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: August 31, 1996
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: 0-12182
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 August 31, 1996: 11,690,000
Number of pages in this Form 10-Q: 12
PART I -- FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
Aug. 31, Mar. 2,
1996 1996
-------- -------
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ 3,901 $11,637
Accounts receivable 7,410 4,645
Inventories 7,668 6,744
Deferred tax asset 1,200 1,200
Prepaid expenses and other current assets 406 399
------- -------
Total current assets 20,585 24,625
Property and equipment - at cost, net
of depreciation and amortization 8,146 6,160
Investment in non-consolidated subsidiary 1,000 852
Other assets 1,155 936
------- -------
$30,886 $32,573
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,263 $ 3,230
Accrued liabilities 2,844 4,659
Current portion of long-term debt 841 993
------- -------
Total current liabilities 5,948 8,882
Long-term debt 400 767
Commitments -- --
Stockholders' equity:
Preferred stock, 3,000 shares
authorized; no shares outstanding -- --
Common stock, $.01 par value;
15,000 shares authorized;
11,690 shares outstanding in
August 1996 and 11,519 in March 1996 117 115
Additional paid-in capital 13,472 13,274
Retained earnings 10,949 9,535
------- -------
Total stockholders' equity 24,538 22,924
------- -------
$30,886 $32,573
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands, except per share data)
Three Months Ended Six Months Ended
-------------------- --------------------
Aug. 31, Sept. 2, Aug. 31, Sept. 2,
1996 1995 1996 1995
-------- -------- -------- --------
Sales $11,463 $14,505 $28,738 $27,170
Cost of sales 8,033 9,629 19,265 18,090
------- ------- ------- -------
Gross profit 3,430 4,876 9,473 9,080
Research and development 1,819 1,059 3,292 2,022
Selling 1,219 1,160 2,552 2,212
General and administrative 807 991 1,691 1,925
------- ------- ------- -------
Income (loss) from operations (415) 1,666 1,938 2,921
Interest and other income (expense), net 127 (20) 266 37
------- ------- ------- -------
Income (loss) before taxes (288) 1,646 2,204 2,958
(Provision) benefit for income taxes 79 (575) (790) (1,035)
Net income (loss) $ (209) $ 1,071 $ 1,414 $ 1,923
Net income (loss) per share $ (.02) $ .09 $ .11 $ .16
Weighted average number of
shares outstanding 11,607 11,908 12,665 11,780
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Six Months Ended
----------------
Aug. 31, Sept. 2,
1996 1995
-------- --------
Cash flows from operating activities:
Net income (loss) $ 1,414 $1,923
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 1,385 1,319
Loss on disposal of equipment -- 23
(Increase) decrease in:
Accounts receivable (2,765) 2,477
Inventories (924) (741)
Prepaid expenses and other assets (226) (86)
Increase (decrease) in
Accounts payable (967) (234)
Accrued liabilities (1,815) 1,696
------- ------
Cash provided by operating activities: (3,898) 6,377
------- ------
Cash flows used in investing activities:
Purchases of property and equipment (3,371) (2,278)
Investments in non-consolidated subsidiary (148) (35)
------- ------
Cash used in investing activities: (3,519) (2,313)
------- ------
Cash flows from financing activities:
Short-term debt borrowings -- 1,304
Term debt repayments (519) (804)
Issuances of common stock 200 765
------- ------
Cash provided (used) by financing activities: (319) 1,265
------- ------
Net increase (decrease) in cash and cash equivalents (7,736) 5,329
Cash and cash equivalents at the beginning of period 11,637 1,654
------- ------
Cash and cash equivalents at end of period $ 3,901 $6,983
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 2, 1996. 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):
Aug. 31, 1996 March 2, 1996
------------- -------------
Raw material $2,184 $2,480
Work in process 1,558 562
Finished goods 3,926 3,702
------ ------
$7,668 $6,744
------ ------
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 six months ended August 31, 1996,
the three and six months ended and September 2, 1995 were increased by
1,058,000, 824,000, and 736,000 respectively, for the dilutive effects of
stock options. There was no share adjustment for the three months ended
August 31, 1996, since the Company incurred a net operating loss and the
effect of stock options would, therefore, be anti-dilutive.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31, 1996 AND SEPTEMBER 2, 1995
SALES
Sales decreased by $3.0 million, or 21%, from $14.5 million for the three
months ended September 2, 1995 to $11.5 million for the three months ended
August 31, 1996. The sales decrease resulted from decreases in both Wireless
Cable product sales and Satellite Television product sales. Sales of
Wireless Cable products decreased $2.9 million, or 28%, from $10.4 million to
$7.5 million. Sales of Satellite Television products decreased $142,000, or
3.5%, from $4.1 million to $3.9 million. The decrease in Wireless Cable
sales resulted primarily from decreased international shipments of Wireless
Cable reception products and MultiCipher, the Company's broadband scrambling
system. The decrease in MultiCipher was further affected by delays in the
introduction of MultiCipher Plus-TM-. The decrease in Satellite Television
product sales resulted from continued softness in the domestic C-Band market
relating to the competition from the introduction of the Ku-DBS system and
price competition in certain foreign markets, primarily Latin America.
