-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SPGOa5iiKETjeO38IC7vdav8GkVa8PnTTNiPBF5J3qDVjPRGjZDMizhkY4zS98TY MOWd+Lzfc+/BEueszznN+g== 0000950149-98-000820.txt : 19980430 0000950149-98-000820.hdr.sgml : 19980430 ACCESSION NUMBER: 0000950149-98-000820 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980423 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980428 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALIFORNIA MICROWAVE INC CENTRAL INDEX KEY: 0000016357 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 941668412 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-07428 FILM NUMBER: 98603105 BUSINESS ADDRESS: STREET 1: 1143 BORREGAS AVE CITY: SUNNYVALE STATE: CA ZIP: 94089 BUSINESS PHONE: 4087324000 MAIL ADDRESS: STREET 1: 1143 BORREGAS AVE CITY: SUNNYVALE STATE: CA ZIP: 94089 8-K 1 FORM 8-K FOR THE REPORT DATED 4/23/98 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 April 23, 1998 Date of Report (Date of earliest event reported) CALIFORNIA MICROWAVE, INC. (Exact name of registrant as specified in its charter) Delaware 0-7428 94-1668412 (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) incorporation) 1143 Borregas Avenue, Sunnyvale, California 94089 (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including are code): 408/732-4000 -1- 2 Item 5. Other Events. On April 23, 1998, California Microwave, Inc. issued three press releases, one announcing adoption of its new corporate strategy and a reorganization of its divisions, one announcing its results for the quarter ended March 31, 1998 and adoption of segment reporting for its divisions, and one announcing the appointment of a new director. All three press releases are attached hereto as exhibits. Also attached as an exhibit hereto is quarterly segment information for the reorganized divisions of California Microwave, Inc. for the fiscal year ended June 30, 1997. Item 7. (c) Exhibits 99.3 Press Release Issued by California Microwave on April 23, 1998 entitled "California Microwave Announces Strategic Repositioning Plan For Growth." 99.4 Press Release Issued by California Microwave on April 23, 1998 entitled "California Microwave Reports $.19 for Third Quarter FY1998: Adopts Segment Reporting." 99.5 Press Release Issued by California Microwave on April 23, 1998 entitled "California Microwave Appoints New Board Member." 99.6 California Microwave Quarterly Segment Information for the fiscal year ended June 30, 1997. SIGNATURE 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 hereunto duly authorized. CALIFORNIA MICROWAVE, INC. (Registrant) By: /s/ GEORGE L. SPILLANE ----------------------------- Name: George L. Spillane Title: Vice President and Secretary Dated: April 28, 1998 -2- EX-99.3 2 PRESS RELEASE 1 EXHIBIT 99.3 [CALIFORNIA MICROWAVE LOGO] FOR IMMEDIATE RELEASE Thursday, April 23, 1998 For Further Information Contact: Stephanie M. Day Investor Information Line: Deborah Passik Vice President- (Toll-free) 1-888-225-6789 William Dunk Partners, Inc. Corporate Communications http://www.calmike.com (919) 929-4100 (408) 743-3429 sday@califmicro.com
CALIFORNIA MICROWAVE ANNOUNCES STRATEGIC REPOSITIONING PLAN FOR GROWTH SUNNYVALE, CALIFORNIA - CALIFORNIA MICROWAVE, INC. (NASDAQ NATIONAL MARKET:CMIC) announced today a series of strategic and operational initiatives that are designed to provide greater focus, direction and growth for the company. After an extensive review of California Microwave's operations, Chief Executive Officer Frederick D. Lawrence stated, "We have carefully defined our field of play: wireless broadband access products and solutions for commercial, satellite and wireless business markets. Our strategies and resources are focused on improving our existing leadership positions in these markets, and developing additional growth segments within them. This focus places us in markets that are growing at rates greater than 20%, which is our growth goal for the company. We have moved decisively away from the holding-company approach that historically characterized the company, and are now managing California Microwave as a focused, integrated, operating business." FIVE ELEMENTS KEY TO STRATEGY California Microwave's new strategy comprises five key, mutually-supporting elements: 1. A REFOCUSED GROWTH BUSINESS: the company has set stringent criteria for the performance of its operating businesses, and is refocusing its investment into high-growth, commercial markets. Low-growth businesses are being divested, and their value harvested for commercial reinvestment. 2. A STREAMLINED ORGANIZATION: the number of separate divisions is being significantly reduced to achieve greater market focus, improved product development, and lower costs. 3. INTERNATIONAL CHANNEL EXPANSION: a separate international division has been established to develop international channels and rapidly grow international sales. 2 April 23, 1998 Page 2 4. AN OPERATIONAL EXCELLENCE INITIATIVE FOCUSED ON MAJOR COST REDUCTION: the company has set a goal to achieve Earnings Before Interest and Taxes (EBIT) of 13% or greater, as a percentage of sales, within 24 months. 