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 September 30, 1999
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 September 30, 1999, there were outstanding 10,238,630 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, 1999
and 1998 2
Balance Sheets
September 30, 1999 and March 31, 1999 3
Statements of Cash Flows
Six Months Ended September 30, 1999 and 1998 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 10
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
Item 7A. Quantitative And Qualitative Disclosures
About Market Risk 11
Signature 12
ii
<PAGE>
ITEM 1. Financial Statements.
--------------------
CALIFORNIA MICRO DEVICES CORPORATION
STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
Three Months Ended Six Months Ended
September 30, September 30,
------------------ -----------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 9,438 $ 8,328 $17,955 $16,560
Cost and expenses:
Cost of sales 6,639 6,238 12,849 12,787
Research and development 769 774 1,727 1,676
Selling, marketing and
administrative 2,032 1,926 4,149 3,407
-------- -------- -------- --------
Total costs and expenses 9,440 8,938 18,725 17,870
-------- -------- -------- --------
Operating (loss) (2) (610) (770) (1,310)
Other expense, net 127 160 304 305
-------- -------- -------- --------
(Loss) before income taxes (129) (770) (1,074) (1,615)
Income taxes - - - -
-------- -------- -------- --------
Net (loss) $ (129) $ (770) $(1,074) $(1,615)
======== ======== ======== ========
Basic and diluted net (loss)
per share $ (0.01) $(0.08) $(0.11) $ (0.16)
======== ======== ======== ========
Weighted average common shares
outstanding 10,154 9,985 10,136 9,984
======== ======== ======== ========
</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)
September 30, March 31,
1999 1999**
------------- -----------
<TABLE>
<S> <C> <C>
ASSETS:
Current assets:
Cash and short-term securities $ - $ 762
Short-term investments 3,373 4,171
Accounts receivable, less allowance for
doubtful accounts of $237 and $224 5,921 4,471
Inventories 8,747 8,438
Other assets 1,032 592
------- -------
Total current assets 19,073 18,434
Property, plant & equipment, net 10,325 11,540
Restricted cash* 2,968 2,900
Other long term assets 778 770
------- -------
Total assets $33,144 $33,644
======= =======
LIABILITIES & SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 3,559 $ 3,239
Accrued salaries and benefits 1,144 998
Other accrued liabilities 652 554
Deferred margin on shipments to distributors 516 576
Current maturities of long-term debt and
capital lease obligations 720 685
------- -------
Total current liabilities 6,591 6,052
Long-term debt, less current maturities 7,412 7,503
Other long-term liabilities 737 919
------- -------
Total liabilities 14,740 14,474
Shareholders' equity:
Common stock - no par value; authorized 25,000,000;
issued and outstanding 10,238,630 as of September 30, 1999
and 10,116,144 as of March 31, 1999 53,640 53,328
Accumulated deficit (35,234) (34,160)
Accumulated other comprehensive income (loss) (2) 2
Total shareholders' equity 18,404 19,170
------- -------
Total liabilities and shareholders' equity $33,144 $33,644
======= ========
</TABLE>
* Includes $2 million in restricted cash which serves as the Company's
guarantee for the CVR value included in the settlement of shareholder
class actions.
** Derived from audited financial statements
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,
----------------
1999 1998
------ ------
<TABLE>
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (1,074) $ (1,615)
Adjustments to reconcile net (loss) to net
cash provided by operating activities:
Depreciation and amortization 1,467 1,424
Net increase in inventories (309) (153)
Net (increase)/decrease in accounts receivable (1,450) 369
Net (increase) /decrease in prepaid expenses
and other current assets (440) 589
Net increase/(decrease) in trade accounts payable
and other current liabilities 564 (397)
Net increase in other long term assets (8) -
Decrease in deferred margin on distributor sales (60) (123)
------- -------
Net cash (used in) provided by operating activities (1,310) 94
------- -------
Cash flows from investing activities:
Short-term investment purchases (1,247) (2,006)
Short-term investment sales 2,040 2,896
Capital expenditures (252) (1,068)
Net change in restricted cash (68) (129)
------- -------
Net cash provided by (used in) investing activities 473 (307)
------- -------
Cash flows from financing activities:
Repayments of capital lease obligations (155) (184)
Repayments of long-term debt (82) -
Proceeds from issuance of common stock 312 30
------- -------
Net cash provided by (used in ) financing activities 75 (154)
------- -------
Net decrease in cash and cash equivalents (762) (367)
Cash and cash equivalents at beginning of period 762 480
------- -------
Cash and cash equivalents at end of period $ - $ 113
======= =======
Supplemental disclosures of cash flow information:
Interest paid $ 448 $ 449
Income taxes paid $ 1 $ -
Supplemental disclosures of non-cash investing
and financing activities:
Unrealized gain/(loss) on securities $ (4) $ (5)
</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 (which include only normal recurring
accruals) necessary to present fairly California Micro Devices Corporation's
(the "Company") financial position as of September 30, 1999, results of
operations for the three and six month periods ended September 30, 1999 and
1998, and cash flows for the six-month periods ended September 30, 1999 and
1998. Results for the quarter are not necessarily indicative of fiscal year
results.
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, 1999.
