<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 31, 2000
REGISTRATION NUMBER 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CALIFORNIA MICRO DEVICES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 94-2672609
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
215 TOPAZ STREET, MILPITAS, CALIFORNIA 95035-5430; TELEPHONE: (408) 263-3214
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
SCOTT HOVER-SMOOT, ESQ.
SECRETARY AND GENERAL COUNSEL
CALIFORNIA MICRO DEVICES CORPORATION
215 TOPAZ STREET, MILPITAS, CALIFORNIA 95035-5430; TELEPHONE: (408) 263-3214
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
RICHARD A. BOEHMER, ESQ. VICTOR A. HEBERT, ESQ.
O'MELVENY & MYERS LLP HELLER EHRMAN WHITE & MCAULIFFE LLP
400 SOUTH HOPE STREET 333 BUSH STREET
LOS ANGELES, CALIFORNIA 90071-2899 SAN FRANCISCO, CALIFORNIA 94104
TELEPHONE: (213) 430-6643 TELEPHONE: (415) 772-6000
FAX: (213) 430-6407 FAX: (415) 772-6268
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.
[ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SHARES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) REGISTRATION FEE(2)
-------------------------------------------------------------------------------------------------------------------------
Common Stock, no par
value.................. 1,725,000 $23.97 $41,348,250 $10,916
-------------------------------------------------------------------------------------------------------------------------
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</TABLE>
(1) Includes shares subject to the underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee. The
registration fee has been calculated in accordance with Rule 457(c) under
the Securities Act based upon the average of the high and low prices
reported on the Nasdaq National Market for August 28, 2000.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED AUGUST 31, 2000
PROSPECTUS
1,500,000 SHARES
[CMDC LOGO]
COMMON STOCK
-------------------------
We are offering 1,500,000 shares of our common stock. Our common stock is
traded on the Nasdaq National Market under the symbol "CAMD." On August 30,
2000, the last reported sale price of our common stock on the Nasdaq National
Market was $24.00 per share.
-------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 4.
-------------------------
<TABLE>
<CAPTION>
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PER SHARE TOTAL
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<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discount....................................... $ $
Proceeds, before expenses, to California Micro Devices...... $ $
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</TABLE>
The underwriters may also purchase up to an additional 225,000 shares from
certain selling shareholders and us at the public offering price, less the
underwriting discount, within 30 days from the date of this prospectus, to cover
over-allotments.
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved of these securities or determined if this prospectus
is truthful or complete. It is illegal for any person to tell you otherwise.
-------------------------
Needham & Company, Inc.
A.G. Edwards & Sons, Inc.
Punk, Ziegel & Company
The date of this prospectus is , 2000
<PAGE> 3
[Inside Front Cover Graphic:
Approximately 1 1/2 inches from the top of the page a caption reading:
"California Micro Devices (CAMD)."
Approximately 1/2 inch below the above caption, a caption reading:
"Standard termination and filtering solutions for personal computers."
Immediately below the above caption, three circular graphics in a triangular
formation depicting: (upper graphic) various personal computer components and
modules, (lower left graphic) various electronic equipment including cellular
telephones, satellite dishes, answering machine and pager, and (lower right
graphic) various computer networking and server equipment, circuit board and
components.
Captions surrounding the above upper graphic reading: "Computers and Servers,"
"microprocessors," "resistor networks," and "resistor-capacitor filters."
Caption to the upper left of the above lower left graphic reading:
"Communications and Consumer."
Caption to the upper right of the above lower right graphic reading:
"electrostatic discharge protection devices."
Caption to the lower right of the above lower left graphic reading: "Networking
and Infrastructure."
Immediately below the above graphics, captions reading: "capacitor arrays,"
"resistor and resistor-capacitor termination networks," "micro power operational
amplifiers," "schottky diode arrays," "asynchronous communications interface
adapters," and "dual tone multifrequency receivers and transceivers." Captions
end approximately 2/3 from the top of the page.
Below the above captions and approximately 1 inch from the bottom of the page,
the Company's triangular logo and the caption "California Micro Devices."
A dark line frame begins at the top of the page and frames the border of the top
left side of the page. The line then crosses to the lower right side of the page
beneath the captions, runs to the bottom of the page level with the Company's
triangular logo and caption, and ceases.]
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 1
Risk Factors................................................ 4
Special Note Regarding Forward-Looking Statements........... 13
Use of Proceeds............................................. 13
Price Range of Common Stock................................. 13
Dividend Policy............................................. 14
Capitalization.............................................. 14
Selected Financial Data..................................... 15
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 16
Business.................................................... 21
Management.................................................. 32
Principal Shareholders...................................... 34
Description of Capital Stock................................ 35
Underwriting................................................ 36
Legal Matters............................................... 37
Experts..................................................... 37
Where You Can Find More Information......................... 38
Index to Financial Statements............................... F-1
</TABLE>
In this prospectus, "CAMD," "we," "us" and "our" refer to California Micro
Devices Corporation. All trademarks appearing in this prospectus are the
property of their respective owners.
You should rely only on the information contained in or incorporated by
reference in this prospectus. We have not, and the underwriters have not,
authorized any other person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. We are not, and the underwriters are not, making an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted.
i
<PAGE> 5
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company and the common stock being sold in this
offering, including "Risk Factors" and our financial statements and related
notes, included elsewhere in this prospectus and incorporated by reference.
CALIFORNIA MICRO DEVICES
We are a leading supplier of thin film integrated passive devices and
complementary analog semiconductors. We focus our expertise on providing high
volume, cost effective, standard and custom solutions for computer systems and
peripherals, high performance networking, and the mobile communications and
telecommunications infrastructure markets. Our customers include original
equipment manufacturers, such as the Acer Group, Cisco Systems Inc., Guidant
Corporation, Intel Corporation, ITI Limited, Nortel Networks Corporation,
Samsung Electronics Co Ltd. and 3Com Corporation, and contract manufacturers,
such as Celestica Inc. and Solectron Corporation.
Passive components -- principally resistors and capacitors -- are used in
virtually all electronic products. Resistors impede the flow of electrical
current and dissipate electrical energy as heat. Capacitors store electrical
charges and pass alternating current while blocking direct current. Individually
and in combination, resistors and capacitors are used to filter, condition,
shape, bias, terminate and improve the characteristics of the electrical signals
used and transmitted by active components such as microprocessors, application
specific integrated circuits, dynamic random access memories and analog
integrated circuits.
Our integrated passive devices replace functional clusters of discrete
passive components that are used for signal filtering and termination at buses
and ports, wave shaping, clock signal filtering, biasing and other traditional
discrete passive component functions. These integrated passive devices are
significantly smaller and provide more functionality than competitive discrete
products.
The demand for discrete and integrated passive components is being driven
by both the increasing number of components per electronic system, and the
increasing number of systems being produced. For example, the number of passive
components in a personal computer increased from a few hundred in the 486
generation of personal computers to as many as 1,000 in the Pentium III series
of personal computers. Similar trends are occurring in mobile phones where
multiple bands, new functionality and higher frequencies are being incorporated,
driving the number of passive components from 300 in older analog phones to as
many as 600 in some current devices. According to a 1998 report by Frost &
Sullivan, the worldwide market for passive components included over $5.0 billion
for resistors and resistor networks and over $9.0 billion for capacitors.
Integrated passive components are increasingly being used to address this
market, particularly in the personal computer, networking and mobile phone
segments.
We meet the needs of our customers through our innovative approach of
integrating thin film passive components and our patented technique of combining
these integrated passive components with semiconductors. Our thin film
technology allows us to combine multiple resistors, capacitors, diodes and other
components into a single, high density device we market under the brand name
"P/Active". We also design and manufacture analog semiconductors that provide
power management functions, and offer low voltage, micro-power operational
amplifiers that we can enhance by adding thin film passive devices. We believe
our products provide the following key benefits to our customers:
- smaller size for miniaturization and portability;
- increased performance at higher frequencies;
- improved reliability;
- improved electrostatic discharge protection;
- shorter time to market;
- lower total cost solutions; and
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<PAGE> 6
- lower power consumption and enhanced power management.
Our objective is to use our leadership position in the design and
manufacture of integrated passive devices to capture a greater share of the
market currently served by discrete passive components. We also intend to become
a leading manufacturer of analog semiconductors that are complementary to our
integrated passive devices. Our strategy includes the following key elements:
- leverage our technology leadership position;
- focus on high volume solutions;
- expand our sales and marketing efforts internationally and domestically;
- develop highly responsive product development and production
capabilities;
- develop standard products to shorten customer time to market; and
- educate the market on our value proposition.
California Micro Devices was incorporated in 1980, and has been a public
company since 1986. Our principal executive offices are located at 215 Topaz
Street, Milpitas, California 95035-5430, and our telephone number is (408)
263-3214.
THE OFFERING
Common stock offered by California Micro
Devices................................. 1,500,000 shares
Common stock to be outstanding after the
offering................................ 12,714,317 shares
Use of proceeds......................... Repayment of approximately $7.0
million of outstanding indebtedness
and for general corporate purposes,
including capital expenditures and
possible acquisitions. See "Use of
Proceeds."
Nasdaq National Market symbol........... CAMD
The foregoing information assumes that the underwriters do not exercise the
option that we and certain selling shareholders have granted to them to purchase
additional shares in the offering and is based on the shares outstanding as of
August 15, 2000. It excludes 2,058,391 shares of common stock subject to
outstanding options with a weighted average exercise price of $6.73 per share,
373,191 shares of common stock available for future grants under our stock
option plans and 353,699 shares of common stock available under our employee
stock purchase plan.
2
<PAGE> 7
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR ENDED MARCH 31, JUNE 30,
--------------------------- ----------------
1998 1999 2000 1999 2000
------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................................ $33,043 $33,617 $43,763 $8,517 $14,876
Cost of sales................................... 24,701 24,730 29,571 6,209 9,600
Gross profit.................................... 8,342 8,887 14,192 2,308 5,276
Operating income (loss)......................... (2,575) (2,098) 1,103 (768) 1,660
Net income (loss)............................... (3,005) (2,771) 632 (945) 1,467
Net income (loss) per common share:
Basic........................................ $ (0.30) $ (0.28) $ 0.06 $(0.09) $ 0.13
Diluted...................................... $ (0.30) $ (0.28) $ 0.05 $(0.09) $ 0.12
Weighted average common shares outstanding:
Basic........................................ 9,971 10,017 10,324 10,117 11,104
Diluted...................................... 9,971 10,017 11,642 10,117 12,523
SUPPLEMENTAL DATA:
Depreciation and amortization................... $ 2,852 $ 2,945 $ 2,899 $ 757 $ 745
Capital expenditures............................ 1,132 1,544 1,981 99 1,585
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 2000
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ACTUAL AS ADJUSTED
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<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments......... $7,469 $33,954
Working capital........................................... 19,860 47,626
Total assets.............................................. 40,944 67,429
Total debt, including current portion..................... 9,795 2,750
Shareholders' equity...................................... 24,698 58,228
</TABLE>
The information under "As Adjusted" in the balance sheet data above
reflects the receipt and application of the net proceeds from the sale of
1,500,000 shares of common stock by us in this offering as described under "Use
of Proceeds," at an assumed public offering price of $24.00 per share.
3
<PAGE> 8
RISK FACTORS
Any investment in our common stock involves a significant degree of risk.
You should carefully consider the following risks as well as the other
information contained in this prospectus. If any of the following risks actually
occur, our business could be harmed, the trading price of our common stock could
decline, and you may lose all or part of your investment.
WE INCURRED LOSSES IN OUR FISCAL YEARS 1998 AND 1999 AND WE MAY BE UNABLE TO
SUSTAIN PROFITABILITY.
We experienced losses for each quarter and fiscal year from June 30, 1998
through September 30, 1999. We incurred net losses of $2.8 million for our
fiscal year ended March 31, 1999 and $594,000 for the nine months ended December
31, 1999. Our accumulated deficit at June 30, 2000 was $32.1 million. Although
our revenues have grown in recent quarters, and profits in the quarters ended
December 31, 1999 and March 31, 2000 were sufficient to make the fiscal year
ended March 31, 2000 profitable, and we were profitable for the quarter ended
June 30, 2000, we cannot assure you that we will be able to sustain revenue
growth and profitability.
OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY BECAUSE OF A NUMBER OF
FACTORS, MANY OF WHICH ARE BEYOND OUR CONTROL.
Our operating results may fluctuate significantly. Some of the factors that
affect our quarterly and annual operating results, many of which are difficult
to control or predict, are:
- the reduction, rescheduling or cancellation of orders by customers;
- fluctuations in the timing and amount of customer requests for product
shipments;
- fluctuations in the manufacturing output, yields and inventory levels of
our suppliers;
- changes in the mix of products that our customers purchase;
- our ability to introduce new products on a timely basis;
- the announcement or introduction of products by our competitors;
- the availability of third-party assembly capacity and raw materials;
- competitive pressures on selling prices;
- market acceptance of our products;
- general conditions in the computer, telecommunications, networking, and
general semiconductor and passives industries; and
- general economic conditions.
OUR MARKETS ARE SUBJECT TO RAPID TECHNOLOGICAL CHANGE AND OUR SUCCESS DEPENDS ON
OUR ABILITY TO DEVELOP AND INTRODUCE NEW PRODUCTS.
The markets for our products are characterized by:
- rapidly changing technologies;
- changing customer needs;
- frequent new product introductions and enhancements;
- increased integration with other functions; and
- rapid product obsolescence.
To develop new products for our target markets, we must develop, gain
access to, and use leading technologies in a cost-effective and timely manner,
and we must continue to expand our technical and
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<PAGE> 9
design expertise. In addition, we must have our products designed into our
customers' future products and maintain close working relationships with key
customers in order to develop new products that meet their changing needs.
Products for some applications are based on new and continually evolving
industry standards. Our ability to compete will depend on our ability to
identify and ensure compliance with these industry standards. As a result, we
could be required to invest significant time and effort and to incur significant
expense to redesign our products to ensure compliance with relevant standards.
We may not be able to identify new product opportunities, successfully
develop and bring to market new products, achieve design wins or respond
effectively to new technological changes or product announcements by our
competitors. In addition, we may not be successful in developing or using new
technologies or in developing new products or product enhancements that achieve
market acceptance. Our pursuit of necessary technological advances may require
substantial time and expense. Failure in any of these areas could harm our
operating results.
OUR FUTURE SUCCESS DEPENDS IN PART ON THE CONTINUED SERVICE OF OUR KEY
ENGINEERING AND MANAGEMENT PERSONNEL AND OUR ABILITY TO IDENTIFY, HIRE AND
RETAIN ADDITIONAL PERSONNEL.
There is intense competition for qualified personnel in the semiconductor
industry, in particular the highly skilled design, applications and test
engineers involved in the development of new analog integrated circuits.
Competition is especially intense in the San Francisco Bay area, where our
corporate headquarters and our Milpitas factory are located, as well as in the
Tempe, Arizona, area, where our other factory is located. We may not be able to
continue to attract and retain engineers or other qualified personnel necessary
for the development of our business or to replace engineers or other qualified
personnel who may leave our employ in the future. Any growth is expected to
place increased demands on our resources and will likely require the addition of
additional management and engineering personnel, and the development of
additional expertise by existing management personnel. Loss of the services of,
or failure to recruit, key engineers or other key technical and management
personnel, or key senior management, could harm our business.
THE CYCLICALITY OF THE SEMICONDUCTOR INDUSTRY COULD RESULT IN PRICING PRESSURES
FOR OUR PRODUCTS THAT COULD LOWER OUR NET SALES AND OPERATING MARGINS AND HARM
OUR PROFITABILITY.
We are dependent on the semiconductor industry. The semiconductor industry
in general has historically experienced significant downturns and wide
fluctuations in supply and demand. The industry has also experienced significant
fluctuations in anticipation of changes in general economic conditions. This has
caused significant variances in product demand, production capacity and rapid
erosion of average selling prices. Industry-wide fluctuations in the future
could result in pricing pressure on our products and lower demand for our
products that could harm our operating margins and net sales.
WE DO OUR OWN WAFER FABRICATION AND DO NOT HAVE ALTERNATE SOURCES FOR MOST OF
OUR PROCESSES.
We operate our own semiconductor and thin film wafer manufacturing
facilities. While some of the processes from our Milpitas factory can be run in
our Tempe facility, and vice versa, in general our processes are unique to the
factory in which they are being produced. We provide these fabrication
facilities with rolling forecasts of our production requirements. However, the
ability of each facility to provide wafers to us is limited by the foundry's
available capacity and influenced by rapid changes in mix. Accordingly, we
cannot be certain that these facilities will be able to supply sufficient
capacity to satisfy our requirements. In addition, much of our equipment has
been utilized for a long time, and can be subject to unscheduled downtime. Other
significant risks associated with our wafer manufacturing include:
- the lack of assured wafer supply, chemicals, or other materials, and
control over delivery schedules;
- the unavailability of, or delays in obtaining access to, key process
technologies;
- the unavailability of, or delays in the ability to hire and train,
sufficient manufacturing personnel;
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<PAGE> 10
- the variability in manufacturing yields and productivity; and
- the availability of spare parts and maintenance service for aging
equipment.
For example, recently we began to expand our operations in Tempe and have
encountered operational problems affecting our production yields which are
primarily related to the shortage of properly trained personnel in the Tempe
area.
WE COULD EXPERIENCE A SUBSTANTIAL DELAY OR INTERRUPTION IN THE SHIPMENT OF OUR
PRODUCTS OR AN INCREASE IN OUR COSTS DUE TO MANY REASONS, INCLUDING:
- a sudden, unanticipated demand for our products;
- a manufacturing disruption experienced by one or more of our wafer
fabrication facilities;
- errors in fabrication or defects in raw materials;
- the time required, or the inability to identify or qualify alternative
manufacturing sources for existing or new products in the case of
disruption; or
- failure of our suppliers to obtain the raw materials and equipment used
in the production of our integrated circuits and integrated passives.
THE MARKETS IN WHICH WE PARTICIPATE ARE INTENSELY COMPETITIVE AND OUR PRODUCTS
ARE NOT SOLD PURSUANT TO LONG TERM CONTRACTS.
Our target markets are intensely competitive. Our ability to compete
successfully in our target markets depends on the following factors:
- designing new products that implement new technologies;
- subcontracting the assembly of new products and delivering them in a
timely manner;
- product quality and reliability;
- technical support and service;
- timely product introduction;
- product performance and features;
- price;
- end-user acceptance of our customers' products;
- compliance with evolving standards; and
- market acceptance of competitors' products.
In addition, our competitors or customers may offer new products based on
new technologies, industry standards or end-user or customer requirements,
including products that have the potential to replace or provide lower-cost or
higher-performance alternatives to our products. The introduction of new
products by our competitors or customers could render our existing and future
products obsolete or unmarketable. In addition, our competitors and customers
may introduce products that integrate the functions performed by our integrated
circuits on a single integrated circuit, or combine our integrated passives onto
the integrated circuit, thus eliminating the need for our products.
Generally, our sales are not subject to long-term contracts but rather to
short-term releases of customer purchase orders, most of which are cancelable on
relatively short notice. The timing of these releases for production as well as
custom design work is not in our control. The percentage of revenues from turns
orders (orders booked and shipped in the same quarter) has ranged from 61% in
the quarter ended June 30, 1999 to as low as 41% for the quarter ended March 31,
2000, making our quarterly revenue dependent on short term orders. Because of
the short life cycles involved with our customers'
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<PAGE> 11
products, the order pattern from individual customers can be erratic with
inventory accumulation and de-accumulation during phases of the life cycle for
our customers' products. As a result, we may experience quarterly fluctuations
in revenue and operating results and the risk of inventory write-offs.
Because our markets are highly fragmented, we generally encounter different
competitors in our various market areas. Competitors with respect to our
integrated passive products include AVX/Kyocera, Beckman Industrial Corp.,
Intarsia, IRC, KOA-Speer, Matsushita Electronics Components, Ltd., Murata-Erie
of North America, Inc., Phillips Electronics N.V. Ltd., ROHM Co.,
STMicroelectronics N.V., TDK Corp. of America and Vishay Intertechnology, Inc.
