ITEM 1. FINANCIAL
STATEMENTS
CALAMP
CORP.
CONSOLIDATED BALANCE
SHEETS
(Unaudited; amounts in thousands, except par value)
|
|
August 31,
|
|
February 29,
|
|
|
2016
|
|
2016
|
Assets
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
94,705
|
|
|
$
|
139,388
|
|
Short-term
marketable securities
|
|
|
22,299
|
|
|
|
88,718
|
|
Accounts
receivable, less allowance for doubtful accounts of $691
|
|
|
|
|
|
|
|
|
and
$622 at August 31, 2016 and February 29, 2016, respectively
|
|
|
68,766
|
|
|
|
49,432
|
|
Inventories
|
|
|
27,999
|
|
|
|
16,731
|
|
Prepaid
expenses and other current assets
|
|
|
7,314
|
|
|
|
4,498
|
|
Total
current assets
|
|
|
221,083
|
|
|
|
298,767
|
|
Property,
equipment and improvements, net of
|
|
|
|
|
|
|
|
|
accumulated
depreciation and amortization
|
|
|
21,599
|
|
|
|
11,225
|
|
Deferred
income tax assets
|
|
|
28,604
|
|
|
|
30,213
|
|
Goodwill
|
|
|
63,180
|
|
|
|
16,508
|
|
Other
intangible assets, net
|
|
|
74,916
|
|
|
|
17,010
|
|
Other
assets
|
|
|
10,777
|
|
|
|
10,640
|
|
|
|
$
|
420,159
|
|
|
$
|
384,363
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
36,604
|
|
|
$
|
24,938
|
|
Accrued
payroll and employee benefits
|
|
|
10,800
|
|
|
|
6,814
|
|
Deferred
revenue
|
|
|
16,855
|
|
|
|
9,438
|
|
Other
current liabilities
|
|
|
17,945
|
|
|
|
8,375
|
|
Total
current liabilities
|
|
|
82,204
|
|
|
|
49,565
|
|
|
1.625%
convertible senior unsecured notes
|
|
|
143,260
|
|
|
|
139,800
|
|
Other
non-current liabilities
|
|
|
13,500
|
|
|
|
5,551
|
|
Total
liabilities
|
|
|
238,964
|
|
|
|
194,916
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
Preferred
stock, $.01 par value; 3,000 shares authorized;
|
|
|
|
|
|
|
|
|
no
shares issued or outstanding
|
|
|
-
|
|
|
|
-
|
|
Common
stock, $.01 par value; 80,000 shares authorized;
|
|
|
|
|
|
|
|
|
36,419
and 36,667 shares issued and outstanding
|
|
|
|
|
|
|
|
|
at
August 31, 2016 and February 29, 2016, respectively
|
|
|
364
|
|
|
|
367
|
|
Additional
paid-in capital
|
|
|
223,680
|
|
|
|
229,159
|
|
Accumulated
deficit
|
|
|
(41,991
|
)
|
|
|
(39,853
|
)
|
Accumulated
other comprehensive loss
|
|
|
(858
|
)
|
|
|
(226
|
)
|
Total
stockholders' equity
|
|
|
181,195
|
|
|
|
189,447
|
|
|
|
$
|
420,159
|
|
|
$
|
384,363
|
|
See accompanying notes to
consolidated financial statements.
2
CALAMP
CORP.
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited; in thousands, except
per share amounts)
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
August 31,
|
|
August 31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
$
|
75,984
|
|
|
$
|
58,498
|
|
|
$
|
152,405
|
|
|
$
|
113,295
|
|
Application subscriptions
and other services
|
|
|
14,495
|
|
|
|
11,310
|
|
|
|
29,221
|
|
|
|
21,942
|
|
Total
revenues
|
|
|
90,479
|
|
|
|
69,808
|
|
|
|
181,626
|
|
|
|
135,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
|
45,486
|
|
|
|
39,223
|
|
|
|
94,375
|
|
|
|
76,560
|
|
Application subscriptions
and other services
|
|
|
7,379
|
|
|
|
5,282
|
|
|
|
14,803
|
|
|
|
9,848
|
|
Total
cost of revenues
|
|
|
52,865
|
|
|
|
44,505
|
|
|
|
109,178
|
|
|
|
86,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
37,614
|
|
|
|
25,303
|
|
|
|
72,448
|
|
|
|
48,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
5,885
|
|
|
|
4,995
|
|
|
|
11,976
|
|
|
|
9,560
|
|
Selling
|
|
|
12,683
|
|
|
|
5,847
|
|
|
|
23,991
|
|
|
|
11,345
|
|
General and
administrative
|
|
|
11,284
|
|
|
|
4,908
|
|
|
|
27,267
|
|
|
|
9,683
|
|
Intangible asset
amortization
|
|
|
3,856
|
|
|
|
1,655
|
|
|
|
7,346
|
|
|
|
3,299
|
|
Total
operating expenses
|
|
|
33,708
|
|
|
|
17,405
|
|
|
|
70,580
|
|
|
|
33,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
3,906
|
|
|
|
7,898
|
|
|
|
1,868
|
|
|
|
14,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income
(loss)
|
|
|
455
|
|
|
|
(43
|
)
|
|
|
908
|
|
|
|
(15
|
)
|
Interest expense
|
|
|
(2,474
|
)
|
|
|
(2,280
|
)
|
|
|
(4,898
|
)
|
|
|
(2,928
|
)
|
Other income
(expense)
|
|
|
(130
|
)
|
|
|
(18
|
)
|
|
|
413
|
|
|
|
(29
|
)
|
|
|
|
(2,149
|
)
|
|
|
(2,341
|
)
|
|
|
(3,577
|
)
|
|
|
(2,972
|
)
|
|
Income
(loss) before income taxes and equity
in net loss of affiliate
|
|
|
1,757
|
|
|
|
5,557
|
|
|
|
(1,709
|
)
|
|
|
11,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
benefit (provision)
|
|
|
(864
|
)
|
|
|
(2,058
|
)
|
|
|
255
|
|
|
|
(4,412
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) before equity in net loss of affiliate
|
|
|
893
|
|
|
|
3,499
|
|
|
|
(1,454
|
)
|
|
|
7,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in
net loss of affiliate
|
|
|
(372
|
)
|
|
|
-
|
|
|
|
(684
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
521
|
|
|
$
|
3,499
|
|
|
$
|
(2,138
|
)
|
|
$
|
7,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.01
|
|
|
$
|
0.10
|
|
|
$
|
(0.06
|
)
|
|
$
|
0.21
|
|
Diluted
|
|
$
|
0.01
|
|
|
$
|
0.10
|
|
|
$
|
(0.06
|
)
|
|
$
|
0.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used
in computing earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
36,390
|
|
|
|
36,135
|
|
|
|
36,425
|
|
|
|
36,049
|
|
Diluted
|
|
|
36,849
|
|
|
|
36,716
|
|
|
|
36,425
|
|
|
|
36,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
521
|
|
|
$
|
3,499
|
|
|
$
|
(2,138
|
)
|
|
$
|
7,558
|
|
Other comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustments
|
|
|
(109
|
)
|
|
|
-
|
|
|
|
(624
|
)
|
|
|
-
|
|
Unrealized
loss on equity investment in French
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
licensee,
net of tax
|
|
|
(16
|
)
|
|
|
-
|
|
|
|
(8
|
)
|
|
|
-
|
|
Total
comprehensive income (loss)
|
|
$
|
396
|
|
|
$
|
3,499
|
|
|
$
|
(2,770
|
)
|
|
$
|
7,558
|
|
See accompanying notes to
consolidated financial statements.