The Company's sales growth during the remainder of fiscal year 1997 is
dependent on renewed growth in the Wireless Cable market, both in the U.S.
and internationally, and the acceptance of MultiCipher Plus, which is
currently in a limited number of installations, some still under evaluation.
GROSS PROFITS AND GROSS MARGINS
Gross profits decreased by $1.4 million, or 30%, from $4.9 million to $3.4
million. Gross margins decreased from 33.6% to 29.9%. The 30% decrease in
gross profits is the result of a 21% decrease in sales, and lower gross
margins on those lower sales. The decrease in gross margins is primarily a
result of lower volumes resulting in an underabsorption of factory costs, and
production start-up costs relating to new product introductions, primarily
MultiCipher Plus.
OPERATING EXPENSES
Research and development expenses increased by $760,000 from $1.1 million to
$1.8 million. The increase was due to personnel additions, increased
consulting services, increased equipment depreciation and higher purchases of
research and development materials as the Company expands its product lines
and continues its development of MultiCipher products, including MultiCipher
Plus. Currently the Company expects research and development expenses to be
lower in the third and fourth quarters than the second quarter amount due to,
among other things, lower consulting services.
Selling expenses increased by $59,000 from $1.16 million to $1.2 million.
The increase was due primarily to personnel additions to support anticipated
higher sales volumes, offset by lower discretionary spending in certain
marketing areas.
General and administrative expenses decreased by $184,000 from $991,000 to
$807,000. The decrease was due primarily to the elimination of incentive
bonuses in fiscal year 1997 due to current operating performance.
INCOME (LOSS) FROM OPERATIONS
Income (loss) from operations, for the reasons noted above, decreased by $2.1
million or 50% from $1.7 million to a loss of $(415,000).
INTEREST AND OTHER INCOME (EXPENSE), NET
Interest and other income (expense), net increased by $147,000 to $127,000
income, net, from $(20,000) expense, net. The primary reasons for the change
is increased interest income, cash discounts and income relating to Micro
Pulse, a 50% equity investment.
PROVISION FOR TAXES
The provision for taxes for the second quarter of fiscal 1997 is based upon
an annualized tax rate of 35%, the same tax rate as fiscal year 1996. This
tax rate assumes savings from benefits allowed for export sales through a
foreign sales corporation formed in March 1993 and research and development
tax credits.
NET INCOME (LOSS)
Net income (loss), for reasons outlined above, decreased by $1.3 million, or
29% from $1 million to $(209,000).
