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, 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
------------------------------------
(Exact name of registrant as specified in its charter)
California 94-2672609
---------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
215 Topaz Street, Milpitas, California 95035-5430
- -------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(408) 263-3214
--------------
(Registrant's telephone number, including area code)
Not applicable
--------------
(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 December 31, 2001, there were outstanding 13,662,994 shares of Issuer's
Common Stock.
CALIFORNIA MICRO DEVICES CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Page Number
Item 1. Condensed Financial Statements
Condensed Statements of Operations
Three and Nine Months Ended December 31,
2001 and 2000 2
Condensed Balance Sheets
December 31, 2001 and March 31, 2001 3
Condensed Statements of Cash Flows
Nine Months Ended December 31, 2001 and 2000 4
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 13
Item 6. Exhibits and Reports on Form 8-K 14
Signature 15
ITEM 1. Financial Statements.
CALIFORNIA MICRO DEVICES CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
-------------------- --------------------
2001 2000 2001 2000
-------- -------- -------- --------
Net sales $ 7,045 $ 14,507 $ 21,788 $ 45,495
Cost and expenses:
Cost of sales 12,676 9,076 28,320 29,401
Research and development 993 892 2,918 2,603
Selling, general, and administrative 2,876 3,031 8,053 8,695
Special charges 45 -- 4,155 --
-------- -------- -------- --------
Total costs and expenses 16,590 12,999 43,446 40,699
-------- -------- -------- --------
Operating income (loss) (9,545) 1,508 (21,658) 4,796
Other expense, net 162 170 601 711
-------- -------- -------- --------
Income (loss) before income taxes (9,707) 1,338 (22,259) 4,085
Income taxes -- 28 -- 83
-------- -------- -------- --------
Net income (loss) $ (9,707) $ 1,310 $(22,259) $ 4,002
======== ======== ======== ========
Net income (loss) per share - basic $ (0.79) $ 0.12 $ (1.89) $ 0.36
======== ======== ======== ========
Weighted average common shares
outstanding -basic 12,264 11,302 11,771 11,212
======== ======== ======== ========
Net income (loss) per fully diluted share $ (0.79) $ 0.11 $ (1.89) $ 0.32
======== ======== ======== ========
Weighted average fully diluted common shares
outstanding 12,264 12,261 11,771 12,453
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
2
CALIFORNIA MICRO DEVICES CORPORATION
CONDENSED BALANCE SHEETS
(Amounts in Thousands, Except Share Data)
December 31, March 31,
2001 2001*
-------- --------
(Unaudited)
ASSETS:
Current assets:
Cash and cash equivalents $ 8,486 $ 2,309
Short-term investments 1,567 4,288
Accounts receivable, net of allowance for doubtful
accounts of $154 and $279 3,016 8,068
Inventories 4,254 11,716
Prepaid expenses and other assets 829 1,451
-------- --------
Total current assets 18,152 27,832
Property, plant & equipment, net 10,233 14,372
Restricted cash 1,202 914
Other long term assets 1,147 1,151
-------- --------
Total assets $ 30,734 $ 44,269
======== ========
LIABILITIES & SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 3,031 $ 3,471
Accrued salaries and benefits 733 1,135
Other accrued liabilities 2,933 657
Deferred margin on shipments to distributors 325 772
Current maturities of long-term debt and capital
lease obligations 1,376 1,594
-------- --------
Total current liabilities 8,398 7,629
Long-term debt, less current maturities 8,389 8,947
Other long-term liabilities and capital leases less
current maturities 536 533
-------- --------
Total liabilities 17,323 17,109
Shareholders' equity:
Common stock - no par value; authorized 25,000,000;
issued and outstanding: 13,662,994 as of December
31, 2001 and 11,459,503 as of March 31, 2001 67,019 58,509
Accumulated deficit (53,608) (31,349)
-------- --------
Total shareholders' equity 13,411 27,160
-------- --------
Total liabilities and shareholders' equity $ 30,734 $ 44,269
======== ========
* Derived from audited financial statements.
The accompanying notes are an integral part of these financial statements.
