UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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: December 2, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
For the transition period from to
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CALIFORNIA AMPLIFIER, INC.
(Exact name of registrant's specified in its charter)
Delaware 95-3647070
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(State or Other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
460 Calle San Pablo
Camarillo, California 93012
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(Address of principal executive offices) (Zip Code)
(805) 987-9000
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(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
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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 December 2, 1995: 5,664,742
Number of pages in this Form: 8
PART I - FINANCIAL INFORMATION
ITEM 1: Financial Statements
CALIFORNIA AMPLIFIER, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
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December 2, March 2,
1995 1995
(Unaudited) (Audited)
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ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . $ 8,695 $1,654
Accounts receivable, net . . . . . . . . . 4,763 6,039
Inventories . . . . . . . . . . . . . . . . 6,644 6,029
Deferred tax asset. . . . . . . . . . . . . 1,200 800
Prepaid expenses and other current assets . 476 436
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Total current assets. . . . . . . . . . 21,778 14,958
Property and equipment - at cost, net
of depreciation and amortization. . . . . 6,251 5,457
Investment in non-consolidated subsidiary . 1,001 977
Other assets. . . . . . . . . . . . . . . . 720 695
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$29,750 $22,087
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . . . . $ 3,398 $ 2,475
Accrued liabilities . . . . . . . . . . . . 4,342 2,940
Current portion of long-term debt . . . . . 1,027 991
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Total current liabilities . . . . . . . 8,767 6,406
Long-term debt. . . . . . . . . . . . . . . 990 782
Stockholders' equity:
Preferred stock, 3,000 shares authorized;
no shares outstanding
Common stock, $.01 par value;
15,000 shares authorized:
5,665 shares outstanding in December 1995
5,471 shares outstanding in March 1995. . 57 54
Additional paid-in capital. . . . . . . . . 12,079 10,268
Retained earnings . . . . . . . . . . . . . 7,857 4,577
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Total stockholders' equity. . . . . . . 19,993 14,899
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$29,750 $22,087
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2
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; in thousands, except per share data)
Three Months Ended Nine Months Ended
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Dec. 2, Nov. 26, Dec. 2, Nov. 26,
1995 1994 1995 1994
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Sales. . . . . . . . . . . . . . . . . . . . . $16,314 $11,661 $43,484 $34,166
Costs of sales . . . . . . . . . . . . . . . . 10,752 7,874 28,842 23,752
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Gross profit . . . . . . . . . . . . . . . . . 5,562 3,787 14,642 10,414
Research and development . . . . . . . . . . . 1,036 789 3,058 2,263
Selling. . . . . . . . . . . . . . . . . . . . 1,372 940 3,584 2,785
General and administrative . . . . . . . . . . 1,111 1,031 3,036 2,686
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Income from operations . . . . . . . . . . . . 2,043 1,027 4,964 2,680
Interest and other (income) expense, net . . . (45) (66) (82) 70
Provision for income taxes . . . . . . . . . . 731 379 1,766 940
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Net income . . . . . . . . . . . . . . . . . . $ 1,357 $ 714 $ 3,280 $ 1,670
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Net income per share . . . . . . . . . . . . . $ .22 $ .13 $ .55 $ .30
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Weighted average number of shares outstanding. 6,132 5,610 5,955 5,575
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SUPPLEMENTAL SALES INFORMATION:
Wireless Cable Products. . . . . . . . . . . . $11,772 $ 5,585 $29,570 $14,194
Satellite Television Products. . . . . . . . . 4,429 6,028 13,581 19,821
Other. . . . . . . . . . . . . . . . . . . . . 113 48 333 151
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$16,314 $11,661 $43,484 $34,166
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3
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
Nine Months Ended
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Dec. 2, Nov. 26,
1995 1994
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Cash flows from operating activities:
Net income. . . . . . . . . . . . . . . . . . . . . . $ 3,280 $ 1,671
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . 2,000 1,811
Loss on disposal of equipment . . . . . . . . . . 23 15
(Increase) decrease in:
Accounts receivable . . . . . . . . . . . . . . 1,276 (796)
Inventories . . . . . . . . . . . . . . . . . . (615) 548
Prepaid expenses and other assets . . . . . . . (465) 275
Increase (decrease) in:
Accounts payable. . . . . . . . . . . . . . . . . 923 (1,027)
Accrued liabilities . . . . . . . . . . . . . . . 1,402 891
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Net cash provided by operating activities . . . . . . 7,824 3,388
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Cash flows used in investing activities:
Purchases of property and equipment . . . . . . . . (2,817) (2,651)
Advances to non-consolidated subsidiary . . . . . . (24) (60)
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Cash used in investing activities . . . . . . . . . . (2,841) (2,711)
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Cash flows from financing activities:
Line of credit repayments . . . . . . . . . . . . . - (666)
Term debt borrowings. . . . . . . . . . . . . . . . 1,304 1,273
Term debt repayments. . . . . . . . . . . . . . . . (1,060) (352)
Issuances of common stock . . . . . . . . . . . . . 1,814 240
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Cash provided by financing activities . . . . . . . . 2,058 495
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Net increase in cash and cash equivalents . . . . . . 7,041 1,172
Cash and cash equivalents at the beginning of period. 1,654 739
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Cash and cash equivalents at end of period. . . . . . $ 8,695 $ 1,911
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4
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 4, 1995.
