<PAGE> 1
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
April 23, 1998
Date of Report (Date of earliest event reported)
CALIFORNIA MICROWAVE, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-7428 94-1668412
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1143 Borregas Avenue, Sunnyvale, California 94089
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including are code): 408/732-4000
-1-
<PAGE> 2
Item 5. Other Events.
On April 23, 1998, California Microwave, Inc. issued three press
releases, one announcing adoption of its new corporate strategy and a
reorganization of its divisions, one announcing its results for the quarter
ended March 31, 1998 and adoption of segment reporting for its divisions,
and one announcing the appointment of a new director. All three press releases
are attached hereto as exhibits. Also attached as an exhibit hereto is quarterly
segment information for the reorganized divisions of California Microwave, Inc.
for the fiscal year ended June 30, 1997.
Item 7.
(c) Exhibits
99.3 Press Release Issued by California Microwave on April 23, 1998
entitled "California Microwave Announces Strategic Repositioning Plan For
Growth."
99.4 Press Release Issued by California Microwave on April 23, 1998
entitled "California Microwave Reports $.19 for Third Quarter FY1998: Adopts
Segment Reporting."
99.5 Press Release Issued by California Microwave on April 23, 1998
entitled "California Microwave Appoints New Board Member."
99.6 California Microwave Quarterly Segment Information for the
fiscal year ended June 30, 1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CALIFORNIA MICROWAVE, INC.
(Registrant)
By: /s/ GEORGE L. SPILLANE
-----------------------------
Name: George L. Spillane
Title: Vice President and
Secretary
Dated: April 28, 1998
-2-
<PAGE> 1
EXHIBIT 99.3
[CALIFORNIA MICROWAVE LOGO]
FOR IMMEDIATE RELEASE
Thursday, April 23, 1998
<TABLE>
<S> <C> <C>
For Further Information Contact:
Stephanie M. Day Investor Information Line: Deborah Passik
Vice President- (Toll-free) 1-888-225-6789 William Dunk Partners, Inc.
Corporate Communications http://www.calmike.com (919) 929-4100
(408) 743-3429
[email protected]
</TABLE>
CALIFORNIA MICROWAVE ANNOUNCES
STRATEGIC REPOSITIONING PLAN FOR GROWTH
SUNNYVALE, CALIFORNIA - CALIFORNIA MICROWAVE, INC. (NASDAQ NATIONAL MARKET:CMIC)
announced today a series of strategic and operational initiatives that are
designed to provide greater focus, direction and growth for the company.
After an extensive review of California Microwave's operations, Chief Executive
Officer Frederick D. Lawrence stated, "We have carefully defined our field of
play: wireless broadband access products and solutions for commercial, satellite
and wireless business markets. Our strategies and resources are focused on
improving our existing leadership positions in these markets, and developing
additional growth segments within them. This focus places us in markets that are
growing at rates greater than 20%, which is our growth goal for the company. We
have moved decisively away from the holding-company approach that historically
characterized the company, and are now managing California Microwave as a
focused, integrated, operating business."
FIVE ELEMENTS KEY TO STRATEGY
California Microwave's new strategy comprises five key, mutually-supporting
elements:
1. A REFOCUSED GROWTH BUSINESS: the company has set stringent criteria for the
performance of its operating businesses, and is refocusing its investment
into high-growth, commercial markets. Low-growth businesses are being
divested, and their value harvested for commercial reinvestment.
2. A STREAMLINED ORGANIZATION: the number of separate divisions is being
significantly reduced to achieve greater market focus, improved product
development, and lower costs.
3. INTERNATIONAL CHANNEL EXPANSION: a separate international division has been
established to develop international channels and rapidly grow international
sales.
<PAGE> 2
April 23, 1998
Page 2
4. AN OPERATIONAL EXCELLENCE INITIATIVE FOCUSED ON MAJOR COST REDUCTION: the
company has set a goal to achieve Earnings Before Interest and Taxes (EBIT)
of 13% or greater, as a percentage of sales, within 24 months.
5. AN ACQUISITIONS AND TECHNOLOGY LICENSING PROGRAM: the company has retained
investment bankers to help identify and execute acquisitions in the
commercial markets which will add channels, technology and scale to its
existing wireless businesses. Target acquisitions may be small add-ons or
substantial on-going businesses.
REFOCUSED GROWTH BUSINESS
California Microwave's operating units have been subjected to scrutiny based on
a set of key criteria:
- - Fit with the new business definition: wireless broadband access products
and solutions for commercial business markets;
- - The ability to achieve greater than 20% annual revenue and profit
growth;
- - The ability to consistently earn returns in excess of the cost of
capital, and therefore create positive, growing Economic Value Added
EVA(R) for shareholders;
- - Currently hold or quickly can achieve a market leadership position --
either number one or two in the market.
In light of these criteria, California Microwave is focusing its investment in
its fast-growing commercial, wireless businesses where it has or can rapidly
build leadership positions. These include:
THE SATELLITE COMMUNICATIONS DIVISION, which consists of EF Data, based in
Tempe, AZ. This business generated $98 million in revenue during the last 12
months. EF Data is the world's leading producer of single-channel-per-carrier
(SCPC) satellite modems and transceivers, holding on average more than twice the
market share of its next largest competitor. EF Data is implementing operational
strategies to sustain and improve its leadership in its core point-to-point
markets. "These strategies include expanding our Application Specific Integrated
Circuit-based (ASIC) modem product lines, further developing our global sales
and marketing channels and improving manufacturing and logistics processes,"
stated Don Anderson, an executive vice president of California Microwave and
president of the Satellite Communications Division.