3
CALAMP
CORP.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited; amounts in thousands)
|
|
Six Months Ended
|
|
|
August
31,
|
|
|
2016
|
|
2015
|
CASH FLOWS FROM OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(2,138
|
)
|
|
$
|
7,558
|
|
Adjustments to reconcile net income (loss)
to net cash
|
|
|
|
|
|
|
|
|
provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
expense
|
|
|
4,032
|
|
|
|
1,675
|
|
Intangible assets
amortization expense
|
|
|
7,346
|
|
|
|
3,299
|
|
Stock-based compensation
expense
|
|
|
3,605
|
|
|
|
2,609
|
|
Amortization of
convertible debt issue costs and discount
|
|
|
3,460
|
|
|
|
2,019
|
|
Foreign
currency remeasurement gains
|
|
|
(460
|
)
|
|
|
-
|
|
Deferred tax assets,
net
|
|
|
(1,091
|
)
|
|
|
4,106
|
|
Equity in net loss of
affiliate
|
|
|
684
|
|
|
|
-
|
|
Impairment of internal
use software
|
|
|
1,364
|
|
|
|
-
|
|
Other
|
|
|
14
|
|
|
|
7
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
1,814
|
|
|
|
2,115
|
|
Inventories
|
|
|
2,043
|
|
|
|
(3,906
|
)
|
Prepaid
expenses and other assets
|
|
|
2,818
|
|
|
|
257
|
|
Accounts
payable
|
|
|
1,929
|
|
|
|
9,487
|
|
Accrued
liabilities
|
|
|
(6,864
|
)
|
|
|
1,185
|
|
Deferred
revenue
|
|
|
760
|
|
|
|
(1,649
|
)
|
NET CASH PROVIDED BY OPERATING
ACTIVITIES
|
|
|
19,316
|
|
|
|
28,762
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from maturities
of marketable securities
|
|
|
66,419
|
|
|
|
6,634
|
|
Purchases of marketable
securities
|
|
|
-
|
|
|
|
(114,010
|
)
|
Capital
expenditures
|
|
|
(3,527
|
)
|
|
|
(2,576
|
)
|
Acquisition of
Crashboxx
|
|
|
-
|
|
|
|
(1,500
|
)
|
Acquisition of LoJack,
net of cash acquired
|
|
|
(116,982
|
)
|
|
|
-
|
|
Advances to
affiliate
|
|
|
(737
|
)
|
|
|
-
|
|
Other
|
|
|
(36
|
)
|
|
|
-
|
|
NET CASH USED IN INVESTING
ACTIVITIES
|
|
|
(54,863
|
)
|
|
|
(111,452
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of
convertible senior notes
|
|
|
-
|
|
|
|
172,500
|
|
Payment of debt issuance
costs
|
|
|
-
|
|
|
|
(5,291
|
)
|
Purchase of convertible
note hedges
|
|
|
-
|
|
|
|
(31,343
|
)
|
Proceeds from issuance of
warrants
|
|
|
-
|
|
|
|
15,991
|
|
Payment of
acquisition-related note and contingent consideration
|
|
|
-
|
|
|
|
(1,262
|
)
|
Repurchases of common
stock
|
|
|
(8,451
|
)
|
|
|
-
|
|
Taxes paid related to net
share settlement of vested equity awards
|
|
|
(1,416
|
)
|
|
|
(2,478
|
)
|
Proceeds from exercise of
stock options
|
|
|
780
|
|
|
|
487
|
|
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES
|
|
|
(9,087
|
)
|
|
|
148,604
|
|
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE CHANGES ON
CASH
|
|
|
(49
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash
equivalents
|
|
|
(44,683
|
)
|
|
|
65,914
|
|
Cash and cash equivalents at beginning of
period
|
|
|
139,388
|
|
|
|
34,184
|
|
Cash and cash equivalents at end of
period
|
|
$
|
94,705
|
|
|
$
|
100,098
|
|
See accompanying notes to
consolidated financial statements.
4
CALAMP
CORP.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
THREE AND SIX MONTHS ENDED AUGUST 31, 2016 AND 2015
NOTE 1 - DESCRIPTION OF
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
CalAmp Corp. (CalAmp or
the Company) is a leading provider of wireless communications solutions for a
broad array of applications to customers globally. The Companys business
activities are organized into its Wireless DataCom and Satellite business
segments.
