UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT --- OF 1934
For the quarterly period ended: May 27, 2000
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 as 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
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(Address of principal executive offices) (Zip
Code)
(805) 987-9000
--------------
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Common Stock Outstanding as of May 27, 2000: 13,244,872
Number of pages in this Form 10-Q: 11
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1: Financial Statements
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
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May 27, Feb. 26,
2000 2000
(unaudited) (audited)
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ASSETS
Current assets:
Cash and cash equivalents $ 4,887 $ 3,074
Accounts receivable, net 16,191 16,038
Inventories 13,485 12,948
Deferred tax asset 8,099 8,487
Prepaid expenses and other current assets 563 685
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Total current assets 43,225 41,232
Property and equipment, at cost, net of
accumulated depreciation and amortization 9,903 9,731
Goodwill, net of amortization 3,760 3,827
Other assets 576 762
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$57,464 $55,552
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,362 $ 9,242
Accrued liabilities 12,212 13,099
Current portion of long-term obligations 239 4,973
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Total current liabilities 18,813 27,314
Long-term obligations, net of current portion 5,141 144
Minority interest share in net assets of
Micro Pulse, Inc. 442 342
Stockholders' equity:
Preferred stock, 3,000 shares authorized;
no shares outstanding --- ---
Common stock, $.01 par value; 30,000 shares authorized;
13,245 shares outstanding in May 2000 and
12,658 in February 2000 132 127
Additional paid-in capital 26,393 23,177
Accumulated other comprehensive income (253) (226)
Retained earnings 6,796 4,674
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Total stockholders' equity 33,068 27,752
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$57,464 $55,552
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See Notes to Unaudited Consolidated Financial Statements
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
(unaudited; in thousands, except per share data)
Three Months Ended
--------------------------
May 27, May 29,
2000 1999
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Sales $32,284 $13,093
Cost of sales 24,352 9,180
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Gross profit 7,932 3,913
Research and development 1,671 1,199
Selling 1,276 1,120
General and administrative 1,433 1,067
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Income from operations 3,552 527
Interest and other income (expense), net (102) 31
Minority interest share in (income) loss of
Micro Pulse (139) 2
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Income before provision for income taxes 3,311 560
Provision for income taxes 1,189 202
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Net income $ 2,122 $ 358
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Net income per share
Basic $ .16 $ 0.03
Diluted $ .15 $ 0.03
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Shares used in per share calculations
Basic 12,955 11,791
Diluted 14,086 12,346
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See Notes to Unaudited Consolidated Financial Statements
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)
Three Months Ended
--------------------------
May 27, May 29,
2000 1999
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Cash flows from operating activities:
Net income $ 2,122 $ 358
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Non-cash income tax provisio 1,087 92
Provision for doubtful accounts 19 30
Depreciation and amortization 897 639
Loss on sale of property and equipment 1 2
Minority interest share in net income
(loss) of Micro Pulse, net of tax 100 (2)
Deferred tax asset --- 92
Change in assets and liabilities,
net of effect of Gardiner
acquisition in fiscal year 2000:
Accounts receivable (172) (3,404)
Inventories (537) (117)
Prepaid expenses and other assets 308 210
Accounts payable (2,880) 1,528
Accrued liabilities (887) 393
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Net cash provided by (used in) operating activities: 58 (179)
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Cash flows from investing activities:
Purchase of property and equipment (1,003) (17)
Net assets acquired from Gardiner --- (2,661)
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Net cash used in investing activities: (1,003) (2,678)
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Cash flows from financing activities:
Debt borrowings 5,000 ---
Debt repayments (2,506) (149)
Issuances of common stock 291 43
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Net cash provided by (used in) financing activities: 2,785 (106)
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Effect of foreign exchange rates (27) (69)
Net increase (decrease) in cash and cash equivalents 1,813 (3,032)
Cash and cash equivalents at the beginning of period 3,074 9,312
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Cash and cash equivalents at end of period $ 4,887 $ 6,280
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See Notes to Unaudited Consolidated Financial Statements
<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 26, 2000. In the opinion of management, these interim financial
statements reflect all adjustments necessary for a fair presentation of the
financial position and results of operations for each of the periods presented.