In the semiconductor area, our competitors include ON Semiconductor Corporation,
Fairchild Semiconductor Corporation, Linear Technology Corporation, Maxim
Integrated Products, Inc., Mitel Corporation, Motorola Semiconductor, Semtech
Corporation, STMicroelectronics N.V., Telcom Semiconductor Inc. and Texas
Instruments, Inc. Many of our competitors are greater than us in size and have
larger financial and other resources than we do.
IF WE ARE UNABLE TO FURTHER PENETRATE THE MARKETS FOR PERSONAL COMPUTERS,
TELECOMMUNICATIONS OR NETWORKING DEVICES, OR IF THESE MARKETS FAIL TO GROW AS
EXPECTED, OUR REVENUES COULD STOP GROWING AND MAY DECLINE.
A significant portion of our revenues in recent periods has been, and is
expected to continue to be, derived from sales to manufacturers of personal
computer, telecommunication, and networking products. In order for us to be
successful, we must continue to penetrate these markets. Furthermore, if these
markets fail to grow as expected, our business could be materially harmed.
WE EXPECT THAT REVENUES CURRENTLY DERIVED FROM SOME OLDER COMMUNICATIONS
PRODUCTS WILL DECLINE IN FUTURE PERIODS, AND OUR BUSINESS WILL BE HARMED IF OUR
OTHER PRODUCTS FAIL TO COMPENSATE FOR THIS DECLINE.
We manufacture some older microprocessor products that are currently used
in places such as India's telephone system and other telecommunications
products. Since all other significant manufacturers of these products are no
longer participating in these markets, our revenues have increased. However,
these devices are not being designed into new systems, so the business will
eventually decline. Additionally, we manufacture a family of old tone generator
products, called DTMF circuits, which are used for tone recognition on analog
telephone systems. As long as these communication systems are in use, there will
be variations of revenue from increased usage when new functions are introduced,
but the long-term business trend is most likely down. If we are unable to find
replacement business for this revenue, our overall business will suffer.
OUR DEPENDENCE ON THIRD-PARTY SUBCONTRACTORS TO ASSEMBLE AND TEST OUR PRODUCTS
SUBJECTS US TO A NUMBER OF RISKS, INCLUDING AN INADEQUATE SUPPLY OF PRODUCTS AND
HIGHER MANUFACTURING COSTS.
We depend on independent subcontractors for the assembly and most of the
testing of our products. As a result, we face significant risks including:
- reduced control over delivery schedules and quality;
- the potential lack of adequate capacity during periods of excess industry
demand;
- difficulties selecting and integrating new subcontractors;
- limited warranties on products supplied to us; and
- potential increases in prices due to capacity shortages and other
factors.
If we fail to deliver our products on time or if the costs of our products
increase, then our profitability and customer relationships could be harmed.
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<PAGE> 12
OUR RELIANCE UPON FOREIGN SUPPLIERS EXPOSES US TO RISKS ASSOCIATED WITH
INTERNATIONAL OPERATIONS.
We use assembly and test subcontractors in Asia, primarily in Thailand and
Malaysia, for most of our products. We intend to continue transferring our
testing and shipping operations to foreign subcontractors. Our dependence on
these subcontractors involves the following substantial risks:
- political and economic instability;
- disruption to air transportation from Asia; and
- changes in tax laws, tariffs and freight rates.
These risks may lead to delayed product delivery or increased costs, which
would harm our profitability and customer relationships. In addition, we
maintain significant inventory of die at our foreign subcontractors that could
be at risk.
We also "drop-ship" product from these foreign subcontractors to customers.
This practice has the effect of both saving freight charges and reducing the
delivery cycle time. However, drop-shipping increases our exposure to
disruptions in operations not under our direct control and has required us to
enhance our computer and information systems to coordinate this remote activity.
OUR DEPENDENCE ON A LIMITED NUMBER OF SUBCONTRACTORS MAY EXPOSE US TO AN
INCREASED RISK OF MANUFACTURING DISRUPTION OR UNCONTROLLED PRICE CHANGES.
Due to the volume of our products, we believe it is impractical for us to
spread our use of subcontractors over more than a few suppliers without
significant increases in our costs. Although to date we have not experienced any
material disruptions with respect to our subcontractors, if the operations of
one or more of our subcontractors should be disrupted, our business may be
adversely impacted. In addition, the volatility of the semiconductor industry
has occasionally resulted in shortages of subcontractor capacity and other
disruption of supplies. We may not be able to find sufficient subcontractors at
a reasonable price or at all if such disruptions occur.
OUR RELIANCE ON FOREIGN CUSTOMERS COULD CAUSE FLUCTUATIONS IN OUR OPERATING
RESULTS.
International sales accounted for 43% of net sales for fiscal year 2000,
37% for fiscal 1999 and 29% of net sales for fiscal 1998. International sales
may account for an increasing portion of our revenues, which would subject us to
the following risks:
- changes in regulatory requirements;
- tariffs and other barriers;
- timing and availability of export licenses;
- political and economic instability;
- difficulties in accounts receivable collections;
- difficulties in staffing and managing foreign subsidiary and branch
operations;
- difficulties in managing distributors;
- difficulties in obtaining governmental approvals for certain products;
- limited intellectual property protection;
- foreign currency exchange fluctuations;
- the burden of complying with and the risk of violating a wide variety of
complex foreign laws and treaties; and
- potentially adverse tax consequences.
8
<PAGE> 13
In addition, because sales of our products have been denominated to date in
United States dollars, increases in the value of the United States dollar could
increase the relative price of our products so that they become more expensive
to customers in the local currency of a particular country. Furthermore, because
some of our customer purchase orders and agreements are influenced, if not
governed, by foreign laws, we may be limited in our ability to enforce our
rights under these agreements and to collect damages, if disputes arise.
IF OUR DISTRIBUTORS OR SALES REPRESENTATIVES EXPERIENCE FINANCIAL DIFFICULTY OR
OTHERWISE ARE UNWILLING TO PROMOTE OUR PRODUCTS, OUR BUSINESS COULD BE HARMED.
We sell many of our products through distributors and sales
representatives. Our distributors and sales representatives could reduce or
discontinue sales of our products or may sell our competitors' products. They
may not devote the resources necessary to sell our products in the volumes and
within the time frames that we expect. In addition, we depend upon the continued
viability and financial resources of these distributors and sales
representatives, some of which are small organizations with limited working
capital. These distributors and sales representatives, in turn, depend
substantially on general economic conditions and conditions within the
electronics industry. We believe that our success will continue to depend upon
these distributors and sales representatives. If our distributor Arrow
Electronics, Inc., in particular, or some of our other distributors and sales
representatives experience financial difficulties, or otherwise become unable or
unwilling to promote and sell our products, our business could be harmed. In
fiscal 2000, Arrow Electronics, Inc. accounted for approximately 17% of our net
product sales.
MANY OF OUR PRODUCTS HAVE LONG, HIGH-RISK SALES CYCLES THAT EXPOSE US TO THE
POSSIBILITY OF DELAYED RETURN, OR COMPLETE LOSS OF OUR RESEARCH AND DEVELOPMENT
INVESTMENT.
Due to the nature of our products, we not only have a long design-in cycle,
but many of the design wins risk replacement with other competing components
until the time the system is released to manufacturing. It typically takes us
more than 12 months to realize volume shipments after we first achieve a design
win with a customer. We first work with customers to achieve a design win, which
may take nine months or longer. Our customers then complete the design, testing
and evaluation process and begin to ramp up production, a period which typically
lasts an additional three months or longer. At any point during this time, we
may lose the design. As a result, a significant period of time may elapse
between our research and development efforts and our realization of revenue, if
any, from volume purchasing of our products by our customers.
DUE TO THE VOLATILITY OF DEMAND FOR OUR PRODUCTS, OUR INVENTORY MAY FROM
TIME-TO-TIME BE IN EXCESS OF OUR NEEDS, WHICH COULD CAUSE WRITE-DOWNS OF OUR
INVENTORY.
Generally our products are sold pursuant to short-term releases of customer
purchase orders and some orders must be filled on an expedited basis. In
addition, many of our products are specific to individual customers. We
typically plan our production and inventory levels based on internal forecasts
of customer demand, which is highly unpredictable and can fluctuate
substantially. Therefore, we often order materials and at least partially
fabricate product in anticipation of customer requirements. In order to achieve
level line loading and efficiencies in manufacturing, we may also order and
process materials in advance of anticipated customer demand.
In the last two years, there has been a trend toward vendor-managed
inventory among some large customers. In such situations, we do not recognize
either revenue or bookings until such time as the customer withdraws inventory
from stock. This imposes the burden upon us of carrying additional inventory
that is on customer premises.
We value our inventories on a part-by-part basis to appropriately consider
excess inventory levels and obsolete inventory based on backlog and demand, and
to consider reductions in sales price. However, due to the volatility of demand,
and the fact that many of our products are specific to individual customers,
backlog is subject to revisions and cancellations and anticipated demand is
constantly changing, which may result in adjustments to inventory valuations in
the future.
9
<PAGE> 14
IF WE ARE UNABLE TO MAINTAIN OUR PRESENT FOUNDRY RELATIONSHIP WITH THE SIPEX
CORPORATION, OR IF THEIR USE OF OUR CAPABILITIES WERE TO DECLINE, OUR REVENUES
WOULD BE IMPACTED.
In the last three fiscal years we have derived approximately 2.5% to 5.0%
of our revenue from foundry business with the Sipex Corporation. In the last
year, Sipex built its own facility. It is likely that Sipex will attempt to
install the process we run for them in their own facility. If that happens, we
will likely lose this business. We may not be able to find replacement foundry
business at that time or in the future.
OUR BACKLOG MAY NOT RESULT IN FUTURE REVENUE.
Due to possible customer changes in delivery schedules and cancellations of
orders, our backlog at any particular point in time is not necessarily
indicative of actual sales for any succeeding period. A reduction of backlog
during any particular period, or the failure of our backlog to result in future
revenue, could harm our business.
OUR OPERATING EXPENSES ARE RELATIVELY FIXED. THEREFORE, WE HAVE LIMITED ABILITY
TO REDUCE EXPENSES QUICKLY IN RESPONSE TO ANY REVENUE SHORTFALLS.
Our operating expenses are relatively fixed, and therefore, we have limited
ability to reduce expenses quickly in response to any revenue shortfalls.
Consequently, our operating results will be harmed if our revenues do not meet
our projections. We may experience revenue shortfalls for the following reasons:
- significant pricing pressures that occur because of declines in average
selling prices over the life of a product;
- sudden shortages of raw materials or fabrication, test or assembly
capacity constraints that lead our suppliers to allocate available
supplies or capacity to other customers and, in turn, harm our ability to
meet our sales obligations; and
- reduction, rescheduling or cancellation of customer orders.
WE MAY, IN THE FUTURE, MAKE ACQUISITIONS THAT WILL INVOLVE NUMEROUS RISKS. WE
CANNOT ASSURE YOU THAT WE WILL BE ABLE TO ADDRESS THESE RISKS SUCCESSFULLY
WITHOUT SUBSTANTIAL EXPENSE, DELAY OR OTHER OPERATIONAL OR FINANCIAL PROBLEMS.
The risks involved with acquisitions include:
- diversion of management's attention;
- failure to retain key personnel;
- amortization of acquired intangible assets;
- customer dissatisfaction or performance problems with an acquired
company;
- the cost associated with acquisitions and the integration of acquired
operations; and
- assumption of known or unknown liabilities or other unanticipated events
or circumstances.
We may not be able to address these risks successfully without substantial
expense, delay or other operational or financial problems.
WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS ADEQUATELY.
Our ability to compete is affected by our ability to protect our
intellectual property rights. We rely on a combination of patents, trademarks,
copyrights, mask work registrations, trade secrets, confidentiality procedures
and non-disclosure and licensing arrangements to protect our intellectual
property rights. Despite these efforts, the steps we take to protect our
proprietary information may not be adequate to prevent misappropriation of our
technology, and our competitors may independently develop technology that is
substantially similar or superior to our technology.
10
<PAGE> 15
More specifically, our pending patent applications or any future
applications may not be approved, and any issued patents may not provide us with
competitive advantages and may be challenged by third parties. If challenged,
our patents may be found to be invalid or unenforceable, and the patents of
others may have an adverse effect on our ability to do business. Furthermore,
others may independently develop similar products or processes, duplicate our
products or processes, or design around any patents that may be issued to us.
WE COULD BE HARMED BY LITIGATION INVOLVING PATENTS AND OTHER INTELLECTUAL
PROPERTY RIGHTS.
As a general matter, the semiconductor and related industries are
characterized by substantial litigation regarding patent and other intellectual
property rights. We may be accused of infringing the intellectual property
rights of third parties. Furthermore, we may have certain indemnification
obligations to customers with respect to the infringement of third-party
intellectual property rights by our products. Infringement claims by third
parties or claims for indemnification by customers or end users of our products
resulting from infringement claims may be asserted in the future and such
assertions, if proven to be true, may harm our business.
Any litigation relating to the intellectual property rights of third
parties, whether or not determined in our favor or settled by us, would at a
minimum be costly and could divert the efforts and attention of our management
and technical personnel. In the event of any adverse ruling in any such
litigation, we could be required to pay substantial damages, cease the
manufacturing, use and sale of infringing products, discontinue the use of
certain processes or obtain a license under the intellectual property rights of
the third party claiming infringement. A license might not be available on
reasonable terms, or at all.
EARTHQUAKES, OTHER NATURAL DISASTERS AND POWER SHORTAGES OR INTERRUPTIONS MAY
DAMAGE OUR BUSINESS.
Our Milpitas facility, including our corporate headquarters, is located in
California near major earthquake faults that have experienced earthquakes in the
past. In addition, some of our suppliers are located near fault lines. In the
event of a major earthquake or other natural disaster near our headquarters, our
operations could be harmed. Similarly, a major earthquake or other natural
disaster near one or more of our major suppliers, like the one that occurred in
Taiwan in September 1999, could disrupt the operations of those suppliers, which
could limit the supply of our products and harm our business.
Additionally, our facility in Tempe, Arizona is located in a desert region
of the southwestern United States. Disruption of water supplies or other
infrastructure support could limit the supply of our products and harm our
business.
We have occasionally experienced power interruptions at our Tempe facility
and the risk of power shortages in California and Arizona have been reported.
Although we have not experienced any material disruption to our business to
date, we cannot assure you that if power interruptions or shortages occur in the
future, they will not adversely affect our business.
OUR STOCK PRICE MAY CONTINUE TO BE VOLATILE.
The market price of our common stock has fluctuated significantly to date.
In the future, the market price of our common stock could be subject to
significant fluctuations due to general economic and market conditions and in
response to other factors, including:
- variations in our anticipated or actual operating results;
- announcements or introductions of new products;
- technological innovations or setbacks by us or our competitors;
- conditions in the semiconductor and passive components markets;
- the commencement of litigation;
- changes in estimates of our performance by securities analysts; and
- announcements of merger or acquisition transactions.
11
<PAGE> 16
In addition, the stock market in recent years has experienced extreme price
and volume fluctuations that have affected the market prices of many high
technology companies, particularly semiconductor companies, that have often been
unrelated or disproportionate to the operating performance of companies. These
fluctuations, as well as general economic and market conditions may harm the
market price of our common stock.
THE ANTI-TAKEOVER PROVISION OF OUR CERTIFICATE OF INCORPORATION AND OF THE
CALIFORNIA GENERAL CORPORATION LAW MAY DELAY, DEFER OR PREVENT A CHANGE OF
CONTROL.
Our board of directors has the authority to issue up to 10,000,000 shares
of preferred stock and to determine the price, rights, preferences and
privileges and restrictions, including voting rights of those shares without any
further vote or action by our shareholders. The rights of the holders of common
stock will be subject to, and may be harmed by, the rights of the holders of any
shares of preferred stock that may be issued in the future. The issuance of
preferred stock may delay, defer or prevent a change in control. The terms of
the preferred stock that might be issued could potentially make more difficult
or expensive our consummation of any merger, reorganization, sale of
substantially all of our assets, liquidation or other extraordinary corporate
transaction. California General Corporation Law requires an affirmative vote of
all classes of stock voting independently in order to approve a change in
control. In addition, the issuance of preferred stock could have a dilutive
effect on our shareholders. Further, our shareholders must give 30 days advance
notice prior to the relevant meeting to nominate a candidate for director or
present a proposal to our shareholders at a meeting. These notice requirements
could inhibit a takeover by delaying shareholder action. The California General
Corporation Law also restricts business combinations with some shareholders once
the shareholder acquires 15% or more of our common stock.
THERE MAY BE A SUBSTANTIAL DISBURSEMENT OF SHARES FROM THE FORMER CHAIRMAN OF
CALIFORNIA MICRO DEVICES THAT COULD NEGATIVELY IMPACT THE STOCK PRICE.
Chan Desaigoudar, the former Chairman of California Micro Devices still
controls approximately 1,700,000 shares of our stock. He may sell some or all of
that stock at any time. However, he is currently subject to a preliminary
injunction that was put in place in May 1996 that would require any proceeds
from the sale of up to 1,500,000 of his shares of our stock to be held in escrow
pending the outcome of certain litigation. We do not know what effect the sale
of some or all of these shares may have on the price of our stock.
OUR FAILURE TO COMPLY WITH ENVIRONMENTAL REGULATIONS COULD RESULT IN SUBSTANTIAL
LIABILITY TO US.
We are subject to a variety of federal, state and local laws, rules and
regulations relating to the protection of health and the environment. These
include laws, rules and regulations governing the use, storage, discharge,
release, treatment and disposal of hazardous chemicals during and after
manufacturing, research and development and sales demonstrations, as well as the
maintenance of healthy and environmentally sound conditions within our
facilities. If we fail to comply with present or future regulations, we could be
subject to substantial liability for clean up efforts, property damage, personal
injury and fines or suspension or cessation of our operations. Restrictions on
our ability to expand or continue to operate our present locations could be
imposed upon us or we could be required to acquire costly remediation equipment
or incur other significant expenses.
ISSUANCE OF NEW LAWS OR ACCOUNTING REGULATIONS, OR REINTERPRETATION OF EXISTING
LAWS OR REGULATIONS, COULD MATERIALLY IMPACT OUR BUSINESS OR STATED RESULTS.
From time to time, the government, courts and financial accounting boards
issue new laws or accounting regulations, or modify or reinterpret existing
ones. We cannot guarantee that there will not be future changes in laws,
interpretations or regulations that would affect our financial results or the
way in which we present them. Additionally, changes in the laws or regulations
could have adverse effects on hiring and many other aspects of our business that
would affect our ability to compete, both domestically and internationally.
12
<PAGE> 17
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus or incorporated by reference are
forward-looking, including, without limitation, the statements under the
captions "Prospectus Summary," "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business." You
can identify these statements by the use of words like "may," "will," "could,"
"continue" and variations of these words or comparable words. Forward-looking
statements do not guarantee future performance and involve risks and
uncertainties. Actual results may differ substantially from the results that the
forward-looking statements suggest for various reasons, including those
discussed under "Risk Factors." These forward looking statements are made only
as of the date of this prospectus. We do not undertake to update or revise the
forward looking statements, whether as a result of new information, future
events or otherwise.
USE OF PROCEEDS
We will receive estimated net proceeds of approximately $33.5 million from
the sale of 1,500,000 shares of common stock in this offering, after deducting
underwriting discount and estimated offering expenses, and assuming a public
offering price of $24.00 per share. We expect to use the net proceeds of this
offering to:
- repay our outstanding industrial revenue bonds (approximately $7.0
million principal and accrued interest through June 30, 2000); and
- provide funds for general corporate purposes, including capital
expenditures and possible acquisitions.
