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 26, 2000 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 15, 2000 was approximately
$338,000,000.
There were 13,234,322 shares of the Registrant's Common Stock outstanding as
of May 15, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on July 14, 2000 are 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 various reception applications. In 1990, the Company discontinued its
involvement in its defense business and focused its business strategy on two
major product lines: Satellite Television and Wireless Cable products. In
January 1998, the Company reorganized into the following business units:
Satellite Products, Wireless Cable Products, and Voice and Data Products. In
September 1999, the Company combined its Wireless Cable and Voice and Data
Products into a separate business unit, Wireless Access Products, to more keenly
focus its resources on the emerging two-way fixed wireless broadband market.
In addition, the Company has a 50.5% ownership interest in Micro Pulse,
Inc., a company who designs, manufactures and markets antennas for various
wireless applications, primarily for Global Positioning Satellite (GPS)
applications.
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 in both commercial satellite dish
applications and home satellite dishes. The Company's Satellite product sales to
date have been primarily generated from sales of integrated downconverters,
amplifiers and feedhorns used in home satellite dish and cable headend dish
applications.
The satellite dish is a parabolic reflector antenna. Microwave signals
transmitted primarily in Ku-band or C-band for video and data transmission, 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 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.
Since its inception the Company has been a leading supplier of C-band
downconverters and amplifiers for the "large backyard dish" to markets
worldwide, but primarily to markets in the United States, Brazil and the Middle
East. With the Company's 1998 reorganization into separate business units, the
Satellite Products business unit focused its resources on Ku-DBS applications,
as well as a broad line of C-band and Ku-band commercial applications. In April
1999, the Company purchased substantially all of the satellite television
products from Gardiner Communications Corp. This acquisition allowed the Company
immediate entry into the U.S. Ku-band Direct Broadcast Satellite mainstream
consumer market, and provides the Company with competitive products for Europe,
and China, both of which position the Company to be a more significant supplier
to key markets around the world.
In fiscal year 2000, approximately 80% of the Company's satellite product
sales were Ku-DBS products, while approximately 20% were C-band consumer and
commercial products. The Company believes Ku-DBS products will continue to
comprise a significant percentage of satellite product sales as the Company
focuses on the DBS market opportunities in the United States, Europe and Latin
America.
<PAGE>
WIRELESS ACCESS PRODUCTS
WIRELESS CABLE VIDEO
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 (MMDS) 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 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 had changed their strategic emphasis and were not going forward
with their Wireless Cable plans. In 1996, BellSouth announced its plan to use
digital Wireless Cable technology to deliver video services in the southeastern
region of the United States. To date, BellSouth has launched video programming
in Atlanta, New Orleans, Orlando, Daytona Beach, and Jacksonville.
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-assess
their video delivery strategy, combined with other factors, resulted in a
significant slowdown in the domestic Wireless Cable market. Independent
operators were confronted with limited financing alternatives, negative cash
flow from operations with their current subscriber levels, and the decision of
whether to expand subscriber counts using analog equipment prior to the
availability of digital equipment. Additionally, the quality and breadth of
programming offered by satellite programmers put analog wireless cable operators
at a distinct disadvantage. These factors, coupled with the U.S. household
market opportunities becoming more focused on Internet services, has resulted in
the MMDS industry largely abandoning one-way video services for two-way fixed
Internet and telephony applications (see Wireless Access Products).
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 Canada, 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 still
significant if capital becomes available for operators to roll-out systems. In
addition, many operators/MMDS spectrum owners may re-assess their video strategy
and focus on two-way Internet and telephony services as the United States market
has initiated as described below.
TWO-WAY TRANSCEIVER PRODUCTS
Terrestrial Wireless Cable operators owned significant wireless spectrum in
the 2.5 to 2.7 gigahertz range. As worldwide markets move toward wireless
communications, wireless cable operators have considered using a portion or all
of the video bandwidth for voice (telephony) or data (Internet access)
applications.
By deploying MMDS two-way wireless technology, operators can offer a
high-speed data service alternative for bridging the critical "last mile"
between networks and customers. There are key distinctions between MMDS and the
two most prevalent traditional high-speed pipelines, cable and digital
subscriber line (DSL), typically provided by local cable or telephone companies.
MMDS not only allows rapid deployment of this new wireless alternative at
relatively low build out costs, it extends high-speed access to rural and
suburban markets that are not served or are underserved by cable or DSL.
Essentially, operators will establish two-way transmissions to and from central
headends, homes, and businesses operating in many instances like cellular
systems. California Amplifier would provide outdoor premise equipment, which the
system operator would install on the subscriber's home or business rooftop. Each
base-station sends and receives data traffic to and from customer premise
modems. The network management system manages and controls the traffic
transmitted over the broadband wireless system. The modems connect to PCs or
LANs located in residences, small/home offices, and medium sized businesses.
These modems send and receive data traffic and provide access to the Internet.
Beginning in March 1999, MCI WorldCom and Sprint began making debt and
equity investments in many of the U.S. multi-system operators, essentially
acquiring over 60% of the MMDS spectrum in major cities throughout the United
States. In conjunction with their acquisitions, the companies announced their
intention to initiate a broad-based roll-out of fixed wireless services to
consumers in approximately 100 U. S. cities by the end of 2001. As of May 2000,
both companies were performing field trials, but had not formally announced
their rollout strategies.
In addition, two-way system field trials are being performed in Canada,
Brazil and Ireland.
ANTENNA PRODUCTS
In January 1993, the Company purchased a 50% ownership interest in Micro
Pulse, Inc. ("Micro Pulse") for $500,000. Micro Pulse designs, manufactures and
markets antennas and amplifiers used principally in GPS applications. Such
products are used in surveying applications, vehicle tracking and marine and
airborne navigation. In fiscal year 1998, the Company acquired additional shares
resulting in a 50.5% controlling interest and, as a result, beginning in fiscal
year 1998, the Company began to consolidate Micro Pulse in its financial
statements.
PRODUCTS
The Company designs, manufactures and markets a broad line of integrated
amplifiers, downconverters, and antennas 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, as will two-way transceivers which downconvert and
upconvert microwave signals used in two-way voice and data for terrestrial
wireless communication between fixed locations.
The Company also markets MultiCipher, a broadband analog scrambling system
for the Wireless Cable industry. Because MultiCipher is a broadband scrambling
system, it decodes all channels transmitted simultaneously which allows a
"whole-house" solution for the Wireless Cable operator thereby eliminating the
requirement of installing conventional set-top boxes on each television in the
subscriber's home.