In addition, EF Data is leveraging its product leadership in the point-to-point
satellite sector to expand its capabilities and presence in the explosively
growing broadband data networking market. EF Data is in the process of acquiring
Time Division Multiple Access (TDMA) technology, which, combined with its
network management systems, will provide the capability to rapidly penetrate the
market for broadband data bandwidth-on-demand for private networks and service
providers. EF Data provides circuit-and packet-switched, demand-assigned
satellite communications that enable customers to send data, video and voice
over high-speed digital links, both domestically and internationally.
<PAGE> 3
April 23, 1998
Page 3
EF Data's recently announced Integrated Services Digital Network (ISDN)
on-demand service, driven by explosive growth of the Internet, has been a first
step in providing broadband data capability for business customers. Satellite
ISDN-on-demand has a multitude of applications, including video conferencing,
distance learning, file transfers, and circuit restoral. EF Data's Phoenix
bandwidth-on-demand management system dynamically allocates satellite power and
bandwidth, based on the needs of network users, and is more cost effective than
dedicated leased lines or satellite circuits.
EF Data's next-generation bandwidth-on-demand products, incorporating TDMA, will
support Transmission Control Protocol/Internet Protocol (TCP/IP) for Internet
access, frame relay for business applications, and Asynchronous Transfer Mode
(ATM) for real-time multimedia.
California Microwave's Satellite Communications Division is serving addressable
markets which are expected to total $500 million in 1998, and which are growing
in excess of 20% per year.
THE TERRESTRIAL MICROWAVE DIVISION consists of Microwave Data Systems (MDS),
based in Rochester, NY, and Microwave Radio Communications (MRC) based in
Chelmsford, MA. This newly formed division combines MDS and MRC into a focused,
integrated competitor in the terrestrial microwave sector. In the last 12
months, this business generated $82 million in revenue, and holds leadership
positions in several core markets. George Arena, formerly president of MDS,
assumes the position of president, Terrestrial Microwave Division, and also
becomes an executive vice president of California Microwave. Bob Morrill,
formerly president of MRC, will continue to work closely with the new division
on market and business development. According to George Arena, "Our traditional
customer base has been the U.S. utility and video broadcast markets. We are
excited that we will be investing in broader bandwidth radios, while expanding
our market horizons to include the telco market by leveraging off our Satellite
Communications Division's international distribution channels."
Television broadcast: MRC is the leading supplier of analog and digital
point-to-point microwave systems for transporting video signals for television
broadcast operations, including electronic news-gathering, satellite backhauls,
studio-transmitter links, and regional networks. Data telemetry communications
for utility and financial infrastructures: MDS is the leading provider of
point-to-multipoint microwave radio systems for applications such as electric
utility substation and distribution automation, and bank and lottery terminal
connectivity. Voice and data communications for remotely sited customers: MDS
provides T1/E1 (1.544 Mbps) and sub-rate T1/E1, high bandwidth efficiency,
point-to-point links for last mile and thin route applications. MDS has over 20%
of this rapidly growing market.
California Microwave's Terrestrial Microwave Division is now poised to develop
additional growth markets that leverage its technology, customer base and
distribution channels in sectors where it is currently the leader. These
include:
The point-to-multipoint broadband wireless market, at both licensed and
unlicensed frequencies (1.5-5.8 GHz). MDS' primary customers will be businesses
which want a low-cost, high-
<PAGE> 4
April 23, 1998
Page 4
reliability solution for thin-route, data network and Internet access. This
embryonic market is expected to grow past $100 million within several years.
High-capacity video transmission: MRC intends to develop or procure the
technology platforms necessary to offer its customers high-capacity (140-155
Mbps) radio links for intercity relays, regional networks, and statewide video
networks.
In addition, the terrestrial division is reviewing, on an ongoing basis, its
strategy in addressing other growth markets -- Local Multipoint Distribution
Systems (LMDS), for example -- where it might participate.
Overall, California Microwave's addressable terrestrial microwave markets are
expected to total over $200 million in 1998, and to grow at a rate greater than
20% annually.
The company intends to leverage its technology platforms within each division
into a broad array of product lines, and also to take advantage of the
increasing convergence of satellite and terrestrial wireless systems. The
company believes that its ability to integrate satellite and terrestrial
wireless technologies into an integrated, end-to-end solution for
customers--e.g., in the video broadcast market--will be an important competitive
advantage. "Working together, our Satellite Communications and Terrestrial
Microwave divisions can jointly offer the television industry end-to-end systems
for digital video transport applications," stated Don Anderson.
These newly focused commercial businesses will target addressable markets
estimated at over $700 million, growing in excess of 20% per year.
To support the investment requirements and opportunities inherent in its
satellite and terrestrial markets, California Microwave intends to harvest the
value of several of its other divisions. This will be done once the required
acquisitions and internal investments have been identified and made for these
high-growth commercial markets.
