-----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, SBQ0J/pYBWTG3Uuj2XLJhMxHctcIw6xKWU/mZiw6setWjR8UB2w6aKC1bs+sFrAo GeSTsLol7UtHNv3WqLBS6Q== 0000730255-03-000041.txt : 20031002 0000730255-03-000041.hdr.sgml : 20031002 20031002162853 ACCESSION NUMBER: 0000730255-03-000041 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030831 FILED AS OF DATE: 20031002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALIFORNIA AMPLIFIER INC CENTRAL INDEX KEY: 0000730255 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 953647070 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12182 FILM NUMBER: 03924709 BUSINESS ADDRESS: STREET 1: 460 CALLE SAN PABLO CITY: CAMARILLO STATE: CA ZIP: 93012 BUSINESS PHONE: 8059879000 MAIL ADDRESS: STREET 1: 460 CALLE SAN PABLO CITY: CAMARILLO STATE: CA ZIP: 93012 10-Q 1 fy04-10q_q2.txt FORM 10-Q 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 quarterly period ended: August 31, 2003 _________________ [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to __________ ____________ Commission File Number: 0-12182 Exact Name of Registrant as Specified in Its Charter: CALIFORNIA AMPLIFIER, INC. ______________________________ DELAWARE 95-3647070 _______________________________ _______________ State or Other Jurisdiction of I.R.S. Employer Incorporation or Organization: Identification No. Address of Principal Executive Offices: 460 Calle San Pablo Camarillo, CA 93012 Registrant's Telephone Number: (805) 987-9000 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] The registrant had 14,749,112 shares of Common Stock outstanding as of September 30, 2003. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CALIFORNIA AMPLIFIER, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands except par value amounts) August 31, February 28, 2003 2003 -------- -------- Assets Current assets: Cash and cash equivalents $ 23,080 $ 21,947 Accounts receivable, less allowance for doubtful accounts of $251 and $273, respectively 12,884 16,053 Inventories 11,700 12,862 Deferred income tax assets 2,846 1,130 Prepaid expenses and other current assets 1,387 1,100 -------- -------- Total current assets 51,897 53,092 Property and equipment, at cost, net of accumulated depreciation and amortization 7,550 9,322 Deferred income tax assets, less current portion 3,973 5,400 Goodwill 20,938 20,938 Other assets 980 845 -------- -------- $ 85,338 $ 89,597 ======== ======== Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $ 3,438 $ 3,005 Accounts payable 11,105 11,553 Accrued payroll and employee benefits 823 1,649 Other accrued liabilities 1,238 2,198 -------- -------- Total current liabilities 16,604 18,405 -------- -------- Long-term debt, less current portion 10,835 12,569 -------- -------- Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; 3,000 shares authorized; no shares issued or outstanding - - Common stock, $.01 par value; 30,000 shares authorized; 14,749 and 14,745 shares issued and outstanding, respectively 147 147 Additional paid-in capital 43,453 43,441 Retained earnings 15,124 15,836 Accumulated other comprehensive loss (825) (801) -------- -------- Total stockholders' equity 57,899 58,623 -------- -------- $ 85,338 $ 89,597 ======== ======== See notes to unaudited consolidated financial statements. CALIFORNIA AMPLIFIER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands except per share amounts) Three Months Ended Six Months Ended August 31, August 31, ------------------- ------------------- 2003 2002 2003 2002 ------- ------- ------- ------- Sales $24,197 $27,526 $42,763 $50,008 Cost of goods sold 20,997 21,171 38,257 37,809 ------- ------- ------- ------- Gross profit 3,200 6,355 4,506 12,199 ------- ------- ------- ------- Operating expenses: Research and development 1,236 1,723 2,598 3,424 Selling 549 744 1,043 1,474 General and administrative 869 1,052 1,713 2,102 ------- ------- ------- ------- Total operating expenses 2,654 3,519 5,354 7,000 ------- ------- ------- ------- Operating income (loss) 546 2,836 (848) 5,199 Non-operating expense, net (129) (79) (182) (80) ------- ------- ------- ------- Income (loss) before income taxes 417 2,757 (1,030) 5,119 Income tax benefit (provision) (27) (939) 318 (1,835) ------- ------- ------- ------- Net income (loss) $ 390 $ 1,818 $ (712) $ 3,284 ======= ======= ======= ======= Net income (loss) per share: Basic $ 0.03 $ 0.12 $ (0.05) $ 0.23 Diluted $ 0.03 $ 0.12 $ (0.05) $ 0.22 Shares used in per share calculations: Basic 14,747 14,720 14,746 14,547 Diluted 14,916 14,914 14,746 14,835 See notes to unaudited consolidated financial statements. CALIFORNIA AMPLIFIER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Six Months Ended August 31, --------------------- 2003 2002 ------- ------- Cash flows from operating activities: Net income (loss) $ (712) $ 3,284 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 1,613 1,824 Equipment impairment writedowns 575 - Gain on sale of equipment (117) (148) Increase in equity associated with tax benefit from exercise of stock options - 2,972 Deferred tax assets, net (289) (1,290) Changes in operating assets and liabilities: Accounts receivable 3,169 (3,017) Inventories 1,162 2,625 Prepaid expenses and other assets (278) (230) Accounts payable (222) 268 Accrued payroll and other accrued liabilities (1,786) (566) ------- ------- Net cash provided by operating activities 3,115 5,722 ------- ------- Cash flows from investing activities: Capital expenditures (978) (702) Proceeds from sale of property and equipment 285 299 Acquisition of Kaul-Tronics - (16,588) ------- ------- Net cash used in investing activities (693) (16,991) ------- ------- Cash flows from financing activities: Proceeds from long-term debt - 12,000 Repayments of long-term debt (1,301) (483) Proceeds from exercise of stock options 12 103 ------- ------- Net cash provided by (used in) financing activities (1,289) 11,620 ------- ------- Net change in cash and cash equivalents 1,133 351 Cash and cash equivalents at beginning of period 21,947 23,156 ------- ------- Cash and cash equivalents at end of period $23,080 $23,507 ======= ======= Supplemental cash flow information: Interest paid $ 281 $ 257 Income taxes paid (net refunds received) $ (93) $ 170 Non-cash investing and financing activities: Issuance of common stock as partial consideration for acquisition of Kaul-Tronics $ - $ 6,054 Increase in valuation allowance for available-for-sale investment $ - $ 209 Issuance of common stock to reduce accrued