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 December 31, 1997
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 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 December 31, 1997, there were outstanding 9,934,506 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 Nine Months Ended December 31, 1997 and 1996 3
Balance Sheets
December 31, 1997 and March 31, 1997 4
Statements of Cash Flows
Nine Months Ended December 31, 1997 and 1996 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 11
Signature 12
<PAGE>
PART I. FINANCIAL INFORMATION
<TABLE>
ITEM 1. Financial Statements.
---------------------
CALIFORNIA MICRO DEVICES CORPORATION
STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
----------------- -----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Net product sales $ 7,702 $ 7,231 $ 23,764 $ 24,264
Technology related revenues 150 350 531 1,030
------- ------- ------- -------
Total revenues 7,852 7,581 24,295 25,294
Cost and expenses:
Cost of sales 5,972 4,955 17,084 16,100
Research and development 719 986 2,298 3,187
Selling, marketing and administrative 1,904 1,796 5,902 5,957
------- ------- ------- -------
Total costs and expenses 8,595 7,737 25,284 25,244
------- ------- ------- -------
Operating (loss) income (743) (156) (989) 50
Other expense (income), net 142 (235) 396 (501)
------- ------- ------- -------
Net (loss) income $ (885) $ 79 $ (1,385) $ 551
======= ======= ======= =======
Net basic and dilutive (loss) income
per share $ (0.09) $ 0.01 $ (0.14) $ 0.05
======= ======= ======= =======
Weighted average common shares
outstanding 9,881 10,333 9,824 10,400
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
BALANCE SHEETS
(Amounts in Thousands, Except Per Share Data)
<TABLE>
December 31, March 31,
1997 1997
------------ ----------
(Unaudited)
<S> <C> <C>
ASSETS:
Current assets:
Cash and short-term securities $ - $ 343
Short-term investments 5,357 6,467
Accounts receivable, less allowance for
doubtful accounts of $424 and $437 4,301 3,938
Inventories 9,454 8,843
Prepaid expenses and other current assets 1,235 874
--------- --------
Total current assets 20,347 20,465
Property, plant & equipment, net 13,432 14,481
Restricted cash 3,237 2,903
Other long term assets 409 421
--------- --------
Total assets $ 37,425 $ 38,270
========= =========
LIABILITIES & SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 2,668 $ 2,618
Accrued salaries and benefits 969 795
Other accrued liabilities 998 1,457
Deferred margin on shipments to distributors 639 576
Current maturities of long-term debt and capital
lease obligations 598 745
--------- --------
Total current liabilities 5,872 6,191
Long-term debt, less current maturities 7,315 7,315
Capital lease obligations, less current maturities 1,065 1,184
--------- --------
Total liabilities 14,252 14,690
Shareholders' equity:
Common stock - no par value; authorized
25,000,000; issued and outstanding 9,934,506 52,950 51,939
Retained earnings (29,777) (28,359)
--------- --------
Total shareholders' equity 23,173 23,580
--------- --------
Total liabilities and shareholders' equity $ 37,425 $ 38,270
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
STATEMENTS OF CASH FLOWS
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
Nine Months Ended
December 31,
------------------------
1997 1996
------------ ---------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (1,385) $ 551
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 2,133 1,624
Litigation funding - (5,000)
Net increase in inventories (611) (1,454)
Net (increase)/decrease in accounts receivable (363) 1,050
Net increase in prepaid expenses
and other current assets (361) (105)
Net decrease in trade accounts payable
and other current liabilities (235) (1,595)
Net decrease in other long term assets 12 109
Increase/(decrease) in deferred margin on
distributor sales 63 (375)
--------- ---------
Net cash used in operating activities (747) (5,195)
--------- ---------
Cash used in investing activities:
Securities purchases (3,927) (3,131)
Securities sales 5,003 15,115
Capital expenditures (1,083) (6,760)
Net change in restricted cash (334) (318)
--------- ---------
Net cash used in investing activities (341) 4,906
--------- ---------
Cash flows from financing activities:
Repayments of capital lease obligations (266) (909)
Repayments of long term debt - (212)
Proceeds from issuance of common stock 1,011 1,434
--------- ---------
Net cash provided by financing activities 745 313
--------- ---------
Net (decrease)/increase in cash and cash equivalents (343) 24
Cash and cash equivalents at beginning of period 343 1,512
--------- ---------
Cash and cash equivalents at end of period $ - $ 1,536
========= =========
Supplemental disclosures of cash flow information:
Interest paid $ 512 $ 523
Supplemental disclosures of non-cash investing
and financing activities:
Unrealized (loss)/gain on securities $ (34) $ 22
Capital expenditures financed through capital
lease obligations $ 163 $ -
Restricted cash $ - $ 2,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
<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 December 31, 1997, results of operations for the three and nine
month periods ended December 31, 1997 and 1996, and cash flows for the nine
month periods ended December 31, 1997 and 1996. 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 year ended March 31, 1997.
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.
