-----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, K/HGUssFLqyAxsD4Y7pWryXAWMR0AvS/YKMscpO8g4lerxoyHhF3WXmd54FREUgy oCvgwIcRTR5ZwzAjA34g2A== 0000800460-99-000002.txt : 19990211 0000800460-99-000002.hdr.sgml : 19990211 ACCESSION NUMBER: 0000800460-99-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALIFORNIA MICRO DEVICES CORP CENTRAL INDEX KEY: 0000800460 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS & ACCESSORIES [3670] IRS NUMBER: 942672609 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15449 FILM NUMBER: 99528704 BUSINESS ADDRESS: STREET 1: 215 TOPAZ ST CITY: MILPITAS STATE: CA ZIP: 95035-5430 BUSINESS PHONE: 4082633214 MAIL ADDRESS: STREET 1: 215 TOPAZ STREET STREET 2: 215 TOPAZ STREET CITY: MILPITAS STATE: CA ZIP: 95035-5430 10-Q 1 United States SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ x ] Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act Of 1934 For the Period Ended December 31, 1998 or [ ] Transition Report Pursuant to Section 10 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period From ____________ to ___________ Commission File Number 0-15449 CALIFORNIA MICRO DEVICES CORPORATION ------------------------------------ (Exact name of registrant as specified in its charter) California 94-2672609 ---------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 215 Topaz Street, Milpitas, California 95035-5430 -------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (408) 263-3214 -------------- (Registrant's telephone number, including area code) Not applicable -------------- (Former name, former address, and former fiscal year if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Applicable Only to Corporate Issuers Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of December 31, 1998, there were outstanding 10,081,293 shares of Issuer's Common Stock. CALIFORNIA MICRO DEVICES CORPORATION INDEX PART I. FINANCIAL INFORMATION Page Number Item 1. Financial Statements Condensed Statements of Operations Three and Nine Months Ended December 31, 1998 and 1997 3 Condensed Balance Sheets December 31, 1998 and March 31, 1998 4 Condensed Statements of Cash Flows Nine Months Ended December 31, 1998 and 1997 5 Notes to Condensed Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 1. Legal Proceedings 11 Item 6. Exhibits and Reports on Form 8-K 12 Signature 13 ii PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements. -------------------- CALIFORNIA MICRO DEVICES CORPORATION CONDENSED STATEMENTS OF OPERATIONS (Amounts in Thousands, Except Per Share Data) (Unaudited) Three Months Ended Nine Months Ended December 31, December 31, ------------------ ----------------- 1998 1997 1998 1997 ------ ------ ------ ------ Revenues: Net product sales $ 8,529 $ 7,702 $25,089 $23,764 Technology related revenues - 150 - 531 ------- ------- ------- ------- Total revenues 8,529 7,852 25,089 24,295 Cost and expenses: Cost of sales 6,072 5,972 18,860 17,084 Research and development 1,004 719 2,680 2,298 Selling, marketing and administrative 1,889 1,904 5,296 5,902 ------- ------- ------- ------- Total costs and expenses 8,965 8,595 26,836 25,284 ------- ------- ------- ------- Operating loss (436) (743) (1,747) (989) Other expense, net 190 142 495 396 ------- ------- ------- ------- Loss before income taxes (626) (885) (2,242) (1,385) Income taxes - - - - ======= ======= ======= ======= Net loss $ (626) $ (885) $(2,242) $(1,385) ======= ======= ======= ======= Basic and diluted net loss per share $ (0.06) $ (0.09) $ (0.22) $ (0.14) ======= ======= ======= ======= Weighted average common shares outstanding 10,020 9,881 9,998 9,824 ======= ======= ======= =======
The accompanying notes are an integral part of these condensed financial statements. CALIFORNIA MICRO DEVICES CORPORATION CONDENSED BALANCE SHEETS (Amounts in Thousands, Except Share Data) December 31, March 31, 1998 1998 ----------- ---------- (unaudited) ASSETS: - ------- Current assets: Cash and short-term securities $ 389 $ 480 Short-term investments 3,659 5,110 Accounts receivable, less allowance for doubtful accounts of $297 and $398 4,554 5,087 Inventories 8,090 8,092 Other assets 654 986 ------- ------ Total current assets 17,346 19,755 Property, plant & equipment, net 12,029 12,925 Restricted cash 3,260 2,909 Other long term assets 471 405 ------- ------ Total assets $33,106 $35,994 ======= ======= LIABILITIES & SHAREHOLDERS' EQUITY: - ----------------------------------- Current liabilities: Accounts payable $ 2,982 $ 3,328 Accrued salaries and benefits 885 1,008 Other accrued liabilities 699 802 Deferred margin on shipments to distributors 521 581 Current maturities of long-term debt and capital lease obligations 500 489 ------- ------ Total current liabilities 5,587 6,208 Long-term debt, less current maturities 7,185 7,185 Capital lease obligations, less current maturities 692 974 ------- ------ Total liabilities 13,464 14,367 Shareholders' equity: Common stock-no par value; authorized 25,000,000;issued and outstanding 10,081,293 and 9,978,151 53,259 53,011 Retained earnings (33,617) (31,384) ------- ------ Total shareholders' equity 19,642 21,627 ------- ------ Total liabilities and shareholders' equity $33,106 $35,994 ======= =======