5. AN ACQUISITIONS AND TECHNOLOGY LICENSING PROGRAM: the company has retained investment bankers to help identify and execute acquisitions in the commercial markets which will add channels, technology and scale to its existing wireless businesses. Target acquisitions may be small add-ons or substantial on-going businesses. REFOCUSED GROWTH BUSINESS California Microwave's operating units have been subjected to scrutiny based on a set of key criteria: - - Fit with the new business definition: wireless broadband access products and solutions for commercial business markets; - - The ability to achieve greater than 20% annual revenue and profit growth; - - The ability to consistently earn returns in excess of the cost of capital, and therefore create positive, growing Economic Value Added EVA(R) for shareholders; - - Currently hold or quickly can achieve a market leadership position -- either number one or two in the market. In light of these criteria, California Microwave is focusing its investment in its fast-growing commercial, wireless businesses where it has or can rapidly build leadership positions. These include: THE SATELLITE COMMUNICATIONS DIVISION, which consists of EF Data, based in Tempe, AZ. This business generated $98 million in revenue during the last 12 months. EF Data is the world's leading producer of single-channel-per-carrier (SCPC) satellite modems and transceivers, holding on average more than twice the market share of its next largest competitor. EF Data is implementing operational strategies to sustain and improve its leadership in its core point-to-point markets. "These strategies include expanding our Application Specific Integrated Circuit-based (ASIC) modem product lines, further developing our global sales and marketing channels and improving manufacturing and logistics processes," stated Don Anderson, an executive vice president of California Microwave and president of the Satellite Communications Division. In addition, EF Data is leveraging its product leadership in the point-to-point satellite sector to expand its capabilities and presence in the explosively growing broadband data networking market. EF Data is in the process of acquiring Time Division Multiple Access (TDMA) technology, which, combined with its network management systems, will provide the capability to rapidly penetrate the market for broadband data bandwidth-on-demand for private networks and service providers. EF Data provides circuit-and packet-switched, demand-assigned satellite communications that enable customers to send data, video and voice over high-speed digital links, both domestically and internationally. 3 April 23, 1998 Page 3 EF Data's recently announced Integrated Services Digital Network (ISDN) on-demand service, driven by explosive growth of the Internet, has been a first step in providing broadband data capability for business customers. Satellite ISDN-on-demand has a multitude of applications, including video conferencing, distance learning, file transfers, and circuit restoral. EF Data's Phoenix bandwidth-on-demand management system dynamically allocates satellite power and bandwidth, based on the needs of network users, and is more cost effective than dedicated leased lines or satellite circuits. EF Data's next-generation bandwidth-on-demand products, incorporating TDMA, will support Transmission Control Protocol/Internet Protocol (TCP/IP) for Internet access, frame relay for business applications, and Asynchronous Transfer Mode (ATM) for real-time multimedia. California Microwave's Satellite Communications Division is serving addressable markets which are expected to total $500 million in 1998, and which are growing in excess of 20% per year. THE TERRESTRIAL MICROWAVE DIVISION consists of Microwave Data Systems (MDS), based in Rochester, NY, and Microwave Radio Communications (MRC) based in Chelmsford, MA. This newly formed division combines MDS and MRC into a focused, integrated competitor in the terrestrial microwave sector. In the last 12 months, this business generated $82 million in revenue, and holds leadership positions in several core markets. George Arena, formerly president of MDS, assumes the position of president, Terrestrial Microwave Division, and also becomes an executive vice president of California Microwave. Bob Morrill, formerly president of MRC, will continue to work closely with the new division on market and business development. According to George Arena, "Our traditional customer base has been the U.S. utility and video broadcast markets. We are excited that we will be investing in broader bandwidth radios, while expanding our market horizons to include the telco market by leveraging off our Satellite Communications Division's international distribution channels." Television broadcast: MRC is the leading supplier of analog and digital point-to-point microwave systems for transporting video signals for television broadcast operations, including electronic news-gathering, satellite backhauls, studio-transmitter links, and regional networks. Data telemetry communications for utility and financial infrastructures: MDS is the leading provider of point-to-multipoint microwave radio systems for applications such as electric utility substation and distribution automation, and bank and lottery terminal connectivity. Voice and data communications for remotely sited customers: MDS provides T1/E1 (1.544 Mbps) and sub-rate T1/E1, high bandwidth efficiency, point-to-point links for last mile and thin route applications. MDS has over 20% of this rapidly growing market. California Microwave's Terrestrial Microwave Division is now poised to develop additional growth markets that leverage its technology, customer base and distribution channels in sectors where it is currently the leader. These include: The point-to-multipoint broadband wireless market, at both licensed and unlicensed frequencies (1.5-5.8 GHz). MDS' primary customers will be businesses which want a low-cost, high- 4 April 23, 1998 Page 4 reliability solution for thin-route, data network and Internet access. This embryonic market is expected to grow past $100 million within several years. High-capacity video transmission: MRC intends to develop or procure the technology platforms necessary to offer its customers high-capacity (140-155 Mbps) radio links for intercity relays, regional networks, and statewide video networks. In addition, the terrestrial division is reviewing, on an ongoing basis, its strategy in addressing other growth markets -- Local Multipoint Distribution Systems (LMDS), for example -- where it might participate. Overall, California Microwave's addressable terrestrial microwave markets are expected to total over $200 million in 1998, and to grow at a rate greater than 20% annually. The company intends to leverage its technology platforms within each division into a broad array