United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QA
(Mark One)
[ x ] Quarterly Report Pursuant To Section 13 Or 15(d) Of The
Securities Exchange Act Of 1934
For the Period Ended September 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 September 30, 1995, there were outstanding 10,189,303 shares of Issuer's
Common Stock.
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Page Number
Item 1. Financial Statements
Statements of Operations
Three and Six Months Ended September 30, 1995 and 1994 2
Balance Sheets
September 30, 1995 and March 31, 1995 3
Statements of Cash Flows
Three and Six Months Ended September 30, 1995 and 1994 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 6. Exhibits and Reports on Form 8-K 9
Signature 10
ii
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
CALIFORNIA MICRO DEVICES CORPORATION
STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
Three Months Six Months
Ended Ended
September 30, September 30,
1995 1994 1995 1994
(restated)
Revenues:
Net product sales $9,322 $7,558 $17,666 $13,936
Technology related revenues 307 255 610 5,975
------ ------ ------ ------
Total revenues 9,629 7,813 18,276 19,911
Cost and expenses:
Cost of sales 5,314 6,096 10,067 22,511
Research and development 795 872 1,661 1,765
Selling, marketing and
administrative 2,729 1,619 5,203 4,179
------ ----- ------ -----
Total costs and expenses 8,838 8,587 16,931 28,455
----- ----- ------ ------
Operating income (loss) 791 (774) 1,345 (8,544)
Other (income) expense, net (45) (38) (8) 208
----- ------ ------ -----
Income (loss) before income
taxes 836 (736) 1,353 (8,752)
Income taxes (benefit) - 50 - (578)
----- ----- ------ ------
Income (loss) before cumulative
effect of change in
accounting 836 (786) 1,353 (8,174)
Cumulative effect of change in
accounting, net of tax - 835 - 835
----- ------- ------ ------
Net income (loss) $ 836 $(1,621) $1,353 $(9,009)
===== ======= ====== =======
Net income (loss) per common share:
Income (loss) before cumulative
effect of change in
accounting $0.08 ($0.09) $0.13 ($0.96)
Cumulative effect of change
in accounting - (0.10) - (0.10)
----- ------- ----- -------
Net income (loss) per share $0.08 $(0.19) $0.13 $(1.06)
===== ======= ===== ======
Weighted average common shares
and share equivalents
outstanding 10,866 8,537 10,324 8,279
The accompanying notes are an integral part of these financial
statements.
2
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
BALANCE SHEETS
(Amounts in Thousands, Except Share Data)
(Unaudited)
Sept. 30, March 31,
1995 1995
ASSETS:
Current assets:
Cash and cash equivalents $2,565 $10,556
Short-term securities 19,261 8,404
Accounts receivable, less allowance for
doubtful accounts of $866 and $832 4,557 3,203
Inventories 5,408 4,747
Refundable income taxes and other assets 442 5,445
------ ------
Total current assets 32,233 32,355
Property, plant & equipment, net 8,337 6,665
Restricted cash 1,068 989
Other long term assets 649 679
------- -------
Total assets $42,287 $40,688
======= =======
LIABILITIES & SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $2,935 $2,725
Accrued salaries and benefits 855 560
Other accrued liabilities 4,825 3,748
Deferred margin on shipments to distributors 1,059 1,157
Current portion of long-term debt and
capital lease obligations 2,006 2,516
------ ------
Total current liabilities 11,680 10,706
Long-term debt, less current maturities 7,724 7,923
Capital lease obligations, less current
maturites 644 1,278
Deferred income 106 136
------ ------
Total liabilities 20,154 20,043
Shareholders' equity:
Common stock - no par value; authorized
25,000,000; issued and outstanding
10,189,303 shares 54,987 54,947
Retained earnings (32,854) (34,302)
------- -------
Total shareholders' equity 22,133 20,645
------- -------
Total liabilities and shareholders' equity $42,287 $40,688
======= =======
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Six Months Ended
September 30,
1995 1994
(restated)
Cash flows from operating activities:
Net income /(loss) $1,353 ($9,010)
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 708 900
Net (increase)/decrease in inventories (661) 10,434
Net (increase)/decrease in accounts
receivable (1,354) 687
Net (increase) /decrease in prepaid expenses
and other current assets 3,628 (1,926)
Net increase in trade accounts payable
and other current liabilities 1,582 1,232
CMD/HML -Joint venture 1,375 --
Net decrease in other long term assets 30 379
Deferred margin on distributor sales (98) 1,221
-------- -------
Net cash (used) provided by operating
activities 6,563 3,917
------ ------
Cash (used) in investing activities:
Securities, net purchases (10,762) (3,000)
Capital expenditures (2,410) (1,096)
Net change in restricted cash (79) (69)
-------- -------
Net cash used in investing activities (13,251) (4,165)
-------- -------
Cash (used) provided by financing activities:
Payment of capital lease obligations (1,144) (895)
Payment of long-term debt (199) (160)
Proceeds from sale/lease back -- 1,383
Proceeds from issuance of common stock 40 15,465
------ ------
Net cash (used) provided by financing
activities (1,303) 15,793
------- ------
Net increase /(decrease) in cash and
cash equivalents (7,991) 15,545
Cash and cash equivalents at beginning
of period 10,556 10,561
------ -------
Cash and cash equivalents at end of period $2,565 $26,106
------ -------
Supplemental disclosures of cash flow information:
Interest paid $ 630 $ 650
Income taxes paid -- $ 2,700
Supplemental disclosures of non-cash investing
and financing activities:
Unrealized gain/(loss) on securities $ 95 --
Capital expenditures financed through
capital lease obligations -- $ 403
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 the
Company's financial position as of September 30, 1995, results of
operations for the six month periods ended September 30, 1995 and
1994, and cash flows for the six month periods ended June 30, 1995
and 1994. Results for the periods 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
In the securities class action lawsuits filed against the
Company and pending before Judge Vaughn Walker of the U.S.