The results of operations and cash flows for such periods are not necessarily
indicative of results to be expected for the full fiscal year.
2. INVENTORIES - Inventories include the cost of material, labor and
manufacturing overhead and are stated at the lower of cost (first-in, first-out)
or market and consist of the following (in 000's):
May 27, 2000 Feb. 26, 2000
------------ -------------
Raw materials $11,047 $10,202
Work in process 1,113 1,073
Finished good 1,325 1,673
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$13,485 $12,948
======= =======
3. NET INCOME PER SHARE - Basic income per share is computed by dividing
reported earnings available to common stockholders by weighted average shares
outstanding. Diluted income per share increases the weighted average shares
outstanding for the dilutive effect of stock options, warrants, and convertible
debt arrangements.
Three Months Ended
--------------------------
May 27, May 29,
2000 1999
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Weighted average shares outstanding - Basic 12,955 11,791
Effect of dilutive securities
Options 715 316
Litigation settlement 124 ---
Convertible debt 292 239
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Weighted average shares outstanding - Diluted 14,086 12,346
======= ========
<PAGE>
4. COMPREHENSIVE INCOME - Comprehensive income is defined as the total of net
income and all non-owner changes in equity. The following table details the
components of comprehensive income for the three months ended May 27, 2000 and
May 29, 1999 (in 000's):
Three Months Ended
--------------------------
May 27, May 29,
2000 1999
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Net income $2,122 $ 358
Foreign currency translation
adjustment, net of tax (27) (69)
------- -------
Comprehensive income $2,095 $ 289
======= =======
5. CONCENTRATION OF RISK - As of May 27, 2000, the Company had accounts
receivable due from one customer of $4,568,000 or 28.2% of consolidated accounts
receivable, and another customer of $3,174,000 or 19.6% of consolidated accounts
receivable.
6. STATEMENT OF CASH FLOWS - In fiscal year 2001, the Company recorded the tax
effect related to the exercise of stock options by increasing paid-in-capital
and deferred tax assets by $700,000. These amounts were excluded from the
statement of cash flows.
In fiscal year 2001, the Company issued 525,000 shares of its common stock for
retirement of $2,231,250 of debt. These amounts were excluded from the statement
of cash flows.
In fiscal year 2000, the Company recorded goodwill of $3,827,000 in conjunction
with the acquisition of certain assets from Gardiner Communications and issued a
note payable for $3,100,000. These amounts were excluded from the statement of
cash flows.
7. SEGMENTS - The Company currently manages its business under three
identifiable business segments, Satellite Products, Wireless Access Products and
Antenna Products.
Segment information for the three months ended May 27, 2000 and May 29, 1999 is
as follows:
<TABLE>
<CAPTION>
Three Months Ended May 27, 2000
-----------------------------------------------------------------
Satellite Wireless Access Antenna Corporate Total
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $24,731 $5,466 $2,087 $ --- $32,284
Gross Profit 5,574 1,424 934 --- 7,932
Product Gross Margins 22.5% 26.0% 44.8% --- 24.6%
Income (Loss) Before Tax 4,413 59 278 (1,439) 3,311
-----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended May 29, 1999
-----------------------------------------------------------------
Satellite Wireless Access Antenna Corporate Total
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $7,031 $4,969 $1,093 $ --- $13,093
Gross Profit 1,872 1,575 466 --- 3,913
Product Gross Margins 26.6% 31.7% 42.6% --- 29.9%
Income (Loss) Before Tax 1,113 348 (5) (896) 560
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</TABLE>
For the three months ended May 27, 2000, two satellite product customers
accounted for 28.9% and 17.8% of consolidated sales. For the three months ended
May 29, 1999, another satellite product customer accounted for 18.1% of
consolidated sales.