Our outstanding industrial revenue bonds accrue interest at 10.5% per annum
and are due at various dates through March 1, 2018 and can be prepaid without
penalty.
Pending use of the net proceeds as described above, we will invest the net
proceeds in investment grade, marketable securities.
PRICE RANGE OF COMMON STOCK
Our common stock is traded on the Nasdaq National Market under the symbol
"CAMD." The following table sets forth for the quarters indicated the high and
low per share closing sales prices as reported by the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
FISCAL 1999
First Quarter............................................ $ 6.375 $ 4.375
Second Quarter........................................... 4.063 1.875
Third Quarter............................................ 3.000 1.625
Fourth Quarter........................................... 3.313 2.250
FISCAL 2000
First Quarter............................................ 2.688 1.875
Second Quarter........................................... 5.688 2.125
Third Quarter............................................ 13.375 4.000
Fourth Quarter........................................... 33.875 12.938
FISCAL 2001
First Quarter............................................ 32.250 12.750
Second Quarter (through August 30, 2000)................. 30.375 21.375
</TABLE>
The last reported sale price of our common stock on the Nasdaq National
Market on August 30, 2000 was $24.00 per share. As of June 30, 2000, there were
approximately 1,065 shareholders of record of our common stock.
13
<PAGE> 18
DIVIDEND POLICY
We have not declared or paid any dividends. We do not intend to pay cash
dividends in the foreseeable future. Furthermore, certain debt covenants
restrict us from paying cash dividends.
CAPITALIZATION
The following table sets forth our actual cash and cash equivalents and
capitalization as of June 30, 2000, and as adjusted to give effect to our sale
and issuance of 1,500,000 shares of common stock in this offering at an assumed
public offering price of $24.00 per share and the application of the associated
net proceeds. This table should be read in conjunction with "Selected Financial
Data," "Management's Discussion and Analysis of Financial Condition and Results
of Operations," and our financial statements and notes appearing elsewhere in
this prospectus supplement or incorporated by reference herein.
<TABLE>
<CAPTION>
JUNE 30, 2000(1)
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash, cash equivalents and short-term investments........... $ 7,469 $ 33,954
======== ========
Restricted cash............................................. $ 1,126 $ --
======== ========
Debt obligations, including current portion(2).............. $ 9,795 $ 2,750
Shareholders' equity:
Common stock, no par value; authorized 25,000,000; issued
and outstanding 11,146,478 actual and 12,646,478 as
adjusted............................................... 56,741 90,271
Preferred stock, no par value; authorized 10,000,000; none
issued and outstanding................................. -- --
Accumulated deficit....................................... (32,061) (32,061)
Accumulated other comprehensive income.................... 18 18
-------- --------
Total shareholders' equity............................. 24,698 58,228
-------- --------
Total capitalization................................... $ 34,493 $ 60,978
======== ========
</TABLE>
-------------------------
(1) The actual and as adjusted information set forth in the table excludes
1,869,205 shares of common stock issuable upon exercise of options
outstanding as of June 30, 2000 at a weighted average exercise price of
$4.61 per share, 61,102 shares of common stock available for future grants
under our stock option plans and 353,699 shares available under our employee
stock purchase plan. In August 2000, an additional 550,000 shares of common
stock were made available for future grants under our stock option plans.
(2) Includes capitalized leases.
14
<PAGE> 19
SELECTED FINANCIAL DATA
The selected financial data as of March 31, 1999 and 2000 and for our
fiscal years ended March 31, 1998, 1999, and 2000 are derived from our audited
financial statements and should be read in conjunction with the audited
financial statements and notes appearing elsewhere in this prospectus and
incorporated by reference herein. The selected financial data as of March 31,
1996, 1997 and 1998 and June 30, 1999, and for the fiscal years ended March 31,
1996 and 1997 are derived from our audited financial statements which are not
included in this prospectus. The selected data as of June 30, 2000 and for the
fiscal three months ended June 30, 2000 are derived from our unaudited financial
statements and notes appearing elsewhere in this prospectus and incorporated by
reference herein. In the opinion of management, the accompanying unaudited
condensed financial statements contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly our financial position
as of June 30, 2000, results of operations for the three-month periods ended
June 30, 1999 and 2000, and cash flows for the three-month periods ended June
30, 1999 and 2000. Results for the quarter are not necessarily indicative of
fiscal year results.
<TABLE>
<CAPTION>
THREE
MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, JUNE 30,
----------------------------------------------- ------------------
1996 1997 1998 1999 2000 1999 2000
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................... $39,882 $32,936 $33,043 $33,617 $43,763 $8,517 $14,876
Cost of sales.............................. 22,430 21,255 24,701 24,730 29,571 6,209 9,600
------- ------- ------- ------- ------- ------- -------
Gross profit............................. 17,452 11,681 8,342 8,887 14,192 2,308 5,276
Research and development expense........... 3,417 4,180 3,017 3,685 3,366 959 810
Selling, marketing and administrative
expense.................................. 10,573 7,412 7,900 7,300 9,723 2,117 2,806
------- ------- ------- ------- ------- ------- -------
Operating income (loss).................. 3,462 89 (2,575) (2,098) 1,103 (768) 1,660
Interest expense........................... 1,100 739 941 892 890 230 236
Interest (income) and other, net........... (2,757) (1,354) (511) (219) (419) (53) (73)
------- ------- ------- ------- ------- ------- -------
Income (loss) before income taxes.......... 5,119 704 (3,005) (2,771) 632 (945) 1,497
Provision for income taxes................. -- -- -- -- -- -- 30
------- ------- ------- ------- ------- ------- -------
Net income (loss)........................ $ 5,119 $ 704 $(3,005) $(2,771) $ 632 $ (945) $ 1,467
======= ======= ======= ======= ======= ======= =======
Net income (loss) per common share:
Basic.................................... $ 0.51 $ 0.07 $ (0.30) $ (0.28) $ 0.06 $(0.09) $ 0.13
Diluted.................................. $ 0.48 $ 0.07 $ (0.30) $ (0.28) $ 0.05 $(0.09) $ 0.12
Weighted average common shares outstanding:
Basic.................................... 10,035 10,234 9,971 10,017 10,324 10,117 11,104
Diluted.................................. 10,645 10,549 9,971 10,017 11,642 10,117 12,523
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
----------------------------------------------- ------------------
1996 1997 1998 1999 2000 1999 2000
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short term
investments.............................. $22,150 $ 6,810 $ 5,590 $ 4,933 $ 6,559 $3,735 $ 7,469
Working capital............................ 23,493 14,274 13,547 12,382 18,417 11,835 19,860
Total assets............................... 44,928 38,270 35,994 33,644 39,086 32,684 40,944
Total liabilities.......................... 18,578 14,690 14,367 14,474 16,126 14,335 16,246
Shareholders' equity....................... 26,350 23,580 21,627 19,170 22,960 18,349 24,698
</TABLE>
15
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
We are a leading supplier of thin film integrated passive devices and
complementary analog semiconductors. We focus our expertise on providing high
volume, cost effective, standard and custom solutions for computer systems and
peripherals, high performance networking, and the mobile communications and
telecommunications infrastructure markets.
In 1995, we began to emphasize using our semiconductor technology to
enhance the functionality of thin film passive devices, where practical. We call
these "P/Active" circuits, the mark being the contraction of the words "Passive"
and "Active." In late 1997, we also began to develop new semiconductor products
with an emphasis on using the thin film passive technology to enhance the
semiconductor functionality when advantageous.
In early 1997, we revised our marketing strategy for the thin film
integrated passives. Historically, the majority of this business consisted of
relatively low volume, high priced, custom products. In order to access the much
larger, standard products market, we adopted a strategy of very aggressive
pricing to penetrate these opportunities. From 1997 through the first half of
1999, this had the effect of significantly lowering gross margins, at the same
time that we were making major investments in research and development and
marketing. The resulting losses were anticipated at the time of the decision,
although the time to recovery was lengthened by a long downturn in both the
passive components and semiconductor industries. Fundamental to this strategy
was the knowledge that our wafer fabrication areas were significantly
underutilized, and that we could generate strong gross margin and profit growth,
even with aggressive pricing, if we could achieve sufficient unit volume to
absorb the large fixed cost base. By the end of calendar year 1999, unit volume
increases were outpacing any further price declines, revenue was growing
significantly, and we had regained profitability.
We recognize revenue from product sales to OEMs and contract manufacturers
upon shipment. We generally recognize revenue on shipments to distributors upon
the final sales by the distributor to OEMs or other end users.
Our cost of sales consists of materials, services, personnel, machinery and
equipment and other costs associated with the operation of our two U.S. wafer
fabrication facilities and the cost of assembly, packaging, and testing of most
of our products by subcontractors in Asia.
Our research and development expenses consist primarily of salaries and
related expense of design engineers and other technical personnel and costs of
experiments with materials and processes. Research and development costs are
expensed as incurred. Selling, marketing and administrative expenses consist
primarily of salaries and related expenses, commission expenses, advertising,
travel and professional services. Advertising is expensed as incurred.
In the following discussion, fiscal 1998, 1999, 2000 refer to the
twelve-month periods ended March 31, 1998, 1999 and 2000, respectively.
16
<PAGE> 21
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of total revenues, certain
statement of operations data:
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED MARCH 31, ENDED JUNE 30,
----------------------------- --------------
1998 1999 2000 1999 2000
------- ------- ------- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues........................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales...................................... 74.8 73.6 67.6 72.9 64.5
----- ----- ----- ----- -----
Gross profit....................................... 25.2 26.4 32.4 27.1 35.5
Research and development expense................... 9.1 10.9 7.7 11.3 5.4
Selling, marketing and administrative expense...... 23.9 21.7 22.2 24.8 18.9
----- ----- ----- ----- -----
Operating income (loss)............................ (7.8) (6.2) 2.5 (9.0) 11.2
Interest expense................................... 2.8 2.7 2.0 2.7 1.6
Interest (income) and other, net................... (1.5) (0.7) (0.9) (0.6) (0.5)
----- ----- ----- ----- -----
Income (loss) before income taxes.................. (9.1)% (8.2)% 1.4% (11.1)% 10.1%
===== ===== ===== ===== =====
</TABLE>
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
Product sales for the quarter ended June 30, 2000, increased by $6,359,000
or 75%, compared to the quarter ended June 30, 1999, with the largest component
of the increase being in products for the networking market. Unit shipments
increased 99% to 28.9 million units in the June 30, 2000 quarter compared to
14.6 million units in the year-earlier quarter. The increase in product sales
was primarily due to increased sales of new products. Sales of our new products
(products introduced within the past three years) increased by 97% in dollars
and 132% in units in the quarter ended June 30, 2000 as compared to the
year-earlier quarter. Thin film products accounted for 65% of dollar sales and
68% of units shipped for the quarter ended June 30, 2000 as compared to 64% of
dollar sales and 72% of units shipped the year-earlier quarter. The decline in
percentage of thin film units shipped was primarily due to increased mix of
single chip products, and lower mix of dual chip products for solving the need
for parallel port filtering, termination and electrostatic discharge protection.
In total the number of parallel port solutions shipped increased by 92% in the
quarter ended June 30, 2000 as compared to the year-earlier period.
Gross margins increased to 35.5% in the June 30, 2000 quarter compared to
27.1% in the year-earlier period due to increased sales and manufacturing
efficiencies. Increased unit volume provides us with better capacity utilization
and pricing leverage with our assembly subcontractors.
Research and development expense was $810,000 and $959,000 for the three
months ended June 30, 2000 and 1999, respectively. The decrease in research and
development expense was due to lower materials costs as the focus of research
and development was more on product development than on process development
compared to the year-earlier period. Decreased material costs were slightly
offset by increased expenditures for personnel.
Selling, marketing and administrative expenses were $2,806,000 and
$2,117,000 for the three months ended June 30, 2000 and 1999, respectively. The
increase in the fiscal 2001 quarter is primarily due to increased commissions,
increased personnel costs, and increased promotional activities, including
expansion of our presence in the Far East and Europe.
As a result of the factors discussed above, operating income for the three
months ended June 30, 2000, was $1,660,000 compared to an operating loss of
$768,000 in the year-earlier period.
Other expense, net for the three months ended June 30, 2000 and 1999, was
$163,000 and $177,000, respectively, as higher interest income in the fiscal
2001 period was offset by the decease in the market value of investments related
to our executive deferred compensation program. This was offset in operating
income as a non-cash reduction in compensation expense.
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Income tax expense of $30,000 for the three months ended June 30, 2000 is a
provision for estimated corporate alternative minimum taxes, which are not
covered by our tax loss carry forward. No income taxes were accrued for the
three months ended June 30, 1999, due to the availability of tax loss carry
forwards.
RESULTS OF OPERATIONS FOR THE THREE FISCAL YEARS ENDED MARCH 31, 2000, 1999, AND
1998
Product sales for fiscal 2000 totaled $43.8 million compared to $33.6
million in fiscal 1999 and $32.5 million in fiscal 1998. The 30% increase in
product sales for fiscal 2000 over 1999 was due primarily to increased sales of
new products, with the majority of the increase being in products for the
networking and telecommunications markets. Units shipped increased 53% in fiscal
2000 compared to the year-earlier period. Sales of new products (products
introduced within the past three years) for fiscal 2000 increased by 96% in
dollars and 119% in units as compared to the year-earlier period. Thin film
integrated devices represented 69% of product sales and 73% of unit shipments
for fiscal 2000 as compared to 69% of product sales and 82% of units shipped in
fiscal 1999. In total the number of thin film parallel port solutions shipped
increased by 21% in fiscal 2000 as compared fiscal 1999, but the number of units
shipped declined due to increased mix of single chip and lower mix of two chip
parallel port solutions. The 3% increase in product sales for fiscal 1999 over
fiscal 1998 reflects primarily the increase in unit sales of our new P/Active
family of products (introduced in calendar 1997), partially offset by a decline
in demand for some of the older semiconductor products. Thin film products,
including P/Active, accounted for approximately 69% of product sales and 82% of
units shipped in fiscal 1999 compared to 66% of product sales and 79% of units
shipped in fiscal 1998.
Technology related revenues, consisting of cost-sharing payments by Hitachi
Metals Ltd. related to joint process and product development projects, were
$569,000 in fiscal 1998. There were no cost-sharing payments by Hitachi Metals
in fiscal 1999 and fiscal 2000 and we expect no further revenue from Hitachi
Metals for joint research and development in the future.
Gross margins increased from 25.2% in fiscal 1998, to 26.4% in fiscal 1999
and 32.4% in fiscal 2000 due to increased sales and manufacturing efficiencies.
Research and development expenses were $3.4 million in fiscal 2000 compared
to $3.7 million in fiscal 1999 and $3.0 million in fiscal 1998. The higher level
of expenditures in fiscal 1999 compared to fiscal 2000 and fiscal 1998 reflected
a higher level of material costs associated with an emphasis on process
development efforts.
Selling, marketing, and administrative expenses in fiscal 2000 were $9.7
million compared to $7.3 million in fiscal 1999 and $7.9 million in 1998. The
increase in fiscal 2000 is primarily due to increased commissions, increased
personnel costs, which included the expansion of our presence in Europe and the
Far East, and increased promotional activities. Fiscal 1999 expenses were lower
than fiscal 1998 primarily due to proceeds from a legal settlement achieved in
fiscal 1999.
Interest expense was $890,000, $892,000, and $941,000, in fiscal 2000,
1999, and 1998, respectively. The decrease in interest expense in fiscal 1999
compared to fiscal 1998 primarily reflects expiration of certain capital
equipment leases. Interest and other income was $419,000 in fiscal 2000 compared
to $219,000 in fiscal 1999 and $511,000 in fiscal 1998. The increase in fiscal
2000 compared to fiscal 1999 was largely due to increased investment income. The
decrease in fiscal 1999 as compared to fiscal 1998 is primarily due to the
comparatively lower level of cash and investments period to period.
We did not incur income tax expense in fiscal 2000 due to the availability
of tax loss carryforwards, nor in fiscal 1999 and fiscal 1998 due to having net
losses in those years. On March 31, 2000, we had Federal and state tax loss
carryforwards of approximately $34.8 million and $6.1 million, respectively.
As a result of the above factors, we had net income of $632,000 in fiscal
2000 compared to a net loss of $2.8 million in fiscal 1999 and a net loss of
$3.0 million in fiscal 1998.
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LIQUIDITY AND CAPITAL RESOURCES
Total cash, short-term securities and investments as of June 30, 2000, were
$7.5 million compared to $6.6 million on March 31, 2000. Receivables decreased
to $8.6 million at June 30, 2000 compared to $8.9 million three months earlier.
Receivables days sales outstanding were 52 days as of June 30, 2000 as compared
to 56 days at March 31, 2000. Inventories increased slightly from the March 2000
quarter, with inventory turns improving to 3.8 turns compared to 3.5 at March
31, 2000. Capital expenditures totaled $1.6 million, reflecting our investment
in new equipment to increase production and to support our production of chip
scale products, which are expected to ramp up later this year. These
expenditures were partially offset by additional long term debt financing.
Total cash, short-term securities and investments as of March 31, 2000,
increased to $6.6 million compared to $4.9 million on March 31, 1999. This
increase was primarily attributable to the inclusion of previously restricted
cash associated with our 1997 class action settlement, since the stock price
guarantee included in the settlement has been met. Receivables increased by $4.4
million, which was attributable to increased product sales during the three
months ended March 31, 2000. Inventories increased by $1.6 million during fiscal
2000, related to increased work-in-process to support new product introductions
and increased sales of new and existing products. This was essentially offset by
a $1.6 million increase in accounts payable. Other current assets increased
$388,000, to $980,000 at March 31, 2000, due to increased annual insurance
payments and prepayments of payroll taxes made during the fiscal year. We also
received $3.2 million from the sale of common stock through our employee stock
plans during fiscal 2000.
We have a $3.0 million revolving secured line of credit agreement that
expires on July 30, 2001. Under the terms of the line of credit, we can borrow
at prime plus one-half percent, collateralized by eligible receivables. We have
made no borrowings against this line. We also have a $1.0 million capital
equipment financing facility that expires on June 30, 2003; under the terms of
this facility we can borrow at prime plus 0.75%. During fiscal 2000 we borrowed
$238,000 against the capital equipment financing and as of June 30, 2000 we had
borrowed an additional $762,000 against this facility. On April 21, 2000 we
secured an additional $500,000 capital equipment financing facility under the
same terms and conditions of the original facility. The new line expires on
August 3, 2003. As of June 30, 2000, we had borrowed $231,000 against this
$500,000 facility. On July 27, 2000 we secured an additional $2.0 million
equipment financing facility that expires on December 25, 2003. Under the terms
of this facility we can borrow at prime plus 0.5%. We are in compliance with our
financial covenants.
We expect to fund our future liquidity needs through the net proceeds from
this offering, 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, we may pursue other sources of
liquidity.
We believe we have sufficient financial resources, excluding the net
proceeds from this offering, to fund our operations for at least the next 12
months.
IMPACT OF THE YEAR 2000
The Year 2000 issue is primarily the result of computer programs using a
two-digit format, as opposed to four digits, to indicate the year.
We have experienced no material impact on our operations as a result of the
transition to the Year 2000. Problems relating to the Year 2000 issue could
still arise, but we do not believe that they will have a material adverse effect
on our financial condition or results of operations. We consider our operations
to be Year 2000 functional and ready to support its customers, however we
continue to monitor our systems to watch for any potential issues in the future.
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MARKET RISK
We own financial instruments that are sensitive to market risks as part of
our investment portfolio. The investment portfolio is used to preserve our cash
until it is required to fund operations and capital investments. None of these
market-risk sensitive instruments are held for trading purposes except for
amounts related to our non-qualified deferred compensation program. We do not
own derivative financial instruments in our investment portfolio. The investment
portfolio contains instruments that are subject to fluctuation in interest
rates.