The principal expected divestiture, which would support the growth of the
commercial side, is of the government businesses. These consist of the
Government Electronics Division (GED) in Woodland Hills, CA, and the Airborne
Systems Integration Division (ASID) in Belcamp, MD. These are profitable,
extremely well managed operations with a long history of providing innovative
products and services to US government and military agencies. The operations
generated $97 million in revenue over the last 12 months. Their products include
airborne and ground-based reconnaissance systems, communications processing
equipment, and satellite communications systems. While strong current profit
contributors, the government operations do not support either the commercial
market focus that California Microwave has chosen or the growth objectives of
the new strategy. Furthermore, significant value has been built up in these
divisions, and management believes that the greatest shareholder wealth can be
created by redeploying this intrinsic value. The company believes that
consolidating the two government divisions will make them even stronger and a
good candidate for future sale. The company anticipates divesting these units
during fiscal year 1999, but not before significant
<PAGE> 5
April 23, 1998
Page 5
actions have been taken to build up the high-growth commercial businesses, both
through acquisition and licensing arrangements.
In addition, the company's Services Division, based in Sunnyvale, CA, is being
sold. This is a business with revenues of less than $10 million that has three
operations: a teleport, which provides two-way transport services via satellite
for Internet service providers, telephone companies and private networks; and
two legacy product lines which supply radar testers to the military and
amplifier replacements to telephone companies. While profitable, the Services
Division's products and services do not fit with California Microwave's new
strategic focus, and management believes the business is a distraction to the
company's main objective of expanding in high-growth, commercial wireless
markets.
Previous announcements have been made regarding the sale of Satellite
Transmission Systems and Microwave Networks, two divisions which did not meet
California Microwave's performance standards.
Management believes that this realignment and refocusing of California
Microwave's business maximizes both the company's growth opportunities and
prospects for creating shareholder value. California Microwave has reported five
sequential, profitable quarters and believes that its focus on operational
excellence provides an opportunity for continuing, long-term improvements.
ORGANIZATION RESHAPED TO EXECUTE STRATEGY
To support its new strategy, the company has consolidated its organizational
structure and strengthened its management team. With the anticipated divestiture
of the government businesses, California Microwave's prior eight divisions will
be reduced to three -- Terrestrial Microwave, Satellite Communications and
International. This consolidation entails a number of important changes in both
organizational structure and in management responsibilities. As discussed
elsewhere in this release, Don Anderson and George Arena have been appointed
corporate officers, and join four other officers, Fred Lawrence, Donna Birks,
Dan Scharre and George Spillane, as the executive leadership team for California
Microwave. George Spillane serves as a vice president and secretary of the
corporation, reporting to Donna Birks.
Microwave Radio Divisions Merged
As described earlier, the company's two microwave radio divisions, Microwave
Radio Communications (MRC) and Microwave Data Systems (MDS), have been
consolidated under one management team and now constitute the Terrestrial
Microwave Division. Their products are based on many of the same components and
technologies, and management believes the merger will realize a number of
benefits, including:
- - Enhanced ability to offer customers a fuller range of products and
solutions;
- - Greater leverage in R&D, engineering and product development efforts;
- - Savings in operating expenses and SG&A;
- - Overall increased scale, scope and clout in the marketplace.
<PAGE> 6
April 23, 1998
Page 6
Dedicated International Division Formed
In order to provide focus and critical mass to California Microwave's
international sales and marketing efforts, an International Division has been
formed, as detailed later in this press release. In the future, the
international sales and marketing of satellite and terrestrial products will be
handled by the International Division.
Shared Services Group Created
As part of the effort to reduce costs and raise net profit margins through
operational excellence, a shared services group will be created to handle a
variety of administrative, HR, financial and operating tasks which are common to
all the businesses.
Corporate Leadership Enhanced
To support implementation of the new growth strategy, key corporate positions
have been added or strengthened. Since the company's new chief executive
officer, Frederick D. Lawrence, was appointed in July 1997, California Microwave
has appointed an executive vice president/chief financial officer (Donna S.
Birks), a chief technology officer (Dr. Daniel L. Scharre), a chief information
officer (Thomas J. Bakewell), and a corporate controller (Andrew D. Miller).
"With these latest appointments, we are rounding out what is a small, but
high-quality, group of corporate executives who provide the necessary skills in
the key areas of finance, accounting, information systems, technology, and
business development," said Fred Lawrence.
INTERNATIONAL CHANNELS EXPANDED
The company believes that the international telecommunications markets provide
large, previously unexploited growth opportunities for both its satellite and
terrestrial microwave products. Historically, each of the California Microwave
divisions approached international markets separately, resulting in an
uncoordinated approach and weak penetration. Accordingly, the company has
established an International Division to serve the needs of its Terrestrial
Microwave and Satellite Communications divisions. This new division, under the
leadership of Salvatore S. Benti, will focus on sales and distribution efforts
in the non-NAFTA markets, specifically Asia, Latin America and Eastern Europe.
Regional sales vice presidents have been named, and the remainder of the
positions for the international division are being filled rapidly from both
internal and external candidates.
Stated Benti, "The International Division will employ a variety of strategies to
significantly expand California Microwave's market share abroad and ensure
growth rates in excess of 20% for all our product lines. We anticipate a number
of changes. We will be involving the product division executives much more
closely in developing major international customer relationships; we will be
establishing deeper and broader distribution in our target countries, using a
balance of local distributors, international partners, and our own direct sales
staff; and we will be presenting a unified face to the customer. We also have
plans to enhance and improve our global customer service and support."
