UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: August 29, 1998
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number: 012182
CALIFORNIA AMPLIFIER, INC.
(Exact name of registrant's specified in its charter)
Delaware 95-3647070
(State or Other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
460 Calle San Pablo
Camarillo, California 93012
(Address of principal executive offices) (Zip Code)
(805) 987-9000
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Common Stock Outstanding as of August 29, 1998: 11,784,572
Number of pages in this Form 10-Q: 12
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
Aug. 29, Feb.28,
1998 1998
(Unaudited) (Audited)
-----------------------
ASSETS
Current assets:
Cash and cash equivalents $ 5,912 $4,422
Accounts receivable 5,219 5,745
Income tax receivable 886 407
Inventories 5,276 6,851
Deferred tax asset 1,777 2,000
Prepaid expenses and other current assets 794 462
- -----------------------------------------------------------------------
Total current assets 19,864 19,887
Property and equipment -- at cost, net of
accumulated depreciation and amortization 5,222 7,116
Other assets 799 828
- -----------------------------------------------------------------------
$25,885 $27,831
- ------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,405 $1,861
Accrued liabilities 1,787 2,399
Current portion of long-term debt 613 741
- -----------------------------------------------------------------------
Total current liabilities 4,805 5,001
Long-term debt 806 1,112
Minority interest share in net assets of
Micro Pulse, Inc. 186 321
Stockholders' equity:
Preferred stock, 3,000 shares authorized;
no shares outstanding --- ---
Common stock, $.01 par value; 30,000 shares authorized;
11,785 shares outstanding in August 1998 and
11,771 shares outstanding in February 1998 118 118
Additional paid-in capital 14,050 14,025
Foreign currency translation adjustment (261) (249)
Retained earnings 6,181 7,503
- -----------------------------------------------------------------------
Total stockholders' equity 20,088 21,397
- -----------------------------------------------------------------------
$25,885 $27,831
- ------------------------------------------------------------------------
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-----------------------------------------
Aug. 29, Aug. 30, Aug. 29, Aug. 30,
1998 1997 1998 1997
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $8,322 $13,091 $17,382 $25,104
Cost of sales 6,383 9,135 12,650 17,477
- ------------------------------------------------------------------------
Gross profit 1,939 3,956 4,732 7,627
Research and development 1,271 1,051 2,487 2,137
Selling 1,155 1,405 2,401 2,712
General and administrative 957 1,105 2,028 2,083
- ------------------------------------------------------------------------
Income (loss) from operations (1,444) 395 (2,184) 695
Interest and other, net (11) (8) (17) (13)
Minority interest share in
(income)loss of Micro Pulse 147 (65) 135 (148)
- ------------------------------------------------------------------------
Income (loss) before taxes (1,308) 322 (2,066) 534
Benefit from (provision for)
income taxes 471 (118) 744 (200)
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Net income (loss) $(837) $204 $(1,322) $ 334
- ------------------------------------------------------------------------
Net income (loss) per share
Basic $(.07) $ .02 $ (.11) $ .03
Diluted $(.07) $ .02 $ (.11) $ .03
- ------------------------------------------------------------------------
Shares used in per share
calculations Basic 11,785 11,763 11,782 11,688
Diluted 11,785 12,034 11,782 12,009
- ------------------------------------------------------------------------
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Six Months Ended
- -----------------------------------------------------------------------
Aug. 29, Aug. 30,
1998 1997
- -----------------------------------------------------------------------
Cash flows from operating activities:
Net income (loss) $(1,322) $ 334
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 1,612 1,562
Minority interest (135) 217
Gain on sale of equipment (4) ---
(Increase) decrease in:
Accounts receivable 526 (1,370)
Inventories 1,575 (1,990)
Prepaid expenses and other assets (559) 380
Increase (decrease) in:
Accounts payable 544 1,465
Accrued liabilities (612) (232)
- -----------------------------------------------------------------------
Cash provided by operating activities: 1,625 366
- -----------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property and equipment (611) (1,784)
Proceeds from sale of property and equipment 885 ---
Purchase of controlling interest in Micro Pulse --- 327
