UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
Amendment Number 1 to
/x/ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended: May 29, 1999
OR
| / / | 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: 012182
CALIFORNIA AMPLIFIER, INC.
(Exact name of registrant as specified in its charter)
| Delaware (State or Other jurisdiction of incorporation or organization) |
95-3647070 (IRS Employer Identification No.) |
|
460 Calle San Pablo Camarillo, California (Address of principal executive offices) |
93012 (Zip Code) |
(805) 987-9000
(Registrant's telephone number including area code)
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 the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report.
Common Stock Outstanding as of May 29, 1999: 11,798,297
Number of pages in this From 10-Q/A: 16
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except par value)
| |
May 29, 1999 |
Feb. 27,1999 |
||||||
|---|---|---|---|---|---|---|---|---|
| |
(Unaudited) (As Restated, see Note 1) |
|
||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 6,207 | $ | 9,312 | ||||
| Accounts receivable, net | 8,780 | 5,002 | ||||||
| Inventories | 3,980 | 3,974 | ||||||
| Deferred tax asset | 1,572 | 1,597 | ||||||
| Prepaid expenses and other current assets | 548 | 446 | ||||||
| Total current assets | 21,087 | 20,331 | ||||||
Property and equipment, at cost, net of accumulated depreciation and amortization |
5,023 |
4,498 |
||||||
| Goodwill, net of amortization | 3,843 | — | ||||||
| Other assets | 700 | 720 | ||||||
| $ | 30,653 | $ | 25,549 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 4,106 | $ | 2,644 | ||||
| Accrued liabilities | 2,094 | 1,613 | ||||||
| Current portion of long-term obligations | 3,634 | 597 | ||||||
| Total current liabilities | 9,834 | 4,854 | ||||||
Long-term debt |
430 |
516 |
||||||
| Minority interest share in net assets of Micro Pulse, Inc. | 112 | 114 | ||||||
Commitments and contingencies |
||||||||
Stockholders' equity: |
||||||||
| Preferred stock, 3,000 shares authorized; no shares issued and outstanding | — | — | ||||||
| Common stock, $.01 par value; 30,000 shares authorized; 11,798 shares outstanding in May 1999 and 11,785 shares outstanding in February 1999 | 118 | 118 | ||||||
| Additional paid-in capital | 14,093 | 14,050 | ||||||
| Accumulated other comprehensive loss | (240 | ) | (170 | ) | ||||
| Retained earnings | 6,306 | 6,067 | ||||||
| Total stockholders' equity | 20,277 | 20,065 | ||||||
| $ | 30,653 | $ | 25,549 | |||||
See Notes to Unaudited Consolidated Financial Statements
2
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands, except per share data)
| |
Three Months Ended |
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|---|---|---|---|---|---|---|---|---|
| |
May 29, 1999 |
May 30, 1998 |
||||||
| |
(As Restated, see Note 1) |
|
||||||
| Sales | $ | 12,928 | $ | 9,060 | ||||
| Cost of sales | 9,285 | 6,267 | ||||||
| Gross profit | 3,643 | 2,793 | ||||||
Research and development |
1,143 |
1,216 |
||||||
| Selling | 1,073 | 1,246 | ||||||
| General and administrative | 1,104 | 1,071 | ||||||
| Income (loss) from operations | 323 | (740 | ) | |||||
Interest and other income (expense), net |
48 |
(6 |
) |
|||||
| Minority interest share in (income) loss of Micro Pulse | 2 | (12 | ) | |||||
| Income (loss) before tax | 373 | (758 | ) | |||||
| (Provision for) benefit from income taxes | (134 | ) | 273 | |||||
| Net income (loss) | $ | 239 | $ | (485 | ) | |||
| Net income (loss) per share | ||||||||
| Basic | $ | 0.02 | $ | (0.04 | ) | |||
| Diluted | $ | 0.02 | $ | (0.04 | ) | |||
| Shares used in per share calculations | ||||||||
| Basic | 11,791 | 11,780 | ||||||
| Diluted | 12,346 | 11,780 | ||||||
See Notes to Unaudited Consolidated Financial Statements
3
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)
| |
Three Months Ended |
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|---|---|---|---|---|---|---|---|---|---|
| |
May 29, 1999 |
May 30, 1998 |
|||||||
| |
(As Restated, see Note 1) |
|
|||||||
| Cash flows from operating activities: | |||||||||
| Net income (loss) | $ | 239 | $ | (485 | ) | ||||
| Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | |||||||||
| Provision for doubtful accounts | 30 | — | |||||||
| Depreciation and amortization | 661 | 787 | |||||||
| Loss on sale of property and equipment | 2 | 6 | |||||||
| Minority interest share in income (loss) of Micro Pulse, net of tax | (2 | ) | 12 | ||||||
| Deferred tax asset | 25 | (27 | ) | ||||||
| Change in assets and liabilities, net of effect of Gardiner acquisition in fiscal year 2000: | |||||||||
| Accounts receivable | (3,402 | ) | 582 | ||||||
| Inventories | 794 | 490 | |||||||
| Prepaid expenses and other assets | 183 | 151 | |||||||
| Accounts payable | 1,462 | 18 | |||||||
| Accrued liabilities | (157 | ) | (290 | ) | |||||
| Net cash (used in) provided by operating activities | (165 | ) | 1,244 | ||||||
| Cash flows from investing activities: | |||||||||
| Purchase of property and equipment | (17 | ) | (272 | ) | |||||
| Net assets acquired from Gardiner | (2,747 | ) | — | ||||||
| Net cash used in investing activities | (2,764 | ) | (272 | ) | |||||
| Cash flows from financing activities: | |||||||||
| Debt repayments | (149 | ) | (292 | ) | |||||
| Issuances of common stock | 43 | 17 | |||||||
| Net cash used in financing activities | (106 | ) | (275 | ) | |||||
| Effect of foreign exchange rates | (70 | ) | — | ||||||
Net (decrease) increase in cash and cash equivalents |
(3,105 |
) |
697 |
||||||
| Cash and cash equivalents at the beginning of period | 9,312 | 4,422 | |||||||
| Cash and cash equivalents at end of period | $ | 6,207 | $ | 5,119 | |||||
See Notes to Unaudited Consolidated Financial Statements
4
CALIFORNIA AMPLIFIER, INC.
Notes to Unaudited Consolidated Financial Statements
(As Restated)
1. Basis of Presentation—The accompanying unaudited consolidated financial statements have been prepared in accordance with the requirements of Form 10-Q and, therefore, do not include all information and footnotes which would be presented were such financial statements prepared in accordance with generally accepted accounting principles. These statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended February 27, 1999. In the opinion of management, these interim financial statements reflect all adjustments necessary for a fair presentation of the financial position and results of operations for each of the periods presented. The results of operations and cash flows for such periods are not necessarily indicative of results to be expected for the full fiscal year.
Restatement of the three Months ended May 29, 1999—On March 29, 2001, the Company announced that during preparation for the Company's fiscal 2001 audit, the corporate controller abruptly resigned and advised management by letter that he had made certain improper adjustments to the Company's accounting records that caused a reduction in recorded expenses. The Company began an investigation into the circumstances reported by the controller and determined that expenses had been inappropriately reduced. As part of its investigation, the Company reviewed substantially all of the journal entries input by the controller and reviewed the general ledger closings for each period in fiscal 2000. The investigation revealed that the controller had reduced reported expenses through the posting of improper journal entries and irregularities in the consolidation of its Hong Kong subsidiary. All of these improper journal entries and irregularities were previously unknown to the Company's management.
The Company has determined the effect of these irregularities and other errors on its previously issued financial statements and has restated the accompanying financial statements for the three months ended May 29, 1999. The improper journal entries have been reversed, and the general ledger closings for each period within the fiscal year have been re-performed and properly consolidated with the accounts of the Company's Hong Kong subsidiary.
In the process of reclosing interim financial statements, the Company identified minor discrepancies which are corrected in the accompanying unaudited interim financial statements.
The Company's investigation determined that there has been no misappropriation of cash or other assets.