<PAGE> 7
April 23, 1998
Page 7
OPERATIONAL EXCELLENCE INITIATIVE FOCUSED ON MAJOR COST REDUCTION
As the company refocuses its business portfolio and develops new growth
opportunities centered around worldwide markets, the operations and business
processes are also being reviewed and refocused to ensure that strategy and
customer value, rather than historical structures, drive how the company does
business. The prior focus of the company, which was to optimize products around
small niches in the wireless marketplace, was appropriate in its time, but
management believes that the combined cost structure this approach produced is
too high going forward.
The company has set the specific goal of improving EBIT, as a percent of
revenue, to at least 13% within 24 months. Currently, there are four information
systems across California Microwave's commercial business divisions and they
will be combined. Overall, the company anticipates having lower transaction
costs, improved SG&A spending, better management information, more relevant cost
analysis, and improved performance measurement tools.
"Our goal is to review the output and efficiency of our business processes
against externally focused, market driven targets, and eliminate non-value-added
work, as perceived by our customers. We believe this is necessary to compete
internationally and prepare the company for expansion. The tangible result will
be improved net operating results and a significant increase in value to both
our customers and shareholders," stated Donna Birks, executive vice president
and chief financial officer.
An early priority is to combine the two commercial terrestrial businesses, MRC
and MDS. This may lead to restructuring charges in fiscal Q4 1998, but those
charges, if any, have not been determined. Simultaneously, the manufacturing
flow, sales support needs, customer interface and financial measurement systems
will be reviewed to enable identification of a combined information system for
purchase in Q1 1999. Implementation will follow with a goal to complete by
fiscal year-end 1999.
ACQUISITIONS AND TECHNOLOGY LICENSING PROGRAM
The company intends to make acquisitions in its core commercial markets to
increase market coverage, add enabling technologies, and improve the scale and
critical mass of these businesses. To fill technology needs within the
divisions, California Microwave is making small acquisitions on its own. It has
retained Lehman Brothers to provide advisory services and to identify
acquisition opportunities that complement California Microwave's commercial
growth plans. The company's intent is to build up the size, scale and
capabilities of its satellite and terrestrial businesses prior to any further
major divestitures. "The focus of our efforts is to expand distribution
channels, add multiple access technology to support point-to-multipoint
broadband applications, augment our high frequency RF technology and improve our
data protocol and network management support functions. These acquisitions will
provide needed technologies for both commercial divisions," says Dr. Dan
Scharre, California Microwave's chief technology officer.
<PAGE> 8
April 23, 1998
Page 8
In addition to aggressively pursuing appropriate acquisitions, California
Microwave is actively seeking to augment its core technologies through licensing
and partnering agreements. This is one of several avenues being pursued to
acquire TDMA access technology for both commercial divisions, for example. The
company has begun discussion with a number of third parties.
As segments of the businesses reach later stages of their product life cycle or
fail to return acceptable levels of profitability, California Microwave will
divest aggressively to ensure resources, both people and money, are focused on
the highest return opportunities.
OTHER ACTIONS SUPPORT THE STRATEGY AND CREATE SHAREHOLDER VALUE
In September 1997, California Microwave's board of directors adopted corporate
governance guidelines in order to align the interests of shareholders,
management and directors. Two key features are:
- - Vesting for stock options is now tied to stock price performance, and is
not automatic;
- - The company's management and its board members are required to own a
substantial amount of stock. Ownership of stock by key managers has
increased to 33% of the goal (which varies from holding stock valued at
one-half to 2 times base salary) since the plan was put in place.
The company is currently implementing or has implemented the following corporate
governance actions as detailed in California Microwave's 1997, proxy statement:
- - The board has reviewed and approved a three-year strategic plan.
- - Former executives of the company no longer serve on California
Microwave's board.
- - The Audit, Compensation and Governance committees consist entirely of
independent directors.
- - Directors shall not stand for reelection after the age of 70. Searches
have been initiated for replacements for those directors who will be
retiring over the year. The first new director, General George Alfred
Joulwan, has just been appointed.
- - A policy has been adopted on confidentiality of voting by shareholders.
- - Incentive compensation is linked to EVA objectives
In order to inject outside perspectives into the planning process, as well as to
meet governance guidelines on strategic plan development, California Microwave
engaged The Institute For Business Renewal (IBR), a strategy advisory firm which
specializes in the communications industry. IBR has assisted the company in
developing its new strategic plan, and will continue to work with it to evolve
that plan over time.
Stern Stewart & Co. is assisting the company to train its employees in the
application of EVA(R) to a broad spectrum of operational decisions. Training is
approximately 60% complete and full implementation is expected by July 1998.
Monitoring and Control
<PAGE> 9
April 23, 1998
Page 9
"We intend to stay on track as our strategy and the marketplace evolve, and we
must carefully monitor progress and communicate it to our employees and
shareholders. To this end we are establishing a series of mechanisms to track
our progress against all of these initiatives," stated Donna Birks, chief
financial officer.
Monthly and quarterly financial measurement and tracking mechanisms are now
being used to drive tactical actions. Progress will be communicated externally
via quarterly reporting. The company has also adopted segment reporting to
conform to the refocused business and began reporting along those lines with the
release of Q3 results today.
In addition to employing its traditional financial tracking mechanisms, a senior
executive has been assigned to monitor each key element of the company's new
strategy -- for example, international expansion and growth, market development,
and operational excellence -- and will be reporting monthly to the chief
executive officer and to the management team on progress made against
pre-defined metrics and milestones.