District Court for the Northern District of California, the
parties and others have filed pleadings related to the class'
renewed Motion for Preliminary Approval of Settlement. This
motion is set for hearing on November 17, 1995.
Pursuant to the Court's order of August 4, 1995, counsel for
the class surveyed selected institutional and large individual
class members in an effort to determine whether the purposed
settlement with the Company was affirmatively supported. Class
members who responded to the survey generally expressed support
for the settlement. On October 12, 1995, the Colorado Public
Employees Retirement Association, a class member, filed an
application for leave to appear in the action for the limited
purpose of participating in the settlement discussions and
determination whether the proposed settlement may be improved. To
date the court has not ruled on that application. The motion has
been opposed by certain of the Company's former officers. In
addition, counsel representing certain institutions, including
both class member and non-class members, has expressed concerns
regarding the adequacy of the notice sent to the selected class members.
On September 18, 1995, Ultrasound Technology Associates
("UTA") filed a complaint against the Company, alleging causes of
action purportedly arising from the Company's termination of its
contract with UTA. On October 13, 1995, the Company filed a
complaint for libel per se against UTA and its attorney. On
October 17, 1995, the Company answered UTA's complaint and
counterclaimed against UTA based on UTA's breach of the contract
between the companies. The Company intends to vigorously pursue
this litigation. Based upon the information currently available
to the Company, management believes this matter will not have a
material adverse affect on the Company's financial position or
results of operations.
5
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Product sales for the quarter ended September 30, 1995,
increased by $1,764,000, or 23%, compared to the quarter ended
September 30, 1994, due primarily to increased sales of thin film
products. Thin film products represented 70% of sales for the
quarter ended September 30, 1995, compared to 45% of sales for the
year ago quarter.
Product sales for the six month period ended September 30,
1995, increased by $3,730,000, or 27%, also due to the increase in
thin film products. For the six months ended September 30, 1995,
thin film products represented 66% of sales, compared to
approximately 40% in the six months ended September 30, 1994.
Sales of thin film products (in absolute dollars) have
approximately doubled during both the three and six months ended
September 30, 1995, when compared to the same periods a year
earlier. The increase in thin film products was partially offset
by diminished sales of an aging semiconductor product line, which
declined by approximately 30% during the three and six months
ended September 30, 1995, when compared with the same periods a
year earlier.
Technology related revenues, relating to engineering projects
partially funded by Hitachi Metals, Ltd. (HML), were at comparable
levels during the three months ended September 30, 1995 and 1994.
Technology related revenue for the six months ended September 30,
1994 included a one-time sale of rights to previously developed
technology in connection with the initial alliance with HML and
cannot be used for direct comparison
Cost of goods for the quarter ended September 30, 1995,
decreased by $782,000 due to the implementation of cost reduction
programs, improved factory utilization and the increased mix of
higher margin thin film products. Gross margins as a percent of
net product sales increased to 43% in the quarter ended September
30, 1995, compared to 19% in the year earlier quarter.
Cost of sales for the six month periods ended September 30,
1995 and 1994 do not provide meaningful comparisons due to a $10.2
million charge for obsolete and slow moving inventory and a $1.7
million warranty charge, both included in the three months ended
June 30, 1994. Excluding these charges, gross margins as a
percent of net product sales would have been 24% in the six months
ended September 30, 1994 as compared to 43% for the 1995 period.