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):
Dec. 2, 1995 March 4, 1995
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Raw material $ 2,778 $ 2,087
Work in process 1,183 346
Finished goods 3,683 3,596
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$ 6,644 $ 6,029
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3. NET INCOME PER SHARE - Net income 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. The weighted average number of shares used in the computation of
net income per share for the three and nine months ended December 2, 1995 and
November 26, 1994 were increased by 491,000, 424,000, 235,000, and 204,000
respectively, for the dilutive effects of stock options.
5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED NOVEMBER 26, 1994 AND DECEMBER 2, 1995
SALES
Sales increased by $4.7 million, or 40% from $11.7 million for the three months
ended November 26, 1994 to $16.3 million for the three months ended December 2,
1995. The increase in sales is a result of an increase in Wireless Cable
product sales offset by a decrease in Satellite Television product sales. Sales
of Wireless Cable products increased $6.2 million, or 111%, from $5.6 million to
$11.8 million. Sales of Satellite Television products decreased $1.6 million,
or 27%, from $6.0 million to $4.4 million. The increases in Wireless Cable
sales resulted primarily from strong demand internationally for the Company's
subscriber reception equipment and sales of its newly introduced broadband
scrambling system, MultiCipher. The decreases in Satellite Television product
sales is a result of continued softness in the domestic market relating to the
introduction of the DBS system and the Company's decision to be more selective
in product offerings in certain international markets.
GROSS PROFIT AND GROSS MARGINS
Gross profit increased by $1.8 million, or 47%, from $3.8 million to $5.6
million, while gross margins increased from 32.5% to 34.1%. The 47% increase in
gross profits is a result of a 40% increase in sales and the 1.6% rate
improvement in gross margins. The increase in gross margin is a result of sales
product mix changes toward Wireless Cable products and a decrease in the sales
of certain low margin Satellite Television products, and product cost reduction
products in manufacturing and design.
OPERATING EXPENSES
Research and development expenses increased by $247,000 from $789,000 to $1.0
million. The increase was due to personnel additions, increased salaries and
increased equipment depreciation. The Company's current development focus is to
broaden the Company's Wireless Cable product line for subscriber reception
equipment, continue its development of products relating to its MultiCipher, and
the development of a KU DBS related product for Satellite Television.
Selling expenses increased by $432,000, or 46%, from $940,000 to $1.4 million.
The increase was primarily due to direct selling expenses from a 40% increase in
sales, additional personnel, including a senior vice president of sales and
marketing and increased coverage in certain international markets.
General and administrative expenses increased by $80,000 from $1.0 million to
$1.1 million. The increase was due primarily to salary increases and accruals
relating to year-end incentive bonuses.
INCOME FROM OPERATIONS
Income from operations increased by $1.0 million, or 99%, from $1.0 million to
$2.0 million. The reasons for the increase are higher sales and gross margins,
offset by increased operating expenses.
INTEREST AND OTHER (INCOME) EXPENSE, NET
Interest and other, net decreased $21,000 from other income, net of $66,000 to
other income, net of $45,000.