Our investment portfolio includes debt instruments that are primarily
United Stated government bonds, high-grade corporate bonds and money market
funds of less than one year in duration. These investments are subject to
interest rate risk, and could decline in value if interest rates increase. Our
investment portfolio also consists of certain commercial paper that is also
subject to interest rate risk. Due to the short duration and conservative nature
of these instruments, we do not believe that we have a material exposure to
interest rate risk.
The interest rates on nearly all of our long-term debt and capital lease
obligations are fixed and therefore not subject to interest rate fluctuations.
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BUSINESS
INTRODUCTION
We are a leading supplier of thin film integrated passive devices and
complementary analog semiconductors. Through proprietary manufacturing
processes, we integrate multiple thin film passive components onto single chips
and enhance their functionality with discrete semiconductor functions to provide
single chip solutions for densely populated, high performance electronic
systems. Our integrated passive devices are significantly smaller and provide
more functionality than competitive discrete products. Integrated passive
devices replace functional clusters of discrete passive components that are used
for signal filtering and termination at buses and ports, wave shaping, clock
signal filtering, biasing, and other traditional discrete component functions.
In some instances, our integrated passive devices also provide semiconductor
functions, such as electrostatic discharge protection.
We also offer analog semiconductor solutions that complement our integrated
passive devices, providing electrostatic discharge protection for ports, smart
power management functions and micro-power operational amplifiers. We use our
thin film passive component technology to enhance the functionality of our
semiconductor products. Additionally, we manufacture and sell an established
line of telecommunications related semiconductor products.
We focus our expertise on providing high volume, cost effective, standard
and custom solutions for computer systems and peripherals, high performance
networking, and the mobile communications and telecommunications infrastructure
markets. Our customers include original equipment manufacturers, such as the
Acer Group, Cisco Systems Inc., Guidant Corporation, Intel Corporation, ITI
Limited, Nortel Networks Corporation, Samsung Electronics Co Ltd. and 3Com
Corporation, and contract manufacturers, such as Celestica Inc. and Solectron
Corporation.
INDUSTRY BACKGROUND
Passive components -- principally resistors and capacitors -- are used in
virtually all electronic products. Resistors impede the flow of electrical
current and dissipate electrical energy as heat. They are used to divide
voltage, pull-up/pull-down voltage, and terminate and control current.
Capacitors store electrical charges and pass alternating current while blocking
direct current. Capacitors are used to filter noise and shape waveforms.
Historically, passive components have been discrete devices that perform one
specific function per device. Individually and in combination, resistors and
capacitors are used to filter, condition, shape, bias, terminate and improve the
characteristics of the electrical signals used and transmitted by active
components such as microprocessors, application specific integrated circuits,
dynamic random access memories and analog integrated circuits.
The demand for discrete and integrated passive components is being driven
by both the increasing number of components per electronic system, and the
increasing number of systems being produced. For example, the number of passive
components in a personal computer increased from a few hundred in the 486
generation of personal computers to as many as 1,000 in the Pentium III series
of personal computers. Similar trends are occurring in mobile phones, where
multiple bands, new functionality and higher frequencies are being incorporated,
driving the number of passive components from 300 in older analog phones to as
many as 600 in some current devices. According to a 1998 report by Frost &
Sullivan, the worldwide market for passive components included over $5.0 billion
for resistors and resistor networks and over $9.0 billion for capacitors.
Integrated passive components are increasingly being used to address this
market, particularly in the personal computer, networking and mobile phone
segments.
The technological progress of the semiconductor industry has been the
driving force behind the electronics industry, and higher levels of integration
on a single chip have been the underlying factor that has made this possible.
Higher levels of integration lead to smaller products with higher performance
and functionality and lower cost.
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The semiconductor industry has segmented into two major technology types --
digital circuits and analog circuits. Digital circuits are used principally in
computationally intensive functions such as computing and digital signal
processing. Manufacturers of digital integrated circuits operate on the leading
edge of process technology (e.g. sub-micron line width) to maximize the
performance and component density of their products.
Analog circuits are more typically found in applications requiring precise
voltage/power control, amplification, and other specialized functions. They are
used throughout all system types, providing the power management and ancillary
functions necessary for system operation. Manufacturers of analog integrated
circuits are able to use lower cost manufacturing facilities with more
established technology (e.g. larger line width) than digital circuit
manufacturers. The analog circuit market tends to be less cyclical and less
capital intensive than the digital, and is more fragmented in terms of products.
This can provide greater opportunities for executing a niche strategy. The
analog circuit market is large and growing, with the Semiconductor Industry
Association reporting that this market is expected to increase from $19.0
billion in 1998 to $47.5 billion in 2003, representing a compound annual growth
rate of 20.0%.
INDUSTRY CHALLENGES
Some of the fastest growing segments of the electronic products markets
are:
- communications infrastructure, including fiber optic transmission;
- wireless communications, including mobile phones;
- networking products;
- personal digital assistants and other portable electronic devices; and
- personal computers and servers.
The technological advances in these market segments have allowed electronic
product manufacturers to address the demands of consumers by designing products
with the following characteristics:
REDUCED SIZE AND WEIGHT. Consumer demand for smaller, more portable
products has created a need to reduce the size of components used in their
manufacture and minimize the required space between components. For example,
laptop computers and mobile phones have continued to get smaller and lighter
while the functionality of these products has increased dramatically.
INCREASED PERFORMANCE AND FUNCTIONALITY. The increasing use of faster
microprocessors in computers and higher frequencies in communication products
require more passive components that can function properly at the high operating
speeds. For example, the number of buses, along with their speed and width, has
increased significantly from the 486 generation to the Pentium III series of
personal computers, with each bus requiring passive components to terminate its
transmission line. Also, as the number of clock lines that serve to transmit
timing signals increased from a few in earlier personal computers to 27 in the
Pentium III, additional passive components are needed for filtering, wave
shaping, and termination.
GREATER RELIABILITY. As electronic systems become a more integral part of
our lives, and more systems become portable, manufacturers must provide products
with greater reliability and the ability to withstand hostile environmental
conditions. For example, we depend on electronic systems in almost every aspect
of our day-to-day lives, including financial transactions, email, health
records, the Internet, emergency response systems and mobile communications.
ELECTROSTATIC DISCHARGE PROTECTION. As electronic systems move out of
controlled environments and become more portable and user configurable, they are
more susceptible to damage from electrostatic discharge caused by human
handling. Protecting connectors and other surfaces where people touch sensitive
electronic devices is vital to assuring long, reliable operation.
SHORTER TIME TO MARKET. The rapid changes in technology and intense
competition have shortened product life cycles dramatically and required
manufacturers to seek shorter time to market. Products such
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as personal computers and mobile phones, which used to have life cycles of one
or two years, are now replaced by newer versions as frequently as every six to
nine months, requiring new products with new functions to quickly ramp into high
volume production.
LOWER TOTAL COST. Manufacturers of electronic systems are facing intense
price competition and are seeking ways of lowering the overall cost of their
products. Lowering the cost of electronic systems is fundamental to increasing
their affordability and allowing them to be applied to new tasks, which allows
more people access to better, faster technology.
REDUCED POWER CONSUMPTION. As devices become more portable and need to
operate for longer periods of time, there is an increasing need for reduced
power consumption to increase battery life. In addition, as power requirements
increase with enhanced system functionality and performance, power management
techniques, such as powering down unused parts of systems, must be employed.
Discrete passive components, because of their size and performance
characteristics, do not effectively meet these needs of system designers.
OUR SOLUTION
We meet the needs of electronic system manufacturers through our innovative
approach of integrating thin film passive components and our patented technique
of combining these integrated passive components with semiconductors. Our thin
film technology allows us to combine more resistors, capacitors, diodes and
other components into a single, high-density device we market under the brand
name "P/Active". We also design and manufacture analog semiconductors that
provide power management functions, and offer low voltage, micro power
operational amplifiers that we can enhance by adding thin film passive devices.
We believe our products provide the following key benefits to our customers:
SMALLER SIZE FOR MINIATURIZATION AND PORTABILITY. Our integration of
multiple passive components into a single integrated device reduces the area
required for the passive components by as much as 80% compared to discrete
passive components. Discrete passive components typically consume a significant
part of the space in an electronic system, limiting either the ability to reduce
product size or to incorporate additional features. For example, in a typical
mobile phone, as much as two thirds of the printed circuit board area is
consumed by passive components.
INCREASED PERFORMANCE AT HIGHER FREQUENCIES. Our thin film technology
components are designed to perform consistently at frequencies up to 3 GHz,
unlike discrete passive components that behave unpredictably at today's higher
frequencies, particularly in excess of 300 MHz. Our PAC RC family of filters
operates properly at up to 10 times the frequency of traditional discrete
components, and can suppress electromagnetic interference/radio frequency
interference noise by as much as 10 times more than combinations of thick film
components at very high frequencies. The operating frequency range of our
integrated passive components is further extended when combined with our new
chip scale packaging technology.
IMPROVED RELIABILITY. We reduce the number of component connections through
higher levels of integration, thus improving reliability and eliminating many of
the problems encountered in the manufacture of printed circuit boards. These
problems include solder migration, cracking and peeling, sensitivity to
environmental conditions and poor solder joints that often accompany the use of
numerous discrete passive components. Depending on the system, up to 40% of all
system failures can be attributed to poor solder interconnections.
IMPROVED ELECTROSTATIC DISCHARGE PROTECTION. All of our P/Active products
have been designed to tolerate high levels of electrostatic discharge, and also
to help protect increasingly sensitive integrated circuits. We produce a family
of dedicated electrostatic discharge protection devices, some of them
application specific, as well as other standard products which combine
electrostatic discharge protection with passive and active functions. We
continue to enhance these products to meet increasingly stringent industry
requirements for electrostatic discharge protection.
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SHORTER TIME TO MARKET. We work with our customers to design application
specific solutions. A number of these solutions can be standardized to meet the
needs of other customers. These standardized solutions assist design engineers
in their efforts to bring products to market more quickly. These solutions
eliminate the need for engineers to design, layout and test their own solution
using numerous discrete components. For example, our Super 1284 is a single
component that combines 26 resistors, 17 capacitors, and 34 diodes to provide
the complete filtering and termination functionality, in addition to the
electrostatic discharge protection needed on the parallel printer port of a
computer.
LOWER TOTAL COST SOLUTIONS. We offer a lower total cost solution compared
with most discrete passive component manufacturers by integrating multiple
passive components into a single chip. Taking into account the per component
costs of assembly, solder, testing, repair, rework and warranty, we believe a
single integrated passive device offers an overall lower cost solution even
though the materials cost of the discrete passive components is usually less. As
noted above, our Super 1284 device replaces 77 discrete or low integration level
components with a single package.
LOWER POWER CONSUMPTION AND ENHANCED POWER MANAGEMENT. We have developed a
product family combining low power CMOS technology with some passive components
to address the problems associated with smart power management techniques. These
techniques are used to support devices which must remain operational when major
parts of a system are powered down or in a "sleep mode" to save electricity. In
addition, we build small, cost effective operational amplifiers that are
designed to operate in small, low power, hand held devices that must conserve
battery power. All of our products use CMOS technology similar to that used in
high component count VLSI, instead of the bipolar semiconductor technology which
is more typically used in higher power drivers and power supplies.
OUR STRATEGY
Our objective is to use our leadership position in the design and
manufacture of integrated passive devices to capture a greater share of the
market currently served by discrete passive components. We also intend to become
a leading manufacturer of analog semiconductors that are complementary to our
integrated passive devices. Our strategy includes the following key elements:
LEVERAGE OUR TECHNOLOGY LEADERSHIP POSITION. We intend to continue to use
our extensive thin film processing and materials expertise in combination with
our semiconductor capabilities to create value added devices for our customers.
In passive components, we provide higher levels of integration by using our thin
film capabilities. We use our applications engineering capability and system
level expertise to design products that are application specific solutions to
customer problems, as opposed to providing discrete components from which
customers construct their own solution. Using our ability to combine thin film
passive components with semiconductors, we are developing new semiconductor
products in power management, micro power amplifiers, electrostatic discharge
protection, as well as custom applications. We are leveraging our success with
power management products into additional products and applications where we
have the opportunity to achieve a leadership position.
FOCUS ON HIGH VOLUME SOLUTIONS. We focus on manufacturers of products in
growth markets such as personal computers and servers, mobile phones and
telecommunications infrastructure, networking equipment that supports the growth
of the Internet and internal computer networks, high performance graphics
workstations, and personal digital assistants, all of which have an increasing
need for higher density and higher performance passive components. We work with
customers to identify common, high volume applications or, when appropriate,
design custom solutions to meet particular customer requirements. We have the
ability to expand our production volumes substantially without adding
significant new facilities or overhead, both in our Milpitas, California and
Tempe, Arizona manufacturing facilities.
EXPAND OUR SALES AND MARKETING EFFORTS INTERNATIONALLY AND DOMESTICALLY. We
are continuing to expand both the breadth and intensity of our sales coverage.
We recently added sales personnel to cover Japan, Taiwan, China, South Korea and
other parts of Southeast Asia. In addition, we have added sales
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capabilities in Europe and increased the number of area managers in the U.S. To
support our enhanced sales efforts and to define more new products, we have
expanded our internal marketing capabilities.
DEVELOP HIGHLY RESPONSIVE PRODUCT DEVELOPMENT AND PRODUCTION
CAPABILITIES. Many system designers leave decisions regarding passive components
to the end of the design cycle, and they often require custom devices to meet
their specific needs. As a result, we continue to invest in both development
capability and inventory planning and production capabilities to allow us to
respond quickly to these customers and shorten design and manufacturing cycles.
DEVELOP STANDARD PRODUCTS TO SHORTEN CUSTOMER TIME TO MARKET. We continue
to work with our existing and potential customers to identify their passive
component and specialized semiconductor requirements. We use this information to
provide customized solutions that often become standard products and solutions
that shorten our customers' time to market.
EDUCATE THE MARKET ON OUR VALUE PROPOSITION. We are educating the market
that our thin film integrated devices are a lower total cost solution than
discrete passive components when the total cost of manufacturing and support is
considered. We also take an aggressive pricing approach to make our solutions
more attractive in connection with certain high volume market opportunities.
OUR COMPETITIVE ADVANTAGES
We believe that we have the following competitive advantages that enable us
to implement solutions to satisfy our customers' needs:
EXTENSIVE EXPERIENCE IN THIN FILM TECHNOLOGIES. We have extensive
experience in creating thin film passive components. We have the flexibility to
use many different substrates, including silicon, ceramic and glass, while our
competitors are generally limited to one type of substrate. This allows us to
apply the technology best suited to a given problem. We can deposit multiple
different resistive materials, use different dielectric materials and add
plating of different materials to address a wide variety of resistor and
capacitor needs.
EXTENSIVE EXPERIENCE IN COMBINING THIN FILM PASSIVE COMPONENTS AND
SEMICONDUCTORS. We believe our in-house ability to combine thin film technology
with semiconductors is unique among passive component manufacturers. Most of our
competitors in the passive component area lack internal semiconductor design and
manufacturing capability. While there are some semiconductor manufacturers who
have limited capabilities to combine semiconductors with passive components, at
present we know of none that are selling integrated thin film passive devices
incorporating semiconductor functions.
APPLICATION ENGINEERING EXPERTISE. Our application engineers define
products that are application specific solutions to our customers' problems. Our
goal is to be able to specify and design application specific devices that not
only meet the needs of the specific customer, but may also be used to meet the
needs of other customers. Traditional passive component manufacturers provide
components from which customers must construct their own solution.
CONTROL OF WAFER FABRICATION FACILITIES WITH AVAILABLE CAPACITY. We
currently operate wafer fabrication facilities in Milpitas, California and
Tempe, Arizona. The processes that we use to build integrated passive devices
are not standard, nor are many of the processes used to build analog
semiconductors. Outsourcing the required manufacturing technology can be quite
difficult for our competitors. We have the capacity at our facilities to
significantly increase production with additional staffing and minimal
additional capital expenditures.
INTEGRATED MANUFACTURING CAPABILITIES. We have developed in-house
specialized capabilities necessary to build a broad range of integrated passive
devices. These capabilities include laser trimming, noise and temperature
coefficient control, testing, plating, optical inspection and chip scale bumping
technologies. Our competitors generally must outsource one or more of these
capabilities, raising issues of availability, cost, quality control and time to
market.
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PRODUCTS
Our products consist of thin film integrated passive products and
semiconductor products and generally range in price from $0.20 to $1.00 per
unit, with some specialized or special purpose products priced up to $10.00 per
unit.
THIN FILM INTEGRATED PASSIVE PRODUCTS
Our integrated passive devices are application specific, high volume
standard and lower volume custom products. They represent complete solutions to
the electronic problems of termination, filtering, and electrostatic discharge
protection that plague many system designers. Most of the systems in our target
markets include a core of highly integrated circuits, accompanied by discrete
passive components, and low integration level integrated circuits or discrete
semiconductors. We service the need for the integration of these companion
components, which in recent years have come to dominate the size and
significantly impact the cost of most systems. Our thin film product offerings
fall into two categories:
- Our P/Active family of components, called "PAC" in the table below,
optimizes high frequency performance, density, reliability and other
capabilities. These components are application specific passive devices
targeted to solve industry standard applications or to complement the
semiconductor offerings of the industry's leading chip suppliers. They
take full advantage of the inherent capabilities of the silicon substrate
to be used as an interconnect between devices, shield for low noise
capabilities, and impedance control. They often include some
semiconductor devices as part of the solution, particularly when
electrostatic discharge protection is required.
- Our Integrated Passive Electronic Component products are cost effective
for customers with high volume requirements or that can take advantage of
our capabilities to provide tight tolerances, low temperature
coefficients, tight matching between components, or other special
characteristics. These products are often custom in nature. They are
typically simpler in function and easier to manufacture and are often
well suited for very low cost applications.
We also offer a variety of precision and non-precision thin film resistors
and capacitors as well as combinations of those elements with and without
semiconductor devices. Devices can be manufactured on a variety of different
substrates. We have particular strength in the area of resistor-capacitor
filters, a rapidly growing and complex segment of the integrated passive
component business. We sell these products both in standard semiconductor
industry packages, primarily surface mount technology, as chip scale packages,
and as unpackaged die. Packaged devices currently represent the dominant portion
of our business, although we expect our new chip scale packages to represent an
increasing portion.
SEMICONDUCTOR PRODUCTS
We manufacture CMOS based analog circuits, utilizing feature sizes of 1.5
microns or greater. In fiscal 1999 and 2000, we developed and introduced four
new semiconductor product families: power management solutions, operational
amplifiers, electrostatic discharge protection devices, and combination devices
targeted at the multiple functions on the VGA port of computers.
- Our power management devices are single chip solutions that implement the
power management techniques used in computer and network enhancements
such as network interface cards, modems, and other system functions which
must remain operational when major parts of systems are powered down.
- Our operational amplifier focus is on providing extremely low power
consumption products that are attractive in the portable systems markets.
Operational amplifiers are used in the processing of analog electrical
signals. We can integrate multiple operational amplifiers with passive
components to provide higher level functions.
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- Our electrostatic discharge protection devices are typically used to
protect connector interfaces and other external elements. These devices
are often combined with signal termination and filtering functions.
- We have introduced a family of products for the VGA port on personal
computers. These devices combine buffer amplifiers, electrostatic
discharge protection, level shifting functions, and termination and
biasing resistors for handling the multiplicity of needs on the video
port of computers.
Our traditional semiconductor business includes mixed signal integrated
circuits that combine digital and analog functions on a single chip. Product
groups include data communications and interface families, and telecommunication
dual tone multi-frequency receiver and transceiver products. These products are
used in customer applications such as 10-10-XXX dialers, answering machines,
portable telephones and switching systems. Additionally, we continue to
manufacture the 65CXX family of microprocessors.