- -----------------------------------------------------------------------
Cash provided by (used in) investing activities: 274 (1,457)
- -----------------------------------------------------------------------
Cash flows from financing activities:
Addition (repayment) of term debt (434) 384
Issuances of common stock 25 19
- -----------------------------------------------------------------------
Cash provided by (used in) financing activities: (409) 403
- -----------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 1,490 (688)
Cash and cash equivalents at end
of period 4,422 3,165
- -----------------------------------------------------------------------
Cash and cash equivalents at end of period $5,912 $2,477
=======================================================================
<PAGE>
CALIFORNIA AMPLIFIER, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation - The accompanying unaudited consolidated financial
statements have been prepared in accordance with the requirements of Form 10-Q
and, therefore, do not include all information and footnotes which would be
presented were such financial statements prepared in accordance with generally
accepted accounting principles. These statements should be read in conjunction
with the Company's Annual Report on Form 10-K for the year ended February 28,
1998. In the opinion of management, these interim financial statements reflect
all adjustments necessary for a fair presentation of the financial position and
results of operations for each of the periods presented. The results of
operations and cash flows for such periods are not necessarily indicative of
results to be expected for the full fiscal year.
2. Inventories - Inventories include the cost of material, labor and
manufacturing overhead and are stated at the lower of cost (first-in, first-out)
or market and consist of the following (in 000's):
Aug. 29, Feb. 28,
1998 1998
- ------------------------------------------------------------------------
Raw materials $2,480 $2,694
Work in process 19 66
Finished goods 2,777 4,091
- ------------------------------------------------------------------------
$5,276 $6,851
- ------------------------------------------------------------------------
3. Comprehensive Income (Loss) - Effective March 1, 1998 the Company adopted the
provisions of SFAS No. 130, "Reporting Comprehensive Income" which establishes
standards for reporting and display of comprehensive income and its components
in a full set of general-purpose financial statements. Comprehensive income is
defined as the total of net income and all non-owner changes in equity. The
following table details the components of comprehensive income (loss) for the
three and six months ended August 29, 1998 and August 30, 1997 (000's):
Quarter Ended
Aug. 29, Aug. 30,
1998 1997
--------- ---------
Net income (loss) $(837) $ 204
Foreign currency translation adjustment 12 3
--------- ---------
Comprehensive income (loss) $(825) $ 207
========= =========
Six Months Ended
Aug. 29, Aug. 30,
1998 1997
--------- ---------
Net income (loss) $(1,322) $ 334
Foreign currency translation adjustment (12) (56)
--------- ---------
Comprehensive income (loss) $(1,334) $ 278
========= =========
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended August 29, 1998 and August 30, 1997
Sales
Sales decreased by $4.8 million from $13.1 million for the three months ended
August 30, 1997, to $8.3 million for the three months ended August 29, 1998.
Sales of Wireless Cable products decreased $3.6 million from $7.8 million to
$4.2 million. Sales of Satellite Television products decreased $703,000 from
$3.8 million to $3.1 million. Sales of Antenna products by Micro Pulse decreased
$462,000 from $1.5 million to $1.0 million.
The decrease in the sale of Wireless Cable products resulted from the
significant downturn in the worldwide Wireless Cable television market, which
began in the second half of fiscal year 1998 and has continued into fiscal year
1999. The sales decrease can be attributed to reductions in the shipments of
both reception equipment, and MultiCipher, the Company's conditional access
system. Reception product sales were adversely affected by curtailed purchases
by existing systems, as well as a lack of new system expansion. MultiCipher
sales were adversely impacted primarily by the lack of new system expansion. The
softness in the Wireless Cable market affected unit shipments, as well as unit
average sale prices as competition lowered unit sales prices in an attempt to
attract customers. The Company reduced its unit sales prices to maintain market
share, however, demand for product was significantly less than in prior periods.
