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 December 31, 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
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(Exact name of registrant as specified in its charter)
California 94-2672609
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(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
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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 December 31, 2000, there were outstanding 11,309,074 shares of Issuer's
Common Stock.
CALIFORNIA MICRO DEVICES CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Page Number
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Item 1. Financial Statements
Statements of Operations
Three and Nine Months Ended December 31, 2000 and 1999 2
Balance Sheets
December 31, 2000 and March 31, 2000 3
Statements of Cash Flows
Nine Months Ended December 31, 2000 and 1999 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 11
Signature 11
ITEM 1. Financial Statements.
CALIFORNIA MICRO DEVICES CORPORATION
STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
Net sales $ 14,507 $ 11,664 $ 45,495 $ 29,619
Cost and expenses:
Cost of sales 9,076 7,867 29,401 20,716
Research and development 892 762 2,603 2,489
Selling, marketing and administrative 3,031 2,463 8,695 6,611
-------- -------- -------- --------
Total costs and expenses 12,999 11,092 40,699 29,816
-------- -------- -------- --------
Operating income (loss) 1,508 572 4,796 (197)
Other expense, net 170 92 711 397
-------- -------- -------- --------
Income (loss) before income taxes 1,338 480 4,085 (594)
Income taxes 28 -- 83 --
-------- -------- -------- --------
Net income (loss) $ 1,310 $ 480 $ 4,002 $ (594)
======== ======== ======== ========
Net income (loss) per share - basic $ 0.12 $ 0.05 $ 0.36 $ (0.06)
======== ======== ======== ========
Weighted average common shares
outstanding -basic 11,286 10,284 11,196 10,205
======== ======== ======== ========
Net income (loss) per fully diluted share $ 0.11 $ 0.04 $ 0.32 $ (0.06)
======== ======== ======== ========
Weighted average fully diluted common shares
outstanding 12,245 11,528 12,437 10,205
======== ======== ======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
2
CALIFORNIA MICRO DEVICES CORPORATION
BALANCE SHEETS
(Amounts in Thousands, Except Share Data)
December 31, March 31,
2000 2000*
-------- --------
(Unaudited)
ASSETS:
Current assets:
Cash and short-term securities $ 2,681 $ 1,490
Short-term investments 5,190 5,069
Accounts receivable, net of allowance for doubtful
accounts of $273 and $219 8,806 8,875
Inventories 12,222 9,994
Prepaid expenses and other assets 1,419 980
-------- --------
Total current assets 30,318 26,408
Property, plant & equipment, net 13,359 10,637
Restricted cash 1,212 902
Other long term assets 1,081 1,139
-------- --------
Total assets $ 45,970 $ 39,086
======== ========
LIABILITIES & SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 4,579 $ 4,821
Accrued salaries and benefits 1,389 1,097
Other accrued liabilities 680 742
Deferred margin on shipments to distributors 600 516
Current maturities of long-term debt and capital
lease obligations 1,131 815
-------- --------
Total current liabilities 8,379 7,991
Long-term debt, less current maturities 8,885 7,342
Other long-term liabilities and capital leases less current
maturities 601 793
-------- --------
Total liabilities 17,865 16,126
Shareholders' equity:
Common stock - no par value; authorized 25,000,000;
issued and outstanding: 11,309,074 as of December
31, 2000 and 11,037,543 as of March 31, 2000 57,628 56,479
Accumulated deficit (29,525) (33,528)
Accumulated other comprehensive income 2 9
-------- --------
Total shareholders' equity 28,105 22,960
-------- --------
Total liabilities and shareholders' equity $ 45,970 $ 39,086
======== ========
<FN>
* Derived from audited financial statements.
The accompanying notes are an integral part of these financial statements.