of product lines, and also to take advantage of the increasing convergence of satellite and terrestrial wireless systems. The company believes that its ability to integrate satellite and terrestrial wireless technologies into an integrated, end-to-end solution for customers--e.g., in the video broadcast market--will be an important competitive advantage. "Working together, our Satellite Communications and Terrestrial Microwave divisions can jointly offer the television industry end-to-end systems for digital video transport applications," stated Don Anderson. These newly focused commercial businesses will target addressable markets estimated at over $700 million, growing in excess of 20% per year. To support the investment requirements and opportunities inherent in its satellite and terrestrial markets, California Microwave intends to harvest the value of several of its other divisions. This will be done once the required acquisitions and internal investments have been identified and made for these high-growth commercial markets. The principal expected divestiture, which would support the growth of the commercial side, is of the government businesses. These consist of the Government Electronics Division (GED) in Woodland Hills, CA, and the Airborne Systems Integration Division (ASID) in Belcamp, MD. These are profitable, extremely well managed operations with a long history of providing innovative products and services to US government and military agencies. The operations generated $97 million in revenue over the last 12 months. Their products include airborne and ground-based reconnaissance systems, communications processing equipment, and satellite communications systems. While strong current profit contributors, the government operations do not support either the commercial market focus that California Microwave has chosen or the growth objectives of the new strategy. Furthermore, significant value has been built up in these divisions, and management believes that the greatest shareholder wealth can be created by redeploying this intrinsic value. The company believes that consolidating the two government divisions will make them even stronger and a good candidate for future sale. The company anticipates divesting these units during fiscal year 1999, but not before significant 5 April 23, 1998 Page 5 actions have been taken to build up the high-growth commercial businesses, both through acquisition and licensing arrangements. In addition, the company's Services Division, based in Sunnyvale, CA, is being sold. This is a business with revenues of less than $10 million that has three operations: a teleport, which provides two-way transport services via satellite for Internet service providers, telephone companies and private networks; and two legacy product lines which supply radar testers to the military and amplifier replacements to telephone companies. While profitable, the Services Division's products and services do not fit with California Microwave's new strategic focus, and management believes the business is a distraction to the company's main objective of expanding in high-growth, commercial wireless markets. Previous announcements have been made regarding the sale of Satellite Transmission Systems and Microwave Networks, two divisions which did not meet California Microwave's performance standards. Management believes that this realignment and refocusing of California Microwave's business maximizes both the company's growth opportunities and prospects for creating shareholder value. California Microwave has reported five sequential, profitable quarters and believes that its focus on operational excellence provides an opportunity for continuing, long-term improvements. ORGANIZATION RESHAPED TO EXECUTE STRATEGY To support its new strategy, the company has consolidated its organizational structure and strengthened its management team. With the anticipated divestiture of the government businesses, California Microwave's prior eight divisions will be reduced to three -- Terrestrial Microwave, Satellite Communications and International. This consolidation entails a number of important changes in both organizational structure and in management responsibilities. As discussed elsewhere in this release, Don Anderson and George Arena have been appointed corporate officers, and join four other officers, Fred Lawrence, Donna Birks, Dan Scharre and George Spillane, as the executive leadership team for California Microwave. George Spillane serves as a vice president and secretary of the corporation, reporting to Donna Birks. Microwave Radio Divisions Merged As described earlier, the company's two microwave radio divisions, Microwave Radio Communications (MRC) and Microwave Data Systems (MDS), have been consolidated under one management team and now constitute the Terrestrial Microwave Division. Their products are based on many of the same components and technologies, and management believes the merger will realize a number of benefits, including: - - Enhanced ability to offer customers a fuller range of products and solutions; - - Greater leverage in R&D, engineering and product development efforts; - - Savings in operating expenses and SG&A; - - Overall increased scale, scope and clout in the marketplace. 