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>
<S> <C> <C>
September 30, March 31,
1999 1999
------------- ---------
Raw materials $ 393 $ 428
Work-in-process 5,999 5,263
Finished goods 2,355 2,747
------ ------
$8,747 $8,438
====== ======
</TABLE>
4. Litigation
----------
Reference should be made to the Company's filings with the SEC, including its
report on Form 10-K for its fiscal year ended March 31, 1999 and its report on
Form 10-Q for the quarter ending June 30, 1999.
From August 5, 1994 through February 16, 1995, eleven purported class action
complaints were filed against the Company in the United States District Court
for the Northern District of California. By court order dated May 20, 1997,
these actions were settled. By court order dated July 27, 1999, that
settlement was modified with respect to the terms of the Contingent Value Right
("CVR"). The subsequent order clarified the date the CVR period began, and
extended the redemption period for the CVRs from three to four years.
Pursuant to the 1997 order, the Company's contribution towards the settlement
consisted of the payment of $6,000,000 in cash and the issuance of 608,696 new
shares of the Company's common stock to the class. Each new share was
accompanied by a CVR, personal to the shareholder, that entitles the
shareholder to receive the difference between $11.50 and the highest 20 day
average trading price of the Company's
5
<PAGE>
common stock (assuming the average price is less than $11.50) over a specified
time period. The CVR expires at the end of that period or when the $11.50
price is met, whichever occurs first. In addition, the Company has put
$2,000,000 into a restricted account as a guarantee for performance under the
CVR. The cash will cease to be restricted, without interest, if and when the
CVR is extinguished. Should any payment to the class be required under the
terms of the CVR, it will be charged to equity, since the full amount of $11.50
per share was included in the $13,000,000 previously expensed.
On July 7, 1999, class counsel filed a motion requesting clarification of the
settlement agreement provisions regarding the CVR period. The settlement
agreement, an attachment to the settlement agreement, and notices that were
provided to the class members inconsistently described the commencement of the
CVR period. The instant motion, in which the Company joined, requests that the
CVR period begin December 7, 1997, and last for 4 years. The other relevant
terms of the CVR remain as stated in the settlement agreement. By order dated
July 27, 1999, this motion was granted by the Court.
The Company is a party to 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.
5. Net Loss Per Share
------------------
The Company calculates earnings per share in accordance with Financial
Accounting Standards Board Statement No. 128, "Earnings per Share." Basic
earnings per common share are computed using the weighted-average number of
common shares outstanding during the period. Diluted earnings per common share
incorporate the incremental shares issuable upon the assumed exercise of
dilutive stock options and other dilutive securities. Diluted earnings per
common share do not differ from the Company's basic earnings per common and
common equivalent share because the effect in periods with a net loss would be
antidilutive.
6. Comprehensive Income
--------------------
Comprehensive loss is principally comprised of the unrealized gains or losses
on the Company's available-for-sale securities. Comprehensive loss for the
three months ended September 30, 1999 and September 30, 1998 was $184,000 and
$736,000, respectively. For the six months ended September 30, 1999 and
September 30, 1998, the comprehensive loss was $1,076,000 and $1,582,000,
respectively.
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 September 30, 1999, increased by $1,110,000
or 13% compared to the quarter ended September 30, 1998. Unit shipments
increased 35% to 17.9 million units in the September 30, 1999 quarter compared
to 13.3 million units in the year-earlier quarter. The increase in product
sales was primarily due to increased sales of the Company's P/Active(R) family
of products to the personal computer market as well as increased sales into
networking, telecommunications, and medical markets, partially offset by
decreases in foundry sales. Thin film products accounted for approximately 70%
of product sales and approximately 80% of units shipped for both the quarters
ended September 30, 1999 and 1998. Within the thin film category, sales of the
newer thin film PAC(tm) products, including the P/Active(R) family, were
approximately 28% of total dollar shipments and approximately 41% of unit
shipments for both the quarters ended September 30, 1999 and 1998.
Product sales for the six month period ended September 30, 1999, increased by
$1,395,000, or 8% over the year-earlier period, also due to increased sales of
the Company's P/Active(R) family of products as well as increased sales into
networking, telecommunications, and medical markets. Units' shipments
increased 28% in the six-month period ended September 30, 1999, compared to the
year-earlier period. Thin film products represented approximately 68% of
product sales and approximately 78% of unit shipments, for both the six months
periods ended September 30, 1999 and 1998. Dollar sales of the newer thin film
PAC(tm) products, including P/Active(R), increased to 42% of total product
sales in the six months ended September 30, 1999 as compared to 38% in the
year-earlier period, resulting in an 18% increase in dollar sales. Unit sales
of the PAC(tm) products increased 43% in the six months ended September 30,
1999 as compared to the year-earlier period.
Gross margins increased sequentially to 30% in the September 30, 1999 quarter
compared to 27% in the June 30, 1999 quarter and 25% in the September 30, 1998
quarter due to increased sales and manufacturing efficiencies.
Research and development expense was $769,000 and $774,000 for the three months
ended September 30, 1999 and 1998, respectively and $1,727,000 and $1,676,000
for the six months ended September 30, 1999 and 1998, respectively.