8. PRO FORMA - On April 19, 1999, the Company acquired the technology and
product rights to substantially all of Gardiner Communications Corp.'s
("Gardiner") products, manufacturing and development related equipment and
inventory from Gardiner to support these product lines. The total purchase
price, including assumption of certain liabilities and related costs of the
acquisition, was approximately $9.3 million, of which $3.5 million relates to
the acquisition of product and technology rights. The Company paid $6.2 million
in cash, and Gardiner received a $3,100,000, 8% one year convertible promissory
note due April 19, 2000. In April 2000, a portion of the debt was converted into
525,000 shares of the Company's common stock at $4.25 per share, which was the
market value at the date of grant, and the remaining balance was paid. As part
of the purchase, the Company recorded Goodwill of $4.1 million which is being
amortized over 15 years.
The following pro forma information combines the operations of the Company and
Gardiner for the three months ended May 29, 1999, as if the acquisition had
occurred at February 27, 1999:
3 Months Ended
May 29, 1999
----------------------------
As Reported Pro forma
----------- ---------
Sales $13,093 $15,093
Net income $ 358 $ 518
Net income per share Basic $ .03 $ .04
Diluted $ .03 $ .04
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Shares used in per share
calculation Basic 12,955 12,955
Diluted 14,086 13,194
--------------------------------------------------------------------------------
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MAY 27, 2000 AND MAY 29, 1999
SALES
Sales increased $19.2 million, or 147%, from $13.1 million for the three months
ended May 29, 1999 to $32.3 million for the three months ended May 27, 2000.
Sales of Satellite products increased $17.7 million, or 252%, from $7.0 million
to $24.7 million. Sales of Wireless Access products increased $497,000, or 10%,
from $5.0 million to $5.5 million. Sales of Antenna products by Micro Pulse
increased $994,000, or 91%, from $1.1 million to $2.1 million.
The increase in sales of Satellite products resulted from continued strong
demand for the Company's U.S. DBS products, and initial shipments of certain
Satellite products to European markets. In the prior year period the Company did
not sell significant amounts of Satellite products to these markets until its
acquisition of Gardiner Communications, which occurred about halfway through the
quarter on April 19, 1999.
The increase in the sales of Wireless Access products is a result of increases
in the Company's sales of two-way transceiver products to the emerging fixed
broadband wireless market, offset by the continued slowdown in the Wireless
Cable video market which resulted in lower dollar and unit shipments of the
Company's Wireless Cable video products. The Company shipped approximately $2.6
million of voice and data access during the three months ended May 27, 2000, as
compared to $300,000 for the three months ended May 29, 1999.
The increase in sales of Antenna products resulted primarily from Micro Pulse
expanding its customer base with a broader antenna product offering.
GROSS PROFITS AND GROSS MARGINS
Gross profits increased by $4.0 million, or 103%, from $3.9 million to $7.9
million. Gross margins decreased to 24.6% from 29.9%. The increase in gross
profits resulted from the 147% increase in sales, offset by lower product gross
margins. The 5.3% decline in overall gross margin resulted primarily from
pricing pressures in satellite products and traditional Wireless Cable products,
a sales mix comprised of 77% Satellite products (54% in the prior year period)
which sell at lower gross margins, higher material procurement costs,
operational inefficiencies related to the difficulties in obtaining certain
electronic components on a timely basis primarily for Satellite products, and
under-absorbed factory overhead for Wireless Access products. The Company
believes it has initiated certain measures to alleviate some of these issues,
but does not expect to see improvement in gross margins during the second
quarter of fiscal year 2001.
OPERATING EXPENSES
Research and development expenses increased by $472,000 from $1.2 million to
$1.7 million. The increase related to additional engineering and design
personnel, higher salaries to remain competitive with industry compensation
trends, and higher material costs relating to new product design.
Selling expenses increased by $156,000 from $1.1 million to $1.3 million. The
increase relates primarily to increased personnel to support higher sales.