PRODUCT TABLE
The following table provides information regarding our product families by
application:
<TABLE>
<S> <C> <C>
----------------------------------------------------------------------------------------------------------
APPLICATION PRODUCT NAME TYPICAL MARKETS
----------------------------------------------------------------------------------------------------------
Filters PAC 1284, PRC 1284, PRC, PACT, PAC - Computers
USB, PAC GAME, PACKBM - Mobile Phones
- Personal Digital
Assistants
- Set Top Boxes
----------------------------------------------------------------------------------------------------------
Termination Devices PACDN, PACR, PRN, PACRAMBUS, PACGTL, - Computers
PACAS, PRC, PACTF, PACV - Base Stations
- Networks
----------------------------------------------------------------------------------------------------------
Resistor Networks PACAC 97, PAC27A, PRN - Computers
- Automobiles
- Medical Devices
- Audio Equipment
- Test Equipment
- Power Supplies
- Networks
----------------------------------------------------------------------------------------------------------
ESD Protection PACDN, DN, PDN, PACVGA - Mobile Phones
- Personal Digital
Assistants
- Computers
- Set Top Boxes
----------------------------------------------------------------------------------------------------------
Power Management CMPWR, PAC27 - Network Interface
Cards
- Modems
- Cable Modems
----------------------------------------------------------------------------------------------------------
Amplifiers CMC7, CMAMP, AMPM - Audio Equipment
- Instrumentation
- Mobile Phones
----------------------------------------------------------------------------------------------------------
Microprocessors and Peripherals G655, G65SC - Telephone Switching
----------------------------------------------------------------------------------------------------------
Dual Tone Multiple Frequency CM8870, CM8880, CM8888, G8912 - 10-10 XXX Dialers
- Telephone Switching
- Answering Machines
- Caller ID
- Smart Phones
----------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 32
FOUNDRY OPERATIONS
We participate in the foundry business, in which wafers are fabricated to
customer specifications using customer designed tooling. Most of these products
are built using unique processes that do not directly compete with the larger
foundries in Southeast Asia and elsewhere. Our intent is to do foundry work to
leverage the capacity of our facilities in Tempe, Arizona, while building our
own products and establishing relationships with key partners. In fiscal 2000,
our major foundry customer was Sipex Corporation, which recently announced the
opening of its own facility. Sipex represented approximately 2.5% of product
sales in fiscal 2000.
CUSTOMERS
Our customers are original equipment manufacturers, contract manufacturers
and distributors. In fiscal 2000, approximately 52% of our revenues came from
the sale of our products directly to original equipment manufacturers and
contract manufacturers. No single end use customer accounted for over 10% of net
product sales. The following were our major customers for fiscal 2000 and the
markets served by our customers with products into which our devices are
incorporated:
<TABLE>
<CAPTION>
CUSTOMER MARKET
-------- ------
<S> <C>
ACER Group Personal Computers
Celestica Inc. Contract Manufacturing
Cisco Systems Inc. Networks
Guidant Corporation Medical Devices
Intel Corporation Computers
ITI Limited Telephone Switching
Nortel Networks Corporation Networks
Samsung Electronics Co Ltd Mobile Phones, Computers
Solectron Corporation Contract Manufacturing
3Com Corporation Networks
</TABLE>
In fiscal 2000, 48% of our revenues came from the sale of our products
through distributors. Arrow Electronics, Inc. and Excelpoint Systems, our two
largest distributors, accounted for approximately 17% and 14% of net product
sales, respectively. In fiscal 1999, no single distributor accounted for greater
than 10% of net sales. In fiscal 1998, Bell Milgray Inc., a distributor, later
acquired by Arrow Electronics, Inc. accounted for approximately 10% of net
product sales.
SALES AND MARKETING
We focus our marketing efforts on high growth electronics sectors,
including the areas of computers and peripherals, portable communications
devices and telecommunications infrastructure, and network systems.
Additionally, we concentrate our efforts on major worldwide electronic system
manufacturers who are considered market leaders in these segments, and where we
feel we have the greatest opportunities and ability to influence the industry at
large. This often involves a longer design-in cycle, but we believe it has
greater long-term business potential.
Our products are primarily specified through contact with customers'
engineering departments, as well as their procurement and manufacturing
personnel. Most of the systems into which our products are designed have short
life cycles. As a result, we require a significant number of new design wins on
an ongoing basis to maintain and grow revenue.
We work with existing and potential customers to identify passive and
specialized semiconductor component needs that our capabilities address, and
seek to have customers design our solutions into their products. We facilitate
these efforts by providing customized solutions as necessary to meet customer
design requirements. These customized designs, and the knowledge acquired during
the design process, can often be used to create standard products, which we can
then offer for similar applications in other areas.
28
<PAGE> 33
In this respect, our business style is closer to that of a semiconductor
company, than that of the traditional passive component company.
We sell through independent regional sales representatives managed by our
sales force headquartered in Milpitas, California, with regional sales offices
throughout the United States, Europe, and Asia. We also sell through
distributors, in the United States, Asia and Europe, to provide sources of our
products at locations closer to the customers. As our standard product line
expands, more of our sales may be through distributors.
There has been a distinct shift from original equipment manufacturing
towards the use of contract manufacturing within our customer base, and we
believe that this trend will continue. Since the end of fiscal 1998 and
continuing through fiscal 2000, a contract manufacturer has been our single
largest direct purchaser of product. In response to this trend, we have a
separate contract manufacturing account program to further develop sales
opportunities in this area.
Foreign sales accounted for 29%, 37%, and 43% of product sales for the
fiscal years ended March 31, 1998, 1999, and 2000, respectively. Many of those
products were designed into United States based original equipment manufacturers
and subcontracted through overseas assemblers. We use independent foreign sales
representatives and distributors to provide international sales support, along
with our employees based abroad. We expect that international sales will
continue to represent a significant portion of our sales for the foreseeable
future. Our sales are denominated in U.S. dollars.
MANUFACTURING
Our manufacturing processes are complex, and require production in a highly
controlled, clean environment suitable for fine tolerances. We currently operate
wafer fabrication facilities in Milpitas, California and Tempe, Arizona that are
ISO 9000 certified. Our Milpitas facility includes a 10,000 square foot clean
room and primarily uses four and five inch round and 4 1/2 inch square wafers to
manufacture thin film passive components. Our Tempe facility includes a 16,000
square foot clean room and is equipped for five inch wafer fabrication of both
thin film passive components and semiconductor products. We use subcontractors
in Asia, primarily in Thailand and Malaysia, for assembly, packaging, and
testing of most of our products.
We manufacture our products using industry standard semiconductor wafer
fabrication equipment that we modify as necessary. We have historically
purchased used processing equipment at significantly lower cost than new
equipment, but have also purchased new equipment for some operations when it
could be shown to be more cost effective or where used equipment was not
available.
RESEARCH AND DEVELOPMENT
Our research and development programs consist primarily of developing new
products, processes and materials in response to identified market needs.
Additionally, we redesign existing products to reduce costs and expand their
capabilities and performance. On June 30, 2000, we had 33 engineers in our
research and development department and process development and improvement
organizations who averaged 17 years of experience.
For the fiscal years ended March 31, 1998, 1999 and 2000, we spent $3.0
million, $3.7 million, and $3.4 million, respectively, on research and
development activities.
INTELLECTUAL PROPERTY
In the last five years, we have been granted 13 U.S. patents related to our
thin film and semiconductor technologies. We have seven U.S. patent applications
pending relating to specific embodiments of our proprietary resistor, capacitor,
diode, process and semiconductor product technologies. We have also established
domestic and international trademarks for our P/Active family of devices.
29
<PAGE> 34
We have acquired a non-exclusive, non-assignable license with respect to
manufacturing flip chip, or "bumped" die, from Flip Chip Technologies. Under the
terms of this license, we can utilize certain of Flip Chip's Ultra Chip Scale
packaging technologies.
Our policy is to apply for patent protection for our unique products and
manufacturing processes where such protection is warranted. Process technologies
are more often designated as trade secrets. With respect to mask works, our
policy is to selectively seek copyright protection. We protect our trade secrets
by having our employees sign confidentiality and non-disclosure agreements as
part of our personnel policy. It is not our intention to rely solely on
protection of intellectual property rights to deter competition. However, when
and where appropriate, we have taken aggressive action to protect our
intellectual property rights.
COMPETITION
Competition in the passive component industry is based on a number of
factors, including price, product performance, established customer
relationships, manufacturing capabilities, product development and customer
support. Our primary competition has come from established competitors and from
pre-existing technologies. Many of our competitors have announced that they are
or will be providing thin film products in addition to their traditional thick
film devices. We have seen only sporadic thin film competition but continue to
believe that this market will become more competitive.
Because our markets are highly fragmented, we generally encounter different
competitors in our various market areas. Competitors with respect to our
integrated passive products include AVX/Kyocera, Beckman Industrial Corp.,
Intarsia, IRC, KOA-Speer, Matsushita Electronics Components, Ltd., Murata-Erie
of North America, Inc., Phillips Electronics N.V. Ltd., ROHM Co.,
STMicroelectronics N.V., TDK Corp. of America and Vishay Intertechnology, Inc.
In the semiconductor area, our competitors include ON Semiconductor Corporation,
Fairchild Semiconductor Corporation, Linear Technology Corporation, Maxim
Integrated Products, Inc., Mitel Corporation, Motorola Semiconductor, Semtech
Corporation, STMicroelectronics N.V., Telcom Semiconductor Inc. and Texas
Instruments, Inc.
ENVIRONMENTAL
We are subject to a variety of federal, state and local regulations in
connection with the discharge and storage of certain chemicals during our
manufacturing processes. We believe that we are in compliance with all such
environmental regulations. Industrial waste generated at our facilities is
either processed prior to discharge or stored in barrels with double containment
methods until removed by an independent contractor. We have obtained all
necessary permits for such discharges and storage.
EMPLOYEES
As of June 30, 2000, we had 305 full-time and part-time employees,
including 33 in sales and marketing, 33 in engineering and research and
development activities and in-process development and improvement organizations,
217 in manufacturing, and 22 in administration. None of our employees is subject
to a collective bargaining agreement. We consider our relations with our
employees to be good.
PROPERTIES
We currently lease approximately 40,000 square feet of office, development
and manufacturing space, including a 10,000 square foot clean room, in Milpitas,
California, pursuant to an agreement that expires on June 30, 2002, that
provides for a current monthly rent of $32,640 plus operating expenses. This
rent amount will be increased 3% annually. We also own five acres of land and a
46,000 square foot building in Tempe, Arizona which houses a 16,000 square foot
clean room, wafer fabrication, manufacturing, and engineering design center.
We also lease approximately 24,000 square feet of space in Tempe, Arizona,
which formerly housed test facilities and warehouse space. Monthly rent on the
leased Tempe facilities as of March 31, 2000 was
30
<PAGE> 35
$11,152 plus operating expenses, pursuant to an agreement that expires in March
2001. These facilities are currently being subleased through the term of the
lease. The sublease revenue is expected to cover the costs of the lease.
We estimate that our wafer fabrication capacity utilization was
approximately 45% in Tempe and 35% in Milpitas at the end of the year ended
March 31, 2000. Ramping up to full wafer fabrication capacity from both of these
locations would require moderate additional capital expenditures as well as an
ongoing replacement of aging equipment.
LEGAL PROCEEDINGS
From August 5, 1994 through February 16, 1995, eleven purported class
action complaints were filed against California Micro Devices, certain of its
former officers and former independent auditors in the United States District
Court for the Northern District of California. The gravamen of the allegations
in these class actions was that the defendants violated Section 10(b) and Rule
10b-5 of the Securities Exchange Act of 1934 by disseminating false and
misleading financial statements and reports for the fiscal years ended June 30,
1993 and 1994. The Department of Justice and the SEC also commenced
investigations of certain of our former officers with respect to the allegations
in the class actions.
By court order dated May 20, 1997, the class action claims against us were
settled. Our contribution towards the settlement consisted of the payment of $6
million in cash and the issuance of 608,696 new shares of the our common stock
to the class. Each new share was accompanied by a Contingent Value Right (CVR),
personal to the shareholder, that guaranteed the shareholder would receive the
difference between $11.50 and the highest 20 day average trading price of our
common stock (assuming the average price is less than $11.50) over a defined
period. As of January 5, 2000 the 20-day average trading price exceeded $11.50
and the CVR was extinguished. We had put $2 million into a restricted account as
a guarantee for performance under the CVR. As a result of the CVR being
extinguished, this $2 million is no longer restricted and is included in cash
and short-term securities as of March 31, 2000.
We have cooperated with the Justice Department in its investigations of the
former officers of California Micro Devices and with the SEC in its
investigation of those former officers and us. The Justice Department has
advised us that we are not currently a target or a subject of investigation. The
SEC has taken the position that it is premature, at this stage in its
investigation, to discuss the resolution of the investigation of us because of
its continuing investigation of our former officers.
We are a party to lawsuits, claims, investigations, and proceedings,
including commercial and employment matters, which are being handled and
defended in the ordinary course of business. We are not aware of any pending
legal proceedings against us that, individually or in the aggregate, would have
a material adverse effect on our business, operating results, or financial
condition.
31
<PAGE> 36
MANAGEMENT
Our executive officers and directors, and their ages as of August 1, 2000,
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Jeffrey C. Kalb(3)............................ 57 President, Chief Executive Officer, Director
John E. Trewin................................ 54 Vice President and Chief Financial Officer
Charles F. Bellavia........................... 53 Vice President of Marketing and Sales
Scott R. Hover-Smoot.......................... 46 General Counsel and Corporate Secretary
John Jorgensen................................ 52 Vice President of Engineering
Arieh Schifrin................................ 62 Vice President of Operations
Wade Meyercord(3)............................. 59 Chairman of the Board
Angel G. Jordan(2)............................ 69 Director
J. Daniel McCranie(1)......................... 56 Director
Stuart Schube(2)(3)........................... 60 Director
John L. Sprague(1)............................ 70 Director
Donald L. Waite(1)(2)......................... 67 Director
</TABLE>
-------------------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
(3) Member of Nominating Committee
JEFFREY C. KALB has been President and Chief Executive Officer since
December 1994. He has been a director since 1995. Mr. Kalb was President and
Chief Executive Officer of MasPar Computer Corporation, a computer systems
manufacturer, from 1988 to 1993. He was Vice President with Digital Equipment
Corporation, a computer systems manufacturer, from 1983 to 1987.
JOHN E. TREWIN has been Vice President and Chief Financial Officer since
January 1995. He was Vice President and Chief Financial Officer of The O'Brien
Corporation, a coatings manufacturer, from 1990 to 1994 and Vice President and
Chief Financial Officer of Ampex Corporation, an electronics equipment and
magnetic recording media manufacturer, from 1986 to 1989.
CHARLES F. BELLAVIA has been Vice President of Marketing and Sales since
April 1999. He was Vice President of Sales from November 1998 to April 1999. Mr.
Bellavia was a management consultant for high technology companies from 1996 to
1998. He was Vice President, Sales and Marketing of Adaptive Logic, Inc., a
semiconductor manufacturing company, from 1994 to 1996; Vice President, Sales
and Marketing for IXYX Corporation, a power semiconductor company, from 1991 to
1993; and Director of Worldwide Sales for Hewlett Packard's Avantek Division
(wireless equipment and devices) from 1984 to 1991.
SCOTT R. HOVER-SMOOT has been Corporate Secretary and General Counsel since
July 1994. He was Associate and Senior Associate at Berliner, Cohen, a law firm,
from 1986 to 1994.
JOHN JORGENSEN has been Vice President of Engineering since November 1995.
He held several positions at National Semiconductor Corporation from 1972 to
1995, including Director of Corporate Business Development, Director of DSP
Business Unit, and Director of Advanced Networks Division.
ARIEH SCHIFRIN has been Vice President of Operations since February 1995.
He was a management consultant for high technology companies from 1991 to 1995.
Mr. Schifrin was Executive Vice President for Catalyst Semiconductor, a
semiconductor company, from 1989 to 1991; Executive Vice President of Xicor,
Inc., a semiconductor manufacturing company, from 1980 to 1989; and Operations
Manager for Data General Corp., a computer company, from 1977 to 1980.
WADE MEYERCORD is Chairman of the Board of Directors and has served on the
Board of Directors since 1992. He is also President of Meyercord & Associates, a
consulting company, since 1987. Mr. Meyercord is currently a Senior Vice
President, Finance & Administration, and CFO of Rioport.com,
32
<PAGE> 37
Inc., an applications service provider for music digital distribution. He was
Senior Vice President of e-commerce at Diamond Multimedia Systems, Inc., a
multimedia and connectivity products company from 1997 to 1999, and Chief
Executive Officer of Read-Rite Corp., an electronic data storage products
company, from 1984 to 1987. Mr. Meyercord is a member of the Board of Directors
of MicroChip Technology, a semiconductor company.
ANGEL G. JORDAN has been a director since 1986. He has been University
Professor of Electrical & Computer Engineering and Robotics, Emeritus, at
Carnegie-Mellon University since 1999, Professor of Electrical & Computer
Engineering and Robotics from 1997 to 1999, Professor of Electrical & Computer
Engineering from 1966 to 1997, Provost from 1983 to 1991, and Dean of
Engineering from 1979 to 1983.
J. DANIEL MCCRANIE has been a director since 1998. Since May 2000, he has
been Executive Vice President of Mergers, Acquisitions and New Business
Development of Cypress Semiconductor Corporation, a manufacturer and supplier of
integrated circuits. Mr. McCranie was Executive Vice President of Marketing and
Sales of Cypress Semiconductor Corporation from 1993 to May 2000. Mr. McCranie
was Chairman and Chief Executive Officer of SEEQ Technology Incorporated, a
semiconductor manufacturer, from 1989 to 1993. He joined SEEQ in 1981 as Vice
President of Sales and Marketing.
STUART SCHUBE has been a director since 1986. He has been President of
Acorn Ventures, Inc., a venture capital management firm, since 1986.
JOHN L. SPRAGUE has been a director since 1996. Prior to that time he was a
director from January 1994 until July 1995. Mr. Sprague has been President of
John L. Sprague Associates, a consulting company, since 1988. He was President
and Chief Executive Officer of Sprague Electric Company, an electronics company,
from 1981 to 1987. Mr. Sprague is a member of the board of directors for SIPEX
Corporation, a manufacturer of analog power semiconductors.
DONALD L. WAITE has been a director since 1997. He has been the Executive
Vice President and Chief Administrative Officer, Seagate Technology, Inc.
(manufacturer of disc drives, tape drives and storage management software) since
1995. Mr. Waite joined Seagate in 1983 as Vice President of Finance and Chief
Financial Officer and became Senior Vice President, Finance in 1984. He has been
a director of CVC Holdings, Inc. (deposition equipment company) since 1995.
33
<PAGE> 38
PRINCIPAL SHAREHOLDERS
As of August 15, 2000, there were 11,214,317 shares of our common stock
issued and outstanding. The following table shows, as of August 15, 2000, the
beneficial ownership of our common stock by:
- owners of more than five percent of our common stock;
- each director;
- each executive officer; and
- all directors and executive officers as a group.
Except as otherwise noted, the persons or entities in this table have sole
voting and investment power with respect to all the shares of common stock
beneficially owned by them.
<TABLE>
<CAPTION>
PERCENT OWNERSHIP
--------------------
SHARES BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER(1) OWNED(2) OFFERING OFFERING
------------------- ------------------- -------- --------
<S> <C> <C> <C>
Chan Desaigoudar.......................................... 1,733,850 15.46% 13.64%
Shorebird, #215
101 Shell Drive
Watsonville, CA 95076
Kern Capital Management LLC............................... 1,592,000 14.20 12.52
114 West 47th Street, Suite 1926
New York, NY 10036
Jeffrey C. Kalb(3)(4)..................................... 461,147 4.00 3.53
John E. Trewin(3)......................................... 119,237 1.06 *
Angel G. Jordan(3)(4)..................................... 102,693 * *
Wade Meyercord(3)(4)...................................... 100,800 * *
John Jorgensen(3)(4)...................................... 70,610 * *
Charles F. Bellavia(3).................................... 67,719 * *
Arieh Schifrin(3)......................................... 57,876 * *
Stuart Schube(3).......................................... 56,666 * *
John L. Sprague(3)(4)..................................... 50,000 * *
Scott R. Hover-Smoot(3)................................... 40,998 * *
Donald L. Waite(3)........................................ 25,748 * *
J. Daniel McCranie(3)..................................... 10,000 * *
Directors and executive officers as a group (12
persons)................................................ 1,163,494 9.75 8.66
</TABLE>
-------------------------
* Less than 1%.
