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, 1996
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
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, 1996, there were outstanding 10,498,895 shares of Issuer's
Common Stock.
1
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Page Number
Item 1. Financial Statements
Statements of Operations
Three Months Ended June 30, 1996 and 1995 2
Balance Sheets
June 30, 1996 and March 31, 1996 3
Statements of Cash Flows
Three Months Ended June 30, 1996 and 1995 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 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 10
Signature 11
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)
<TABLE>
Three Months Ended June 30,
--------------------------
1996 1995
---- ----
<S> <C> <C>
Revenues:
Net product sales $ 9,295 $ 8,344
Technology related sales 300 303
-------- -------
Total revenues 9,595 8,647
Cost and expenses:
Cost of sales 6,224 4,753
Research and development 987 866
Selling, marketing and administrative 2,152 2,474
------- -------
Total costs and expenses 9,363 8,093
------- -------
Operating income 232 554
Other (income) expense, net (100) 37
------ -------
Income before income taxes 332 517
Income taxes - -
Net income $ 332 $ 517
======= =======
Net income per share $ 0.03 $ 0.05
======= =======
Weighted average common shares and
share equivalents outstanding 11,020 9,782
</TABLE>
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)
<TABLE>
June 30, March 31,
1996 1996
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 510 $ 1,512
Short-term investments 18,436 20,638
Accounts receivable, less allowance for
doubtful accounts of $909 and $960 4,558 4,500
Inventories 7,515 6,940
Prepaid expenses and other assets 462 585
-------- --------
Total current assets 31,481 34,175
Property and equipment, net 11,564 9,314
Restricted cash 1,144 905
Other long-term assets 450 534
-------- --------
Total assets $ 44,639 $ 44,928
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,091 $ 2, 832
Accrued salaries and benefits 1,032 1,250
Other accrued liabilities 3,355 4,279
Deferred margin on shipments to distributors 1,027 1, 039
Current maturities of long-term debt and
capital lease obligations 855 1,282
-------- --------
Total current liabilities 9,360 10, 682
Long-term debt, less current maturities 7,490 7, 490
Capital lease obligations less current maturities 226 299
Deferred income - 107
-------- -------
Total liabilities 17,076 18,578
Shareholders' equity:
Common stock - no par value; authorized 25,000,000;
issued and outstanding 10,498,895 shares 56,378 55,442
Retained earnings (deficit) (28,815) (29,092)
------- -------
Total shareholders' equity 27,563 26,350
Total liabilities and shareholders' equity $44,639 $44,928
======= =======
</TABLE>
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)
<TABLE>
Three Months Ended
June 30,
-------------------
1996 1995
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 332 $ 517
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 540 360
Net (increase)/decrease in inventories (575) 172
Net (increase)/decrease in accounts receivable (58) (610)
Net (increase)/decrease in prepaid expenses and
other current assets 123 161
Net increase/(decrease) in trade accounts payable
and other current liabilities (883) 232
Net (increase)/decrease in other long term assets 84 -
Increase/(decrease) in deferred margin on
distributor sales (12) 91
------- -------
Net cash (used)/provided by operating activities (449) 923
------- -------
Cash used in investing activities:
Security purchases (2,069) (446)
Security sales 4,216 600
Capital expenditures (2,790) (962)
Net change in restricted cash (239) (241)
------- -------
Net cash used in investing activities (882) (1,049)
------- -------
Cash (used)/provided by financing activities:
Payment of capital lease obligations (524) (648)
Payment of long-term debt (83) (84)
Proceeds from issuance of common stock 936 -
------- -------
Net cash (used)/provided by financing activities 329 (732)
------- -------
Net increase/(decrease) in cash and cash equivalents (1,002) (858)
Cash and cash equivalents at the beginning of period 1,512 10,556
------- -------
Cash and cash equivalents at the end of period $ 510 $ 9,698
======= =======
Supplemental disclosure of cash flow information:
Interest paid $ 64 $ 148
Income taxes paid $ - $ -
</TABLE>
The accompanying notes are an integral part of these financial
statements.
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 California Micro Devices
Corporation's (the "Company") financial position as of June 30, 1996,
results of operations for the three month periods ended June 30, 1996 and
1995, and cash flows for the three-month periods ended June 30, 1996 and
1995. Results for the quarter are not necessarily indicative of fiscal
year results.