Selling, marketing and administrative expenses ("S, M & A") were $2,032,000 and
$1,926,000 for the three months ended September 30, 1999 and 1998,
respectively. The increase in the 1999 quarter is primarily due to increased
commissions as a result of increased sales. S, M & A expenses were $4,149,000
and $3,407,000 for the six-month periods ended September 30, 1999 and 1998,
respectively. Administrative expenses for the six months ended September 30,
1998 were lower due to the receipt of a one-time insurance settlement in June
1998.
As a result of the factors discussed above, operating losses for the three and
six months ended September 30, 1999, were $2,000 and $770,000 compared to
operating losses of $610,000 and $1,310,000 in the year earlier periods.
Other expense, net for the three and six months ended September 30, 1999, was
$127,000 and $304,000 as compared to expense of $160,000 and $305,000 in the
year earlier periods, due to reduced interest income.
No income taxes were accrued for the three and six months ended September 30,
1999, or September 30, 1998, due to the availability of tax loss carry forwards
and current period losses.
The weighted average common shares outstanding were 10,154,000 shares and
10,136,000 shares for the three and six months ended September 30, 1999,
respectively, compared to 9,985,000 shares and 9,984,000 shares, respectively,
in the year earlier periods.
7
<PAGE>
Liquidity and Capital Resources
Net cash and cash equivalents as of September 30, 1999, was $3.4 million
compared to $4.9 million on March 31, 1999, reflecting primarily a $1.4 million
increase in accounts receivable. Receivables days sales outstanding ("DSO")
were 56 days as of September 30, 1999 as compared to 47 days at March 31, 1999.
The increase in DSO primarily reflects a higher percentage of sales in the
third month of the September 1999 quarter as compared to the March 1999
quarter. Inventory levels increased by $309,000, or 4%, due to increased work-
in-process for the higher-volume P/Active? products. Other assets increased
$440,000, to $1,032,000 at September 30, 1999, due to annual insurance payments
made during the September quarter and increases in stock from the employee
stock purchase program.
The Company has a $3.0 million revolving secured line of credit agreement that
expires on July 31, 2000. Under the terms of the line of credit, the Company
can borrow at prime plus one-half percent, collateralized by eligible
receivables. The Company also has a $1.0 million capital equipment financing
facility that expires on June 30, 2003; under the terms of this facility the
Company can borrow at prime plus 0.75%. There were no borrowings on either of
these facilities at September 30, 1999 and March 31, 1999, and during the six
month periods then ended. The Company is in compliance with its financial
covenants.
The Company expects to fund its future liquidity needs through its existing
cash balances, cash flows from operations, bank borrowings, and equipment lease
and loan financing arrangements. Depending on market conditions and the
results of operations, the Company may pursue other sources of liquidity.
The Company believes that it has sufficient financial resources to fund its
operations for at least the next twelve months.
Impact of Year 2000
Many computer systems employ a two-digit date field and could experience
problems beyond the year 1999. Also, some systems assign special meaning to
certain dates, such as 9/9/99, and the year 2000 is a leap year, which some
systems may not recognize. To address these and other related issues, the
Company evaluated its management information systems (MIS) and developed a
plan, as described herein, to convert all of its MIS applications to year 2000
compliant versions by March 31, 1999. This plan encompassed all major
categories of systems in use by the Company, including manufacturing, sales,
finance and human resources.
California Micro Devices utilizes software packages supplied by outside vendors
for all of its mission critical applications. These software vendors have
supplied the Company with versions of their software that they have certified
to be year 2000 compliant. However, the Company recognized that relying on
certification statements alone could potentially place its systems at risk if
some level of integration and system level testing was not also performed. To
ensure that these applications work in CMD's environment, the Company completed
consolidated, system-level test procedures that incorporated testing each of
the key applications. The positive results of these tests allowed the Company
to proceed with its migration to year 2000 compliant systems and the Company
was fully converted as of March 1, 1999 and has been operating on those systems
since that time. The Company's systems operated normally through the 9/9/99
date. As a result of the above, the Company has not formulated formal
contingency plans regarding conversion to year 2000 compliant critical systems.
Should any unforeseen difficulties arise in the operation of these software
packages, the Company could convert to alternate software packages.
The Company has completed its evaluation of computers and software utilized in
its manufacturing operations. Nothing has come to the attention of the Company
that would indicate a material impact of year 2000 issues on the Company's
results of operation or financial condition.
The Company has substantially completed its evaluation of the possible impact
of year 2000 issues on its key suppliers and subcontractors. Part of this
evaluation was performed based upon representations received from those key
suppliers and subcontractors. Noncompliance with year 2000 issues on the part
of key
8
<PAGE>
suppliers and subcontractors, or within the international transportation
system, could result in disruption of the Company's operations. Nothing has
come to the attention of the Company that would indicate a material impact on
the Company as a result of year 2000 issues at its key suppliers and
subcontractors. However, the potential impact and related costs are not known
at this time.
The Company's products are not date sensitive.
The out-of-pocket expenditures incurred to date related to these programs are
less than $300,000. The Company currently expects that the total incremental
expenditures of these programs will not exceed $500,000. Most of these
expenditures involve new capital equipment that will be amortized over a three
to five year period.