3
CALIFORNIA MICRO DEVICES CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Nine Months Ended
December 31,
--------------------
2001 2000
-------- --------
Cash flows from operating activities:
Net income (loss) $(22,259) $ 4,002
Adjustments to reconcile net income (loss)
to net cash provided by/(used in) operating activities:
Non-cash portion of special charges 3,395 --
Write-off of discontinued inventory 3,783 --
Provision for distributor discontinued inventory 1,125 --
Depreciation and amortization 2,315 2,209
Change in assets and liabilities:
Inventories 3,679 (2,228)
Accounts receivable 5,052 69
Prepaid expenses and other current assets 622 (439)
Trade accounts payable and other current liabilities 309 (12)
Other long term assets (8) 46
Other long term liabilities 3 (24)
Deferred margin on distributor sales (447) 84
-------- --------
Net cash (used in)/provided by operating activities (2,431) 3,707
-------- --------
Cash flows from investing activities:
Short-term investment purchases (4,772) (7,841)
Short-term investment sales 7,493 7,714
Capital expenditures (1,559) (4,919)
Net change in restricted cash (288) (310)
-------- --------
Net cash provided by/(used in) investing activities 874 (5,356)
-------- --------
Cash flows from financing activities:
Repayments of capital lease obligations (170) (306)
Repayments of long-term debt (1,105) (263)
Borrowing of long-term debt 499 2,260
Proceeds from private placement offering of common stock, net 7,610 --
Proceeds from issuance of common stock under employee benefit plans 900 1,149
-------- --------
Net cash provided by financing activities 7,734 2,840
-------- --------
Net increase in cash and cash equivalents 6,177 1,191
Cash and cash equivalents at beginning of period 2,309 1,490
-------- --------
Cash and cash equivalents at end of period $ 8,486 $ 2,681
======== ========
Supplemental disclosures of cash flow information:
Interest paid $ 687 $ 723
The accompanying notes are an integral part of these financial statements.
4
CALIFORNIA MICRO DEVICES CORPORATION
Notes to Condensed Financial Statements
(unaudited)
1. Basis of Presentation
In the opinion of management, the accompanying unaudited condensed financial
statements contain all adjustments necessary to present fairly California Micro
Devices Corporation's (the "Company", "we", "us" or "our") financial position as
of December 31, 2001, results of operations for the three and nine months ended
December 31, 2001 and 2000, and cash flows for the nine-month periods ended
December 31, 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 our 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 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,
2001 2001
------- -------
Raw materials $ 288 $ 574
Work-in-process 2,719 6,337
Finished goods 1,247 4,805
------- -------
$ 4,254 $11,716
======= =======
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 us that, individually or in the aggregate, we would expect
to have a material adverse effect on our business, operating results, or
financial condition.
5
5. Net Income (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 Nine Months Ended
------------------ -----------------
December 31, December 31,
------------ ------------
2001 2000 2001 2000
-------- -------- -------- --------
Numerator:
Numerator for basic and diluted net income per
share - net income (loss) $ (9,707) $ 1,310 $(22,259) $ 4,002
Denominator for basic net income (loss) per share:
Weighted average common shares used in
computing basic net income (loss) per share 12,264 11,302 11,771 11,212
-------- -------- -------- --------
Basic net income (loss) per share $ (0.79) $ 0.12 $ (1.89) $ 0.36
-------- -------- -------- --------
Denominator for diluted net income per share:
Weighted average common shares 12,264 11,302 11,771 11,212
Employee stock options to purchase common stock -- 959 -- 1,241
-------- -------- -------- --------
Shares used in computing diluted net income per
Share 12,264 12,261 11,771 12,453
-------- -------- -------- --------
Diluted net income (loss) per share $ (0.79) $ 0.11 $ (1.89) $ 0.32
-------- -------- -------- --------
Options to purchase 1,929,923 and 1,644,871 shares of common stock were
outstanding during the three and nine months ended December 31, 2001,
respectively, but were not included in the computation of diluted net income per
share because we incurred a net loss. Options to purchase 275,115 and 425,466
shares of common stock were outstanding during the three and nine months ended
December 31, 2000 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 of including these
options would be antidilutive.