</FN>
3
CALIFORNIA MICRO DEVICES CORPORATION
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Nine Months Ended
December 31,
------------------
2000 1999
------- -------
Cash flows from operating activities:
Net income (loss) $ 4,002 $ (594)
Adjustments to reconcile net (loss)
to net cash provided by operating activities:
Depreciation and amortization 2,209 2,159
Net increase in inventories (2,228) (1,014)
Net (increase)/decrease in accounts receivable 69 (2,103)
Net increase in prepaid expenses and other current assets (439) (621)
Net increase/(decrease) in trade accounts payable
and other current liabilities (12) 1,590
Net (increase)/decrease in other long term assets 46 (97)
Net increase/(decrease) in other long term liabilities (24) 111
Increase / (decrease) in deferred margin on distributor sales 84 (60)
------- -------
Net cash provided by (used in) operating activities 3,707 (629)
------- -------
Cash flows from investing activities:
Short-term investment purchases (7,841) (1,960)
Short-term investment sales 7,714 2,707
Capital expenditures (4,919) (857)
Net change in restricted cash (310) 1,708
------- -------
Net cash provided by (used in) investing activities (5,356) 1,598
------- -------
Cash flows from financing activities:
Repayments of capital lease obligations (306) (280)
Additions to capital leases -- 238
Repayments of long-term debt (263) (125)
Borrowings of long term debt 2,260 --
Proceeds from issuance of common stock 1,149 931
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Net cash provided by financing activities 2,840 764
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Net increase in cash and cash equivalents 1,191 1,733
Cash and cash equivalents at beginning of period 1,490 762
------- -------
Cash and cash equivalents at end of period $ 2,681 $ 2,495
======= =======
Supplemental disclosures of cash flow information:
Interest paid $ 723 $ 670
Income taxes paid -- --
Supplemental disclosures of non-cash investing and financing activities:
Unrealized gain/(loss) on securities $ (7) $ (15)
Additions to capital financed by leases $ -- $ 238
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
4
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 (which include only normal recurring
accruals) necessary to present fairly California Micro Devices Corporation's
(the "Company") financial position as of December 31, 2000, results of
operations for the three and nine month periods ended December 31, 2000 and
1999, and cash flows for the nine-month periods ended December 31, 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 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):
December 31, March 31,
2000 2000
------------- ------------
Raw materials $ 578 $ 452
Work-in-process 7,409 6,473
Finished goods 4,235 3,069
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$ 12,222 $ 9,994
============= ============
4. Litigation
The Company is 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. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse effect on
the financial condition or overall trends in the results of operations of the
Company.
5
5. Net Income (Loss) Per Share
The following table sets forth the computation of basic and diluted income
(loss) per share:
Three months ended Nine months ended
December 31, December 31,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
(In thousands, except per share amounts)
Numerator:
Numerator for basic and diluted net income per
share - net income (loss) $ 1,310 $ 480 $ 4,002 $ (594)
======== ======== ======== ========
Denominator for basic net income (loss) per share:
Weighted average common hares used in computing
basic net income per share 11,286 10,284 11,196 10,205
======== ======== ======== ========
Basic net income (loss) per share $ 0.12 $ 0.05 $ 0.36 $ (0.06)
======== ======== ======== ========
Denominator for diluted net income per share:
Weighted average common shares 11,286 10,284 11,196 10,205
Employee stock options to purchase common stock 959 1,244 1,241 --
-------- -------- -------- --------
Shares used in computing diluted net income per share 12,245 11,528 12,437 10,205
======== ======== ======== ========
Diluted net income per share $ 0.11 $ 0.04 $ 0.32 $ (0.06)
======== ======== ======== ========
For the quarter ended December 31, 1999 and the quarter and nine months ended
December 31, 2000, options to purchase shares of common stock, representing
80,500 shares, 513,828 shares and 548,693 shares, respectively, were outstanding
during the period but were not included in the computation of diluted net income
per share because the options' exercise price was greater than the average
market price of the common stock and, therefore, the effect would be
antidilutive. For nine months ended December 31, 1999, 2,517,000 options to
purchase shares of common stock were excluded from the computation of diluted
net loss per share because the effect would be antidilutive.
6. Comprehensive Income
Comprehensive income is principally comprised of net income (loss) and
unrealized gains or losses on the Company's available-for-sale securities.
Comprehensive income for the three months ended December 31, 2000 and December
31, 1999 was $1,307,000 and $469,000, respectively. For the nine months ended
December 31, 2000 comprehensive income was $3,996,000 and for the nine months
ended December 31, 1999, the comprehensive loss was $609,000.