2. 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.
The condensed financial statements should be read in conjunction
with the financial statements included with the Company's annual report
on Form 10-K for the fiscal year ended March 31, 1996.
3. Inventories
-----------
The components of inventory consist of the following:
<TABLE>
(Amounts in Thousands)
June 30, March 31,
1996 1996
-------- --------
<S> <C> <C>
Raw materials $ 1,006 $ 1,093
Work-in-process 4,360 3,949
Finished goods 2,149 1,898
-------- --------
$ 7,515 $ 6,940
======== ========
</TABLE>
4. Litigation
----------
Reference should be made to the Company's filings with the SEC,
including its reports on Form 10-K for its 1996 fiscal year. In addition
to the matters reported therein, the following legal proceedings have
taken place:
In connection with the purported class action litigation previously
reported, the Company continues to engage in settlement discussions with
counsel for the class. In consideration of the decisions to date in the
class action proceedings, there can be no absolute assurance that the
ultimate resolution of this litigation will be in the amount and form
which the Company has recognized in its financial statements. However,
based on information currently available to it,
5
<PAGE>
the Company believes that any settlement of this matter will involve
terms that are comparable in aggregate value to those previously proposed
to and accepted by the former Class counsel.
The Company is a defendant or plaintiff in various other actions
which arose in the normal course of business. In the opinion of
management, the ultimate disposition of these matters will not have a
material adverse effect on the financial condition or overall trends in
the results of the operations of the Company.
The Company believes that, with regard to these matters and those
previously reported, it has, to the best of its knowledge, made such
adjustments to its financial statements by means of reserves and
expensing the costs thereof, that these matters will not have any
additional adverse impact on the Company's financial condition.
Provided, however, that if the ultimate resolution of the class action
litigation substantially exceeds the amounts previously reserved
therefore, such resolution may have a material adverse effect on the
Company's financial condition.
5. Net Income Per Share
--------------------
Net income per share for each period is computed using the weighted
average number of common shares and dilutive common share equivalents
outstanding during the periods.
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, 1996, increased by
$951,000 or 11% compared to the quarter ended June 30, 1995, due to
increased sales of semiconductor products in the telecommunications
sector. Thin film product sales for the quarter ended June 30, 1996,
were essentially flat as compared to the year earlier quarter. Thin film
sales continue to represent the majority of net product sales, but
declined to 55% of net product sales from 61% of net product sales
compared to the same period in fiscal 1996 due to declining sales to the
personal computer market, and the reduced level of activity in the
electronic component markets. This decline was partially offset by
increased sales to the networking and workstation markets. Compared to
the quarter ended March 31, 1996 (fiscal 1996 fourth quarter),
semiconductor sales for the June 30, 1996 quarter were essentially flat,
but thin film sales declined $1.3 million primarily due to lower sales to
the personal computer market.
Technology related revenue for the quarters ended June 30, 1996 and
June 30, 1995 related to engineering projects partially funded by Hitachi
Metals, Ltd. ("HML").
Gross margins for net product sales for the quarter ended June 30,
1996 were 33% compared to 43% for the quarter ended June 30, 1995. The
reduction in margins for the current quarter is a result of the change in
product sales mix, reflecting increased sales of packaged devices which
involve considerable external expenditures and reduced sales of product
in die form, which absorbed considerable fixed internal overhead.
Research and development expenditures for the quarter ended June 30,
1996 were 11% of product sales compared to 10% for the three months ended
June 30, 1995. The increase in research and development expenditure to
$987,000 for the June 30, 1996 quarter compared to $866,000 in the year
earlier period was due primarily to new development projects, including
new P/Active( products for SCSI Terminators and RC Network products.
Selling, marketing, and administrative costs decreased as a
percentage of sales to 23% of net product sales in the quarter ended June
30, 1996 compared to 30% of net product sales in the quarter ended June
30, 1995. This drop in spending primarily reflects reductions in unusual
audit, consulting and legal fees incurred in the corresponding 1995
quarter.
As a result of the factors discussed above, operating income for the
quarter ended June 30, 1996 was $232,000 compared to operating income of
$554,000 for the year earlier quarter.