Statement of Operations Data
(in thousands)
| |
Three Months Ended May 29, 1999 |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| |
As Originally Reported |
Restatement Adjustments |
As Restated |
||||||||
| Sales | $ | 13,093 | $ | (165 | ) | $ | 12,928 | ||||
| Cost of sales | 9,180 | 105 | 9,285 | ||||||||
| Gross profit | 3,913 | (270 | ) | 3,643 | |||||||
| Operating expenses | 3,386 | (66 | ) | 3,320 | |||||||
| Other income, net | 33 | 17 | 50 | ||||||||
| Provision for income taxes | (202 | ) | 68 | (134 | ) | ||||||
| Net income | 358 | (119 | ) | 239 | |||||||
| Net per share— | |||||||||||
| Basic | $ | 0.03 | $ | (0.01 | ) | $ | 0.02 | ||||
| Diluted | $ | 0.03 | $ | (0.01 | ) | $ | 0.02 | ||||
5
Balance Sheet Data
(in thousands)
| |
As of May 29, 1999 |
||||||||
|---|---|---|---|---|---|---|---|---|---|
| |
As Originally Reported |
Restatement Adjustments |
As Restated |
||||||
| Cash and cash equivalents | $ | 6,280 | $ | (73 | ) | $ | 6,207 | ||
| Accounts receivable, net | 8,376 | 404 | 8,780 | ||||||
| Inventories | 4,091 | (111 | ) | 3,980 | |||||
| Deferred tax asset | 1,505 | 67 | 1,572 | ||||||
| Prepaid expenses and other current assets | 544 | 4 | 548 | ||||||
| Property and equipment, net | 5,649 | (626 | ) | 5,023 | |||||
| Goodwill, net of amortization | 3,826 | 17 | 3,843 | ||||||
| Other assets | 481 | 219 | 700 | ||||||
| Accounts payable | 4,172 | (66 | ) | 4,106 | |||||
| Accrued liabilities | 2,006 | 88 | 2,094 | ||||||
| Stockholders' equity | 20,398 | (121 | ) | 20,277 | |||||
2. Inventories—Inventories include the cost of material, labor and manufacturing overhead and are stated at the lower of cost (first-in, first-out) or market and consist of the following (in thousands):
| |
May 29, 1999 |
Feb. 27, 1999 |
||||
|---|---|---|---|---|---|---|
| Raw materials | $ | 2,328 | $ | 2,441 | ||
| Work in process | 49 | 40 | ||||
| Finished goods | 1,603 | 1,493 | ||||
| $ | 3,980 | $ | 3,974 | |||
3. Comprehensive Income (Loss)—Effective March 1, 1998, the Company adopted the provisions of SFAS No. 130, "Reporting Comprehensive Income" which establishes standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. Comprehensive income is defined as the total of net income and all non-owner changes in equity. The following table details the components of comprehensive income for the three months ended May 29, 1999 and May 30, 1998 (in thousands):
| |
Quarter Ended May 29, 1999 |
Quarter Ended May 30, 1998 |
|||||
|---|---|---|---|---|---|---|---|
| Net income (loss) | $ | 239 | $ | (485 | ) | ||
| Foreign currency translation adjustment, net of tax | (70 | ) | (24 | ) | |||
| Comprehensive income (loss) | $ | 169 | $ | (509 | ) | ||
4. Segments
In June 1997, the FASB introduced SFAS No. 131 "Disclosures About Segments of an Enterprise and Related Information." In conjunction with the Company's reorganization into business units in January 1998, the Company adopted SFAS No. 131 in fiscal year 1999, and will be applied on a limited basis to interim periods thereafter. The adoption of this standard had no effect on the Company's
6
financial position or results of operations, but did change the presentation of segment information as presented below (in thousands):
| |
Three Months Ended May 29, 1999 |
|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
Satellite |
Wireless Access |
Antenna |
Corporate |
Total |
|||||||||||
| Sales | $ | 6,866 | $ | 4,969 | $ | 1,093 | $ | — | $ | 12,928 | ||||||
| Gross Profit | 1,796 | 1,381 | 466 | — | 3,643 | |||||||||||
| Gross Margin | 26.2 | % | 27.8 | % | 42.6 | % | — | 28.2 | % | |||||||
| Income (Loss) Before Tax | 1,093 | 200 | (1 | ) | (919 | ) | 373 | |||||||||
| |
Three Months Ended May 29, 1998 |
|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
Satellite |
Wireless Access |
Antenna |
Corporate |
Total |
|||||||||||
| Sales | $ | 2,202 | $ | 5,552 | $ | 1,306 | $ | — | $ | 9,060 | ||||||
| Gross Profit | 704 | 1,549 | 540 | — | 2,793 | |||||||||||
| Gross Margin | 32.0 | % | 27.9 | % | 41.3 | % | — | 30.8 | % | |||||||
| Income (Loss) Before Tax | 32 | 150 | (22 | ) | (918 | ) | (758 | ) | ||||||||
5. Acquisition and Pro Forma Results of Operations
On April 19, 1999, the Company acquired the technology and product rights to substantially all of Gardiner Communications Corp.'s ("Gardiner") products, inventory, and manufacturing and development related equipment. The total purchase price, including the assumption of certain liabilities and certain costs incurred in connection with the acquisition was approximately $9.3 million. The Company paid approximately $2.8 million in cash on closing and will pay approximately $3.4 million in cash on or about August 30, 1999 for additional inventory and equipment. Gardiner received a $3.1 million, 8% one year promissory note due April 19, 2000. A portion of the debt can be converted into 525,000 shares of the Company's common stock at the lower per share conversion price equal to $4.25 or the average closing sales price of the Company's common stock for the immediate twenty trading days prior to conversion. As part of the purchase, the Company recorded Goodwill of $3.9 million which is being amortized over 15 years.