The costs of the project and the date on which the Company believes it will
complete the year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third-party modification plans
and other factors. There can be no assurance that these estimates will be
achieved and actual results could differ materially from those anticipated.
The Company believes that its most reasonably likely worst-case year 2000
scenarios would relate to problems with the systems of third parties rather
than with the Company's internal systems or its products. Because the Company
has less control over assessing and correcting the year 2000 problems of third
parties, the Company believes the risks are greatest in the areas of utility
services, telecommunications, transportation supply chains and critical
suppliers of materials. Due to the large number of variables involved, the
Company cannot provide an estimate of the damage it might suffer if any of
these scenarios were to occur.
Based on currently available information, management does not believe that the
year 2000 matters discussed above related to internal systems or products sold
to customers will have a material adverse impact on the Company's financial
condition or overall trends in results of operations. However, it is uncertain
to what extent the Company may be affected by such matters. In addition, there
can be no assurance that the failure to ensure year 2000 capability by a
supplier or another third party would not have a material adverse effect on the
Company.
Cautionary Statement
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Act of 1934, as amended. Except for the historical information
contained in this discussion of the business and the discussion and analysis of
financial condition and results of operations, the matters discussed herein 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, unit volumes,
intense competition within the industry, the Company's ability to attract and
retain high quality people, 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, cost reductions, year 2000 issues, 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. Actual results could differ
materially from those projected in the forward-looking statements as a result
of factors set forth above and elsewhere in this Form 10-Q.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
Reference should be made to the Company's filings with the SEC, including its
report on Form 10-K for its fiscal year ended March 31, 1999 and its report on
Form 10-Q for the quarter ending June 30, 1999.
From August 5, 1994 through February 16, 1995, eleven purported class action
complaints were filed against the Company in the United States District Court
for the Northern District of California. By court order dated May 20, 1997,
these actions were settled. By court order dated July 27, 1999, that
settlement was modified with respect to the terms of the Contingent Value Right
("CVR"). The subsequent order clarified the date the CVR period began, and
extended the redemption period for the CVRs from three to four years.
Pursuant to the 1997 order, the Company's contribution towards the settlement
consisted of the payment of $6,000,000 in cash and the issuance of 608,696 new
shares of the Company's common stock to the class. Each new share was
accompanied by a CVR, personal to the shareholder, that entitles the
shareholder to receive the difference between $11.50 and the highest 20 day
average trading price of the Company's common stock (assuming the average price
is less than $11.50) over a specified time period. The CVR expires at the end
of that period or when the $11.50 price is met, whichever occurs first. In
addition, the Company has put $2,000,000 into a restricted account as a
guarantee for performance under the CVR. The cash will cease to be restricted,
without interest, if and when the CVR is extinguished. Should any payment to
the class be required under the terms of the CVR, it will be charged to equity,
since the full amount of $11.50 per share was included in the $13,000,000
previously expensed.
On July 7, 1999, class counsel filed a motion requesting clarification of the
settlement agreement provisions regarding the CVR period. The settlement
agreement, an attachment to the settlement agreement, and notices that were
provided to the class members inconsistently described the commencement of the
CVR period. The instant motion, in which the Company joined, requests that the
CVR period begin December 7, 1997, and last for 4 years. The other relevant
terms of the CVR remain as stated in the settlement agreement. By order dated
July 27, 1999, this motion was granted by the Court.
The Company is a party to 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.
10
<PAGE>
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 August 5,
1999.
Proposal No. 1 Election of Directors. The following individuals,
who received the votes indicated, were elected as directors:
NAME FOR WITHHELD
Dr. Angel Jordan 7,576,591 937,795
Jeffrey Kalb 7,567,021 947,365
J. Daniel McCranie 7,575,620 938,766
Wade Meyercord 7,576,841 937,545
Stuart Schube 7,576,786 937,600
Dr. John Sprague 7,566,918 947,468
Donald Waite 7,577,320 937,066
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
7,627,762 876,277 10,347
Proposal No. 3 The proposal to approve the amendment of the 1995
Employee Stock Purchase Plan was approved. The results of the voting
was as follows:
FOR AGAINST WITHHELD
6,929,033 1,204,110 381,243
ITEM 6. Exhibits and Reports on Form 8-K.
Exhibit Description
(a) 4.1 1995 Employee Stock Purchase Plan - Amended As Of July 18, 1997,
August 7, 1998, and August 5, 1999.
(b) FDS Financial Data Schedule (For EDGAR Filing Only)
(c) Form 8-K None
(d) 10.11 Amended Commitment letter from Comerica Bank.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
No material changes from the Company's report on form 10K for the period ending
March 31, 1999.
11
<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 9, 1999 /s/John E. Trewin
John E. Trewin
Vice President and Chief Financial Officer
12
<PAGE>
Exhibit 4.1
CALIFORNIA MICRO DEVICES CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN AS AMENDED
JULY 18, 1997, AUGUST 7, 1998, AND AUGUST 5, 1999
1. PURPOSE.
--------
The purpose of this Plan is to provide an opportunity for Employees of
California Micro Devices Corporation (the "Corporation") and its Designated
Subsidiaries, to purchase Common Stock of the Corporation and thereby to have
an additional incentive to contribute to the prosperity of the Corporation. It
is the intention of the Corporation that the Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as
amended, and the Plan shall be construed in accordance with this intention.