The Company, through its 50.5% controlling interest in Micro Pulse, 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 2000, 1999, and 1998, Satellite products accounted for
69.7%, 33.7%, and 28.0% of the Company's sales, respectively. Wireless access
products accounted for 22.1%, 54.8%, and 59.1% of the Company's sales,
respectively. Antenna products, which represent sales by Micro Pulse, accounted
for 8.2%, 11.5%, and 12.9% of the Company's consolidated sales in fiscal years
2000, 1999 and 1998, respectively.
For additional information regarding the Company's sales by segment and
geographical area, see Note 11 of Notes to Consolidated Financial Statements.
<PAGE>
MANUFACTURING
The Company currently manufactures and assembles its products in Camarillo,
California, and Garland, Texas, USA, and under a subcontract arrangement in
China. Manufacturing operations consist of placing hundreds of electronic
devices onto printed circuit boards, assembling one or more boards into
primarily aluminum housings, tuning microwave devices, and testing of final
assembled products.
Electronic devices, components and made-to-order assemblies 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. During the second half of fiscal year 2000, and during the
first quarter of fiscal year 2001, the Company has been experiencing difficulty
in receiving timely delivery of certain key components which, to some extent,
affected shipments and manufacturing productivity.
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 May
1999.
RESEARCH AND DEVELOPMENT
Each of the markets the Company competes in 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 four primary areas: Ku-DBS products,
two-way MMDS transceivers, digital Wireless Cable video reception products, and
the MultiCipher "whole-house" broadband scrambling system. In addition,
development resources were allocated to broaden existing product lines, reduce
product costs and improve performance by product redesign efforts.
Research and development expenses were $5,215,000, $4,764,000, and
$4,475,000, during fiscal years 2000, 1999, and 1998, respectively.
SALES AND MARKETING
The Company sells its wireless access products directly to system operators
as well as through distributors and system integrators. 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, USA, corporate headquarters. In
addition, the Company has sales offices and personnel in Paris, France; Sao
Paulo, Brazil; and Hong Kong, China. 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.
Micro Pulse sales and marketing functions are centralized in its Camarillo
California, USA corporate headquarters. In addition, Micro Pulse also utilizes
sales representatives to identify markets and customers, and to sell its
products.
See also Note 11 of Notes to Consolidated Financial Statements for segment
and geographical sales information.
<PAGE>
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 terrestrial Wireless access 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 acquisition of Gardiner's satellite products
broadened the Company's satellite product offering, and strengthened its
competitive position in key markets. In the GPS and wireless antenna markets
Micro Pulse relies upon its reputation for innovation, quality and its quick
time to market with new design requirements.
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 to the annualized sales trends. 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, since "book and ship" orders are such
a significant percentage of sales.
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 fourteen 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.
The Company currently has six other patents pending.
California Amplifier(R) and MultiCipher(R) are federally registered
trademarks of the Company. The Company has also filed for trademark protection
for its MultiCipher Plus product line.
EMPLOYEES
At February 26, 2000, the Company had 706 employees, including contract
employees, and Micro Pulse had 60 employees. None of the Company's employees are
represented by a labor union.
<PAGE>
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 37,000 square feet for assembly in
Garland, Texas, and offices in Paris, France; Sao Paulo, Brazil; and Hong Kong,
China. See also Note 9 to Consolidated Financial Statements.
Micro Pulse's corporate headquarters and manufacturing facility is located
on approximately 15,000 square feet of leased space in Camarillo, California,
which Micro Pulse rents on a month-to-month basis.
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 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 actions remained in the Superior Court for the State of
California. 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. On May 15, 2000, the Company filed a complaint against one of
its insurance carriers seeking $2.0 million of coverage in connection with this
settlement that the insurer has refused to provide.
On March 7, 2000, the Company announced it had received 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 but not
served, alleges that California Amplifier has infringed Andrew Corporation's
patent in the design of certain products. California Amplifier believes that the
allegations are unfounded and without merit and will vigorously defend any
attempt by the plaintiff to prosecute this action.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the three months ended February 26, 2000, no matters were submitted
to a vote of the Company's security holders.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
The Company's Common Stock trades on The Nasdaq Stock Market under the
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 Nasdaq:
Low High
------- -------
Fiscal Year Ended February 26, 2000:
1st Quarter $ 1.69 $ 5.88
2nd Quarter 4.06 14.94
3rd Quarter 11.18 25.12
4th Quarter 22.25 45.00
Fiscal Year Ended February 27, 1999:
1st Quarter $ 2.50 $ 3.44
2nd Quarter 1.25 2.56
3rd Quarter 1.25 3.47
4th Quarter 1.44 2.88
At May 15, 2000 the number of stockholders of record of the Company's Common
Stock was 259. 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 11,670.
The Company has never paid a cash dividend and has no current plans to pay
cash dividends on its Common Stock.
<PAGE>
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.
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
(in thousands, except per share data)
<CAPTION>
Years Ended
- -----------------------------------------------------------------------------------------------------
Feb. 26, Feb. 27, Feb. 28, Mar. 1, Mar 2,
2000 1999 1998 1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $85,628 $37,140 $46,933 $49,290 $ 61,590
Income (loss) before taxes (1) (2,177) (2,217) (4,149) 1,037 7,638
Net income (loss) (1,393) (1,436) (2,665) 633 4,958
Basic and diluted net income
(loss) per share (0.12) (0.12) (0.23) 0.05 0.41
- -----------------------------------------------------------------------------------------------------
<FN>
(1) Fiscal year 2000 includes a $9.5 million charge for settlement of
litigation. Excluding this charge net income would have been approximately
$4.7 million, or $.35 per fully diluted share.
</FN>
</TABLE>
<TABLE>
CONSOLIDATED BALANCE SHEETS DATA:
(in thousands)
<CAPTION>
As of Each Year End
2000 1999 1998 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total assets $55,552 $25,549 $27,831 $29,536 $ 32,573
Working capital 13,918 15,477 14,886 15,001 15,743
Long-term debt, net of
current portion 144 516 1,112 525 767
Stockholders' equity 27,752 20,065 21,397 24,148 22,924
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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:
<TABLE>
<CAPTION>
Years Ended
- -------------------------------------------------------------------------------------------------
Feb. 26, Feb. 27, Feb. 28,
2000 1999 1998
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales:
Satellite Products 69.7% 33.7% 28.0%
Wireless Access Products 22.1 54.8 59.1
Antenna Products 8.2 11.5 12.9
- ------------------------------------------------------------------------------------------------
Total sales 100.0 100.0 100.0
Gross profit 27.4 28.4 22.8
Research and development 6.1 12.8 9.5
Selling 6.1 12.0 11.1
General and administrative 6.1 10.4 10.3
- ------------------------------------------------------------------------------------------------
Income (loss) from operations 9.1 (6.8) (8.1)
Settlement of class action litigation (11.1) --- ---
Interest and other, net (.2) --- ---
Minority interest share in (income) loss of Micro Pulse (.4) .8 (.7)
- -------------------------------------------------------------------------------------------------
Loss before benefit from income taxes (2.5) (6.0)
(8.8)
Benefit from income taxes .9 2.1 3.2
- --------------------------------------------------------------------------------------------------
Net loss (1.6)% (3.9)% (5.6)%
- --------------------------------------------------------------------------------------------------
</TABLE>
FISCAL YEARS 2000 AND 1999
Sales increased $48.5 million, or 131%, from $37.1 million in fiscal year
1999 to $85.6 million in fiscal year 2000. The fiscal year 2000 sales increase
resulted primarily from the significant increase in sales of satellite products.