3. Inventories
-----------
The components of inventory consist of the following (amounts in
thousands):
<TABLE>
December 31, March 31,
1997 1997
------------ ---------
<S> <C> <C>
Raw materials $ 866 $ 1,316
Work-in-process 5,462 3,821
Finished goods 3,126 3,706
-------- --------
$ 9,454 $ 8,843
======== ========
</TABLE>
4. Litigation
----------
Reference should be made to the Company's filings with the SEC, including
its reports on Form 10-K for its fiscal year ended March 31, 1997, and its
reports on Form 10-Q for the quarters ending June 30, 1997 and September 30,
1997.
The Company is a party to or target of lawsuits, claims, investigations,
and proceedings, including commercial and employment matters, which are being
handled and defended in the ordinary 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
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.
<PAGE>
5. Net Income (loss) Per Share
---------------------------
Net income per share for each period is computed using the weighted
average number of common shares and dilutive common shares outstanding during
the periods. Net loss per share for each period is computed using the weighted
average number of common shares outstanding during the period.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards N0. 128, Earnings per Share. Statement 128
replaced the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants,
and convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where necessary, restated, in
conformance with Statement 128 requirements.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations.
----------------------
Results of Operations
Product sales for the quarter ended December 31, 1997, increased by
$471,000, or 7%, compared to the quarter ended December 31, 1996, due primarily
to increased sales into the computer and telecommunications segments. Thin
film products represented approximately 70% of product sales for the quarter
ended December 31, 1997, compared to 54% of product sales for the year ago
quarter.
Product sales for the nine months ended December 31, 1997, decreased by
$500,000, or 2%, due to decreased sales into the workstation and
telecommunications segments. For the nine months ended December 31, 1997, thin
film products represented 70% of sales, compared to 57% in the previous nine
months period.
Shipments to a contract manufacturer, Solectron, were approximately 11% of
product sales for the quarter ended December 31, 1997. Sales to Solectron have
increased primarily due to sales of the Company's PAC 1284 parallel port
filtration devices, which have been designed into boards Solectron manufactures
for Intel. The Company's sales of PAC 1284 devices to all customers were 13%
of sales for the quarter ended December 31, 1997. In addition to the PAC 1284
device, the Company sold twenty (20) other different CMD parts to Solectron for
products Solectron manufactures for companies other than Intel, such as Sun
Microsystems, Silicon Graphics, and Cisco Systems.
Technology related revenues, relating to research and development projects
partially funded by Hitachi Metals, Ltd. (HML), decreased by $200,000 in the
quarter ended December 31, 1997, compared to the year ago quarter, and
decreased by $499,000 in the nine months ended December 31, 1997, compared to
the year earlier period, due to lower overall R&D spending and reduced
participation by HML in shared R&D projects.
Gross margins as a percentage of net product sales were 22% for the
quarter ended December 31, 1997, compared to 31% for the year earlier quarter,
and were 28% for the nine months ended December 31, 1997, compared to 34% for
the nine months ended December 31, 1996. The decrease in gross margin for both
the quarter and nine month periods was due to both a change in product sales
mix, reflecting increased mix of lower margin high volume standard products and
a lower mix of higher margin, low volume custom products, and price reductions
due to general pricing pressure in the passive and semiconductor industries.
Research and development expenditures decreased by $267,000, for the
quarter ended December 31, 1997, compared to the prior year quarter, and by
$889,000 for the nine months ended December 31, 1997, compared to the year
earlier period. The decline in R&D was related to decreased materials cost
which offset an increase in R&D payroll and headcount. In the year earlier
periods, more of the Company's R&D programs were focused on new base
technologies. As a result materials costs were higher during fiscal 1997 than
in fiscal 1998. During fiscal 1998, increased product development resources
have resulted in an increase in payroll compared to fiscal 1997.
Selling, marketing and administrative costs were approximately 25% of
sales for the three and the nine months ended December 31, 1997 and 1996.
S,M&A increased $108,000 for the quarter ended December 31, 1997, compared to
the year earlier period and decreased $55,000 for the nine months ended
December 31, 1997, compared to the year earlier period. Within S,M&A,
administrative costs are lower than a year ago, while selling and marketing
costs are higher. The Company is keeping tight control of general expenses,
but is continuing to make selective investments in people and materials to
expand its marketing and sales activities.
As a result of the factors discussed above, operating income (loss) for
the three and nine months ended December 31, 1997 and 1996, was ($743,000) and
($989,000), respectively, compared with ($156,000) and $50,000, respectively,
in the year earlier periods.
Other (income)/expense decreased for the three and nine months ended
December 31, 1996, due to reduced interest income related to reduced short-term
investments and because the year earlier periods included a one-time gain of
$185,000 from the receipt of the Company's remaining interest in Cell Access.
<PAGE>
No income taxes were accrued for the three and nine months ended December
31, 1997 and 1996, due to the availability of tax loss carryforwards.
The weighted average shares outstanding decreased to 9,881,000 shares for
the three months ended December 31, 1997, and decreased to 9,824,000 million
shares for the nine months period. This compares to the 10,333,000 shares and
10,400,000 shares in the year earlier periods. The reduction of shares during
the current periods was due to the impact the reduced number of shares required
for the settlement of shareholder class action lawsuits after December 16,
1996. This impact was partially offset by the addition of 193,382 shares of
common stock issued through the exercise of stock options and the employee
stock purchase plan during the nine months ended December 31, 1997.