6. Comprehensive Income/(Loss)
Comprehensive income/(loss) is principally comprised of net income (loss) and
unrealized gains or losses on the Company's available-for-sale securities.
Comprehensive loss for the three and nine months ended December 31, 2001 was
$9.7 million and $22.3 million, respectively. Comprehensive income for the three
and nine months ended December 31, 2000 was $1.3 million and $4.0 million,
respectively.
7. Income Taxes
For the three- and nine-month periods ended December 31, 2001, there was no
provision for income taxes due to the net loss for the period. For the three and
nine months ended December 31, 2000, we recorded provisions for income taxes of
$28,000 and $83,000, respectively, 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 fiscal
2001 tax provisions consisted of federal and state alternative minimum taxes.
8. Restructuring & Impairment Charges
6
In September 2001, our board of directors approved a detailed plan for the
implementation of our strategy to outsource a significant portion of our wafer
manufacturing. The plan calls for the consolidation of all of our internal wafer
fabrication activities into our Tempe, AZ facility with selected high-value
backend manufacturing operations continuing at our Milpitas headquarters. As a
result of the plan, we recorded restructuring and impairment charges of $4.6
million and $4.8 million in the quarters ended September 30, 2001 and December
31, 2001 respectively. Of the $4.6 million charge in the quarter ended September
30, 2001, $0.5 million was recorded in cost of goods sold and $4.1 million was
included in operating expenses under the caption "Special Charges." Of the $4.8
million charged, $4.4 million was recorded as cost of goods sold and $332,000 as
sales provisions for product returns and $45,000 was recorded as "Special
Charges."
The following table describes the nature of the restructuring and impairment
charges (in thousands):
Total Cash Non-Cash Restructuring Liability
Charge Payments Charges at December 31, 2001
------ -------- ------- --------------------
Severance & benefits $ 438 $ -- $ -- $ 438
Facilities and equipment 3,717 41 3,395 281
------ ------ ------ ------
Special charges $4,155 $ 41 $3,395 $ 719
====== ====== ====== ======
In connection with the restructuring program, we will reduce our headcount by
approximately 40 employees, primarily in the manufacturing functions and located
at the Milpitas facility. The workforce reduction resulted in a $438,000 charge
relating to severance and fringe benefits. Prior to the end of the our quarter
ended September 30, 2001, our management with the proper level of authority,
approved and committed us to the plan of termination, determined the benefits
the terminated employees would receive and communicated the benefit package to
employees in enough detail that they could determine their type and amount of
benefit. No employees had been terminated as of December 31, 2001. Our
management anticipates that the termination of the majority of the impacted
employees will be completed by June 30, 2002.
The restructuring program calls for us to relocate from our Milpitas facility
once all internal wafer fabrication activities have been consolidated in our
Tempe, AZ facility. As required by the lease for the Milpitas facility, we are
obligated to restore the Milpitas facility to its pre-lease condition.
Accordingly, we recorded $251,000 in estimated renovation costs related to the
Milpitas facility. In addition, we recorded an asset impairment charge of $3.4
million related to the write-down of equipment that will be located in Tempe and
continue to be used to produce approximately 25% of the Company's products. The
restructuring plan calls for a decrease in the number and volume of products
generated with these assets and as a result, we determined that these assets
were impaired, and accordingly, we wrote-down the value of the assets to their
estimated fair value. Fair value was estimated as the amounts for which the
assets could be purchased in an arms-length transaction.
In connection with our revised manufacturing strategy, we discontinued certain
older products and wrote-off the related discontinued manufacturing and
distributor inventory. The $4.9 million charge related to the write-off of the
inventory has been classified as costs of goods sold in the condensed statement
of operations for the nine months ended December 31, 2001.
9. Secured Line of Credit
In the quarter ended December 31, 2001, we reduced our secured line of credit
from $3.0 million to $1.0 million. This line of credit agreement 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.
10. Common Stock
7
On December 3, 2001, we sold 2,000,000 shares of our no par value common stock
at $4.11 per share, yielding gross cash proceeds of $8.2 million, in a private
placement. Offering expenses of $600,000 were offset against the proceeds for
net proceeds of $7.6 million. Needham & Company, Inc. served as the placement
agent and, in addition to cash fees, received five-year warrants to purchase
approximately 60,000 shares of our common stock with an exercise price of $4.11
per share, which are immediately exercisable.