6 April 23, 1998 Page 6 Dedicated International Division Formed In order to provide focus and critical mass to California Microwave's international sales and marketing efforts, an International Division has been formed, as detailed later in this press release. In the future, the international sales and marketing of satellite and terrestrial products will be handled by the International Division. Shared Services Group Created As part of the effort to reduce costs and raise net profit margins through operational excellence, a shared services group will be created to handle a variety of administrative, HR, financial and operating tasks which are common to all the businesses. Corporate Leadership Enhanced To support implementation of the new growth strategy, key corporate positions have been added or strengthened. Since the company's new chief executive officer, Frederick D. Lawrence, was appointed in July 1997, California Microwave has appointed an executive vice president/chief financial officer (Donna S. Birks), a chief technology officer (Dr. Daniel L. Scharre), a chief information officer (Thomas J. Bakewell), and a corporate controller (Andrew D. Miller). "With these latest appointments, we are rounding out what is a small, but high-quality, group of corporate executives who provide the necessary skills in the key areas of finance, accounting, information systems, technology, and business development," said Fred Lawrence. INTERNATIONAL CHANNELS EXPANDED The company believes that the international telecommunications markets provide large, previously unexploited growth opportunities for both its satellite and terrestrial microwave products. Historically, each of the California Microwave divisions approached international markets separately, resulting in an uncoordinated approach and weak penetration. Accordingly, the company has established an International Division to serve the needs of its Terrestrial Microwave and Satellite Communications divisions. This new division, under the leadership of Salvatore S. Benti, will focus on sales and distribution efforts in the non-NAFTA markets, specifically Asia, Latin America and Eastern Europe. Regional sales vice presidents have been named, and the remainder of the positions for the international division are being filled rapidly from both internal and external candidates. Stated Benti, "The International Division will employ a variety of strategies to significantly expand California Microwave's market share abroad and ensure growth rates in excess of 20% for all our product lines. We anticipate a number of changes. We will be involving the product division executives much more closely in developing major international customer relationships; we will be establishing deeper and broader distribution in our target countries, using a balance of local distributors, international partners, and our own direct sales staff; and we will be presenting a unified face to the customer. We also have plans to enhance and improve our global customer service and support." 7 April 23, 1998 Page 7 OPERATIONAL EXCELLENCE INITIATIVE FOCUSED ON MAJOR COST REDUCTION As the company refocuses its business portfolio and develops new growth opportunities centered around worldwide markets, the operations and business processes are also being reviewed and refocused to ensure that strategy and customer value, rather than historical structures, drive how the company does business. The prior focus of the company, which was to optimize products around small niches in the wireless marketplace, was appropriate in its time, but management believes that the combined cost structure this approach produced is too high going forward. The company has set the specific goal of improving EBIT, as a percent of revenue, to at least 13% within 24 months. Currently, there are four information systems across California Microwave's commercial business divisions and they will be combined. Overall, the company anticipates having lower transaction costs, improved SG&A spending, better management information, more relevant cost analysis, and improved performance measurement tools. "Our goal is to review the output and efficiency of our business processes against externally focused, market driven targets, and eliminate non-value-added work, as perceived by our customers. We believe this is necessary to compete internationally and prepare the company for expansion. The tangible result will be improved net operating results and a significant increase in value to both our customers and shareholders," stated Donna Birks, executive vice president and chief financial officer. An early priority is to combine the two commercial terrestrial businesses, MRC and MDS. This may lead to restructuring charges in fiscal Q4 1998, but those charges, if any, have not been determined. Simultaneously, the manufacturing flow, sales support needs, customer interface and financial measurement systems will be reviewed to enable identification of a combined information system for purchase in Q1 1999. Implementation will follow with a goal to complete by fiscal year-end 1999. ACQUISITIONS AND TECHNOLOGY LICENSING PROGRAM The company intends to make acquisitions in its core commercial markets to increase market coverage, add enabling technologies, and improve the scale and critical mass of these businesses. To fill technology needs within the divisions, California Microwave is making small acquisitions on its own. It has retained Lehman Brothers to provide advisory services and to identify acquisition opportunities that complement California Microwave's commercial growth plans. The company's intent is to build up the size, scale and capabilities of its satellite and terrestrial businesses prior to any further major divestitures. "The focus of our efforts is to expand distribution channels, add multiple access technology to support point-to-multipoint broadband applications, augment our high frequency RF technology and improve our data protocol and network management support functions. These acquisitions will provide needed technologies for both commercial divisions," says Dr. Dan Scharre, California Microwave's chief technology officer. 