General and administrative expenses increased by $366,000 from $1.1 million to
$1.4 million. The increase related to increased personnel and higher salaries to
support the larger business unit organizations.
<PAGE>
INCOME FROM OPERATIONS
Income from operations, for the reasons noted above, increased by $3.0 million,
to $3.6 million from $527,000 in the comparable prior year period.
MINORITY INTEREST SHARE IN INCOME (LOSS) OF MICRO PULSE
The Company consolidates 100% of the sales and expenses of Micro Pulse. The
minority interest share in income of Micro Pulse eliminates the 49.5% of the
income (loss) of Micro Pulse.
PROVISION FOR INCOME TAXES
The provision for taxes for the first quarter of fiscal 2001 is based upon an
annualized tax rate of 36%, the same tax rate as fiscal year 2000. This tax rate
assumes savings from benefits allowed for export sales through a foreign sales
corporation and research and development tax credits, plus benefits from the
exercise of nonqualified stock options.
NET INCOME
Net income, for reasons outlined above, increased by $1.8 million to $2.1
million from $358,000 in the comparable prior year period.
See also Note 7 "Segments," included in Notes to Unaudited Consolidated
Financial Statements included elsewhere herein for additional operating data for
separate business units.
LIQUIDITY AND CAPITAL RESOURCES
In May 2000, the Company renegotiated its financial arrangement with U.S. Bank.
Under the terms of the new credit and debt arrangement, the Company borrowed
$5.0 million as a term loan, with interest only at LIBOR plus 2.2% until June
2001, at which time the loan will convert to a five-year fully amortizing term
loan. However, such loan can be prepaid without penalty. In addition, the
Company's working capital facility was increased to $8.0 million.
The Company believes that cash flow from operations together with the funds
available under its credit facility, are sufficient to support operations and
capital equipment requirements over the next twelve months.
The Company believes that inflation and foreign currency exchange rates have not
had a material effect on its operations. The Company believes that fiscal year
2001 will not be impacted significantly by foreign exchange fluctuation since a
significant portion of the Company's fiscal year 2001 projected sales are to
U.S. markets, or to international markets where its sales are negotiated in U.S.
dollars. Import tariffs in countries such as Brazil and China have made it more
difficult to compete with in-country manufacturers.
SAFE HARBOR STATEMENT
Forward looking statements in this 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,
market growth, new competition, competitive pricing and continued pricing
declines in the DBS market, supplier constraints, manufacturing yields, meeting
demand with multiple facilities, timing and market acceptance of new product
introductions, new technologies, 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. The
dismissal was upheld by the U.S. Court of Appeals for the Ninth Circuit on
October 8, 1999.
On March 27, 2000 the trial began for the lawsuit filed 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 March 29, 2000 the parties
reached a settlement. Under terms of the settlement, the Company's insurance
carriers will pay approximately $1.5 million, and the Company will pay $2.0
million and issue 187,500 shares of its common stock. This represents a total
settlement of approximately $11.0 million of which $9.5 million was accrued in
the accompanying consolidated financial statements for the year ended February
26, 2000.
The Company has filed a lawsuit against one of its insurance carriers to receive
$2.0 million of coverage the insurance carrier has stated was not covered under
the insurance policy.
On March 7, 2000, the Company announced that it had received a complaint of
patent infringement from Andrew Corporation. The complaint, filed against
California Amplifier in the U.S. District Court for the Eastern District of
Texas, alleges that certain California Amplifier products infringe Andrew
Corporation's patent rights. The complaint was served with this initial pleading
on or about June 5, 2000. A first amended complaint was filed by Andrew
Corporation on June 28, 2000. California Amplifier believes that the allegations
of the first amended complaint lack merit and the Company intends to vigorously
defend the action.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended May 27, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
California Amplifier, Inc.
---------------------------------
(Registrant)
July 10, 2000 /s/ Michael R. Ferron
---------------------------------
Michael R. Ferron
Vice President, Finance and
Chief Accounting Officer
