<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the fiscal year ended February 28, 1998 Commission File Number 0-12182
CALIFORNIA AMPLIFIER, INC.
(Exact name of Registrant as specified in its Charter)
Delaware 95-3647070
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
460 Calle San Pablo, Camarillo, California 93012
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (805) 987-9000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
None None
Securities registered pursuant to Section 12(g) of the Act:
$.01 par value Common Stock
(Title of Class)
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock of the Registrant held by
non-affiliates of the Registrant as of May 22, 1998 was approximately
$32,078,748.
There were 11,779,572 shares of the Registrant's Common Stock outstanding as
of May 22, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on July 17, 1998 is incorporated by reference
into Part III, Items 11, 12 and 13 of this Form 10-K. This Proxy Statement will
be filed within 120 days after the end of the fiscal year covered by this
report.
<PAGE>
PART I
ITEM 1. BUSINESS
THE COMPANY
California Amplifier, Inc. (the 'Company') was incorporated in 1981. Since
its inception, the Company has been engaged in the design, manufacture and
marketing of microwave components used in both defense and commercial markets,
primarily relating to the amplification and conversion of microwave signals used
in reception applications. In 1990, the Company discontinued its involvement in
its defense business and since that time has concentrated on two major product
lines: Wireless Cable and Satellite Television products. In December 1997, the
Company reorganized into three business units: Wireless Cable Products,
Satellite Products, and Voice and Data Products. In addition, in March 1997, the
Company increased its 50% ownership interest in Micro Pulse, Inc., acquired in
1993, to a 50.5% controlling interest. Micro Pulse designs manufactures and
markets antennas for various wireless applications, primarily for Global
Positioning Satellite (GPS) applications.
WIRELESS CABLE PRODUCTS
Wireless Cable television operates in many ways similar to coaxial cable
multichannel television transmission. The key difference is that Wireless Cable
does not have cable connecting the headend/transmission site to each home, but
instead uses a microwave frequency band to transmit programming within a local
service area. The signal can generally be received by subscribers within a 25-40
mile omni-directional radius of the transmission tower depending on the
transmitter power; however, the subscriber must have a direct line-of-sight or
"view" between the tower and the receive antenna. Typically, 65%-80% of the
homes within the service area will be able to receive the wireless signal, with
the remainder shadowed from the transmitter. The percentage of line-of-sight
homes is affected by the tower elevation, local topography and the subscriber
antenna height.
In the United States there are approximately 110 million television
households, of which approximately 65% receive its programming from cable
companies. Currently there are approximately 220 Wireless Cable operations in
the United States, serving approximately 1.0 million subscribers, with
line-of-sight access to approximately 30 million television households. Industry
analysts estimate that a fully-financed wireless system could reach penetration
levels of 10%-15% of line-of-sight homes due to inherent cost advantages of the
technology, compared to cable. These penetration levels can be achieved by
addressing various factors but primarily additional capital availability to
finance growth, and the adoption of digital compression which would eliminate
constraints with respect to channel capacity.
In 1995, the Wireless Cable industry in the United States generated a great
deal of interest with Tele-TV, a consortium comprised of Bell Atlantic, NYNEX
and Pacific Telesis, which announced its intention to deliver video to customers
using Wireless Cable digital compression technology. Initial projections for a
digital subscriber rollout by Tele-TV were 2.0 million subscribers within three
years of introduction. In late 1996, the Tele-TV consortium announced that
certain members (Bell Atlantic and NYNEX) had changed their strategic emphasis
and were not going forward with their Wireless Cable plans. Pacific Telesis
remained committed to Wireless Cable, but on a slower rollout than previously
planned, and currently is evaluating its strategy with a single operation in
Orange County, California. In 1996, Bell South announced its plan to use digital
Wireless Cable technology to deliver video services in the southeastern region
of the United States in such cities as Atlanta and New Orleans. To date, there
has been no significant number of wireless subscribers added in these cities.
The Tele-TV participation in Wireless Cable television was viewed by many
industry experts as the beginning of well financed companies entering the
Wireless Cable market through acquisition or alliances with existing domestic,
multiple system operators. The decision by the Tele-TV partners to re-access
their video delivery strategy, combined with other factors, has resulted in a
significant slowdown in the domestic Wireless Cable market. Independent
operators are now confronted with limited financing alternatives, negative cash
flow from operations with current subscriber levels, and the decision of whether
to expand subscriber counts using analog equipment prior to the availability of
digital equipment.
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The decision to switch from analog to digital is a costly one, both from a
system architecture, and per subscriber standpoint. As a result of the current
capital constraints confronting the independent system operators, the conversion
from analog to digital is no longer an equipment availability issue. Until the
Wireless Cable industry in the United States can attract financial resources to
introduce digital Wireless Cable television through alliances, acquisitions or
the equity/debt markets, the industry will continue to be an insignificant
participant in the delivery of multichannel pay television to consumers. This
has directly impacted the Company's shipment levels over the last eighteen
months, and has created a great deal of uncertainty with respect to future
subscriber growth for U.S. Wireless Cable operators, and hence the growth of the
Company's product sales to this industry in the U.S..
Internationally, the Wireless Cable industry has experienced significant
growth in response to increasing worldwide demand for multichannel television
and the increased availability of a variety of programming such as HBO, CNN,
MTV, ESPN and Disney. The Company believes that Wireless Cable technology, in
many instances, is better suited than traditional cable to provide multichannel
television to the consumer, especially in less developed countries and in areas
that are not densely populated. The lack of a need for a cable network allows
Wireless Cable operators to commence broadcasting more quickly, with less of an
initial investment than for traditional cable, and to quickly expand throughout
a service area. To date, Wireless Cable systems have been launched throughout
the world, including major systems in Mexico, Venezuela, Brazil, Argentina,
Paraguay, Chile, Qatar, Thailand, Malaysia, Nigeria, Australia, Czech Republic,
Russia and Ireland. Similar launches in these countries, and other geographical
areas, are expected to continue as programming is made available to these areas.
Because the international markets do not have a high percentage of pay
television subscribers to television households, and are not dominated by a
single method of delivery, as cable is in the United States, the potential for
Wireless Cable as a programming delivery method internationally, is significant.
The Company believes that Latin America, Africa and Eastern Europe's Wireless
Cable television expansion will continue during the next fiscal year.
Accordingly, it is these markets which the Company will focus its marketing and
sales resources for both its wireless reception products and MultiCipher, the
Company's proprietary Wireless Cable scrambling system.
SATELLITE PRODUCTS
Satellite dishes are used for the reception of video, audio and data
transmitted from orbiting satellites. The Company's products, which are
components of the dish assembly, are used both in commercial satellite dish
applications and home satellite dishes. The Company's Satellite product dollar
sales to date, however, have been primarily generated from sales of
downconverters, amplifiers and integrated feedhorns and amplifiers used in home
satellite dish and cable headend dish applications.
The satellite dish is a parabolic reflector antenna. Microwaves are
transmitted from orbiting satellites toward the earth's surface. The dish
reflects the microwaves back to a focal point where a feedhorn collects the
microwaves transferring the signals into an amplifier/downconverter. The
microwave amplifier literally amplifies the microwave signal millions of times
for further processing. The downconverter changes the frequency into an
intermediate frequency so that the receiver and television can process the
signal and create a picture.
The home satellite industry has undergone substantial changes over the past
several years. During the early 1980's, home satellite systems in the United
States were capable of receiving a wide variety of television broadcast signals,
including those delivered to pay television and cable television operators,
without charge since the transmitted signals were not scrambled. In 1986,
certain broadcasters began to scramble their signal, and today virtually all
premium programmers in the U.S. scramble their programming. To view scrambled
programs, the viewer is required to purchase a decoder and pay a periodic fee to
the programmer or program reseller.
In 1994, the Direct Broadcast System (DBS) was introduced in the United
States. The DBS system uses high powered satellites and Ku-Band to transmit
programming to subscribers digitally. As a result of the satellite transmission
power and the Ku frequency, the satellite dish required for signal reception is
only eighteen inches in diameter. This compares to C-Band dishes that range from
five to twelve feet in diameter. The Ku-DBS system has been very well accepted
since its introduction and installations total over 6 million television
households, while C-Band installations approximate 2 million, down from a 1994
high of 4.2 million. A small dish with the capability of receiving a significant
number of channels, primarily because the DBS satellite transmits digital
signals at high power levels, offers a consumer an alternative to the big,
<PAGE>
C-Band backyard dish. As a result, since the DBS launch, new C-band
installations have been reduced dramatically to less than 75,000 per year, while
U.S. DBS installations are projected to increase over 2.0 million per year.
The international market for Satellite Television exists primarily in Europe,
the Middle East, Asia and Latin America where cable penetration is substantially
less than in the United States. The Company believes the international market
for Satellite Television, which has an installed base of over 20 million dishes,
will continue to grow in response to increased worldwide demand for television
spurred, in part, by an increase in the availability and variety of programming.
Certain United States cable television networks have expanded their programming
coverage internationally. The availability of highly desirable programming such
as HBO, CNN, MTV, ESPN and Disney has led to the growth of the various methods
of multichannel television delivery in the many international markets. As
previously stated, both C-Band and Ku-Band dishes will be used by consumers
depending upon how the programmers choose to transmit such signals. Both Ku-Band
and C-Band satellite launches are scheduled over the next several years, however
the Ku-DBS alternative is becoming increasingly more popular to programmers as a
means of delivery directly to subscribers.