Sales of Satellite products increased $47.2, or 377%, from $12.5 million to
$59.7 million. Sales of Wireless access products decreased $1.4 million, or 7%,
from $20.3 million to $19.0 million. Sales of Antenna products, which represent
total sales by Micro Pulse, increased $2.7 million, or 63%, from $4.3 million to
$7.0 million.
The $47.2 million sales increase in Satellite products resulted primarily
from significantly higher unit sales of U.S. DBS products, which were acquired
from Gardiner Communications in April 1999.
The $1.4 million sales decrease in Wireless access products was a result of
approximately $2.9 million decrease in sales of wireless cable video products,
offset by a $1.5 million increase in sales of two-way transceiver products. The
Company anticipates that there may be continued softness of unit sales in
traditional wireless cable products as system operators consider two-way
Internet and telephony offerings.
The $2.7 million sales increase in sales of Antenna products resulted
primarily from Micro Pulse expanding its customer base for certain GPS
applications with a resulting increase in units sold.
Gross profits increased $12.9 million, or 122%, from $10.5 million in fiscal
year 1999 to $23.4 million in fiscal year 2000. The increase in gross profits
occurred because of a 131% increase in sales offset by lower product gross
margins as satellite products represented a larger percentage of total sales.
Gross margins decreased from 28.4% in fiscal year 1999 to 27.4% in fiscal
year 2000. The decrease in gross margins relates primarily to the fact that
approximately 70% of total sales were sales of satellite products, which are
lower margin products.
Research and development expenses increased by $451,000, from $4.8 million
in fiscal year 1999 to $5.2 million in fiscal year 2000. The increase results
from additional personnel and salary increases to remain competitive with
industry compensation trends. As a percentage of sales, research and development
expenses decreased to 6.1% from 12.8% in fiscal year 1999. This is primarily a
result of the significant increase in sales and the fact that in prior years the
Company maintained research and development regardless of lower sales in the
near-term.
Selling expenses increased by $769,000 from $4.4 million in fiscal year 1999
to $5.2 million in fiscal year 2000. The increase relates primarily to increases
in salaries and additions in personnel to support increased sales.
General and administrative expenses increased by $1.3 million from $3.9
million in fiscal year 1999 to $5.2 million in fiscal year 2000. The increase
results primarily from increases in incentive bonuses, legal fees, and additions
relating to the acquisition of Gardiner, including goodwill amortization.
Each of the functional operating expenses declined as a percentage of sales
due to the 131% increase in total sales, so it is difficult to analyze such
costs from year-to-year as a percentage of sales.
Income (loss) from operations increased by $10.4 million from a loss of $2.5
million in fiscal year 1999 to income of $7.8 million in fiscal year 2000. The
principal reasons for the improvement were as described above, increased sales
resulting in increased gross profits of $12.9 million, offset by increased
operating expenses of $2.5 million.
The settlement of litigation relates to the class action litigation filed in
June, 1997 (see Note 12 to notes to consolidated financial statements included
elsewhere herein).
The benefit from income taxes was $784,000, or 36% of the loss before taxes
in fiscal year 2000. This is relatively consistent with the tax rate of
approximately 35.2% in fiscal year 1999.
For the reasons outlined above, the net loss for fiscal year 2000 was $1.4
million, comparable to the net loss incurred in fiscal year 1999.
<PAGE>
FISCAL YEARS 1999 AND 1998
Sales decreased $9.8 million, or 20.9%, from $46.9 million in fiscal year
1998 to $37.1 million in fiscal year 1999. The fiscal year 1999 sales decrease
resulted from decreases in sales in each of the Company's product groups.
Sales of Wireless products decreased $7.4 million, or 26.7%, from $27.7
million to $20.3 million. Sales of Satellite products decreased $628,000, or
4.8%, from $13.1 million to $12.5 million. Sales of Antenna products, which
represent total sales by Micro Pulse, decreased $1.8 million, or 29.1%, from
$6.1 million to $4.3 million.
The $7.4 million sales decrease in Wireless products was primarily a result
of decreases in sales of MultiCipher scrambling products in key markets in
Africa, Latin America, and the United States. Wireless cable operators in most
major markets curtailed expansion of new systems, as well as net subscriber
growth in their existing systems due primarily to a lack of available capital.
Sales of Wireless reception products remained relatively flat with the prior
year, with increased sales in the United States and Canada because of new
systems by BellSouth and Look TV, offset by decreases in Latin America and
Africa, and other U.S. operators. The Company's Voice and Data products
accounted for approximately $1.1 million in sales in fiscal year 1999, its first
year of offering such products.
The $628,000 sales decrease in Satellite products resulted primarily from
lower C-Band sales in the United States and the Middle East, offset by increases
in Ku-Band DBS sales in Canada.
The $1.8 million sales decrease in sales of Antenna products by Micro Pulse
resulted primarily from significantly lower unit sales to certain major GPS
customers, as foreign competition increased, and the end of a major military
contract.
Gross profits decreased approximately $200,000, or 1%, from $10.7 million in
fiscal year 1998 to $10.5 million in fiscal year 1999. The decrease in gross
profits occurred because of a $9.8 million sales decrease, offset by higher
gross margins.
Gross margins increased from 22.8% in fiscal year 1998 to 28.4% in fiscal
year 1999. The gross margin between years should be compared, however, after
adjusting for a fiscal year 1998 inventory obsolescence charge of $3.0 million
which impacted 1998 gross margins by approximately 6.5%. Adjusting for this
charge, the gross margins between years were relatively constant. Factors
affecting fiscal year 1999 gross margins was the $9.8 million or 20.9% decrease
in sales, as well as the aggressive inventory reduction program, both of which
impacted overhead utilization. Offsetting these factors were improvements in
supply management which reduced material component costs, improved productivity,
reduced overhead, and lowered product returns under warranty.