liability $ - $ 4,030 See notes to unaudited consolidated financial statements. CALIFORNIA AMPLIFIER, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Six Months Ended August 31, 2003 Note 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION California Amplifier, Inc. (the "Company") designs, manufactures and markets microwave equipment used in the reception of television programming transmitted from satellites and wireless terrestrial transmission sites, and two-way transceivers used for wireless high-speed Internet (broadband) service. The Company's Satellite business unit designs and markets reception products principally for the Direct Broadcast Satellite ("DBS") subscription television market in the United States. The Wireless Access business unit designs and markets integrated reception and two-way transmission fixed wireless equipment for terrestrial broadband data and video applications, the latter sometimes referred to as "Wireless Cable". On April 5, 2002, the Company acquired substantially all of the assets, properties and business of Kaul-Tronics, Inc., a Wisconsin corporation, and two affiliated companies (collectively, "Kaul-Tronics"). The results of Kaul-Tronics' operations have been included in the Company's consolidated financial statements since that date. The operations acquired by the Company involve primarily the design and manufacture of satellite antenna dishes used in the DBS industry. The satellite antenna dishes of the type produced by Kaul-Tronics, and the downconverter/amplifier devices ("LNBFs") of the type produced by the Company, together comprise the outdoor portion of customer premise equipment for DBS television reception. All intercompany transactions and accounts have been eliminated in consolidation. In the opinion of the Company's management, the accompanying consolidated financial statements reflect all adjustments necessary to present fairly the Company's financial position at August 31, 2003 and its results of operations for the three and six month periods ended August 31, 2003 and 2002. The results of operations for such periods are not necessarily indicative of results to be expected for the full fiscal year. The Company uses a 52-53 week fiscal year ending on the Saturday closest to February 28, which for fiscal year 2003 fell on March 1, 2003. The actual interim periods ended on August 30, 2003 and August 31, 2002. In the accompanying consolidated financial statements, the 2003 fiscal year end is shown as February 28 and the interim period end for both years is shown as August 31 for clarity of presentation. Certain notes and other information are condensed or omitted from the interim financial statements presented in this Quarterly Report on Form 10- Q. Therefore, these financial statements should be read in conjunction with the Company's 2003 Annual Report on Form 10-K as filed with the Securities and Exchange Commission on May 30, 2003. Note 2 - INVENTORIES Inventories include the cost of material, labor and manufacturing overhead, are stated at the lower of cost (determined on the first-in, first-out method) or market, and consist of the following (in thousands): August 31, February 28, 2003 2003 ------ ------ Raw materials and subassemblies $ 9,089 $ 9,627 Finished goods 2,611 3,235 ------ ------ $11,700 $12,862 ====== ====== Note 3 - GOODWILL AND OTHER INTANGIBLE ASSETS As a result of adopting Statement of Financial Accounting Standards No. 142, "Accounting for Goodwill and Intangible Assets", at the beginning of fiscal 2003, the Company no longer records amortization on goodwill. There was no change in the carrying amount of goodwill during the six months ended August 31, 2003. All goodwill is associated with the Company's Satellite business segment. The first annual goodwill impairment test was conducted as of December 31, 2002. This test indicated that there was no impairment of goodwill at that date. Because of the write-down of certain assets in the Satellite segment in the first quarter ended May 31, 2003, the Company conducted an interim impairment test as of that date. This test also indicated that there was no impairment of goodwill. The Company used a discounted cash flow approach to estimate the fair value of its Satellite reporting unit in these impairment tests. At August 31, 2003, the gross carrying amount and accumulated amortization of covenants not to compete acquired in conjunction with the Kaul-Tronics acquisition (Note 1) was $400,000 and $148,000, respectively. The covenants not to compete, which are included in Other Assets in the accompanying consolidated balance sheet, are being amortized on a straight- line basis over a weighted average life of approximately 4.1 years. Note 4 - FINANCING ARRANGEMENTS At August 31, 2003, the Company had a $10 million working capital revolving line of credit with a commercial bank. Borrowings under this line of credit bear interest at the London Inter-Bank Offer Rate (LIBOR) plus 2.0% or the bank's prime rate, and are secured by substantially all of the Company's assets. At August 31, 2003, there were no borrowings outstanding under the line of credit. At that date, there was $1,582,000 reserved under the line of credit for outstanding standby letters of credit, and an additional $2,225,000 reserved for outstanding trade letters of credit. The Company also has two bank term loans which had an aggregate outstanding principal balance of $14,273,000 at August 31, 2003. Note 5 - INCOME TAXES Deferred income tax assets reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A deferred income tax asset is recognized if realization of such asset is more likely than not, based upon the weight of available evidence which includes historical operating performance and the Company's forecast of future operating performance. The Company evaluates the realizability of its deferred income tax assets on a quarterly basis, and a valuation allowance is provided, as necessary, in accordance with the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". During this evaluation, the Company reviews its forecasts of future operating performance in conjunction with the positive and negative evidence surrounding the realizability of its deferred income tax asset to determine if a valuation allowance is needed. At February 28, 2003, the deferred tax asset valuation allowance was $3,335,000. Based on profitable operations in the three year period ended February 28, 2003, and on management's internal forecast