With the Company's reorganization into separate business units, the Satellite
Products business unit will focus its resources on Ku-DBS applications, as well
as a broad line of commercial applications. For the DBS market, the Company must
emphasize lower cost DBS solutions in the mainstream consumer markets, as well
as higher sales price products which offer feature, performance, or installation
advantages. For commercial applications, the Company will focus on digital
applications for satellite head-ends and data transmission.
VOICE AND DATA PRODUCTS
Wireless Cable operators own significant wireless spectrum or bandwidth in
the 2.5 to 2.7 gigahertz range. As a result of the trend to switch from analog
transmission of video to digital transmission, the number of video channels
increase from approximately 31 channels to as much as 300 channels. Depending on
the demand for video services, operators have considered using the unused video
bandwidth for voice (telephony) or data (Internet access) applications. To date,
there has only been limited system testing for these "wireless local-loops." It
is the belief of many industry experts that the technology is proven; however,
the rollout of wireless local-loop systems in the United States on a broad scale
will require a significant financial commitment which currently does not exist
within the Wireless Cable television industry.
California Amplifier has worked closely with the Wireless Cable operators as
well as with system integration to develop two-way transceivers for wireless
local-loop applications. Because of the telecommunications move toward wireless
communication, the Company has increased its focus on wireless fixed location
products with the formation of its Voice and Data Products business unit as part
of the December 1997 reorganization. In addition, this business unit will work
closely with Micro Pulse to broaden the market opportunities for its core
antenna technologies.
INVESTMENT IN MICRO PULSE, INC.
In January 1993, the Company purchased a 50% ownership interest in Micro
Pulse, Inc. ("Micro Pulse") for $100,000 in cash and a $400,000 convertible
promissory note. In April 1995, the note was converted into 100,000 shares of
the Company's common stock. Micro Pulse designs, manufactures and markets
antennas and amplifiers used principally in global positioning systems ("GPS").
Such products are used in surveying applications, vehicle tracking and marine
and airborne navigation. In March 1997, the Company acquired additional shares
resulting in a 50.5% controlling interest and, as a result, in fiscal year 1998
the Company consolidated the sales (Antenna products) and expenses of Micro
Pulse in its statement of operations.
PRODUCTS
The Company designs, manufactures and markets a broad line of amplifiers,
downconverters, antennas and integrated products used in the reception,
conversion and amplification of microwave signals used in conjunction with the
reception of video, audio, and data transmitted from satellites or earth-based
transmitters using microwave signals. Products serve both the Wireless Cable
industry (S-Band) and the Satellite Television industry (C-Band and Ku-Band) and
two-way voice and data transceivers for wireless communication between fixed
locations.
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The Company also manufactures and markets a broadband scrambling system
called MultiCipher, used by Wireless Cable operators to protect their signals
from unauthorized viewing. Because MultiCipher is a broadband scrambling system,
it decodes all channels transmitted simultaneously. This allows a 'whole-house'
solution for the Wireless Cable operator and eliminates the requirement of
installing a conventional set-top box on each television in the subscribers'
home.
The Company, through its 50.5% controlling interest in Micro Pulse, also
designs manufactures and markets a broad line of antenna products used in GPS
applications for vehicle and asset tracking, surveying, and marine and airborne
navigation.
During fiscal years 1998, 1997, and 1996, Wireless Cable products, which
include MultiCipher and Voice and Data products, accounted for 59.1%, 69.9%, and
70.1% of the Company's sales, respectively, and Satellite products accounted for
28.0%, 29.9%, and 29.3% of the Company's sales, respectively. Antenna products,
which represent sales by Micro Pulse accounted for 12.9% of the consolidated
sales in fiscal year 1998, the first year Micro Pulse's operations were
consolidated. For additional information regarding the Company's sales by
geographical areas, see Note 10 of Notes to Consolidated Financial Statements.
MANUFACTURING
The Company currently manufactures and assembles its products in its
Camarillo, California, USA, facility. Manufacturing operations consist
principally of assembling of components built from fabricated parts, printed
circuit boards and electronic devices, and microwave tuning and testing of
assembled products. The Company has assembled products in Mexico and from
time-to-time evaluates other manufacturing operations in other countries based
upon various factors, including anticipated sales growth, labor content, product
life cycles and shipments by geographical regions.
Electronic devices, components and raw materials used in the Company's
products are generally obtained from a number of suppliers, although certain
materials are obtained from a limited number of sources. Some devices or
components are standard items while others are manufactured to the Company's
specifications by its suppliers. The Company attempts to operate without
substantial levels of raw materials by depending on certain key suppliers to
provide material on a "just-in-time" basis. The Company believes that most raw
materials are available from alternative suppliers. However, any significant
interruption in the delivery of such items could have an adverse effect on the
Company's operations.
ISO 9001 INTERNATIONAL CERTIFICATION
In August 1995, the Company became registered to ISO 9001, the international
standard for conformance to quality excellence in meeting market needs in all
areas including product design, manufacturing, quality assurance and marketing.
The registration assessment was performed by Underwriter's Laboratory, Inc.,
according to the ISO 9001:1994 International Standard. Continuous assessments to
maintain certification are performed semi-annually, and the Company has
maintained its certification through each audit evaluation, most recently March
1998.
RESEARCH AND DEVELOPMENT
Both the Wireless Cable and Satellite markets are characterized by
technological change, evolving industry standards, and new product requirements
to meet market growth. During the last three years, the Company has focused its
research and development resources on three primary areas: digital Wireless
Cable reception products, the MultiCipher "whole-house" broadband scrambling
system, and Ku-DBS products. In addition, development resources were allocated
to broaden existing product lines, reduce product costs and improve performance
by product redesign efforts. Research and development costs have been a
significant expense over the past three fiscal years consistent with this
strategy.
Research and development expenses were $4,475,000, $5,789,000, and
$4,376,000, during fiscal years 1998, 1997, and 1996, respectively.
<PAGE>
As noted elsewhere herein, in December 1997, the Company reorganized into
three separate business units, Wireless Cable Products, Satellite Products, and
Voice and Data Products. Each business unit has dedicated design and development
resources which will be more keenly focused on specific product and market
opportunities. The Company is committed to maintaining its development
commitment even though other operating costs have been reduced as the Company
experiences a sales slowdown.
SALES AND MARKETING
The Company sells its Wireless Cable products directly to Wireless Cable
operators, but will occasionally utilize a distributor for certain geographical
regions. The Company sells its Satellite products through satellite equipment
distributors, but, from time to time, sells certain products to manufacturers
for incorporation into complete satellite dish systems, or directly to DBS
operators.
The Company's sales and marketing functions for each business unit are
centralized in its Camarillo, California, U.S.A., corporate headquarters. In
addition, the Company has sales offices and personnel in Paris, France; Sao
Paulo, Brazil; and Bangkok, Thailand. The Company may add additional sales
offices and employees as market conditions warrant, in market areas that require
additional sales and customer support not adequately served by a major
distributor or reseller. See also Note 10 of Notes to Consolidated Financial
Statements for major customer and geographical sales information.
COMPETITION
The markets in which the Company competes are highly competitive. In
addition, if the markets for the Company's products continue to grow, the
Company anticipates increased competition from new companies entering such
markets, some of whom may have financial and technical resources substantially
greater than those of the Company. Furthermore, because some of the Company's
products may not be proprietary, they may be duplicated by low-cost producers,
resulting in price and margin pressures.
The Company believes that competition in its markets is based primarily on
price, performance, reputation, product reliability and technical support. In
the Wireless Cable market, the Company has supplier relationships with major
Wireless Cable operators in various regions of the world, and believes that its
pricing, accompanied by product performance, reliability, low field failure
rate, and its ongoing technical support, are currently competitive advantages to
the Company. In the Satellite Television market, where the Company has
participated since its inception in 1981, its reputation for performance and
quality allows the Company a competitive advantage if pricing of its products is
comparable to its competitors.
The Company's continued success in these markets, however, will depend upon
its ability to continue to design and manufacture quality products at
competitive prices.
BACKLOG
The Company's products are sold to customers that do not usually enter into
long-term purchase agreements, and as a result, the Company's backlog at any
date is not significant. In addition, because of customer order modifications,
cancellations, or orders requiring wire transfers or letters of credit from
international customers, the Company's backlog as of any particular date, may
not be indicative of sales for any future period. Moreover, the lack of backlog
makes it more difficult for the Company to forecast its sales from period to
period.
PATENTS, TRADEMARKS AND LICENSES
The Company's timely application of its technology and its design,
development and marketing capabilities have been of substantially greater
importance to its business than patents or licenses.
The Company currently has ten patents ranging from design features for
downconverter and antenna products, to its MultiCipher broadband scrambling
system. Those that relate to its downconverter products do not give the Company
any significant advantage since other manufacturers using different design
approaches can offer similar microwave products in the marketplace. The Company
does believe, however, that certain Wireless Cable antenna patented designs, and
the broadband scrambling technology for encoding and decoding multi-channel
television signals used in the MultiCipher system are significant and may result
in a competitive advantage for the Company. In May 1997, the Company filed suit
in the U.S. District Court for the Central District of California against
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Pacific Monolithics, Inc. for patent infringement of the Company's MultiCipher
patent. In July 1997, the infringement suit was settled and the Company entered
into a license agreement with Pacific Monolithics to license the MultiCipher
technology.
The Company currently has five other patents pending.
California Amplifier and MultiCipher are federally registered trademarks of
the Company. The Company has also filed for trademark protection for its
MultiCipher Plus product line.
EMPLOYEES
At February 28, 1998, the Company had 226 employees. None of the Company's
employees are represented by a labor union.
ITEM 2. PROPERTIES
The Company's corporate headquarters and manufacturing facility is located in
Camarillo, California (approximately 60 miles north of Los Angeles) and consists
of approximately 64,000 square feet located on approximately four acres of land.
