United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ x ] Quarterly Report Pursuant To Section 13 Or 15(d) Of The Securities
Exchange Act Of 1934 For the Period Ended June 30, 2000
or
[ ] Transition Report Pursuant To Section 10 Or 15(d) Of The
Securities Exchange Act Of 1934 For The Transition Period From __ To __
Commission File Number 0-15449
CALIFORNIA MICRO DEVICES CORPORATION
------------------------------------
(Exact name of registrant as specified in its charter)
California 94-2672609
---------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
215 Topaz Street, Milpitas, California 95035-5430
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(Address of principal executive offices) (Zip Code)
(408) 263-3214
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(Registrant's telephone number, including area code)
Not applicable
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(Former name, former address, and former fiscal year
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
As of June 30, 2000, there were outstanding 11,146,478 shares of Issuer's
Common Stock.
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Page Number
Item 1. Financial Statements
Statements of Operations
Three Months Ended June 30, 2000 and 1999 2
Balance Sheets
June 30, 2000 and March 31, 2000 3
Statements of Cash Flows
Three Months Ended June 30, 2000 and 1999 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 10
Item 6. Exhibits and Reports on Form 8-K 10
Signature 11
ii
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
---------------------
CALIFORNIA MICRO DEVICES CORPORATION
STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<S> <C> <C>
Three Months Ended
June 30,
---------------------
2000 1999
---------------------
Net sales $14,876 $ 8,517
Cost and expenses:
Cost of sales 9,600 6,209
Research and development 810 959
Selling, marketing and administrative 2,806 2,117
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Total costs and expenses 13,216 9,285
------- -------
Operating income (loss) 1,660 (768)
Other expense, net 163 177
------- -------
Income before income taxes 1,497 (945)
Provision for income taxes 30 -
------- -------
Net income (loss) $ 1,467 $ (945)
======= =======
Net earnings/(loss) per share - basic $ 0.13 $ (0.09)
======= =======
Net earnings/(loss) per share - diluted $ 0.12 $ (0.09)
======= =======
Weighted average common shares and share
equivalents outstanding - basic 11,104 10,117
======= =======
Weighted average common shares and share
equivalents outstanding - diluted 12,523 10,117
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
BALANCE SHEETS
(Amounts in Thousands, Except Share Data)
<TABLE>
<S> <C> <C>
June 30, March 31,
2000 2000*
-------- ---------
(Unaudited)
ASSETS:
Current assets:
Cash and short-term securities $ 2,175 $ 1,490
Short-term investments 5,294 5,069
Accounts receivable, less allowance for
doubtful accounts of $238 and $219 8,558 8,875
Inventories 10,164 9,994
Prepaid expenses and other assets 1,019 980
------- -------
Total current assets 27,210 26,408
Property, plant & equipment, net 11,481 10,637
Restricted cash 1,126 902
Other long term assets 1,127 1,139
------- -------
Total assets $40,944 $39,086
======= =======
LIABILITIES & SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 4,192 $ 4,821
Accrued salaries and benefits 1,181 1,097
Other accrued liabilities 562 742
Deferred margin on shipments to
Distributors 516 516
Current maturities of long-term debt
and capital lease obligations 899 815
------- -------
Total current liabilities 7,350 7,991
Long-term debt, less current maturities 8,267 7,342
Capital lease obligations, less current
Maturities 629 793
------- -------
Total liabilities 16,246 16,126
======= =======
Shareholders' equity:
Common stock - no par value; authorized
25,000,000; issued and outstanding
June 30 and March 31, 2000 11,146,478
and 11,037,543, respectively 56,741 56,479
Accumulated deficit (32,061) (33,528)
Accumulated other comprehensive income 18 9
------- -------
Total shareholders' equity 24,698 22,960
------- -------
Total liabilities and
shareholders' equity $40,944 $39,086
======= =======
*Derived from audited financial statements.
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<TABLE>
<S> <C> <C>
Three Months Ended
June 30,
------------------
2000 1999
-------- -------
Cash flows from operating activities:
Net Income (loss) $ 1,467 $ (945)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 745 757
Net increase in inventories (170) (230)
Net decrease/(increase) in accounts receivable 317 (236)
Net increase in prepaid expenses and
other current assets (39) (187)
Net (decrease)/increase in trade accounts payable
and other current liabilities (725) 38
Net decrease/(increase) in other long term assets 5 (21)
Decrease in deferred margin on distributor sales - (60)
------- -------
Net cash provided by/ (used in) operating activities 1,600 (884)
------- -------
Cash used in investing activities:
Securities purchases (3,011) (1,247)
Securities sales 2,795 2,060
Capital expenditures (1,585) (99)
Net change in restricted cash (224) (222)
------- -------
Net cash (used in)/ provided by investing activities (2,025) 492
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Cash flows from financing activities:
Repayments of capital lease obligations (100) (63)
Repayments of long-term debt (45) (54)
Borrowing of long-term debt 993 -
Proceeds from issuance of common stock 262 70
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Net cash provided/ (used) in financing activities 1,110 (47)
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Net increase/(decrease) in cash and cash equivalents 685 (439)
Cash and cash equivalents at beginning of period 1,490 762
------- -------
Cash and cash equivalents at end of period $ 2,175 $ 323
======= =======
Supplemental disclosures of cash flow information:
Interest paid $ 236 $ 230
Supplemental disclosures of non-cash investing
and financing activities:
Unrealized gain (loss) on securities $ 9 $ 54
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
Notes to Financial Statements
1. Basis of Presentation
---------------------
In the opinion of management, the accompanying unaudited condensed
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly California Micro
Devices Corporation's (the "Company") financial position as of June 30,
2000, results of operations for the three-month periods ended June 30,
2000 and 1999, and cash flows for the three-month periods ended June 30,
2000 and 1999. Results for the quarter are not necessarily indicative of
fiscal year results.