The following pro forma combines the operations of the Company and Gardiner as if the acquisition had occurred at the beginning of each of the respective periods (in thousands):
| |
3 Months May 29, 1999 |
3 Months May 30, 1998 |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
As Reported |
Pro forma |
As Reported |
Pro forma |
|||||||||
| Sales | $ | 12,928 | $ | 14,928 | $ | 9,060 | $ | 13,248 | |||||
Net Income (Loss) |
$ |
239 |
$ |
399 |
$ |
(485 |
) |
$ |
(229 |
) |
|||
Net Income (Loss) Per Diluted Share |
$ |
.02 |
$ |
.03 |
$ |
(.04 |
) |
$ |
(.02 |
) |
|||
6. Statement of Cash Flows—In fiscal year 2000, the Company recorded goodwill of $3.9 million in conjunction with the acquisition of certain assets from Gardiner Communications and issued a note payable for $3.1 million. The non-cash portion of this acquisition was excluded from the statement of cash flows.
7. Subsequent Events
On June 11, 1997, the Company and certain of its directors and officers had two legal actions filed against them, one in the United States District Court, Central District of California, entitled Yourish v. California Amplifier, Inc., et al., Case No. 97-4293 CBM (Mcx), and the other in the Superior Court for the State of California, County of Ventura, entitled Yourish v. California Amplifier, Inc. et al., Case No.
7
CIV 173569. On June 30, 1997, another legal action was filed against the same defendants in the Superior Court for the State of California, County of Ventura, entitled Burns, et al., v. California Amplifier, Inc., et al., Case No. CIV 173981. All three actions were purported class actions on behalf of purchasers of the common stock of the Company between September 12, 1995 and August 8, 1996. The actions claimed that the defendants engaged in a scheme to make false and misleading statements and omit to disclose material adverse facts to the public concerning the Company, allegedly causing the Company's stock price to artificially rise, and thereby allegedly allowing the individual defendants to sell stock at inflated prices. Plaintiffs claimed that the purported stockholder class was damaged when the price of the stock declined upon disclosure of the alleged adverse facts. On September 21, 1998, the Federal legal action was dismissed in the United States District Court. The dismissal was upheld by the U.S. Court of Appeals for the Ninth Circuit on October 8, 1999.
On March 27, 2000 the trial began for the lawsuit filed in the Superior Court for the State of California, County of Ventura, entitled Yourish v. California Amplifier, Inc., et al., Case No. CIV 173569. On March 29, 2000 the parties reached a settlement. Under terms of the settlement the Company will issue 187,500 shares of its common stock along with a cash payment of $3.5 million, funded in part by insurance proceeds, for a total settlement of approximately $11.0 million, of which $9.5 million was accrued in the consolidated financial statements for the year ended February 26, 2000. By Order dated September 14, 2000, the court approved the terms of the settlement and dismissed the action with prejudice. As of November 25, 2000, the Company had issued 65,625 of the 187,500 shares and paid $2.5 million of the $3.5 million, with one of its insurance carriers paying the remaining $1.0 million.