The Company also leases an aggregate of approximately 30,000 square feet of
space in two facilities across from its headquarters facility which are used for
finished goods storage, and a tool and die operation. These leases expire in
2004. The Company also leases offices in Paris, France; Sao Paulo, Brazil; and
Bangkok, Thailand. See also Note 9 to Consolidated Financial Statements.
The Company also owns three acres of land adjacent to its leased headquarters
which could be used for expansion if the Company chose to add resources to its
Camarillo, California, USA manufacturing facility.
ITEM 3. 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 omitted 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the three months ended February 28, 1998, no matters were submitted to
a vote of the Company's security holders.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
The Company's Common Stock is traded on the Nasdaq National Market ("NNM")
under the trading symbol "CAMP." The following table sets forth for each fiscal
period indicating the high and low closing sale prices for the Company's Common
Stock, as reported by the NNM:
LOW HIGH
FISCAL YEAR ENDED FEBRUARY 28, 1998:
1st Quarter $ 3.25 $ 5.50
2nd Quarter 3.62 6.12
3rd Quarter 3.12 6.00
4th Quarter 2.00 3.75
FISCAL YEAR ENDED MARCH 1, 1997:
1st Quarter $22.12 $46.00
2nd Quarter 6.50 48.75
3rd Quarter 6.12 14.25
4th Quarter 4.87 9.50
On March 22, 1996, the Company effected a two-for-one stock split. All per
share amounts contained herein have been retroactively adjusted to reflect the
stock split.
At May 22, 1998 the number of stockholders of record of the Company's Common
Stock was 326. The number of stockholders of record does not include the number
of persons having beneficial ownership held in "street name" which are estimated
to approximate 9,500.
The Company has never paid a cash dividend and has no current plans to pay
cash dividends on its Common Stock.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain selected financial data which has been
derived from the audited consolidated financial statements of the Company for
each of the respective years. The selected financial data should be read in
conjunction with the consolidated financial statements and related notes thereto
and Management's Discussion and Analysis of Financial Condition and Results of
Operations contained herein.
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
(in thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended
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Feb. 28, Mar. 1, Mar. 2, Mar. 4, Feb. 26,
1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C>
Sales $46,933 $49,290 $61,590 $45,656 $40,664
Income (loss) before taxes (4,149) 1,037 7,638 3,770 2,279
Net income (loss) (2,665) 633 4,958 2,451 1,556
Diluted net income (loss)
per share (0.23) 0.05 0.41 0.22 0.14
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CONSOLIDATED BALANCE SHEET DATA:
(in thousands)
As of Each Year End
1998 1997 1996 1995 1994
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Total assets $27,831 $29,536 $32,573 $22,087 $19,599
Working capital 14,886 15,001 15,743 8,552 6,093
Long-term debt, net of
current portion 1,112 525 767 782 773
Stockholders' equity 21,397 24,148 22,924 14,899 12,163
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</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
sales represented by items included in the Company's Consolidated Statements of
Operations:
Years Ended
Feb. 28, March 1, March 2,
1998 1997 1996
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Sales:
Wireless Cable Products 59.1% 69.9% 70.1%
Satellite Products 28.0 29.9 29.3
Antenna Products 12.9 --- ---
Other --- .2 .6
Total sales 100.0 100.0 100.0
Gross profit 22.8 29.4 34.0
Research and development 9.5 11.8 7.1
Selling 11.1 9.7 8.1
General and administrative 10.3 6.5 6.6
Income (loss) from operations (8.1) 1.4 12.2
Interest and other, net --- .7 .2
Minority interest share in income of
Micro Pulse (.7) --- ---
Income (loss) before provision for
income taxes (8.8) 2.1 12.4
Benefit (provision) for income taxes 3.2 .8 4.4
Net income (loss) (5.6)% 1.3% 8.0%
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FISCAL YEARS 1998 AND 1997
Sales decreased by $2.4 million, or 5%, from $49.3 million in fiscal year
1997 to $46.9 million in fiscal year 1998. The fiscal year 1998 sales decrease
resulted from decreases in Wireless Cable and Satellite product sales, offset by
sales of Antenna products which represent sales by Micro Pulse, consolidated
since March 1997 when the Company increased its ownership interest in Micro
Pulse from 50.0% to 50.5%.
Sales of Wireless Cable products decreased $6.7 million, or 19%, from $34.4
million to $27.7 million. Sales of Satellite products decreased $1.7 million, or
11%, from $14.8 million to $13.1 million. Sales of Antenna products which
represent sales by Micro Pulse, were $6.1 million in fiscal year 1998, but were
not consolidated in fiscal year 1997.
The $6.7 million decrease in Wireless Cable sales was primarily a result of
decreases in sales of MultiCipher scrambling products in Asia and the United
States as customers curtailed their subscriber growth. Wireless reception
products remained relatively flat with the prior year, with increased sales in
Latin America, offset by decreases in the United States, Asia and Africa.
Domestically, there continues to be a lack of capital availability for
independent domestic operators to fund subscriber growth, as well as the
continued delays in the introduction of digital Wireless Cable television by
certain telcos, such as Pacific Bell and Bell South.
The $1.7 million decrease in the sales of Satellite products resulted
primarily from lower sales in the United States because of the continued shift
from C-band to DBS delivery systems, in which the Company does not participate
on a broad scale, and in the Middle East where pricing competition has caused
the Company to lose sales.
<PAGE>
Domestic sales increased $2.3 million from $17.1 million to $19.4 million.
Foreign sales decreased $4.6 million from $32.2 million to $27.6 million. The
increase in domestic sales results from the inclusion of $6.1 million of Antenna
product sales shipped by Micro Pulse, offset by decreases in sales of Wireless
Cable and Satellite products. Domestically, Wireless Cable operators curtailed
their purchases of both Wireless Cable reception equipment and MultiCipher. In
addition, the sales of Satellite products decreased domestically as the demand
for the Company's C-band products continued to decline as the Ku-DBS market
continued to gain market share. The decrease in foreign sales related primarily
to decreases in the sales of Wireless Cable products, primarily MultiCipher in
the Asian region. See also Note 10, to Notes to Consolidated Financial
Statements for sales by geographical region.
Gross profits decreased $3.8 million, or 26%, from $14.5 million to $10.7
million. Gross margins decreased from 29.4% to 22.8%. The decrease in gross
margins resulted primarily from $8.4 million in lower sales shipped from the
California Amplifier facility which resulted in significant under-utilization of
direct labor and factory overhead. In addition gross margins were negatively
impacted because of higher warranty expenses, and the $3.0 million in charges
relating to slow-moving and obsolete inventory reserves. The inventories which
have been reserved relate primarily to Wireless Cable products, both reception
equipment and MultiCipher, which have been severely impacted by the slowdown
experienced in the Wireless Cable industry. The Company believes that gross
margins in fiscal year 1999 will improve from fiscal year 1998 levels of 22.8%
due to reduced headcount, improved operating efficiencies, and inventory control
programs.
Research and development expenses decreased by $1.3 million, from $5.8
million to $4.5 million. As a percentage of sales, research and development
decreased from 11.8% to 9.5%. The decrease in expenses during fiscal year 1998
as compared to fiscal year 1997 results from significant development expenses
incurred during fiscal year 1997 relating to the development and introduction of
MultiCipher Plus, the Company's tiered, whole-house scrambling system.
Offsetting these decreases, however, are research and development expenses
relating to Micro Pulse, which were consolidated during the current fiscal year.
Although the Company continues to focus on cost containment programs until the
revenue trend reverses, the Company remains committed to new product design and
therefore expects development expenditures to increase in fiscal year 1999 as
compared to fiscal year 1998 amounts.
Selling expenses increased $413,000 from $4.8 million to $5.2 million. The
increase relates primarily to the inclusion of application and field engineering
expenses in selling expense in fiscal year 1998, and expenses in the current
year relating to Micro Pulse, offset by decreases in certain discretionary sales
and marketing spending.
General and administrative expenses increased by $1.6 million from $3.2
million to $4.8 million. The increase results primarily from certain
reorganization expenses, increased bad debt expense, legal expenses relating to
the stockholder litigation, and the inclusion of general and administrative
expenses relating to Micro Pulse.
Income (loss) from operations decreased by $4,494,000 from $688,000 to
($3,806,000). The principal reasons for the decline were, as described above,
decreased sales and gross margins, and increases in general and administrative
expenses.
The benefit for taxes was $1,484,000, or 35.8% of the loss before taxes. This
is relatively consistent with prior year tax provisions of approximately 39%.
The net loss for fiscal year 1998 was $2,665,000 million, as compared to net
income of $633,000 in fiscal year 1997. The significant decline in earnings
relates primarily to the decline in sales and gross margins, and higher general
and administrative expenses.
<PAGE>
FISCAL YEARS 1997 AND 1996
Sales decreased by $12.3 million, or 20.0%, from $61.6 million in fiscal year
1996 to $49.3 million in fiscal year 1997. The fiscal year 1997 sales decrease
resulted from declines in both Wireless Cable and Satellite product sales. Sales
of Wireless Cable products decreased $8.7 million, or 20.2%, from $43.2 million
to $34.4 million. Sales of Satellite products decreased $3.3 million, or 18.3%,
from $18.1 million to $14.8 million. Domestic sales from both product lines
decreased $66,000 to $17.1 million.
The decrease in Wireless Cable sales was a result of two major factors.