Research and development expenses increased by approximately $300,000, from
$4.5 million in fiscal year 1998 to $4.8 million in fiscal year 1999. As a
percentage of sales however, research and development increased from 9.5% to
12.8%. Although the Company continued to focus on cost containment programs, the
Company remained committed to new product design, and therefore, development
expenditures increased in fiscal year 1999 as compared to fiscal year 1998. The
increase relates primarily to increased salaries for engineers, and some
personnel additions.
Selling expenses decreased by approximately $800,000 from $5.2 million in
fiscal year 1998 to $4.4 million in fiscal year 1999. The decrease relates
primarily to the decreases in certain discretionary sales and marketing
expenses.
General and administrative expenses decreased by approximately $900,000 from
$4.8 million in fiscal year 1998 to $3.9 million in fiscal year 1999. The
decrease results primarily from certain reorganization expenses incurred in 1998
and not in 1999 and lower bad debt expense in fiscal year 1999.
The loss from operations decreased by approximately $1.3 million from $3.8
million in fiscal year 1998 to $2.5 million in fiscal year 1999. The principal
reasons for the improvement were, as described above, decreased sales offset by
lower operating expenses.
The benefit from taxes was $781,000, or 35.2% of the loss before taxes in
fiscal year 1999. This is relatively consistent with the tax rate of
approximately 35.8% in fiscal year 1998.
For the reasons outlined above, the net loss for fiscal year 1999 was $1.4
million, as compared to net loss of $2.7 million in fiscal year 1998.
LIQUIDITY AND CAPITAL RESOURCES
As of February 26, 2000, the Company had cash on hand of $3.1 million and
$4.5 million available under a working capital facility with U.S. Bank.
In May 2000, the Company renegotiated its financial arrangement with U.S.
Bank. Under terms of the new credit and debt arrangement the Company borrowed
$5.0 million as part of a term loan, interest only at LIBOR plus 2.2% until June
2001, at which time it will convert to a five-year 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. See also the
accompanying Consolidated Statement of Cash Flows for each of the three years in
the period ended February 26, 2000.
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 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 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,
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>
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:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Ira Coron 71 Chairman of the Board of Directors
Fred M. Sturm 42 Chief Executive Officer, President and Director
Benson Chin 51 Vice President, Operations
Philip Cox 60 Vice President, Wireless Products
Michael R. Ferron 45 Vice President, Finance, Chief Financial Officer
and Corporate Secretary
Robert Hannah 39 Vice President, Satellite Products
Kris Kelkar 36 Vice President, Wireless Access Products
Arthur H. Hausman (1) 76 Director
William E. McKenna (1)(2) 80 Director
Thomas L. Ringer (2) 68 Director
<FN>
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
</FN>
</TABLE>
Ira Coron has been Chairman of the Board for California Amplifier, Inc.
since March of 1994, and in addition was the Chief Executive Officer until 1997
and remained an officer of the Company until February 1999. 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 as a
member of the Executive Committee of the Wireless Communications Association.
<PAGE>
Fred M. Sturm was appointed Chief Executive Officer, President and Director
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). From 1979 to 1990, he held a variety of general
management positions with M/A-Com and TRW Electronics, which served RF and
microwave markets.
Benson Chin joined the Company as Vice President, Operations in February
2000. From 1998 until joining California Amplifier, Mr. Chin was Vice President
of Wireless Manufacturing for Superconductor Technologies, Inc. From 1990 to
1998 Mr. Chin has held various positions with Harman International, Inc., most
recently Director of Manufacturing.
Philip Cox joined the Company in July 1996. In January 1998, in conjunction
with the reorganization previously mentioned, Mr. Cox was appointed Vice
President, Wireless Products. Prior to July 1996, he held various sales and
marketing positions with Signal Technology and M/A-Com.
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 (1987-1990) and Arthur Young & Company (1977-1987).
Robert Hannah joined the Company as Vice President of Engineering in April
1995. In January 1998, 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 January 1998, in
conjunction with the reorganization previously mentioned, Mr. Kelkar was
appointed Vice President, Voice and Data Products, and, most recently, Vice
President, Wireless Access Products. Prior to April 1995, he held various
positions with General Instrument Corporation, the most recent 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, 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 Midway Games, Inc., Drexler Technology
Company and WMS Industries, Inc.
Thomas L. Ringer has been a director of the Company since August 1996.
Since 1990, Mr. Ringer has been actively involved as a member of the boards of
directors for various companies. Mr. Ringer is currently Chairman of Wedbush
Morgan Securities, Inc., Chairman of M.S. Aerospace, Inc., Chairman of Document
Sciences Corporation, Chairman of Aquatec Water Systems, and Chairman of the
Center for Innovation and Entrepreneurship. Prior to 1990, Mr. Ringer served as
Chairman, President and Chief Executive Officer of Recognition Equipment, Inc.,
President and Chief Executive Officer of Fujitsu Systems of America, Inc., and
President and Chief Executive Officer of Computer Machinery Corporation.
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 executive officers and to administer the Company's Stock Option
Plans.
The Company also has an Audit Committee which reviews the scope of audit
procedures employed by the Company's independent auditors, approves the audit
fee charged by the independent auditors, and reviews the audit reports rendered
by the Company's independent auditors. The Audit Committee reports to the Board
of Directors with respect to such matters and recommends the selection of
independent auditors.
Officers are appointed by and serve at the discretion of the Board of
Directors.
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 14, 2000.
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 14, 2000.
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 14,
2000.
<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 26, 2000.
(c) Exhibits. Reference is made to the Index to Exhibits on pages 36-37 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 26, 2000
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 26, 2000
/s/ Fred M. Sturm Chief Executive Officer, President
and Director May 26, 2000
/s/ William E. McKenna Director May 26, 2000
/s/ Arthur H. Hausman Director May 26, 2000
/s/ Thomas L. Ringer Director May 26, 2000
/s/ Michael R. Ferron Vice President, Finance, May 26, 2000
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
and Comprehensive Loss 23
Consolidated Statements of Cash Flows 24
Notes to Consolidated Financial Statements 25-35
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
California Amplifier, Inc.:
We have audited the accompanying consolidated balance sheets of California
Amplifier, Inc. (a Delaware corporation) and subsidiaries as of February 26,
2000 and February 27, 1999, and the related consolidated statements of
operations, stockholders' equity and comprehensive loss, and cash flows for each
of the three years in the period ended February 26, 2000. 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 auditing standards generally
accepted in the United States. 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 26, 2000 and February 27, 1999, and the results
of their operations and their cash flows for each of the three years in the
period ended February 26, 2000, in conformity with accounting principles
generally accepted in the United States.