In March 2016, the Company
completed the acquisition of all outstanding shares of common stock of LoJack
Corporation (LoJack), a global leader in products and services for tracking
and recovering cars, trucks and other valuable mobile assets. See Note 2 for a
description of this acquisition.
Up to and including the
quarter ended August 31, 2016, products of the Company's Satellite segment were
sold to EchoStar, an affiliate of Dish Network, for incorporation into complete
subscription satellite television systems. In April 2016, EchoStar notified the
Company that it would stop purchasing products from the Company at the end of
its then-current product demand forecast as a result of a consolidation of its
supplier base. EchoStars product demand forecast with the Company extended
through August 2016, and the products covered by this forecast were
substantially all shipped prior to August 31, 2016. In light of the fact that
EchoStar accounted for essentially all of the revenues of the Satellite segment,
the Companys Satellite business was shut down effective August 31, 2016.
Certain notes and other
information included in the Companys Annual Report on Form 10-K 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 Companys 2016 Annual Report on Form 10-K as filed with the
Securities and Exchange Commission on April 20, 2016.
In the opinion of the
Companys management, the accompanying unaudited consolidated financial
statements reflect all adjustments (consisting of normal recurring adjustments)
considered necessary to present fairly the Companys financial position at
August 31, 2016 and its results of operations for the three and six months ended
August 31, 2016 and 2015. The results of operations for such periods are not
necessarily indicative of results to be expected for the full fiscal year.
All significant
intercompany transactions and accounts have been eliminated in
consolidation.
Revenue Recognition
The Company recognizes
revenue from product sales when persuasive evidence of an arrangement exists,
delivery has occurred, the sales price is fixed or determinable and collection
of the sales price is reasonably assured. Generally, for product sales that are
not bundled with an application service these criteria are met at the time
product is shipped, except for shipments made on the basis of FOB Destination
terms, in which case title transfers to the customer and the revenue is recorded
by the Company when the shipment reaches the customer. Customers generally do
not have a right of return except for defective products returned during the
warranty period. The Company records estimated commitments related to customer
incentive programs as reductions of revenues.
In addition to product
sales, the Company provides Software as a Service (SaaS) subscriptions for its
fleet management and vehicle telematics applications through which customers are
provided with the ability to wirelessly communicate with monitoring devices
installed in vehicles and other mobile or remote assets via software
applications hosted by the Company. Generally, the Company defers the
recognition of revenue for the products that are sold with application
subscriptions because the products are not functional without the application
services. In such circumstances, the associated product costs are recorded as
deferred costs in the balance sheet. The deferred product revenue and deferred
product cost amounts are amortized to application subscriptions revenue and cost
of revenue on a straight-line basis over minimum contractual subscription
periods of one to five years. Revenues from renewals of data communication
services after the initial contract term are
recognized as application subscriptions revenue when the services are
provided. When customers prepay application subscription renewals, such amounts
are recorded as deferred revenues and are recognized ratably over the renewal
term.
5
In the United States, the
Company generally recognizes revenue on LoJack product sales that have no
associated continuing service obligations on the part of the Company upon
installation of the products. Revenue relating to sales made to the Companys
third party installation partners, who purchase the Companys products and
perform installations themselves, is recognized upon shipment, which is prior to
the installation of the related products in the end users vehicle. Revenue from
the sales of products to international licensees is recognized upon shipment of
the products to the licensee or when payment becomes reasonably assured,
whichever is later.
In Italy, the purchase of
an initial monitoring service contract is a requirement at the time the consumer
purchases a LoJack product. Revenue is recognized over the life of the contract.
These contracts, which are sold separately from the LoJack hardware, are offered
for terms ranging from 12 to 60 months and are generally payable in full upon
activation of the related unit or renewal of a previous contract. Customers are
also offered a month-to-month option for service contracts.
The Company offers several
types of extended warranty contracts in the United States. For those contracts
for which an independent third party insurer, and not the Company, is the
primary obligor, the Company recognizes revenue at the time of the sale of the
warranty. For those warranty products to which the Company is the primary
obligor, revenue is deferred and is recognized over five years, which is the
estimated life of new vehicle ownership. For the majority of extended warranty
contracts originated after 2011, the Company recognizes revenue at the time of
sale.
For those warranties for
which an independent third party insurer, and not the Company, is the primary
obligor, the Company records revenue on a gross basis, with related costs being
included in cost of goods sold. The Company considered the factors for gross and
net revenue recording and determined that despite not being the primary obligor
for the majority of these arrangements, gross revenue reporting was appropriate
based on the relevant accounting guidance. Specifically, the Company has
latitude in establishing price; it can change the product offering; it has
discretion in supplier selection; it is involved in the determination of product
or service specifications; it bears the credit risk; and the amount that it
earns on each contract is not fixed.
Cash and Cash
Equivalents
The Company considers all
highly liquid investments with remaining maturities at date of purchase of three
months or less to be cash equivalents.
Fair Value
Measurements
The Company applies fair
value accounting for all financial assets and liabilities and non-financial
assets and liabilities that are recognized or disclosed at fair value in the
financial statements. The Company defines fair value as the price that would be
received from selling an asset or paid to transfer a liability in an orderly
manner in an arms-length transaction between market participants at the
measurement date. Fair value is estimated by applying the following hierarchy,
which prioritizes the inputs used to measure fair value into three levels and
bases the categorization within the hierarchy upon the lowest level of input
that is available and significant to the fair value measurement:
Level 1
Quoted prices in active markets for identical
assets or liabilities.
Level 2
Observable inputs other than quoted prices in
active markets for identical assets and liabilities, quoted prices for identical
or similar assets or liabilities in inactive markets, or other inputs that are
observable or can be corroborated by observable market data for substantially
the full term of the assets or liabilities.
Level 3
Inputs that are generally unobservable and
typically reflect managements estimate of assumptions that market participants
would use in pricing the asset or liability.
In accordance with the fair
value accounting requirements, companies may choose to measure eligible
financial instruments and certain other items at fair value. The Company has
elected the fair value option for its investment in marketable securities on a contract-by-contract basis at
the time each contract is initially recognized in the financial statements or
upon an event that gives rise to a new basis of accounting for the items.