First, international markets, which had been expanding subscriber growth through
new system additions as well as the growth of existing systems, saw a decrease
in the number of new system additions in calendar 1996, as compared to prior
years. This impacted overall subscriber growth in markets where the Company had
significant market share. Second, the U.S. domestic market, which was expected
to begin a digital rollout in calendar 1996, delayed this technology shift as
certain regional Bell operating companies re-evaluated their video delivery
strategy. This caused uncertainty in the market and resulted in several
independent operators having less access to capital which limited their
expansion strategies for analog installations and conversion to systems using
digital technologies. As a result, sales of Wireless reception products
decreased from prior year amounts. However, sales of the Company's MultiCipher
products to analog wireless systems offset the Wireless reception product
shortfall.
The decrease in Satellite product sales resulted from continued softness in
the domestic C-band market and continued pricing pressures internationally. The
Company offset the decrease in C-band sales with increased sales of its Ku-band
products, primarily to international markets where the Ku-band product offerings
are much broader than the current United States Ku-band DBS market. Decreases in
domestic sales of Satellite products and Wireless Cable reception products were
offset by increases in MultiCipher product sales. Foreign sales decreased $12.2
million, or 27.5%, from $44.4 million to $32.2 million. The primary geographical
areas of decrease were Asia for Wireless Cable products, and Europe and
Australia for Satellite products.
Gross profits decreased by $6.5 million, or 30.9%, from $21.0 million to
$14.5 million. Gross margins decreased from 34% to 29.4%. The decrease in gross
profit resulted from a 20% decrease in sales, a decline in gross margins, and
under-utilization of factory overhead. The gross margin pressures resulted from
competitive pricing pressures, to which the Company responded by lowering unit
sales prices, delays in cost reduction programs because development resources
were allocated to the development of digital products, the introduction of
"MultiCipher Plus" during fiscal year 1997 at gross margins lower than expected
margins, and higher than anticipated product returns on initial shipments of
MultiCipher Plus. Also included in cost of sales which negatively impacted gross
profits and gross margins, were amounts relating to under-utilization of the
Company's manufacturing infrastructure as sales volumes decreased during the
second half of fiscal year 1997.
Research and development expenses increased by $1.4 million, from $4.4
million to $5.8 million. As a percentage of sales, research and development
increased from 7.1% to 11.8%. The increases resulted from the need for
additional resources, primarily personnel and equipment, to focus on the design
and development of a digital line of Wireless Cable reception products; the
MultiCipher "whole-house" scrambling system; and Ku-DBS products for Satellite
Television.
Selling expenses decreased by $201,000, from $5.0 million to $4.8 million,
but as a percentage of sales, increased from 8.1% to 9.7%. The decrease related
primarily to reductions in discretionary marketing expenses.
General and administrative expenses decreased by $876,000, from $4.1 million
to $3.2 million, and decreased as a percentage of sales, from 6.6% to 6.5%. The
decrease in general and administrative expenses resulted primarily from a
reduction in incentive bonuses in fiscal year 1997 as compared to fiscal year
1996 due to the decline in operating performance as compared to fiscal year
1996.
Income from operations decreased by $6.8 million, or 91%, from $7.5 million
to $688,000. The principal reasons for the decline were decreased sales and
gross margins, and increases in research and development expenses.
<PAGE>
The $140,000 income attributable to non-consolidated subsidiary relates to
the Company's 50% equity investment in Micro Pulse. The Company recognized
$179,000 in income which represented 50% of Micro Pulse's fiscal year 1997 net
income of $358,000, offset by $39,000 in amortization expense relating to the
Company's initial investment in excess of 50% of Micro Pulse's net equity.
The provision for income taxes decreased by $2.3 million, from $2.7 million
to $404,000. Income taxes as a percentage of income before taxes were 39.0% in
fiscal year 1997 and 35.0% in fiscal year 1996. The tax rates are a result of
taxes, based upon a statutory rate, offset by benefits relating to the Company's
foreign sales corporation, and research and development tax credits.
Net income decreased $4.3 million, or 87%, from $5.0 million to
$633,000.
LIQUIDITY AND CAPITAL RESOURCES
As of February 28, 1998 the Company had cash hand of $4.4 million and working
capital of approximately $15 million. In addition, the Company has a $6.0
million working capital facility with California United Bank, a $2.0 million
capital equipment facility with NationsBank and 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 February 28, 1998, no amounts were outstanding under any
of these arrangements, except for approximately $1.9 million in term debt due to
NationsBank, borrowed under prior capital equipment agreements. The $6.0 million
credit facility with California United Bank expires on August 3, 1998; however,
the Company has verbal assurances from the Bank that the agreement will be
renewed for an additional year at similar or more favorable 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.
YEAR 2000 COMPLIANCE
The Company has a plan to ensure all software applications are Year 2000
compliant. The plan includes, among other things, updating its current
integrated financial and manufacturing software. As such, management believes
that after January 1, 2000, the Company will be able to continue to accurately
accumulate and summarize data relating to its business operations. The total
estimated cost associated with Year 2000 compliance is less than $100,000.
SAFE HARBOR STATEMENT
Forward looking statements in this Form 10-K which include, without
limitation, statements relating to the Company's plans, strategies, objectives,
expectations, intentions, projections and other information regarding future
performance, are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. The words "believes," "anticipates,"
"expects," and similar expressions are intended to identify forward-looking
statements. These forward-looking statements reflect the Company's current views
with respect to future events and financial performance and are subject to
certain risks and uncertainties, including, without limitation, product demand,
competitive market growth, timing and market acceptance of new product
introductions, competition, pricing and other risks and uncertainties that are
detailed from time to time in the Company's periodic reports filed with the
Securities and Exchange Commission, copies of which may be obtained from the
Company upon request. Such risks and uncertainties could cause actual results to
differ materially from historical results or those anticipated. Although the
Company believes the expectations reflected in such forward-looking statements
are based upon reasonable assumptions, it can give no assurance that its
expectations will be attained. The Company undertakes no obligation to update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and related financial information required to be
filed hereunder are indexed on page 19 of this report and are incorporated
herein by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
Name Age Position
---------------------------------------------------------------------
Ira Coron 69 Chairman of the Board of Directors
Fred M. Sturm 40 Chief Executive Officer, President
and Director
Philip Cox 59 Vice President, Wireless Products
Dale DeHart 45 Vice President, Operations
Michael R. Ferron 43 Vice President, Finance, Chief
Financial Officer
and Corporate Secretary
Robert Hannah 37 Vice President, Satellite Products
Kris Kelkar 34 Vice President, Voice and Data
Products
Arthur H. Hausman(1) 74 Director
William E. McKenna(1)(2)
78 Director
Thomas L. Ringer (2) 66 Director
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
Ira Coron joined the Company as Chairman and Chief Executive Officer in March
1994, and in August 1997 relinquished his responsibilities as Chief Executive
Officer. From 1989 to 1994 he was an independent management consultant to
several companies and venture capital firms. He retired from TRW, Inc., after
serving in numerous senior management positions from June 1967 to July 1989
among which was Vice President and General Manager of TRW's Electronic
Components Group. He also serves on the Board of Directors of Made 2 Manage
Systems, Inc., and CMC Industries, Inc.
Fred M. Sturm was appointed Chief Executive Officer and President in August
1997. Prior to joining the Company from 1990 to 1997, Mr. Sturm was President
of Chloride Power Systems (USA), and Managing Director of Chloride Safety,
Security, and Power Conversion (UK), both of which are part of Chloride Group,
PLC (LSE: CHLD). Chloride Group, based in London, has annual revenues of about
$180 million. From 1983 to 1990, he held a variety of general management
positions with M/A-Com and TRW Electronics, which served RF and microwave
markets.
<PAGE>
Philip Cox joined the Company in July 1996. In December 1997, in conjunction
with the reorganization previously mentioned, Mr. Cox was appointed Vice
President, Wireless Products. He has over 29 years experience in sales and
marketing of communications products, working with both M/A-Com and Signal
Technology.
Dale DeHart was appointed Vice President, Operations in January 1998. Prior
to joining the Company, Mr. DeHart lead his own manufacturing consulting
practice, and from 1996 to 1997 was Vice President, Operations for Vixel
Corporation a manufacturer of telecommunications products. From 1994 to 1996 he
was the Vice President, Operations of Spectrian, Inc., a manufacturer of power
amplifiers for cellular base stations. He has also held management positions at
Colortan, Inc., TRW Electronics, M/A-Com and Hewlett Packard.
Michael R. Ferron joined the Company as Vice President, Finance and Chief
Financial Officer in October 1990 and was appointed Corporate Secretary in March
1991. Prior to October 1990, Mr. Ferron was employed by the accounting firms of
Deloitte & Touche and Arthur Young & Company, respectively.
Robert Hannah joined the Company as Vice President of Engineering in April
1995. In December 1997, in conjunction with the reorganization previously
mentioned, Mr. Hannah was appointed Vice President, Satellite Products. Prior to
April 1995, Mr. Hannah held various positions with Hughes, most recently the
position of Technical Manager at Hughes Network Systems.
Kris Kelkar was appointed Senior Vice President of Sales and Marketing in
April 1995 and Vice President, Marketing in April 1997. In December 1997, in
conjunction with the reorganization previously mentioned, Mr. Kelkar was
appointed Vice President, Voice and Data Products. Since 1988 he held various
positions with General Instrument Corporation, more recently he held the
position of Vice President of International Marketing for General Instrument's
Communications Division.
Arthur H. Hausman has been a director of the Company since 1987. Mr. Hausman
is Chairman Emeritus of the Board of Ampex Corporation. He served as Chairman of
the Board of Directors and Chief Executive Officer of Ampex, having been with
Ampex for 27 years until his retirement in 1988. He currently serves as a
director of Drexler Technology Corporation, California Microwave, Inc., and
director emeritus of TCI, Inc. He was appointed by President Reagan to the
President's Export Council, to the Council's Executive Committee and to the
Chairmanship of the Export Administration Subordinate Committee of the Council
for the period 1985 to 1989.