8 April 23, 1998 Page 8 In addition to aggressively pursuing appropriate acquisitions, California Microwave is actively seeking to augment its core technologies through licensing and partnering agreements. This is one of several avenues being pursued to acquire TDMA access technology for both commercial divisions, for example. The company has begun discussion with a number of third parties. As segments of the businesses reach later stages of their product life cycle or fail to return acceptable levels of profitability, California Microwave will divest aggressively to ensure resources, both people and money, are focused on the highest return opportunities. OTHER ACTIONS SUPPORT THE STRATEGY AND CREATE SHAREHOLDER VALUE In September 1997, California Microwave's board of directors adopted corporate governance guidelines in order to align the interests of shareholders, management and directors. Two key features are: - - Vesting for stock options is now tied to stock price performance, and is not automatic; - - The company's management and its board members are required to own a substantial amount of stock. Ownership of stock by key managers has increased to 33% of the goal (which varies from holding stock valued at one-half to 2 times base salary) since the plan was put in place. The company is currently implementing or has implemented the following corporate governance actions as detailed in California Microwave's 1997, proxy statement: - - The board has reviewed and approved a three-year strategic plan. - - Former executives of the company no longer serve on California Microwave's board. - - The Audit, Compensation and Governance committees consist entirely of independent directors. - - Directors shall not stand for reelection after the age of 70. Searches have been initiated for replacements for those directors who will be retiring over the year. The first new director, General George Alfred Joulwan, has just been appointed. - - A policy has been adopted on confidentiality of voting by shareholders. - - Incentive compensation is linked to EVA objectives In order to inject outside perspectives into the planning process, as well as to meet governance guidelines on strategic plan development, California Microwave engaged The Institute For Business Renewal (IBR), a strategy advisory firm which specializes in the communications industry. IBR has assisted the company in developing its new strategic plan, and will continue to work with it to evolve that plan over time. Stern Stewart & Co. is assisting the company to train its employees in the application of EVA(R) to a broad spectrum of operational decisions. Training is approximately 60% complete and full implementation is expected by July 1998. Monitoring and Control 9 April 23, 1998 Page 9 "We intend to stay on track as our strategy and the marketplace evolve, and we must carefully monitor progress and communicate it to our employees and shareholders. To this end we are establishing a series of mechanisms to track our progress against all of these initiatives," stated Donna Birks, chief financial officer. Monthly and quarterly financial measurement and tracking mechanisms are now being used to drive tactical actions. Progress will be communicated externally via quarterly reporting. The company has also adopted segment reporting to conform to the refocused business and began reporting along those lines with the release of Q3 results today. In addition to employing its traditional financial tracking mechanisms, a senior executive has been assigned to monitor each key element of the company's new strategy -- for example, international expansion and growth, market development, and operational excellence -- and will be reporting monthly to the chief executive officer and to the management team on progress made against pre-defined metrics and milestones. PICKING UP THE PACE According to Fred Lawrence, "The company has been thorough in assessing its strengths, weaknesses, and options for the future. The overriding consideration driving its decision-making has been growing shareholder value, on a consistent basis, over time. The actions the company has taken are significant, but they are also just the start of a longer-term process aimed at reinforcing California Microwave as a major player in both satellite and terrestrial wireless, broadband markets. The current and new commercial markets which the company is targeting are rapidly growing, structurally attractive segments of the wireless universe, and represent robust investment prospects. California Microwave's management and board are both enthusiastic about the focus of the company. This is not a static strategy, but rather one which will continue to evolve over time. The company intends to brief its shareholders, employees, customers, and the investment community on its strategy and results on a regular basis going forward." Statements made in this press release that are not historical facts, including any statements about expectations for fiscal year 1998 and beyond are forward-looking statements, involving certain risks and uncertainties. Factors that could cause the company's actual results to differ materially from management's projections, estimates and expectations include, but are not limited to, delays in the receipt of orders or in the shipment of products, the company's success in implementing its strategic plan, and other factors referred to in the company's Securities and Exchange Commission filings. Separately, California Microwave announced today results for its third quarter ended March 31, 1998, and the appointment of General George A. Joulwan to its board of directors. California Microwave, Inc. (http://www.calmike.com) is a leading U.S. supplier of satellite earth station and microwave radio infrastructure products and information and collection systems. 10 April 23, 1998 Page 10 EVA is a registered trademark of Stern Stewart & Co. ### EX-99.4 3 PRESS RELEASE 1 EXHIBIT 99.4 FOR IMMEDIATE RELEASE April 23, 1998 For Further Information Contact: Stephanie M. Day Investor Information Line: Deborah Passik Vice President- (Toll-free) 1-888-225-6789 William Dunk Partners, Inc. Corporate Communications http://www.calmike.com (919) 929-4100 (408) 743-3429 sday@califmicro.com
