UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: November 29, 1997
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number: 012182
CALIFORNIA AMPLIFIER, INC.
(Exact name of registrant's specified in its charter)
Delaware 95-3647070
(State or Other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
460 Calle San Pablo
Camarillo, California 93012
(Address of principal executive offices) (Zip Code)
(805) 987-9000
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Common Stock Outstanding as of November 29, 1997: 11,743,322
Number of pages in this Form 10-Q: 12
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except par value)
Nov. 29, Mar. 1,
1997 1997
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(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ 3,443 $ 3,165
Accounts receivable 8,441 7,316
Inventories 8,612 8,200
Prepaid expenses and other current assets 1,360 1,183
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Total current assets 21,856 19,864
Property and equipment -- at cost, net of
accumulated depreciation and amortization 7,640 7,407
Other assets 1,044 2,265
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$30,540 $29,536
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,602 $ 2,136
Accrued liabilities 2,548 1,928
Current portion of long-term debt 701 799
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Total current liabilities 5,851 4,863
Long-term debt 816 525
Minority interest share in net assets of
Micro Pulse 250 ---
Stockholders' equity:
Preferred stock, 3,000 shares authorized;
no shares outstanding --- ---
Common stock, $.01 par value; 30,000 shares authorized;
11,743 shares outstanding in November 1997 and
11,713 in March 1997 117 117
Additional paid-in capital 14,075 13,990
Foreign currency translation adjustment (177) (127)
Retained earnings 9,608 10,168
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Total stockholders' equity 23,623 24,148
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$30,540 $ 29,536
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CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands, except per share data)
Three Months Ended Nine Months Ended
Nov. 29, Nov. 30, Nov. 29, Nov. 30,
1997 1996 1997 1996
Sales $13,382 $11,702 $38,486 $40,440
Cost of sales 10,517 8,296 27,994 27,561
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Gross profit 2,865 3,406 10,492 12,879
Research and development 1,159 1,440 3,296 4,732
Selling 1,342 1,127 4,054 3,679
General and administrative 1,696 711 3,779 2,402
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Income (loss) from operations (1,332) 128 (637) 2,066
Interest and other income
(expense), net (15) 74 (28) 340
Minority interest share in income
of Micro Pulse (50) --- (198) ---
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Income (loss) before taxes (1,397) 202 (863) 2,406
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Benefit (provision) for income taxes 503 (75) 303 (865)
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Net income (loss) $ (894) $ 127 $ (560) $1,541
Net income (loss) per share $(0.08) $ 0.01 $(0.05) $ 0.12
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Weighted average number of
shares outstanding 11,735 12,276 11,725 12,520
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Nine Months Ended
Nov. 29, Nov. 30,
1997 1996
Cash flows from operating activities:
Net income (loss) $(560) $1,541
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 2,435 2,156
Loss on disposal of equipment 13 22
(Increase) decrease in
Accounts receivable (352) (4,229)
Inventories 222 (2,019)
Prepaid expenses and other assets 191 (521)
Increase (decrease) in:
Accounts payable (24) (785)
Accrued liabilities 22 (1,907)
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Cash provided by operating activities: 1,947 (5,742)
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Cash flows used in investing activities:
Purchases of property and equipment (2,443) (3,728)
Purchase of controlling interest in Micro Pulse 327 ---
Minority interest share in net assets of Micro
Pulse 250 ---
Advance to Micro Pulse --- (227)
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Cash used in investing activities: (1,866) (3,955)
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Cash flows from financing activities:
Addition (repayment) of term debt 162 (162)
Issuances of common stock 35 288
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Cash provided (used) by financing activities: 197 126
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Net increase (decrease) in cash and cash equivalents 278 (9,571)
Cash and cash equivalents at the beginning of period 3,165 11,637
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Cash and cash equivalents at end of period $3,443 $2,066
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CALIFORNIA AMPLIFIER, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION - The accompanying unaudited consolidated financial
statements have been prepared in accordance with the requirements of Form 10-Q
and, therefore, do not include all information and footnotes which would be
presented were such financial statements prepared in accordance with generally
accepted accounting principles. These statements should be read in conjunction
with the Company's Annual Report on Form 10-K for the year ended March 1, 1997.
In the opinion of management, these interim financial statements reflect all
adjustments necessary for a fair presentation of the financial position and
results of operations for each of the periods presented. The results of
operations and cash flows for such periods are not necessarily indicative of
results to be expected for the full fiscal year.