Earnings (loss) per share were $(0.09) and $(0.14) for the three months
and nine months ended December 31, 1997, compared to $0.01 and $0.05 for the
year earlier periods, respectively.
Liquidity and Capital Resources
In the nine months period ended December 31, 1997, the Company's cash and
short term securities and investments decreased by $1.5 million from $6.8
million to $5.4 million. The net loss of $1.4 million for the period includes
non-cash charges for depreciation and amortization totaling $2.1 million.
Capital expenditures for the period totaled $1.1 million.
Inventories increased by $0.6 million, or 7%, from March 31, 1997, due to
increased work-in-process inventories, partially offset by decreases in raw
materials and finished goods. The increase in work-in-process reflects
increase in die bank inventory to improve customer response times.
Accounts receivable increased by $.4 million primarily due to increased
sales. Gross days sales outstanding, computed on quarterly sales, were 55 days
at December 31, 1997, compared to 54 days at March 31, 1997.
Prepaid expenses and other assets increased by $0.4 million primarily due
to an increase in unsold stock from the employee stock purchase plan and in
amounts due from HML related to joint R&D projects.
Trade accounts payable and other accrued liabilities decreased $0.2
million primarily due to payment of previously accrued legal fees and reduction
of advances from HML related to joint R&D projects.
The Company has a Line of Credit with a bank expiring July 31, 1998, which
allows borrowing up to $3,000,000, at prime, with no collateral required. The
terms of the Line of Credit require the Company to pay a commitment fee equal
to one-quarter percent (1/4%) per annum on the average daily unused amount of
the Line of Credit. In addition, the Company is required to meet certain
financial covenants during the term of the agreement. Due to the loss for the
nine months ended December 31, 1997, the Company is not in compliance with one
of these covenants. However, the Company foresees no need to borrow against
this line, and since its inception in 1995, there have been 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 affect 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 respond quickly 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 affect the liquidity needs of the Company.
<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 10-K for its fiscal year ended March 31, 1997, and its
reports on Form 10-Q for the quarters ending June 30, 1997 and September 30,
1997.
The Company is a party to or target of lawsuits, claims, investigations,
and proceedings, including commercial and employment matters, which are being
handled and defended in the ordinary 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
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.
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits
--------
(i) Exhibit 11 Computation of Per Share Earnings
(ii) Exhibit 27 Financial Data Schedule*
(b) Reports on Form 8-K
-------------------
Not Applicable
*Exhibit on EDGAR filing only.
<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: February 10, 1998 /s/ John E. Trewin
----------------------------------------
John E. Trewin
Vice President and Chief Financial Officer
<PAGE>
EXHIBIT 11
CALIFORNIA MICRO DEVICES CORPORATION
Computation of Per Share Earnings
(Amounts in Thousands, Except Share Data)
(Unaudited)
<TABLE>
Three Months Ended Nine Months Ended
December 31, December 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net (loss) income $ (885) $ 79 $ (1,385) $ 551
======== ======== ======== ========
BASIC:
Weighted average common
shares outstanding 9,881 10,333 9,824 10,400
======== ======== ======== ========
Basic (loss) income per share $ (0.09) $ 0.01 $ (0.14) $ 0.05
======== ======== ======== ========
DILUTED:
Weighted average common
shares outstanding 9,881 10,333 9,824 10,400
Effect of dilutive securities
attributable to options - 111 - 390
-------- -------- -------- --------
Dilutive potential common
shares outstanding 9,881 10,444 9,824 10,790
======== ======== ======== ========
Dilutive (loss) income
per share $ (0.09) $ 0.01 $ (0.14) $ 0.05
======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> DEC-31-1997
<CASH> 0
<SECURITIES> 5,357
<RECEIVABLES> 4,725
<ALLOWANCES> (424)
<INVENTORY> 9,454
<CURRENT-ASSETS> 20,347<F1>
<PP&E> 25,312
<DEPRECIATION> (11,881)
<TOTAL-ASSETS> 37,425<F2>
<CURRENT-LIABILITIES> 5,872
<BONDS> 0
0
0
<COMMON> 52,950
<OTHER-SE> (29,777)
<TOTAL-LIABILITY-AND-EQUITY> 23,173
<SALES> 7,702
<TOTAL-REVENUES> 7,852<F3>
<CGS> 5,972
<TOTAL-COSTS> 5,972
<OTHER-EXPENSES> 8,595<F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 234
<INCOME-PRETAX> (885)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (885)
<EPS-PRIMARY> (0.09)<F5>
<EPS-DILUTED> (0.09)
<FN>
<F1>Includes Other assets - $409K.
<F3>Includes Technology related revenue - $150K.
<F2>Includes Restricted cash - $3,327; and Other long term assets - $409K.
<F4>Includes Research and development - $719K; Selling, marketing and
administrative - $1,904K; Interest (income) - $91K; and Other (income)/
expense - $1K.
<F5>New basic (loss) income per share.
</FN>
</TABLE>