2. DEFINITIONS.
------------
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the committee appointed by the Board in
accordance with Section 12 of the Plan.
(d) "Common Stock" shall mean the Common Stock of the Corporation,
or any stock into which such Common Stock may be converted.
(e) "Compensation" shall mean an Employee's wages or salary and other
amounts payable to an Employee on account of personal services rendered by the
Employee to the Corporation or a Designated Subsidiary and which are reportable
as wages or other compensation on the Employee's Form W-2, plus pre-tax
contributions of the Employee under a cash or deferred arrangement (401(k)
plan) or cafeteria plan maintained by the Corporation or a Designated
Subsidiary, but excluding, however, (1) non-cash fringe benefits, (2) special
payments as determined by the Committee (e.g., moving expenses, unused
vacation, severance pay), (3) income from the exercise of stock options or
other stock purchases and (4) any other items of Compensation as determined by
the Committee.
(f) "Corporation" shall mean California Micro Devices Corporation, a
California corporation.
(g) "Designated Subsidiary" shall mean a Subsidiary, which has been
designated by the Board as eligible to participate in the Plan.
(h) "Employee" shall mean an individual employed (within the
meaning of Code section 3401(c) and the regulations thereunder) by the
Corporation or a Designated Subsidiary.
(i) "Entry Date" shall mean the first day of each Option Period.
The first Entry Date shall be such date as is determined by the Committee.
(j) "Exercise Date" shall mean the last business day of each Exercise
Period.
(k) "Exercise Period" shall mean a six-month or other period as determined
by the Committee. The first Exercise Period during an Option Period shall
commence on the first day of such Option Period. Subsequent Exercise Periods,
if any, shall run consecutively after the termination of the preceding Exercise
Period. The last Exercise Period in an Option Period shall terminate on the
last day of such Option Period.
(l) "Fair Market Value" shall mean the value of one (1) share of Common
Stock on the relevant date, determined as follows:
(i) If the shares are traded on an exchange or on the Nasdaq Stock
Market, the reported "closing price" on the next preceding
trading day (provided that in the case of the first Entry Date,
the Fair Market Value shall be the initial price to the
public in the Company's initial public offering);
(ii) If the shares are traded over-the-counter on the NASDAQ System
(other than on the Nasdaq Stock Market), the mean between the bid
and the ask prices on said System at the close of business on the
next preceding trading day (provided that in the case of the
first Entry Date, the Fair Market Value shall be the initial
price to the
13
<PAGE>
public in the Company's initial public offering); and
(iii) If neither (1) nor (2) applies, the fair market value as
determined by the Committee in good faith. Such determination
shall be conclusive and binding on all persons.
(m) "Option Period" shall mean a period of up to twenty-seven (27) months
as determined by the Committee.
(n) "Participant" shall mean a participant in the Plan as described in
Section 4 of the Plan.
(o) "Plan" shall mean this employee stock purchase plan.
(p) "Subsidiary" shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, as
described in Code section 424(f).
3. ELIGIBILITY.
------------
Any Employee regularly employed on a full-time basis by the Corporation or
by any Designated Subsidiary on an Entry Date shall be eligible to participate
in the Plan with respect to the Option Period commencing on such Entry Date,
provided that the Committee may establish administrative rules requiring that
employment commence some minimum period (e.g., one pay period) prior to an
Entry Date to be eligible to participate with respect to that Entry Date. An
Employee shall be considered employed on a full-time basis unless his or her
customary employment is less than 20 hours per week or five months per year.
No Employee may participate in the Plan if immediately after an option is
granted the Employee owns or is considered to own (within the meaning of
section 424(d) of the Code), shares of stock, including stock which the
Employee may purchase by conversion of convertible securities or under
outstanding options granted by the Corporation, possessing five percent (5%) or
more of the total combined voting power or value of all classes of stock of the
Corporation or of any of its Subsidiaries. All Employees who participate in
the Plan shall have the same rights and privileges under the Plan except for
differences which may be mandated by local law and which are consistent with
Code section 423(b)(5). The Committee may impose restrictions on eligibility
and participation of Employees who are officers and directors to facilitate
compliance with federal or state securities laws.
4. PARTICIPATION.
--------------
4.1 An Employee who is eligible to participate in the Plan in accordance
with Section 3 may become a Participant by filing, on a date prescribed by the
Committee prior to an applicable Entry Date, a completed payroll deduction
authorization and Plan enrollment form provided by the Corporation. An
eligible Employee may authorize payroll deductions at the rate of any whole
percentage of the Employee's Compensation, not to exceed fifteen percent (15%)
of the Employee's Compensation, or such lesser percentage as specified by the
Committee as applied to an Entry Date or Option Period. All payroll deductions
may be held by the Corporation and commingled with its other corporate funds.
No interest shall be paid or credited to the Participant with respect to such
payroll deductions except where required by local law as determined by the
Committee. A separate bookkeeping account for each Participant shall be
maintained by the Corporation under the Plan and the amount of each
Participant's payroll deductions shall be credited to such account. A
Participant may not make any additional payments into such account.
