March 14, 1997, the company announced its withdrawal of the
proposal.

Note 2:  Other income for the six months ended March 30, 1996,
includes a $1.3 million final payment from Seagate Technology Inc.
for their purchase of the company's Tape Head business unit in
December 1994.

Note 3:  Primary net income per share is computed by dividing net
income by the weighted average number of shares of common stock and
common stock equivalents outstanding during the period.  Common
stock equivalents include exercise of the company's stock options.
    Fully diluted net income per share 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 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 subordinated debentures.
-0-

                APPLIED MAGNETICS CORP. AND SUBSIDIARIES
          Condensed Consolidated Balance Sheets -- Unaudited
            (in thousands, except share and par value data)

                                        March 29,         Sept. 28,
                                          1997              1996

Current assets:
  Cash and equivalents                  $155,282          $127,400
  Accounts receivable, net                61,254            43,403
  Inventories                             51,666            35,980
  Prepaid expenses and other               9,009            10,122
Total current assets                     277,211           216,905
Property, plant and equipment, at cost   331,950           288,856
Less: accumulated depreciation          (169,800)         (155,134)
Property, plant and equipment, net       162,150           133,722
Other assets                               9,012             8,823
Total assets                            $448,373          $359,450

LIABILITIES AND SHAREHOLDERS'
 INVESTMENT

Current liabilities:
  Current portion of long-term debt          $38            $1,865
  Bank notes payable                      50,644            45,789
  Accounts payable                        54,091            32,314
  Accrued payroll and benefits            11,770            11,001
  Other current liabilities                6,637             8,054

Total current liabilities                123,180            99,023

Long-term debt, net                      115,107           116,263
Other liabilities                          4,153             4,465

Shareholders' investment:
  Common stock, 10 cent par value,
  authorized 40 million shares, issued
  23,739,593 shares and 23,283,047
  shares at March 29, 1997, and
  Sept. 28, 1996, respectively             2,374             2,328
Paid-in capital                          188,603           185,378
Retained earnings (deficit)               16,150           (46,813)
Treasury stock, at cost (116,995 shares
 as of March 29, 1997, and Sept. 28,
 1996, respectively)                      (1,194)           (1,194)
Total shareholders' investment           205,933           139,699
Total liabilities and shareholders'
 investment                             $448,373          $359,450

CONTACT: Applied Magnetics Corp., Goleta

Craig D. Crisman, 805/683-5353