2. INVENTORIES - Inventories include the cost of material, labor and
manufacturing overhead and are stated at the lower of cost (first-in, first-out)
or market and consist of the following (in 000's):
Nov. 29, 1997 March 1, 1997
Raw material $3,258 $2,510
Work in process 363 1,568
Finished goods 4,991 4,122
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$8,612 $8,200
====== ======
3. NET INCOME (LOSS) PER SHARE - Net income (loss) per share is based upon the
weighted average number of shares outstanding during each of the respective
years, including the dilutive effects of stock options and warrants using the
treasury stock method for the periods which the Company was profitable. The
weighted average number of shares used in the computation of net income per
share for the three and nine months ended November 30, 1996, were increased by
573,000, and 871,000, respectively, for the dilutive effects of stock options.
4. CONSOLIDATION OF INVESTMENT IN MICRO PULSE, INC. - In March 1997, the Company
acquired additional shares in Micro Pulse, Inc. ("Micro Pulse"), which resulted
in California Amplifier holding a 50.5% controlling interest in Micro Pulse.
Accordingly, as of November 29, 1997, and for the three and nine month periods
ended November 29, 1997, the balance sheet, statements of income, and cash flows
of Micro Pulse are consolidated with those of the Company, reduced by the
minority interests' share in the net assets and income of Micro Pulse. Prior to
March 2, 1997 and as of March 1, 1997, the 50% investment in Micro Pulse was
accounted for using the equity method of accounting.
5. THIRD QUARTER CHARGE FOR RESTRUCTURING AND PRODUCT OBSOLESENCE - On December
9, 1997, the Company's Board of Directors approved a plan of restructuring the
Company's operations to a business unit organization whereby business units are
responsible for distinct product lines. In conjunction with this decision, the
Company established reserves aggregating $1.8 million as a charge
("restructuring charge") to third quarter operating results, for the costs
relating to restructuring the Company's business operations into three separate
product line business units, and provide for excess and potentially obsolete
inventories impacted by current market conditions, and future sales and product
development strategies implemented by each business unit. The organizational
changes will be made during the fourth quarter of fiscal year 1998, and the
Company anticipates them to be completed by the fiscal 1998 year end. The three
business unit organizations will be Satellite Products, Wireless Products, and
Voice and Data Products.
6. CONTINGENCIES - In June 1997, the Company and certain of its Directors and
Officers had three legal actions filed against them, one in United States
District Court, Central District of California, Western Division and two in
Superior Court for the State of California, County of Ventura. See Part II, Item
I- Legal Proceedings included elsewhere herein. Based upon the analysis
performed to date, the Company and its Directors and Officers plan to vigorously
defend themselves against these claims.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED NOVEMBER 29, 1997 AND NOVEMBER 30, 1996
SALES
Sales increased by $1.7 million, or 14% from $11.7 million for the three months
ended November 30, 1996 to $13.4 million for the three months ended November 29,
1997. Sales of Wireless Cable products increased $263,000, or 4%, from $7.7
million to $7.9 million. Sales of Satellite Television products increased
$23,000, from $4.0 million to $4.1 million. Sales of antenna products, which
represent sales by Micro Pulse, the Company's 50.5% consolidated subsidiary,
were $1.4 million. In fiscal year 1997, the sales of Micro Pulse were not
consolidated since the Company did not own a majority interest in Micro Pulse.
The increase in Wireless Cable products resulted from increases in sales of
wireless reception products, offset by decreases in sales of MultiCipher
products. Sales of Wireless reception products increased primarily in Latin
America, while sales of MultiCipher products decreased primarily in the
United States as system growth was curtailed at key domestic wireless
operators.
Sales of Satellite Television products remained relatively flat as compared to
sales in the third quarter of the prior year, however, there was a shift in
sales by regions, primarily reduced sales to Europe and the Middle East, with
increased sales to Canada.
The Company's ability to increase sales in the fourth quarter, as well as into
fiscal year 1999 beginning March 1998, is dependent upon the Company maintaining
its Wireless Cable market share internationally, the introduction of digital
Wireless Cable television in the United States, continued demand for its Ku-DBS
products into niche markets, the introduction and acceptance of new DBS products
for domestic markets, and new product introductions at its Micro Pulse
subsidiary.
GROSS PROFITS AND GROSS MARGINS
Gross profits decreased by $541,000, or 16%, from $3.4 million to $2.7 million.
Gross margins decreased from 29.1% to 21.4%. The decrease in gross profits
resulted from increased sales, offset by a decrease in product gross margins,
and an approximate charge of $1.2 million relating to the $1.8 restructuring
charge (see Note 5 to Notes to Unaudited Consolidated Financial Statements
included elsewhere herein). Product gross margins prior to the $1.2 million
restructuring charge remained relatively flat as compared with the preceding
second quarter gross margins of 30.2%.