William E. McKenna has been a director of the Company since October 1983.
Since December 1977, Mr. McKenna has been general partner of MCK Investment
Company, a private investment company. Mr. McKenna was Chairman of the
Board of Directors of Technicolor, Inc. from 1970 to 1976 and was formerly
Chairman of the Board of Directors and Chief Executive Officer of Hunt Foods
& Industries, Inc. and its successor, Norton Simon, Inc. From 1960 to 1967,
Mr. McKenna was associated with Litton Industries, Inc. as a Director and in
various executive capacities. He is currently a director of Safeguard Health,
Inc., Midway Games, Inc., Drexler Technology Company and WMS Industries, Inc.
Thomas L. Ringer has been a director of the Company since August 1996.
Mr. Ringer is Chairman of the Board of E*Capital Corporation, the holding
company for Wedbush Morgan Securities, Inc., and Chairman of the Board of
M.S. Aerospace, Inc. a manufacturer of precision fasteners. Mr. Ringer
has served as Chairman, President and Chief Executive Officer for Recognition
Equipment, Inc., President and Chief Executive Officer of Fujitsu Systems of
America, Inc., and President and Chief Executive Officer of Computer Machinery
Corporation. In addition, Mr. Ringer currently serves on the Board of Aquatic
Water Systems, Inc., Document Sciences Corporation, Public Safety Equipment,
Inc., and the Center for Innovation and Entrepreneurship.
Officers are appointed by and serve at the discretion of the Board of
Directors.
<PAGE>
Each director holds office until the next annual meeting of stockholders or
until his successor has been duly elected and qualified. Each non-employee
director receives an annual stock option grant to purchase 8,000 shares at the
fair-market-value at time of grant which vest over a one-year period, a monthly
fee of $1,250, and reimbursement of out-of-pocket expenses in attending the
Company's Board of Directors meetings. There are no family relationships among
any directors or executive officers of the Company.
The Company has a Compensation Committee which reviews and makes
recommendations to the Board of Directors with respect to the compensation of
the Company's officers and to administer the Company's Key Employee Stock Option
Plan. The Company also has an Audit Committee which reviews the scope of audit
procedures employed by the Company's independent auditors, reviews the audit
reports rendered by the Company's independent auditors and approves the audit
fee charged by the independent auditors. The Audit Committee reports to the
Board of Directors with respect to such matters and recommends the selection of
independent auditors.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the information under the captions "Executive
Compensation" in the Company's definitive proxy statement for the Annual Meeting
of Stockholders to be held on July 17, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Incorporated by reference from the information under the caption "Stock
Ownership" in the Company's definitive proxy statement for the Annual Meeting of
Stockholders to be held on July 17, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the information contained under the caption
"Certain Relationships and Related Transactions" in the Company's definitive
proxy statement for the Annual Meeting of Stockholders to be held on July 17,
1998.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.
(a) Financial Statements. Reference is made to the Index to
Consolidated Financial Statements on page 19 of this report.
(b) Form 8-K. The Company made no filings on Form 8-K during the three months
ended February 28, 1998.
(c) Exhibits. Reference is made to the Index to Exhibits on pages
35-36 of this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities 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.
By: /s/ Fred M. Sturm
Chief Executive Officer
Dated: May 22, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
CAPACITIES
SIGNATURES IN WHICH SERVED DATES
/s/Ira Coron Chairman of the Board of Directors May 22, 1998
/s/Fred M. Sturm Chief Executive Officer, President
and Director May 22, 1998
/s/William E. McKenna Director May 22, 1998
/s/Arthur H. Hausman Director May 22, 1998
/s/Thomas L. Ringer Director May 22, 1998
/s/Michael R. Ferron Vice President, Finance, May 22, 1998
Chief Financial Officer
(Principal Accounting Officer)
and Corporate Secretary
<PAGE>
CALIFORNIA AMPLIFIER, INC.
Index to Consolidated Financial Statements
Page
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 20
FINANCIAL STATEMENTS:
Consolidated Balance Sheets 21
Consolidated Statements of Operations 22
Consolidated Statements of Stockholders' Equity 23
Consolidated Statements of Cash Flows 24
Notes to Consolidated Financial Statements 25-34
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
California Amplifier, Inc.:
We have audited the accompanying consolidated balance sheets of California
Amplifier, Inc. (a Delaware corporation) and subsidiaries as of February 28,
1998, and March 1, 1997, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended February 28, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of California Amplifier, Inc. and
subsidiaries as of February 28, 1998, and March 1, 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended February 28, 1998, in conformity with generally accepted accounting
principles.
/S/ ARTHUR ANDERSEN LLP
Los Angeles, California
April 8, 1998
<PAGE>
CALIFORNIA AMPLIFIER, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
Feb. 28, March 1,
1998 1997
- ------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 4,422 $ 3,165
Accounts receivable 5,745 6,510
Income tax receivable 407 806
Inventories 6,851 8,200
Deferred tax asset 2,000 800
Prepaid expenses and other current assets 462 383
------- -------
Total current assets 19,887 19,864
Property and equipment -- at cost, net of
accumulated depreciation and amortization 7,116 7,407
Investment in non-consolidated subsidiary --- 1,000
Other assets 828 1,265
------- -------
$27,831 $29,536
- ------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,861 $ 2,136
Accrued liabilities 2,399 1,928
Current portion of long-term debt 741 799
------- -------
Total current liabilities 5,001 4,863
Long-term debt 1,112 525
Minority interest share in net assets of
Micro Pulse, Inc. 321 ---
Stockholders' equity:
Preferred stock, 3,000 shares authorized;
no shares outstanding --- ---
Common stock, $.01 par value; 30,000 shares authorized;
11,771 shares outstanding in February 1998 and
11,713 shares outstanding in March 1997 118 117
Additional paid-in capital 14,025 13,990
Foreign currency translation adjustment (249) (127)
Retained earnings 7,503 10,168
------- -------
Total stockholders' equity 21,397 24,148
------- -------
$27,831 $29,536
- ------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
CALIFORNIA AMPLIFIER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except net income (loss) per share)
Years Ended
Feb. 28, March 1, March 2,
1998 1997 1996
- ------------------------------------------------------------------------
Sales $ 46,933 $ 49,290 $ 61,590
Cost of sales 36,236 34,810 40,637
------- ------- -------
Gross profit 10,697 14,480 20,953
Research and development 4,475 5,789 4,376
Selling 5,215 4,802 5,003
General and administrative 4,813 3,201 4,077
------- ------- -------
Income (loss) from operations (3,806) 688 7,497
Interest and other income, net 153 327 460
Interest expense (212) (118) (219)
Minority interest share in income of
Micro Pulse (284) --- ---
Income (loss) attributable to
non-consolidated subsidiary --- 140 (100)
------- ------- -------
Income (loss) before provision for
income taxes (4,149) 1,037 7,638
Benefit from (provision for) income taxes 1,484 (404) (2,680)
------- ------- -------
Net income (loss) $(2,665) $ 633 $ 4,958
- ----------------------------------------------------------------------
Net income (loss) per share:
Basic $ (0.23) $ .05 $ .44
Diluted $ (0.23) $ .05 $ .41
- ----------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
CALIFORNIA AMPLIFIER, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Cumulative
Foreign
Additional Currency
Common Stock Paid-in Translation Retained
Shares Amount Capital Adjustment Earnings Total
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at March 4, 1995 10,816 $108 $10,214 $--- $4,577 $14,899
Conversion of debt 100 1 399 --- --- 400
Exercise of stock options 603 6 2,642 --- --- 2,648
Currency translation
adjustment --- --- --- 19 --- 19
Net income --- --- --- --- 4,958 4,958
- --------------------------------------------------------------------------
Balances at March 2, 1996 11,519 115 13,255 19 9,535 22,924
Exercise of stock options
and warrants 194 2 735 --- --- 737
Currency translation
adjustment --- --- --- (146) --- (146)
Net income --- --- --- --- 633 633
- --------------------------------------------------------------------------
Balances at March 1, 1997 11,713 117 13,990 (127) 10,168 24,148
Exercise of stock options 58 1 35 --- --- 36
Currency translation
adjustment --- --- --- (122) --- (122)
Net loss --- --- --- --- (2,665) (2,665)
- ---------------------------------------------------------------------------
Balances at
February 28, 1998 11,771 $118 $14,025 $(249) $7,503 $21,397
- ---------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CALIFORNIA AMPLIFIER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended
Feb. 28, March 1, March 2,
1998 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(2,665) $ 633 $4,958
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 3,280 2,016 2,693
Loss on sale of property and equipment 1 12 12
Minority interest income 284 --- ---
(Income) loss attributable to
non-consolidated subsidiary --- (140) 100
(Increase) decrease in assets and
liabilities, net of effect from
purchase of controlling
interest in Micro Pulse:
Accounts receivable 1,537 (1,865) 1,394
Inventories 1,983 (1,456) (715)
Income tax receivable 399 (806) ---
Deferred tax asset (1,200) 400 (400)
Prepaid expenses and other assets 303 (313) (204)
Increase (decrease) in:
Accounts payable (766) (1,094) 755
Accrued liabilities (126) (2,731) 1,719
- --------------------------------------------------------------------------
Net cash provided by (used in)
operating activities 3,030 (5,344) 10,312
- --------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property and equipment (2,750) (3,420) (3,408)
Proceeds from sale of property and
equipment 12 --- ---
Purchase of controlling interest
in Micro Pulse 327 --- ---
Payments from (advances to)
non-consolidated subsidiary --- (8) 25
- --------------------------------------------------------------------------
Net cash used in investing activities (2,411) (3,428) (3,383)
- --------------------------------------------------------------------------
Cash flows from financing activities:
Debt borrowings 1,582 608 1,304
Debt repayments (980) (1,044) (917)
Issuances of common stock,
net of retirements 36 736 2,667
- -------------------------------------------------------------------------
Net cash provided by financing activities 638 300 3,054
- -------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 1,257 (8,472) 9,983
Cash and cash equivalents
at beginning of year 3,165 11,637 1,654
- -------------------------------------------------------------------------
Cash and cash equivalents
at end of year $ 4,422 $ 3,165 $11,637
- -------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
California Amplifier, Inc. (the "Company") designs, manufactures and markets
microwave products used primarily in the reception of video transmitted from
satellites or wireless terrestrial sites. The Company most recently introduced
two-way wireless products used in emerging voice (telephony) and data (Internet)
applications.