Other (income)/expense for the current quarter was an income of
$100,000 as compared to an expense of $37,000 in the 1995 quarter. This
was due to increased interest income from investments and also due to
reduced interest expense on leased equipment and debt balances.
No income taxes were accrued for the quarters ended June 30, 1996 or
June 30, 1995, due to the availability of tax loss carryforwards.
7
<PAGE>
The weighted average of common shares outstanding increased to 11.0
million shares in the June 30, 1996 quarter compared to 9.8 million
shares for the quarter ended June 30, 1995. The increase of 1.2 million
weighted shares outstanding is due primarily to stock options exercised
by employees, and stock issued for proposed settlement agreements. The
additional dilution was caused by the effect on the calculation of
outstanding options due to the higher stock price during the June 30,
1996 quarter as compared to the June 30, 1995 quarter.
Liquidity and Capital Resources
The Company's cash, cash equivalents, and short term securities
decreased by $3,204,000, from $22,150,000 at March 31, 1996 to
$18,946,000 at June 30, 1996 primarily due to capital expenditures of
$2,800,000 (including operating lease buyouts of approximately
$1,800,000), paydown of capital lease and debt obligations, and lower
other accrued liabilities due to reduced sales commissions and settlement
of a contractual dispute.
Accounts receivable increased by $58,000 for the quarter ended June
30, 1996, due primarily to timing of shipments in the quarter. Based on
net product sales, net days sales outstanding were 53 days for the June
30, 1996 quarter compared with 46 days for the three months ended March
31, 1996. Timing of shipments accounted for approximately 5 days of this
increase.
Product inventories were $7,515,000 at June 30, 1996 or $575,000
greater than the balance of $6,940,000 at March 31, 1996. Increases in
new product inventories and growth of established product lines
contributed to the increase.
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 available bank borrowings under its line of
credit. The Company has a bank line of credit, expiring July 31, 1997,
under which it can borrow up to $3,000,000, at prime, collateralized by
short term investments managed by the bank. As of June 30, 1996 there
were no borrowings against this line of credit.
Cautionary Statement
Statements included herein which are not historical facts are
forward looking statements. Such forward looking statements are made
pursuant to the safe harbor provisions of the Private/Securities
Litigation Reform Act of 1995. The forward looking statements regarding
revenues, orders and sales involve a number of risks and uncertainties,
including but not limited to, demand for the Company's product, pricing
pressures which could effect the Company's gross margin or the ability to
consummate sales, intense competition within the industry, the need for
the Company to keep pace with technological developments and timely
respond to changes in customer needs, the Company's dependence on third
party suppliers for components for its products and the Company's
dependence upon intellectual property rights which, if not available to
the Company, could have a material adverse effect on the Company. These
same factors, as well as others, such as the continuing litigation
involving the Company, could also effect the liquidity needs of the
Company.
8
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
------------------
Reference should be made to the Company's filings with the SEC,
including its reports on Form and 10-K for its 1996 fiscal year. In
addition to the matters reported therein, the following legal proceedings
have taken place:
In connection with the purported class action litigation previously
reported, the Company continues to engage in settlement discussions with
counsel for the class. In consideration of the decisions to date in the
class action proceedings, there can be no absolute assurance that the
ultimate resolution of this litigation will be in the amount and form
which the Company has recognized in its financial statements. However,
based on information currently available to it, the Company believes that
any settlement of this matter will involve terms that are comparable in
aggregate value to those previously proposed to and accepted by the
former Class counsel.
The Company is a defendant or plaintiff in various other actions
which arose in the normal course of business. In the opinion of
management, the ultimate disposition of these matters will not have a
material adverse effect on the financial condition or overall trends in
the results of the operations of the Company.
The Company believes that, with regard to these matters and those
previously reported, it has, to the best of its knowledge, made such
adjustments to its financial statements by means of reserves and
expensing the costs thereof, that these matters will not have any
additional adverse impact on the Company's financial condition.
Provided, however, that if the ultimate resolution of the class action
litigation substantially exceeds the amounts previously reserved
therefore, such resolution may have a material adverse effect on the
Company's financial condition.
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 July 26,
1996.