The condensed financial statements should be read in conjunction with the
financial statements included with the Company's annual report on Form
10-K for the fiscal year ended March 31, 2000.
2. Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
3. Inventories
-----------
The components of inventory consist of the following (amounts in
thousands):
<TABLE>
<S> <C> <C>
June 30, March 31,
2000 2000
-------- --------
Raw materials $ 419 $ 452
Work-in-process 7,083 6,473
Finished goods 2,662 3,069
------- -------
$10,164 $ 9,994
======= =======
</TABLE>
4. Litigation
----------
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 or threatened 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.
5
<PAGE>
5. Earnings (Loss) Per Share
-------------------------
The following table sets forth the computation of basic and diluted
income (loss) per share:
(In thousands, except per share amounts)
<TABLE>
<S> <C> <C>
Three months ended
June 30,
2000 1999
------- -------
Numerator:
Numerator for basic and diluted net income
per share - net income (loss) $ 1,467 $ (945)
Denominator for basic net income (loss) per share:
Weighted average common shares used in
computing basic net income (loss) per share 11,104 10,117
Basic net income (loss) per share $ 0.13 $ (0.09)
Denominator for diluted net income per share:
Weighted average common shares 11,104 10,117
Employee stock options to purchase common stock 1,419 -
Shares used in computing diluted
net income per share 12,523 10,117
Diluted net income (loss) per share $ 0.12 $ (0.09)
</TABLE>
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.
6. Comprehensive Income
--------------------
Comprehensive income (loss) for the three-months ended June 30, 2000 and
June 30, 1999 was $1,458,000 and ($891,000), respectively.
7. Income Taxes
------------
For the three months ended June 30, 2000, 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.
6
<PAGE>
8. Recent Accounting Pronouncements
--------------------------------
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 Securities and Exchange Commission 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. 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 6 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.
7
<PAGE>
ITEM 2. Management's Discussion And Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations.
----------------------
Results of Operations
Product sales for the quarter ended June 30, 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 the Company's 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 ESD 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.
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 R&D 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 the Company's 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 the Company's executive deferred compensation
program. This was offset in operating income as a non-cash reduction in
compensation expense.
For the three months ended June 30, 2000, 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.
Liquidity and Capital Resources
Total cash, short-term securities and investments as of June 30, 2000,
was $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 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.
8
<PAGE>
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
receivables. There have been no borrowings against this facility. We
also have a $3.5 million capital equipment financing facility that
expires on December 31, 2003. Under the terms of this facility we can
borrow at rates ranging from prime plus 0.5% to prime plus 0.75%. As of
June 30, 2000 and March 31, 2000, respectively, we borrowed $1,231,000
and $238,000 against this capital equipment financing facility. We are
in compliance with our financial covenants.
We expect to fund our future liquidity needs through existing cash
balances, cash flows from operations, bank borrowings, and existing
equipment lease and loan financing arrangements. Depending on market
conditions and the results of operations, we may pursue other sources of
liquidity.
The Company believes that it has sufficient financial resources to fund
its operations for the foreseeable future.
Cautionary Statement
This report contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Act of 1934, as amended. Except for the
historical information contained in this discussion of the business
and the discussion and analysis of financial condition and results of
operations, the matters discussed herein are forward-looking
statements. Such forward-looking statements are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act
of 1995. The forward-looking statements regarding revenues, orders,
and sales involve a number of risks and uncertainties, including but
not limited to, demand for the Company's product, pricing pressures
which could affect the Company's gross margin or the ability to
consummate sales, unit volumes, intense competition within the
industry, the Company's ability to attract and retain high quality
people, the need for the Company to keep pace with technological
developments and respond quickly to changes in customer needs,
successful introduction of new products, the Company's dependence on
third party suppliers for components for its products, cost
reductions, year 2000 issues, and the Company's dependence upon
intellectual property rights which, if not available to the Company,
could have a material adverse effect on the Company. These same
factors, as well as others, such as the continuing litigation
involving the Company, could also affect the liquidity needs of the
Company. Actual results could differ materially from those projected
in the forward-looking statements as a result of factors set forth
above and elsewhere in this Form 10-Q.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
------------------
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 or threatened 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.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
-----------------------------------------------------------
No material changes have occurred from the Company's report on form 10K
for the period ending March 31, 2000.
ITEM 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibit Description
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FDS Financial Data Schedule
(For Edgar Filing Only)
(b) Form 8-K None
10
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
CALIFORNIA MICRO DEVICES CORPORATION
------------------------------------
(Registrant)
Date: August 11, 2000 /s/ John E. Trewin
-------------------------------------------
John E. Trewin
Vice President and Chief Financial Officer
11