8
11. Recent Accounting Pronouncements
In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144 ("SFAS 144"), "Accounting for Impairment or Disposal of Long-Lived Assets."
SFAS 144 supercedes Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be
Disposed Of" and is effective for years beginning after December 15, 2001. SFAS
144 provides accounting and reporting standards for the impairment of long-lived
assets and for long-lived assets to be disposed of. SFAS 144 establishes one
accounting model to be used for long-lived assets to be disposed of by sale,
whether previously held and used or newly acquired and resolves significant
implementation issues that existed in SFAS 121. We expect that adoption of SFAS
144 will not have a material impact on our financial statements.
9
ITEM 2. Management's Discussion And Analysis of Financial Condition and
Results of Operations.
Results of Operations
Sales. Product sales decreased by $7.5 million or 51%, for the quarter ended
December 31, 2001 compared to the quarter ended December 31, 2000, and decreased
by $23.7 million or 52% for the nine months ended December 31, 2001 compared
with same period in the prior year. The largest component of these decreases is
in products for the communications infrastructure market followed by lower sales
into the computer market. Also contributing to the decrease in product sales is
our foundry business in which product sales decreased from $289,000 and $1.9
million for the three and nine months ended December 31, 2000, respectively, to
$50,000 and $529,000 in the three and nine months ended December 31, 2001,
respectively. These declines were partially offset by higher sales into the
medical and other markets. Sales in the medical market increased $527,000 or
110% and $1.2 million or 89% for the three and nine months ended December 31,
2001, respectively, as compared to the same periods in the prior year. Sales in
the other market increased $260,000 and $1.2 million for the three and nine
months ended December 31, 2001, respectively as compared to the same periods in
the prior year due to increased sales into a lighting application. Unit
shipments decreased 40% to 20.0 million units in the December 31, 2001 quarter
compared to 33.3 million units in the year-earlier quarter and decreased 39% to
59.9 million units in the nine months ended December 31, 2001 compared to 98.1
million units in the year-earlier period.
Gross Margin. Gross margin, as a percentage of sales, decreased to a negative
80.0% in the December 31, 2001 quarter compared to positive 37.4% in the
year-earlier period and to a negative 30.0% for the nine months ended December
31, 2001 compared to positive 35.4% in the year-earlier period. These decreases
were the result of decreased manufacturing efficiencies on lower production
volume as sales decreased and charges of $4.4 million for the three-month period
and $4.9 million for the nine-month period related inventory write-offs in
connection with our strategy to outsource a significant portion of our wafer
manufacturing.
Research and Development. Research and development (R&D) expense was $993,000
and $892,000 for the quarters ended December 31, 2001 and 2000, respectively.
The increase in research and development expense was due to increased personnel
costs. R&D expense for the nine months ended December 31, 2001 and 2000 was $2.9
million and $2.6 million, respectively, with the increase due to increased
personnel costs and the costs of opening the new design center in Austin, Texas.
Selling, General and Administrative. Selling, general, and administrative (SG&A)
expenses were $2.9 million and $3.0 million for the quarters ended December 31,
2001 and 2000, respectively, and $8.1 million and $8.7 million for the nine
months ended December 31, 2001 and 2000, respectively. These decreases are
primarily due to decreased commissions expense, decreased personnel costs and
decreased advertising, partially offset by increased legal costs.
Special Charges. For the three and nine months ended December 31, 2001, we
recorded restructuring and other charges totaling $4.8 million and $9.4 million
respectively, related to our strategy to outsource a significant portion of our
wafer manufacturing. As part of this strategy, we plan to consolidate all of our
internal wafer fabrication activities into our Tempe, AZ facility with selected
high-value backend manufacturing operations continuing at our Milpitas, CA
headquarters. Of the $4.8 million charge for the three months ended December 31,
2001, $4.4 million was recorded as costs of goods sold, $45,000 was included in
operating expenses as "Special Charges", and $332,000 was recorded as a sales
provision for distributor inventory returns. Of the $9.4 million charge for the
nine months ended December 31, 2001, $4.9 million was recorded as costs of goods
sold and $4.2 million was included in operating expenses as "Special Charges",
and $332,000 was recorded as sales provision for distributor inventory returns.