SIX MONTHS ENDED AUGUST 31, 1996 AND SEPTEMBER 2, 1995
SALES
Sales increased by $1.6 million, or 6%, from $27.2 million for the six months
ended September 2, 1995 to $28.7 million for the six months ended August 31,
1996. Sales of Wireless Cable products increased $2.6 million, or 15%, from
$17.8 million to $20.4 million. Sales of Satellite Television products
decreased $935,000, or 10%, from $9.2 million to $8.2 million. The increases
in Wireless Cable sales resulted primarily from higher first quarter sales of
MultiCipher, the Company's broadband scrambling system, offset by lower sales
of Wireless Cable reception products. The decreases in Satellite Television
product sales is a result of continual softness in the domestic C-Band market
relating to competition from the introduction of the Ku-DBS system and
competition and pricing in certain international markets.
GROSS PROFITS AND GROSS MARGINS
Gross profits increased $393,000, or 4%, from $9.1 million to $9.5 million,
and gross margins decreased from 33.4% to 33%. The 4% increase in gross
profits resulted from a 6% increase in sales offset by a .4% reduction in
gross margins. Gross margins declined primarily as a result of lower sales
volumes in the second quarter resulting in an underabsorption of factory
costs, and production start-up costs relating to new product introductions,
primarily MultiCipher Plus.
OPERATING EXPENSES
Research and development expenses increased $1.3 million from $2.0 million to
$3.3 million. The increase resulted from personnel additions, salary
increases, increased equipment depreciation, higher research and development,
material purchases as the Company expands its product lines and continues the
development of MultiCipher products and increased consulting services.
Selling expenses increases $340,000 from $2.2 million to $2.6 million. The
increase is primarily a result of increased salaries and personnel additions.
General and Administrative expenses decreased $234,000 from $1.9 million to
$1.7 million. The decrease is due primarily to increases salaries and
additional personnel, offset by a decrease in incentive bonuses due to
operating performance.
INCOME FROM OPERATIONS
Income from operations decreased $983,000, or 37%, from $2.9 million to $1.9
million. The decrease is a result of decreased sales, lower gross margins
and increased research and development expenses as noted above.
INTEREST AND OTHER (INCOME) EXPENSE, NET
Interest and other income, net increased by $229,000 to $266,000 from
$37,000. The primary reasons for the increase is increased interest income,
cash discounts and income relating to MicroPulse, a 50% equity investment.
PROVISIONS OF INCOME TAXES
The provision for taxes for fiscal year 1997 and fiscal year 1996 were based
upon an annualized 35% tax rate. The rate is less than the Federal and State
combined rate because of tax benefits due to export sales and research and
development tax credits.
NET INCOME
For the reasons outline above, net income decreased $509,000, or 26%, from
$1.9 million to $1.4 million.
LIQUIDITY AND CAPITAL RESOURCES
Currently the Company has a $6.0 million working capital facility with
California United Bank and a $2.0 million capital equipment facility with
NationsBank. 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 August 31, 1996, no amounts were outstanding under any of
these arrangements except term debt totaling $1.2 million due to NationsBank
borrowed under prior arrangements. The working capital facility expires in
August 1997, and the equipment facility in December 1996.
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
has received verbal commitments from its current banks and other banks that
the Company current borrowing amounts will be renewed at similar terms.
The Company believes that inflation has not had a material effect on its
operations.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of California Amplifier, Inc. was held
July 19, 1996.
At the annual meeting of stockholders proposals were considered for the
election of Ira Coron, David R. Nichols, William E. McKenna and Arthur H.
Hausman as directors to serve until the 1997 annual meeting of stockholders.
Other matters voted upon at the meeting included (i) the approval of an
amendment to the Company's Certificate of Incorporation to increase the
number of shares of common stock authorized from 15,000,000 to 30,000,000,
(ii) approval of an amendment to the California Amplifier, Inc. 1989 Key
Employee Stock Option Plan to increase the number of shares of common stock
issuable from 2,600,000 to 3,400,000. The director-nominees were elected and
all proposals were approved.
The voting results were as follows:
Proposal
1) Election of directors:
For Against Withheld
--------- ------- --------
Ira Coron 9,347,774 0 431,519
David R. Nichols 9,348,974 0 430,319
William E. McKenna 9,343,674 0 435,619
Arthur H. Hausman 9,341,954 0 437,339
On August 26, 1996, Thomas Ringer was appointed to the Board of Directors.