of future operating results, management believes it is more likely than not that the Company will generate sufficient taxable income in the future to utilize deferred tax assets of $6,819,000. As a result of this analysis, the deferred tax asset valuation allowance was reduced to $3,164,000 at August 31, 2003. The effective income tax rate was 30.9% and 35.8% in the six months ended August 31, 2003 and 2002, respectively. The decrease in effective tax rate is attributable primarily to the fact that, beginning in fiscal 2004, adjustments to the deferred tax asset valuation allowance have a corresponding impact on the income tax provision or benefit reported in the consolidated statement of operations. Prior to fiscal 2004, reductions of the deferred tax asset valuation allowance were offset by increases in additional paid-in capital, and accordingly the effective income tax rate in fiscal 2003 was not impacted by adjustments to the valuation allowance. Note 6 - EARNINGS PER SHARE Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution, using the treasury stock method, that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock or resulted in the issuance of Common Stock that then shared in the earnings of the Company. In computing diluted earnings per share, the treasury stock method assumes that outstanding options are exercised and the proceeds are used to purchase common stock at the average market price during the period. Options will have a dilutive effect under the treasury stock method only when the Company reports income and the average market price of the common stock during the period exceeds the exercise price of the options. The following is a summary of the calculation of weighted average shares used in the computation of basic and diluted earnings per share (in thousands): Three months ended Six months ended August 31, August 31, ---------------- ---------------- 2003 2002 2003 2002 ------ ------ ------ ------ Basic weighted average number of common shares outstanding 14,747 14,720 14,746 14,547 Effect of dilutive securities: Stock options 169 194 - 288 ------ ------ ------ ------ Diluted weighted average number of common shares outstanding 14,916 14,914 14,746 14,835 ====== ====== ====== ====== Options outstanding at August 31, 2002 to purchase approximately 1,236,000 shares of Common Stock at prices ranging from $4.72 to $50.56 were excluded from the computation of diluted earnings per share for the three and six months then ended. Because the Company had a net loss for the six ended August 31, 2003, outstanding stock options to purchase approximately 2,590,000 shares of common stock at exercise prices ranging from $2.76 to $50.56 would be anti- dilutive and were therefore not included in the computation of diluted earnings per share. Note 7 - COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) is defined as the total of net income (loss) and all changes that impact stockholders' equity other than transactions involving stockholders' ownership interests. The following table details the components of comprehensive income (loss) for the three and six month periods ended August 31, 2003 and 2002 (in thousands): Three months ended Six months ended August 31, August 31, ---------------- ---------------- 2003 2002 2003 2002 ------ ------ ------ ------ Net income (loss) $ 390 $1,818 $ (712) $3,284 Unrealized holding loss on available-for-sale investments (25) (35) (24) (209) ------ ------ ------ ------ Comprehensive income (loss) $ 365 $1,783 $ (736) $3,075 ====== ====== ====== ====== Note 8 - STOCK OPTIONS In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148, "Accounting for Stock Based Compensation - Transition and Disclosure" ("FAS No. 148"). FAS No. 148 amends Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS No. 123"), to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock based employee compensation. In addition, FAS No. 148 amends the disclosure requirements of FAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. As allowed by Statement of FAS No. 123, the Company has elected to continue to measure compensation cost under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25"). Under APB No. 25, compensation expense is measured on the first date at which both the number of shares and the exercise price are known. Under the Company's stock option plans, this would typically be the grant date. To the extent that the exercise price equals or exceeds the market value of the stock on the grant date, no compensation expense is recognized. Because all of the options granted by the Company are at exercise prices not less than the market value on the date of grant, no compensation expense is recognized under this accounting treatment in the accompanying unaudited consolidated statements of operations. The fair value of options at date of grant was estimated using the Black-Scholes option pricing model with the following assumptions: Options granted during the six months ended August 31, Options granted ------------------- before 2003 2002 March 1, 2002 ------ ------ ----------- Expected life (years) 5 5 5 to 10 Dividend yield 0% 0% 0% The range for interest rates is 2.58% to 6.82%, and the range for volatility is 49% to 147%. The estimated compensation cost for outstanding stock options calculated using these assumptions is as follows (in thousands): Three months ended Six months ended August 31, August 31, -------------- ---------------- 2003 2002 2003 2002 ------ ------ ------ ------ Compensation cost for outstanding stock options $890 $1,054 $1,968 $2,027 ==== ====== ====== ====== The following table illustrates the effect on net income (loss) and earnings (loss) per share if the Company had applied the fair value recognition provisions of FAS 123 to stock-based employee compensation (in thousands except per share amounts): Three months ended Six months ended August 31, August 31, ---------------- ---------------- 2003 2002 2003 2002 ------ ------ ------ ------ Net income (loss) as reported $ 390 $1,818 $ (712) $ 3,284 Less total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (539) (639) (1,193) (1,228) ----- ----- ----- ------ Pro forma net income (loss) $ (149) $1,179 $(1,905) $ 2,056 ===== ===== ===== ====== Earnings (loss) per share: Basic - As reported $ 0.03 $0.12 $(0.05) $0.23 Pro forma $(0.01) $0.08 $(0.13) $0.14 Diluted - As reported $ 0.03 $0.12 $(0.05) $0.22 Pro forma $(0.01) $0.08 $(0.13) $0.14 Note 9 - CONCENTRATION OF RISK Because the