ARTHUR ANDERSEN LLP
Los Angeles, California
April 4, 2000
<PAGE>
CALIFORNIA AMPLIFIER, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
<TABLE>
<CAPTION>
Feb. 26, Feb. 27,
2000 1999
- ---------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,074 $ 9,312
Accounts receivable, net of allowance of $473,000
and $535,000 at February 26, 2000, and
and February 27, 1999, respectively 16,038 4,823
Inventories 12,948 3,974
Deferred tax asset 8,487 1,597
Prepaid expenses and other current assets 685 625
- ---------------------------------------------------------------------------------------------------
Total current assets 41,232 20,331
Property and equipment, at cost, net of
accumulated depreciation and amortization 9,731 4,498
Goodwill, net of accumulated amortization of $225,000 3,827 ---
Other assets 762 720
- ---------------------------------------------------------------------------------------------------
$ 55,552 $ 25,549
- ---------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,242 $ 2,644
Accrued liabilities 13,099 1,613
Short-term and current portion of long-term debt 4,973 597
- ---------------------------------------------------------------------------------------------------
Total current liabilities 27,314 4,854
Long-term debt 144 516
Minority interest share in net assets of
Micro Pulse, Inc. 342 114
Stockholders' equity:
Preferred stock, 3,000 shares authorized;
no shares outstanding --- ---
Common stock, $.01 par value; 30,000 shares authorized;
12,658 shares outstanding in February 2000 and
11,785 in February 1999 127 118
Additional paid-in capital 23,177 14,050
Accumulated other comprehensive loss (226) (170)
Retained earnings 4,674 6,067
- ---------------------------------------------------------------------------------------------------
Total stockholders' equity 27,752 20,065
- ---------------------------------------------------------------------------------------------------
$ 55,552 $ 25,549
- -----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CALIFORNIA AMPLIFIER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except net loss per share)
<TABLE>
<CAPTION>
Years Ended
- ------------------------------------------------------------------------------------------------
Feb. 26, Feb. 27, Feb. 28,
2000 1999 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $ 85,628 $ 37,140 $46,933
Cost of sales 62,197 26,595 36,236
- ------------------------------------------------------------------------------------------------
Gross profit 23,431 10,545 10,697
Research and development 5,215 4,764 4,475
Selling 5,210 4,441 5,215
General and administrative 5,185 3,880 4,813
- ------------------------------------------------------------------------------------------------
Income (loss) from operations 7,821 (2,540) (3,806)
Settlement of litigation (9,500) --- ---
Interest and other income (expense), net (196) 28 (59)
Minority interest share in (income) loss of
Micro Pulse (302) 295 (284)
- -------------------------------------------------------------------------------------------------
Loss before benefit from income taxes (2,177) (2,217) (4,149)
Benefit from income taxes 784 781 1,484
- ------------------------------------------------------------------------------------------------
Net loss $ (1,393) $ (1,436) $(2,665)
- ------------------------------------------------------------------------------------------------
Net loss per share:
Basic/Diluted $ (.12) $ (.12) $ (.23)
- ------------------------------------------------------------------------------------------------
Shares used in per share calculation 12,072 11,782 11,734
- ------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CALIFORNIA AMPLIFIER, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE LOSS
(in thousands)
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Stock Paid-in Retained Comprehensive
Shares Amount Capital Earnings Loss Total
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at March 1, 1997 11,713 $117 $13,990 $10,168 $(127) $24,148
Comprehensive income:
Net loss --- --- --- (2,665) --- (2,665)
Foreign translation adjustment --- --- --- --- (122) (122)
------
(2,787)
Exercise of stock options 58 1 35 --- --- 36
- -----------------------------------------------------------------------------------------------------
Balances at February 28, 1998 11,771 118 14,025 7,503 (249) 21,397
Comprehensive income:
Net loss --- --- --- (1,436) --- (1,436)
Foreign translation adjustment --- --- --- --- 79 79
---
(1,357)
Exercise of stock options 14 --- 25 --- --- 25
- -----------------------------------------------------------------------------------------------------
Balances at February 27, 1999 11,785 118 14,050 6,067 (170) 20,065
Comprehensive income:
Net loss --- --- --- (1,393) --- (1,393)
Foreign translation adjustment --- --- --- --- (56) (56)
-----
(1,449)
Exercise of stock options 873 9 4,127 --- --- 4,136
Tax benefit from exercise
of stock options --- --- 5,000 --- --- 5,000
- -----------------------------------------------------------------------------------------------------
Balances at February 26, 2000 12,658 $127 $23,177 $ 4,674 $(226) $27,752
- -----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CALIFORNIA AMPLIFIER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended
- -------------------------------------------------------------------------------------------------
Feb. 26, Feb. 27, Feb. 28,
2000 1999 1998
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(1,393) $ (1,436) $(2,665)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Non-cash litigation charge 9,500 --- ---
Non-cash income tax benefit (3,470) --- ---
Depreciation and amortization 2,990 3,013 3,280
Loss on sale of property and equipment 3 14 1
Minority interest share in net income (loss)
of Micro Pulse, net of tax 228 (207) 195
Deferred tax asset 595 403 (1,200)
Change in assets and liabilities,
net of effect from purchase of controlling
interest in Micro Pulse in 1999
and Gardiner acquisition in 2000:
Accounts receivable (11,153) 987 1,247
Allowance for doubtful accounts (62) (65) 290
Inventories (6,322) 2,877 1,983
Prepaid expenses and other assets 164 352 824
Accounts payable 4,598 783 (766)
Accrued liabilities 4,615 (786) (37)
- -------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 293 5,935 3,152
- -------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property and equipment (5,352) (1,321) (2,750)
Net assets acquired from Gardiner (6,170) --- ---
Proceeds from sale of property and equipment 7 912 12
Purchase of controlling interest in Micro Pulse --- --- 327
- -------------------------------------------------------------------------------------------------
Net cash used in investing activities (11,515) (409) (2,411)
- -------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Debt borrowings 1,500 --- 1,582
Debt repayments (596) (740) (980)
Issuances of common stock 4,136 25 36
- -------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 5,040 (715) 638
- -------------------------------------------------------------------------------------------------
Effect of foreign exchange rates (56) 79 (122)
Net increase (decrease) in cash and
cash equivalents (6,238) 4,890 1,257
Cash and cash equivalents
at beginning of year 9,312 4,422 3,165
- -------------------------------------------------------------------------------------------------
Cash and cash equivalents
at end of year $ 3,074 $ 9,312 $ 4,422
- -------------------------------------------------------------------------------------------------
</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 equipment used in the reception of video transmitted from satellites
and wireless terrestrial transmission sites, and two-way wireless transceivers
used in the emerging fixed point wireless 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 Note 2).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company (a
Delaware corporation) 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 also 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.