In connection with the settlement of the Yourish action, the Company and certain of its former and current officers and directors have filed a lawsuit (California Amplifier, Inc., et al. v. RLI Insurance Company, et al., Ventura County Superior Court Case No. CIV196258), against one of its insurance carriers to recover $2.0 million of coverage the insurance carrier has stated was not covered under its policy of insurance. The insurance carrier filed a Motion for Judgment on the Pleadings seeking judgment on the basis, inter alia, that the claims in the Yourish action for alleged violations of Sections 25400 and 25500 of the California Corporation Code were not insurable as a matter of law pursuant to Insurance Code Section 533. The Plaintiffs opposed the motion and a hearing was held on September 22, 2000. On October 18, 2000, the Court entered an Order on granting the motion for judgment on the pleadings. Judgment was entered on November 9, 2000, and Notice of Entry of Judgment given on November 15, 2000. California Amplifier filed a Notice of Appeal on November 21, 2000 and an Opening Brief on March 1, 2001. The Defendants filed a Response Brief on April 30, 2001. Plaintiff's Reply Brief was filed on May 21, 2001. No hearing date has been set to argue the appeal.
On March 29, 2001, the Company announced that it was investigating improper adjustments made by the corporate controller to the Company's accounting records (see Note 1). On March 29, 2001, subsequent to the Company's announcement, NASDAQ halted trading of the Company's common stock.
On April 4, 2001, the Company announced that Arthur Andersen LLP had withdrawn its opinion with respect to the Company's financial statements for the fiscal year ended February 26, 2000.
On May 3, 2001, the Company announced that it had received notification from NASDAQ that due to the Company's failure to comply with filing requirements requiring audited financial statements to be included in its annual report, NASDAQ intended to delist the shares of the Company's common stock at the opening of business on May 8, 2001. The Company appealed the notice of delisting and currently has a hearing scheduled for May 25, 2001. Until the hearing, the Company's common stock will continue to be listed on NASDAQ, although trading will continue to be halted.
On May 4, 2001, the Company announced that it had received notice from the Securities and Exchange Commission (the SEC) that the SEC is conducting an informal inquiry into the circumstances
8
that caused the Company to restate its financial statements. The Company intends to cooperate with the SEC inquiry.
Following the announcement by the Company on March 29, 2001 of the resignation of its Controller and the possible overstatement of net income for the fiscal year ended February 26, 2000, the Company and certain of its officers and directors have been named defendants in twenty putative class actions in federal court:
9
Division, Case No. CV-01-03322 MRP (DNBx). This action alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.
10
10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.
Sixteen of the class actions seek to represent a class of purchasers of the Company's common stock for the period between April 6 or 7, 2000 to March 28, 2001. Four of the class actions seek to represent a class of purchasers of the Company's common stock for the period between June 10 or 11, 1999 to March 28 or 29, 2001 (Taylor, Welch, Moccia, and Itchhaporia). All of the complaints cite to the Company's March 29, 2001 announcement regarding the resignation of the Company's corporate controller and statement that net income for the fiscal year ended February 26, 2000 may have been overstated by as much as $2.2 million. The complaints generally allege that the defendants artificially inflated the price of the Company's stock during the class period by allegedly making false representations about the Company's financial results or failing to disclose adverse facts about its financial results. The complaints also allege without specific facts that the individual defendants knew or were reckless in making the alleged false statements about the Company's financial results.
The twenty actions are expected to be consolidated into a single action pursuant to stipulation of the parties. The Company expects to move to dismiss the complaints after they are consolidated and a lead plaintiffs' counsel appointed, and intends to defend the actions vigorously. At this time it is not possible to determine the outcome of these actions.
11
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
RESULTS OF OPERATIONS
Three Months Ended May 29, 1999 and May 30, 1998
Sales
Sales increased by $3.9 million, or 42.7%, to $12.9 million for the three months ended May 29, 1999 from $9.1 million for the three months ended May 30, 1998. Sales of Satellite products increased $4.7 million, or 212%, to $6.9 million from $2.2 million. Sales of Wireless products decreased $583,000, or 10.5%, to approximately $5.0 million from $5.6 million. Sales of Antenna products by Micro Pulse decreased $213,000, or 16.3%, to $1.1 million from $1.3 million.
The increase in Satellite product sales resulted from increased sales of Ku DBS products as the Company has continued to emphasize its shift from C-band products, as well as sales of the U.S. DBS products, which were acquired from Gardiner Communications and included in shipments since April 19, 1999. The decrease in Wireless product sales resulted primarily from continued softness in the Worldwide Wireless Cable market, primarily in Latin America. The decrease in Antenna product sales resulted from continued competition in GPS related markets.