(1) Based solely upon information furnished by such individuals or contained in
filings made by such beneficial owners with the SEC.
(2) Includes shares subject to options exercisable within 60 days of August 15,
2000.
(3) The address of each of these individuals is 215 Topaz Street, Milpitas,
California 95035.
(4) The following individuals have agreed to sell up to the number of shares
indicated if the underwriters exercise their over-allotment option: Jeffrey
C. Kalb (40,000 shares); Angel G. Jordan (10,000 shares); Wade Meyercord
(5,000 shares); John Jorgensen (5,000 shares); and John L. Sprague (15,000
shares).
34
<PAGE> 39
DESCRIPTION OF CAPITAL STOCK
The following description summarizes the most important terms of our
capital stock. Because it is only a summary, it does not contain all of the
information that may be important to you. For a complete description, you should
refer to our Articles of Incorporation and Bylaws.
Our Articles of Incorporation authorizes us to issue 25 million shares of
common stock and 10 million shares of preferred stock. No other classes of
capital stock are authorized under our Articles of Incorporation.
COMMON STOCK
Each share of common stock is entitled to one vote on all matters submitted
to a vote of the shareholders. Holders of common stock may receive dividends
only when our Board of Directors declares them. In certain cases, common
shareholders may not receive dividends until we have satisfied our obligations
to any preferred shareholders. If we liquidate, dissolve or wind-up our
business, either voluntarily or not, common shareholders will share equally in
the assets remaining after we pay our creditors and any preferred shareholders.
The common stock has no preemptive, conversion or other subscription rights.
PREFERRED STOCK
Our Board of Directors may issue shares of preferred stock at any time, in
one or more series, without shareholder approval. The Board of Directors will
determine the designation, relative rights, preferences and limitations of each
series of preferred stock. If we issue preferred stock, it could delay a change
in control and make it harder to remove our present management. Under certain
circumstances, preferred stock could also adversely affect the voting power of
common shareholders.
35
<PAGE> 40
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below, for whom Needham & Company Inc., A.G. Edwards & Sons,
Inc. and Punk, Ziegel & Company, L.P. are acting as representatives, have
severally agreed to purchase an aggregate of 1,500,000 shares of common stock
from us, at the public offering price less the underwriting discount set forth
on the cover page of this prospectus, in the amounts set forth opposite their
names below.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Needham & Company, Inc.
A.G. Edwards & Sons, Inc.
Punk, Ziegel & Company, L.P.
---------
Total............................................. 1,500,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
underwriters are subject to specified conditions precedent and that the
underwriters will purchase all shares of common stock offered by this prospectus
if any of those shares are purchased.
The representatives have advised us that the underwriters propose to offer
the shares of common stock directly to the public at the public offering price
set forth on the cover page of this prospectus, and to various securities
dealers at a price less a concession of not more than $ per share. The
underwriters may allow, and those dealers may reallow, a concession of not more
than $ per share to various other dealers. After the shares of common stock
are released for sale to the public, the offering price and other selling terms
may from time to time be varied by the underwriters. No change in those terms
shall change the amount of the proceeds we will receive, as set forth on the
cover page of this prospectus. The common stock is listed on the Nasdaq National
Market.
We and certain selling shareholders have granted to the underwriters an
option, exercisable within 30 days after the date of this prospectus, to
purchase up to an aggregate of 225,000 additional shares of common stock at the
public offering price less the underwriting discount set forth on the cover page
of this prospectus. The underwriters may exercise the option solely to cover
over-allotments, if any, made in connection with the sale of common stock
offered by this prospectus. To the extent that the underwriters exercise the
over-allotment option, each underwriter will be committed, subject to specified
conditions, to purchase a number of additional shares of common stock which is
proportionate to that underwriter's initial commitment as set forth in the table
above.
Our executive officers and directors have agreed that, during the period
beginning from the date of this prospectus and continuing to and including the
date 90 days after the date of this prospectus, without the prior written
consent of Needham & Company, Inc., they will not sell, contract to sell, or
otherwise dispose of any shares of common stock, options to acquire common stock
or securities exchangeable for or convertible into common stock, except for the
shares of common stock offered in connection with this offering. We have agreed,
with certain limited exceptions, not to offer, sell, contract to sell, grant any
option to purchase, transfer or otherwise dispose of, any shares of common stock
for a period of 90 days after the date of this prospectus.
The representatives have informed us that they do not expect sales to
accounts over which the underwriters exercise discretionary authority to exceed
5% of the total number of shares of common stock offered by them.
We have agreed to indemnify the underwriters against specified liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments that the underwriters may be required to make in respect thereof.
In connection with this offering, the underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of our
36
<PAGE> 41
common stock. Specifically, the underwriters may over-allot in connection with
this offering by selling more shares than are set forth on the cover page of
this prospectus. This creates a short position in our common stock for their own
account. "Covered" short sales are sales made in an amount not greater than the
underwriters' option to purchase additional shares from us in the offering. The
underwriters may close out any covered short position by either exercising their
option to purchase additional shares or purchasing shares in the open market. In
determining the source of shares to close out the covered short position, the
underwriters will consider, among other things, the price of shares available
for purchase in the open market as compared with the price at which they may
purchase shares through the overallotment option. "Naked" short sales are any
sales in excess of this option. The underwriters must close out any naked short
position by purchasing shares in the open market. A naked short position is more
likely to be created if the underwriters are concerned that there may be
downward pressure on the price of the common stock in the open market after
pricing that could adversely affect investors who purchase in the offering. To
stabilize the price of our common stock, the underwriters may bid for, and
purchase, our common stock in the open market prior to the completion of the
offering.
The underwriters may also impose a penalty bid. This occurs when a
particular underwriter or dealer repays selling concessions allowed to it for
distributing our common stock in this offering because the underwriters
repurchase that stock in stabilizing or short covering transactions.
Finally, the underwriters may bid for, and purchase, shares of our common
stock in market making transactions.
These activities may stabilize or maintain the market price of our common
stock at a price that is higher than the price that might otherwise exist in the
absence of these activities. The underwriters are not required to engage in
these activities, and may discontinue any of these activities at any time
without notice. These transactions may be effected on the Nasdaq National
Market, or otherwise.
The following table summarizes the compensation we will pay to the
underwriters:
<TABLE>
<CAPTION>
TOTAL WITHOUT TOTAL WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
--------- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts and commissions we will pay...
Underwriting discounts and commissions the selling
shareholders will pay..............................
</TABLE>
Underwriting discounts and commissions are calculated on a percentage basis
of the offering price equal to %. We will pay all of the expenses of the
offering, estimated to be $ , other than underwriting discounts and
commissions to be paid by the selling shareholders with respect to any shares
sold by them.
LEGAL MATTERS
O'Melveny & Myers LLP, Los Angeles, California, will pass upon the validity
of the shares of common stock we are offering. Heller Ehrman White & McAuliffe
LLP, San Francisco, California, will pass upon certain legal matters for the
underwriters.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements and schedule included in our Annual Report on Form 10-K for the year
ended March 31, 2000, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement.
Additionally, we have included our financial statements at March 31, 2000 and
1999, and for each of the three years in the period ended March 31, 2000 as set
forth in their report which is also included herein. Our financial statements
and schedule are incorporated by reference and our financial statements are
37
<PAGE> 42
included in reliance on Ernst & Young LLP's report, given on their authority as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Our filings are
available to the public over the Internet at the SEC's web site at
"http://www.sec.gov." You can read and copy any document that we file with the
SEC at the following SEC public reference facilities:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661
</TABLE>
You can also obtain copies of the documents at prescribed rates by writing
to the SEC's Public Reference Section at 450 Fifth Street, N.W., Washington,
D.C. 20549. Please call 1-800-SEC-0330 for further information on the operation
of the SEC's public reference facilities. You also can inspect copies of our
filings at the Nasdaq Stock Market at 1735 K Street, N.W., Washington, D.C.
20006.
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with the SEC. This means that we can disclose important
information to you by referring you to those documents. Information incorporated
by reference is part of this prospectus. Information that we later file with the
SEC will automatically update and supersede this information.
We incorporate by reference our Annual Report on Form 10-K for the year
ended March 31, 2000, our quarterly report on Form 10-Q for the three months
ended June 30, 2000, and any future filings made with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until this
offering is completed.
You may request a copy of these filings, at no cost, by contacting us in
writing or by telephone at the following address:
California Micro Devices Corporation
215 Topaz Street
Milpitas, California 95035-5430
Attention: Kim Kacir
(408) 263-3214
This prospectus is part of a registration statement that we filed with the
SEC. This prospectus does not contain all of the information included in the
registration statement. We have omitted certain parts of the registration
statement in accordance with the rules and regulations of the SEC. For further
information, we refer you to the registration statement, including its exhibits
and schedules.
38
<PAGE> 43
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Balance Sheets at March 31, 1999 and March 31, 2000 and at
June 30, 2000
(unaudited)................................................. F-3
Statements of Operations for the years ended March 31, 1998,
1999 and 2000 and for the three months ended June 30, 1999
and 2000 (unaudited)...................................... F-4
Statements of Shareholders' Equity for the years ended March
31, 1998, 1999 and 2000 and for the three months ended
June 30, 2000 (unaudited)................................. F-5
Statements of Cash Flows for the years ended March 31, 1998,
1999 and 2000 and for the three months ended June 30, 1999
and 2000 (unaudited)...................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 44
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Shareholders
California Micro Devices Corporation
We have audited the accompanying balance sheets of California Micro Devices
Corporation as of March 31, 2000 and 1999, and the related statements of
operations, shareholders' equity, and cash flows for each of the three years in
the period ended March 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatements. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of California Micro Devices
Corporation as of March 31, 2000 and 1999, and the results of its operations and
its cash flows for each of the three years in the period ended March 31, 2000 in
conformity with accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
San Jose, California
April 26, 2000
F-2
<PAGE> 45
CALIFORNIA MICRO DEVICES CORPORATION
BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31, JUNE 30,
1999 2000 2000
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents............................... $ 764 $ 1,490 $ 2,175
Short-term investments.................................. 4,169 5,069 5,294
Accounts receivable, less allowance for doubtful
accounts of $224, $219 and $238, respectively........ 4,471 8,875 8,558
Inventories............................................. 8,438 9,994 10,164
Other assets............................................ 592 980 1,019
-------- -------- --------
Total current assets................................. 18,434 26,408 27,210
Property and equipment, net............................. 11,540 10,637 11,481
Restricted cash......................................... 2,900 902 1,126
Other long-term assets.................................. 770 1,139 1,127
-------- -------- --------
Total assets......................................... $ 33,644 $ 39,086 $ 40,944
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable........................................ $ 3,239 $ 4,821 $ 4,192
Accrued salaries and benefits........................... 998 1,097 1,181
Other accrued liabilities............................... 554 742 562
Deferred margin on shipments to distributors............ 576 516 516
Current maturities of long-term debt.................... 306 398 477
Current maturities of capital lease obligations......... 379 417 422
-------- -------- --------
Total current liabilities............................ 6,052 7,991 7,350
Long-term debt, less current maturities................. 7,503 7,342 8,267
Other long-term liabilities and capital leases less
current maturities................................... 919 793 629
-------- -------- --------
Total liabilities.................................... 14,474 16,126 16,246
Shareholders' equity:
Preferred stock -- no par value; 10,000,000 shares
authorized; none issued and outstanding.............. -- -- --
Common stock -- no par value; 25,000,000 shares
authorized; shares issued and outstanding:
10,116,144, 11,037,543, and 11,146,478 as of March
31, 1999, March 31, 2000 and June 30, 2000
(unaudited), respectively............................ 53,328 56,479 56,741
Accumulated deficit....................................... (34,160) (33,528) (32,061)
Accumulated other comprehensive income.................... 2 9 18
-------- -------- --------
Total shareholders' equity................................ 19,170 22,960 24,698
-------- -------- --------
Total liabilities and shareholders' equity................ $ 33,644 $ 39,086 $ 40,944
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 46
CALIFORNIA MICRO DEVICES CORPORATION
STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED MARCH 31, JUNE 30,
----------------------------- ------------------
1998 1999 2000 1999 2000
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Net product sales....................... $32,474 $33,617 $43,763 $ 8,517 $14,876
Technology related revenues............. 569 -- -- -- --
------- ------- ------- ------- -------
Total revenues....................... 33,043 33,617 43,763 8,517 14,876
Cost and expenses:
Cost of sales........................... 24,701 24,730 29,571 6,209 9,600
Research and development................ 3,017 3,685 3,366 959 810
Selling, marketing and administrative... 7,900 7,300 9,723 2,117 2,806
------- ------- ------- ------- -------
Total costs and expenses............. 35,618 35,715 42,660 9,285 13,216
------- ------- ------- ------- -------
Operating income (loss)................... (2,575) (2,098) 1,103 (768) 1,660
Interest expense.......................... 941 892 890 230 220
Interest (income) and other expense,
net..................................... (511) (219) (419) (53) (57)
------- ------- ------- ------- -------
Income (loss) before income taxes......... (3,005) (2,771) 632 (945) 1,497
Provision for income taxes................ -- -- -- -- 30
------- ------- ------- ------- -------
Net income (loss)......................... $(3,005) $(2,771) $ 632 $ (945) $ 1,467
======= ======= ======= ======= =======
Basic earnings (loss) per share........... $ (0.30) $ (0.28) $ 0.06 $ (0.09) $ 0.13
======= ======= ======= ======= =======
Diluted earning (loss) per share.......... $ (0.30) $ (0.28) $ 0.05 $ (0.09) $ 0.12
======= ======= ======= ======= =======
Weighted average common shares
outstanding............................. 9,971 10,017 10,324 10,117 11,104
Dilutive effect of employee stock
options................................. -- -- 1,318 -- 1,419
------- ------- ------- ------- -------
Weighted average common shares
outstanding, assuming dilution.......... 9,971 10,017 11,642 10,117 12,523
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 47
CALIFORNIA MICRO DEVICES CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ACCUMULATED
NUMBER OF OTHER
-------------------- ACCUMULATED COMPREHENSIVE
SHARES AMOUNT DEFICIT INCOME/(LOSS) TOTAL
---------- ------- ----------- ------------- -------
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1997........................ 9,741,124 $51,939 $(28,384) $25 $23,580
Components of comprehensive loss:
Net loss....................................... -- -- (3,005) -- (3,005)
Change in unrealized loss on available for sale
investments.................................. -- -- -- (20) (20)
-------
Total comprehensive loss..................... (3,025)
Exercise of stock options...................... 51,742 214 -- 214
Employee Stock Purchase Plan................... 185,485 858 -- 858
---------- ------- -------- --- -------
Balance at March 31, 1998........................ 9,978,351 53,011 (31,389) 5 21,627
Components of comprehensive loss:
Net loss....................................... -- -- (2,771) -- (2,771)
Change in unrealized loss on available for sale
investments.................................. -- -- -- (3) (3)
-------
Total comprehensive loss..................... (2,774)
Exercise of stock options...................... 6,600 26 26
Employee Stock Purchase Plan................... 100,993 211 211
Stock award.................................... 200 1 1
Licensing agreement............................ 30,000 79 79
---------- ------- -------- --- -------
Balance at March 31, 1999........................ 10,116,144 53,328 (34,160) 2 19,170
Components of comprehensive income
Net income (Unaudited)......................... 632 632
Change in unrealized income on available for
sale investments............................. 7 7
-------
Total comprehensive income................... 639
Exercise of stock options........................ 729,641 2,191 2,191
Employee Stock Purchase Plan..................... 191,758 960 960
---------- ------- -------- --- -------
Balance at March 31, 2000........................ 11,037,543 56,479 (33,528) $ 9 22,960
---------- ------- -------- --- -------
Components of comprehensive income:
Net income (Unaudited)......................... 1,467 1,467
Change in unrealized income on available for
sale investments (Unaudited)................. 9 9
-------
Total comprehensive income (Unaudited)....... 1,476
Exercise of stock options (Unaudited)............ 108,935 262 262
---------- ------- -------- --- -------
Balance at June 30, 2000 (Unaudited)............. 11,146,478 $56,741 $(32,061) $18 $24,698
========== ======= ======== === =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 48
CALIFORNIA MICRO DEVICES CORPORATION
STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31, JUNE 30,
----------------------------- ------------------
1998 1999 2000 1999 2000
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................ $(3,005) $(2,771) $ 632 $ (945) $ 1,467
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating
activities:
Depreciation and amortization.................. 2,852 2,945 2,899 757 745
Issuance of common stock for licensing
agreement.................................... -- 79 -- -- --
Change in operating assets and liabilities:
Accounts receivable.............................. (1,148) 616 (4,404) (236) 317
Inventories...................................... 751 (346) (1,556) (230) (170)
Prepaid expenses and other assets................ (113) 394 (388) (187) (39)
Trade accounts payable and other current
liabilities.................................... 268 (347) 1,869 38 (725)
Other long-term assets........................... 16 (381) (384) (21) 5
Other long-term liabilities...................... -- 323 290 -- --
Deferred margin on shipments to distributors..... 5 (5) (60) (60) --
------- ------- ------- ------- -------
Net cash provided by (used in) operating
activities................................ (374) 507 (1,102) (884) 1,600
------- ------- ------- ------- -------
Investing activities:
Purchases of short-term investments.............. (6,144) (4,822) (3,626) (1,247) (3,011)
Sales of short-term investments.................. 7,481 5,760 2,735 2,060 2,795
Capital expenditures............................. (1,132) (1,544) (1,981) (99) (1,585)
Net change in restricted cash.................... (6) 9 1,998 (222) (224)
------- ------- ------- ------- -------
Net cash (used in) provided by investing
activities................................ 199 (597) (874) 492 (2,025)
------- ------- ------- ------- -------
Financing activities:
Repayments of capital lease obligations.......... (585) (357) (379) (63) (100)
Repayments of debt............................... (175) (157) (306) (54) (45)
Additions of long-term debt...................... -- 650 238 -- 993
Proceeds from issuance of common stock........... 1,072 238 3,151 70 262
------- ------- ------- ------- -------
Net cash provided by financing activities.... 312 374 2,704 (47) 1,110
------- ------- ------- ------- -------
Net increase in cash and cash equivalents.......... 137 284 728 (439) 685
Cash and cash equivalents at beginning of period... 343 480 762 762 1,490
------- ------- ------- ------- -------
Cash and cash equivalents at end of period......... $ 480 $ 764 $ 1,490 $ 323 $ 2,175
======= ======= ======= ======= =======
Supplemental disclosures of cash flow information:
Interest paid.................................... $ 941 $ 892 $ 890 $ 230 $ 236
Supplemental disclosures of non-cash investing and
financing activities:
Capital expenditures financed through capital
lease obligations.............................. $ 163 $ -- $ -- $ -- $ --
Unrealized gain (loss) on securities............. $ (20) $ (3) $ 7 $ 54 $ 9
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 49
CALIFORNIA MICRO DEVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY
We design, develop, manufacture and market thin film integrated passive
devices and complementary analog semiconductors for Original Equipment
Manufacturers and contract manufacturers who need high density, high
performance, lower cost and unique functionality. The Company uses its
silicon-based thin film materials and semiconductor process technology to
integrate multiple passive and active elements onto a single integrated circuit.
Our analog semiconductor products include primarily analog and mixed signal
products for the telecommunications industry, electrostatic discharge protection
devices, power management devices and operational amplifiers.
Our products are marketed primarily to customers in the computer and
computer peripherals, wireless communications, networking, and medical
industries.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
In the accompanying financial statements, fiscal 1998, 1999, and 2000 refer
to twelve months ended March 31, 1998, 1999, and 2000, respectively.