CALIFORNIA MICROWAVE REPORTS $.19 FOR THIRD QUARTER FY1998; ADOPTS SEGMENT REPORTING SUNNYVALE, CALIFORNIA - CALIFORNIA MICROWAVE, INC. (NASDAQ NATIONAL MARKET: CMIC) today reported results from continuing operations for its fiscal 1998 third quarter ended March 31, 1998. Continuing operations for all periods presented exclude the operating results of Microwave Networks (MN) and Satellite Transmission Systems (STS), which have been divested. Third-quarter income from continuing operations was $3.1 million, or $.19 per share, on sales of $66.6 million. This compares to a profit of $1.9 million, or $.11 per share, on sales of $58.6 million reported for last year's third quarter. New orders booked in the third quarter decreased 8% to $69.5 million, compared to $75.3 million for the comparable period last year, driven primarily by timing of large government orders. For the nine-month-period ended March 31, new orders booked increased 10% in California Microwave's commercial businesses ($135 million compared to $123 million) and decreased 11% in the government sector, for a net bookings increase of 3%. International orders for the commercial business totaled $64.3 million for the latest nine months versus $58.2 million in last year's comparable period. Activity was strongest in Latin America, where both the terrestrial microwave and satellite communications businesses have good distribution. Sales and bookings into China were strong and offset any major impact from the continued softness in the remaining Asia markets where the company has limited presence. Backlog at March 31, 1998, totaled $104.8 million, compared to $119.8 million at March 31, 1997. "Our government sales growth has been impacted by contracting cycles and has reduced our year-to-date growth rates as some business has shifted between quarters. On the commercial side, however, we are pleased with the market prospects and our net year-to-year sales growth. In our terrestrial microwave business, Microwave Data Systems (MDS) is continuing to see strong business growth in its new line of digital signal processing-based multiple address radios, including both licensed products for international markets and spread-spectrum products, which are primarily for domestic applications. And, while we are pleased with the heightened interest from broadcasters in Microwave Radio Communications' (MRC) new digital video radios, the conversion from analog to digital transmission is not expected to gain real momentum until the 1999-2000 time frame. From a return perspective, we continue to be on track despite the shifts in government business, and expect to achieve our goal of 33% gross margin for FY98, which is driven by a changing business mix (commercial business growing faster than lower-margin government business), and increased product gross margins in our commercial business. Our 2 April 23, 1998 Page 2 focus in the fourth quarter is to reduce working capital and operating expenses as we begin our operational excellence initiative to consolidate and standardize our transaction processing throughout the commercial segments of the company," stated Donna S. Birks, executive vice president and chief financial officer. Beginning with this quarterly earnings release, the company has adopted segment reporting to conform with its Strategic Plan, which was announced today. The three segments are aligned as follows: o Satellite Communications is the company's commercial satellite products segment, represented by the EF Data business unit. Previously, the Satellite Communications segment also included Government division sales of satellite products and the teleport segment of the Services division. o Terrestrial Microwave is the company's commercial terrestrial microwave products segment and represents the combination of MRC and MDS. Previously called Radio Products, it historically has included a small piece of the Services division business related to radio retrofit and repair. o Government is the company's Department of Defense contracted sales of products and includes the Government Electronics Division, Airborne Systems Integration Division and the Services Division, which is about 10% of the segment. Previously called Information Collection and Communications, this group typically has both fixed-price and cost-plus long-term contracts. Both the Satellite Communications and Terrestrial Microwave divisions sell products to government customers on commercial-off-the-shelf terms, but will account for those sales in their respective segments. Further, additional segment information highlighting profitability and other relevant operating characteristics of the businesses has been added to provide a better understanding of the company's performance. "We believe we can provide better insight into the focus and performance of the company by reporting in more detail by each division. The company will continue to review the data published each quarter to ensure adequate and relevant performance metrics are readily available. This is consistent with our focus on shareholder value," stated Donna Birks. As previously announced, the company completed sale of its STS division to L3 during the quarter and announced the sale of its Microwave Networks Division (MN) to Tadiran, which was completed on April 21. As announced on March 2, 1998, an additional provision of $12.5 million, or $.76 per share, was recorded in the third quarter to reflect the actual loss on the sale of MN. Separately, California Microwave announced today its strategic plan for future growth and the appointment of retired General George A. Joulwan to its board of directors. Statements made in this press release that are not historical facts, including any statements about expectations for fiscal year 1998 and beyond are forward-looking statements, involving certain risks and uncertainties. Factors that could cause the company's actual results to differ materially from management's 3 April 23, 1998 Page 3 projections, estimates and expectations include, but are not limited to, delays in the receipt of orders or in the shipment of products, the company's success in implementing its strategic plan, and other factors referred to in the company's Securities and Exchange Commission filings. California Microwave, Inc. (http://www.calmike.com) is a leading U.S. supplier of satellite earth station and microwave radio infrastructure products and information and collection systems. 4 April 23, 1998 Page 4 CALIFORNIA MICROWAVE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share amounts)
