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 ACT OF 1934
For the quarterly period ended: May 30, 1998
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES 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
(State or Other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
460 Calle San Pablo
Camarillo, California 93012
(Address of principal executive offices) (Zip Code)
(805) 987-9000
(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
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 30, 1998: 11,779,572
Number of pages in this Form 10-Q: 9
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1: Financial Statements
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except par value)
May 30, Feb. 28,
1998 1998
(Unaudited) (Audited)
- ------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 5,119 $ 4,422
Accounts receivable 5,571 6,152
Inventories 6,361 6,851
Deferred tax asset 2,000 2,000
Prepaid expenses and other current assets 308 462
- ------------------------------------------------------------------------------
Total current assets 19,359 19,887
Property and equipment -- at cost, net of
accumulated depreciation and amortization 6,595 7,116
Other assets 832 828
- ------------------------------------------------------------------------------
$26,786 $27,831
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,879 $ 1,861
Accrued liabilities 2,109 2,399
Current portion of long-term debt 610 741
- ------------------------------------------------------------------------------
Total current liabilities 4,598 5,001
Long-term debt 951 1,112
Minority interest share in net assets of
Micro Pulse, Inc. 332 321
Stockholders' equity:
Preferred stock, 3,000 shares authorized;
no shares outstanding --- ---
Common stock, $.01 par value; 30,000 shares authorized;
11,780 shares outstanding in May 1998 and
11,771 shares outstanding in February 1998 118 118
Additional paid-in capital 14,042 14,025
Foreign currency translation adjustment (273) (249)
Retained earnings 7,018 7,503
- ------------------------------------------------------------------------------
Total stockholders' equity 20,905 21,397
- ------------------------------------------------------------------------------
$26,786 $27,831
- ------------------------------------------------------------------------------
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands, except per share data)
Three Months Ended
May 30, May 31,
1998 1997
- ------------------------------------------------------------------------------
Sales $ 9,060 $12,013
Cost of sales 6,267 8,342
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Gross profit 2,793 3,671
Research and development 1,216 1,086
Selling 1,246 1,307
General and administrative 1,071 978
- ------------------------------------------------------------------------------
Income (loss) from operations (740) 300
Interest and other expense, net 6 5
Minority interest share in income of
Micro Pulse 12 83
- -------------------------------------------------------------------------------
Income (loss) before tax (758) 212
Benefit from (provision for) income taxes 273 (82)
- ------------------------------------------------------------------------------
Net income (loss) $ (485) $ 130
- ------------------------------------------------------------------------------
Net income (loss) per share:
Basic $ (0.04) $ 0.01
Diluted $ (0.04) $ 0.01
- ------------------------------------------------------------------------------
Shares used in per share calculations:
- ------------------------------------------------------------------------------
Basic 11,780 11,731
Diluted 11,780 11,981
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Three Months Ended
- ------------------------------------------------------------------------------
May 30, May 31,
1998 1997
- ------------------------------------------------------------------------------
Cash flows from operating activities:
Net income (loss) $(485) $ 130
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 787 766
(Increase) decrease in:
Accounts receivable 373 (843)
Income tax receivable 209 666
Inventories 490 (1,027)
Prepaid expenses and other assets 124 370
Increase (decrease) in:
Accounts payable 18 154
Accrued liabilities (290) (199)
- -------------------------------------------------------------------------------
Cash provided by operating activities: 1,226 17
- ------------------------------------------------------------------------------
Cash flows provided by (used in) investing activities:
Purchases of property and equipment (272) (270)
Retirements of property and equipment (net) 6 ---
Purchase of controlling interest in Micro Pulse --- 327
Minority interest share in net assets of Micro Pulse 12 179
- -------------------------------------------------------------------------------
Cash provided by (used in) investing activities: (254) 236
- ------------------------------------------------------------------------------
Cash flows from financing activities:
Repayment of long-term debt (292) (228)
Issuances of common stock 17 10
- ------------------------------------------------------------------------------
Cash used in financing activities: (275) (218)
- -------------------------------------------------------------------------------
Net increase in cash and cash equivalents 697 35
Cash and cash equivalents at the beginning of period 4,422 3,165
- ------------------------------------------------------------------------------
Cash and cash equivalents at end of period $5,119 $3,200
- -------------------------------------------------------------------------------
<PAGE>
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 February 28,
1998. 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 30, 1998 May 31, 1997
--------------------------
Raw material $3,038 $2,691
Work in process 71 1,131
Finished goods 3,252 6,039
------ -----
$6,361 $9,861
====== ======
3. COMPREHENSIVE INCOME - Effective March 1, 1998 the Company adopted the
provisions of SFAS No. 130, "Reporting Comprehensive Income" which establishes
standards for reporting and display of comprehensive income and its components
in a full set of general-purpose financial statements. Comprehensive income is
defined as the total of net income and all non-owner changes in equity. The
following table details the components of comprehensive income for the three
months ended May 30, 1998 and May 31, 1997 (000's):
Quarter Ended Quarter Ended
May 30, May 31,
1998 1997
-----------------------------
Net income (loss) $(485) $ 130
Foreign currency translation adjustment,
net of tax (24) 4
-------- --------
Comprehensive income $(509) $ 134
========= ========
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MAY 30, 1998 AND MAY 31, 1997
SALES
Sales decreased by $2.9 million, or 24.9% from $12.0 million for the three
months ended May 31, 1997 to $9.1 million for the three months ended May 30,
1998. The sales decrease resulted from decreases in sales of Wireless Cable
products, Satellite products, and 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 $1.5 million, or 21.3%, to $5.6
million. Sales of Satellite Television products decreased $1.1 million, or
32.6%, to $2.2 million. Sales of Antenna products by Micro Pulse decreased
$381,000, or 22.6%, to $1.3 million.