The Company continues to experience pressures on gross margins primarily because
of competitive pricing pressures. As a result, the Company will concentrate on
achieving increased sales volumes, product cost reductions and product
differentiation in an attempt to maintain or increase gross margins.
OPERATING EXPENSES
Research and development expenses decreased by $281,000 from $1.4 million to
$1.2 million. The decrease resulted primarily from reduced expenditures relating
to the introduction and rollout of MultiCipher Plus, offset by research and
development expenses incurred by Micro Pulse, which is now consolidated but was
not included in the comparable prior year period.
Selling expenses increased by $215,000 from $1.1 million to $1.3 million. The
increase was due primarily to personnel additions, and selling expenses incurred
by Micro Pulse, which is now consolidated but was not included in the comparable
prior year period.
General and administrative expenses increased by $985,000 from $711,000 to $1.7
million. The increase was primarily due to approximately $600,000 in
restructuring charges (see Note 5 to Notes to Unaudited Consolidated Financial
Statements included elsewhere herein), and administrative expenses incurred by
Micro Pulse, which is now consolidated but was not included in the comparable
prior year period.
INCOME (LOSS) FROM OPERATIONS
Income (loss) from operations, for the reasons noted above, decreased by $1.5
million, or 91%, from $128,000 to $(1,332,000).
INTEREST AND OTHER INCOME (EXPENSE, NET
Interest and other income (expense), net decreased by $89,000 to $15,000
expense, net from $74,000 income, net. The primary reason for the decrease is
reduced interest income because of lower cash balances during the current fiscal
year.
MINORITY INTEREST SHARE IN INCOME OF MICRO PULSE
The minority interest share in income of Micro Pulse represents the 49.5%
ownership interest's share of the consolidated income before tax of Micro Pulse.
In the prior year, Micro Pulse was not consolidated, therefore, no income was
booked during the third quarter of the prior year for California Amplifier's
then 50% ownership interest, which was accounted for using the equity method of
accounting.
PROVISION FOR TAXES
The provision for taxes for the third quarter of fiscal 1998 is based upon an
annualized tax rate of 36%. This tax rate assumes savings from benefits allowed
for export sales through a foreign sales corporation, and research and
development tax credits.
NET INCOME (LOSS)
Net income (loss), for reasons outlined above, decreased by $1.0 million, or
86%, from $127,000 to $(894,000).
NINE MONTHS ENDED NOVEMBER 29, 1997 AND NOVEMBER 30, 1996
SALES
Sales decreased by $2.0 million, or 5%, from $40.4 million for the nine months
ended November 30, 1996 to $38.5 million for the nine months ended November 29,
1997. Sales of Wireless Cable products decreased $5.3 million, or 19%, from
$28.1 million to $22.8 million. Sales of Satellite Television products decreased
$1.1 million, or 10%, from $12.3 million to $11.1 million. Sales of antenna
products, which represent sales by Micro Pulse, the Company's 50.5% consolidated
subsidiary, were $4.6 million. In fiscal year 1997, the sales of Micro Pulse
were not consolidated since the Company did not own a majority interest in Micro
Pulse.
The decreases in Wireless Cable sales resulted primarily from an increase in
wireless reception products in Latin America, offset by significant decreases in
MultiCipher products in Asia and the United States.
The decrease in Satellite Television products resulted from decreases in sales
to Europe and the Middle East regions, offset by increases in sales of DBS
products, primarily to Canada.
The Company's ability to increase sales in the fourth quarter, as well as into
fiscal year 1999 beginning March 1998, is dependent upon the Company maintaining
its Wireless Cable market share internationally, the introduction of digital
Wireless Cable television in the United States which the Company must
participate, continued demand for its Ku-DBS products into niche markets, the
introduction and acceptance of DBS products domestically, and new product
introductions at its Micro Pulse subsidiary.
GROSS PROFITS AND GROSS MARGINS
Gross profits decreased by $2.4 million, or 18.5%, from $12.9 to $10.5 million,
and gross margins decreased from 31.8% to 27.3%. The decreases in gross profits
resulted from a decrease in sales and product gross margins, and an approximate
charge of $1.2 million relating to the $1.8 million aggregate restructuring
charge. (See Note 5 to Notes to Unaudited Consolidated Financial Statements
included elsewhere herein.)
The decrease in gross margins resulted primarily from the $1.2 million
restructuring charge, as well as reduced product gross margins because of
continued pricing pressures in international Wireless Cable markets.