PROVISION FOR INCOME TAXES
The provision for taxes for the fiscal year 1996 and 1995 is based upon an
annualized tax rate of 35%. This tax rate is less than the statutory Federal
and State combine rate due primarily to benefits from export sales and research
and development tax credits.
NET INCOME
For reasons outlined above, net income increased by $643,000, or 90% from
$714,000 to $1.4 million.
6
NINE MONTHS ENDED NOVEMBER 26, 1994 AND DECEMBER 2, 1995
SALES
Sales increased by $9.3 million, or 27%, from $34.2 million for the nine months
ended November 26, 1994 to $43.5 million for the nine months ended December 2,
1995. Sales of Wireless Cable products increased $15.4 million or 108%, from
$14.2 million to $29.6 million. Sales of Satellite Television products
decreased $6.2 million, or 31%, from $19.8 million to $13.6 million. The
increase in Wireless Cable sales resulted primarily from strong demand
internationally for the Company's subscriber reception equipment and sales of
its newly introduced broadband scrambling system, MultiCipher. The decreases in
Satellite Television product sales is a result of continued softness in the
domestic market relating to the introduction of the DBS system and the Company's
decision to be more selective in product offerings in certain international
markets.
GROSS PROFITS AND GROSS MARGINS
Gross profits increased $6.2 million, or 60%, from $10.4 million to $14.6
million, and gross margins increased from 30.5% to 33.7%. The 60% increase in
gross profits resulted from a 27% increase in sales and a 3.2% rate improvement
in gross margins. Gross margins improved primarily because of the Company's
sales product mix changes toward Wireless Cable products and a decrease in the
sales of certain low margin Satellite Television products, and product cost
reduction programs in manufacturing and design.
OPERATING EXPENSES
Research and development expenses increased $795,000 from $2.3 million to $3.1
million. The increases result from personnel additions, salary increases,
increased depreciation and higher material purchases. The Company's current
development focus is to broaden the Company's Wireless Cable product line for
subscriber reception equipment, continue its development of MultiCipher
products, and the development of a KU DBS related product for Satellite
Television.
Selling expenses increased $799,000, or 29% from $2.8 million to $3.6 million.
The increase is primarily a result of direct selling expenses from a 27%
increase in sales, additional personnel, including a senior vice president of
sales and marketing and increased coverage in certain international markets.
General and administrative expenses increased $350,000 from $2.7 million to $3.0
million. The increase is due primarily to increases in salaries, additional
personnel and increased incentive bonus accruals.
INCOME FROM OPERATIONS
Income from Operations increased $2.3, or 85%, from $2.7 million to $5.0
million. The increase is a result of increased sales and improved gross margins
offset by increased operating expenses.
INTEREST AND OTHER (INCOME) EXPENSE, NET
Interest and other, net increased $152,000 from a net expense of $70,000 to
$82,000 other income, net. The increase is primarily due to increased interest
income and cash discounts during the fiscal year 1996 period.
PROVISION FOR INCOME TAXES
The provision for taxes for fiscal year 1996 and fiscal year 1995 were based
upon a 35% tax rate. the rate is less than the Federal and State combine rate
because of tax benefits due to export sales and research and development tax
credits.
NET EARNINGS
For reasons outlined above, net earnings increased $1.6 million, or 96% from
$1.7 million to $3.3 million.
7
LIQUIDITY AND CAPITAL RESOURCES
Currently, the Company has a $5.0 million working capital facility with
California United Bank at the bank's prime rate (8.75%) and $700,000 available
under a capital equipment facility with NationsBank at the Federal Funds rate
(5.69%) plus 2.75%. 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 December 2, 1995, no amounts were outstanding under the working
capital arrangements. The $5.0 million credit facility with California United
Bank expires on August 1, 1996 and the equipment line with NationsBank on
December 31, 1995.
The Company believes that cash flow from operations together with the funds
available under its credit arrangements are sufficient to support operations
through the current fiscal year.
The Company believes that inflation has not had a material effect on its
operations.
PART II - OTHER INFORMATION
Information applicable to Items 1 through 6 has been reported by the registrant
in previous filings or has already been disclosed in the financial information
provided in Part I.
No reports on Form 8-K were filed during the quarter ended December 2, 1995.
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.
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(Registrant)
December 22, 1995 /s/ Michael R. Ferron
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Michael R. Ferron
Vice President, Finance and
Chief Accounting Officer
8