6
Foreign Currency
Translation and Accumulated Other Comprehensive Loss Account
A cumulative foreign
currency translation loss of $850,000 related to the Companys foreign
subsidiaries is included in accumulated other comprehensive income (loss) in the
stockholders equity section of the consolidated balance sheet at August 31,
2016. The aggregate foreign currency transaction exchange rate gains (losses)
included in determining income (loss) before income taxes and equity in net loss
of affiliate were $405,000 and $(29,000) in the six months ended August 31, 2016
and 2015, respectively.
Recently Issued
Accounting Standards
In March 2016, the
Financial Accounting Standards Board (FASB) issued Accounting Standards Update
2016-09, Compensation Stock Compensation: Improvements to Employee Share-Based
Payment Accounting (ASU 2016-09). This update is intended to simplify the
accounting for share-based payment transactions, including the accounting for
income taxes, forfeitures and statutory tax withholding requirements, as well as
classification in the statement of cash flows. The amendments in this update are
effective for annual periods beginning after December 15, 2016, and interim
periods within those fiscal years. The Company is currently evaluating the
impact of adoption of the new standard on its consolidated financial statements.
In February 2016, the FASB
issued Accounting Standards Update 2016-02, Leases. The new standard establishes
a right-of-use (ROU) model that requires a lessee to record a ROU asset and a
lease liability on the balance sheet for all leases with terms longer than 12
months. Leases will be classified as either finance or operating, with the
classification affecting the pattern of expense recognition in the income
statement. The new standard is effective for fiscal years beginning after
December 15, 2018, including interim periods within those fiscal years. A
modified retrospective transition approach is required for lessees for capital
and operating leases existing at, or entered into after, the beginning of the
earliest comparative period presented in the financial statements, with certain
practical expedients available. Early adoption is permitted. The Company is
currently evaluating the impact of adoption of the new standard on its
consolidated financial statements.
In January 2016, the FASB
issued Accounting Standards Update 2016-01, Financial InstrumentsOverall:
Recognition and Measurement of Financial Assets and Financial Liabilities (ASU
2016-01). This standard revises an entitys accounting related to (1) the
classification and measurement of investments in equity securities and (2) the
presentation of certain fair value changes for financial liabilities measured at
fair value. It also amends certain disclosure requirements associated with the
fair value of financial instruments. Under the new guidance, entities will have
to measure equity investments that do not result in consolidation and are not
accounted for under the equity method at fair value and recognize any changes in
fair value in net income unless the investments qualify for the new practicality
exception. ASU 2016-01 is effective for financial statements issued for fiscal
years beginning after December 15, 2017, and interim periods within those fiscal
years. The Company is currently evaluating the impact of this standard on its
consolidated financial statements.
In May 2014, the FASB
issued Accounting Standards Update No. 2014-09, Revenue from Contracts with
Customers (ASU 2014-09). The revenue recognition standard provides a five-step
analysis of transactions to determine when and how revenue is recognized. The
core principle is that a company should recognize revenue to depict the transfer
of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those
goods or services. In August 2015, the FASB issued ASU No. 2015-14, Revenue from
Contracts with Customers: Deferral of the Effective Date, which deferred the
effective date of this revenue standard for periods beginning after December 15,
2016 to December 15, 2017, with early adoption permitted but not earlier than
the original effective date. ASU 2014-09 must be applied retrospectively to each
period presented or as a cumulative-effect adjustment as of the date of
adoption. The Company is continuing to evaluate the effect and methodology of
adopting this accounting standard on its results of operations, cash flows and
financial position.
In April 2014, the FASB
issued Accounting Standards Update No. 2014-08, Reporting Discontinued
Operations and Disclosures of Disposals of Components of an Entity (ASU
2014-08). This update amends the definition of a discontinued operation, and
requires additional disclosures about discontinued operations, as well as
disposal transactions that do not meet the discontinued operations criteria.
Under this new guidance, only disposals of a component representing a strategic
shift in operations that has or will have a major impact on the Companys
operations or financial results should be classified as discontinued
operations. The effective date of this standard was March 1, 2015. See Note 15 which describes the effect of the adoption of this standard.
7
NOTE 2 LOJACK
ACQUISITION
In March 2016, the Company
completed the acquisition of all outstanding shares of common stock of LoJack.
As a result of the acquisition, LoJack became a wholly-owned subsidiary of
CalAmp and is consolidated with the Companys financial statements as of March
15, 2016 as a component of the Companys Wireless DataCom business segment. The
Company funded the acquisition from cash on hand. The total purchase price was
$131.7 million, which included the $5.5 million fair value of the 850,100 shares
of LoJack common stock that CalAmp purchased in the open market in November and
December 2015, prior to entering into a definitive acquisition agreement with
LoJack.