PICKING UP THE PACE
According to Fred Lawrence, "The company has been thorough in assessing its
strengths, weaknesses, and options for the future. The overriding consideration
driving its decision-making has been growing shareholder value, on a consistent
basis, over time. The actions the company has taken are significant, but they
are also just the start of a longer-term process aimed at reinforcing California
Microwave as a major player in both satellite and terrestrial wireless,
broadband markets. The current and new commercial markets which the company is
targeting are rapidly growing, structurally attractive segments of the wireless
universe, and represent robust investment prospects. California Microwave's
management and board are both enthusiastic about the focus of the company. This
is not a static strategy, but rather one which will continue to evolve over
time. The company intends to brief its shareholders, employees, customers, and
the investment community on its strategy and results on a regular basis going
forward."
Statements made in this press release that are not historical facts, including
any statements about expectations for fiscal year 1998 and beyond are
forward-looking statements, involving certain risks and uncertainties. Factors
that could cause the company's actual results to differ materially from
management's projections, estimates and expectations include, but are not
limited to, delays in the receipt of orders or in the shipment of products, the
company's success in implementing its strategic plan, and other factors referred
to in the company's Securities and Exchange Commission filings.
Separately, California Microwave announced today results for its third quarter
ended March 31, 1998, and the appointment of General George A. Joulwan to its
board of directors.
California Microwave, Inc. (http://www.calmike.com) is a leading U.S. supplier
of satellite earth station and microwave radio infrastructure products and
information and collection systems.
<PAGE> 10
April 23, 1998
Page 10
EVA is a registered trademark of Stern Stewart & Co.
###
<PAGE> 1
EXHIBIT 99.4
FOR IMMEDIATE RELEASE
April 23, 1998
<TABLE>
<S> <C> <C>
For Further Information Contact:
Stephanie M. Day Investor Information Line: Deborah Passik
Vice President- (Toll-free) 1-888-225-6789 William Dunk Partners, Inc.
Corporate Communications http://www.calmike.com (919) 929-4100
(408) 743-3429
[email protected]
</TABLE>
CALIFORNIA MICROWAVE REPORTS $.19 FOR THIRD
QUARTER FY1998; ADOPTS SEGMENT REPORTING
SUNNYVALE, CALIFORNIA - CALIFORNIA MICROWAVE, INC. (NASDAQ NATIONAL MARKET:
CMIC) today reported results from continuing operations for its fiscal 1998
third quarter ended March 31, 1998. Continuing operations for all periods
presented exclude the operating results of Microwave Networks (MN) and Satellite
Transmission Systems (STS), which have been divested. Third-quarter income from
continuing operations was $3.1 million, or $.19 per share, on sales of $66.6
million. This compares to a profit of $1.9 million, or $.11 per share, on sales
of $58.6 million reported for last year's third quarter.
New orders booked in the third quarter decreased 8% to $69.5 million, compared
to $75.3 million for the comparable period last year, driven primarily by timing
of large government orders. For the nine-month-period ended March 31, new orders
booked increased 10% in California Microwave's commercial businesses ($135
million compared to $123 million) and decreased 11% in the government sector,
for a net bookings increase of 3%. International orders for the commercial
business totaled $64.3 million for the latest nine months versus $58.2 million
in last year's comparable period. Activity was strongest in Latin America, where
both the terrestrial microwave and satellite communications businesses have good
distribution. Sales and bookings into China were strong and offset any major
impact from the continued softness in the remaining Asia markets where the
company has limited presence. Backlog at March 31, 1998, totaled $104.8 million,
compared to $119.8 million at March 31, 1997.
"Our government sales growth has been impacted by contracting cycles and has
reduced our year-to-date growth rates as some business has shifted between
quarters. On the commercial side, however, we are pleased with the market
prospects and our net year-to-year sales growth. In our terrestrial microwave
business, Microwave Data Systems (MDS) is continuing to see strong business
growth in its new line of digital signal processing-based multiple address
radios, including both licensed products for international markets and
spread-spectrum products, which are primarily for domestic applications. And,
while we are pleased with the heightened interest from broadcasters in Microwave
Radio Communications' (MRC) new digital video radios, the conversion from analog
to digital transmission is not expected to gain real momentum until the
1999-2000 time frame. From a return perspective, we continue to be on track
despite the shifts in government business, and expect to achieve our goal of 33%
gross margin for FY98, which is driven by a changing business mix (commercial
business growing faster than lower-margin government business), and increased
product gross margins in our commercial business. Our
<PAGE> 2
April 23, 1998
Page 2
focus in the fourth quarter is to reduce working capital and operating expenses
as we begin our operational excellence initiative to consolidate and standardize
our transaction processing throughout the commercial segments of the company,"
stated Donna S. Birks, executive vice president and chief financial officer.
Beginning with this quarterly earnings release, the company has adopted segment
reporting to conform with its Strategic Plan, which was announced today. The
three segments are aligned as follows:
o Satellite Communications is the company's commercial satellite products
segment, represented by the EF Data business unit. Previously, the
Satellite Communications segment also included Government division sales
of satellite products and the teleport segment of the Services division.
o Terrestrial Microwave is the company's commercial terrestrial microwave
products segment and represents the combination of MRC and MDS.
Previously called Radio Products, it historically has included a small
piece of the Services division business related to radio retrofit and
repair.
o Government is the company's Department of Defense contracted sales of
products and includes the Government Electronics Division, Airborne
Systems Integration Division and the Services Division, which is about
10% of the segment. Previously called Information Collection and
Communications, this group typically has both fixed-price and cost-plus
long-term contracts. Both the Satellite Communications and Terrestrial
Microwave divisions sell products to government customers on
commercial-off-the-shelf terms, but will account for those sales in
their respective segments.