The Company continues to experience pressures on gross margins primarily because
of competitive pricing pressures. As a result, the Company will concentrate on
increased sales volumes, product cost reductions and product differentiation in
an attempt to maintain or increase gross margins.
OPERATING EXPENSES
Research and development expenses decreased $1.4 million from $4.7 million to
$3.3 million. The decrease resulted primarily from reduced expenditures relating
to the development, introduction and rollout of MultiCipher Plus. These reduced
expenses were offset by research and development costs incurred by Micro Pulse,
which is now consolidated but was not included in the comparable prior year
period.
Selling expenses increased $375,000 from $3.7 million to $4.1 million. The
increase is primarily a result of personnel additions, and selling expenses
incurred by Micro Pulse, which is now consolidated but was not included in the
comparable prior year period.
General and Administrative expenses increased $1.4 million from $2.4 million to
$3.8 million . The increase is due primarily to approximately $600,000 in
restructuring charges (see Note 5 to Notes to Unaudited Consolidated Financial
Statements included elsewhere herein), a higher level of administrative
expenses, and the administrative costs of Micro Pulse which is now consolidated
but was not included in the comparable prior year period.
INCOME (LOSS) FROM OPERATIONS
Income (loss) from operations decreased $2.7 million, or 70%, from $2.1
million to $(637,000).
INTEREST AND OTHER (INCOME) EXPENSE, NET
Interest and other income, net decreased by $368,000 from $340,000 income, net
to $28,000 expense, net. The primary reason for the decrease is reduced interest
income because of lower cash balances during the current year period.
MINORITY INTEREST SHARE IN INCOME OF MICRO PULSE
The minority interest share in income of Micro Pulse represents 49.5% ownership
interest's share of the consolidated income before tax of Micro Pulse. In the
prior year, Micro Pulse was not consolidated, therefore, no income was booked
during the third quarter of the prior year for California Amplifier's then 50%
ownership interest which was accounted for using the equity method of
accounting.
PROVISION FOR INCOME TAXES
The provision for taxes for the third quarter of fiscal 1998 is based upon an
annualized tax rate of 36%, the same tax rate as fiscal year 1997. This tax rate
assumes savings from benefits allowed for export sales through a foreign sales
corporation and research and development tax credits.
NET INCOME (LOSS)
For the reasons outlined above, net income (loss) decreased $2.1 million, or
64%, from $1.5 million to $(560,000).
LIQUIDITY AND CAPITAL RESOURCES
The Company has a $6.0 million working capital facility with California United
Bank at the bank's prime rate (8.5% at November 29, 1997). In addition,
California Amplifier s.a.r.l., its foreign subsidiary, has an informal
arrangement with a French bank to borrow up to $600,000. As of November 29,
1997, no amounts were outstanding under any of these arrangements. The $6.0
million credit facility with California United Bank expires in August 1998.
The Company believes that cash flow from operations, together with the funds
available under its credit facilities, are sufficient to support operations and
capital equipment requirements over the next twelve months.
The Company believes that inflation has not had a material effect on its
operations.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On June 11, 1997, the Company and certain of its directors and officers had two
legal actions filed against them, one in the United States District Court,
Central District of California, entitled Yourish v. California Amplifier, Inc.,
et al., Case No. 97-4293 (BM (Mcx), and the other in the Superior Court for the
State of California, County of Ventura, entitled Yourish v. California
Amplifier, Inc. et al., Case No. CIV 173569. On June 30, 1997, another legal
action was filed against the same defendants in the Superior Court for the State
of California, County of Ventura, entitled Burns, et al., v. California
Amplifier, Inc., et al., Case No. CIV 173981. All three actions are purported
class actions on behalf of purchasers of the common stock of the Company between
September 12, 1995 and August 8, 1996. The actions claim that the defendants
engaged in a scheme to make false and misleading statements and omit to disclose
material adverse facts to the public concerning the Company, allegedly causing
the Company's stock price to artificially rise, and thereby allegedly allowing
the individual defendants to sell stock at inflated prices. Plaintiffs claim
that the purported stockholder class was damaged when the price of the stock
declined upon disclosure of the alleged adverse facts. The Company and its legal
counsel are currently evaluating the claims. Based upon the analysis performed
to date, the Company, its directors and officers, plan to vigorously defend
themselves against these claims.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No reports on Form 8-K were filed during the quarter ended November
29, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
California Amplifier, Inc.
(Registrant)
January 9, 1998 /s/ Michael R. Ferron
-----------------------------
Michael R. Ferron
Vice President, Finance and
Chief Accounting Officer
INDEX TO EXHIBITS
*27 Financial Data Schedule
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* Filed herewith