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. Each of
the fiscal years 2000, 1999, and 1998 consisted of 52 weeks. Fiscal year 2001
will consist of 53 weeks.
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.
CONCENTRATION OF RISK
At February 26, 2000 and February 27, 1999, the Company had some cash and cash
equivalents in three U.S. banks in excess of Federally insured amounts, foreign
banks, and grade A1P1 commercial paper investments at Salomon Smith Barney as
follows (in 000's):
2000 1999
- --------------------------------------------------------------------------------
U.S. banks $ 2,166 $ 4,884
Foreign banks 908 362
Salomon Smith Barney --- 4,066
- --------------------------------------------------------------------------------
$ 3,074 $ 9,312
- --------------------------------------------------------------------------------
As of February 26, 2000, the Company had an account receivable due from one
customer in the amount of $4,486,000, or 28.0% of consolidated accounts
receivable, another customer in the amount of $2,471,000, or 15.4% of
consolidated accounts receivable, and another customer in the amount of
$1,658,000, or 10.3% of consolidated accounts receivable. At February 27, 1999
the Company had an account receivable due from one customer in the amount of
$1,145,000, or 23.8% of consolidated accounts receivable, and from another
customer in the amount of $678,000, or 14.1% 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. In fiscal years 2000, 1999, and 1998,
$37,000, $96,000, and $592,000, was charged to expense, respectively. Amounts
charged to the allowance account for bad debt write-offs and costs relating to
product returns were $99,000, $411,000, and $443,000, in fiscal years 2000,
1999, and 1998, respectively.
WARRANTY
The Company warrants its products against defects over periods ranging from
ninety days 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 $201,000, $377,000, and $834,000, in fiscal years
2000, 1999, and 1998, respectively. Amounts charged against accrued warranty for
the actual costs of maintaining the Company's warranty program were $284,000,
$487,000, and $734,000, in fiscal years 2000, 1999, and 1998, 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. 26, Feb. 27,
2000 1999
- --------------------------------------------------------------------------------
Raw materials $ 10,202 $ 2,441
Work in process 1,073 40
Finished goods 1,673 1,493
- --------------------------------------------------------------------------------
$ 12,948 $ 3,974
- --------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and consists of the following (in
000's):
Feb. 26, Feb. 27,
2000 1999
- --------------------------------------------------------------------------------
Machinery and equipment $ 16,775 $ 9,362
Furniture and computers 4,652 5,013
Tooling 3,438 3,955
Leasehold improvements 1,129 1,116
- --------------------------------------------------------------------------------
25,994 19,446
Less accumulated depreciation and amortization (16,263) (14,948)
- --------------------------------------------------------------------------------
$ 9,731 $ 4,498
- --------------------------------------------------------------------------------
At February 26, 2000, the Company had approximately $1.9 million of machinery
and equipment that was not yet placed in service.
<PAGE>
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 accumulated depreciation are removed from the accounts and any resulting
gain or loss is included in income (loss) from operations.
Depreciation and amortization are based upon the estimated useful lives of the
related assets using the straight-line method. Useful lives range from two to
five years, and in the case of leasehold improvements over the life of the
lease.
ACCOUNTING FOR LONG-LIVED ASSETS
The Company reviews property and equipment and other long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying amounts of an asset may not be recoverable. Recoverability is measured
by comparison of carrying amount to future net cash flows an asset is expected
to generate. If an asset is considered to be impaired, the impairment to be
recognized is measured by the amount as which the carrying amount of the assets
exceeds the projected discounted future cash flows arising from the asset.
FOREIGN CURRENCY TRANSLATION AND COMPREHENSIVE INCOME
The financial statements of the Company's Paris, France subsidiary are
translated into United States dollars using current or historical exchange rates
of exchange, as appropriate, with gains or losses included in the accumulated
other comprehensive loss account in the stockholders' equity section of the
consolidated balance sheets. Foreign currency translation adjustments are the
Company's only component of comprehensive income, which includes all non-owner
changes in stockholders' equity.
NET LOSS PER SHARE
Basic income (loss) 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.
No diluted loss per share was calculated for fiscal years 2000, 1999 and 1998
since the inclusion would be anti-dilutive and reduce the loss per share for
each of the respective fiscal years.
GOODWILL
Goodwill represents the excess of purchase price and related costs over the
value assigned to the net tangible assets of businesses acquired. Goodwill is
amortized on a straight-line basis over 15 years. Periodically, the Company
reviews the recoverability of goodwill. The determination of possible impairment
is based primarily on the ability to recover the balance of the goodwill from
expected future operating cash flows on an undiscounted basis. In management's
opinion, no impairment exists at February 26, 2000. Amortization expense was
$225,000 in fiscal year 2000.
STATEMENTS OF CASH FLOWS
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
In fiscal years 2000, 1999, and 1998, the Company paid interest of $382,000,
$199,000, and $212,000, respectively.
In fiscal years 2000 and 1998 the Company paid income taxes of $21,000 and
$375,000, respectively. No income taxes were paid in fiscal year 1999.
<PAGE>
NONCASH INVESTING AND FINANCING ACTIVITIES:
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 2000,the Company issued a $3,100,000 promissory note in
connection with the Gardiner acquisition. This note has been excluded from the
statement of cash flows.
In fiscal year 2000, the Company recorded the tax effect related to the exercise
of certain stock options in fiscal year 2000. In connection with the exercise of
those options, the Company increased additional paid-in-capital and the deferred
tax asset by $5,000,000. These amounts have been excluded from the statement of
cash flows.
At February 26, 2000, the Company accrued a $9,500,000 litigation settlement in
its consolidated balance sheet as a charge to fiscal year 2000 operations. In
connection with this charge, the Company recorded a non-cash income tax benefit
of $3,470,000, thereby increasing the deferred tax asset by $2,485,000 and
decreasing accrued liabilities by $985,000.
ACCOUNTING FOR STOCK OPTIONS
As allowed by Statement of Financial Accounting Standards ("SFAS") No. 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 No. 25") and comply with the pro forma disclosure requirements
of the standard (see Note 8).
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current year
presentation.
3. ACQUISITION AND PRO FORMA RESULTS OF OPERATIONS
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 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.