Further, additional segment information highlighting profitability and other
relevant operating characteristics of the businesses has been added to provide a
better understanding of the company's performance.
"We believe we can provide better insight into the focus and performance of the
company by reporting in more detail by each division. The company will continue
to review the data published each quarter to ensure adequate and relevant
performance metrics are readily available. This is consistent with our focus on
shareholder value," stated Donna Birks.
As previously announced, the company completed sale of its STS division to L3
during the quarter and announced the sale of its Microwave Networks Division
(MN) to Tadiran, which was completed on April 21. As announced on March 2, 1998,
an additional provision of $12.5 million, or $.76 per share, was recorded in the
third quarter to reflect the actual loss on the sale of MN.
Separately, California Microwave announced today its strategic plan for future
growth and the appointment of retired General George A. Joulwan to its board of
directors.
Statements made in this press release that are not historical facts, including
any statements about expectations for fiscal year 1998 and beyond are
forward-looking statements, involving certain risks and uncertainties. Factors
that could cause the company's actual results to differ materially from
management's
<PAGE> 3
April 23, 1998
Page 3
projections, estimates and expectations include, but are not limited to, delays
in the receipt of orders or in the shipment of products, the company's success
in implementing its strategic plan, and other factors referred to in the
company's Securities and Exchange Commission filings.
California Microwave, Inc. (http://www.calmike.com) is a leading U.S. supplier
of satellite earth station and microwave radio infrastructure products and
information and collection systems.
<PAGE> 4
April 23, 1998
Page 4
CALIFORNIA MICROWAVE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
------------------- -------- --------------------- --------
1998 1997 % Change 1998 1997 % Change
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 66,631 $ 58,559 + 14 $ 197,612 $ 183,090 + 8
Cost of products sold 44,062 40,197 + 10 131,074 134,080 - 2
--------- --------- --------- ---------
Gross margin 22,569 18,362 + 23 66,538 49,010 + 36
--------- --------- --------- ---------
Expenses:
Research & development 4,881 4,154 + 18 14,643 13,426 + 9
Marketing & administration 11,630 9,659 + 20 34,705 33,180 + 5
Amortization of intangible assets 344 373 - 8 1,032 1,063 - 3
--------- --------- --------- ---------
Total expenses 16,855 14,186 + 19 50,380 47,669 + 6
--------- --------- --------- ---------
Operating income 5,714 4,176 + 37 16,158 1,341 NM
Interest expense net (880) (1,406) - 37 (2,886) (4,060) - 29
Litigation settlement -- -- (1,900) -- NM
Gain on sale of subsidiary -- -- -- 2,744 NM
--------- --------- --------- ---------
Income from continuing operations
before income taxes 4,834 2,770 + 75 11,372 25 NM
Provision for income taxes 1,729 915 + 89 4,083 8 NM
--------- --------- --------- ---------
Income from continuing operations 3,105 1,855 + 67 7,289 17 NM
Loss from discontinued operations (12,500) (7,859) + 59 (12,500) (33,289) - 62
--------- --------- --------- ---------
Net loss $ (9,395) $ (6,004) + 56 $ (5,211) $ (33,272) - 84
========= ========= ========= =========
Per share (basic and diluted)
Income(loss) from continuing
operations $ 0.19 $ 0.11 + 73 $ 0.44 $ 0.00 NM
Loss from discontinued operations (.76) (.48) + 58 (.76) (2.06) - 63
--------- --------- --------- ---------
Net loss $ (.57) $ (.37) + 54 $ (.32) $ (2.06) - 84
========= ========= ========= =========
Average shares 16,505 16,273 + 1 16,509 16,182 + 2
Average shares and equivalents 16,780 16,407 + 2 16,753 16,300 + 3
(Thousands)
Bookings $ 69,549 $ 75,262 - 8 $ 211,377 $ 205,808 + 3
Backlog 104,847 119,826 - 12 104,847 119,826 - 12
</TABLE>
NM = Not Meaningful
<PAGE> 5
April 23, 1998
Page 5
CALIFORNIA MICROWAVE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31 June 30
1998 1997
<S> <C> <C>
Assets
Cash and cash equivalents $ 3,265 $ 4,974
Receivables 55,159 35,701
Inventories 50,819 50,353
Income tax refunds and deferred tax assets 28,653 35,855
Net assets of discontinued businesses 47,485 79,656
Property, plant and equipment (net) 23,696 22,812
Intangible assets 28,231 29,488
Other assets 10,028 7,534
-------- --------
$247,336 $266,373
======== ========
Liabilities and stockholders' equity
Current liabilities $ 77,295 $ 72,058
Long-term liabilities 62,485 76,291
Stockholders' equity 107,556 118,024
-------- --------
$247,336 $266,373
======== ========
</TABLE>
<PAGE> 6
April 23, 1998
Page 6
CALIFORNIA MICROWAVE, INC.