7. Income Taxes
For the three and nine months ended December 31, 2000, the Company recorded a
provision for income taxes of $28,000 and $83,000, respectively, based on the
projected effective annual tax rate of 2%. The effective tax rate for fiscal
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 and nine ended December 31, 1999 due to the
Company's year-to-date net loss during the period. The Company's tax provision
consisted of federal and state alternative minimum taxes.
6
8. Recent Accounting Pronouncements
The Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 101
(SAB 101), "Revenue Recognition in Financial Statements" summarizes certain of
the SEC's views in applying generally accepted accounting principles to revenue
recognition in financial statements. The Company will be required to adopt the
provisions of SAB 101 in the fourth quarter of our fiscal year ending March 31,
2001. The net effect of adopting the statement will be accounted for as a change
in accounting principle and will be reflected in the financial statements as if
the Company had adopted the provisions of the statement as of the beginning of
the financial year. We are reviewing our compliance with SAB 101, but do not
expect it to affect the underlying strength and weakness of our business as
measured by the dollar value of the Company's shipments and cash flows.
9. Capital Equipment Financing
The company has three equipment financing facilities that have been utilized to
purchase manufacturing equipment. In the quarter and nine months ended December
31, 2000 we borrowed $1.2 million and $2.2 million respectfully. We have a $1.0
million capital equipment financing facility that expires on July 31, 2003;
under the terms of this facility we can borrow at prime plus 0.75%. As of
December 31, 2000 we had borrowed $1.0 million against this capital equipment
financing facility. On April 21, 2000 we secured an additional $500,000 capital
equipment financing facility under the same terms and conditions as the original
facility. The new line expires on August 31, 2003. As of December 31, 2000, we
had borrowed $500,000 against this $500,000 facility. On July 27, 2000, we
secured an additional $2.0 million equipment financing facility that expires on
December 25, 2003. Under the terms of this facility we can borrow at prime plus
0.5%. As of December 31, 2000, we had borrowed $1.0 million against this $2.0
million capital equipment financing facility. We are in compliance with our
financial covenants.
7
ITEM 2. Management's Discussion And Analysis of Financial Condition and
Results of Operations.
Results of Operations
Product sales for the quarter ended December 31, 2000, increased by $2,843,000,
or 24%, compared to the quarter ended December 31, 1999, with the majority of
the increase being in products for the networking market. Unit shipments
increased 43% to 33.3 million units in the December 31, 2000 quarter compared to
23.3 million units in the year-earlier quarter. The increase in 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 47% in
dollars and 65% in units in the quarter ended December 31, 2000 as compared to
the year-earlier quarter. The most notable increase in new products was the PWR
family, which increased 174% in units and 203% in dollars compared to the
year-earlier quarter. Sales of the parallel port family were relatively flat.
Product sales for the nine month period ended December 31, 2000, increased by
$15,876,000, or 54%, over the year-earlier period, also due to increased sales
of new products, with the majority of the increase being in products for the
networking market. Units shipped increased 76% in the nine-month period ended
December 31, 2000 compared to the year-earlier period. New product sales for the
nine months ended December 31, 2000 increased by 80% in dollars and 115% in
units as compared to the year-earlier period. The PWR family of products
increased 360% in units and 440% in dollars compared to the year-earlier
nine-month period. The number of parallel port solutions shipped increased by
80% in the nine months ended December 31, 2000 as compared to the year-earlier
period, but increased 32% in dollars due to the higher mix of lower cost single
chip solutions.
Gross margins increased to 37.4% in the December 31, 2000 quarter compared to
32.6% in the December 31, 1999 quarter and increased to 35.4% for the nine
months ended December 31, 2000 compared to 30.0% for the nine months ended
December 31, 1999 due to increased sales and manufacturing efficiencies.
Due to the widely reported weakness in the computer, telecommunications and
networking industries in which we participate and its impact on the electronics
and related components industries, we expect sales in the March 31, 2001 quarter
to be 10 to 15% lower than sales in the December 31, 2000 quarter and expect
lower gross margins as a result.
Research and development expense was $892,000 and $762,000 for the three months
ended December 31, 2000 and 1999, respectively, and $2,603,000 and $2,489,000
for the nine months ended December 31, 2000 and 1999, respectively. The increase
in research and development expense was due to increased personnel costs.
