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 June 30, 2001
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 ___
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 June 30, 2001, there were outstanding 11,498,542 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 Months Ended June 30, 2001 and 2000 2
Balance Sheets
June 30, 2001 and March 31, 2001 3
Statements of Cash Flows
Three Months Ended June 30, 2001 and 2000 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 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 10
Signature 11
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
CALIFORNIA MICRO DEVICES CORPORATION
STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended
June 30,
----------------------
2001 2000
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Net sales $ 6,105 $ 14,876
Cost and expenses:
Cost of sales 6,658 9,600
Research and development 898 810
Selling, marketing and administrative 2,714 2,806
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Total costs and expenses 10,270 13,216
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Operating income (loss) (4,165) 1,660
Other expense, net
126 163
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Income before income taxes (4,291) 1,497
Provision for income taxes
-- 30
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Net income (loss) $ (4,291) $ 1,467
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Net earnings(loss) per share - basic $ (0.37) $ 0.13
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Net earnings(loss) per share - diluted $ (0.37) $ 0.12
======== ========
Weighted average common shares
and share equivalents outstanding - basic 11,474 11,104
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Weighted average common shares
and share equivalents outstanding - diluted 11,474 12,523
======== ========
The accompanying notes are an integral part of these financial statements.
CALIFORNIA MICRO DEVICES CORPORATION
BALANCE SHEETS
(Amounts in Thousands, Except Share Data)
June 30, March 31,
2001 2001*
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(Unaudited)
ASSETS:
Current assets:
Cash and cash equivalents $ 2,106 $ 2,309
Short-term investments 3,333 4,288
Accounts receivable, less allowance for doubtful
accounts of $285 and $279 4,565 8,068
Inventories 10,873 11,716
Other assets 1,315 1,451
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Total current assets 22,192 27,832
Property, plant and equipment, net 14,050 14,372
Restricted cash 1,128 914
Other long-term assets 1,162 1,151
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Total assets $ 38,532 $ 44,269
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LIABILITIES & SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 2,848 $ 3,471
Accrued salaries and benefits 946 1,135
Other accrued liabilities 409 657
Deferred margin on shipments to distributors 784 772
Current maturities of long-term debt and capital
lease obligations 1,347 1,594
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Total current liabilities 6,334 7,629
Long-term debt and capital lease obligations, less current maturities 8,678 8,947
Other long-term liabilities 548 533
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Total liabilities 15,560 17,109
Shareholders' equity:
Common stock - no par value; authorized 25,000,000; issued and outstanding
June 30 and March 31, 2001 11,498,542 and
11,459,503, respectively 58,616 58,509
Accumulated deficit (35,640) (31,349)
Accumulated other comprehensive income (loss) (4) --
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Total shareholders' equity 22,972 27,160
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Total liabilities and shareholders' equity $ 38,532 $ 44,269
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<FN>
*Derived from audited financial statements.
</FN>
The accompanying notes are an integral part of these financial statements.
CALIFORNIA MICRO DEVICES CORPORATION
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Three Months Ended
June 30,
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2001 2000
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Cash flows from operating activities:
Net Income/(loss) $(4,291) $ 1,467
Adjustments to reconcile net income to net cash provided by/(used in)
operating activities:
Depreciation and amortization 812 745
Net decrease/(increase) in inventories 843 (170)
Net decrease/(increase) in accounts receivable 3,503 317
Net decrease/(increase) in prepaid expenses and other current assets 136 (39)
Net (decrease)/increase in trade accounts payable and other current liabilities (1,060) (725)
Net decrease/(increase) in other long term assets -- 5
Net (decrease)/increase in deferred margin on distributor sales 12 --
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Net cash (used in)/provided by operating activities (45) 1,600
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Cash used in/(provided by) investing activities:
Securities purchases (2,661) (3,011)
Securities sales and maturities 3,612 2,795
Capital expenditures (486) (1,585)
Net change in restricted cash (214) (224)
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Net cash (used in)/ provided by investing activities 251 (2,025)
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Cash flows from financing activities:
Repayments of capital lease obligations (160) (100)
Repayments of long-term debt (356) (45)
Borrowing of long-term debt -- 993
Proceeds from issuance of common stock 107 262
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Net cash (used in)/provided by financing activities (409) 1,110
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Net (decrease)/increase in cash and cash equivalents (203) 685
Cash and cash equivalents at beginning of period 2,309 1,490
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Cash and cash equivalents at end of period $ 2,106 $ 2,175
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Supplemental disclosures of cash flow information:
Interest paid $ 235 $ 236
Income taxes paid $ 32 $ 0
Supplemental disclosures of non-cash investing and financing activities:
Unrealized gain (loss) on securities $ (4) $ 9
The accompanying notes are an integral part of these financial statements.
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 (consisting of only normal recurring
adjustments) necessary to present fairly California Micro Devices Corporation's
(the "Company") financial position as of June 30, 2001, results of operations
for the three-month periods ended June 30, 2001 and 2000, and cash flows for the
three-month periods ended June 30, 2001 and 2000. 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, 2001.