Cash and Cash Equivalents
We consider all highly liquid debt instruments with a maturity date of
three months or less at the date of purchase to be cash equivalents. Cash
equivalents generally consist of commercial paper, and money market funds.
Short-term Investments
We invest our excess cash in high quality instruments. All of our
marketable investments, except for investments related to our non-qualified
deferred compensation program, are classified as available-for-sale and we view
our available-for-sale portfolio as available for use in current operations.
Accordingly, we have classified all investments, except for amounts related our
non-qualified deferred compensation program described in Note 15, as short-term,
even though the stated maturity date may be one year or more past the current
balance sheet date.
Available-for-sale securities are stated at fair market value, with
unrealized gains and losses, net of tax, reported as a component of
shareholders' equity. The cost of securities sold is based upon the specific
identification method. Realized gains and losses and declines in value judged to
be other than temporary are included in interest income and other (net).
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) basis.
F-7
<PAGE> 50
CALIFORNIA MICRO DEVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
are computed using the straight-line method over the shorter of the estimated
useful lives of the assets, or the remaining lease term. Estimated useful lives
of assets are as follows:
<TABLE>
<S> <C>
Building................................................ 40 years
Machinery and equipment................................. 3 - 7 years
Leasehold improvements.................................. 5 - 7 years
Furniture and fixtures.................................. 7 years
</TABLE>
Revenue Recognition
Revenue from product sales to end user customers is recognized upon
shipment. We generally recognize revenue on shipments to distributors upon the
final sales by the distributor to OEMs or other end users. Distributor
agreements allow the distributors certain rights of return and price protection
on unsold merchandise. As a result, we believe that deferral of such distributor
sales and related cost of sales as deferred gross margins until the merchandise
is resold by the distributors results in a more meaningful measurement of
revenue from distributors.
Revenue under license and technology agreements is recognized as technology
related sales upon completion of the appropriate terms of the agreement. Revenue
under product development and engineering design agreements is recognized as
technology related sales using the percentage-of-completion method.
Advertising
We expense all advertising as incurred.
Net Income (Loss) 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 stock options and other dilutive securities. Options to purchase
2,315,000 and 2,478,000 shares of common stock outstanding during fiscal 1998
and fiscal 1999, respectively, were not included in the computation of diluted
net income per common share because the effect in years with a net loss would be
antidilutive. Options to purchase 77,000 shares of common stock outstanding
during fiscal 2000 were not included in the earnings per share computation, as
the effect of including them would be antidilutive.
Options to purchase 25,260 shares of common stock were outstanding during
the three months ended June 30, 1999, but were not included in the computation
of diluted net loss per share as the Company incurred a net loss and the effect
of the securities would have been antidilutive.
Employee Stock Plans
As allowed under Statement of Financial Accounting Standard No. 123 (SFAS
123), "Accounting for Stock Based Compensation," we account for our employee
stock plans in accordance with the provision of Accounting Principles Board's
Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees." and have
adopted the disclosure provisions of SFAS 123.
F-8
<PAGE> 51
CALIFORNIA MICRO DEVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Comprehensive Income
Accumulated other comprehensive income (loss) presented in the accompanying
balance sheets consists of the accumulated net unrealized losses on
available-for-sale securities.
Recent Accounting Pronouncements
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133") requires that we
recognize all derivatives on the balance sheet at fair value. Derivatives that
do not qualify as hedges must be adjusted to fair value through net income. SFAS
No. 133 is effective for the our fiscal year beginning April 1, 2001. We do not
currently hold any derivatives and do not anticipate holding any derivatives in
the future. Accordingly, we do not expect this pronouncement to materially
impact future results.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin 101, ("SAB 101"), "Revenue Recognition in Financial
Statements". SAB 101 summarizes the SEC's views in applying generally accepted
accounting principles to selected revenue recognition issues. In June 2000, the
SEC issued SAB 101B, which delays the effective date of SAB 101 until no later
than the fourth fiscal quarter of fiscal years beginning after December 15,
1999. We are required to apply the guidance in SAB 101 to our financial
statements no later than the fourth quarter of fiscal 2001. Changes in the
Company's revenue recognition policy resulting from the interpretation of SAB
101 would be reported as a change in accounting principle in the quarter ending
March 31, 2001. The change in the revenue recognition policy would result in a
cumulative adjustment in the fourth quarter of fiscal 2001 to reflect the
deferral of revenue for shipments previously reported as revenue, that do not
meet SAB 101 revenue recognition requirements. In subsequent periods, the
Company would disclose the amount of revenue, if material, recognized in those
periods that were included in the cumulative effect adjustment. The Company is
currently evaluating what effect, if any, that SAB 101 will have on the
Company's financial statements. Management believes that SAB 101, to the extent
that it is applicable to the Company, will not effect the underlying strength or
weakness of the Company's business operations as measured by the dollar value of
the Company's shipments and cash flows.
In March 2000, the Financial Accounting Standard Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation -- an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44
clarifies the application of APB Opinion No. 25 and among other issues clarifies
the following: the definition of an employee for purposes of applying APB
Opinion No. 25; the criteria for determining whether a plan qualifies as a
noncompensatory plan; the accounting consequences of various modifications to
the terms of previously fixed stock options or awards; and the accounting for an
exchange of stock compensation awards in a business combination. FIN 44 is
effective July 1, 2000, but certain conclusions in FIN 44 cover specific events
that occurred after either December 15, 1998 or January 12, 2000. The Company
does not expect the application of FIN 44 to have a material impact on the
Company's financial position or results of operations.
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.
F-9
<PAGE> 52
CALIFORNIA MICRO DEVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. HITACHI METALS, LTD.
During fiscal 2000 we terminated our Joint Development Agreement with
Hitachi Metals Ltd. (HML). In prior years, HML may have shared in a percentage
of the actual expenditures for mutually agreed upon joint product development.
We included HML's share of product development expenses in the Statements of
Operations as "Technology related revenues". Additionally, HML has stopped
selling our product subject to a private label agreement we had with them. We do
not expect to receive revenue from HML for joint research and development or
from product sales in the future.
Sales to and receivables from Hitachi Metals, Ltd., and its subsidiary,
Hitachi Kinzoku Shoji, Ltd., were not material in fiscal years 1998, 1999, and
2000.
4. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The following is a summary of cash, cash equivalents and marketable
securities at March 31, 1999, March 31, 2000 and June 30, 2000, (amounts in
thousands):
<TABLE>
<CAPTION>
MARCH 31, MARCH 31, JUNE 30,
1999 2000 2000
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Cash equivalents
Money market funds*.............................. $ 2,251 $1,136 $2,011
Commercial paper................................. 535 354 206
Less:
Amount classified as restricted cash**........... (2,000) -- --
------- ------ ------
Total cash equivalents........................ $ 786 $1,490 $2,217
======= ====== ======
Short-term investments
Commercial paper................................. $ -- $1,694 $2,216
U. S. Treasuries & U.S. Government agencies...... 2,251 1,493 1,157
Corporate bonds.................................. 1,918 1,882 1,921
------- ------ ------
Total short-term investments.................. $ 4,169 $5,069 $5,294
======= ====== ======
</TABLE>
-------------------------
* Money market funds of $23,000 and $42,000, related to a benefit plan for
March 31, 2000 and June 30, 2000, respectively, are included in the above
table.
** See Note 16 of Notes to Financial Statements.
F-10
<PAGE> 53
CALIFORNIA MICRO DEVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The following is a summary of available-for-sale securities at March 31,
1999, March 31, 2000, and June 30, 2000, respectively, (amounts in thousands):
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------ ---------- ---------- ---------
<S> <C> <C> <C> <C>
March 31, 1999:
Commercial paper................................ $ 535 $-- $ -- $ 535
U.S. Treasuries & U.S. government agencies...... 2,254 1 (4) 2,251
Corporate bonds................................. 1,918 3 (3) 1,918
------ --- ---- ------
Total........................................ $4,707 $ 4 $ (7) $4,704
====== === ==== ======
March 31, 2000:
Commercial paper................................ $2,029 $19 $ -- $2,048
U.S. Treasuries & U.S. government agencies...... 1,497 -- (4) 1,493
Corporate bonds................................. 1,890 -- (8) 1,882
------ --- ---- ------
Total........................................ $5,416 $19 $(12) $5,423
====== === ==== ======
June 30, 2000 (Unaudited)
Commercial Paper................................ $2,422 $-- $ -- $2,422
U.S. Treasuries & U.S. government agencies...... 1,150 7 -- 1,157
Corporate bonds................................. 1,910 11 -- 1,921
------ --- ---- ------
Total........................................ $5,482 $18 $ -- $5,500
====== === ==== ======
</TABLE>
Of the fiscal 2000 securities listed above, $4.9 million of debt securities
(at estimated fair market value) mature within one year and $0.5 million mature
between one and two years. Realized gains and losses on the sales of securities
are reported as other income and were not significant for all periods presented.
5. CONCENTRATIONS OF CREDIT RISK
Our financial instruments that are exposed to concentrations of credit risk
consist primarily of temporary cash investments and trade accounts receivable.
We place our temporary cash investments and short-term securities with
substantial financial service institutions.
A significant portion of our sales are to customers whose activities are
related to computer and computer peripherals, wireless communications,
networking, medical, and consumer electronics industries, including some who are
located in foreign countries. We generally extend credit to these customers and,
therefore, the aforementioned industries and economic influences of customers'
geographic locations affect collection of accounts receivable. However, we
monitor extensions of credit and require collateral, such as letters of credit,
whenever deemed necessary.
6. CONCENTRATION OF OTHER RISKS
Markets
We market our products into high-technology industries, such as personal
computers, telecommunications, and networking, that are characterized by rapid
technological change, intense competitive pressure, and volatile demand
patterns. Most of the systems into which the Company's products are designed
have short life cycles. As a result, we require a significant number of new
design wins on an ongoing basis to maintain and grow revenue.
F-11
<PAGE> 54
CALIFORNIA MICRO DEVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Customers
Generally, our sales are not subject to long-term contracts but rather to
short-term releases of customers' purchase orders, most of which are cancelable
on relatively short notice. The timing of these releases for production as well
as custom design work are in the control of the customer, not us. Because of the
short life cycles involved with our customers' products, the order pattern from
individual customers can be erratic with significant accumulation and
de-accumulation of inventory during phases of the life cycle. For these reasons,
our backlog and bookings as of any particular date may not be representative of
actual sales for any succeeding period.
Inventories
We value our inventories on a part-by-part basis to appropriately consider
excess inventory levels and obsolete inventory based on backlog and demand, and
to consider reductions in sales price. However, due to the volatility of demand,
and the fact that many of our products are specific to individual customers,
backlog is subject to revisions and cancellations and anticipated demand is
constantly changing, which may require adjustments to inventory valuations in
the future.
Manufacturing
Our manufacturing processes are complex, and require production in a highly
controlled, clean environment suitable for fine tolerances. Normal manufacturing
risks include errors in fabrication processes, defects in raw materials, process
changes, as well as other factors that can affect yields.
Subcontractors
We use subcontractors in Asia, primarily Thailand and Malaysia, for
assembly, packaging, and test of most of our product. This common industry
practice is subject to political and economic risks and industry volatility has
occasionally resulted in shortages of subcontractor capacity and other
disruptions to supply.
7. INVENTORIES
Inventories consist of the following (amounts in thousands):
<TABLE>
<CAPTION>
MARCH 31, MARCH 31, JUNE 30,
1999 2000 2000
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials...................................... $ 428 $ 452 $ 419
Work-in-process.................................... 5,263 6,473 7,083
Finished goods..................................... 2,747 3,069 2,662
------ ------ -------
$8,438 $9,994 $10,164
====== ====== =======
</TABLE>
F-12
<PAGE> 55
CALIFORNIA MICRO DEVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. PROPERTY AND EQUIPMENT
Property and equipment consist of the following (amounts in thousands):
<TABLE>
<CAPTION>
MARCH 31, MARCH 31, JUNE 30,
1999 2000 2000
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Land............................................... $ 137 $ 137 $ 137
Buildings.......................................... 3,030 3,030 3,030
Machinery, equipment and tooling................... 22,772 24,709 26,149
Leasehold improvements............................. 714 758 901
Furniture and fixtures............................. 367 367 369
------- ------- -------
27,020 29,001 30,586
Less accumulated depreciation and amortization..... 15,480 18,364 19,105
------- ------- -------
$11,540 $10,637 $11,481
======= ======= =======
</TABLE>
9. SHORT-TERM BORROWINGS
We have a $3.0 million revolving secured line of credit agreement that
expires on June 30, 2001. Under the terms of the line of credit, we can borrow
at prime plus one-half percent, collateralized by eligible accounts receivable.
We also have a $1.0 million capital equipment financing facility that expires on
June 30, 2003; under the terms of this facility we can borrow at prime plus
0.75%. There were no borrowings on either of these facilities at March 31, 1999.
During fiscal 2000 there were no borrowings against the revolving line of
credit. We borrowed $238,000 against the capital equipment financing facility
during fiscal 2000. We are in compliance with our financial covenants. On April
21, 2000 we secured an additional $500,000 capital equipment financing facility
under the same terms and conditions that expires August 3, 2003.
In July 2000 (unaudited), the Company and its bank agreed to extend the
line of credit through June 30, 2001 and the Company secured an additional $2.0
million equipment financing facility, bringing the total facility to $3.5
million. From April 1, 2000 through June 30, 2000, the Company borrowed an
additional $993,000 against the capital equipment financing facility. As of June
30, 2000, approximately $3.0 million for use under the line of credit and $2.3
million for use under the $3.5 million capital equipment financing facility,
remain available.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
We have evaluated the estimated fair value of its financial instruments.
The amounts reported as cash and cash equivalents, accounts receivable,
short-term borrowings, accounts payable and accrued expenses approximate fair
value due to their short-term maturities. The fair values of short-term
investments are estimated based on quoted market prices. The fair value for
long-term debt was estimated using discounted cash flow analysis based on
estimated interest rates for similar types of borrowing arrangements.
The carrying amounts and estimated fair values of our long-term debt as of
March 31, 2000 are as follows (amounts in thousands):
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
-------- ------
<S> <C> <C>
Long-term debt (excluding capital leases)................. $7,740 $8,320
</TABLE>
F-13
<PAGE> 56
CALIFORNIA MICRO DEVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. LONG-TERM DEBT
Long-term debt consists of the following (amounts in thousands):
<TABLE>
<CAPTION>
MARCH 31, MARCH 31, JUNE 30,
1999 2000 2000
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Industrial revenue bonds at 10.5%, due through
March 1, 2018.................................... $7,185 $7,045 $7,045
Equipment financing agreement due through
June 14, 2002.................................... 624 457 413
Equipment financing agreement due through
June 30, 2003.................................... -- 238 1,231
------ ------ ------
7,809 7,740 8,689
Less current maturities............................ 306 398 422
------ ------ ------
$7,503 $7,342 $8,267
====== ====== ======
</TABLE>
In January 1999, we borrowed $650,000 under a credit agreement, due June
14, 2002, collateralized by certain of our equipment. The agreement extends for
42 months, carries an interest rate of 9.9%, and has a prepayment option.
In September 1999 we secured a capital equipment financing agreement
collateralized by accounts receivable and other assets. The agreement carries an
interest rate of prime plus 3/4 of 1% and expires in June 2003. In April 2000 we
secured additional capital equipment financing from the same institution under
the same terms and conditions with an expiration date of August 2003.
Our industrial revenue bonds are collateralized by a lien on all of our
land and buildings in Tempe, Arizona, and certain equipment acquired with the
proceeds of the bonds, and require certain minimum annual sinking fund payments
ranging from $155,000 in fiscal 2001 to $780,000 in fiscal 2018. As of March 1,
2000, we may prepay the 10.5% Industrial Revenue Bond by redeeming all or part
of the outstanding principal amounts without penalty. At March 31, 2000, cash of
$900,000 was held in sinking fund trust accounts of which $800,000 is to be used
for principal and interest payments in the event of default by the Company, and
the balance to be used for semi-annual interest and principal payments.
The industrial revenue bonds and certain lease agreements require the
maintenance of various financial covenants including certain minimum levels of
net worth, current ratio, quick ratio, ratio of debt to net worth, debt
coverage, and debt to working capital ratio. We are in compliance with these
covenants at March 31, 2000. As a result of these covenants, our ability to pay
dividends is restricted.
Future maturities of long-term debt at March 31, 2000 are as follows
(amounts in thousands):
<TABLE>
<S> <C>
2001........................................................ $ 398
2002........................................................ 451
2003........................................................ 336
2004........................................................ 225
2005........................................................ 225
2006 and thereafter......................................... 6,105
------
$7,740
======
</TABLE>
F-14
<PAGE> 57
CALIFORNIA MICRO DEVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
12. LEASE COMMITMENTS
Operating Leases
We lease certain manufacturing facilities under operating leases expiring
in fiscal 2001 and 2003. We sublet a leased facility in Arizona for the
remaining period of the lease. The rents received should equal the amounts we
owe during the remaining lease period. Future gross minimum lease payments,
under non-cancelable operating leases, for the years ending March 31 are as
follows (amounts in thousands):
<TABLE>
<S> <C>
2001........................................................ $ 548
2002........................................................ 414
2003........................................................ 104
------
1,066
Sublease receipts........................................... (148)
------
$ 918
======
</TABLE>
Rent expense was $417,000, $450,000, and $445,000 net of sublease income of
$143,000, $147,000, and $148,000 in fiscal 1998, 1999, and 2000, respectively.
Capital Leases
Obligations under capital leases are at interest rates ranging from
approximately 7% to 10%, depending primarily upon the purchase option
arrangements at the end of the lease term, and are due in monthly installments
through April 2002. Future minimum lease payments, under capital leases for the
years ending March 31, are as follows (amounts in thousands):
<TABLE>
<S> <C>
2001........................................................ $455
2002........................................................ 181
----
Total minimum lease payments................................ 636
Less amount representing interest........................... 41
----
Present value of net minimum lease payments................. 595
Less current maturities..................................... 417
----
$178
====
</TABLE>
Machinery and equipment under capital leases are as follows (amounts in
thousands):
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1999 2000
--------- ---------
<S> <C> <C>
Cost................................................... $1,619 $1,619
Less accumulated depreciation.......................... 377 609
------ ------
$1,242 $1,010
====== ======
</TABLE>
F-15
<PAGE> 58
CALIFORNIA MICRO DEVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
13. INCOME TAXES
Due to current year losses and the availability of tax loss carryforwards,
there was no provision for income taxes for the periods ended March 31, 1998,
1999, and 2000. A reconciliation of our effective tax rate to the federal
statutory rate is as follows:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-----------------------
1998 1999 2000
----- ----- -----
<S> <C> <C> <C>
Federal statutory tax rate.............................. (34)% (34)% 34%
Losses with no current benefit.......................... 34% 34% --
Utilization of loss carryforward........................ -- -- (34)%
--- --- ---
Effective income tax rate............................... 0% 0% 0%
=== === ===
</TABLE>
Deferred income taxes reflect the tax effects of net operating loss and
credit carryforwards and temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes. Significant components of our deferred tax assets and
liabilities are as follows (amounts in thousands):
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1999 2000
--------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards..................... $ 10,500 $ 12,200
Tax credit carryforwards............................. 450 500
Inventory reserves................................... 3,500 3,500
Other non-deductible accruals and reserves........... 900 400
-------- --------
Total deferred tax assets.............................. 15,350 16,600
Less valuation allowance............................. (15,050) (16,300)
-------- --------
Net deferred tax asset................................. 300 300
Deferred tax liabilities:
Tax over book depreciation........................... 300 300
-------- --------
Total net deferred tax asset...................... $ -- $ --
======== ========
</TABLE>
As we had net losses in fiscal 1998 and fiscal 1999, and the first two
quarters of fiscal 2000, we have provided a valuation allowance against total
deferred tax assets. We will continue to evaluate our ability to realize the
deferred tax asset on a quarterly basis. The valuation allowance increased by
$950,000 and $1,250,000 during the years ended March 31, 1999 and 2000,
respectively. Approximately $3,000,000 of the valuation allowance for deferred
tax assets relates to benefits of stock option deductions which, when
recognized, will be directly allocated to common stock.