The decrease in sales of Satellite Television products resulted from the
continued decrease in sales of C-Band products internationally because current
unit pricing prohibits the Company from competing in these markets at acceptable
gross margins. These sales decreases were offset by sales of Ku-DBS products
domestically as the Company expands its presence in the Ku-DBS marketplace.
The decrease in the sale of Antenna products by Micro Pulse resulted primarily
from increased competition, reductions in buying patterns by certain customers
as compared to the prior year, and unit price declines.
The Company's objective is to achieve sequential quarterly sales increases. This
is dependent upon the Company maintaining its Wireless Cable market share
internationally, a successful Wireless Cable digital rollout in the United
States in which the Company must participate as a key supplier, and the timely
introduction of certain Ku-DBS and commercial satellite products.
Gross Profit and Gross Margin
Gross profit for the three months ended August 29, 1998 decreased by $2.1
million from $4.0 million for the three months ended August 30, 1997, to $1.9
million. Gross margin decreased 23.8% from 30.2% to 23.3%. The decrease in gross
profit resulted from lower sales volumes and reduced gross margins. The gross
margin decrease is primarily a result of product sales mix and under-utilization
of factory overhead because of the decreased sales volumes.
There will be continued pressure on gross margins primarily because of
competitive pricing pressures. As a result, the Company will concentrate on
product cost reductions and product differentiation in an attempt to maintain or
increase gross margins.
Operating Expenses
Research and development expenses increased by $220,000 from $1.1 million to
$1.3 million. The 20% increase resulted primarily from increased engineering
personnel, as well as increased salaries to remain competitive with industry
salary requirements.
Selling expenses decreased by $250,000, or 12.8%, from $1.4 million to $1.2
million. The decrease in selling expense relates primarily to a reduction in
discretionary marketing expenses, and reductions in variable selling expenses
because of lower sales.
General and administrative expenses decreased by $148,000 from $1.1 million to
$957,000. The decrease relates primarily to reductions in certain administrative
expenses, offset by increases in legal expenses relating to the stockholder
class action litigation.
Income (Loss) from Operations
Income (loss) from operations, for the reasons noted above, decreased by $1.8
million, from operating income of $395,000 for the three months ended August 30,
1997, to an operating loss of $1.4 million for the three months ended August 29,
1998.
Minority Interest Share in (Income) Loss of Micro Pulse
The minority interest share in (income) loss of Micro Pulse represents 50.5% of
the (income) loss before tax of Micro Pulse. The current year amount represents
50.5% of Micro Pulse's loss before tax, while the prior year period represents
49.5% of Micro Pulse's operating income.
Benefit from (Provision for) Income Taxes
The benefit from income taxes the second quarter of fiscal 1999 is based upon an
annualized tax rate of 36%. This tax rate assumes savings from benefits allowed
for export sales through a foreign sales corporation and research and
development tax credits.
The Company believes it will return to profitability in future periods.
Accordingly, the tax benefit recorded during the current period, and recorded as
a deferred tax asset in the accompanying consolidated balance sheet is expected
to be utilized.
Net Income (Loss)
Net income (loss), for reasons outlined above, decreased by $1.0 million, from
net income of $204,000 to a net loss of $837,000 for the three months ended
August 29, 1998.
<PAGE>
Six Months Ended August 29, 1998 and August 30, 1997
Sales
Sales decreased by $7.7 million, or 31%, from $25.1 million for the six months
ended August 30, 1997, to $17.4 million for the six months ended August 29,
1998. Sales of Wireless Cable products decreased $5.1 million from $14.9 million
to $9.8 million. Sales of Satellite Television products decreased $1.8 million
from $7.1 million to $5.3 million. Sales of Antenna products by Micro Pulse
decreased $843,000 from $3.2 million to $2.3 million.
The decreases in Wireless Cable sales resulted primarily from the significant
downturn in the worldwide Wireless Cable television market, which began in the
second half of fiscal year 1998 and has continued during into fiscal year 1999.