Company sells into markets dominated by a few large service providers, a significant percentage of consolidated sales and consolidated accounts receivable relate to a small number of customers. Sales to customers which accounted for 10% or more of consolidated sales for the three and six month periods ended August 31, 2003 or 2002, as a percent of consolidated sales, are as follows: Three months ended Six months ended August 31, August 31, ---------------- ---------------- Customer 2003 2002 2003 2002 -------- ------ ------ ------ ------ A 35.5% 47.2% 34.0% 48.7% B 21.5% 8.2% 19.6% 5.4% C 13.5% 0.4% 8.8% 0.4% Accounts receivable from these customers as a percent of consolidated net accounts receivable are as follows: August 31, Feb. 28, 2003 2003 ------ ------ A 38.3% 58.0% B 23.3% 5.5% C 4.8% 0.5% Customers A, B and C are customers of the Satellite segment. No customer of the Wireless Access segment accounted for 10% or more of consolidated sales during the periods shown above. Note 10 - PRODUCT WARRANTIES The Company generally warrants its products against defects over periods ranging from 3 to 24 months. An accrual for estimated future costs relating to products returned under warranty is recorded as an expense when products are shipped. At the end of each quarter, the Company adjusts its liability for warranty claims based on its actual warranty claims experience as a percentage of sales for the preceding three years. In addition, during the fourth quarter of fiscal 2003, the Company accrued warranty cost of $250,000 in connection with a product replacement program, as further described in Note 12. Such amount is included in the warranty liability at August 31, 2003. Increases in and reductions of the warranty liability for the six months ended August 31, 2003 and 2002 is as follows (in thousands): Six months ended August 31, ----------------- 2003 2002 ------ ------ Balance at beginning of period $491 $376 Charged (credited) to costs and expenses (26) 87 Deductions (73) (112) ---- ---- Balance at end of period $392 $351 ==== ==== Note 11 - SEGMENT INFORMATION The Company currently manages its business under two identifiable business segments: Satellite products and Wireless Access products. Segment information for the three months ended August 31, 2003 and 2002 is as follows (in thousands): Three months ended August 31, 2003: Wireless Satellite Access Corporate Total ------- ------ ------- ----- Sales $22,022 $ 2,175 $24,197 Gross profit $ 2,610 $ 590 $ 3,200 Gross margin 11.9% 27.1% 13.2% Income (loss) before income taxes $ 1,892 $ (477) $ (998) $ 417 Three months ended August 31, 2002: Wireless Satellite Access Corporate Total ------- ------ ------- ----- Sales $24,640 $ 2,886 $27,526 Gross profit $ 5,463 $ 892 $ 6,355 Gross margin 22.2% 30.9% 23.1% Income (loss) before income taxes $ 4,300 $ (412) $(1,131) $ 2,757 Six months ended August 31, 2003: Wireless Satellite Access Corporate Total ------- ------ ------- ----- Sales $38,643 $ 4,120 $42,763 Gross profit $ 3,470 $ 1,036 $ 4,506 Gross margin 9.0% 25.1% 10.5% Income (loss) before income taxes $ 1,884 $(1,019) $(1,895) $(1,030) Six months ended August 31, 2002: Wireless Satellite Access Corporate Total ------- ------ ------- ----- Sales $44,114 $ 5,894 $50,008 Gross profit $10,291 $ 1,908 $12,199 Gross margin 23.3% 32.4% 24.4% Income (loss) before income taxes $ 8,030 $ (729) $(2,182) $ 5,119 Included in cost of sales for Satellite products during the six months ended August 31, 2003 were asset impairment writedowns of $575,000 on surface mount equipment which had become underutilized due to increased outsourcing of printed circuit board subassemblies to contract manufacturers and certain other manufacturing equipment which was taken out of service. The underutilized surface mount equipment was sold in August 2003. Also included in Satellite product cost of sales for the six months ended August 31, 2003 was a lower of cost or market inventory writedown of $242,000. The foregoing items had an aggregate adverse impact of 2.1% on Satellite gross margin in the latest six month period. The Company considers income (loss) before income taxes to be the primary measure of profit or loss of its business segments. The amount shown for each period in the "Corporate" column above for income (loss) before income taxes consists of general and administrative expenses not allocated to the business segments, and non-operating income (expense). General and administrative expense includes salaries and wages for the CEO, the CFO, all finance and accounting personnel, human resource personnel, information services personnel, and corporate expenses such as audit fees, director and officer liability insurance, and director fees and expenses. Non-operating income (expense) includes interest income, interest expense and foreign currency gains and losses. Note 12 - COMMITMENTS AND CONTINGENCIES In March 2003, one of the Company's customers made a $1.6 million claim against the Company for what the customer described as its expected costs for a replacement program involving a product that had been supplied by the Company. The Company accrued $250,000 at February 28, 2003 as its best estimate of the costs to resolve this matter, and there have been no changes in this accrued liability balance during the six months ended August 31, 2003. The Company can give no assurance that the actual costs to resolve this claim will not exceed the $250,000 reserve amount. See further discussion of this matter in Note 12 to the unaudited consolidated financial statements contained in the Company's Form 10-Q for the quarter ended May 31, 2003. Note 13 - LEGAL MATTER In 2001, the Company was notified that the Securities and Exchange Commission (SEC) was conducting an investigation into the circumstances that caused the Company to restate earnings for fiscal year 2000 and the first three quarters of fiscal year 2001. The Company has provided the SEC with documents and testimony, and management believes that it has fully cooperated, and will continue to fully cooperate, with the SEC in connection with its investigation. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CRITICAL ACCOUNTING POLICIES The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements 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 sales and expenses during the reporting periods. Areas where significant judgments are made include, but are not limited to: allowance for doubtful accounts, inventory valuation, product warranties and the deferred tax asset valuation allowance. Actual results could differ materially from these estimates. Allowance for Doubtful Accounts The Company establishes an allowance for estimated bad debts based upon a review and evaluation of specific customer accounts identified as known and expected collection problems, based on historical experience, due to insolvency, disputes or other collection issues. As further described in Note 9 to the accompanying unaudited consolidated financial statements, the Company's customer base is quite concentrated, with three customers accounting for 66% of accounts receivable at August 31, 2003 and 62% of the Company's sales in the six months then ended. Changes in either a key customer's financial position, or the economy as a whole, could cause actual write-offs to be materially different from the recorded allowance amount. Inventories The Company evaluates the carrying value of inventory on a quarterly basis to determine if the carrying value is recoverable at estimated selling prices. To the extent that estimated selling prices do not exceed the associated carrying values, inventory carrying amounts are written down. In addition, the Company generally treats inventory on hand or committed with suppliers, which is not expected to be sold within the next 12 months, as excess and thus appropriate write-downs of the inventory carrying amounts are established through a charge to cost of sales. Estimated usage in the next 12 months is based on firm demand represented by orders in backlog at the end of the quarter and management's estimate of sales beyond existing backlog, giving consideration to customers' forecasted demand, ordering patterns and product life cycles. Significant reductions in product pricing, or changes in technology and/or demand may necessitate additional write-downs of inventory carrying value in the future. Deferred Income Tax Asset Valuation Allowance Deferred income tax assets reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and for income tax purposes. A deferred income tax asset is recognized if realization of such asset is more likely than not, based upon the weight of available evidence which includes historical operating performance and the Company's forecast of future operating performance. The Company evaluates the realizability of its deferred income tax asset on a quarterly basis, and a valuation allowance is provided, as necessary. During this evaluation, the Company reviews its forecasts of income in conjunction with the positive and negative evidence surrounding the realizability of its deferred income tax asset to determine if a valuation allowance is needed, and the valuation allowance is adjusted accordingly. If in the future the Company were unable to support the recovery of its net deferred income tax asset, it would be required to provide an additional valuation allowance for all or a portion of the net deferred income tax asset, which would increase the income tax provision. At August 31, 2003, the Company's net deferred income tax asset was $6,819,000, which amount is net of a valuation allowance of $3,164,000. During fiscal years 2003 and 2002, the valuation allowance was reduced by an aggregate amount of $9,173,000, substantially all of which related to tax benefits associated with exercises of non-qualified stock options in prior years and was therefore recognized by increasing additional paid-in capital. That portion of the valuation allowance that related to these tax benefits on stock option deductions was fully eliminated as of the end of fiscal 2003. Therefore, beginning in fiscal 2004, reductions of the deferred tax asset valuation allowance have a corresponding impact on the income tax provision or benefit reported in the consolidated statement of operations. During the six months ended August 31, 2003, the deferred tax asset valuation allowance was reduced by $145,000, which had the effect of lowering the estimated effective income tax rate for fiscal 2004. Valuation of Long-lived Assets and Goodwill The Company accounts for long-lived assets other than goodwill in accordance with the provisions of Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment and Disposal of Long Lived Assets" ("FAS 144"), which supersedes Statement of Financial Accounting Standards No. 121 and certain sections of Accounting Principles Board Opinion No. 30 specific to discontinued operations. FAS 144 classifies long-lived assets as either: (1) to be held and used; (2) to be disposed of by other than sale; or (3) to be disposed of by sale. This standard introduces a probability-weighted cash flow estimation approach to deal with situations in which alternative courses of action to recover the carrying amount of a long-lived asset are under consideration or a range is estimated for the amount of possible future cash flows. This statement, which the Company adopted in fiscal 2003, did not have a material impact on the Company's financial position or results of operations prior to fiscal 2004. FAS 144 requires, among other things, that an entity review its long-lived assets and certain related intangibles for impairment whenever changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. During the six months ended August 31, 2003, the Company recorded an impairment writedown of $575,000 on certain surface mount manufacturing equipment, tooling and other equipment used in the Satellite business unit which had become underutilized due to increased outsourcing to contract manufacturers. The Company also adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets", in fiscal 2003. As a result goodwill, all of which relates to the Company's Satellite business unit, is no longer amortized. Instead, goodwill is subject to annual impairment testing, or more frequently as impairment indicators arise. The test for impairment involves the use of estimates related to the fair values of the business operations with which goodwill is associated and is usually based on projected cash flows or a market value approach. The first annual goodwill impairment test was conducted as of December 31, 2002, which indicated that there was no impairment of goodwill at that date. Because of the writedown of certain assets in the Satellite segment under FAS No. 144 during the quarter ended May 31, 2003, the Company conducted an interim impairment test as of that date. This test also indicated that there was no impairment