Three Months Ended Nine Months Ended March 31 March 31 ------------------- -------- --------------------- -------- 1998 1997 % Change 1998 1997 % Change ---- ---- -------- ---- ---- -------- Net Sales $ 66,631 $ 58,559 + 14 $ 197,612 $ 183,090 + 8 Cost of products sold 44,062 40,197 + 10 131,074 134,080 - 2 --------- --------- --------- --------- Gross margin 22,569 18,362 + 23 66,538 49,010 + 36 --------- --------- --------- --------- Expenses: Research & development 4,881 4,154 + 18 14,643 13,426 + 9 Marketing & administration 11,630 9,659 + 20 34,705 33,180 + 5 Amortization of intangible assets 344 373 - 8 1,032 1,063 - 3 --------- --------- --------- --------- Total expenses 16,855 14,186 + 19 50,380 47,669 + 6 --------- --------- --------- --------- Operating income 5,714 4,176 + 37 16,158 1,341 NM Interest expense net (880) (1,406) - 37 (2,886) (4,060) - 29 Litigation settlement -- -- (1,900) -- NM Gain on sale of subsidiary -- -- -- 2,744 NM --------- --------- --------- --------- Income from continuing operations before income taxes 4,834 2,770 + 75 11,372 25 NM Provision for income taxes 1,729 915 + 89 4,083 8 NM --------- --------- --------- --------- Income from continuing operations 3,105 1,855 + 67 7,289 17 NM Loss from discontinued operations (12,500) (7,859) + 59 (12,500) (33,289) - 62 --------- --------- --------- --------- Net loss $ (9,395) $ (6,004) + 56 $ (5,211) $ (33,272) - 84 ========= ========= ========= ========= Per share (basic and diluted) Income(loss) from continuing operations $ 0.19 $ 0.11 + 73 $ 0.44 $ 0.00 NM Loss from discontinued operations (.76) (.48) + 58 (.76) (2.06) - 63 --------- --------- --------- --------- Net loss $ (.57) $ (.37) + 54 $ (.32) $ (2.06) - 84 ========= ========= ========= ========= Average shares 16,505 16,273 + 1 16,509 16,182 + 2 Average shares and equivalents 16,780 16,407 + 2 16,753 16,300 + 3 (Thousands) Bookings $ 69,549 $ 75,262 - 8 $ 211,377 $ 205,808 + 3 Backlog 104,847 119,826 - 12 104,847 119,826 - 12
NM = Not Meaningful 5 April 23, 1998 Page 5 CALIFORNIA MICROWAVE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
March 31 June 30 1998 1997 Assets Cash and cash equivalents $ 3,265 $ 4,974 Receivables 55,159 35,701 Inventories 50,819 50,353 Income tax refunds and deferred tax assets 28,653 35,855 Net assets of discontinued businesses 47,485 79,656 Property, plant and equipment (net) 23,696 22,812 Intangible assets 28,231 29,488 Other assets 10,028 7,534 -------- -------- $247,336 $266,373 ======== ======== Liabilities and stockholders' equity Current liabilities $ 77,295 $ 72,058 Long-term liabilities 62,485 76,291 Stockholders' equity 107,556 118,024 -------- -------- $247,336 $266,373 ======== ========
6 April 23, 1998 Page 6 CALIFORNIA MICROWAVE, INC. Segment Information (Dollars in millions)
FISCAL 1998 FISCAL 1997 ------------------------------------------ ------------------ BOOKINGS Q1 Q2 Q3 9M YTD Q3 9M YTD - ----------------------------------------------------------------------------------------------- Satellite Communications $ 24.3 $ 25.0 $ 22.2 $ 71.5 $ 21.9 $ 65.4 Terrestrial Microwave 19.1 23.9 20.7 63.6 21.1 57.3 ------ ------ ------ ------ ------ ------ Commercial 43.4 48.9 42.9 135.1 43.0 122.7 Government 13.5 37.9 25.8 77.2 33.1 86.8 Eliminations -1.6 -0.2 0.8 -0.9 -0.8 -3.7 ------ ------ ------ ------ ------ ------ Total 55.3 86.6 69.5 211.4 75.3 205.8 BOOKINGS MIX - ----------------------------------------------------------------------------------------------- Commercial International 34% 29% 29% 30% 28% 28% Domestic 42% 27% 34% 33% 28% 30% ------ ------ ------ ------ ------ ------ Subtotal 76% 56% 63% 63% 56% 58% Government 24% 44% 37% 37% 44% 42% BOOK-TO-BILL - ----------------------------------------------------------------------------------------------- Satellite Communications 109% 98% 96% 101% 123% 117% Terrestrial Microwave 103% 107% 97% 102% 120% 106% ------ ------ ------ ------ ------ ------ Commercial 106% 102% 97% 101% 122% 111% Government 54% 184% 116% 113% 134% 113% ------ ------ ------ ------ ------ ------ Total 86% 130% 104% 107% 129% 112% BACKLOG - ----------------------------------------------------------------------------------------------- Satellite Communications $ 15.2 $ 14.6 $ 13.7 $ 19.8 Terrestrial Microwave 12.3 13.8 13.2 15.3 ------ ------ ------ ------ Commercial 27.5 28.4 26.9 35.1 Government 56.9 74.2 77.9 88.4 ------ ------ ------ ------ Eliminations -2.5 -0.7 0.0 -3.7 ------ ------ ------ ------ Total 81.9 101.9 104.8 119.8 SALES - ----------------------------------------------------------------------------------------------- Satellite Communications $ 22.3 $ 25.7 $ 23.1 $ 71.1 $ 17.7 $ 56.1 Terrestrial Microwave 18.5 22.3 21.3 62.1 17.6 54.1 ------ ------ ------ ------ ------ ------ Commercial 40.8 48.0 44.4 133.2 35.3 110.2 Government 25.2 20.6 22.3 68.0 24.6 76.8 Eliminations -1.6 -2.0 -0.1 -3.6 -1.3 -3.9 ------ ------ ------ ------ ------ ------ Total 64.4 66.6 66.6 197.6 58.6 183.1 SALES MIX - ----------------------------------------------------------------------------------------------- Commercial International 31% 34% 32% 33% 28% 27% Domestic 30% 35% 35% 33% 32% 32% ------ ------ ------ ------ ------ ------ Subtotal 61% 69% 67% 66% 60% 59% Government 39% 31% 33% 34% 40% 41% GROSS MARGIN - ----------------------------------------------------------------------------------------------- Commercial 38% 39% 38% 38% 37% 33% Government 20% 22% 24% 22% 20% 17% ------ ------ ------ ------ ------ ------ Total 32% 35% 34% 34% 31% 27%
7 April 23, 1998 Page 7