The accompanying notes are an integral part of these condensed financial statements. CALIFORNIA MICRO DEVICES CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (Amounts in Thousands) (Unaudited) Nine Months Ended December 31, ----------------- 1998 1997 ------- ------- Cash flows from operating activities: Net loss $ (2,242) $ (1,385) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,165 2,133 Net decrease /(increase) in inventories 2 (611) Net decrease/(increase) in accounts receivable 533 (363) Net decrease/(increase) in prepaid expenses and other current assets 332 (361) Net decrease in trade accounts payable and other current liabilities (572) (235) Net (decrease)/increase in other long term assets (66) 12 (Decrease)/increase in deferred margin on distributor sales (60) 63 ------- ------- Net cash from (used in) operating activities 92 (747) ------- ------- Cash flows from investing activities: Securities purchases (3,163) (3,927) Securities sales 4,623 5,003 Capital expenditures (1,269) (1,083) Net change in restricted cash (351) (334) ------- ------- Net cash used in investing activities (160) (341) ------- ------- Cash flows from financing activities: Repayments of capital lease obligations (271) (266) Proceeds from issuance of common stock 248 1,011 ------- ------- Net cash (used in)/from financing activities (23) 745 ------- ------- Net decrease in cash and cash equivalents (91) (343) Cash and cash equivalents at beginning of period 480 343 ------- ------- Cash and cash equivalents at end of period $ 389 $ - ======= ====== Supplemental disclosures of cash flow information: Interest paid $ 476 $ 512 Income taxes paid $ - $ - Supplemental disclosures of non-cash investing and financing activities: Unrealized gain/(loss) on securities $ 9 $ (34) Capital expenditures financed through capital lease obligations $ - $ 163
The accompanying notes are an integral part of these condensed financial statements. CALIFORNIA MICRO DEVICES CORPORATION Notes to Condensed Financial Statements 1. Basis of presentation --------------------- In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments (which include only normal recurring accruals) necessary to present fairly California Micro Devices Corporation's (the Company) financial position as of December 31, 1998, results of operations for the three and nine month periods ended December 31, 1998 and 1997, and cash flows for the nine-month periods ended December 31, 1998 and 1997. Results for the quarter are not necessarily indicative of fiscal year results. The condensed financial statements should be read in conjunction with the financial statements included with the Company's annual report on Form 10-K for the fiscal year ended March 31, 1998. 2. Use of Estimates ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. Inventories ----------- The components of inventory consist of the following (amounts in thousands): December 31, March 31, 1998 1998 ---------- --------- Raw materials $ 547 $ 775 Work-in-process 5,716 5,480 Finished goods 1,827 1,837 ------ ------ $8,090 $8,092 ====== ======
4. Litigation ---------- Reference should be made to the Company's filings with the SEC, including its report on Form 10-K for its fiscal year ended March 31, 1998, and its reports on Form 10-Q for the quarters ended June 30, 1998 and September 30, 1998. The Company is a party to or target of lawsuits, claims, investigations, and proceedings, including commercial and employment matters, which are being handled and defended in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the financial condition or overall trends in the results of operation of the Company. The Company believes, with regard to these matters and those previously reported, it has, to the best of its knowledge, made such adjustments to its financial statements by means of reserves and expensing the costs thereof, that these matters will not have any additional material adverse impact on the Company's financial condition. 5. Net Loss Per Share ------------------ Basic earnings per common share are computed using the weighted-average number of common shares outstanding during the period. Diluted earnings per common share incorporate the incremental shares issuable upon the assumed exercise of stock options and other dilutive securities. Diluted earnings per common share are calculated in the same manner as the Company's basic earnings per common share. 