United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ x ] Quarterly Report Pursuant To Section 13 Or 15(d) of
The Securities Exchange Act Of 1934
For the Period Ended June 30, 1995
or
[ ] Transition Report Pursuant to Section 10 or 15(d) of
The Securities Exchange Act of 1934
For the Transition Period From ________ to _________
Commission File Number 0-15449
CALIFORNIA MICRO DEVICES CORPORATION
(Exact name of registrant as specified in its charter)
California 94-2672609
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
215 Topaz Street, Milpitas, California 95035-5430
Address of principal executive offices) (Zip Code)
(408) 263-3214
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address, and
former fiscal year if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes: X No __
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by the court. Yes: X No __
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
As of June 30, 1995, there were outstanding 10,181,404 shares of
Issuer's Common Stock.
1
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
Page
Number
<S> <C> <C>
Item 1. Financial Statements
Statements of Operations
Three Months Ended June 30, 1995 and 1994 2
Balance Sheets
June 30, 1995 and March 31, 1995 3
Statements of Cash Flows
Three Months Ended June 30, 1995 and 1994 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 6. Exhibits and Reports on Form 8-K 9
Signature 10
</TABLE>
i
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
CALIFORNIA MICRO DEVICES CORPORATION
STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
Three Months Ended June 30,
1995 1994
(restated)
<S> <C> <C>
Revenues:
Net product sales $ 8,344 $ 6,378
Technology related sales 303 5,720
------- -------
Total revenues 8,647 12,098
Cost and expenses:
Cost of sales 4,753 16,415
Research and development 866 893
Selling, marketing and administrative 2,474 2,560
------- ------
Total costs and expenses 8,093 19,868
------- ------
Operating income (loss) 554 (7,770)
Other expense, net 37 246
------ -------
Income (loss) before income taxes 517 (8,016)
Income taxes (benefit) - (628)
------ ------
Net income (loss) $ 517 $(7,388)
Net income (loss) per share $ 0.05 $ (0.92)
====== =======
Weighted average common shares and
share equivalents outstanding 9,782 8,020
</TABLE>
2
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
BALANCE SHEETS
(Amounts in Thousands, Except Share Data)
(Unaudited)
<TABLE>
June 30, March 31,
1995 1995
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 9,698 $10,556
Short-term securities 8,250 8,404
Accounts receivable, less allowance for
doubtful accounts of $1,022 and $832 3,813 3,203
Inventories 4,575 4,747
Refundable income taxes and other assets 5,284 5,445
------- -------
Total current assets 31,620 32,355
Property and equipment, net 7,267 6,665
Restricted cash 1,230 989
Other long-term assets 679 679
------- -------
Total assets $40,796 $40,688
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,978 $ 2,725
Accrued salaries and benefits 783 560
Other accrued liabilities 3,766 3,748
Deferred margin on shipments to
distributors 1,066 1,157
Current maturities of long-term debt
and capital lease obligations 2,353 2,516
------- -------
Total current liabilities 10,946 10,706
Long-term debt, less current maturities 7,840 7,923
Capital lease obligations less current
maturities 792 1,278
Deferred income 108 136
------- -------
Total liabilities 19,686 20,043
Shareholders' equity:
Common stock - no par value; authorized
25,000,000; issued and outstanding
10,181,404 shares 54,947 54,947
Retained earnings (33,837) (34,302)
------- -------
Total shareholders' equity 21,110 20,645
------- -------
Total liabilities and shareholders'
equity $40,796 $40,688
======= =======
</TABLE>
3
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<TABLE>
Three Months Ended June 30,
1995 1994
(restated)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 517 $ (7,389)
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Depreciation and amortization 360 596
Net change in inventories 172 10,372
Net change in accounts receivable (610) 599
Net change in prepaid expenses
and other current assets 161 246
Net change in trade accounts payable
and other current liabilities 232 (165)
Net change in other long-term assets - 374
Deferred margin on distributor sales 91 -
------- -------
Net cash provided by operating activities 923 4,633
------- -------
Cash used in investing activities:
Net security purchases 154 (3,000)