The decrease in Wireless Cable sales resulted primarily from decreases in sales
of both wireless reception products and MultiCipher. Domestically, operators
continue to delay purchases of equipment as the digital rollout is evaluated and
potential financial alternatives are determined. Internationally, market growth
continues, but at a rate less than the prior year. In addition, many
international operators purchased product in the second half of fiscal year 1998
anticipating a more accelerated growth rate, and, because of slower growth rates
still have significant quantities on-hand to satisfy near-term growth. The
decrease in Satellite Television product sales resulted from continued decreases
in C-band sales, offset by increased Ku-band sales. Sales of Antenna products
decreased as a result of reductions in sales to certain major customers, as
certain wireless markets and products evolve.
The Company's objective to increase sales sequentially by quarter 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 as a key supplier, and entry into the Ku-DBS markets with its new
stacked Ku-DBS product.
GROSS PROFITS AND GROSS MARGINS
Gross profits decreased by $878,000, or 23.9%, from $3.7 million to $2.8
million. Gross margins increased from 30.6% to 30.8%. The decrease in gross
profits resulted from lower sales volumes offset by the slight increase in gross
margins. Gross margins remained under pressure due to low sales volumes,
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.
Gross margins will remain under pressure until the Company can increase its
sales volumes as previously described.
OPERATING EXPENSES
Research and development expenses increased by $130,000 from $1.1 million to
$1.2 million. The increase resulted primarily from increased salaries to remain
competitive with current salary for design engineers.
Selling expenses decreased by $61,000 from $1.31 million to $1.25 million. The
decrease was due primarily to reductions in certain discretionary spending,
offset by increases in salaries.
General and administrative expenses increased by $93,000 from $978,000 to $1.07
million. The increase was primarily due to legal fees relating to the class
action litigation.
<PAGE>
INCOME (LOSS) FROM OPERATIONS
Income (loss) from operations, for the reasons noted above, decreased by $1.04
million, from $300,000 of income to a $740,000 loss.
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. The decrease from $83,000 to $12,000 is a
result of Micro Pulse earning $168,000 in the first quarter of the prior year,
and $24,000 in the current quarter.
BENEFIT FROM (PROVISION FOR) INCOME TAXES
The benefit from taxes for the first quarter of fiscal 1999 is based upon an
annualized tax rate of 36%, the same tax rate as fiscal year 1998. This tax rate
assumes savings from benefits allowed for export sales through a foreign sales
corporation and research and development tax credits.
NET INCOME (LOSS)
Net income (loss), for reasons outlined above, decreased by $615,000, from net
income of $130,000 to a $485,000 net loss.
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 30, 1998). 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 30, 1998, no amounts were
outstanding under any of these arrangements. The $6.0 million credit facility
with California United Bank expires in August 1998. Based upon initial
conversations with the bank, the line will be renewed, but may be reduced from
the current $6.0 million credit facility due to the Company's current level of
operations.
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.
<PAGE>
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, Inc.,
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, Inc. et al., Case No. CIV 173569. On June 30, 1997, another legal
action was filed against the same defendants in the Superior Court for the State
of California, County of Ventura, entitled Burns, et al., v. California
Amplifier, Inc., et al., Case No. CIV 173981. All three actions are purported
class actions on behalf of purchasers of the common stock of the Company 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.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended May 30, 1998.
<PAGE>
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.
(Registrant)
July 10, 1998 /s/ Michael R. Ferron
-----------------------------
Michael R. Ferron
Vice President, Finance and
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET ON PAGE 2 AND THE CONSOLIDATED STATEMENTS
OF OPERATIONS ON PAGE 3 OF THE COMPANY'S FORM 10-Q FOR THE THREE MONTHS
ENDED MAY 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000730255
<NAME> CALIFORNIA AMPLIFIER, INC.
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