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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
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ACT OF 1934
For the quarterly period ended: May 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number: 012182
CALIFORNIA AMPLIFIER, INC.
(Exact name of registrant's specified in its charter)
Delaware 95-3647070
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(State or Other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
460 Calle San Pablo
Camarillo, California 93012
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(Address of principal executive offices) (Zip Code)
(805) 987-9000
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(Registrant's telephone number including area code)
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 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Common Stock Outstanding as of May 31, 1997: 11,717,000
Number of pages in this Form 10-Q: 8
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PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except par value)
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May 31, Mar. 1,
1997 1997
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(Unaudited) (Audited)
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ASSETS
Current assets:
Cash and cash equivalents $ 3,200 $ 3,165
Accounts receivable 8,265 7,316
Inventories 9,861 8,200
Prepaid expenses and other current assets 1,092 1,183
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Total current assets 22,418 19,864
Property and equipment -- at cost, net of
accumulated depreciation and amortization 7,152 7,407
Other assets 1,134 2,265
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$ 30,704 $ 29,536
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,780 $ 2,136
Accrued liabilities 2,327 1,928
Current portion of long-term debt 722 799
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Total current liabilities 5,829 4,863
Long-term debt 405 525
Minority interest share in net assets of
Micro Pulse 179 ---
Stockholders' equity:
Preferred stock, 3,000 shares authorized;
no shares outstanding --- ---
Common stock, $.01 par value; 30,000 shares authorized;
11,717 shares outstanding in May 1997 and
11,713 in March 1997 117 117
Additional paid-in capital 13,999 13,990
Foreign currency translation adjustment (123) (127)
Retained earnings 10,298 10,168
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Total stockholders' equity 24,291 24,148
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$ 30,704 $ 29,536
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2
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CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; in thousands, except per share data)
Three Months Ended
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May 31, June 1,
1997 1996
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Sales $ 12,013 $ 17,275
Cost of sales 8,342 11,232
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Gross profit 3,671 6,043
Research and development 1,086 1,473
Selling 1,307 1,333
General and administrative 978 884
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Income from operations 300 2,353
Interest and other income (expense), net (5) 139
Minority interest share in income of
Micro Pulse (83) ---
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Income before tax 212 2,492
Provision for income taxes 82 869
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Net income $ 130 $ 1,623
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Net income per share $ .01 $ .13
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Weighted average number of shares outstanding 11,981 12,742
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3
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Three Months Ended
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May 31, June 1,
1997 1996
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Cash flows from operating activities:
Net income $ 130 $1,623
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 766 712
(Increase) decrease in:
Accounts receivable (843) (3,362)
Income tax receivable 666 ---
Inventories (1,027) (1,336)
Prepaid expenses and other assets 370 (253)
Increase (decrease) in:
Accounts payable 154 383
Accrued liabilities (199) (389)
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Cash provided (used) by operating activities: 17 (2,622)
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Cash flows provided by (used in) investing activities:
Purchases of property and equipment (270) (2,295)
Purchase of controlling interest in Micro Pulse 327 ---
Minority interest share in net assets of Micro Pulse 179 ---
Advance to Micro Pulse --- (45)
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Cash provided by (used in) investing activities: 236 (2,340)
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Cash flows from financing activities:
Repayment of term debt (228) (258)
Issuances of common stock 10 108
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Cash used by financing activities: (218) (150)
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Net increase (decrease) in cash and cash equivalents 35 (5,112)
Cash and cash equivalents at the beginning of period 3,165 11,637
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Cash and cash equivalents at end of period $3,200 $6,525
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4
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CALIFORNIA AMPLIFIER, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION - The accompanying unaudited consolidated financial
statements have been prepared in accordance with the requirements of Form
10-Q and, therefore, do not include all information and footnotes which would
be presented were such financial statements prepared in accordance with
generally accepted accounting principles. These statements should be read in
conjunction with the Company's Annual Report on Form 10-K for the year ended
March 1, 1997. In the opinion of management, these interim financial
statements reflect all adjustments necessary for a fair presentation of the
financial position and results of operations for each of the periods
presented. The results of operations and cash flows for such periods are not
necessarily indicative of results to be expected for the full fiscal year.