Capital expenditures (962) (1,096)
Net change in restricted cash (241) (241)
------- -------
Net cash used in investing activities (1,049) (4,337)
------- -------
Cash (used) provided by financing activities:
Payment of capital lease obligations (648) (459)
Payment of long-term debt (84) (82)
Proceeds from sale/leaseback - 1,383
Proceeds from issuance of common stock - 15,389
------- -------
Net cash (used) provided by financing
activities (732) 16,231
------- -------
Net increase (decrease) in cash and cash
equivalents (858) 16,527
Cash and cash equivalents at the beginning
of period 10,556 10,561
------- -------
Cash and cash equivalents at the end
of period $ 9,698 $27,088
======= =======
Supplemental disclosure of cash flow information:
Interest paid $ 148 $ 114
Income taxes paid $ - $ 210
Supplemental disclosure of non-cash investing and
financing activities:
Unrealized loss on securities $ (54) $ -
Capital expenditures financed through capital
lease obligations - $ 403
</TABLE>
4
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
Notes to Financial Statements
1. Basis of Presentation
In the opinion of management, the accompanying unaudited
condensed financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to
present fairly its financial position as of June 30, 1995,
results of operations for the three month periods ended June 30,
1995 and 1994, and cash flows for the three-month periods ended
June 30, 1995 and 1994. Results for the quarter are not
necessarily indicative of fiscal year results.
The condensed financial statements should be read in
conjunction with the California Micro Devices Corporation
financial statements included with the Company's annual report on
Form 10-K for the nine months ended March 31, 1995.
2. Change in Method of Accounting for Shipments to Distributors
Effective July 1, 1994, the Company changed its accounting
method of recognizing revenue on shipments to distributors until
final sale by the distributor. Previously, including the quarter
ended June 30, 1994, the Company recognized revenue at the time
of shipment to the distributor. Distributor agreements allow the
distributors certain rights of return and price protection on
unsold merchandise. As a result, the Company believes that
deferral of the recognition of distributor sales and related
gross margins until the merchandise is resold by the distributors
results in a more meaningful measurement of operations and is a
preferable method of accounting for such shipments. Information
to compute the proforma effect of this accounting change on the
quarter ended June 30, 1994 is not available.
3. Litigation
On August 4, 1995, Judge Vaughn Walker of the U. S.
District Court for Northern California, issued an order regarding
the securities class action lawsuits filed against the Company.
Judge Walker, in ruling on the bids by two law firms to represent
the propose class action of shareholders, rejected one bid
and required the other law firm to undertake an evaluation of
class members' affirmative support of the terms of the previously
announced proposed settlement and that firm's attorney fee
proposal. Judge Walker's order states that if the terms of the
proposed settlement are not affirmatively supported by a
significant portion of the prospective class, the court will
disapprove the proposed class settlement, and will solicit bids
from other law firms who seek to represent the prospective class.
The order further states that if no other law firms bid for the
right to represent the prospective class, the court will deny
certification of the class.
On May 5, 1995, the Company sued Chan Desaigoudar, its
former CEO and Chairman of the Board, for fraud, negligent
misrepresentation, breach of fiduciary duty, constructive trust
and for injunctive relief, based on his actions as a corporate
officer. Mr. Desaigoudar generally denied the allegations of the
complaint, and on August 3, 1995, served his cross complaint
against the Company for alleged breach of Mr. Desaigoudar's
employment agreement
5
<PAGE>
and other related alleged wrongs. The Company believes Mr. Desaigoudar's
cross complaint to be without merit, and intends to vigorously pursue its
action against him.
6
<PAGE>
ITEM 2. Management's Discussion And Analysis of Financial
Condition and Results of Operations.
Results of Operations
Product sales for the quarter ended June 30, 1995,
increased by $1,966,000 or 31% compared to the quarter ended June
30, 1994, due primarily to increased sales of thin film products.