of goodwill. The Company used a discounted cash flow approach to estimate the fair value of its Satellite business unit in these impairment tests. The Company believes the estimate of its valuation of long-lived assets and goodwill is a "critical accounting estimate" because if circumstances arose that led to a decrease in the valuation it could have a material impact on the Company's results of operations. Product Warranties The Company provides for the estimated cost of product warranties at the time revenue is recognized. While it engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its component suppliers, the Company's warranty obligation is affected by product failure rates and material usage and service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage or service delivery costs differ from management's estimates, revisions to the estimated warranty liability would be required. RESULTS OF OPERATIONS The Company's sales and gross profit by business segment for the three and six months ended August 31, 2003 and 2002 are as follows: SALES BY SEGMENT Three months ended August 31, Six months ended August 31, ------------------------------- ------------------------------- 2003 2002 2003 2002 -------------- -------------- ------------- -------------- % of % of % of % of Segment $000s Total $000s Total $000s Total $000s Total - --------- ------- ----- ------- ----- ------- ----- ------- ----- Satellite $22,022 91.0% $24,640 89.5% $38,643 90.4% $44,114 88.2% Wireless 2,175 9.0% 2,886 10.5% 4,120 9.6% 5,894 11.8% ------- ----- ------- ----- ------- ----- ------- ----- Total $24,197 100.0% $27,526 100.0% $42,763 100.0% $50,008 100.0% ======= ===== ======= ===== ======= ===== ======= ===== GROSS PROFIT BY SEGMENT Three months ended August 31, Six months ended August 31, ------------------------------- ------------------------------- 2003 2002 2003 2002 -------------- -------------- ------------- -------------- % of % of % of % of Segment $000s Total $000s Total $000s Total $000s Total - --------- ------- ----- ------- ----- ------- ----- ------- ----- Satellite $ 2,610 81.6% $ 5,463 86.0% $ 3,470 77.0% $10,291 84.4% Wireless 590 18.4% 892 14.0% 1,036 23.0% 1,908 15.6% ------- ----- ------- ----- ------- ----- ------- ----- Total $ 3,200 100.0% $ 6,355 100.0% $ 4,506 100.0% $12,199 100.0% ======= ===== ======= ===== ======= ===== ======= ===== Sales Sales of Satellite products decreased $2,618,000, or 10.6% in the three months ended August 31, 2003 from the same period in the previous fiscal year. For the six months ended August 31, 2003, sales of Satellite products decreased by $5,471,000 from $44,114,000 to $38,643,000. These declines resulted primarily from reduced customer orders in the latest three- and six-month periods due to customers' overstocked inventories of certain satellite television reception products. The Satellite products impacted by this order slowdown are predominantly the more technologically advanced products that have higher selling prices. The Company believes that this decline in orders from key Satellite customers was a temporary condition, and that sales of Satellite products have begun to return to more normal levels as a result of these customers working down their existing inventory quantities. Sales of Wireless Access products in the three months ended August 31, 2003 declined by $711,000, or 25%, from the same period in the prior year. For the six months ended August 31, 2003, sales of Wireless products decreased by $1,774,000 from $5,894,000 to $4,120,000. The decline in the six-month results occurred primarily because last year's amount included sales to three customers totaling approximately $2.4 million, substantially all of which did not recur in the latest six-month period. Gross Profit and Gross Margins Satellite gross profit decreased $2,853,000, or 52%, and gross margin for Satellite products declined from 22.2% in the three months ended August 31, 2003 to 11.9% in the latest quarter. In the latest six-month period, Satellite gross profit declined by $6,821,000, or 66%, from the comparable period of the prior year, and gross margin declined to 9.0% this year from 23.3% last year. Included in cost of sales for Satellite products during the six months ended August 31, 2003 were impairment writedowns totaling $575,000 on surface mount machines and other manufacturing equipment which had become underutilized due to increased outsourcing of printed circuit board subassemblies to contract manufacturers. Also included in Satellite product cost of sales for the six months ended August 31, 2003 was a lower of cost or market inventory writedown of $242,000. The foregoing items had an aggregate adverse impact of 2.1% on Satellite gross margin in the latest six month period. The remainder of the decline in Satellite gross margin is attributable primarily to the lower production and sales volume in the latest quarter and six month period relative to the prior year and the resultant lower absorption of fixed overhead costs, and the effect of competitive pricing pressures on certain Satellite products. Wireless Access gross profit decreased $302,000, or 34%, while gross margin for Wireless Access products declined to 27.1% in the second quarter of fiscal 2004 from 30.9% in the second quarter of fiscal 2003. For the six months ended August 31, 2003, Wireless Access gross profit declined by $872,000, or 46%, from the comparable period of the prior year, and gross margin declined to 25.1% this year from 32.4% last year. These declines are primarily attributable to the decrease in Wireless sales in the latest three- and six month periods and the resultant lower absorption of fixed overhead costs. See also Note 11 to the accompanying unaudited consolidated financial statements for additional operating data by business segment. Operating Expenses Research and development expense decreased by $487,000, or 28%, from $1,723,000 in the second quarter of last year to $1,236,000 in the latest quarter. For the six month year-to-date periods, research and development expense decreased $826,000 from $3,424,000 last year to $2,598,000 this year. These reductions are due in part to the cancellation, in the second quarter of last fiscal year, of a product development contract for broadband wireless application specific integrated circuits (ASICs) because the market timing for large scale deployment of this technology was considered to be uncertain in the near-term future. Expense