Pursuant to the Company's
business combinations accounting policy, the Company estimated the preliminary
fair values of net tangible and intangible assets acquired, and the excess of
the consideration transferred over the aggregate of such fair values was
recorded as goodwill. The preliminary fair values of net tangible assets and
intangible assets acquired were based upon preliminary valuations. The Company's
estimates and assumptions reflected in such preliminary valuations are subject
to change within the measurement period, which is up to one year from the
acquisition date. The primary areas that remain preliminary relate to the fair
values of intangible assets acquired, certain tangible assets and liabilities
acquired, certain legal matters, deferred income taxes and goodwill. The Company
expects to continue to obtain information to assist in determining the fair
values of the net assets acquired during the measurement period. The following
is the preliminary purchase price allocation for LoJack (in thousands):
Purchase
price
|
|
|
|
|
|
$
|
131,735
|
|
Less cash
acquired, net of debt assumed
|
|
|
|
|
|
|
(9,303
|
)
|
Net cash paid
|
|
|
|
|
|
|
122,432
|
|
Fair value
of net assets acquired:
|
|
|
|
|
|
|
|
|
Current assets other than
cash
|
|
$
|
41,532
|
|
|
|
|
|
Property and
equipment
|
|
|
12,259
|
|
|
|
|
|
Developed
technology
|
|
|
8,200
|
|
|
|
|
|
Tradename
|
|
|
35,500
|
|
|
|
|
|
Customer lists
|
|
|
4,650
|
|
|
|
|
|
Dealer
relationships
|
|
|
16,850
|
|
|
|
|
|
Other non-current
assets
|
|
|
4,208
|
|
|
|
|
|
Deferred tax
liability
|
|
|
(2,700
|
)
|
|
|
|
|
Current
liabilities
|
|
|
(33,457
|
)
|
|
|
|
|
Deferred revenue,
non-current
|
|
|
(8,698
|
)
|
|
|
|
|
Other non-current
liabilities
|
|
|
(2,584
|
)
|
|
|
|
|
Total
fair value of net assets acquired
|
|
|
|
|
|
|
75,760
|
|
Goodwill
|
|
|
|
|
|
$
|
46,672
|
|
The Company paid a premium
(i.e., goodwill) over the fair value of the net tangible and identified
intangible assets acquired. The Company believes the acquisition aligns with its
strategy to deliver innovative, next generation connected vehicle telematics
technologies, thereby accelerating the Companys strategic roadmap in this large
and fast growing market. Furthermore, the Company believes that combining
CalAmp's leading
portfolio of
wireless connectivity devices, software, services and applications with LoJacks
world-renowned brand, proprietary stolen vehicle recovery product, unique law
enforcement network and strong relationships with auto dealers, heavy equipment
providers and global licensees will create a market leader that is
well-positioned to drive the broad adoption of connected vehicle telematics
technologies and applications worldwide. The combined enterprise offers
customers access to integrated, turnkey offerings that enable a multitude of
high value applications encompassing vehicle security and enhanced driver
safety. Furthermore, the combination of CalAmps and LoJacks technology
offerings is expected to provide global customers with connected vehicle
applications to help ensure that retail auto dealers remain competitive and
relevant in todays rapidly evolving markets.
8
The goodwill arising from
the LoJack acquisition is not deductible for income tax purposes.
The fair value of the
LoJack trade receivables at March 15, 2016 was $21.2 million, comprised of a
gross contractual amount of $22.3 million net of receivables of $1.1 million not
expected to be collected.
In connection with the
acquisition of LoJack, the Company has assumed liabilities related to quality
assurance programs, warranty claims and contract obligations which are included
in accrued expenses and other current liabilities in the purchase price
allocation described above. The fair
value of inventories acquired included a
purchase accounting fair market value step-up of $4.6 million. In the six months
ended August 31, 2016, the Company recognized $4.3 million of this markup as a
component of cost of revenues that reflects the extent to which the inventory
that was subject to step-up was sold to the Companys customers in such period.
Included in inventory as of August 31, 2016 was $0.3 million relating to the
remaining fair value step-up associated with the LoJack acquisition.
During the quarter ended August 31, 2016, the Company received an independent appraisal of LoJacks property and equipment, which resulted in a purchase
accounting fair market value step-up of $2.6 million. In the three months ended
August 31, 2016, the Company recognized $0.4 million of this markup as a
component of cost of revenues and operating expenses that reflects the extent to
which the property, equipment and improvements that were subject to the step-up were
depreciated.
Acquisition and
integration-related costs of $3.5 million were included in selling, general, and
administrative expenses in the Company's statements of comprehensive income
(loss) for the three and six months ended August 31, 2016.
Revenues of LoJack included
in the consolidated statements of operations for the three and six months ended
August 31, 2016 were $31.9 million and $59.8 million, respectively.
Post-acquisition earnings of LoJack on a standalone basis are impracticable to
determine, because immediately following the acquisition CalAmp began to
integrate LoJack into its existing operations.
The following is unaudited
pro forma consolidated financial information for the Company presented as if the
acquisition of LoJack had occurred on March 1, 2015, the beginning of the
Companys prior fiscal year.
(in thousands except per
share amounts)
|
|
Pro Forma
|
|
|
Six Months Ended
|
|
|
August 31,
|
|
|
2016
|
|
2015
|
Revenues
|
|
$
|
186,881
|
|
$
|
200,539
|
Net
income
|
|
$
|
5,447
|
|
$
|
2,120
|
|
Earnings per
share:
|
|
|
|
|
|
|
Basic
|
|
$
|
0.15
|
|
$
|
0.06
|
Diluted
|
|
$
|
0.15
|
|
$
|
0.06
|
|
Shares used
in computing earnings per share:
|
|
|
|
|
|
|
Basic
|
|
|
36,425
|
|
|
36,049
|
Diluted
|
|
|
36,931
|
|
|
36,691
|
9
The following adjustments
were included in the unaudited pro forma financial information (in thousands):
|
|
Pro Forma
|
|
|
Six Months Ended
|
|
|
August 31,
|
|
|
2016
|
|
2015
|
LoJack
standalone net income:
|
|
|
|
|
|
|
|
|
From March 1 to March 14,
2016
|
|
$
|
973
|
|
|
$
|
-
|
|
For the six month period
ended September 30, 2015
|
|
|
-
|
|
|
|
2,669
|
|
Increase
(decrease) in revenue for fair valuation of
|
|
|
|
|
|
|
|
|
deferred revenue
|
|
|
984
|
|
|
|
(984
|
)
|
(Increase)
decrease in costs and expenses:
|
|
|
|
|
|
|
|
|
Amortization of inventory
step-up
|
|
|
4,318
|
|
|
|
(4,318
|
)
|
Amortization of intangible
assets and depreciation of
|
|
|
|
|
|
|
|
|
property,
equipment and improvements acquired
|
|
|
(309
|
)
|
|
|
(3,700
|
)
|
Acquisition and integration
expenses
|
|
|
3,539
|
|
|
|
(3,195
|
)
|
Net increase (decrease) in
pretax income (loss)
|
|
|
9,505
|
|
|
|
(9,528
|
)
|
Income tax
effects
|
|
|
(1,920
|
)
|
|
|
4,090
|
|
Change in
net income (loss)
|
|
|
7,585
|
|
|
|
(5,438
|
)
|
Net income
(loss) as reported
|
|
|
(2,138
|
)
|
|
|
7,558
|
|
Pro forma
net income loss
|
|
$
|
5,447
|
|
|
$
|
2,120
|
|
The pro forma consolidated
financial information is not necessarily indicative of what the Company's actual
results of operations would have been had LoJack been included in the Company's
historical consolidated financial statements for all of the six month periods
ended August 31, 2016 and 2015. In addition, the pro forma consolidated
financial information does not attempt to project the future results of
operations of the combined company.