FISCAL 1998 FISCAL 1997 ----------------------------------- --------------- EBIT(1) Q1 Q2 Q3 9M YTD Q3 9M YTD - ------------------------------------------------------------------------------------ Satellite Communications $ 2.3 $ 3.1 $ 1.8 $ 7.2 $ 1.0 $-1.6 Terrestrial Microwave 2.3 3.7 3.8 9.8 2.0 6.4 ----- ----- ----- ----- ----- ----- Commercial 4.6 6.8 5.6 17.0 3.0 4.8 Government 2.2 1.4 2.3 5.9 2.2 4.7 Other -2.1 -4.4 -2.2 -8.6 -1.0 -5.4 ----- ----- ----- ----- ----- ----- Total 4.7 3.8 5.7 14.3 4.2 4.1 EBITDA (2) - ------------------------------------------------------------------------------------ Commercial $ 6.1 $ 8.4 $ 7.4 $21.9 $ 4.5 $ 9.3 Government 2.5 1.8 2.9 7.1 2.5 5.6 Other -1.4 -4.0 -1.7 -7.0 -0.2 -3.4 ----- ----- ----- ----- ----- ----- Total 7.2 6.2 8.6 22.0 6.8 11.5
(1) Earnings Before Interest and Taxes (2) Earnings Before Interest, Taxes, Depreciation and Amortization EX-99.5 4 PRESS RELEASE 1 EXHIBIT 99.5 FOR IMMEDIATE RELEASE Thursday, April 23, 1998 For Further Information Contact: Stephanie M. Day Investor Information Line: Deborah Passik Vice President- (Toll-free) 1-888-225-6789 William Dunk Partners, Inc. Corporate Communications http://www.calmike.com (919) 929-4100 (408) 743-3429 sday@califmicro.com
CALIFORNIA MICROWAVE APPOINTS NEW BOARD MEMBER SUNNYVALE, CALIFORNIA - CALIFORNIA MICROWAVE, INC. (NASDAQ NATIONAL MARKET:CMIC) announced the election of U.S. Army General George A. Joulwan, 58, retired Supreme Allied Commander, Europe and Commander in Chief, United States European Command, to its board of directors at its board meeting on April 23, 1998. GENERAL JOULWAN: EXTENSIVE INTERNATIONAL EXPERIENCE During his 36 years in the service, General Joulwan spent 18 years in Europe in various leadership positions until his retirement from the U.S. Army in June 1997. While serving six years in Washington, DC, he was executive officer to the chairman of the Joint Chiefs of Staff from 1982 to 1985, and subsequently director for force requirements of the Office of the Deputy Chief of Staff for Operations and Plans, U.S. Army from 1985 to 1986. He was also special assistant to the President of the United States from 1973 to 1974 in Washington DC, and special assistant to the Supreme Allied Commander, Europe, General Alexander Haig from 1974 to 1975 in Belgium. General Joulwan holds a BS from the United States Military Academy and an MA in political science from Loyola University. He has been awarded many U.S. decorations and badges for bravery and service, including the Distinguished Service Medal and Silver Star. "We are pleased to attract to our board an individual with such extensive international experience and excellent leadership skills. General Joulwan's insight will be a significant asset as we implement our global expansion strategy," said Frederick D. Lawrence, California Microwave's chairman and chief executive officer. Separately, California Microwave announced today results for its third quarter ended March 31, 1998, and its strategic plan for future growth. California Microwave, Inc. (http://www.calmike.com) is a leading U.S. supplier of satellite earth station and microwave radio infrastructure products and information and collection systems. EX-99.6 5 CALIFORNIA MICROWAVE SEGMENT INFORMATION 1 EXHIBIT 99.6 CALIFORNIA MICROWAVE, INC. Segment Information (Dollars in millions)
FISCAL 1997 ------------------------------------------- BOOKINGS Q1 Q2 Q3 Q4 Total ------- ------- ------- ------- -------- Satellite Communications $ 21.2 $ 22.3 $ 21.9 $ 20.3 $ 85.7 Terrestrial Microwave 17.8 18.4 21.1 16.4 73.7 ------- ------- ------- ------- -------- Commercial 39.0 40.7 43.0 36.7 159.4 Government 21.6 32.1 33.1 8.4 95.2 Eliminations (1.8) (1.1) (0.8) (2.8) (6.5) ------- ------- ------- ------- -------- Total $ 58.8 $ 71.7 $ 75.3 $ 42.3 $ 248.1 ======= ======= ======= ======= ======== BOOKINGS MIX Commercial International 30% 27% 28% 35% 29% Domestic 33% 28% 28% 45% 33% Subtotal 63% 55% 56% 80% 62% Government 37% 45% 44% 20% 38% BOOK-TO-BILL Satellite Communications 120% 109% 123% 76% 103% Terrestrial Microwave 99% 99% 120% 82% 99% ------- ------- ------- ------- -------- Commercial 109% 104% 122% 78% 102% Government 78% 132% 134% 30% 91% ------- ------- ------- ------- -------- Total 95% 114% 129% 60% 98% BACKLOG Satellite Communications $ 14.0 $ 15.8 $ 19.8 $ 13.3 Terrestrial Microwave 11.9 11.7 15.3 11.7 ------- ------- ------- ------- Commercial 25.9 27.5 35.1 25.0 Government 70.6 78.3 88.4 67.4 Eliminations (2.4) (2.7) (3.7) (1.3) ------- ------- ------- ------- Total $ 94.1 $ 103.1 $ 119.8 $ 91.1 ======= ======= ======= ======= SALES Satellite Communications $ 17.7 $ 20.6 $ 17.7 $ 26.9 $ 83.0 Terrestrial Microwave 18.0 18.6 17.6 19.9 74.1 ------- ------- ------- ------- -------- Commercial 35.7 39.2 35.3 46.8 157.1 Government 27.9 24.4 24.6 27.8 104.7 Eliminations (1.8) (.8) (1.3) (3.5) (7.6) ------- ------- ------- ------- -------- Total $ 61.8 $ 62.8 $ 58.6 $ 71.1 $ 254.2 ======= ======= ======= ======= ======== SALES MIX Commercial International 24% 28% 28% 31% 28% Domestic 31% 33% 32% 32% 31% ------- ------- ------- ------- -------- Subtotal 55% 61% 60% 63% 59% Government 45% 39% 40% 37% 41% GROSS MARGIN Commercial 37% 25% 37% 36% 34% Government 19% 10% 20% 22% 18% ------- ------- ------- ------- -------- Total 30% 20% 31% 33% 29%
2 April 23, 1998 Page 2
FISCAL 1997 ------------------------------------------- EBIT1 Q1 Q2 Q3 Q4 Total ------- ------- ------- ------- -------- Satellite Communications $ 0.3 $( 2.8) $ 1.0 $ 3.3 $ 1.8 Terrestrial Microwave 2.7 1.7 2.0 3.3 9.7 ------- ------- ------- ------- -------- Commercial 3.0 (1.1) 3.0 6.6 11.5 Government 2.5 0.0 2.2 2.8 7.5 Other (2.8) (1.7) (1.0) (3.7) (9.2) ------- ------- ------- ------- -------- Total 2.7 (2.8) 4.2 5.7 9.8 EBITDA2 Commercial $ 4.4 $ 0.4 $ 4.5 $ 8.5 $ 17.4 Government 2.9 0.3 2.5 3.2 8.8 Other (2.0) (1.4) (0.2) (3.6) (6.6) ------- ------- ------- ------- -------- Total 5.3 (0.7) 6.8 8.1 19.6
1 Earnings Before Interest and Taxes 2 Earnings Before Interest, Taxes, Depreciation and Amortization -----END PRIVACY-ENHANCED MESSAGE-----