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 assets and 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):
June 30, March 31,
2001 2001
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Raw materials $ 676 $ 574
Work-in-process 6,101 6,337
Finished goods 4,096 4,805
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$10,873 $11,716
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4. Litigation
We are 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. We are not aware of any pending or threatened legal
proceedings against the Company that, individually or in the aggregate, would
have a material adverse effect on our business, operating results, or financial
condition.
5. Earnings (Loss) Per Share
The following table sets forth the computation of basic and diluted income
(loss) per share: (In thousands, except per share amounts)
Three months ended
June 30,
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2001 2000
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Numerator:
Numerator for basic and diluted net income per
share - net income (loss) $ (4,291) $ 1,467
Denominator for basic net income (loss) per share:
Weighted average common shares used in computing
basic net income (loss) per share 11,474 11,104
Basic net income (loss) per share $ (0.37) $ 0.13
Denominator for diluted net income per share:
Weighted average common shares 11,474 11,104
Employee stock options to purchase common stock -- 1,419
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Shares used in computing diluted net income per share 11,474 12,523
Diluted net income (loss) per share $ (0.37) $ 0.12
Options to purchase 1,391,751 shares of common stock were outstanding during the
three months ended June 30, 2001, but were not included in the computation of
diluted net loss per share as the Company incurred a net loss and the effect of
the securities would have been antidilutive.
6. Comprehensive Income
Comprehensive (loss) income for the three-months ended June 30, 2001 and June
30, 2000 was ($4,295,000) and $1,458,000, respectively.
7. Income Taxes
For the three months ended June 30, 2001 there was no provision for income taxes
due to the net loss for the period. For the three months ended June 30, 2000,
the Company recorded a provision for income taxes of $30,000 based on the
projected effective annual tax rate of 2%, substantially below the federal
statutory rate of 35% due to the utilization of federal and state tax loss and
credit carryforwards. The June 30, 2000 tax provision consisted of federal and
state alternative minimum taxes.
8. Change in Estimate
The Company revised its estimate of sales through its distribution channels. As
a result, the Company deferred an additional $1.3 million in revenue at the end
of the quarter. The effect on net loss was an increase of $229,000.
9. Recent Accounting Pronouncements
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133") requires that we recognize
all derivatives on the balance sheet at fair value. Derivatives that are not
hedges must be adjusted to fair value through net income. SFAS No. 133 was
effective for the Company beginning on April 1, 2001. We do not currently hold
any derivatives and do not anticipate holding any derivatives in the future.
Accordingly, we do not expect this pronouncement to materially impact future
results.
On July 20, 2001 the FASB issued Statement 141 on business combinations
prohibiting pooling-of-interests and Statement 142 on goodwill and other
intangible assets. Under Statement 142, goodwill no longer will be amortized,
but instead, will be tested for impairment on a periodic basis. The amortization
provisions of Statement 142 apply to goodwill and intangible assets acquired
after June 30, 2001. With respect to goodwill and intangible assets acquired
prior to July 1, 2001, the Company will be required to adopt Statement 142 in
the fiscal year beginning April 1, 2002. The Company does not currently have
material intangible assets and therefore expects that the adoption of these two
statements will not have a material affect on the Company.
10. Subsequent Events
During fiscal 2002, we entered into a capital equipment financing facility for
$500,000 collateralized by certain of our equipment. The terms of this facility
allows us to borrow at prime plus 0.75% and expires on August 31, 2001. During
the second quarter of 2002, we borrowed $499,000 under this facility.
ITEM 2. Management's Discussion And Analysis of Financial Condition and
Results of Operations.
Results of Operations
Product sales for the quarter ended June 30, 2001, decreased by $8,771,000 or
59%, compared to the quarter ended June 30, 2000, with the largest component of
the decrease being in products for the communications infrastructure market.
Unit shipments decreased 32% to 19.7 million units in the June 30, 2001 quarter
compared to 28.8 million units in the year-earlier quarter. Due to the severity
of the current business environment, the Company revised its estimate of sales
through its distribution channels and as a result, deferred an additional $1.3
million in revenue at the end of the quarter.
Cost of goods sold increased to 109% of sales in the June 30, 2001 quarter
compared to 64.5% in the year-earlier period. This increase was primarily due to
reduced factory utilization and lower economies of scale resulting from the low
level of sales and provisions for slow-moving inventory totaling $1.3 million.
Research and development expense was $898,000 and $810,000 for the three months
ended June 30, 2001 and 2000, respectively. The increase in research and
development expense was primarily due to increased headcount.
Selling, marketing and administrative expenses were $2,714,000 and $2,806,000
for the three months ended June 30, 2001 and 2000, respectively. The decrease in
the fiscal 2002 quarter is primarily due to decreased commissions, partially
offset by reserves for a reorganization of its distribution channels.
As a result of the factors discussed above, operating loss for the three months
ended June 30, 2001, was $4,165,000 compared to an operating income of
$1,660,000 in the year-earlier period.