On August 31, 1996, David R. Nichols resigned from the Board of Directors
and as an officer of the Company.
2) Approval of amendment to the Company's Certificate of Incorporation
received 9,097,648 votes for, 645,577 votes against, 32,568 votes withheld
and 3,500 broker non-votes.
3) Approval of an amendment to the California Amplifier, Inc. 1989 Key
Employee Stock Option Plan received 3,446,487 votes for, 2,830,819 votes
against, 61,307 votes withheld and 3,440,680 broker non-votes.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See exhibit index attached hereto which is incorporated herein by this
reference.
(b) No reports on Form 8-K were filed during the quarter ended
August 31, 1996.
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)
October 8, 1996 /s/ Michael R. Ferron
Michael R. Ferron
Vice President, Finance and
Chief Accounting Officer
INDEX TO EXHIBITS
*3.1 Certificate of Incorporation of the Registrant, as amended, filed as
Exhibit 3.1 to the Registrant's Registration Statement on Form S-1
(33-59702) and by this reference is incorporated herein and made a
part hereof.
*3.1.1 Amendment to Certificate of Incorporation of the Registrant, as
filed with the Delaware Secretary of State on September 19, 1996.
3.2 Bylaws of the Registrant, as amended, filed as Exhibit 3.2 to the
Registrant's Form 8-K dated February 27, 1992 and by this reference is
incorporated herein and made a part hereof.
10.1 1984 Key Employee Stock Option Plan filed as Exhibit 10.1 to the
Registrant's Registration Statement on Form S-1 (2-87042) and by this
reference is incorporated herein and made a part hereof.
10.2 Form of Incentive Stock Option Agreement filed as Exhibit 10.2 to the
Registrant's Registration Statement on Form S-1 (2-87042) and by this
reference is incorporated herein and made a part hereof.
10.3 Form of Nonqualified Stock Option Agreement filed as Exhibit 10.3 to the
Registrant's Registration Statement on Form S-1 (2-87042) and by this
reference is incorporated herein and made a part hereof.
10.4 1989 Key Employee Stock Option Plan filed as Exhibit 4.4 to the
Registrant's Registration Statement on Form S-8 (33-31427) and by this
reference is incorporated herein and made a part hereof.
10.4.1 Amendment No. 1 to the 1989 Key Employee Stock Option Plan
filed as Exhibit 4.7 to the Registrant's Registration Statement on
Form S-8 (33-36944) and by this reference is incorporated herein and
made a part hereof.
10.4.2 Amendment No. 2 to the 1989 Key Employee Stock Option Plan filed as
Exhibit 4.8 to the Registrant's Registration Statement on
Form S-8 (33-72704) and by this reference is incorporated herein
and made a part hereof.
10.4.3 Amendment No. 3 to the 1989 Key Employee Stock Option Plan
filed as Exhibit 4.10 to the Registrant's Registration Statement on
Form S-8 (33-60879) and by this reference is incorporated herein and
made a part hereof.
10.5 Form of Incentive Stock Option Agreement filed as Exhibit 4.6 to the
Registrant's Registration Statement on Form S-8 (33-31427) and by this
reference is incorporated herein and made a part hereof.
10.6 Form of Nonqualified Stock Option Agreement filed as Exhibit 4.6 to the
Registrant's Registration Statement on Form S-8 (33-31427) and by this
reference is incorporated herein and made a part hereof.
10.7 Form of Option Agreement for Non-Employee Directors filed as Exhibit 4.9
to the Registrant's Registration Statement on Form S-8 (33-36944) and
by this reference is incorporated herein and made a part hereof.
10.8 Letter Agreements regarding sale of the building dated July 18, 1988,
filed as an exhibit to Form 8-K, dated February 27, 1989, filed as an
exhibit to the Registrant's Annual Report on Form 10-K for the fiscal
year ended February 28, 1989 and by this reference is incorporated
herein and made a part hereof.