6. Adoption of FAS 130 ------------------- Effective in the first quarter of fiscal year 1999, the Company adopted Statement 130, Reporting Comprehensive Income. Statement 130 establishes new rules for the reporting and display of comprehensive income and its components; however, the adoption of this Statement had no impact on the Company's net income or shareholders' equity. Statement 130 requires unrealized gains or losses on the Company's available-for-sale securities, which prior to adoption were reported separately in stockholders' equity to be included in other comprehensive income. Prior year financial statements have been reclassified to conform to the requirements of Statement 130. Comprehensive loss for the three months ended December 31, 1998 and 1997 was $617,000 and $919,000, respectively. 7. Subsequent Events ----------------- In January 1999, the Company borrowed $650,000 under a credit agreement collateralized by certain equipment. The term of the agreement is 42 months, carries an interest rate of 9.9%, and has a prepayment option. ITEM 2. Management's Discussion and Analysis of Financial ------------------------------------------------- Condition and Results of Operations. ----------------------------------- Results of Operations Product sales for the quarter ended December 31, 1998, increased by $827,000, or 11%, compared to the quarter ended December 31, 1997. Unit shipments increased 26% to 14.4 million units in the December 31, 1998 quarter compared to 11.5 million units in the year-earlier quarter. The increase in product sales was primarily due to increased sales of the Company's P/Active? family of products to the personal computer ("PC") market. Thin film products accounted for approximately 71% of product sales and approximately 84% of units shipped for the quarter ended December 31, 1998 compared to 66% of product sales and 78% of units shipped in the year-earlier period. Within the thin film category, sales of the newer thin film PAC? products, including the P/Active? family, increased to 27% of total product sales and 36% of total units shipped compared to 21% of total dollar sales and 27% of total units shipments in the year ago quarter. Product sales for the nine months ended December 31, 1998, increased by $1,325,000, or 6%, due to increased sales of the Company's PAC? family of products. Units' shipments increased 18% in the nine-month period ended December 31, 1998, compared to the year-earlier period. Thin film products represented approximately 67% of product sales and approximately 80% of unit shipments, for both the nine months periods ended December 31, 1998 and 1997. However, sales of the newer thin film PAC? products, including P/Active?, increased to 26% of total product sales and 37% of total units shipments in the nine months ended December 31, 1998, compared to 14% and 18%, respectively, in the year-earlier period, offset by decreases in older thin film products. There was no technology related revenue for the three and nine months ended December 31, 1998, compared to technology revenues of $150,000 and $531,000 for the three and nine months ended December 31, 1997, respectively, due to lack of participation by Hitachi Metals, Ltd. (HML) in shared engineering projects. The Company does not expect to receive revenue from HML for joint research and development in the future. Gross margins on product sales increased to 28.8% in the December 31, 1998 quarter compared to 22.5% in the December 31, 1997, quarter due to improved yields and cost reductions. Compared to a year ago year-to-date gross margins are lower due to a changing mix of products, continued pricing pressure in the PC market, .and a lower mix of products for the US telecommunications market. R&D expense was $1,004,000 and $2,680,000 for the three and nine months ended December 31, 1998 compared with $719,000 and $2,298,000 in the year earlier periods. The increase both for the quarter and year-to-date was due primarily to increased material costs related to several new product developments. Selling, marketing and administrative expenses were $1,889,000 and $5,296,000 for the three and nine months ended December 31, 1998, compared to $1,904,000 and $5,902,000 in the year earlier periods. The reduction in administrative expense for the nine months ended December 31, 1998 was due to the receipt of a one-time insurance settlement in June 1998. As a result of the factors discussed above, the operating (loss) for the three and nine months ended December 31, 1998 and 1997, was ($436,000) and ($1,747,000), respectively, compared with ($743,000) and ($989,000), respectively, in the year earlier periods. Other expense (net) for the three and nine months ended December 31, 1998, was $190,000 and $495,000 as compared to net expense of $142,000 and $396,000 in the year earlier periods. The increase for the three month period compared to the year-earlier period is due primarily to the settlement of a patent litigation and the increase for the nine month