Other expense, net for the three months ended June 30, 2001 and 2000, was
$126,000 and $163,000, respectively, as the Company had increased gains in the
market value of investments related to the Company's executive deferred
compensation program of $31,000, which offset the reduction in interest income
due to lower investment balances and reduced interest rates in the period.
For the three months ended June 30, 2000, the Company recorded a provision for
income taxes of $30,000 based on the projected effective annual tax rate of 2%.
The effective tax rate for fiscal 2001 was substantially below the federal
statutory rate of 35% due to the utilization of federal and state tax loss and
credit carryforwards. The Company's tax provision consisted of federal and state
alternative minimum taxes. No similar amounts were recorded for the three months
ended June 30, 2001 due to the Company's net loss during the period.
Liquidity and Capital Resources
Total cash, short-term securities and investments as of June 30, 2001, was $5.4
million compared to $6.6 million on March 31, 2001. Cash provided by decreases
in receivables and inventories was offset by the net loss and a decrease in
accounts payable. As a result, cash used by operating activities was $45,000.
Capital expenditures totaled $486,000, primarily reflecting our investment in
new equipment to support our production of chip scale products, which are
expected to ramp up later this year. Payments of $516,000 against long term debt
and capital leases was partially offset by $107,000 received from the sale of
stock through our employee stock option and stock purchase plans.
We have a $3.0 million revolving secured line of credit agreement that expires
on June 30, 2002. 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. During fiscal 1999, we borrowed $650,000 under a
credit agreement, due June 14, 2002, collateralized by certain of our equipment.
The agreement extends for 42 months, carries an interest rate of 9.9% and has a
prepayment option. During fiscal 2001, we entered into an
additional agreement with the same provider for $975,000 credit agreement
collateralized by certain of our equipment at a 9.6% interest rate for a period
of 48 months. This agreement expires on March 31, 2005. During fiscal 2000, we
entered into two capital equipment financing facilities for $1.0 million and
$500,000. The terms of these facilities allow us to borrow at prime plus 0.75%
and expire on July 31 and August 31, 2003, respectfully. During fiscal 2000 and
2001, we borrowed the full amounts available under these facilities. At March
31, 2001, no additional funds were available under these two facilities. In July
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%. During fiscal 2001 we borrowed $997,000 against this $2.0
million facility. During fiscal 2002, we entered into a capital equipment
financing facility for $500,000 collateralized by certain of our equipment. The
terms of this facility allows us to borrow at prime plus 0.75% and expires on
August 31, 2001. During the second quarter of 2002, we borrowed $499,000 under
this facility. We are in compliance with our financial covenants.
While 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, we expect to use a significant portion of our cash
when and if our revenues increase. Depending on market conditions and the
results of operations, we may pursue other sources of liquidity such as a
private equity or debt financing.
The Company believes that it has sufficient financial resources to fund its
operations for the foreseeable future.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
No material changes have occurred from the Company's report on Form 10-K for the
period ending March 31, 2001.
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. Such forward-looking statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward looking statements are not historical facts
and are based on current expectations, estimates, and projections about our
industry; our beliefs and assumptions; and our goals and objectives, Words
such as "anticipates", "expects", "intends", "plans "believes",, "seeks", and
"estimates", and variations of these words and similar expressions are
intended to identify forward-looking statements. Examples of the kinds of
forward-looking statements in this report include statements regarding the
following (1) our expectation that our production of chip scale products will
ramp up later this year, (2) our expectation to fund our future liquidity
needs through existing cash balances, cash flows from operations, bank
borrowings, and equipment lease and loan financing arrangements, (3) our
belief that the Company has sufficient financial resources to fund its
operations for the foreseeable future, and (4) our expectation that the
Company will utilize a significant portion of our cash if and when its
revenues increase. These statements are only prediction, are not guarantees
of future performance, and are subject to risks, uncertainties, and other
factors, some of which are beyond our control, are difficult to predict, and
could cause actual results to differ materially from those expressed or
forecasted in the forward-looking statements. These risks and uncertainties
include those set forth in this report and in the Company's other SEC
filings, in particular its annual report on Form 10-K for fiscal 2001 ended
March 31, 2001. Except as required by law, we undertake no obligation to
update any forward-looking statement, whether as a result of new information,
future events, or otherwise.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
We are 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. We are not aware of any pending or threatened legal
proceedings against the Company that, individually or in the aggregate, would
have a material adverse effect on our business, operating results, or financial
condition.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibit Description
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1. Commitment Letter Offer letter dated March 29, 2001
between the Company and Robert V.
Dickinson, President and CEO of the
Company.
2. Option Agreement Stock Option Agreement dated April
16, 2001, between the Company and
Robert V. Dickinson, President and
CEO of the Company.
(b) Form 8-K On April 16, 2001, the Company
filed a Form 8-K, under Item 5,
reporting the selection of a new
CEO and President.
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
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(Registrant)
Date: August 14, 2001 /s/ John E. Trewin
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John E. Trewin
Vice President and Chief Financial Officer