2. INVENTORIES - Inventories include the cost of material, labor and
manufacturing overhead and are stated at the lower of cost (first-in,
first-out) or market and consist of the following (in 000's):
May 31,1997 March 1, 1997
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Raw material $2,691 $2,510
Work in process 1,131 1,568
Finished goods 6,039 4,122
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$9,861 $8,200
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3. NET INCOME PER SHARE - Net income per share is based upon the weighted
average number of shares outstanding during each of the respective years,
including the dilutive effects of stock options and warrants using the
treasury stock method. The weighted average number of shares used in the
computation of net income per share for the three months ended May 31, 1997
and June 1, 1996 were increased by 515,000 and 1,208,000, respectively, for
the dilutive effects of stock options and warrants.
4. CONSOLIDATION OF INVESTMENT IN MICRO PULSE, INC. - In March 1997, the
Company acquired additional shares in Micro Pulse, Inc. ("Micro Pulse"),
which resulted in California Amplifier holding a 50.5% controlling interest
in Micro Pulse. Effective March 2, 1997, the statements of income, balance
sheet, and cash flows of Micro Pulse are consolidated with those of the
Company, reduced by the minority interests' share in the net assets and
income of Micro Pulse. The 50% investment in Micro Pulse had previously been
accounted for using the equity method of accounting.
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MAY 31, 1997 AND JUNE 1, 1996
SALES
Sales decreased by $5.3 million, or 31% from $17.3 million for the three
months ended June 1, 1996 to $12.0 million for the three months ended May 31,
1997. The sales decrease resulted from decreases in sales of Wireless Cable
products and Satellite television products, offset by sales of Antenna
products, which represent sales by Micro Pulse, a company which the Company
holds a 50.5% controlling interest. Sales of Wireless Cable products
decreased $5.9 million, or 46%, to $7.1 million. Sales of Satellite
Television products decreased $998,000, or 23%, to $3.3 million. Sales of
Antenna products by Micro Pulse were $1.7 million, but were not consolidated
in the prior year.
The decrease in Wireless Cable sales resulted primarily from decreases in
sales of Wireless Reception products and MultiCipher. Domestically,
operators continue to delay purchases of equipment as the digital rollout is
evaluated. Internationally, market growth continues, but the first quarter
of the prior year had sales to new system launches which accounted for a
significant percentage of Wireless Cable sales. In the current quarter,
there were no major system sales of the same magnitude. Accordingly,
year-to-year sales decreased. The decrease in Satellite Television product
sales resulted from continued decreases in C-band sales, offset by increased
Ku-band sales. The Company has not been successful in booking a major DBS
order to completely offset its reduced sales of C-band products. Sales of
Antenna products, as noted above, have only been consolidated since March 2,
1997 when the Company acquired a controlling interest.
The Company's future sales growth is dependent upon maintaining its Wireless
Cable market share internationally, a successful Wireless Cable digital
rollout in the United States which the Company must participate, and
continued demand for its Ku-DBS product into niche markets.
GROSS PROFITS AND GROSS MARGINS
Gross profits decreased by $2.4 million, or 39%, from $6.0 million to $3.7
million. Gross margins decreased from 35% to 30.6%. The decrease in gross
profits resulted from lower sales volumes and lower gross margins. The gross
margin reduction resulted primarily from lower sales, under-utilization of
factory overhead, and reduced product gross margins, primarily in Wireless
Reception products, as a result of competitive pricing in a soft market
environment.
OPERATING EXPENSES
Research and development expenses decreased by $387,000 from $1.5 million to
$1.1 million. The decrease resulted primarily from reduced expenditures in
the current quarter as compared to the first quarter of the prior year,
relating to the development of MultiCipher Plus, offset by research and
development expenses incurred by Micro Pulse, which is now consolidated.
Selling expenses decreased by $26,000 from $1.33 million to $1.31 million.
The decrease was due primarily to reductions in certain discretionary
spending, offset by increases in salaries, personnel additions and an
increased level of international selling expenses relating to the increases
in sales in various international regions, as well as selling expenses
incurred by Micro Pulse, which is now consolidated.
General and administrative expenses increased by $94,000 from $884,000 to
$978,000. The increase was due to reduced expenses, offset by administrative
expenses incurred by Micro Pulse, which is now consolidated.
INCOME FROM OPERATIONS
Income from operations, for the reasons noted above, decreased by $2.1
million, from $2.4 million to $300,000.