period is due primarily to that settlement and reduced interest income from investments. No income taxes were accrued for the three and nine months ended December 31, 1998, or 1997, due to the availability of tax loss carry forwards and current periods losses. The weighted average common shares outstanding were 10,020,000 shares and 9,998,000 shares for the three and nine months ended December 31, 1998, respectively, compared to 9,881,000 shares and 9,824,000 shares, respectively, in the year earlier periods. The increase of shares during the current periods was partly due to the issuance of 30,000 shares of restricted common stock issued as part of the above mentioned settlement of patent litigation. This increase also included the issuance of 66,342 shares of common stock through the employee stock purchase plan during the nine months ended December 31, 1998. Earnings (loss) per share were $(0.06) and $(0.22) for the three months and nine months ended December 31, 1998, compared to $(0.09) and $(0.14) for the year earlier periods, respectively. Liquidity and Capital Resources Net cash, cash equivalents and short-term investments as of December 31, 1998, decreased $1,542,000 from March 31, 1998, primarily due to capital expenditures of $1,269,000 for equipment, and payment of capital lease obligations of $271,000. A decrease in accounts receivable of $533,000 was offset by a reduction in accounts payable and other current liabilities of $572,000. The Company has a $3.0 million line of credit agreement that expires on July 31, 1999. Under the terms of the line of credit, the Company can borrow up to $3.0 million at prime, collateralized by short-term investments managed by the bank. There were no bank borrowings at December 31, 1998 and 1997 and there were no borrowings during fiscal 1998 and 1997. The Company is in compliance with its financial covenants. In January 1999, the Company borrowed $650,000 under a credit agreement collateralized by certain equipment. The term of the agreement is 42 months, carries an interest rate of 9.9%, and has a prepayment option. The Company expects to fund its future liquidity needs through its existing cash balances, cash flows from operations, bank borrowings, and equipment lease and loan financing arrangements. Depending on market conditions and the results of operations, the Company may pursue other sources of liquidity. The Company believes that it has sufficient financial resources to fund its operations for at least the next twelve months. Impact of Year 2000 Many computer systems employ a two-digit date field and could experience problems beyond the year 1999. Also, some systems assign special meaning to certain dates, such as 9/9/99, and the year 2000 is a leap year, which some systems may not recognize. The Company has evaluated its management information systems (MIS) and has developed a plan, as described herein, to convert all of its MIS applications to year 2000 compliant versions by March 31, 1999. This plan is intended to encompass all major categories of systems in use by the Company, including manufacturing, sales, finance and human resources. California Micro Devices utilizes software packages supplied by outside vendors for all of its mission critical applications. These software vendors have supplied the Company with versions of their software that they have certified to be year 2000 compliant. However, the Company recognizes that relying on certification statements alone could potentially place its systems at risk if some level of integration and system level testing is not also performed. To ensure that these applications work in CMD's environment, the Company has completed a consolidated, system level test plan that incorporated testing each of the key applications. The positive results of these tests have allowed the Company to proceed with its migration plan to year 2000 compliant systems and the Company expects to be fully converted by the end of fiscal year 1999 (March 31, 1999). As a result of the above progress, the Company has not formulated formal contingency plans regarding conversion to year 2000 compliant critical systems. Should any unforeseen difficulties arise in the implementation of these software packages, the Company would convert to alternate software packages. The Company has completed its evaluation of computers and software utilized in its manufacturing operations. Nothing has come to the attention of the Company that would indicate a material impact of year 2000 issues on the Company's results of operation or financial condition. The Company is also evaluating the possible impact of year 2000 issues on its key suppliers and subcontractors. Noncompliance with year 2000 issues on the part of key suppliers and subcontractors could result in disruption of the Company's operations. However, the potential impact and related costs are not