The Company also has a 50.5% controlling interest in Micro Pulse, Inc. ('Micro
Pulse'), a company that designs, manufactures and markets antennas and
amplifiers used principally in global positioning systems. (See Notes 2 and 3).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, California Amplifier s.a.r.l., the Company's
subsidiary in France, and Cal Amp FSC, Inc., a foreign sales corporation. The
Consolidated financial statements as of and for the year ended February 28, 1998
include the accounts of Micro Pulse. In fiscal year 1998, the Company acquired
additional shares of Micro Pulse which resulted in the Company holding a 50.5%
controlling interest. All significant intercompany transactions have been
eliminated. Prior to fiscal 1998, the Company's 50% non-controlling ownership
interest in Micro Pulse was accounted for using the equity method.
FISCAL YEAR
The Company reports results on the basis of a 52/53 week accounting calendar
ending on the last Saturday of February or the first Saturday of March.
STOCK SPLIT
On February 16, 1996, the Board of Directors approved a two-for-one stock split
distributed in the form of a stock dividend on March 22, 1996. All per share
amounts in fiscal year 1996 have been retroactively adjusted to reflect this
stock split.
REVENUE RECOGNITION
Revenue on product sales is recognized at the time of shipment.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
<PAGE>
CONCENTRATION OF RISK
As of February 28, 1998, the Company had cash and cash equivalent balances of
$3,750,000 at financial institutions (primarily California United Bank, Salomon
Smith Barney and Bank of America) which were in excess of federally insured
amounts.
As of February 28, 1998, the Company had an account receivable due from one
customer in the amount of $787,360, or 11.9% of consolidated accounts
receivable.
CASH AND CASH EQUIVALENTS
The Company considers all liquid investments with an original maturity of less
than three months to be cash equivalents.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company has established a reserve for potential write-offs relating to
noncollectibility of accounts receivable. As of February 28, 1998 and March 1,
1997, the allowance for doubtful accounts was $850,000 and $560,000,
respectively. In fiscal year 1998, 1997, and 1996, $592,000, $14,000, and
$473,000 was charged to expense, respectively. Amounts charged to the allowance
account for bad debt write-offs and costs relating to product returns were
$443,000, $671,000, and $12,000 in fiscal years 1998, 1997, and 1996,
respectively.
WARRANTY
The Company warrants its products against defects over periods ranging from one
to five years. An accrual for estimated future costs relating to products
returned under warranty is recorded as an expense when products are shipped.
Warranty expense was $834,000, $206,000, and $969,000 in fiscal years 1998,
1997, and 1996, respectively. Amounts charged to accrued warranty for the actual
costs of maintaining the Company's warranty program were $734,000, $806,000, and
$469,000 in fiscal years 1998, 1997, and 1996, respectively.
INVENTORIES
Inventories include costs of materials, 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):
Feb. 28, March 1,
1998 1997
- ------------------------------------------------------------------------
Raw materials $2,694 $2,510
Work in process 66 1,568
Finished goods 4,091 4,122
- ------------------------------------------------------------------------
$6,851 $8,200
========================================================================
<PAGE>
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and consists of the following (in
000's):
Feb. 28, March 1,
1998 1997
- ------------------------------------------------------------------------
Land $ 706 $ 706
Machinery and equipment 10,548 9,125
Furniture and computers 4,686 4,271
Tooling 4,227 3,201
Leasehold improvements 1,153 1,084
- ------------------------------------------------------------------------
21,320 18,387
Less accumulated depreciation and amortization (14,204) (10,980)
- ------------------------------------------------------------------------
$7,116 $7,407
========================================================================
The Company follows the policy of capitalizing expenditures which materially
increase asset lives, and charging ordinary maintenance and repairs to
operations, as incurred. When assets are sold or disposed of, the cost and
related depreciation are removed from the accounts and any resulting gain or
loss is included in income. Depreciation and amortization is based upon the
estimated useful lives of the related assets using the straight-line method.
Useful lives range from two to five years.
NET INCOME (LOSS) PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." The statement replaces primary EPS with basic EPS, which is computed by
dividing reported earnings available to common shareholders by weighted average
shares outstanding. The provision also requires the calculation of diluted EPS,
which increases the weighted average shares outstanding for the dilutive effect
of stock options and warrants. The Company adopted this statement in fiscal year
1998, and all prior year earnings per share amounts have been recalculated based
on the provisions of SFAS No. 128.
The following schedule summarizes the information used to compute earnings per
common share (in thousands except per share data):
Years Ended
Feb. 28, March 1, March 2,
1998 1997 1996
- ----------------------------------------------------------------------
Net income (loss) $(2,665) $ 633 $4,958
- ----------------------------------------------------------------------
Weighted average number of common shares
used to compute basic net income (loss)
per common share 11,734 11,638 11,186
Dilutive effect of common share equivalents --- 913 996
Weighted average number of common shares
used to compute diluted net income (loss)
per common share 11,734 12,551 12,182
- ----------------------------------------------------------------------
Basic net income (loss) per common share $(0.23) $.05 $.44
Diluted net income (loss) per
common share $(0.23) $.05 $.41
- ----------------------------------------------------------------------
<PAGE>
STATEMENTS OF CASH FLOWS
In fiscal years 1998, 1997 and 1996 the Company paid interest of $212,000,
$118,000, and $219,000, respectively.
In fiscal years 1998, 1997 and 1996 the Company paid income taxes of $375,000,
$839,000, and $1,103,000, respectively.
In fiscal year 1998, the Company exchanged $100,000 in amounts due from Micro
Pulse for an additional ownership interest increasing its ownership from 50.0%
to 50.5%.
In fiscal year 1996, the Company exchanged $400,000 of debt for 100,000 shares
of its common stock as part of a convertible debt arrangement (see Note 3).
ACCOUNTING FOR STOCK OPTIONS
The Company adopted Statement of Financial Accounting Standards No. 123,
'Accounting for Stock Based Compensation' (SFAS 123) in fiscal 1997. As allowed
by SFAS 123, the Company has elected to continue to measure compensation cost
under Accounting Principles Board Opinion No. 25, 'Accounting for Stock Issued
to Employees' (APB 25) and comply with the pro forma disclosure requirements of
the new standard (see Note 8).
NEW AUTHORITATIVE PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) introduced SFAS
No. 130, 'Reporting Comprehensive Income.' SFAS No. 130 requires disclosures
regarding changes in the equity of the Company that result from transactions and
other economic events other than transactions with stockholders. SFAS No. 130
will be adopted by the Company in fiscal year 1999. Management does not expect
the adoption of this standard to have a material effect on the Company's
financial position or results of operations.
In June 1997, the FASB issued SFAS No. 131, 'Disclosures About Segments of an
Enterprise and Related Information.' The statement requires disclosures for
business segments determined using the 'management approach,' which is based on
the way the chief operating decision-maker organizes segments within a company.
SFAS No. 131 will be adopted by the Company in fiscal year 1999, and it must be
applied on a limited basis to interim periods thereafter. The standard will have
no effect on the Company's financial position or results of operations, but may
change the presentation of segment information in the consolidated financial
statements.
3. INVESTMENT IN MICRO PULSE, INC.
In January 1993, the Company purchased a 50% ownership interest in Micro Pulse
for $500,000. Under the terms of the agreement, the Company paid $100,000 in
cash to the principal stockholders of Micro Pulse and issued a $400,000
convertible subordinated note bearing interest at 8% due in January 1996. In
April 1995, the holders of the note chose to convert the note, and received
100,000 shares of the Company's common stock.
In March 1997, the Company acquired additional shares of Micro Pulse for
$100,000 by a reduction of the receivable due from Micro Pulse. This resulted in
the Company owning a 50.5% controlling interest in Micro Pulse. Accordingly, as
of February 28, 1998 and for the year then ended, the financial statements of
Micro Pulse have been consolidated in the accompanying consolidated financial
statements. Costs in excess of net assets acquired (goodwill) of $236,000
relating to the acquisition of Micro Pulse are being amortized over a ten year
period.
<PAGE>
As of March 1, 1997, and for fiscal years 1997 and 1996, the investment in Micro
Pulse was accounted for using the equity method of accounting. Summary
information relating to the results of operations and the financial condition of
Micro Pulse for fiscal years 1997 and 1996 is as follows (in 000's):
1997 1996
- ------------------------------------------------------------------------
Sales $5,540 $3,500
Net income 358 250
Total assets 2,031 1,100
Stockholders' Equity (Deficit) 152 (145)
- ------------------------------------------------------------------------
The Company recognized sales to Micro Pulse of $93,000 and $377,000 in fiscal
years 1997 and 1996, respectively. The Company recognized interest income
relating to the receivable due from Micro Pulse of $68,000 and $75,000 in fiscal
years 1997 and 1996, respectively. The Company recognized interest expense
relating to the $400,000 note payable prior to its conversion in April 1995 of
$5,000 in fiscal year 1996.