Research and development expenditures declined in dollars and
as a percentage of sales during the three and six months ended
September 30, 1995, due to the lower cost of wafers and other
materials used in engineering projects compared to the year
earlier periods.
Selling, marketing and administrative costs increased
overall and as a percentage of sales in the quarter ended
September 30, 1995, when compared to the year earlier quarter due
to costs associated with shareholder litigation and related
matters, including approximately $300,000 in unusual legal fees.
Additionally, increased sales and profits have resulted in
increased sales commissions and bonuses. Other cost increases
include the cost of the annual shareholders' meeting (none held
last year), relocation and recruitment costs, and severance
reserves. The six months ended September 30, 1995, include
significantly higher audit and consulting fees associated with the
clean-up of the Company's administrative affairs as well as costs
associated with shareholder litigation and related matters,
including approximately $500,000 in unusual legal costs. The six
months ended September 30, 1994, include a $1.3 million bad debt
write-off recognized in the quarter ended June 30, 1994.
6
<PAGE>
As a result of the factors discussed above, operating income
for the quarter and six months ended September 30, 1995, was
$791,000 and $1,345,000, respectively, compared with losses of
$774,000 and $8.5 million, respectively, in the year earlier
periods.
Other expense for the six months ended September 30, 1995,
decreased by $200,000 from the year earlier period due to
increased interest income and reduced interest expense.
No income taxes were accrued for the quarter and six months
ended September 30, 1995, due to the availability of tax loss
carryforwards. An income tax benefit of $628,000 was recorded in
the quarter ended June 30, 1994, representing the benefit of
carryback losses. There were foreign withholding taxes of $50,000
in the quarter ended September 30, 1994.
The net losses for the six months periods ended September 30,
1994, include a $835,000 one-time charge for the cumulative effect
of change in accounting principle. See Note 2 of Notes to
Financial Statements.
The weighted average common shares outstanding increased to
10.9 million shares and 10.4 million shares for the three and six
months ended September 30, 1995, respectively, from 8.5 million
shares in the year earlier periods 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
HML, as well as the dilutive effect of stock options.
Liquidity and Capital Resources
The Company's cash and short term securities increased by
$2.9 million from $18,960,000 on March 31, 1995, to $21,826,000 on
September 30, 1995, due to the collection of income tax refunds
and a receivable from HML related to a discontinued project in the
Philippines. These were partially offset by capital expenditures
of $2,410,000, which included end-of-lease equipment buy-outs of
$882,000. The remaining capital expenditures of $1,528,000 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 $1,354,000 due primarily to
increased sales. Gross days sales outstanding were 52 days at
September 30, 1995, compared to 50 days at March 31, 1995.
Inventories increased by $661,000, or 14%, from June 30,
1995, due to increased work-in-process inventories to support
increased orders. Backlog of product orders was $10.3 million at
September 30, 1995, compared to $5.6 million at March 31, 1995.
Accrued salaries and benefits increased due to increased
headcount, increased bonus expense, and severance reserves.
Other accrued liabilities increased primarily due to
increased sales tax and sales commissions, relocation and
recruitment costs, and accrued royalties.
The Company expects to be able to fund its liquidity needs
for a 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.
7
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
In the securities class action lawsuits filed against the
Company and pending before Judge Vaughn Walker of the U.S.
District Court for the Northern District of California, the
parties and others have filed pleadings related to the class'
renewed Motion for Preliminary Approval of Settlement. This
motion is set for hearing on November 17, 1995.
Pursuant to the Court's order of August 4, 1995, counsel for
the class surveyed selected institutional and large individual
class members in an effort to determine whether the purposed
settlement with the Company was affirmatively supported. Class
members who responded to the survey generally expressed support
for the settlement. On October 12, 1995, the Colorado Public
Employees Retirement Association, a class member, filed an
application for leave to appear in the action for the limited
purpose of participating in the settlement discussions and
determination whether the proposed settlement may be improved. To
date the court has not ruled on that application. The motion has
been opposed by certain of the Company's former officers. In
addition, counsel representing certain institutions, including
both class member and non-class members, has expressed concerns
regarding the adequacy of the notice sent to the selected class
members.
On September 18, 1995, Ultrasound Technology Associates
("UTA") filed a complaint against the Company, alleging causes of
action purportedly arising from the Company's termination of its
contract with UTA. On October 13, 1995, the Company filed a
complaint for libel per se against UTA and its attorney. On
October 17, 1995, the Company answered UTA's complaint and
counterclaimed against UTA based on UTA's breach of the contract
between the companies. The Company intends to vigorously pursue
this litigation. Based upon the information currently available
to the Company, management believes this matter will not have a
material adverse affect on the Company's financial position or
results of operations.