<PAGE>
The following unaudited pro forma statements combines the operations of the
Company and Gardiner as if the acquisition had occurred at the beginning of each
of the respective periods (in 000's except per share data):
<TABLE>
<CAPTION>
Year Ended Year Ended
---------------------- -----------------------
February 26, 2000 February 27, 1999
As Reported Pro Forma As Reported Pro Forma
---------------------- -----------------------
<S> <C> <C> <C> <C>
Sales $ 85,628 $ 87,628 $ 37,140 $ 58,901
Net income (loss) $ (1,393) $ (1,233) $ (1,436) $ 321
Net income (loss) per share Basic $ (.12) $ (.10) $ (.12) $ .03
Diluted $ (.12) $ (.10) $ (.12) $ .03
Shares used in per share calculation
Basic 12,072 12,072 11,782 11,782
Diluted 12,072 12,072 11,782 12,600
- -----------------------------------------------------------------------------------------------------
</TABLE>
4. ACCRUED LIABILITIES
Accrued liabilities consist of the following (in 000's):
Feb. 26, Feb. 27,
2000 1999
- --------------------------------------------------------------------------------
Payroll and related expenses $ 1,924 $ 727
Warranty 462 545
Income taxes 78 6
Accrued settlement for litigation 9,500 ---
Other accrued liabilities 1,135 335
- --------------------------------------------------------------------------------
$13,099 $ 1,613
- --------------------------------------------------------------------------------
5. SHORT-TERM BORROWINGS
In conjunction with the Gardiner acquisition (Note 3), the Company issued a
$3,100,000 one-year note bearing interest at 8%, due on April 19, 2000.
Subsequent to February 26, 2000, a portion of the note was converted into
525,000 shares of common stock, and the remaining balance was paid.
As of February 26, 2000, the Company had a $6.0 million working capital credit
facility with U.S. Bank. Borrowings outstanding bear interest at the bank's
prime rate (8.75% at February 26, 2000) and are secured by substantially all of
the Company's assets, excluding the assets secured by other debt arrangements.
At February 26, 2000, $1.5 million was outstanding under this credit facility
and $4.5 million was available for borrowing. The credit facility contains
certain financial covenants and ratios that the Company is required to maintain.
At February 26, 2000, the Company was in default with certain covenants but they
were waived by the bank.
<PAGE>
6. LONG-TERM DEBT
Long-term debt consists of the following (in 000's):
Feb. 26, Feb. 27,
2000 1999
- --------------------------------------------------------------------------------
Notes payable to a bank, secured by equipment,
bearing interest at rates ranging
from 8.19% to 8.24%
payable monthly through January 2002 $ 517 $1,113
Less portion due within one year (373) (597)
- --------------------------------------------------------------------------------
$ 144 $ 516
- --------------------------------------------------------------------------------
Annual maturities on long-term debt as of February 26, 2000, are as follows (in
000's):
2001 $ 373
2002 144
- --------------------------------------------------------------------------------
$ 517
- --------------------------------------------------------------------------------
7. INCOME TAXES
The (benefit from) provision for income taxes for fiscal years 2000, 1999, and
1998, are as follows (in 000's):
2000 1999 1998
- --------------------------------------------------------------------------------
Current - Federal $ 2,281 $ (352) $ (584)
- State 521 --- (95)
- Foreign 162 (26) 395
Deferred - Federal (3,185) (343) (1,020)
- State (563) (60) (180)
- --------------------------------------------------------------------------------
$ (784) $ (781) $(1,484)
- --------------------------------------------------------------------------------
Differences between the benefit from income taxes and income taxes computed
using the statutory federal income tax rate for fiscal years 2000, 1999 and 1998
are as follows (in 000's):
<TABLE>
<CAPTION>
2000 1999 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax at statutory federal rate (34%) $ (740) $ (788) $(1,772)
State income taxes, net of federal
income tax effect (121) (107) (300)
Foreign taxes 162 (26) 395
Research and development credit --- 96 ---
Other, net (85) 44 193
- -----------------------------------------------------------------------------------------------------
$ (784) $ (781) $(1,484)
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The components of the net deferred income tax asset are as follows (in 000's):
Feb. 26, Feb. 27,
2000 1999
- --------------------------------------------------------------------------------
Depreciation $ 294 $ 124
Warranties 158 117
Inventory valuation 353 216
Allowance for doubtful accounts 132 102
Research and development credit 49 998
Litigation settlement accrual 2,485 ---
Tax benefit from stock options 5,000 ---
Other, net 16 40
- --------------------------------------------------------------------------------
$ 8,487 $1,597
- --------------------------------------------------------------------------------
8. STOCK OPTIONS
The Company has two stock option plans for its employees, the 1989 Key Employee
Stock Option Plan ("1989 Plan"), and the 1999 Stock Option Plan ("1999 Plan").
Under the 1999 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 1989 Plan expired in May 1999 and no additional options may
be granted under this plan. Under provisions of the 1989 Stock Option Plan, all
options vest upon a change in control of ownership of the Company.
The following table summarizes the option activity for fiscal years 2000, 1999,
and 1998, (in 000's except dollar amounts):
Weighted
Number Average
Shares Option Price
- --------------------------------------------------------------------------------
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
Granted 340 2.23
Exercised (14) 1.98
Canceled (178) 3.81
- --------------------------------------------------------------------------------
Outstanding at February 27, 1999 2,017 3.88
Granted 706 19.25
Exercised (873) 3.82
Canceled (165) 3.74
- --------------------------------------------------------------------------------
Outstanding at February 26, 2000 1,685 $10.36
- --------------------------------------------------------------------------------
The weighted average theoretical value for options granted during the year was
$9.43, $1.77, and $2.59 for fiscal years 2000, 1999, and 1998, respectively.
The number of common stock options available for grant as of each fiscal year
end were 500,000 for 2000, 175,225 for 1999, and 337,100 for 1998.