4. ACCRUED LIABILITIES
Accrued liabilities consist of the following (in 000's):
Feb. 28, March 1,
1998 1997
- ------------------------------------------------------------------------
Payroll and related expenses $ 811 $ 744
Warranty 655 500
Income taxes 236 ---
Other accrued liabilities 697 684
- ------------------------------------------------------------------------
$2,399 $1,928
- ------------------------------------------------------------------------
5. SHORT-TERM BORROWINGS
The Company has a $6.0 million working capital credit facility with a bank.
Borrowings outstanding bear interest at the bank's prime rate (8.5% at February
28, 1998) and are secured by substantially all of the Company's assets,
excluding the assets secured by other debt arrangements. The credit facility
expires in August 1998. At February 28, 1998 and March 1, 1997, no amounts were
outstanding under this credit facility and $6.0 million was available for
borrowing. The credit facility contains certain financial covenants and ratios
that the Company is required to maintain. At February 28, 1998, the Company was
either in compliance with the covenants or had obtained a waiver from the bank.
The Company was in compliance with all covenants at March 1, 1997.
The Company's foreign subsidiary has a $600,000 informal borrowing facility with
a French bank. The borrowings are unsecured and bear interest at rates ranging
from 6% to 8%. At February 28, 1998, no amounts were outstanding under the
credit arrangement, and $600,000 was available for borrowing. The facility can
be withdrawn by the bank at any time.
<PAGE>
6. LONG-TERM DEBT
Long-term debt consists of the following (in 000's):
Feb. 28, March 1,
1998 1997
- ------------------------------------------------------------------------
Note payable to a bank, secured by equipment,
bearing interest at rates ranging
from 8.19% to 8.24%
payable monthly through January 2002 $1,853 $1,324
Less portion due within one year (741) (799)
- ------------------------------------------------------------------------
$1,112 $ 525
- ------------------------------------------------------------------------
Annual maturities on long-term debt as of February 28, 1998, are as follows (in
000's):
1999 $ 741
2000 596
2001 372
2002 144
- ------------------------------------------------------------------------
$1,853
- ------------------------------------------------------------------------
7. INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of the
Financial Accounting Standards Board Statement No. 109 "Accounting for Income
Taxes" (SFAS No. 109). Under SFAS No. 109, deferred income tax assets or
liabilities are computed based on the temporary difference between the financial
statement and income tax bases of assets and liabilities using the enacted
marginal income tax rate in effect for the year in which the differences are
expected to reverse. Deferred income tax expenses or credits are based on
changes in the deferred income tax assets or liabilities from period to period.
The provision for income taxes for fiscal years 1998, 1997, and 1996 are as
follows (in 000's):
1998 1997 1996
- ------------------------------------------------------------------------
Current - Federal $(584) $(175) $ 2,512
- State (95) (31) 443
- Foreign 395 210 125
Deferred- Federal (1,020) 340 (340)
- State (180) 60 (60)
- ------------------------------------------------------------------------
$(1,484) $404 $2,680
========================================================================
<PAGE>
Differences between the provision for income taxes and income taxes computed
using the statutory federal income tax rate for fiscal years 1998, 1997, and
1996 are as follows (in 000's):
1998 1997 1996
- ------------------------------------------------------------------------
Income tax at statutory federal
rate (34%) $(1,772) $ 353 $ 2,597
State income taxes (8.4%),
net of federal income tax effect (300) 62 458
Foreign taxes 395 210 125
Research and development credit --- --- (102)
Alternative Minimum Tax credit --- --- (83)
Other, net 193 (221) (315)
- ------------------------------------------------------------------------
$(1,484) $ 404 $2,680
========================================================================
The components of the net deferred income tax asset are as follows (in 000's):
Feb. 28, March 1,
1998 1997
- ------------------------------------------------------------
Depreciation $ 73 $ 95
Warranties 209 200
Inventory valuation 1,346 440
Allowance for doubtful accounts 209 160
Other, net 163 (95)
- ------------------------------------------------------------
$2,000 $ 800
============================================================
8. STOCK OPTIONS
The Company has one stock option plan for its employees, the 1989 Key Employee
Stock Option Plan ("1989 Plan"). Under the 1989 Plan, stock options can be
granted at prices not less than 100% of the fair market value at the date of
grant. Option grants are exercisable at the discretion of the Compensation
Committee, but usually over a four year vesting period.
The following table summarizes the option activity for fiscal years 1998, 1997,
and 1996 (in 000's except dollar amounts):
Weighted
Number Average
Shares Option Price
- ------------------------------------------------------------------------
Outstanding at March 4, 1995 1,464 $2.24
Granted 562 7.09
Exercised (603) 2.27
Canceled (109) 4.15
- ------------------------------------------------------------------------
Outstanding at March 2, 1996 1,314 4.83
Granted 330 18.19
Exercised (109) 3.08
Canceled (147) 11.00
- ------------------------------------------------------------------------
Outstanding at March 1, 1997 1,388 7.49
Granted 976 3.42
Exercised (95) 1.68
Canceled (400) 15.13
- ------------------------------------------------------------------------
Outstanding at February 28, 1998 1,869 $4.16
- ------------------------------------------------------------------------
The weighted average theoretical value for options granted during the year was
$2.59, $15.01 and $5.66 for fiscal years 1998, 1997, and 1996 respectively.
<PAGE>
The number of common stock options available for grant as of each fiscal year
were 337,100 for 1998, 912,650 for 1997, and 299,400 for 1996. On July 19, 1996,
the Stockholders approved the proposal to increase the number of shares
available to grant by 800,000 shares.
Options outstanding at February 28, 1998 and related weighted average price and
life information is as follows:
<TABLE>
<CAPTION>
Weighted Total
Total Average Weighted Weighted
Range of Options Remaining Average Options Average
Exercise Outstanding Life Exercise Exercisable Exercise
Prices (Years) Price Price
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$0.69-$0.82 97,300 2.2 $ 0.76 97,300 $ 0.76
$1.69-$2.57 619,000 9.6 2.23 138,000 2.31
$3.50-$4.88 742,100 8.6 3.91 151,100 3.70
$5.53-$9.00 374,100 7.5 7.10 180,175 7.11
$13.60-$16.25 26,000 8.5 18.42 26,000 18.42
$21.88-$26.97 10,000 8.1 26.97 2,500 26.97
- -------------------------------------------------------------------------
$0.69-$26.97 1,868,500 8.2 $ 4.16 595,075 $ 4.67
- -------------------------------------------------------------------------
</TABLE>
As permitted by SFAS 123, the Company continues to apply the accounting rules of
APB No. 25 governing the recognition of compensation expense from its Stock
Option Plans. Such accounting rules measure compensation expense on the first
date at which both the number of shares and the exercise price are known. Under
the Company's plans, this would typically be the grant date. To the extent that
the exercise price equals or exceeds the market value of the stock on the grant
date, no expense is recognized. As options are generally granted at exercise
prices not less than the fair market value on the date of grant, no compensation
expense is recognized under this accounting treatment in the accompanying
statements of operations.
The fair value of options at date of grant was estimated using the Black-Scholes
model with the following weighted average assumptions:
1998 1997 1996
- --------------------------------------------------------------------------
Expected life (years) 10 10 10
Dividend yield --- --- ---
The range for interest rates is 5.45% - 7.14%, and the range for volatility is
65% - 77%. The estimated stock-based compensation cost calculated using the
assumptions indicated totaled $713,000, $1,863,000 and $404,000 in fiscal year
1998, 1997 and 1996 respectively. This would result in a pro forma net loss
resulting from the increased compensation cost of $3,378,000, or $0.27 per
share, pro forma net loss of $485,000, or $0.04 per share, and pro forma net
income of $4,716,000, or $0.39 per share, in fiscal year 1998, 1997 and 1996
respectively. The effect of stock-based compensation on net income for fiscal
1998, 1997 and 1996 may not be representative of the effect on pro forma net
income in future years because compensation expense related to grants made prior
to fiscal 1996 is not considered.
9. COMMITMENTS
The Company leases its corporate and manufacturing facility as part of an
operating lease through February 2004. The lease agreement requires the Company
to pay all property taxes and any insurance premiums associated with the
coverage of the facility.
In addition, the Company leases a shipping, finished goods and storage facility
as part of an operating lease through February 2004. The Company also leases
offices in Paris, France; Sao Paulo, Brazil; and Bangkok, Thailand, under
certain lease arrangements. In addition, the Company leases equipment used in
the manufacturing operation.
<PAGE>
The following table represents the future minimum rent payments required under
all operating leases with terms in excess of one year as of February 28, 1998
(in 000's):
Fiscal Year:
1999 $602
2000 607
2001 610
2002 590
2003 600
Thereafter 600
- ------------------------------------------------------------------------
$3,609
========================================================================
Rent expense for fiscal years 1998, 1997, and 1996 was $707,000, $1,013,000, and
$1,200,000, respectively.
10. MAJOR CUSTOMERS AND FOREIGN SALES INFORMATION
The Company operates in a single business segment: the design, manufacture and
sale of microwave components and subsystems. In fiscal year 1998, no customer
accounted for 10% of the Company's sales. In fiscal year 1997, one customer
accounted for 11.1% of the Company's sales, and in fiscal year 1996, one
customer accounted for 13% of the Company's sales.