ITEM 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of stockholders, at which the
proposals described below were submitted to stockholders, was held
on September 15, 1995.
Proposal No. 1 Election of Directors. the following
individuals, who received the votes indicated, were elected as
directors:
NAME FOR WITHHELD
David Schoon 7,371,129 0
Wade Meyercord 6,621,858 0
Jeffrey Kalb 6,621,858 0
C. K. N. Patel 6,621,852 0
Dr. Angel Jordan 6,621,738 0
Stuart Schube 6,621,738 0
Proposal No. 2 The proposal to ratify the appointment of
Ernst & Young LLP, as the Company's independent auditors for the
current fiscal year was approved. The results of the voting was
as follows:
FOR AGAINST WITHHELD
6,610,232 38,691 1,962,297
8
<PAGE>
Proposal No. 3 The proposal to approve the 1995 Stock
Option Plan was approved. The results of the voting was as
follows:
FOR AGAINST WITHHELD
4,206,056 2,437,670 115,415
Proposal No. 4 The proposal to approve the 1995 Employee
Stock Purchase Plan was approved. The results of the voting was
as follows:
FOR AGAINST WITHHELD
6,356,465 191,693 95,194
Proposal No. 5 The proposal to approve the 1995 Non-
Employee Directors' Stock Option Plan was approved. The results
of the voting was as follows:
FOR AGAINST WITHHELD
4,131,100 2,471,765 156,276
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 11 Computation of Per Share Earnings
(b) Reports on Form 8-K
(i) On September 28, 1995, the Company
filed a report on Form 8-K, reporting the results of its Annual
Meeting of Shareholders resulting in the election of a Board of
Directors, approval of Stock Options Plans, and ratification of
independent auditors of the Company.
(ii) On September 28, 1995, the Company
filed a report on Form 8-K, reporting the election of Bob
Filiault, Vice President of Worldwide Sales, as an Officer of the
Company.
(iii) On October 5, 1995, the Company filed
a report on Form 8-K, reporting the release of certain information
at its Annual Shareholder's Meeting.
(iv) On November 3, 1995, the Company filed
a report on Form 8-K, reporting the release of certain information
on October 26, 1995, regarding the Company's second quarter 1996
financials.
(c) Reports on Form S-8
On August 17, 1995, the Company filed a report
on Form S-8, reporting the registration of 2,335,000 shares of
the Company's common stock.
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: November 14, 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)
Three Months Six Months
Ended Ended
September 30, September 30,
1995 1994 1995 1994
(restated)
Net income (loss) $ 836 ($1,621) $1,353 $(9,009)
PRIMARY:
Weighted average common
shares outstanding 10,215 8,537 9,780 8,279
Common equivalents attributable to:
Options and warrants 651 544
Total weighted average common
and common equivalent
shares outstanding 10,866 8,537 10,324 8,279
Net income (loss) per share $ 0.08 ($0.19) $0.13 $(1.09)
FULLY DILUTED
Weighted average
common shares 10,215 8,537 9,780 8,279
Common equivalent attributable to:
Options and warrants 671 577
Total weighted average common
and common equivalent
shares outstanding 10,886 8,537 10,357 8,279
Net income (loss) per share $0.08 ($0.19) $0.13 $(1.09)
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,565
<SECURITIES> 19,261
<RECEIVABLES> 4,643
<ALLOWANCES> 866
<INVENTORY> 5,408
<CURRENT-ASSETS> 32,233<F1>
<PP&E> 10,054<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 42,287
<CURRENT-LIABILITIES> 11,680
<BONDS> 0
<COMMON> 54,987
0
0
<OTHER-SE> (32,854)
<TOTAL-LIABILITY-AND-EQUITY> 42,287
<SALES> 9,322
<TOTAL-REVENUES> 9,629<F3>
<CGS> 5,314
<TOTAL-COSTS> 5,314
<OTHER-EXPENSES> 3,524<F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (45)
<INCOME-PRETAX> 836
<INCOME-TAX> 0
<INCOME-CONTINUING> 836
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 836
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
<FN>
<F1>Includes Refundable income taxes and other assets - 442.
<F2>Includes Property, plant & equipment, net - 8,337; Restricted cash - 1,068; and
Other long term assets - 649.
<F3>Includes Technology related sales - 307.
<F4>Includes Research and Development - 795; Selling, marketing, and administrative
expense - 2,729.
</FN>
</TABLE>