<PAGE>
Options outstanding at February 26, 2000 and related weighted average price and
life information is as follows:
<TABLE>
<CAPTION>
Weighted Total
Total Average Weighted Weighted
Range of Options Remaining Life Average Options Average
Exercise Prices Outstanding (Years) Exercise Price Exercisable Exercise Price
- ------------------ ---------------- ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 0.69-$ 1.75 146,700 8.62 $ 1.73 14,450 $ 1.56
$ 1.875-$ 2.76 464,350 8.00 $ 2.19 188,100 $ 2.19
$ 3.50-$ 4.09 313,500 6.78 $ 3.89 134,250 $ 3.80
$ 4.72-$ 6.88 162,875 8.02 $ 5.49 57,875 $ 5.96
$ 7.22-$ 9.125 177,750 6.92 $ 7.82 112,000 $ 7.35
$11.00-$16.25 123,500 9.30 $11.66 21,300 $12.97
$21.88-$27.00 43,000 8.10 $25.80 17,500 $24.06
$40.00 253,000 9.95 $40.00 0 0
- ------------------ -------------- ------------------ ---------------- ------------- ------------------
$ 0.69-$40.00 1,684,675 8.11 $10.36 545,475 $ 5.15
- ------------------ -------------- ------------------ ---------------- ------------- ------------------
</TABLE>
As permitted by SFAS No. 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 consolidated 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:
2000 1999 1998
----------- ---------- ---------
Expected life (years) 10 10 10
Dividend yield ---- --- ----
The range for interest rates is 4.15% - 7.14%, and the range for volatility is
49% - 77%. The estimated stock-based compensation cost calculated using the
assumptions indicated totaled $846,000, $949,000, and $713,000 in fiscal years
2000, 1999, and 1998 respectively. This would result in pro forma net losses
resulting from the increased compensation cost of $2,239,000, or $.19 per share,
$2,385,000, or $.19 per share, and $3,378,000, or $.27 per share, in fiscal year
2000, 1999, and 1998 respectively. The effect of stock-based compensation on net
losses for fiscal 1999, 1998 and 1997 may not be representative of the effect on
pro forma net income or loss 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 facilities under operating
leases that expire in February 2004. The lease agreement for its corporate
facility requires the Company to pay all property taxes and insurance premiums
associated with the coverage of the facility.
In addition, the Company leases a manufacturing facility in Garland, Texas; and
sales offices in Paris, France; Sao Paulo, Brazil; and Hong Kong, China, under
certain lease arrangements. The Company also leases certain equipment used in
the manufacturing operation under operating lease arrangements.
<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 26, 2000
(in 000's):
Fiscal Year:
2001 $ 610
2002 590
2003 600
2004 605
2005 480
- -------------------------------------------------------------------------------
$ 2,885
- -------------------------------------------------------------------------------
Rent expense for fiscal years 2000, 1999, and 1998, was $732,000, $780,000, and
$707,000, respectively.
10. 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 it had received 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 but not
served, alleges that California Amplifier has infringed Andrew Corporation's
patent in the design of certain products. California Amplifier believes that the
allegations are unfounded and without merit and will vigorously defend any
attempt by the plaintiff to prosecute this action.
<PAGE>
11. SEGMENT AND GEOGRAPHIC DATA
In conjunction with the Company's reorganization into separate business units in
January 1998, the Company adopted SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information" in fiscal year 1999. In fiscal year 1998
(and for all prior years), the Company managed its business as a single segment
with separate product lines. Accordingly, for fiscal year 1998, separate segment
information is unavailable. The adoption of this standard had no effect on the
Company's financial position or results of operations, but did change the
presentation of segment information presented below (in 000's):
Fiscal Year 2000:
<TABLE>
<CAPTION>
Satellite Wireless Access Antenna Corporate Total
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ 59,688 $ 18,952 $ 6,988 $ --- $ 85,628
Gross Profit 15,788 4,939 2,704 --- 23,431
Income (loss) before tax 11,678 101 682 (14,638) (2,177)
Depreciation 1,573 977 190 250 2,990
Identifiable Assets $ 31,823 $ 8,058 $ 2,531 $13,140 $ 55,552
- -----------------------------------------------------------------------------------------------------
</TABLE>
Fiscal Year 1999:
<TABLE>
<CAPTION>
Satellite Wireless Access Antenna Corporate Total
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $12,503 $20,338 $ 4,299 $ --- $ 37,140
Gross Profit 3,377 5,837 1,331 --- 10,545
Income (loss) before taxes 850 557 (518) (3,106) (2,217)
Depreciation 994 1,526 227 266 3,013
Identifiable Assets $ 4,146 $ 7,347 $ 1,582 $12,474 $ 25,549
- -----------------------------------------------------------------------------------------------------
</TABLE>
The Company does not have significant long-lived assets outside the United
States.
Sales information by product line for each of the three years in the period
ended February 26, 2000, are as follows (in 000's):
2000 1999 1998
- --------------------------------------------------------------------------------
Satellite Products $59,688 $ 12,503 $13,131
Wireless Products 18,952 20,338 27,738
Antenna Products 6,988 4,299 6,064
- --------------------------------------------------------------------------------
$85,628 $37,140 $46,933
- --------------------------------------------------------------------------------
Sales information by geographical area for each of the three years in the period
ended February 26, 2000 is as follows (000's):
2000 1999 1998
- --------------------------------------------------------------------------------
United States $66,781 $20,265 $19,378
Canada 5,419 2,987 2,750
Latin America 1,240 3,556 12,122
Europe 4,394 3,094 4,726
Middle East 847 520 203
Africa 1,832 3,739 4,014
Asia 4,091 1,449 2,757
Australia 1,024 1,530 983
- --------------------------------------------------------------------------------
$85,628 $37,140 $46,933
- --------------------------------------------------------------------------------
In fiscal year 2000 one U.S. satellite products customer accounted for 19.4% of
consolidated sales, and another U.S. satellite customer accounted for 17.4% of
consolidated sales. In fiscal years 1999 and 1998 no customer accounted for 10%
or more of consolidated sales.
<PAGE>
12. QUARTERLY FINANCIAL INFORMATION
The following summarizes certain quarterly statement of operations data for each
of the quarters in fiscal years 2000 and 1999 (in 000's, except percentages and
per share data):
<TABLE>
<CAPTION>
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter 2000
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ 13,093 $18,575 $26,251 $27,709 $85,628
Gross profits 3,913 5,244 6,720 7,554 23,431
Gross margins 29.9% 28.2% 25.6% 27.3% 27.4%
Net income (loss) 358 901 1,585 (4,237) (1,393)
Income (loss) per share $ 0.03 $ 0.08 $ 0.13 $(0.34) $(0.12)
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter 1999
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ 9,060 $ 8,322 $ 9,681 $10,077 $37,140
Gross profits 2,793 1,939 2,776 3,037 10,545
Gross margins 30.8% 23.3% 28.7% 30.1% 28.4%
Net loss (485) (837) (205) 91 (1,436)
Loss per share $ (0.04) $(0.07) $(0.02) $ 0.01 $(0.12)
- -----------------------------------------------------------------------------------------------------
</TABLE>
<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
1Exhibit 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.
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 BALANCE SHEET ON PAGE 21 AND THE CONSOLIDATED STATEMENTS OF
OPERATIONS ON PAGE 22 OF THE COMPANY'S FORM 10-K FOR THE YEAR ENDED FEBRUARY 26,
2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000730255
<NAME> California Amplifier, Inc.
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