The decrease can be attributed to reductions in the shipments of both reception
equipment, and MultiCipher the Company's conditional access system. Reception
product sales were adversely affected by curtailed purchases by existing
systems, as well as a lack of new system expansion. MultiCipher sales were
adversely impacted particularly by the lack of new system expansion. The
softness in the Wireless Cable market affected unit shipments, as well as unit
average sale prices as competition lowered unit sales prices in an attempt to
attract customers. The Company reduced its unit sales prices to maintain market
share, however, demand for product was significantly less than in prior periods.
The decrease in sales of Satellite Television products resulted from the
continued decrease in sales of C-Band products internationally because current
unit pricing prohibits the Company from competing in these markets at acceptable
gross margins. These sales decreases were offset by sales of Ku-DBS products
domestically as the Company expands its presence in the Ku-DBS marketplace.
The decrease in the sale of Antenna products by Micro Pulse resulted primarily
from increased competition, reductions in buying patterns by certain customers
as compared to the prior year, and unit price declines.
The Company's objective is to achieve sequential quarterly sales increases. This
is dependent upon the Company maintaining its Wireless Cable market share
internationally, a successful Wireless Cable digital rollout in the United
States in which the Company must participate as a key supplier, and the timely
introduction of certain Ku-DBS, and commercial satellite products.
Gross Profit and Gross Margin
Gross profit for the six months ended August 29, 1998 decreased by $2.9 million
from $7.6 million for the six months ended August 30, 1997, to $4.7 million.
Gross margin decreased from 30.3% to 27.2%. The decrease in gross profit
resulted from lower sales volumes and reduced gross margins. The gross margin
decline is primarily a result of lower sales volumes, pricing competition in
Wireless Cable reception and Ku-DBS products, product sales mix resulting in
lower unit sales prices year-to-year, decreases in unit sale prices because of
reduced pricing for most products, and under-utilization of factory overhead
because of the decreased sales volumes.
There will be continued pressure on gross margins primarily because of
competitive pricing pressures. As a result, the Company will concentrate on
product cost reductions and product differentiation in an attempt to maintain or
increase gross margins.
Operating Expenses
Research and development expenses increased $350,000 from $2.1 million to $2.5
million. The increase resulted primarily from increased engineering personnel,
as well as increased salaries to remain competitive with industry salary
requirements.
Selling expenses decreased $311,000 from $2.7 million to $2.4 million. The
decrease in selling expense relates primarily to a reduction in discretionary
marketing expenses, and reductions in variable selling expenses because of lower
sales.
General and Administrative expense decreased $55,000 from $2.1 million to $2.0
million. The decrease relates primarily to reductions in certain administrative
expenses, offset, by increases in legal expenses relating to the stockholder
class action litigation.
Income (Loss) from Operations
Income (loss) from operations, for the reasons outlined above, decreased $2.9
million, from operating income of $695,000 to an operating loss of $2.2 million.
Minority Interest Share in (Income) Loss of Micro Pulse
The minority interest share in (income) loss of Micro Pulse represents 50.5% of
the (income) loss before tax of Micro Pulse. The current year amount represents
50.5% of Micro Pulse's loss before tax, while the prior year period represents
49.5% of Micro Pulse's operating income.
Benefit from (Provision for) Income Taxes
The benefit from income taxes for the six months ended August 29, 1998, is based
upon an annualized tax rate of 36%. This tax rate assumes savings from benefits
allowed for export sales through a foreign sales corporation and research and
development tax credits.
The Company believes it will return to profitability in future periods.
Accordingly, the tax benefit recorded during the current period, and recorded as
a deferred tax asset in the accompanying consolidated balance sheet is expected
to be utilized.
Net Income (Loss)
Net income (loss), for reasons outlined above, decreased by $1.65 million from
net income of $334,000, to a net loss of $1,322,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a $6.0 million working capital facility with California United
Bank at the bank's prime rate (8.5% at August 29, 1998). In addition, California
Amplifier s.a.r.l., its foreign subsidiary, has an informal arrangement with a
French bank to borrow up to $600,000. As of August 29, 1998, no amounts were
outstanding under any of these arrangements. The $6.0 million credit facility
with California United Bank expires in November 1998. The Company believes the
Bank will renew the credit facility at a lower amount because of the Company's
current sales volumes.