Segment Information
(Dollars in millions)
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1997
------------------------------------------ ------------------
BOOKINGS Q1 Q2 Q3 9M YTD Q3 9M YTD
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Satellite Communications $ 24.3 $ 25.0 $ 22.2 $ 71.5 $ 21.9 $ 65.4
Terrestrial Microwave 19.1 23.9 20.7 63.6 21.1 57.3
------ ------ ------ ------ ------ ------
Commercial 43.4 48.9 42.9 135.1 43.0 122.7
Government 13.5 37.9 25.8 77.2 33.1 86.8
Eliminations -1.6 -0.2 0.8 -0.9 -0.8 -3.7
------ ------ ------ ------ ------ ------
Total 55.3 86.6 69.5 211.4 75.3 205.8
BOOKINGS MIX
- -----------------------------------------------------------------------------------------------
Commercial
International 34% 29% 29% 30% 28% 28%
Domestic 42% 27% 34% 33% 28% 30%
------ ------ ------ ------ ------ ------
Subtotal 76% 56% 63% 63% 56% 58%
Government 24% 44% 37% 37% 44% 42%
BOOK-TO-BILL
- -----------------------------------------------------------------------------------------------
Satellite Communications 109% 98% 96% 101% 123% 117%
Terrestrial Microwave 103% 107% 97% 102% 120% 106%
------ ------ ------ ------ ------ ------
Commercial 106% 102% 97% 101% 122% 111%
Government 54% 184% 116% 113% 134% 113%
------ ------ ------ ------ ------ ------
Total 86% 130% 104% 107% 129% 112%
BACKLOG
- -----------------------------------------------------------------------------------------------
Satellite Communications $ 15.2 $ 14.6 $ 13.7 $ 19.8
Terrestrial Microwave 12.3 13.8 13.2 15.3
------ ------ ------ ------
Commercial 27.5 28.4 26.9 35.1
Government 56.9 74.2 77.9 88.4
------ ------ ------ ------
Eliminations -2.5 -0.7 0.0 -3.7
------ ------ ------ ------
Total 81.9 101.9 104.8 119.8
SALES
- -----------------------------------------------------------------------------------------------
Satellite Communications $ 22.3 $ 25.7 $ 23.1 $ 71.1 $ 17.7 $ 56.1
Terrestrial Microwave 18.5 22.3 21.3 62.1 17.6 54.1
------ ------ ------ ------ ------ ------
Commercial 40.8 48.0 44.4 133.2 35.3 110.2
Government 25.2 20.6 22.3 68.0 24.6 76.8
Eliminations -1.6 -2.0 -0.1 -3.6 -1.3 -3.9
------ ------ ------ ------ ------ ------
Total 64.4 66.6 66.6 197.6 58.6 183.1
SALES MIX
- -----------------------------------------------------------------------------------------------
Commercial
International 31% 34% 32% 33% 28% 27%
Domestic 30% 35% 35% 33% 32% 32%
------ ------ ------ ------ ------ ------
Subtotal 61% 69% 67% 66% 60% 59%
Government 39% 31% 33% 34% 40% 41%
GROSS MARGIN
- -----------------------------------------------------------------------------------------------
Commercial 38% 39% 38% 38% 37% 33%
Government 20% 22% 24% 22% 20% 17%
------ ------ ------ ------ ------ ------
Total 32% 35% 34% 34% 31% 27%
</TABLE>
<PAGE> 7
April 23, 1998
Page 7
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1997
----------------------------------- ---------------
EBIT(1) Q1 Q2 Q3 9M YTD Q3 9M YTD
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Satellite Communications $ 2.3 $ 3.1 $ 1.8 $ 7.2 $ 1.0 $-1.6
Terrestrial Microwave 2.3 3.7 3.8 9.8 2.0 6.4
----- ----- ----- ----- ----- -----
Commercial 4.6 6.8 5.6 17.0 3.0 4.8
Government 2.2 1.4 2.3 5.9 2.2 4.7
Other -2.1 -4.4 -2.2 -8.6 -1.0 -5.4
----- ----- ----- ----- ----- -----
Total 4.7 3.8 5.7 14.3 4.2 4.1
EBITDA (2)
- ------------------------------------------------------------------------------------
Commercial $ 6.1 $ 8.4 $ 7.4 $21.9 $ 4.5 $ 9.3
Government 2.5 1.8 2.9 7.1 2.5 5.6
Other -1.4 -4.0 -1.7 -7.0 -0.2 -3.4
----- ----- ----- ----- ----- -----
Total 7.2 6.2 8.6 22.0 6.8 11.5
</TABLE>
(1) Earnings Before Interest and Taxes
(2) Earnings Before Interest, Taxes, Depreciation and Amortization
<PAGE> 1
EXHIBIT 99.5
FOR IMMEDIATE RELEASE
Thursday, April 23, 1998
<TABLE>
<S> <C> <C>
For Further Information Contact:
Stephanie M. Day Investor Information Line: Deborah Passik
Vice President- (Toll-free) 1-888-225-6789 William Dunk Partners, Inc.
Corporate Communications http://www.calmike.com (919) 929-4100
(408) 743-3429
[email protected]
</TABLE>
CALIFORNIA MICROWAVE APPOINTS NEW BOARD MEMBER
SUNNYVALE, CALIFORNIA - CALIFORNIA MICROWAVE, INC. (NASDAQ NATIONAL MARKET:CMIC)
announced the election of U.S. Army General George A. Joulwan, 58, retired
Supreme Allied Commander, Europe and Commander in Chief, United States European
Command, to its board of directors at its board meeting on April 23, 1998.