4.2 Under procedures established by the Committee, a Participant may
suspend or discontinue participation in the Plan or may reduce the rate of his
or her payroll deductions at any time during an Offering Period by completing
and filing a new payroll deduction authorization and Plan enrollment form with
the Corporation, provided that the Committee may, in its discretion, impose
restrictions on a Participant's ability to change the rate of payroll
deductions. A Participant may increase his or her rate of payroll deductions
only effective on an Entry Date by filing a new payroll deduction authorization
and Plan enrollment form. If a new payroll deduction authorization and Plan
enrollment form is not filed with the Corporation, the rate of payroll
deductions shall continue at the originally elected rate throughout the Option
Period unless the Committee determines to change the permissible rate.
If a Participant suspends participation during an Exercise Period,
his or her accumulated payroll deductions will remain in the Plan for
purchase of shares as specified in Section 6 on the following Exercise
Date, but the Participant will not again participate until he or she
completes a new payroll deduction
14
<PAGE>
authorization and Plan enrollment form. The Committee may establish rules
limiting the frequency with which Participants may suspend and resume payroll
deductions under the Plan and may impose a waiting period on Participants
wishing to resume suspended payroll deductions. If a Participant discontinues
participation in the Plan, the amount credited to the Participant's individual
account shall be paid to the Participant without interest (except where
required by local law). In the event any Participant terminates employment
with the Corporation or any Subsidiary for any reason (including death) prior
to the expiration of an Option Period, the Participant's participation in the
Plan shall terminate and all amounts credited to the Participant's account
shall be paid to the Participant or the Participant's estate without interest
(except where required by local law). Whether a termination of employment has
occurred shall be determined by the Committee. The Committee may also
establish rules regarding when leaves of absence or change of employment status
(e.g., from full-time to part-time) will be considered to be a termination of
employment, and the Committee may establish termination of employment
procedures for this Plan which are independent of similar rules established
under other benefit plans of the Corporation and its Subsidiaries.
In the event of a Participant's death, any accumulated payroll deductions
will be paid, without interest, to the estate of the Participant.
5. OFFERING.
---------
5.1 The maximum number of shares of Common Stock which may be issued
pursuant to the Plan shall be Nine Hundred Sixty Thousand (960,000) shares.
The Committee may designate any amount of available shares for offering for any
Option Period determined pursuant to Section 5.2.
5.2 Each Option Period, Entry Date and Exercise Period shall be
determined by the Committee. The Committee shall have the power to change the
duration of future Option Periods or future Exercise Periods, and to determine
whether or not to have overlapping Option Periods, with respect to any
prospective offering, without shareholder or Board approval.
5.3 With respect to each Option Period, each eligible Employee who has
elected to participate as provided in Section 4.1 shall be granted an option to
purchase that number of shares of Common Stock which may be purchased with the
payroll deductions accumulated on behalf of such Employee (assuming payroll
deductions at a rate of 15% of Compensation) during each Exercise Period within
such Option Period at the purchase price specified in Section 5.4 below;
provided, however, (1) in no event shall the Employee be entitled to accrue
rights to purchase shares under the Plan (and all other employee stock purchase
plans, as defined in Code section 423, of the Corporation and its subsidiaries)
at a rate which exceeds $25,000 of the Fair Market Value of such stock
(determined at the time the option is granted) for any calendar year in which
such option is outstanding at any time, and (2) the maximum shares subject to
any option shall in no event exceed 10,000.
5.4 The option price under each option shall be the lower of: (i) eighty-
five percent (85%) of the Fair Market Value of the Common Stock on the Entry
Date on which an option is granted, or (ii) eighty-five percent (85%) of the
Fair Market Value on the Exercise Date on which the Common Stock is purchased.
5.5 If the total number of shares of Common Stock for which options
granted under the Plan are exercisable exceeds the maximum number of shares
offered on any Entry Date, the number of shares which may be purchased under
options granted on the Entry Date shall be reduced on a pro rata basis in as
nearly a uniform manner as shall be practicable and equitable. In this event,
payroll deductions shall also be reduced or refunded accordingly. If an
Employee's payroll deductions during any Exercise Period exceeds the purchase
price for the maximum number of shares permitted to be purchased under Section
5.3, the excess shall be refunded to the Participant without interest (except
where otherwise required by local law).
5.6 In the event that the Fair Market Value of the Corporation's Common
Stock is lower on the first day of an Exercise Period within an Option Period
(subsequent "Reassessment Date") than it was on Entry Date for such Option
Period, all Employees participating in the Plan on the Reassessment Date shall
be deemed to have relinquished the unexercised portion of the option granted on
the Entry Date and to have enrolled in and received a new option commencing on
such Reassessment Date, unless the Committee has
15
<PAGE>
determined not to permit overlapping Option Periods or to restrict such
transfers to lower price Option Periods.
6. PURCHASE OF STOCK.
------------------
Upon the expiration of each Exercise Period, a Participant's option
shall be exercised automatically for the purchase of that number of full shares
of Common Stock which the accumulated payroll deductions credited to the
Participant's account at that time shall purchase at the applicable price
specified in Section 5.4.