Thin film products represented 61% of net product sales for the
quarter ended June 30, 1995 as compared with 55% for the nine
months ended March 31, 1995 and 45% for the twelve months ended
June 30, 1994. Technology related revenue for the quarter ended
June 30, 1995 related to engineering projects partially funded by
Hitachi Metals, Ltd. (HML). Technology related revenue for the
quarter ended June 30, 1994 relates to a one-time sale of rights
to previously developed technology in connection with the initial
alliance with HML.
Cost of sales for the quarter June 30, 1995, are not
comparable to the year-earlier period. Cost of sales for the
quarter ended June 30, 1994, included a $10.2 million charge for
obsolete and slow moving inventory and a $1.7 million warranty
charge. Without those charges, cost of goods for the quarter
ended June 30, 1994 would have been 71% of product sales as
compared with 57% of product sales for the quarter ended June 30,
1995. This equates to a gross margin of 29% in the 1994 quarter
as compared to 43% in the 1995 quarter. The improvement in
product gross margins is attributable to higher mix of thin film
products, improved factory utilization, and cost reduction
programs.
Research and development expenditures for the quarter
ended June 30, 1995 were 10% of product sales compared to 14% of
product sales for the quarter ended June 30, 1994. In dollar
terms, however, research and development expenditures were
relatively constant: $865,000 in the 1995 quarter compared to
$893,000 in 1994.
Selling, marketing, and administrative costs decreased as
a percentage of sales to 30% in the quarter ended June 30, 1995
from 40% in the quarter ended June 30, 1994. The year-earlier
quarter included a $1.3 million bad debt write-off and the June
30, 1995 quarter included over $200,000 of legal costs related to
shareholder litigation and related matters. Absent these costs,
selling, marketing and administrative costs would have been 27%
in the quarter ended June 30, 1995 and 20% in the year earlier
quarter. This increase is due primarily to higher audit and
consulting costs associated with an ongoing clean-up of the
Company's administrative affairs.
As a result of the factors discussed above, operating
income for the quarter ended June 30, 1995 was $554,000 compared
to an operating loss of $7.8 million for the year earlier
quarter.
Other expense decreased to $37,000 in the 1995 quarter
from $246,000 in the quarter ended June 30, 1994, primarily due
to increased interest income from investments and also due to
reduced interest expense on leased equipment.
No income taxes were accrued for the quarter ended June
30, 1995, due to the availability of tax loss carryforwards. An
income tax benefit of $628,000 was recognized for the quarter
ended June 30, 1994, representing the amount of available tax
loss carrybacks.
7
<PAGE>
The weighted average of common shares outstanding
increased to 9.8 million shares in the June 30, 1995 quarter
compared to 8.0 million shares for the quarter ended June 30,
1994, primarily due to the issuance of 1.5 million shares held in
trust for the tentative settlement of shareholder class action
lawsuits and 100,000 shares issued to Hitachi Metals, Ltd.
Liquidity and Capital Resources
The Company's cash and cash equivalents decreased by
$1,012,000, from $18,960,000 at March 31, 1995 to $17,948,000 at
June 30, 1995, primarily due to capital expenditures of $962,000,
which included end-of-lease equipment buy-outs of $258,000. The
remaining capital expenditures of $704,000 are made up primarily
of selected investments to enhance manufacturing efficiency and
capacity and investments in new computer systems and software.
Accounts receivable increased by $610,000 due to
increased sales. Based on product sales, net days sales
outstanding were 41 days for the 1995 quarter compared with 45
days for the three months ended June 30, 1994.
Inventories remained relatively constant in dollars while
sales increased 31%. Inventory management has been strengthened
and will continue to be an area of focus.
The Company expects to be able to fund its liquidity
needs for at least the next twelve months through its existing
cash balances, cash flows from operations, and bank borrowings
under its line of credit. The Company has a bank line of credit,
expiring July 31, 1996, under which it can borrow up to
$3,000,000, at prime, collateralized by short term investments
managed by the bank. There have been no borrowings against this
line of credit.