GENERAL JOULWAN: EXTENSIVE INTERNATIONAL EXPERIENCE
During his 36 years in the service, General Joulwan spent 18 years in Europe in
various leadership positions until his retirement from the U.S. Army in June
1997. While serving six years in Washington, DC, he was executive officer to the
chairman of the Joint Chiefs of Staff from 1982 to 1985, and subsequently
director for force requirements of the Office of the Deputy Chief of Staff for
Operations and Plans, U.S. Army from 1985 to 1986. He was also special assistant
to the President of the United States from 1973 to 1974 in Washington DC, and
special assistant to the Supreme Allied Commander, Europe, General Alexander
Haig from 1974 to 1975 in Belgium. General Joulwan holds a BS from the United
States Military Academy and an MA in political science from Loyola University.
He has been awarded many U.S. decorations and badges for bravery and service,
including the Distinguished Service Medal and Silver Star.
"We are pleased to attract to our board an individual with such extensive
international experience and excellent leadership skills. General Joulwan's
insight will be a significant asset as we implement our global expansion
strategy," said Frederick D. Lawrence, California Microwave's chairman and chief
executive officer.
Separately, California Microwave announced today results for its third quarter
ended March 31, 1998, and its strategic plan for future growth.
California Microwave, Inc. (http://www.calmike.com) is a leading U.S. supplier
of satellite earth station and microwave radio infrastructure products and
information and collection systems.
<PAGE> 1
EXHIBIT 99.6
CALIFORNIA MICROWAVE, INC.
Segment Information
(Dollars in millions)
<TABLE>
<CAPTION>
FISCAL 1997
-------------------------------------------
BOOKINGS Q1 Q2 Q3 Q4 Total
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Satellite Communications $ 21.2 $ 22.3 $ 21.9 $ 20.3 $ 85.7
Terrestrial Microwave 17.8 18.4 21.1 16.4 73.7
------- ------- ------- ------- --------
Commercial 39.0 40.7 43.0 36.7 159.4
Government 21.6 32.1 33.1 8.4 95.2
Eliminations (1.8) (1.1) (0.8) (2.8) (6.5)
------- ------- ------- ------- --------
Total $ 58.8 $ 71.7 $ 75.3 $ 42.3 $ 248.1
======= ======= ======= ======= ========
BOOKINGS MIX
Commercial
International 30% 27% 28% 35% 29%
Domestic 33% 28% 28% 45% 33%
Subtotal 63% 55% 56% 80% 62%
Government 37% 45% 44% 20% 38%
BOOK-TO-BILL
Satellite Communications 120% 109% 123% 76% 103%
Terrestrial Microwave 99% 99% 120% 82% 99%
------- ------- ------- ------- --------
Commercial 109% 104% 122% 78% 102%
Government 78% 132% 134% 30% 91%
------- ------- ------- ------- --------
Total 95% 114% 129% 60% 98%
BACKLOG
Satellite Communications $ 14.0 $ 15.8 $ 19.8 $ 13.3
Terrestrial Microwave 11.9 11.7 15.3 11.7
------- ------- ------- -------
Commercial 25.9 27.5 35.1 25.0
Government 70.6 78.3 88.4 67.4
Eliminations (2.4) (2.7) (3.7) (1.3)
------- ------- ------- -------
Total $ 94.1 $ 103.1 $ 119.8 $ 91.1
======= ======= ======= =======
SALES
Satellite Communications $ 17.7 $ 20.6 $ 17.7 $ 26.9 $ 83.0
Terrestrial Microwave 18.0 18.6 17.6 19.9 74.1
------- ------- ------- ------- --------
Commercial 35.7 39.2 35.3 46.8 157.1
Government 27.9 24.4 24.6 27.8 104.7
Eliminations (1.8) (.8) (1.3) (3.5) (7.6)
------- ------- ------- ------- --------
Total $ 61.8 $ 62.8 $ 58.6 $ 71.1 $ 254.2
======= ======= ======= ======= ========
SALES MIX
Commercial
International 24% 28% 28% 31% 28%
Domestic 31% 33% 32% 32% 31%
------- ------- ------- ------- --------
Subtotal 55% 61% 60% 63% 59%
Government 45% 39% 40% 37% 41%
GROSS MARGIN
Commercial 37% 25% 37% 36% 34%
Government 19% 10% 20% 22% 18%
------- ------- ------- ------- --------
Total 30% 20% 31% 33% 29%
</TABLE>
<PAGE> 2
April 23, 1998
Page 2
<TABLE>
<CAPTION>
FISCAL 1997
-------------------------------------------
EBIT1 Q1 Q2 Q3 Q4 Total
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Satellite Communications $ 0.3 $( 2.8) $ 1.0 $ 3.3 $ 1.8
Terrestrial Microwave 2.7 1.7 2.0 3.3 9.7
------- ------- ------- ------- --------
Commercial 3.0 (1.1) 3.0 6.6 11.5
Government 2.5 0.0 2.2 2.8 7.5
Other (2.8) (1.7) (1.0) (3.7) (9.2)
------- ------- ------- ------- --------
Total 2.7 (2.8) 4.2 5.7 9.8
EBITDA2
Commercial $ 4.4 $ 0.4 $ 4.5 $ 8.5 $ 17.4
Government 2.9 0.3 2.5 3.2 8.8
Other (2.0) (1.4) (0.2) (3.6) (6.6)
------- ------- ------- ------- --------
Total 5.3 (0.7) 6.8 8.1 19.6
</TABLE>
1 Earnings Before Interest and Taxes
2 Earnings Before Interest, Taxes, Depreciation and Amortization