Sales information by product line, by domestic and foreign sales, and by
geographical area are as follows (unaudited in 000's):
1998 1997 1996
- ------------------------------------------------------------------------
Wireless Cable Products $27,738 34,438 $43,155
Satellite Products 13,131 14,758 18,058
Antenna Products 6,064 --- ---
Other --- 94 377
- ------------------------------------------------------------------------
$46,933 $49,290 $61,590
========================================================================
Domestic $19,378 $17,070 $17,136
Foreign 27,555 32,220 44,454
- ------------------------------------------------------------------------
$46,933 $49,290 $61,590
========================================================================
U.S. & Canada $22,128 $19,025 $18,113
Latin America 12,122 8,495 9,673
Europe 4,726 5,265 10,871
Middle East 203 2,267 245
Africa 4,014 4,637 3,085
Asia 2,757 8,921 17,343
Australia 983 680 2,260
- ------------------------------------------------------------------------
$46,933 $49,290 $61,590
========================================================================
<PAGE>
11. QUARTERLY FINANCIAL INFORMATION
The following summarizes certain quarterly statement of operations data for each
of the quarters in fiscal years 1998 and 1997 (unaudited in 000's, except
percentages and per share data):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Fiscal 1998
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $12,013 $13,091 $13,382 $8,447 $46,933
Gross profits 3,671 3,956 2,865 205 10,697
Gross margins 30.6% 30.2% 21.4% 2.4% 22.8%
Net income (loss) 130 204 (894) (2,105) (2,665)
Income (loss) per share $ 0.01 $ 0.02 $(0.08) $(0.18) $(0.23)
- ------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Fiscal 1997
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $17,275 $11,463 $11,702 $8,850 $49,290
Gross profits 6,043 3,430 3,406 1,601 14,480
Gross margins 35% 29.9% 29.1% 18.1% 29.4%
Net income (loss) 1,623 (209) 127 (908) 633
Income (loss) per share $0.13 $(0.02) $ 0.01 $(0.08) $0.05
- ------------------------------------------------------------------------
</TABLE>
12. 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 omitted 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. At this stage, it is not
possible to predict the outcome or determine a range of possible costs or
losses, if any. Based upon the analysis performed to date, the Company, its
directors and officers, plan to vigorously defend themselves against these
claims.
<PAGE>
INDEX TO EXHIBITS
3.1 Certificate of Incorporation of the Registrant, as amended, filed as
Exhibit 3.1 to the Registrant's Registration Statement on Form S-1
(33-59702) and by this reference is incorporated herein and made a part
hereof.
3.1.1 Amendment to Certificate of Incorporation of the Registrant, as filed with
the Delaware Secretary of State on September 19, 1996, filed as Exhibit
3.1.1 to the Registrant's Interim Report on Form 10-Q for the period ended
August 31, 1996.
3.2 Bylaws of the Registrant, as amended, filed as Exhibit 3.2 to the
Registrant's Form 8-K dated February 27, 1992 and by this reference is
incorporated herein and made a part hereof.
10.1 1984 Key Employee Stock Option Plan filed as Exhibit 10.1 to the
Registrant's Registration Statement on Form S-1 (2-87042) and by this
reference is incorporated herein and made a part hereof.
10.2 Form of Incentive Stock Option Agreement filed as Exhibit 10.2 to the
Registrant's Registration Statement on Form S-1 (2-87042) and by this
reference is incorporated herein and made a part hereof.
10.3 Form of Nonqualified Stock Option Agreement filed as Exhibit 10.3 to the
Registrant's Registration Statement on Form S-1 (2-87042) and by this
reference is incorporated herein and made a part hereof.
10.4 1989 Key Employee Stock Option Plan filed as Exhibit 4.4 to the
Registrant's Registration Statement on Form S-8 (33-31427) and by this
reference is incorporated herein and made a part hereof.
10.4.1 Amendment No. 1 to the 1989 Key Employee Stock Option
Plan filed as Exhibit 4.7 to the Registrant's Registration
Statement on Form S-8 (33-36944) and by this reference is
incorporated herein and made a part hereof.
10.4.2 Amendment No. 2 to the 1989 Key Employee Stock Option
Plan filed as Exhibit 4.8 to the Registrant's Registration
Statement on Form S-8 (33-72704) and by this reference is
incorporated herein and made a part hereof.
10.4.3 Amendment No. 3 to the 1989 Key Employee Stock Option
Plan filed as Exhibit 4.10 to the Registrant's Registration
Statement on Form S-8 (33-60879) and by this reference is
incorporated herein and made a part hereof.
10.5 Form of Incentive Stock Option Agreement filed as Exhibit 4.6 to the
Registrant's Registration Statement on Form S-8 (33-31427) and by this
reference is incorporated herein and made a part hereof.
10.6 Form of Nonqualified Stock Option Agreement filed as Exhibit 4.6 to the
Registrant's Registration Statement on Form S-8 (33-31427) and by this
reference is incorporated herein and made a part hereof.
10.7 Form of Option Agreement for Non-Employee Directors filed as Exhibit 4.9
to the Registrant's Registration Statement on Form S-8 (33-36944) and by
this reference is incorporated herein and made a part hereof.
10.8 Letter Agreements regarding sale of the building dated July 18, 1988,
filed as an exhibit to Form 8-K, dated February 27, 1989, filed as an
exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year
ended February 28, 1989 and by this reference is incorporated herein and
made a part hereof.
10.9 Building Lease and Rider on building between the Registrant and Calle San
Pablo Property Co. dated January 31, 1989, filed as an exhibit to the
Registrant's Annual Report on Form 10-K for the fiscal year ended February
28, 1989 and by this reference is incorporated herein and made a part
hereof.
<PAGE>
10.9.1 Amendment of Lease on building between the Registrant
and Calle San Pablo Property Co. dated February 9, 1995, filed as
an exhibit to this Annual Report on Form 10-K for the fiscal year
ended March 4, 1995.
10.10 Form of Indemnity Agreement filed as an exhibit to the Registrant's Annual
Report on Form 10-K for the fiscal year ended February 29, 1988 and by
this reference is incorporated herein and made a part hereof.
10.11 Stockholder Rights Plan filed as an exhibit to the Registrant's Form 8-K
dated September 5, 1991 and by this reference is incorporated herein and
made a part hereof.
10.12 Distribution Agreement between Registrant and Pan Asian Systems, Ltd.,
dated July 3, 1992 filed as Exhibit 10.17 to the Company's Registration
Statement on Form S-1 (33-59702) and by this reference is incorporated
herein and made a part hereof.
10.13 Stock Purchase Agreement dated December 31, 1992 by and among Registrant,
Peter J. Connolly, Steven G. Ow and Toni Ow, and The Peter J. Connolly
Charitable Remainder Unitrust dated June 15, 1992 filed as Exhibit 10.20
to the Company's Registration Statement on Form S-1 (33-59702) and by this
reference is incorporated herein and made a part hereof.
10.24 Commercial Security Agreement between Registrant and California United
Bank dated July 26, 1995, filed as Exhibit 10.24 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended March 2, 1996.
10.25 First Amendment to Business Loan Agreement between Registrant and
California United Bank, dated July 26, 1995, filed as Exhibit 10.25 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended March 2,
1996.
10.26 Promissory Note between Registrant and California United Bank dated
August 6, 1996, filed as an exhibit to this Annual Report on Form 10-K for
the fiscal year ended March 1, 1997.
10.27 Second Amendment to Business Loan Agreement between Registrant and
California United Bank, dated August 6, 1996, filed as an exhibit to this
Annual Report on Form 10-K for the fiscal year ended March 1, 1997.
10.28 Building Lease on building between the Registrant and The Jennings Bypass
Trust, dated September 11, 1996, filed as an exhibit to this Annual Report
on Form 10-K for the fiscal year ended March 1, 1997.
10.29 Land Purchase Agreement on land between the Registrant and Rhoda-May A.
Dallas Trust, dated February 13, 1996, filed as an exhibit to this Annual
Report on Form 10-K for the fiscal year ended March 1, 1997.
10.30 Loan Agreement between Registrant and California United Bank, dated August
22, 1997, filed as Exhibit 10.30 to the Registrant's Quarterly Report on
Form 10-Q for the period ended August 30, 1997.
10.31 Change in Terms Agreement between Registrant and California United Bank,
dated August 22, 1997, and filed as Exhibit 10.31 to the Registrant's
Quarterly Report on Form 10-Q for the period ended August 30, 1997.
*27 Financial Data Schedule
*Filed herewith
- -------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET ON PAGE 21 AND THE CONSOLIDATED STATEMENT
OF OPERATIONS ON PAGE 22 OF THE COMPANY'S FORM 10-K FOR THE YEAR ENDED
FEBRUARY 28, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000730255
<NAME> California Amplifier, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-02-1997
<PERIOD-END> FEB-28-1998
<CASH> 4,422
<SECURITIES> 0
<RECEIVABLES> 6,595
<ALLOWANCES> 850
<INVENTORY> 6,851
<CURRENT-ASSETS> 19,887
<PP&E> 21,320
<DEPRECIATION> 14,204
<TOTAL-ASSETS> 27,831
<CURRENT-LIABILITIES> 5,001
<BONDS> 0
0
0
<COMMON> 14,143
<OTHER-SE> 7,254
<TOTAL-LIABILITY-AND-EQUITY> 27,831
<SALES> 46,933
<TOTAL-REVENUES> 46,933
<CGS> 36,236
<TOTAL-COSTS> 14,503
<OTHER-EXPENSES> 284
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</TABLE>