Gross Profits and Gross Margins
Gross profits increased by $850,000, or 30.4%, to $3.6 million for the three months ended May 29, 1999 from $2.8 million for the three months ended May 30, 1998. Gross margins decreased to 28.2% from 30.8%. The increase in gross profits resulted from the 42.7% increase in sales, offset by lower gross margins. The decline in gross margins resulted primarily from increased sales of lower gross margin DBS Satellite products, acquired from Gardiner in April 1999, partially offset by higher gross margins for the Company's Wireless Cable Video products.
See also Note 4 Segments included elsewhere herein.
Operating Expenses
Research and development expenses decreased by $73,000 from $1,216,000 to $1,143,000.
Selling expenses decreased by $173,000 from $1,246,000 to $1,073,000.
General and administrative expenses increased by $33,000 from $1,071,000 to $1,104,000.
During the prior year, the Company focused on reducing operating costs more in line with the then current sales levels. Accordingly, the organizational infrastructure was downsized in the later part of fiscal year 1999 resulting in lower operating costs. Total operating costs in the first quarter of fiscal year 2000 increased by $334,000, compared to the aggregate operating costs in the fourth quarter of fiscal year 1999, which is primarily attributable to increased operating costs associated with the acquisition of Gardiner in April 1999.
Income (Loss) from Operations
Income from operations, for the reasons noted above, increased by $1.06 million, to income of $323,000 from a loss of $740,000.
Minority Interest Share in (Income) Loss of Micro Pulse
The Company consolidates 100% of the sales and expenses of Micro Pulse. The minority interest share in the (income) loss of Micro Pulse eliminates the 49.5% of the (income) loss of Micro Pulse.
12
(Provision for) Benefit from Income Taxes
The provision for taxes for the first quarter of fiscal 2000 is based upon an annualized tax rate of 36%, the same tax rate as fiscal year 1999. This tax rate assumes savings from benefits allowed for export sales through a foreign sales corporation and research and development tax credits.
Net Income (Loss)
Net income, for reasons outlined above, increased by $724,000, to net income of $239,000 from a loss of $485,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a $6.0 million credit facility with Santa Monica Bank at the bank's prime rate (8.0% at July 1, 1999). As of May 29, 1999, there were no amounts outstanding under this arrangement.
The Company believes that cash flow from operations, together with the funds available under its credit facility, are sufficient to support operations and capital equipment requirements over the next twelve months.
The Company believes that inflation has not had a material effect on its operations.
YEAR 2000 COMPLIANCE
COMPANY PRODUCTS
The Company's satellite, wireless cable, voice and data, and antenna microwave reception and transceiver products do not contain time or date code applications and are therefore, not impacted by the Year 2000 century change. The Company's wireless cable scrambling and conditional access system, MultiCipher, does have date and time characteristics in microprocessor embedded software and in its software interface applications. The Company has identified programming issues that may impact how certain information must be input by MultiCipher customers, for example, the scheduling of future pay-per-view events. Upgrades to address such issues are now available to customers on a fee basis. All current shipments of MultiCipher system head-ends are year 2000 compliant.
INTERNAL OPERATIONS
General. The computer system issues relating to dates beyond 1999 are the result of many computer programs being written to use and store dates with only the last two digits of the applicable year. As a result, these programs may assume that all two digit dates are twentieth century dates. This could result in system failure, anomalous system behavior or incorrect system reporting. System failure could, in turn, temporarily affect the Company's ability to process customer transactions, interface with vendors and engage in similar normal business activities.
The Company has assessed how it may be impacted. The Company has formulated and begun implementation of a plan to address all known aspects of the issue. The Company has already completed a substantial portion of this plan and is on schedule to fully complete the plan by August of 1999, except for some desktop personal computers which may extend into the last quarter of calendar 1999.
Software Information Systems. The Company's software information systems consist primarily of a financial and manufacturing system (Computer Associates KBM), and other smaller scale software applications, and other programs developed internally.
In January 1999, the Computer Associates KBM financial and manufacturing software upgrade was completed and is now year 2000 compliant. Telemagic and Sales Tracker, two software applications, are not year 2000 compliant and will be upgraded or discontinued prior to July 1999. In addition, software on networks and desktop computers are currently being tested for year 2000 compliance. The Company
13
does not expect any major issues related to upgrading these software applications, at a cost of less than $60,000.