known at this time. The out-of-pocket expenditures incurred to date related to these programs are less than $200,000. The Company currently expects that the total incremental expenditures of these programs will not exceed $500,000. Most of these expenditures involve new capital equipment that will amortize over a three to five year period. The costs of the project and the date on which the Company believes it will complete the year 2000 modifications are based on management's best estimates, which were derived utilizing numerous assumptions of future events, including the continued availability of certain resources, third- party modification plans and other factors. There can be no assurance that these estimates will be achieved and actual results could differ materially from those anticipated. Based on currently available information, management does not believe that the year 2000 matters discussed above related to internal systems or products sold to customers will have a material adverse impact on the Company's financial condition or overall trends in results of operations. However, it is uncertain to what extent the Company may be affected by such matters. In addition, there can be no assurance that the failure to ensure year 2000 capability by a supplier or another third party would not have a material adverse effect on the Company. Cautionary Statement This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended. Except for the historical information contained in this discussion of the business and the discussion and analysis of financial condition and results of operations, the matters discussed herein are forward-looking statements. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward- looking statements regarding revenues, orders, and sales involve a number of risks and uncertainties, including but not limited to, demand for the Company's product, pricing pressures which could affect the Company's gross margin or the ability to consummate sales, unit volumes, intense competition within the industry, the Company's ability to attract and retain high quality people, the need for the Company to keep pace with technological developments and respond quickly to changes in customer needs, the Company's dependence on third party suppliers for components for its products, cost reductions, year 2000 issues, and the Company's dependence upon intellectual property rights which, if not available to the Company, could have a material adverse effect on the Company. These same factors, as well as others, such as the continuing litigation involving the Company, could also affect the liquidity needs of the Company. Actual results could differ materially from those projected in the forward-looking statements as a result of factors set forth above and elsewhere in this Form 10-Q. PART II. OTHER INFORMATION ITEM 1. Legal Proceedings. ----------------- Reference should be made to the Company's filings with the SEC, including its report on Form 10-K for its fiscal year ended March 31, 1998, and its report on Form 10-Q for the quarters ended June 30, 1998 and September 30, 1998. The Company is a party to or target of lawsuits, claims, investigations, and proceedings, including commercial and employment matters, which are being handled and defended in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the financial condition or overall trends in the results of operation of the Company. The Company believes, with regard to these matters and those previously reported, it has, to the best of its knowledge, made such adjustments to its financial statements by means of reserves and expensing the costs thereof, that these matters will not have any additional material adverse impact on the Company's financial condition. ITEM 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit 27 Financial Data Schedule* (b) Reports on Form 8-K On November 30, 1998, the Company filed a Form 8-K, under Item 5, reporting the release of certain information regarding the Company's new officer. *Exhibit on EDGAR filing only. SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CALIFORNIA MICRO DEVICES CORPORATION ------------------------------------ (Registrant) Date: February 11, 1999 /s/ John E. Trewin --------------------------- John E. Trewin Vice President and Chief Financial Officer EX-27 2
5 3-MOS MAR-31-1999 DEC-31-1998 $ 389 $ 3,659 $ 4,851 $ (297) $ 8,090 $ 17,346 $ 26,745 $ (14,716) $ 33,106 $ 5,587 $ 0 $ 0 $ 0 $ 53,259 $ (33,617) $ 33,106 $ 8,529 $ 8,529 $ 6,072 $ 6,072 $ 2,877 $ 0 $ 206 $ (626) $ 0 $ 0 $ 0 $ 0 $ 0 $ (626) $ (0.08) $ (0.08) Includes - Other assets $654K. Includes - Restricted cash $3,260K; Other long term assets $471K. Includes - Research and development $1,004K; Selling, marketing and administrative $1,889; Interest (income) $(59K); and Other income (expense) $43K.
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