8
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
On August 4, 1995, Judge Vaughn Walker of the U. S.
District Court for Northern California, issued an order regarding
the securities class action lawsuits filed against the Company.
Judge Walker, in ruling on the bids by two law firms to represent
the propose class action of shareholders, rejected one bid and
required the other law firm to undertake an evaluation of class
members' affirmative support of the terms of the previously
announced proposed settlement and that firm's attorney fee
proposal. Judge Walker's order states that if the terms of the
proposed settlement are not affirmatively supported by a
significant portion of the prospective class, the court will
disapprove the proposed class settlement, and will solicit bids
from other law firms who seek to represent the prospective class.
The order further states that if no other law firms bid for the
right to represent the prospective class, the court will deny
certification of the class.
On May 5, 1995, the Company sued Chan Desaigoudar, its
former CEO and Chairman of the Board, for fraud, negligent
misrepresentation, breach of fiduciary duty, constructive trust
and for injunctive relief, based on his actions as a corporate
officer. Mr. Desaigoudar generally denied the allegations of the
complaint, and on August 3, 1995, served his cross complaint
against the Company for alleged breach of Mr. Desaigoudar's
employment agreement and other related alleged wrongs. The
Company believes Mr. Desaigoudar's cross complaint to be without
merit, and intends to vigorously pursue its action against him.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 11 Computation of Per Share Earnings
(b) Reports on Form 8-K
On August 1, 1995, the Company filed a report on Form 8-K,
reporting the resignation of Mr. Chan Desaigoudar as a director of the
Company.
9
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.
CALIFORNIA MICRO DEVICES CORPORATION
(Registrant)
Date: August 10, 1995 /s/ John E. Trewin
John E. Trewin
Vice President and
Chief Financial Officer
10
<PAGE>
EXHIBIT 11
CALIFORNIA MICRO DEVICES CORPORATION
Computation of Per Share Earnings
(Amounts in Thousands, Except Share Data)
(Unaudited)
<TABLE>
Three Months Ended June 30,
1995 1994
(restated)
<S> <C> <C>
Net income (loss) $ 517 $(7,388)
======= =======
PRIMARY:
Weighted average common shares
outstanding 9,346 8,020
Common equivalents attributable to:
Options and warrants 436 -
------- -------
Total weighted average common and
common equivalent shares
outstanding 9,782 8,020
======= =======
Net income (loss) per share $ 0.05 $ (0.92)
======= =======
FULLY DILUTED
Weighted average common shares 9,346 8,020
Common equivalent attributable to:
Options and warrants - using
quarter-end market price 482 -
------- -------
Total weighted average common and
common equivalent shares
outstanding 9,828 8,020
======= =======
Net income (loss) per share $ 0.05 $ (0.92)
======= ========
</TABLE>
11
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000800460
<NAME> CALIFORNIA MICRO DEVICES CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 9,698
<SECURITIES> 8,250
<RECEIVABLES> 4,835
<ALLOWANCES> (1,022)
<INVENTORY> 4,575
<CURRENT-ASSETS> 31,620<F1>
<PP&E> 9,176<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 40,796
<CURRENT-LIABILITIES> 10,946
<BONDS> 0
<COMMON> 54,947
0
0
<OTHER-SE> (33,837)
<TOTAL-LIABILITY-AND-EQUITY> 40,796
<SALES> 8,344
<TOTAL-REVENUES> 8,647<F3>
<CGS> 4,753
<TOTAL-COSTS> 4,753
<OTHER-EXPENSES> 3,340<F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37
<INCOME-PRETAX> 517
<INCOME-TAX> 0
<INCOME-CONTINUING> 517
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 517
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
<FN>
<F1>Includes Refundable income taxes and other assets - 5,284.
<F2>Includes Property and equipment, net - 7,267; Restricted cash - 1,230; and
Other long-term assets - 79.
<F3>Includes Technology related sales - 303.
<F4>Includes Research and development - 866; Selling, marketing and
administrative expense - 2,474.
</FN>
</TABLE>