NOTE 3 CASH, CASH
EQUIVALENTS AND INVESTMENTS
The following tables
summarize the Companys financial instrument assets as of August 31, 2016 and
February 29, 2016 using the hierarchy described in Note 1 under the heading
Fair Value Measurements (in thousands):
|
|
As of August 31,
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Classification
|
|
|
|
|
|
|
|
|
|
|
|
|
of Fair
Value
|
|
|
|
|
|
Unrealized
|
|
|
|
|
Cash and
|
|
Short-Term
|
|
|
|
|
|
Adjusted
|
|
Gains
|
|
Fair
|
|
Cash
|
|
Marketable
|
|
Other
|
|
|
Cost
|
|
(Losses)
|
|
Value
|
|
Equivalents
|
|
Securities
|
|
Assets
|
Cash
|
|
$
|
31,665
|
|
$
|
-
|
|
|
$
|
31,665
|
|
$
|
31,665
|
|
$
|
-
|
|
$
|
-
|
|
Level 1:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
|
40
|
|
|
-
|
|
|
|
40
|
|
|
40
|
|
|
-
|
|
|
-
|
Mutual funds (1)
|
|
|
5,171
|
|
|
67
|
|
|
|
5,238
|
|
|
-
|
|
|
-
|
|
|
5,238
|
Equity
investment in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
French
licensee (2)
|
|
|
296
|
|
|
(10
|
)
|
|
|
286
|
|
|
-
|
|
|
-
|
|
|
286
|
|
Level 2:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
|
|
63,000
|
|
|
-
|
|
|
|
63,000
|
|
|
63,000
|
|
|
-
|
|
|
-
|
Corporate bonds
|
|
|
22,302
|
|
|
(3
|
)
|
|
|
22,299
|
|
|
-
|
|
|
22,299
|
|
|
-
|
|
Total
|
|
$
|
122,474
|
|
$
|
54
|
|
|
$
|
122,528
|
|
$
|
94,705
|
|
$
|
22,299
|
|
$
|
5,524
|
10
|
|
As of February 29,
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Classification
|
|
|
|
|
|
|
|
|
|
|
|
|
of Fair
Value
|
|
|
|
|
|
Unrealized
|
|
|
|
|
Cash and
|
|
Short-Term
|
|
|
|
|
|
Adjusted
|
|
Gains
|
|
Fair
|
|
Cash
|
|
Marketable
|
|
Other
|
|
|
Cost
|
|
(Losses)
|
|
Value
|
|
Equivalents
|
|
Securities
|
|
Assets
|
Cash
|
|
$
|
6,890
|
|
$
|
-
|
|
|
$
|
6,890
|
|
$
|
6,890
|
|
$
|
-
|
|
$
|
-
|
|
Level 1:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual
funds (1)
|
|
|
3,753
|
|
|
(383
|
)
|
|
|
3,370
|
|
|
-
|
|
|
-
|
|
|
3,370
|
LoJack
common stock (3)
|
|
|
4,050
|
|
|
1,416
|
|
|
|
5,466
|
|
|
-
|
|
|
-
|
|
|
5,466
|
|
Level 2:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
|
|
130,900
|
|
|
-
|
|
|
|
130,900
|
|
|
130,900
|
|
|
-
|
|
|
-
|
Corporate
bonds
|
|
|
82,300
|
|
|
(16
|
)
|
|
|
82,284
|
|
|
1,556
|
|
|
80,728
|
|
|
|
Commercial
paper
|
|
|
8,032
|
|
|
-
|
|
|
|
8,032
|
|
|
42
|
|
|
7,990
|
|
|
-
|
|
Total
|
|
$
|
235,925
|
|
$
|
1,017
|
|
|
$
|
236,942
|
|
$
|
139,388
|
|
$
|
88,718
|
|
$
|
8,836
|
|
(1)
|
|
The Company has
established a non-qualified deferred compensation plan for certain members
of management and all non-employee directors. The Company is informally
funding its obligations under the deferred compensation plan by purchasing
shares in various equity, bond and money market mutual funds that are held
in a Rabbi Trust and are restricted for payment of obligations to plan
participants. The deferred compensation plan liability is included in
Other Non-current Liabilities in the accompanying consolidated balance
sheets.
|
|
|
|
(2)
|
|
The equity investment
in LoJacks French licensee, in the form of a publicly-traded common
stock, is accounted for as an available-for-sale security and is valued at
the quoted closing price on its market exchange. The related unrealized
gains or losses are included in accumulated other comprehensive income
(loss) in the stockholders equity section of the consolidated balance
sheet.
|
|
|
|
(3)
|
|
The Company purchased
850,100 shares of LoJack common stock in the open market in November and
December 2015, prior to entering into a definitive agreement to acquire
100% of LoJacks common stock. These shares were considered trading
securities and were recorded at fair value as of February 29,
2016.