10.9 Building Lease and Rider on building between the Registrant and Calle
San Pablo Property Co. dated January 31, 1989, filed as an exhibit to
the Registrant's Annual Report on Form 10-K for the fiscal year ended
February 28, 1989 and by this reference is incorporated herein and made
a part hereof.
10.9.1 Amendment of Lease on building between the Registrant and Calle
San Pablo Property Co. dated February 9, 1995, filed as an exhibit to
this Annual Report on Form 10-K for the fiscal year ended
March 4, 1995.
10.10 Form of Indemnity Agreement filed as an exhibit to the Registrant's
Annual Report on Form 10-K for the fiscal year ended February 29, 1988
and by this reference is incorporated herein and made a part hereof.
10.11 Stockholder Rights Plan filed as an exhibit to the Registrant's
Form 8-K dated September 5, 1991 and by this reference is incorporated
herein and made a part hereof.
10.12 Distribution Agreement between Registrant and Pan Asian Systems, Ltd.,
dated July 3, 1992 filed as Exhibit 10.17 to the Company's Registration
Statement on Form S-1 (33-59702) and by this reference is incorporated
herein and made a part hereof.
10.13 Stock Purchase Agreement dated December 31, 1992 by and among
Registrant, Peter J. Connolly, Steven G. Ow and Toni Ow, and
The Peter J. Connolly Charitable Remainder Unitrust dated
June 15, 1992 filed as Exhibit 10.20 to the Company's Registration
Statement on Form S-1 (33-59702) and by this reference is incorporated
herein and made a part hereof.
10.14 8% Convertible Subordinated Note dated January 20, 1993 by Registrant
payable to The Peter J. Connolly Charitable Remainder Unitrust dated
June 15, 1992 filed as Exhibit 10.21 to the Registrant's Registration
Statement on Form S-1 (33-59702) and by this reference is incorporated
herein and made a part hereof.
10.15 8% Convertible Subordinated Note dated January 20, 1993 by Registrant
payable to Steven G. Ow and Toni Ow dated June 15, 1992 filed as
Exhibit 10.22 to the Registrant's Registration Statement on Form S-1
(33-59702) and by this reference is incorporated herein and made a
part hereof.
10.16 Promissory Note dated January 20, 1993 by Micro Pulse
Incorporated, payable to Registrant filed as Exhibit 10.23 to the
Registrant's Registration statement on Form S-1 (33-59702) and by this
reference is incorporated herein and made a part hereof.
10.17 Option Agreement entered into as of February 4, 1993 by and
among CAMP Acquisition Corp., Mr. Charles W. Ergen and the Registrant
filed as Exhibit 10.24 to the Registrant's Registration Statement on
Form S-1 (33-59702) and by this reference is incorporated herein and
made a part hereof.
10.18 Promissory Note Agreement between Registrant and California United Bank
dated April 5, 1993, filed as Exhibit 10.18 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended February 27, 1993
and by this reference is incorporated herein and made part hereof.
10.19 Change in Terms Agreement between Registrant and California United Bank,
dated July 22, 1994, and filed as an exhibit to this Annual Report on
Form 10-K for the fiscal year ended March 4, 1995.
10.20 First Amendment to Business Loan Agreement between Registrant and
California United Bank, dated July 22, 1994, filed as an exhibit to
this Annual Report on Form 10-K for the fiscal year ended March 4, 1995.
10.21 Second Amendment to Business Loan Agreement between Registrant and
California United Bank, dated September 13, 1994, filed as an exhibit
to this Annual Report on Form 10-K for the fiscal year ended
March 4, 1995.
10.22 Business Loan Agreement between Registrant and California United Bank,
dated July 26, 1995.
10.23 Promissory Note between Registrant and California United Bank dated
July 26, 1995.
10.24 Commercial Security Agreement between Registrant and California
United Bank dated July 26, 1995.
10.25 First Amendment to Business Loan Agreement between Registrant and
California United Bank, dated July 26, 1995.
*27 Financial Data Schedule
*Filed herewith.