associated with this product development contract was $130,000 and $330,000, respectively, in the three and six months ended August 31, 2002. Also contributing to the decline in research and development expense in the latest six month period was lower salaries expense due to staffing reductions ($240,000) and lower incentive compensation expense ($218,000). Selling expense decreased by 26% from $744,000 in the three months ended August 31, 2002 to $549,000 in the three months ended August 31, 2003. For the six month periods, selling expense decreased 29% from $1,474,000 last year to $1,043,000 this year. These decreases are primarily attributable to lower incentive compensation expense, which declined by $177,000 and $291,000 in the latest three and six month periods, respectively, compared to the prior year. Also contributing to the declines was bad debts expense, which was lower by $51,000 and $79,000 in the latest three and six month periods, respectively, compared to the prior year. General and administrative expense in the latest quarter decreased 17% to $869,000 from $1,052,000 in the second quarter of last year. For the six month periods, general and administrative expenses decreased by $389,000, or 19%, to $1,713,000 in 2003 from $2,102,000 in 2002. These declines are due mainly to reduced incentive compensation expense, which was lower by $174,000 and $363,000 in the latest three and six month periods, respectively, compared to the prior year. Non-operating Expense, Net Net non-operating expense increased from $79,000 in the second quarter of last year to $129,000 in the latest quarter. This increase in net non- operating expense is attributable to the change in foreign currency gains and losses. There was a foreign currency gain of $13,000 in last year's second quarter, and a foreign currency loss of $37,000 in the latest quarter. Net non-operating expense for the six month periods increased from $80,000 in 2002 to $182,000 in 2003 due to the change in foreign currency gains and losses ($70,000) and greater net interest expense ($32,000). Income (loss) before income taxes Income before income taxes in the latest quarter was $417,000 compared to $2,757,000 in the second quarter of last year. For the six month periods, income (loss) before income taxes was ($1,030,000) in 2003 compared to $5,119,000 in 2002. These declines in the latest three and six month periods compared to the prior year are due to decreases in gross profit, partially offset by lower operating expenses, all as discussed above. Income Taxes The effective income tax rate was 30.9% and 35.8% in the six months ended August 31, 2003 and 2002, respectively. The decline in effective tax rate is attributable primarily to the fact that, beginning in the current year, adjustments to the deferred tax asset valuation allowance have a corresponding impact on the income tax provision or benefit reported in the consolidated statement of operations. Prior to fiscal 2004, reductions of the deferred tax asset valuation allowance were offset by increases in additional paid-in capital, and accordingly the effective income tax rate last year was not impacted by adjustments to the valuation allowance. See further discussion of the deferred tax asset valuation allowance in Note 5 to the accompanying unaudited financial statements. LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of liquidity are its cash and cash equivalents, which amounted to $23,080,000 at August 31, 2003, and its working capital line of credit with a bank. During the six months ended August 31, 2003, cash and cash equivalents increased by $1,133,000. This increase consisted of cash provided by operations of $3,115,000, proceeds from sale of fixed assets of $285,000, and proceeds from stock option exercises of $12,000, partially offset by cash used for capital expenditures of $978,000 and debt repayments of $1,301,000. Components of operating working capital decreased by $2,045,000 during the six months ended August 31, 2003, comprised of a decrease of $3,169,000 in accounts receivable, a decrease of $1,162,000 in inventory, an increase of $278,000 in prepaid expenses and other assets, a decrease of $222,000 in accounts payable, and a decrease of $1,786,000 in accrued payroll and other accrued liabilities. The Company believes that inflation and foreign currency exchange rates have not had a material effect on its operations. The Company believes that fiscal year 2004 will not be impacted significantly by foreign exchange since a significant portion of the Company's sales are to U.S. markets, or to international markets where its sales are denominated in U.S. dollars. At August 31, 2003, the Company had a $10 million working capital revolving line of credit with a commercial bank. Borrowings under this line of credit bear interest at LIBOR plus 2.0% or the bank's prime rate, and are secured by substantially all of the Company's assets. At August 31, 2003, there were no borrowings outstanding under the line of credit. At that date, there was $1,582,000 reserved under the line of credit for outstanding standby letters of credit, and an additional $2,225,000 reserved for outstanding trade letters of credit. The Company also has two bank term loans which had an aggregate outstanding principal balance of $14,273,000 at August 31, 2003. Following is a summary of the Company's contractual cash obligations as of August 31, 2003 (in thousands): Future Cash Payments Due by Fiscal Year --------------------------------------- Contractual 2004 There- Obligations (Remainder) 2005 2006 2007 2008 after Total - ------------- ------ ------ ------ ------ ------ ------ ------ Debt principal $1,713 $3,426 $4,423 $2,911 $1,800 $ - $14,273 Operating leases 379 433 681 699 699 2,328 5,219 ------ ------ ------ ------ ------ ------ ------ Total contractual cash obligations $2,092 $3,859 $5,104 $3,610 $2,499 $2,328 $19,492 ====== ====== ====== ====== ====== ====== ====== The Company believes that cash flow from operations, together with amounts available under its working capital line of credit, are sufficient to support operations, fund capital equipment requirements and discharge contractual cash obligations over the next twelve months. SAFE HARBOR STATEMENT Forward looking statements in this 10-Q which include, without limitation, statements relating to the Company's plans, strategies, objectives, expectations, intentions, projections and other information regarding future