Selling, marketing and administrative expenses ("S, M & A") were $3,031,000 and
$2,463,000 for the three months ended December 31, 2000 and 1999, respectively,
and $8,695,000 and $6,611,000 for the nine-month periods ended December 31, 2000
and 1999, respectively. The increases in the fiscal 2001 periods are primarily
due to increased commissions, increased personnel costs, and increased
promotional activities, including expansion of the Company's presence in Europe.
As a result of the factors discussed above, operating income for the three
months ended December 31, 2000, was $1,508,000 compared to $572,000 in the
year-earlier period. For the nine months ended December 31, 2000, there was an
operating income of $4,796,000 as compared to an operating loss of $197,000 in
the year earlier period.
Other expense, net for the three and nine months ended December 31, 2000, was
$170,000 and $711,000 as compared to expense of $92,000 and $397,000 in the year
earlier periods. The increase in the nine months ended December 31, 2000 was due
primarily to the write-off of $250,000 of expenses related to a secondary
offering of the Company's stock that was withdrawn in September 2000, due to
market conditions.
8
Income taxes accrued for the three and nine months ended December 30, 2000, were
$28,000 and $83,000. There were no income taxes accrued for the three and nine
months ended December 31, 1999, due to the availability of tax loss carry
forwards and the nine-month period losses.
Liquidity and Capital Resources
Total cash, short-term securities and investments as of December 31, 2000, was
$7.9 million compared to $6.6 million on March 31, 2000. Receivables days sales
outstanding were 55 days as of December 31, 2000 as compared to 56 days at March
31, 2000. Inventories increased by $2.2 million from the March quarter, related
primarily to increased work-in-process to support new product introductions and
also due to the slowdown in the electronics industry during the December, 2000
quarter. Other current assets increased $439,000, to $1,419,000 at December 31,
2000, due to prepaid business and medical insurance premiums. Capital
expenditures totaled $4.9 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 calendar year. These expenditures were
partially offset by additional long term debt financing of $2.3 million.
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. We have made no
borrowings against this line. We also have a $1.0 million capital equipment
financing facility that expires on July 31, 2003; under the terms of this
facility we can borrow at prime plus 0.75%. As of December 31, 2000 we had
borrowed $1.0 million against this capital equipment financing facility. On
April 21, 2000 we secured an additional $500,000 capital equipment financing
facility under the same terms and conditions as the original facility. The new
line expires on August 31, 2003. As of December 31, 2000, we had borrowed
$500,000 against this $500,000 facility. On July 27, 2000, we secured an
additional $2.0 million equipment financing facility that expires on December
25, 2003. Under the terms of this facility we can borrow at prime plus 0.5%. As
of December 31, 2000, we had borrowed $1.0 million against this $2.0 million
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 equipment lease and loan
financing arrangements. Depending on market conditions and the results of
operations, we may pursue other sources of liquidity.
We believe that we have sufficient financial resources to fund its operations
for the foreseeable future.
Market Risk
We own financial instruments that are sensitive to market risks as part of our
investment portfolio. The investment portfolio is used to preserve our cash
until it is required to fund operations and capital investments. None of these
market-risk sensitive instruments are held for trading purposes except for
amounts related to our non-qualified deferred compensation program. We do not
own derivative financial instruments in our investment portfolio. The investment
portfolio contains instruments that are subject to fluctuation in interest
rates.
Our investment portfolio includes debt instruments that are primarily United
States government bonds, high-grade corporate bonds and money market funds of
less than one year in duration. These investments are subject to interest rate
risk, and could decline in value if interest rates increase. Our investment
portfolio also consists of certain commercial paper that is also subject to
interest rate risk. Due to the short duration and conservative nature of these
instruments, we do not believe that we have a material exposure to interest rate
risk.
The interest rates on most of our long-term debt and capital lease obligations
are fixed and therefore not subject to interest rate fluctuations.
9
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, the Company's dependence on third party suppliers
for components for its products, cost reductions,, 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 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. We undertake no obligation to update any of the forward-looking
statements in this report.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
See discussion under the caption "Market Risk" in Item 2 above.
10
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
The Company is 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. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse effect on
the financial condition or overall trends in the results of operations of the
Company.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K
None
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: February 12, 2001 /s/John E. Trewin
------------------------------------------
John E. Trewin
Vice President and Chief Financial Officer
11