Of the total restructuring and other charges, $8.6 million of the charges are
non-cash in nature and the remaining approximately $800,000 is expected to be
paid in cash in the first half of calendar 2002.
10
The following table describes the nature of the restructuring and impairment
charges (in thousands):
Total Cash Non-Cash Restructuring Liability
Charge Payments Charges at December 31, 2001
------ -------- ------- --------------------
Severance & benefits $ 438 $ -- $ -- $ 438
Facilities and equipment 3,717 41 3,395 281
------ ------ ------ ------
Special charges $4,155 $ 41 $3,395 $ 719
Operating Income/(Loss). As a result of the factors discussed above, operating
loss for the quarter ended December 31, 2001, was $9.5 million compared to
operating income of $1.5 million in the year-earlier quarter and operating loss
for the nine months ended December 31, 2001 was $21.7 million compared to
operating income of $4.8 million for the year-earlier period.
Other Expense, Net. Other expense, net, for the quarter ended December 31, 2001
and 2000, was $162,000 and $170,000, respectively, and for the nine months ended
December 31, 2001 and 2000, was $601,000 and $711,000, respectively. The
decreases in the fiscal 2002 periods were primarily due to reduced interest
expense as a result of expiring capital leases.
Income Taxes. For the three-months and nine-months ended December 31, 2001,
there was no provision for income taxes due to the net loss for the period. For
the three and nine months ended December 31, 2000, we recorded provisions for
income taxes of $28,000 and $83,000, respectively, 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 fiscal 2000 tax provisions consisted of federal and state
alternative minimum taxes.
Recent Accounting Pronouncements. In August 2001, the FASB issued Statement of
Financial Accounting Standards No. 144 ("SFAS 144"), "Accounting for Impairment
or Disposal of Long-Lived Assets." SFAS 144 supercedes Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to Be Disposed Of" and is effective for years
beginning after December 15, 2001. SFAS 144 provides accounting and reporting
standards for the impairment of long-lived assets and for long-lived assets to
be disposed of. SFAS 144 establishes one accounting model to be used for
long-lived assets to be disposed of by sale, whether previously held and used or
newly acquired and resolves significant implementation issues that existed in
SFAS 121. We expect that adoption of SFAS 144 will not have a material impact on
our financial statements.
Liquidity and Capital Resources
We have historically financed our operations through a combination of debt and
equity financing and cash generated from operations. Total cash, cash
equivalents and short-term investments as of December 31, 2001, was $10.1
million compared to $6.6 million on March 31, 2001. Receivables decreased to
$3.0 million at December 31, 2001 compared to $8.1 million nine months earlier,
primarily as a result of lower sales. Receivables days-sales-outstanding were 42
days as of December 31, 2001 as compared to 49 days at March 31, 2001.
Inventories decreased $7.6 million from March 31, 2001 to $4.3 million at
December 31, 2001, in part due to the write-off of discontinued inventory of
$3.8 million and in part due to lower levels of production in response to
decreased sales activity. Inventory turn at December 31, 2001 are 4.2 as
compared to 3.4 at March 31, 2001. Capital expenditures for the nine months
ended December 31, 2001, totaled $1.6 million, reflecting primarily our
investment in new equipment to support our production of chip scale products,
which are expected to ramp up later this year.
Operating activities used $2.4 million of cash during the nine months ended
December 31, 2001. For the nine months ended December 31, 2001, our use of cash
consisted primarily of net loss before non-cash expenses, including
depreciation, of $11.6 million. Increases in long-term assets and decreases in
deferred margin used an additional $455,000 of cash. These cash uses were offset
by decreases in accounts
11
receivable, inventories prepaid expenses and other current assets and increases
in accounts payable and other current liabilities, net, and long-term
liabilities which provided $9.7 million of cash for operations.
We generated $874,000 of cash from investing activities for the nine months
ended December 31, 2001, which was the result of net proceeds from the sale of
investments of $2.7 million, partially offset by cash used to purchase capital
equipment.