7. PAYMENT AND DELIVERY.
---------------------
Upon the exercise of an option, the Corporation shall deliver to the
Participant the Common Stock purchased and the balance of any amount of
payroll deductions credited to the Participant's account not used for
the purchase. The Committee may permit or require that shares be deposited
directly with a broker designated by the Participant (or a broker selected by
the Committee), and the Committee may utilize electronic or automated methods
of share transfer. To the extent the unused cash balance represents a
fractional share, the unused cash balance credited to the Participant's account
shall be carried over to the next Exercise Period, if the Participant is also a
Participant in the Plan at that time or refunded to the Participant, as
determined by the Committee. The Corporation shall retain the amount of
payroll deductions used to purchase Common Stock as full payment for the Common
Stock and the Common Stock shall then be fully paid and non-assessable. No
Participant shall have any voting, dividend, or other stockholder rights with
respect to shares subject to any option granted under the Plan until the option
has been exercised and shares issued.
8. RECAPITALIZATION.
-----------------
If after the grant of an option, but prior to the purchase of Common Stock
under the option, there is any increase or decrease in the number of
outstanding shares of Common Stock because of a stock split, stock dividend,
combination or recapitalization of shares subject to options, the number of
shares to be purchased pursuant to an option, the share limit of Section 5.3
and the maximum number of shares specified in Section 5.1 shall be
proportionately increased or decreased, the terms relating to the purchase
price with respect to the option shall be appropriately adjusted by the
Committee, and the Committee shall take any further actions which, in the
exercise of its discretion, may be necessary or appropriate under the
circumstances.
The Committee, if it so determines in the exercise of its sole discretion,
also may adjust the number of shares specified in Section 5.1, as well as the
price per share of Common Stock covered by each outstanding option and the
maximum number of shares subject to any individual option, in the event the
Corporation effects one or more reorganizations, recapitalizations, spin-offs,
split-ups, rights offerings or reductions of shares of its outstanding Common
Stock.
The Committee's determinations under this Section 8 shall be conclusive and
binding on all parties.
9. MERGER, LIQUIDATION, OTHER CORPORATION TRANSACTIONS.
----------------------------------------------------
In the event of the proposed liquidation or dissolution of the Corporation,
the Option Period will terminate immediately prior to the consummation of such
proposed transaction, unless otherwise provided by the Committee in its sole
discretion, and all outstanding options shall automatically terminate and the
amounts of all payroll deductions will be refunded without interest to the
Participants.
In the event of a proposed sale of all or substantially all of the assets of
the Corporation, or the merger or consolidation of the Corporation with or into
another corporation, then in the sole discretion of the Committee, (1) each
option shall be assumed or an equivalent option shall be substituted by the
successor corporation or parent or subsidiary of such successor corporation,
(2) a date established by the Committee on or before the date of consummation
of such merger, consolidation or sale shall be treated as an Exercise
16
<PAGE>
Date, and all outstanding options shall be deemed exercisable on such date or
(3) all outstanding options shall terminate and the accumulated payroll
deductions shall be returned to the Participants.
10. TRANSFERABILITY.
----------------
Options granted to Participants may not be voluntarily or involuntarily
assigned, transferred, pledged, or otherwise disposed of in any way, and any
attempted assignment, transfer, pledge, or other disposition shall be null and
void and without effect. If a Participant in any manner attempts to transfer,
assign or otherwise encumber his or her rights or interest under the Plan,
other than as permitted by the Code, such act shall be treated as an election
by the participant to discontinue participation in the Plan pursuant to
Section 4.2.
11. AMENDMENT OR TERMINATION OF THE PLAN.
-------------------------------------
11.1 The Plan shall continue until February 9, 2005, unless previously
terminated in accordance with Section 11.2.
11.2 The Board may, in its sole discretion, insofar as permitted by law,
terminate or suspend the Plan, or revise or amend it in any respect whatsoever,
except that, without approval of the stockholders, no such revision or
amendment shall:
(a) materially increase the number of shares subject to the Plan other
than an adjustment under Section 8 of the Plan;
(b) materially modify the requirements as to eligibility for
participation in the Plan;
(c) materially increase the benefits accruing to Participants;
(d) reduce the purchase price specified in Section 5.4, except as
specified in Section 8;
(e) extend the term of the Plan beyond the date specified in Section
11.1; or
(f) amend this Section 11.2 to defeat its purpose.
12. ADMINISTRATION.
---------------
The Plan shall be administered by a Committee, which shall consist of at
least three members appointed by the Board. The Committee shall have full
power and authority to promulgate any rules and regulations, which it deems
necessary for the proper administration of the Plan, to interpret the
provisions and supervise the administration of the Plan, and to take all action
in connection with administration of the Plan as it deems necessary or
advisable. Decisions of the Committee shall be made by a majority of its
members and shall be final and binding upon all participants. Any decision
reduced to writing and signed by a majority of the members of the Committee
shall be fully effective as if it had been made at a meeting of the Committee
duly held. The Corporation shall pay all expenses incurred in the
administration of the Plan. No Committee member shall be liable for any action
or determination made in good faith with respect to the Plan or any option
granted thereunder.