6
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INTEREST AND OTHER INCOME (EXPENSE), NET
Interest and other income (expense), net, decreased by $144,000 to $5,000
expense, net, from $139,000 income, net. The primary reason for the decrease
is reduced interest income because of lower cash balances during the current
quarter.
MINORITY INTEREST SHARE IN INCOME OF MICRO PULSE
The minority interest share in income of Micro Pulse represents 49.5% of the
income before tax of Micro Pulse. In the prior year, Micro Pulse was not
consolidated, however, no income was booked during the first quarter of the
prior year for California Amplifier's then 50% ownership interest which was
accounted for using the equity method of accounting.
PROVISION FOR TAXES
The provision for taxes for the first quarter of fiscal 1998 is based upon an
annualized tax rate of 36%, the same tax rate as fiscal year 1997. This tax
rate assumes savings from benefits allowed for export sales through a foreign
sales corporation and research and development tax credits.
NET INCOME
Net income, for reasons outlined above, decreased by $1.5 million, from $1.6
million to $130,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a $6.0 million working capital facility with California
United Bank at the bank's prime rate (8.5% at May 31, 1997). In addition,
California Amplifier s.a.r.l., its foreign subsidiary, has an informal
arrangement with a French bank to borrow up to $600,000. As of May 31, 1997,
no amounts were outstanding under any of these arrangements. The $6.0
million credit facility with California United Bank expires on August 4,
1997. The Company is currently in discussions with California United Bank to
renew the agreement for an additional year at similar terms.
The Company believes that cash flow from operations, together with the funds
available under its credit facilities, are sufficient to support operations
and capital equipment requirements over the next twelve months.
The Company believes that inflation has not had a material effect on its
operations.
7
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On June 11, 1997, the Company and certain of its directors and officers had
two legal actions filed against them, one in the United States District
Court, Central District of California, entitled YOURISH V. CALIFORNIA
AMPLIFIER, ET AL., Case No. 97-4293 (BM (Mcx), and the other in the Superior
Court for the State of California, County of Ventura, entitled YOURISH V.
CALIFORNIA AMPLIFIER, ET AL., Case No. CIV 173569. The actions are purported
class actions on behalf of purchasers of the common stock of California
Amplifier between September 12, 1995 and August 8, 1996. The actions claim
that the defendants engaged in a scheme to make false and misleading
statements and omit to disclose material adverse facts to the public
concerning the Company, allegedly causing the Company's stock price to
artificially rise, and thereby allegedly allowing the individual defendants
to sell stock at inflated prices. Plaintiffs claim that the purported
stockholder class was damaged when the price of the stock declined upon
disclosure of the alleged adverse facts. The Company and its legal counsel
are currently evaluating the claims. Based upon the analysis performed to
date, the Company, its directors and officers, plan to vigorously defend
themselves against these claims.
Information applicable to Items 2 through 6 has been reported by the
registrant in previous filings or has already been disclosed in the financial
information provided in Part I.
No reports on Form 8-K were filed during the quarter ended May 31, 1997.
SIGNATURES
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 thereunto duly authorized.
California Amplifier, Inc.
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(Registrant)
July 14, 1997 /s/ Michael R. Ferron
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Michael R. Ferron
Vice President, Finance and
Chief Accounting Officer
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET ON PAGE 2 AND THE CONSOLIDATED STATEMENTS
OF INCOME ON PAGE 3 OF THE COMPANY'S FORM 10-Q FOR THE THREE MONTHS ENDED
MAY 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-02-1997
<PERIOD-END> MAY-31-1997
<CASH> 3,200
<SECURITIES> 0
<RECEIVABLES> 8,934
<ALLOWANCES> 669
<INVENTORY> 9,861
<CURRENT-ASSETS> 22,418
<PP&E> 19,131
<DEPRECIATION> 11,979
<TOTAL-ASSETS> 30,704
<CURRENT-LIABILITIES> 5,829
<BONDS> 0
0
0
<COMMON> 14,116
<OTHER-SE> 10,175
<TOTAL-LIABILITY-AND-EQUITY> 30,704
<SALES> 12,013
<TOTAL-REVENUES> 8,342
<CGS> 3,371
<TOTAL-COSTS> 88
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