Computer Hardware and Operating Systems. Computer hardware and operating systems includes all data center equipment (IBM AS400 system) and networks (Novell and Microsoft NT). In January 1999, the Company purchased a new IBM AS400 in conjunction with the Computer Associates software upgrades and is now year 2000 compliant. The current NT networks are year 2000 compliant, but the Novell Network is not. This network will be upgraded or converted to NT by August 1999 with an estimated cost of less than $20,000.
Communications Systems. Communications systems includes all data center equipment (fax machines, telephone systems, and related software systems) used to support external communications with customers, employees, and suppliers, business partners and all corporate equipment and software systems used to support internal business management communications. Each significant component of these communications systems has been upgraded.
Suppliers and Other Business Partners. This area of the plan called for all significant suppliers and other business partners to be surveyed for year 2000 readiness. Most of the significant trade vendors have already been contacted. The Company anticipates that these activities will continue into the third quarter of calendar 1999. The Company is not currently aware of any single vendor or business partner with year 2000 compliance issues that could have a material impact on the Company. The Company can provide no assurance that year 2000 compliance will be successfully implemented by all of its suppliers.
Contingency Planning. The Company has not yet developed a comprehensive contingency plan to address the risk of operational problems and costs likely to result from a failure by the Company or by a supplier or business partner to address year 2000 readiness. This plan will be developed by the end of August 1999. It will list specific action plans for failure in any of the identified areas of the year 2000 compliance plan. The Company believes that failure to complete any of the remaining work to be done will not alone adversely affect the continuity of the core business. The Company believes its current state of readiness is on schedule with a conservative plan to be fully year 2000 compliant by August of 1999 and that business risks have been minimized. However, there can be no guarantee that year 2000 compliance issues not yet identified or fully addressed will not materially affect the Company's operations or expose it to third party liability.
SAFE HARBOR STATEMENT
Forward looking statements in this Form 10-Q/A 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, product demand, market growth, new competition, competitive pricing and continued pricing declines in the DBS market, supplier constraints, manufacturing yields, timing and market acceptance of new product introductions, new technologies, the financial investigation announced on March 29, 2001, litigation and related matters and other risks and uncertainties that are detailed from time to time in the Company's periodic reports filed with the Securities and Exchange Commission, copies of which may be obtained from the Company upon request. Such risks and uncertainties could cause actual results to differ materially from historical results or those 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.
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On June 11, 1997, the Company and certain of its directors and officers had two legal actions filed against them, one in the United States District Court, Central District of California, entitled Yourish v. California Amplifier, Inc., et al., Case No. 97-4293 (BM (Mcx), and the other in the Superior Court for the State of California, County of Ventura, entitled Yourish v. California Amplifier, Inc. et al., Case No. CIV 173569. On June 30, 1997, another legal action was filed against the same defendants in the Superior Court for the State of California, County of Ventura, entitled Burns, et al., v. California Amplifier, Inc., et al., Case No. CIV 173981. All three actions are purported class actions on behalf of purchasers of the common stock of the Company between September 12, 1995 and August 8, 1996. The actions claim that the defendants engaged in a scheme to make false and misleading statements and omitted disclosure of material adverse facts to the public concerning the Company, allegedly causing the Company's stock price to artificially rise, and thereby allegedly allowing the individual defendants to sell stock at inflated prices. Plaintiffs claim that the purported stockholder class was damaged when the price of the stock declined upon disclosure of the alleged adverse facts. The Company and its legal counsel are currently evaluating the claims. Based upon the analysis performed to date, the Company, its directors and officers, plan to vigorously defend themselves against these claims.
See also Note 6, Subsequent Events included elsewhere herein.
None.
ITEM 3. Defaults upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
None.
ITEM 6. Exhibits and Reports on Form 8-K
Current report on Form 8-K dated May 3, 1999 (date of event April 19, 1999) reporting Item 2 "Acquisition or Disposition of Assets" and Item 7 "Financial Statements, Proforma Financial Information and Exhibits."
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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.
| CALIFORNIA AMPLIFIER, INC. (Registrant) |
||
May 22, 2001 |
/s/ MICHAEL R. FERRON Michael R. Ferron Vice President, Finance and Chief Accounting Officer |
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