|
NOTE 4 - INVENTORIES
Inventories consist of the
following (in thousands):
|
August 31,
|
|
February 29,
|
|
2016
|
|
2016
|
Raw
materials
|
$
|
16,202
|
|
$
|
14,145
|
Work
in process
|
|
432
|
|
|
180
|
Finished goods
|
|
11,365
|
|
|
2,406
|
|
$
|
27,999
|
|
$
|
16,731
|
11
NOTE 5 GOODWILL AND
OTHER INTANGIBLE ASSETS
All goodwill shown in the
accompanying consolidated balance sheets is associated with the Companys
Wireless DataCom segment. Changes in goodwill are as follows (in thousands):
|
Six Months Ended
|
|
August
31,
|
|
2016
|
|
2015
|
Balance at beginning of period
|
$
|
16,508
|
|
$
|
15,483
|
Acquisition of LoJack
|
|
46,672
|
|
|
-
|
Acquisition of Crashboxx
|
|
-
|
|
|
1,025
|
Balance at end of period
|
$
|
63,180
|
|
$
|
16,508
|
Other intangible assets are
comprised as follows (in thousands):
|
|
|
|
Gross
|
|
Accumulated
Amortization
|
|
Net
|
|
|
Amort-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ization
|
|
Feb. 29,
|
|
Addi-
|
|
Aug. 31,
|
|
Feb. 29,
|
|
|
|
|
Aug. 31,
|
|
Aug. 31,
|
|
Feb. 29,
|
|
|
Period
|
|
2016
|
|
tions
|
|
2016
|
|
2016
|
|
Expense
|
|
2016
|
|
2016
|
|
2016
|
Supply contract
|
|
5
years
|
|
$
|
2,220
|
|
$
|
-
|
|
$
|
2,220
|
|
$
|
1,679
|
|
$
|
216
|
|
$
|
1,895
|
|
$
|
325
|
|
$
|
541
|
Developed technology
|
|
2-7
years
|
|
|
14,080
|
|
|
8,200
|
|
|
22,280
|
|
|
6,427
|
|
|
1,913
|
|
|
8,340
|
|
|
13,940
|
|
|
7,653
|
Tradenames
|
|
7-10
years
|
|
|
2,143
|
|
|
35,500
|
|
|
37,643
|
|
|
1,522
|
|
|
1,778
|
|
|
3,300
|
|
|
34,343
|
|
|
621
|
Customer lists
|
|
4-7
years
|
|
|
18,300
|
|
|
4,650
|
|
|
22,950
|
|
|
10,358
|
|
|
2,305
|
|
|
12,663
|
|
|
10,287
|
|
|
7,942
|
Dealer relationships
|
|
7
years
|
|
|
-
|
|
|
16,850
|
|
|
16,850
|
|
|
-
|
|
|
1,104
|
|
|
1,104
|
|
|
15,746
|
|
|
-
|
Covenants not to compete
|
|
5
years
|
|
|
170
|
|
|
|
|
|
170
|
|
|
128
|
|
|
18
|
|
|
146
|
|
|
24
|
|
|
42
|
Patents
|
|
5
years
|
|
|
273
|
|
|
52
|
|
|
325
|
|
|
62
|
|
|
12
|
|
|
74
|
|
|
251
|
|
|
211
|
|
|
|
|
$
|
37,186
|
|
$
|
65,252
|
|
$
|
102,438
|
|
$
|
20,176
|
|
$
|
7,346
|
|
$
|
27,522
|
|
$
|
74,916
|
|
$
|
17,010
|
Estimated future
amortization expense is as follows (in thousands):
Fiscal Year
|
|
|
|
2017 (remainder)
|
$
|
7,730
|
2018
|
|
15,005
|
2019
|
|
11,660
|
2020
|
|
9,652
|
2021
|
|
7,830
|
Thereafter
|
|
23,039
|
|
$
|
74,916
|
NOTE 6 OTHER ASSETS
Other assets consist of the
following (in thousands):
|
August 31,
|
|
February 29,
|
|
2016
|
|
2016
|
Deferred compensation plan assets
|
$
|
5,238
|
|
$
|
3,370
|
Investment in international licensees
|
|
2,327
|
|
|
-
|
Equity investment in and loans to UK affiliate
|
|
1,124
|
|
|
1,167
|
Other
|
|
2,088
|
|
|
637
|
Investment in LoJack common stock
|
|
-
|
|
|
5,466
|
|
$
|
10,777
|
|
$
|
10,640
|
Included in the assets of
the LoJack acquisition are investments in international licensees at the
preliminary valuation of $2,327,000 consisting of a 12.5% equity interest in
LoJacks Mexican licensee of $1,541,000, a 17.5% equity interest in LoJacks
Benelux licensee of $500,000, and a 5.5% interest in LoJacks French licensee of
$286,000. The Company has not yet obtained all information required to complete
the valuation of the Mexican and Benelux investments. The investment in LoJacks
French licensee, in the form of a marketable equity security, is accounted for as an available-for-sale security and is
valued at the quoted closing price of its market exchange as of the reporting
date.
12
The equity investment and
loans to the Companys UK affiliate of $1,124,000 include a 49% equity interest
in and loans to Smart Driver Club Limited. The investment is accounted for under
the equity method since the Company has significant influence over the investee.
The Companys equity in the net loss of this affiliate amounted to $684,000 for
the six months ended August 31, 2016. In May 2016, the Company made a loan of
$737,000 denominated in British pounds to Smart Driver Club Limited bearing
interest at an annual interest rate of 8%, with principal and all unpaid
interest due May 19, 2020.
LoJack became a
wholly-owned subsidiary of the Company in March 2016, at which time the
investment of $5.5 million as of February 29, 2016 became part of the purchase
price of the LoJack acquisition, as described in Note 2.
NOTE 7 - FINANCING
ARRANGEMENTS
Bank Credit Facility
The Company has a credit
facility with Square 1 Bank that provides for borrowings up to $15 million or
85% of eligible accounts receivable, whichever is less. The credit facility
expires on March 1, 2017. Borrowings under this line of credit bear interest at
the banks prime rate. There were no borrowings outstanding under this credit
facility at August 31, 2016 or February 29, 2016.
The bank credit facility
contains financial covenants that require the Company to maintain a minimum
level of earnings before interest, income taxes, depreciation, amortization and
other noncash charges (EBITDA) and a minimum debt coverage ratio, both measured
monthly on a rolling 12-month basis. At August 31, 2016, the Company was in
compliance with its debt covenants under the credit facility.
