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 30, 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: 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 30, 1996: 11,712,000
Number of pages in this Form 10-Q: 9
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
_______________________________________________________________________________
Nov. 30, Mar. 2,
1996 1996
---------- ---------
(Unaudited) (Audited)
_______________________________________________________________________________
ASSETS
Current assets:
Cash and cash equivalents $ 2,066 $11,637
Accounts receivable 8,874 4,645
Inventories 8,763 6,744
Deferred tax asset 1,200 1,200
Prepaid expenses and other current assets 547 399
_______________________________________________________________________________
Total current assets 21,450 24,625
Property and equipment - at cost, net
of depreciation and amortization 7,710 6,160
Investment in non-consolidated subsidiary 1,079 852
Other assets 1,309 936
_______________________________________________________________________________
$31,548 $32,573
_______________________________________________________________________________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,445 $ 3,230
Accrued liabilities 2,752 4,659
Current portion of long-term debt 882 993
_______________________________________________________________________________
Total current liabilities 6,079 8,882
Long-term debt 716 767
Commitments --- ---
Stockholders' equity:
Preferred stock, 3,000 shares
authorized; no shares outstanding --- ---
Common stock, $.01 par value;
30,000 shares authorized;
11,712,000 shares outstanding in
November 1996 and 11,519 in March 1996 117 115
Additional paid-in capital 13,560 13,274
Retained earnings 11,076 9,535
_______________________________________________________________________________
Total stockholders' equity 24,753 22,924
_______________________________________________________________________________
$31,548 $32,573
_______________________________________________________________________________
2
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; in thousands, except per share data)
_______________________________________________________________________________
Three Months Ended Nine Months Ended
------------------ -----------------
Nov. 30, Dec. 2, Nov. 30, Dec. 2,
1996 1995 1996 1995
_______________________________________________________________________________
Sales $11,702 $16,314 $40,440 $43,484
Cost of sales 8,296 10,752 27,561 28,842
_______________________________________________________________________________
Gross profit 3,406 5,562 12,879 14,642
Research and development 1,440 1,036 4,732 3,058
Selling 1,127 1,372 3,679 3,584
General and administrative 711 1,111 2,402 3,036
_______________________________________________________________________________
Income from operations 128 2,043 2,066 4,964
Interest and other income (expense), net 74 45 340 82
_______________________________________________________________________________
Income before taxes 202 2,088 2,406 5,046
Provision for income taxes (75) (731) (865) (1,766)
________________________________________________________________________________
Net income $ 127 $ 1,357 $ 1,541 $ 3,280
_______________________________________________________________________________
_______________________________________________________________________________
Net income per share $ .01 $ .11 $ .12 $ .28
_______________________________________________________________________________
_______________________________________________________________________________
Weighted average number of
shares outstanding 12,276 12,264 12,520 11,910
_______________________________________________________________________________
_______________________________________________________________________________
3
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Nine Months Ended
________________________________________________________________________________
Nov. 30, Dec. 2,
1996 1995
________________________________________________________________________________
Cash flows from operating activities:
Net income $ 1,541 $ 3,280
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 2,156 2,000
Loss on disposal of equipment 22 23
(Increase) decrease in
Accounts receivable (4,229) 1,276
Inventories (2,019) (615)
Prepaid expenses and other assets (521) (465)
Increase (decrease) in:
Accounts payable (785) 923
Accrued liabilities (1,907) 1,402
________________________________________________________________________________
Cash provided by operating activities: (5,742) 7,824
________________________________________________________________________________
Cash flows used in investing activities:
Purchases of property and equipment (3,728) (2,817)
Investments in non-consolidated subsidiary (227) (24)
________________________________________________________________________________
Cash used in investing activities: (3,955) (2,841)
________________________________________________________________________________
Cash flows from financing activities:
Term-debt borrowings 608 1,304
Term debt repayments (770) (1,060)
Issuances of common stock 288 1,814
________________________________________________________________________________
Cash provided (used) by financing activities: 126 2,058
________________________________________________________________________________
Net increase (decrease) in cash and cash equivalents (9,571) 7,041
Cash and cash equivalents at the beginning of period 11,637 1,654
_______________________________________________________________________________
Cash and cash equivalents at end of period $ 2,066 $ 8,695
_______________________________________________________________________________
4
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):
Nov. 30, 1996 March 2, 1996
------------ -------------
Raw material $2,749 $2,480
Work in process 791 562
Finished goods 5,223 3,702
------ ------
$8,763 $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 three and nine months ended
November 30, 1996 and December 2, 1995 were increased by 573,000, 871,000,
491,000, and 424,000 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 30, 1996 AND DECEMBER 2, 1995
SALES
Sales decreased by $4.6 million, or 28% from $16.3 million for the three months
ended December 2, 1995 to $11.8 million for the three months ended November 30,
1996. The sales decrease resulted from decreases in both Wireless Cable product
sales and Satellite Television product sales. Sales of Wireless Cable products
decreased $4.1 million or 35%, from $11.8 million to $7.7 million. Sales of
Satellite Television products decreased $390,000, or 9%, from $4.4 million to
$4.0 million.