Net cash provided by financing activities was $7.7 million for the nine months
ended December 31, 2001, and was primarily the result of $7.6 million received
from the private placement offering of our common stock. In the third quarter of
fiscal 2002, we sold approximately two million shares of our common stock to
several institutional investors and certain of our directors for gross proceeds
of $8.2 million, offset by offering expenses of $600,000. In addition, we
received $900,000 from the issuance of our common stock under our employee
benefit plans and $499,000 from long-term borrowings. Repayments of capital
lease obligations and long-term debt of $1.3 million partially offset these
proceeds.
We have a $1.0 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.
In the second quarter of fiscal 2002, we announced and began to implement a
restructuring program aimed at bringing our costs more in line with the current
revenue levels and restoring our long-term profitability. We believe that these
actions will reduce our operating costs beginning in the second half of calendar
2002.
Operating and capital requirements depend on many factors, including the levels
at which we maintain revenue, margins, inventory, accounts receivable and
operating expenses. We believe that we have sufficient financial resources to
fund our operations for at least the next 12 months. However, to the extent that
existing cash balances and available financing sources are insufficient to
support our activities, we may need to raise additional funds through public or
private equity or debt financing. These funds may not be available to us, or if
available, we may not be able to obtain them on terms favorable to us.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
No material changes have occurred from our report on Form 10-K for the period
ending March 31, 2001.
12
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 that our manufacturing
restructuring program will reduce our operating expenses beginning in the
second half of calendar 2002, (3) our belief that we have sufficient
financial resources to fund operations for at least 12 months (4) our
expectation that pending litigation will not have a material adverse affect
on our business, operating results, or financial condition, and (5) our plan
to outsource a significant portion of our wafer manufacturing and to
consolidate all of our internal wafer fabrication activities into our Tempe,
AZ facility, with selected high-value backend manufacturing operations
continuing at our Milpitas, CA headquarters. These statements are only
predictions, 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 our other SEC filings, in particular our annual report on Form
10-K for fiscal 2001 ended March 31, 2001. Also, due to plans to outsource a
significant portion of our wafer manufacturing to one or more third parties,
additional risks are encountered due to such factors as potential inability
to secure adequate and cost-effective capacity during periods when demand
outstrips capacity, reduced control over delivery schedules and quality,
dependence upon one, or possibly more, contractors to supply us with wafers,
potential misappropriation of our intellectual property, and exposure to
political and economic instability in the country or countries where our
third party fabrication facilities are located. In addition, litigation
against us which had been dormant has become active with discovery ongoing,
and therefore adverse facts could be learned which could affect our expected
liability or lack of liability and, if trials occur, unexpected judgments
could result. 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.
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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 us that, individually or in the aggregate, we would expect
to have a material adverse effect on our business, operating results, or
financial condition.
ITEM 2. Changes in Securities and Use of Proceeds.
On December 3, 2001, we sold 2,000,000 shares of our no par value common stock
at $4.11 per share, yielding gross cash proceeds of $8.22 million, in a private
placement. Needham & Company, Inc. served as the placement agent and, in
addition to cash fees, received five-year warrants to purchase approximately
60,000 shares of our common stock with an exercise price of $4.11 per share. The
private placement and the warrant issuance were made to accredited investors and
were conducted in reliance upon the exemption from registration under the
Securities Act of 1933, as amended, provided by Rule 506 of Regulation D. The
participants in the private placement were predominantly institutional
investors, with our officers and directors purchasing the balance of the shares.
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ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
4.3 Stock Purchase Agreement dated November 21,
2001 between the Company and Investors.
10.12 Letter Agreement between the Company and
Neeham & Company, Inc. dated October 23,
2001.
(b) Form 8-K
On November 5, 2001, the Company filed a Form 8-K,
under Item 5, reporting the election of David
Witkowski as Vice President of Sales.
On December 5, 2001, the Company filed a Form 8-K,
under Item 5, reporting the private placement of
2,000,000 shares of the Company's common stock.
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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 14, 2002 /s/Kenneth E. Thornbrugh
---------------------------------------------
Kenneth E. Thornbrugh
Vice President Finance & Administration
Chief Financial Officer
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