At March 31, 2000, we had federal and state net operating loss
carryforwards of approximately $34,800,000 and $6,100,000 respectively. In
addition, we had federal and California credit carryforwards of approximately
$300,000 and $200,000, respectively. These carryforwards will expire at various
dates beginning in 2008 through 2020, except for certain state net operating
losses which expire from 2000 through 2005.
Utilization of the net operating losses and credit carryforwards may be
subject to substantial annual limitation due to ownership change provisions of
the Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.
F-16
<PAGE> 59
CALIFORNIA MICRO DEVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For the three months ended June 30, 2000 (unaudited), the Company recorded
a provision for income taxes of $30,000 based on the projected effective annual
tax rate of 2%. The effective tax rate for 2001 is substantially below the
federal statutory rate of 35% due to the utilization of federal and state tax
loss and credit carryforwards. No similar amounts were recorded for the three
months ended June 30, 1999 due to the Company's net loss during the period. The
Company's tax provision consisted of federal and state alternative minimum
taxes.
14. INTEREST INCOME AND OTHER, NET
Interest income and other, net, consists of (amounts in thousands):
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS
MARCH 31, ENDED JUNE 30,
-------------------- --------------
1998 1999 2000 1999 2000
---- ---- ---- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest income....................... $403 $295 $300 $56 $128
Other income (expense)................ 108 (76) 119 (3) (55)
---- ---- ---- --- ----
$511 $219 $419 $53 $ 73
==== ==== ==== === ====
</TABLE>
Interest income reflects the amounts earned from investments in short-term
securities.
15. EMPLOYEE BENEFIT PLANS
401(k) Savings Plan
We maintain a 401(k) Savings Plan covering substantially all of our
employees. Under the plan, eligible employees may contribute up to 15% of their
base compensation to the plan with the Company matching at a rate of 50% of the
participants' contributions up to a maximum of 3% of their base compensation.
Participants' contributions are fully vested at all times. The Company's
contributions vest incrementally over a two-year period. During fiscal 1998,
1999, and 2000, we expensed $210,000, $217,000, and $278,000, respectively,
relating to our contributions under the plan. During the three months ended June
30, 1999 and 2000, we expensed (unaudited) $54,000 and $82,000, respectively,
relating to our contributions under the plan.
Nonqualified Deferred Compensation Plan
In April 1997, we implemented a nonqualified deferred compensation plan for
the benefit of eligible employees. This plan is designed to permit certain
discretionary employer contributions in excess of the tax limits applicable to
the 401(k) plan and to permit employee deferrals in excess of certain tax
limits. Company assets earmarked to pay benefits under the plan are held by a
rabbi trust. We have classified the diversified assets held by the rabbi trust
as trading, and recorded them at fair market value. Under current accounting
rules, assets of a rabbi trust must be accounted for as if they are assets of
the Company; therefore, all earnings and expenses are recorded in our financial
statements. In fiscal 1998 and fiscal 1999 the market value change in trust
assets was not significant. Compensation expense of $151,000 was recognized in
fiscal 2000 as a result of increases in the market value of the trust assets,
with the same amount being recorded as securities gains included in interest
income. For the three months ended June 30, 2000, we recognized a reduction in
compensation expense of $49,000 (unaudited) as a result of a decrease in the
market value of the trust assets, with the same amount being recorded as
securities losses included in interest income. Additionally, during fiscal 1998,
1999, and 2000, we expensed $21,000, $8,000, and zero, respectively, relating to
our contributions under the plan.
F-17
<PAGE> 60
CALIFORNIA MICRO DEVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Stock Option Plans
The 1995 Employee Stock Option Plan (the "1995 Plan") is administered by a
stock option committee consisting of not less than two qualified directors. The
1995 Non-Employee Directors Plan (the "Directors Plan") is administered by not
less than three members of the Board and the amount of shares granted to the
directors on an annual basis are fixed in amount, as approved by the
shareholders.
Under our 1995 Plan, for fiscal year ended March 31, 1999 and 2000,
2,433,563 and 1,779,933 shares of common stock are reserved for issuance,
respectively. As of June 30, 2000, 1,704,876 (unaudited) shares of common stock
are reserved for issuance. The 1995 Plan provides for issuance of options to
employees and consultants at prices not less than 85% of fair market value for
shares issued under a non-qualified stock option agreement. Options may also be
issued to key employees for not less than 100% of fair market value for shares
issued under an incentive stock option agreement.
Under the Directors Plan, for fiscal year ended March 31, 1999 and 2000,
274,875 and 254,250 shares of common stock are reserved for issuance,
respectively. As of June 30, 2000, 225,431 (unaudited) shares of common stock
are reserved for issuance. The 1995 Directors Plan provides for a fixed issuance
amount to the directors at prices not less than 100% of the fair market value of
the common stock at the time of the grant.
In addition to the two 1995 plans, we have a plan that was adopted in 1981
(the Employee Incentive Stock Option Plan), and another plan that was adopted in
1987 (the 1987 Stock Option Plan) both of which are still extant although no new
options are being issued under these plans. These plans provided for the
issuance of 1,500,000 and 2,500,000 shares of common stock, respectively. Under
these plans, the Company has granted incentive stock options and non-qualified
options to designated employees, officers, and directors. As of June 30, 2000,
there were no shares of common stock reserved for issuance.
Generally, options under the plans become exercisable and vest over varying
periods ranging up to four years as specified by the Board of Directors. Option
terms do not exceed ten years from the date of the grant and all plans except
the 1981 Employee Incentive Stock Option Plan (the "1981 Plan") expire within 20
years of date of adoption. The Board of Directors may terminate the 1981 Plan at
any time. No options may be granted during any period of suspension or after
termination of any plan. Unexercised options expire upon, or within, three
months of termination of employment, depending upon the circumstances
surrounding termination.
F-18
<PAGE> 61
CALIFORNIA MICRO DEVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The following is a summary of stock option activity and related
information, including the effect of repricing of grants and cancellations
during fiscal 1998 and 1999 of 692,150 and 1,325,742 shares, respectively:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
---------------------------------------------------------------------- THREE MONTHS ENDED
1998 1999 2000 JUNE 30, 2000
--------------------- ---------------------- --------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- --------- ---------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Options:
Outstanding at beginning of
period....................... 2,032,446 $6.13 2,315,331 $5.44 2,477,595 $3.58 1,952,461 $ 4.27
Granted........................ 1,178,297 $6.12 1,756,742 $3.02 455,210 $5.80 46,000 $17.82
Exercised...................... (51,742) $4.19 (6,600) $3.93 (729,641) $3.00 (108,935) $ 3.69
Canceled....................... (843,670) $8.11 (1,587,878) $5.68 (250,703) $3.69 (20,321) $ 6.89
--------- ----- ---------- ----- --------- ----- --------- ------
Outstanding at end of period... 2,315,331 $5.44 2,477,595 $3.58 1,952,461 $4.27 1,869,205 $ 4.61
========= ===== ========== ===== ========= ===== ========= ======
Exercisable.................... 861,577 $4.91 717,201 $4.68 1,044,826 $4.06 1,003,463 $ 4.05
Available for grant*........... 182,016 325,760 106,031 61,102
</TABLE>
-------------------------
* Available for grant under plans which are currently active.
The following table summarizes information about options outstanding at
June 30, 2000 (unaudited):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------------------------- OPTIONS EXERCISABLE
WEIGHTED- ------------------------
AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
--------------- ----------- ------------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$2.25 - $ 2.66.................... 31,875 8.65 $ 2.47 6,843 $2.44
$2.81 - $ 2.81.................... 507,322 6.81 $ 2.81 294,389 $2.81
$2.87 - $ 3.50.................... 321,014 8.06 $ 3.15 82,816 $3.28
$3.93 - $ 3.93.................... 488,798 4.62 $ 3.93 488,798 $3.93
$4.12 - $ 6.44.................... 335,015 9.03 $ 6.34 28,625 $5.39
$6.81 - $21.13.................... 185,181 6.97 $11.09 101,992 $8.50
--------- ---- ------ --------- -----
1,869,205 6.89 $ 4.61 1,003,463 $4.05
========= ==== ====== ========= =====
</TABLE>
Employee Stock Purchase Plan
The 1995 Employee Stock Purchase Plan as Amended June 15, 1999, (the
"Purchase Plan") is available for all full-time employees possessing less than
5% of the Company's common stock on a fully diluted basis. The Purchase Plan
provides for the issuance of up to 960,000 shares at 85% of the fair market
value of the common stock at certain defined points in the plan offering
periods. Purchase of the shares is to be through employees' payroll deductions
and may not exceed 15% of their total compensation. The Purchase Plan terminates
on February 9, 2005, or earlier at the discretion of the Company's Board of
Directors. As of fiscal year-end March 31, 1998, 1999, and 2000, 5,564, 64,571
and 372,813 shares were reserved for issuance, respectively. As of June 30,
2000, 372,813 (unaudited) shares were reserved for issuance.
F-19
<PAGE> 62
CALIFORNIA MICRO DEVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The following is a summary of stock purchased under the plan:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31, THREE MONTHS
-------------------------------- ENDED
1998 1999 2000 JUNE 30, 2000
-------- -------- -------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Aggregate purchase price..................... $858,000 $211,000 $680,004 $ 0
Shares purchased............................. 185,485 100,993 191,758 0
Employee participants........................ 151 161 185 201
</TABLE>
Stock-Based Compensation
In accordance with the intrinsic value method, we generally recognize no
compensation expense with respect to employee stock grants. Pro forma
information regarding net (loss) and net (loss) per share is required by SFAS
123 for grants after April 1, 1995, as if we had accounted for stock grants
under the fair value method and is presented below. The fair value of our
stock-based grants was estimated using a Black-Scholes option-pricing model. The
Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have specific vesting schedules and are
ordinarily not transferable. Because the Black-Scholes model requires the input
of highly subjective assumptions, including the expected stock price volatility
which can materially affect the fair value estimate, in management's opinion,
the existing models do not necessarily provide a reliable single measure of the
fair value of its grants.
The fair value of our stock-based grants was estimated assuming no expected
dividends and the following weighted-average assumptions:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31, YEARS ENDED MARCH 31,
OPTIONS PURCHASE PLAN
----------------------- -----------------------
1998 1999 2000 1998 1999 2000
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Expected life years.............................. 3.02 2.81 3.43 0.34 0.21 0.25
Volatility....................................... 0.61% 0.96% 1.03% 0.64% 1.29% 1.13%
Risk-free interest rate.......................... 5.77% 4.69% 6.13% 5.43% 5.00% 5.06%
</TABLE>
For pro forma purposes, the estimated fair value of our stock-based grants
is amortized over the options' vesting period for stock options granted under
the 1995 Plan and the Director Plan, and the purchase period for stock purchases
under the Purchase Plan. The pro forma information follows (amounts in thousands
except per share amounts):
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------
1998 1999 2000
------- ------- ------
<S> <C> <C> <C>
Net (loss) -- pro forma................................ $(5,073) $(5,112) $ (786)
Diluted net (loss) per share -- pro forma.............. $ (0.51) $ (0.51) $(0.08)
</TABLE>
The weighted-average fair value of stock options granted in fiscal 1999 and
2000 were $4.04 and $5.80 per share, respectively. The weighted-average fair
value of the option element of the Purchase Plan stock granted in fiscal 1999
and 2000 was $0.95 and $1.39 per share, respectively.
F-20
<PAGE> 63
CALIFORNIA MICRO DEVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
16. LITIGATION
From August 5, 1994 through February 16, 1995, eleven purported class
action complaints were filed against us in the United States District Court for
the Northern District of California.
By court order dated May 20, 1997, the class action claims against the
Company were settled. Our contribution towards the settlement consisted of the
payment of $6 million 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
Contingent Value Right (CVR), personal to the shareholder, that guaranteed the
shareholder would 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 defined period. As of January 5, 2000 the 20-day
average trading price exceeded $11.50 and the CVR was extinguished. We had put
$2 million into a restricted account as a guarantee for performance under the
CVR. As a result of the CVR being extinguished this $2 million is no longer
restricted and is included in cash and short-term securities as of March 31,
2000.
The Company has cooperated with the Justice Department in its investigation
of the Company's former officers and with the SEC in its investigation of the
Company's former officers and the Company. The Justice Department has advised us
that we are not currently a target or subject of investigation. The SEC has
taken the position that it is premature, at this stage in its investigation, to
discuss the resolution of the investigation of the Company because of its
continuing investigation of the Company's former officers.
The Company is a party to lawsuits, claims, investigations, and
proceedings, including commercial and employment matters, which are being
handled and defended in the ordinary course of business. We are not aware of any
pending legal proceedings against the Company that, individually or in the
aggregate, would have a material adverse effect on our business, operating
results, or financial condition
17. SEGMENT INFORMATION
Our operations are classified into one reportable segment. Substantially
all of our operations and long-lived assets reside in the United States although
we have sales operations in Europe, Japan, Hong Kong and Taiwan. In fiscal 1998,
Bell Milgray Inc., a distributor, later acquired by Arrow Electronics, accounted
for approximately 10% of net product sales. In fiscal 1999, no single customer
accounted for greater than 10% of net sales. In fiscal 2000, Arrow Electronics,
Inc. and Excelpoint Systems PTE, both distributors, accounted for 17% and 14% of
net sales, respectively. Other than the United States and Singapore (10.5% of
net sales in fiscal 2000), no one country accounted for more than 10% of net
sales in fiscal 1998, 1999 and 2000. Sales in to Singapore were $1,272,000,
$2,054,000 and $4,598,000, in fiscal 1998, 1999, and 2000, respectively. Foreign
currency transaction gains and losses are not significant.
Net sales to geographic regions reported below are based upon the
customers' locations (amounts in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
YEARS ENDED MARCH 31, (UNAUDITED)
----------------------------- -------------------
1998 1999 2000 1999 2000
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net product sales to geographic regions:
United States........................... $22,898 $21,070 $24,836 $4,149 $ 8,123
Europe.................................. 3,787 3,098 3,882 649 1,470
Far East and other...................... 5,789 9,449 15,045 3,719 5,283
------- ------- ------- ------ -------
Net product sales......................... $32,474 $33,617 $43,763 $8,517 $14,876
======= ======= ======= ====== =======
</TABLE>
F-21
<PAGE> 64
[Inside Back Cover Graphic:
Approximately 1 1/2 inches from the top of the page, a caption reading:
"Benefits of Integrated Passive Devices."
Immediately below the above caption, a caption reading: "Parallel Port
Solutions, Before and After."
Immediately below the above caption, two photographs each illustrating a circuit
board. A caption below the left photograph reading "Before PAC1284 (Without
ESD)." A caption below the right photograph reading "After PAC1284 (With ESD)."
Below above photographs and captions and approximately 1/3 from the top of the
page a caption reads: "High Volume Manufacturing Capacity."
Immediately below the above caption, a caption reading: "California Micro
Devices operates two wafer fabrication facilities which represent over 26,000
square feet of high volume manufacturing capacity."
Immediately below and to the right of the above captions, two slightly offset
photographs depicting buildings. A caption within the upper photograph reads
"Tempe" and a caption within the lower paragraph reads "Milpitas."
Immediately below and to the left of the above captions, two captions reading:
[text corresponding to the upper photograph] "Tempe, Arizona:" and immediately
below and on new lines [each of the following set off by bullets] "16,000
square foot clean room, Process technology development, Product engineering,
and Test operations," and [text corresponding to the lower photograph]
"Milpitas, California:" and immediately below and on new lines [each of the
following set off by bullets] "10,000 square foot clean room, Process
technology development, Product engineering, and Test and laser trim
operations."
Below above captions and photographs and approximately 1 inch from the bottom
of the page, the Company's triangular logo and the caption "California Micro
Devices."
A dark line frame begins approximately 1/3 from the top of the page to the left
of the circuit board photographs, runs to the left margin of the page, and then
turns down to run to the top of the caption "High Volume Manufacturing
Capacity," where it ceases.
A dark line frame begins immediately below the Tempe photograph and runs down
the border of the right margin until immediately below the Milpitas photograph
whereupon it crosses the page to the right margin and runs down the left border
of the page until it is parallel to the Company's logo whereupon it crosses the
page to the right where it intersects the Company logo.]
<PAGE> 65
[California Micro Devices]
<PAGE> 66
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are the actual and estimated expenses incurred in connection
with the registration and sale of the shares. The Registrant will pay all of
these expenses.
<TABLE>
<CAPTION>
ITEM AMOUNT
---- ----------
<S> <C>
SEC registration fee........................................ $ 10,916
NASD fee.................................................... 4,635
Nasdaq fee.................................................. 16,500
Printing fees and expenses.................................. 100,000
Legal fees and expenses..................................... 150,000
Accountants' fees and expenses.............................. 75,000
Blue sky fees and expenses.................................. 10,000
Miscellaneous............................................... 32,949
----------
Total..................................................... $ 400,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 317 of the California Corporations Code allows for the
indemnification of officers, directors and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act. Registrant's Articles of Incorporation and Bylaws provide for
indemnification of Registrant's directors, officers, employees and other agents
to the extent and under the circumstances permitted by the California
Corporations Code.
ITEM 16. EXHIBITS.
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*1. Form of Underwriting Agreement
*5. Opinion of O'Melveny & Myers LLP as to legality of
securities being registered
23.1 Consent of Independent Auditors
*23.2 Consent of O'Melveny & Myers LLP (included in Exhibit 5)
24. Power of Attorney (included on the signature page hereof)
</TABLE>
-------------------------
* To be filed by amendment
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the
II-1
<PAGE> 67
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or Rule 497(h) under the Securities Act of 1933 shall be deemed to be
part of this registration statement as of the time it was declared
effective; and
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE> 68
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Milpitas, California, on August 31, 2000.
CALIFORNIA MICRO DEVICES CORPORATION
By: /s/ JOHN E. TREWIN
------------------------------------
John E. Trewin
Vice President and Chief Financial
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints John Trewin and Scott Hover-Smoot,
and each of them, as his attorney in fact and agent, with full power of
substitution, for him in any and all capacities, to sign any and all amendments
to this Registration Statement (including post-effective amendments or any
abbreviated registration statement and any amendments thereto filed pursuant to
Rule 462(b) increasing the number of securities for which registration is
sought), and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them or their substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below and on August 31, 2000.
<TABLE>
<S> <C>
/s/ JEFFREY C. KALB /s/ JOHN E. TREWIN
--------------------------------------------- ---------------------------------------------
Jeffrey C. Kalb John E. Trewin
(Director, President, Chief Executive Officer (Vice President, Chief Financial Officer and
and Principal Executive Officer) Principal Financial and Accounting Officer)
/s/ WADE MEYERCORD /s/ STUART SCHUBE
--------------------------------------------- ---------------------------------------------
Wade Meyercord (Director) Stuart Schube (Director)
/s/ ANGEL G. JORDAN /s/ JOHN L. SPRAGUE
--------------------------------------------- ---------------------------------------------
Angel G. Jordan (Director) John L. Sprague (Director)
/s/ J. DANIEL MCCRANIE /s/ DONALD L. WAITE
--------------------------------------------- ---------------------------------------------
J. Daniel McCranie (Director) Donald L. Waite (Director)
</TABLE>
II-3
<PAGE> 69
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*1. Form of Underwriting Agreement
Opinion of O'Melveny & Myers LLP as to legality of
*5 securities being registered
23.1 Consent of Independent Auditors
*23.2 Consent of O'Melveny & Myers LLP (included in Exhibit 5)
24. Power of Attorney (included on signature page hereof)
</TABLE>
-------------------------
* To be filed by amendment.