The decrease in Wireless Cable sales resulted primarily from decreases in sales
of shipments of Wireless Cable reception products both domestically and
internationally, offset by increases in MultiCipher sales. 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 softness in sales to the Wireless Cable market is a result of the following:
many domestic operators foregoing the expansion of their analog systems,
awaiting the transition to digital compression technology; delays in the
introduction of digital transmission by the Tele-TV consortium; capital
availability to Wireless Cable operators; delays in the introduction of Wireless
Cable to certain international markets. Until these issues can be
satisfactorily resolved, the sales of Wireless Cable products which have
historically increased significantly period to period, will continue to be under
pressure as the Company and its competitors compete for a smaller sales base.
GROSS PROFITS AND GROSS MARGINS
Gross profits decreased by $2.2 million, or 39%, from $5.6 million to $3.4
million. Gross margins decreased from 34.1% to 29.1%. The 38.8% decrease in
gross profits is the result of a 28% decrease in sales and lower gross margins
on these lower sales. The decrease in gross margin is primarily a result of
lower volumes resulting in an underabsorption of factory costs, and production
start-up costs and higher initial product costs relating to new product
introductions, primarily MultiCipher Plus.
OPERATING EXPENSES
Research and development expenses increased by $404,000 from $1.0 million to
$1.4 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.
Selling expenses decreased by $245,000 from $1.4 million to $1.1 million. The
increase was due primarily to personnel additions, offset by lower discretionary
spending in certain marketing areas.
General and administrative expenses decreased by $400,000 from $1.1 million to
$711,000. The decrease was due primarily to the elimination of incentive
bonuses in fiscal year 1997 due to the current operating performance which is
below plan.
INCOME FROM OPERATIONS
Income from operations, for the reasons noted above, decreased by $1.9 million,
or 94%, from $2.0 million to $128,000.
INTEREST AND OTHER INCOME (EXPENSE), NET
6
Interest and other income (expense), net increased by $29,000 to $74,000 income,
net, from $45,000 income, net. The primary reasons for the change is increased
interest income, cash discounts and income relating to Micro Pulse, a 50% equity
investment.
7
PROVISION FOR TAXES
The provision for taxes for the third 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
Net income, for reasons outlined above, decreased by $1.2 million, or 91%,
from $1.4 million to $127,000.
NINE MONTHS ENDED NOVEMBER 30, 1996 AND DECEMBER 2, 1995
SALES
Sales decreased by $3.0 million, or 7%, from $43.5 million for the nine months
ended December 2, 1995 to $40.4 million for the nine months ended November 30,
1996. Sales of Wireless Cable products decreased $1.5 million, or 5%, from
$29.6 million to $28.0 million. Sales of Satellite Television products
decreased 1.3 million, or 10%, from $13.6 million to $12.3 million.
The decrease in Wireless Cable sales resulted primarily from decreases in sales
of Wireless Cable reception products offset by increases in sales of MultiCipher
products. The decrease in Satellite Television product sales is a result of
continued 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.
The softness in sales to the Wireless Cable market is a result of the following:
many domestic operators foregoing the expansion of their analog systems,
awaiting the transition to digital compression technology; delays in the
introduction of digital transmission by the Tele-TV consortium; capital
availability to Wireless Cable operators; delays in the introduction of Wireless
Cable to certain international markets. Until these issues can be
satisfactorily resolved, the sales of Wireless Cable products which have
historically increased significantly period to period, will continue to be under
pressure as the Company and its competitors compete for a smaller sales base.
GROSS PROFITS AND GROSS MARGINS
Gross profits decreased $1.8 million, or 12%, from $14.6 million to $12.9
million, and gross margins decreased from 33.7% to 31.8%. The 12% decrease in
gross profits resulted from a 7% decrease in sales and a 1.9% reduction in gross
margins. Gross margins declined primarily as a result of lower sales volumes in
the second and third quarter resulting in an underabsorption of factory costs,
production start-up costs, and higher initial product costs relating to new
product introductions, primarily MultiCipher Plus.
OPERATING EXPENSES
Research and development expenses increased $1.7 million from $3.1 million to
$4.7 million. The increase resulted from personnel additions, salary increases,
increased equipment depreciation, and increased consulting services as the
Company expands its product offering, primarily in Wireless Cable reception
products, and MultiCipher Plus.
Selling expenses increased $95,000 from $3.6 million to $3.7 million. The
increase is primarily a result of personnel additions and increased salaries,
offset by lower discretionary spending.
General and Administrative expenses decreased $634,000 from $3.0 million to $2.4
million. The decrease is due primarily to increased salaries and additional
personnel, offset by a decrease in incentive bonuses due to the operating
performance which is below plan.
8
INCOME FROM OPERATIONS
Income from operations decreased $2.9 million, or 59%, from $5.0 million to $2.1
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 $258,000 to $340,000 from $82,000.
The primarily reasons for the increase is increased interest income, cash
discounts and income relating to Micro Pulse, a 50% equity investment.
PROVISION FOR 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 outlined above, net income decreased $1.7 million, or 53%, from
$3.3 million to $1.5 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a $6.0 million working capital facility with California United
Bank. 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 30, 1996, no amounts were outstanding under the working capital
arrangement. The working capital facility with California United Bank expires
in August 1997.
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
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
During the three months ended November 30, 1996, no matters were
submitted to a vote of the Company's security holders.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended November 30,
1996.
9
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 6, 1996 /s/ Michael R. Ferron
_________________________________________
Michael R. Ferron
Vice President, Finance and
Chief Accounting Officer
10