performance, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words "believes," "anticipates," "expects," and similar expressions are intended to identify forward-looking statements. These forward-looking statements reflect the Company's current views with respect to future events and financial performance and are subject to certain risks and uncertainties, including, without limitation, lack of product diversification, dependence upon a small number of customers, highly competitive markets, rapid technology changes affecting the Company's wireless access business, and other risks and uncertainties that are described under the heading "Risk Factors" in the Company's Annual Report on Form 10-K as filed with the SEC on May 30, 2003, copies of which may be obtained from the Company upon request, or directly from the SEC's website at http://www.sec.gov/. Such risks and uncertainties could cause future results to differ materially from historical results or from results presently anticipated. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be attained. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's financial instruments include cash equivalents, accounts receivable, accounts payable and bank term loans payable. At August 31, 2003, the carrying values of cash equivalents, accounts receivable and accounts payable approximate fair values given the short maturity of these instruments. The carrying value of bank term loans payable approximates fair value since the interest rates on these loans approximate the interest rates which are currently available to the Company for the issuance of debt with similar provisions and maturities. Based on the amount of bank debt outstanding at August 31, 2003, a change in interest rates of one percent would result in an annual impact of approximately $110,000, net of tax, on the Company's consolidated statement of income. A portion of the Company's operations consists of its investment in a foreign subsidiary. As a result, the consolidated financial results have been and could continue to be affected by changes in foreign currency exchange rates. However, the Company believes that it does not have material foreign currency exchange rate risk since its foreign subsidiary accounts for less than 10% of consolidated revenues, and a significant portion of the foreign subsidiary's sales, even though made in international markets, are denominated in U.S. dollars. Furthermore, the Company's purchases of raw materials and components from foreign suppliers are typically denominated in U.S. dollars. It is the Company's policy not to enter into derivative financial instruments for speculative purposes. Furthermore, the Company generally does not enter into foreign currency forward exchange contracts. There are no foreign currency forward exchange contracts outstanding at August 31, 2003. ITEM 4. CONTROLS AND PROCEDURES As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Rules 13a-15(b) and 15d-15(b) under the Securities Exchange Act of 1934 (the "Exchange Act"). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiary) required to be included in the Company's periodic SEC filings. During the period covered by this report there have been no significant changes in the Company's internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See Note 13 to the accompanying consolidated financial statements for a description of pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the 2003 Annual Meeting of Stockholders held on July 17, 2003, the six incumbent directors stood for reelection to a one year term expiring at the fiscal 2004 Annual Meeting. All six of the director nominees were reelected. Following is a summary of the results of the director voting: Votes Against or Votes For Withheld Unvoted -------- ------- ------- Ira Coron 10,659,614 2,819,838 1,266,360 Richard Gold 12,474,490 1,004,962 1,266,360 Arthur Hausman 12,479,584 999,868 1,266,360 Frank Perna 12,591,364 888,088 1,266,360 Thomas Ringer 12,595,304 884,148 1,266,360 Fred Sturm 12,592,219 887,233 1,266,360 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits Exhibit 31.1 - Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Exhibit 31.2 - Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Exhibit 32 - Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 b. Reports on Form 8-K: On June 19, 2003, the Company filed a report on Form 8-K that furnished a copy of its press release announcing the financial results for the Company's first quarter ended May 31, 2003. 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 thereunto duly authorized. October 2, 2003 /s/ Richard K. Vitelle - --------------------------------- ----------------------------------- Date Richard K. Vitelle Vice President Finance & CFO (Principal Financial Officer and Chief Accounting Officer) EX-31 3 exhibit_31-1.txt CEO SECTION 302 CERTIFICATION EXHIBIT 31.1 CHIEF EXECUTIVE OFFICER CERTIFICATION PURSUANT TO SARBANES-OXLEY ACT SECTION 302 I, Fred M. Sturm, Chief Executive Officer of California Amplifier, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of California Amplifier, Inc. (the "registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. October 2, 2003 /s/ Fred M. Sturm ------------------------ ----------------------------- Date Fred M. Sturm Chief Executive Officer EX-31 4 exhibit_31-2.txt CFO SECTION 302 CERTIFICATION EXHIBIT 31.2 CHIEF FINANCIAL OFFICER CERTIFICATION PURSUANT TO SARBANES-OXLEY ACT SECTION 302 I, Richard K. Vitelle, Chief Financial Officer of California Amplifier, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of California Amplifier, Inc. (the "registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. October 2, 2003 /s/ Richard K. Vitelle ------------------------ ----------------------------- Date Richard K. Vitelle Chief Financial Officer EX-32 5 exhibit_32.txt OFFICERS' SECTION 906 CERTIFICATION EXHIBIT 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of California Amplifier, Inc. (the "Company") on Form 10-Q for the period ended August 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Fred M. Sturm, President and Chief Executive Officer of the Company, and Richard K. Vitelle, Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Fred M. Sturm ----------------------------- Fred M. Sturm President and Chief Executive Officer /s/ Richard K. Vitelle ----------------------------- Richard K. Vitelle Vice President and Chief Financial Officer October 2, 2003 -----END PRIVACY-ENHANCED MESSAGE-----