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 and equipment 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. As of
August 29, 1998 the Company remained on target to ensure Y2K compliance by
January 1, 2000.
<PAGE>
SAFE HARBOR STATEMENT
Forward looking statements in this Form 10-Q 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>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
On June 11, 1997, the Company and certain of its directors and officers had two
legal actions filed against them, one in the United States District Court,
Central District of California, entitled Yourish v. California Amplifier, Inc.,
et al., Case No. 97-4293 CBM (Mcx), and the other in the Superior Court for the
State of California, County of Ventura, entitled Yourish v. California
Amplifier, Inc. et al., Case No. CIV 173569. On June 30, 1997, another legal
action was filed against the same defendants in the Superior Court for the State
of California, County of Ventura, entitled Burns, et al., v. California
Amplifier, Inc., et al., Case No. CIV 173981. All three actions are purported
class actions on behalf of purchasers of the common stock of the Company between
September 12, 1995 and August 8, 1996. The actions claim that the defendants
engaged in a scheme to make false and misleading statements and omit to disclose
material adverse facts to the public concerning the Company, allegedly causing
the Company's stock price to artificially rise, and thereby allegedly allowing
the individual defendants to sell stock at inflated prices. Plaintiffs claim
that the purported stockholder class was damaged when the price of the stock
declined upon disclosure of the alleged adverse facts. On September 21, 1998,
the Federal legal action was dismissed in the United States District Court, but
the State legal action remains in the Superior Court for the State of
California. 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 in State
court.
ITEM 2.Changes in Securities
None
ITEM 3.Defaults upon Senior Securities
None
ITEM 4.Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders of California Amplifier, Inc. was
held July 17, 1998.
At the annual meeting of stockholders a proposal was considered for the election
of Ira Coron, Fred Sturm, Arthur H. Hausman, William E. McKenna and Thomas L.
Ringer as directors to serve until the 1999 annual meeting of stockholders. All
of the five director-nominees were elected. The voting results are summarized
below:
Proposal
1)Election of Directors:
For Withheld Against
Ira Coron 10,785,642 282,622 0
Fred Sturm 10,856,136 212,128 0
Arthur H. Hausman 10,821,493 246,771 0
William E. McKenna 10,808,337 259,927 0
Thomas L. Ringer 10,800,356 267,908 0
<PAGE>
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
(a) No reports on Form 8-K were filed during the quarter ended August
29, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
California Amplifier, Inc.
(Registrant)
October 9, 1998 /s/ Michael R. Ferron
-------------------------
Michael R. Ferron
Vice President, Finance and
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET ON PAGE 2 AND THE CONSOLIDATED STATEMENTS
OF OPERATIONS ON PAGE 3 OF THE COMPANY'S FORM 10-Q FOR THE THREE AND SIX MONTHS
ENDED AUGUST 29, 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> 6-MOS
<FISCAL-YEAR-END> FEB-27-1999
<PERIOD-END> AUG-29-1998
<CASH> 5,912
<SECURITIES> 0
<RECEIVABLES> 5,787
<ALLOWANCES> 568
<INVENTORY> 5,276
<CURRENT-ASSETS> 19,864
<PP&E> 20,350
<DEPRECIATION> 15,128
<TOTAL-ASSETS> 25,885
<CURRENT-LIABILITIES> 4,805
<BONDS> 0
0
0
<COMMON> 14,168
<OTHER-SE> 5,920
<TOTAL-LIABILITY-AND-EQUITY> 25,885
<SALES> 17,382
<TOTAL-REVENUES> 17,382
<CGS> 12,650
<TOTAL-COSTS> 6,916
<OTHER-EXPENSES> 135
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (17)
<INCOME-PRETAX> (2,066)
<INCOME-TAX> (744)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,322)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