Proposal No. 1 Election of Directors. The following individuals,
--------------
who received the votes indicated, were elected as directors:
<TABLE>
<S> <C> <C>
NAME FOR WITHHELD
---------------- --------- --------
Jeffrey Kalb 8,340,672 113,845
Wade Meyercord 8,340,672 118,870
Dr. Angel Jordan 8,340,671 86,904
Stuart Schube 8,340,671 88,655
Dr. John Sprague 8,340,671 79,830
David Schoon 6,642,537 161,505
</TABLE>
9
<PAGE>
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:
<TABLE>
<S> <C> <C>
FOR AGAINST WITHHELD
--------- ------- --------
8,634,475 25,490 12,405
</TABLE>
Proposal No. 3 The proposal to approve the amendment of the 1995
Employee Stock Option Plan was approved. The results of the voting was
as follows:
<TABLE>
<S> <C> <C>
FOR AGAINST WITHHELD
--------- ------- --------
6,125,669 2,472,822 73,879
</TABLE>
Proposal No. 5 The proposal to approve the amendment of the 1995
Non-Employee Directors' Stock Option Plan was approved. The results of
the voting was as follows:
<TABLE>
<S> <C> <C>
FOR AGAINST WITHHELD
--------- ------- --------
6,303,965 2,290,827 77,578
</TABLE>
ITEM 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits
Exhibit 11 Computation of Per Share Earnings
(b) Reports on Form 8-K
(1) On June 25, 1996, the Company filed a Form 8-K,
reporting the release of certain information
regarding the Company's first quarter 1997
financials.
(2) On August 2, 1996, the Company filed a Form 8-K,
reporting the release of certain information
regarding the Company's second quarter 1997
financials.
(3) On August 2, 1996, the Company filed a Form 8-K,
reporting the release of certain information
regarding the Company's Annual Meeting of
Shareholders including the election of its
Directors, ratification of Independent Auditors, and
amendments to stock option plans.
(4) On August 5, 1996, the Company filed a Form 8-K,
reporting the release of certain information
regarding the Company's appointment of an advisory
director to the Company's Board of Directors.
10
<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 14, 1996 /s/ John E. Trewin
-----------------------------
John E. Trewin
Vice President and Chief Financial Officer
11
<PAGE>
EXHIBIT 11
CALIFORNIA MICRO DEVICES CORPORATION
Computation of Per Share Earnings
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
Three Months Ended June 30,
--------------------------
1996 1995
---- -----
<S> <C> <C>
Net income $ 332 $ 517
PRIMARY:
Weighted average common shares outstanding 10,365 9,346
Common equivalents attributable to options 655 436
------- -------
Total weighted average common and common
equivalent shares outstanding 11,020 9,782
======= =======
Net income per share $ 0.03 $ 0.05
======= =======
FULLY DILUTED
Weighted average common shares outstanding 10,365 9,346
Common equivalent attributable to options
- using quarter-end market price 657 482
------- -------
Total weighted average common and common
equivalent shares outstanding 11,022 9,828
======= =======
Net income per share $ 0.03 $ 0.05
======= =======
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 510
<SECURITIES> 18,436
<RECEIVABLES> 5,467
<ALLOWANCES> (909)
<INVENTORY> 7,515
<CURRENT-ASSETS> 31,481<F1>
<PP&E> 19,660
<DEPRECIATION> (8,096)
<TOTAL-ASSETS> 44,639<F2>
<CURRENT-LIABILITIES> 9,360
<BONDS> 0
0
0
<COMMON> 56,378
<OTHER-SE> (28,815)
<TOTAL-LIABILITY-AND-EQUITY> 44,639
<SALES> 9,295
<TOTAL-REVENUES> 9,595<F3>
<CGS> 6,224
<TOTAL-COSTS> 6,224
<OTHER-EXPENSES> 2,812<F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 227
<INCOME-PRETAX> 332
<INCOME-TAX> 0
<INCOME-CONTINUING> 332
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 332
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
<FN>
<F1>Includes Prepaid expenses and other assets - 462.
<F2>Includes Restricted cash - 1,144; and Other long-term assets - 450.
<F3>Includes Technology related sales - 300.
<F4>Includes Research and development - 987; and
Selling, marketing and administration - 2,152; Interest (income) - (325);
Other (income)/expense (net) - (2).
</FN>
</TABLE>