13. COMMITTEE RULES FOR FOREIGN JURISDICTIONS.
------------------------------------------
The Committee may adopt rules or procedures relating to the operation and
administration of the Plan in non-United States jurisdictions to accommodate
the specific requirements of local laws and procedures. Without limiting the
generality of the foregoing, the Committee is specifically authorized to adopt
rules and procedures regarding handling of payroll deductions, conversion of
local currency, withholding procedures and handling of stock certificates,
which vary with local requirements.
14. SECURITIES LAWS REQUIREMENTS.
-----------------------------
The Corporation shall not be under any obligation to issue Common Stock upon
the exercise of any option unless and until the Corporation has determined
that: (i) it and the Participant have taken all actions required to register
the Common Stock under the Securities Act of 1933, or to perfect an exemption
from the registration requirements thereof; (ii) any applicable listing
requirement of any stock exchange on which the
17
<PAGE>
Common Stock is listed has been satisfied; and (iii) all other applicable
provisions of state and federal law have been satisfied.
15. GOVERNMENTAL REGULATIONS.
-------------------------
This Plan and the Corporation's obligation to sell and deliver
shares of its stock under the Plan shall be subject to the approval of
any governmental authority required in connection with the Plan or the
authorization, issuance, sale, or delivery of stock hereunder.
16. NO ENLARGEMENT OF EMPLOYEE RIGHTS.
----------------------------------
Nothing contained in this Plan shall be deemed to give any Employee
the right to be retained in the employ of the Corporation or any
Designated Subsidiary or to interfere with the right of the Corporation
or Designated Subsidiary to discharge any Employee at any time.
17. GOVERNING LAW.
--------------
This Plan shall be governed by California law, but shall be
interpreted to be consistent with the requirements of any employee
stock purchase plan under Code section 423.
18. EFFECTIVE DATE.
---------------
This Plan shall be effective February 10, 1995, subject to approval
of the shareholders of the Corporation within 12 months of its adoption
by the Board of Directors.
18
<PAGE>
Exhibit 10.11
COMERICA
MODIFICATION TO LOAN & SECURITY AGREEMENT
This First Modification to Loan & Security Agreement (this "Modification")
is entered into by and between ("Borrower") California Micro Devices
Corporation and COMERICA BANK-CALIFORNIA ("Bank") as of this September 23,
1999, at San Jose, California.
RECITALS
A. Bank and Borrower have previously entered into a Loan & Security
Agreement (Accounts & Inventory) (the "Agreement") dated April 14, 1999.
B. Borrower has requested, and Bank has agreed, to modify the Agreement as
set forth below.
AGREEMENT
For good and valuable consideration, the parties agree as set forth below:
Incorporation by Reference. The Agreement as modified hereby and the
---------------------------
Recitals are incorporated herein by this reference:
Section 6.17 Borrower shall maintain the following financial ratios and
covenants on a consolidated and non-consolidated basis:
b. Tangible Effective Net Worth in an amount not less than $14,500,000.00
increasing by 75% of quarterly profits and by 100% of any new equity or
subordinated debt raised.
f. A ratio of Cash Flow to Fixed Charges of not less that 1:50:1.00
beginning with the quarter ending 03/31/2000, on a rolling two quarter basis.
Legal Effect Except as specifically set forth in this Modification, all of
------------
the terms and conditions of the Agreement remain in full force and effect.
Integration. This is an integrated Modification and supersedes all prior
------------
negotiations and agreements regarding the subject matter hereof. All
amendments hereto must be in writing and signed by the parties.
IN WITNESS WHEREOF, the parties have agreed as of the date first set forth
above.
California Micro Devices Corporation COMERICA BANK-CALIFORNIA
By: /s/ John E. Trewin By: /s/ Alan Jepsen
John E. Trewin
Title: Vice President & CFO Alan Jepsen, Vice President
19
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] QTR-2
[FISCAL-YEAR-END] MAR-31-2000
[PERIOD-END] SEP-30-1999
[CASH] $ -
[SECURITIES] 3,373
[RECEIVABLES] 6,158
[ALLOWANCES] (237)
[INVENTORY] 8,747
[CURRENT-ASSETS] $ 19,073<F1>
[PP&E] 27,272
[DEPRECIATION] (16,947)
[TOTAL-ASSETS] $ 33,144<F2>
[CURRENT-LIABILITIES] $ 6,591
[BONDS] 0
[COMMON] 53,640
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] (35,234)
[TOTAL-LIABILITY-AND-EQUITY] $ 33,144
[SALES] $ 9,438
[TOTAL-REVENUES] 9,438
[CGS] 6,639
[TOTAL-COSTS] 6,639
[OTHER-EXPENSES] 2,710<F3>
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] $ 218
[INCOME-PRETAX] (129)
[INCOME-TAX] 0
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (129)
[EPS-BASIC] (0.01)
[EPS-DILUTED] (0.01)
<FN>
<F1>Includes - Other accounts receivable - $458K; prepaid expense - $574K.
<F2>Includes - Restricted cash - $2,968K; Deposits and other assets - $490k;
Debt issuance cost - $288K.
<F3>Includes - Research and development - $769K; Selling, marketing,
and administrative - $2,032K; Interest Income ($99k);
other expense $8k.
</FN>
</TABLE>