1.625% Convertible
Senior Unsecured Notes
As of August 31, 2016, the
Company had $172.5 million aggregate principal amount of convertible senior
unsecured notes (the Notes) outstanding. The Notes are senior unsecured
obligations of the Company and bear interest at a rate of 1.625% per year
payable in cash on May 15 and November 15 of each year beginning on November 15,
2015. The Notes will mature on May 15, 2020 unless earlier converted or
repurchased in accordance with their terms. The Company may not redeem the Notes
prior to their stated maturity date. The Notes will be convertible into cash,
shares of the Companys common stock or a combination of cash and shares of
common stock, at the Companys election, based on an initial conversion rate of
36.2398 shares of common stock per $1,000 principal amount of Notes, which is
equivalent to an initial conversion price of $27.594 per share of common stock,
subject to customary adjustments. Holders may convert their Notes at their
option at any time prior to November 15, 2019 upon the occurrence of certain
events in the future, as defined in the indenture agreement dated May 6, 2015
(the Indenture). During the period from November 15, 2019 to May 13, 2020,
holders may convert all or any portion of their Notes regardless of the
foregoing conditions. The Companys intent is to settle the principal amount of
the Notes in cash upon conversion. If the conversion value exceeds the Note
principal amount, the Company would deliver shares of its common stock in
respect to the remainder of its conversion obligation in excess of the aggregate
principal amount (the conversion spread). The shares associated with the
conversion spread, if any, would be included in the denominator for the
computation of diluted earnings per share, with such shares calculated using the
average closing price of the Companys common stock during each period. As of
August 31, 2016, none of the conditions allowing holders of the Notes to convert
have been met.
If the Company undergoes a
fundamental change (as defined in the Indenture), holders of the Notes may
require the Company to repurchase their Notes at a repurchase price of 100% of
the principal amount of the Notes, plus any accrued and unpaid interest, if any,
to but not including the fundamental change repurchase date.
In addition, following
certain corporate events that occur prior to maturity, the Company will increase
the conversion rate for a holder who elects to convert its Notes in connection
with such a corporate event in certain circumstances. In such event, an
aggregate of up to 2.5 million additional shares of common stock could be issued
upon conversions in connection with such corporate events, subject to adjustment
in the same manner as the conversion rate.
13
Balances attributable to
the Notes consist of the following (in thousands):
|
August 31,
|
|
February 29,
|
|
2016
|
|
2016
|
Principal
|
$
|
172,500
|
|
|
$
|
172,500
|
|
Less: Unamortized debt discount
|
|
(25,933
|
)
|
|
|
(29,002
|
)
|
Unamortized debt issuance costs
|
|
(3,307
|
)
|
|
|
(3,698
|
)
|
Net
carrying amount of the Notes
|
$
|
143,260
|
|
|
$
|
139,800
|
|
The Notes are carried at
their principal amount, net of unamortized debt discount and issuance costs, and
are not carried at fair value at each period end. The issuance date fair value
of the liability component of the Notes in the amount of $138.9 million was
determined using a discounted cash flow analysis, in which the projected
interest and principal payments were discounted back to the issuance date of the
Notes at a market interest rate for nonconvertible debt of 6.2%, which
represents a Level 3 fair value measurement. The debt discount of $33.6 million
is being amortized to interest expense using the effective interest method with
an effective interest rate of 6.2% over the period from the issuance date
through the contractual maturity date of the Notes of May 15, 2020. The
approximate fair value of the Notes as of August 31, 2016 was $161 million,
which was estimated on the basis of inputs that are observable in the market and
which is considered a Level 2 measurement method in the fair value hierarchy.
See Note 14 for information
related to interest expense on the Notes.
NOTE 8 - INCOME TAXES
Deferred income taxes
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. The Company evaluates the realizability of its deferred income tax
assets and a valuation allowance is provided, as necessary. In assessing this
valuation allowance, the Company reviews historical and future expected
operating results and other factors, including its recent cumulative earnings
experience, expectations of future taxable income by taxing jurisdiction and the
carryforward periods available for tax reporting purposes, to determine whether
it is more likely than not that deferred tax assets are realizable.
The Company files income
tax returns in the U.S. federal jurisdiction, various U.S. states and Puerto
Rico, Canada, United Kingdom, Ireland, Italy, Netherlands, Brazil, Mexico,
Uruguay and New Zealand. Income tax returns filed for fiscal year 2011 and
earlier are not subject to examination by U.S. federal and state tax
authorities. Certain income tax returns for fiscal years 2012 through 2016
remain open to examination by U.S. federal and state tax authorities. However,
to the extent allowed by law, the tax authorities may have the right to examine
prior periods in which net operating losses or tax credits were generated and
carried forward, and to make adjustments up to the net operating loss or tax
credit carryforward amount. Income tax returns for fiscal years 2012 through
2016 remain open to examination by tax authorities in Canada, United Kingdom,
Ireland, Italy, Netherlands, Brazil, Mexico, Uruguay, New Zealand, and Puerto
Rico.
14
NOTE 9 - EARNINGS PER
SHARE
Basic earnings per share is
computed by dividing net income for the period by the weighted average number of
common shares outstanding during the period. Diluted earnings per share is
computed by dividing net income for the period by the weighted average number of
common shares outstanding during the period, plus the dilutive effect of
outstanding stock options and restricted stock-based awards using the treasury
stock method. The following table sets forth the composition 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,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Basic weighted average number of common
|
|
|
|
|
|
|
|
|
shares
outstanding
|
|
36,390
|
|
36,135
|
|
36,425
|
|
36,049
|
Effect of stock options and restricted stock units
|
|
|
|
|
|
|
|
|
computed on treasury
stock method
|
|
459
|
|
581
|
|
-
|
|
642
|
Diluted weighted average number of common
|
|
|
|
|
|
|
|
|
shares
outstanding
|
|
36,849
|
|
36,716
|
|
36,425
|
|
36,691
|
All outstanding options and
restricted stock units at August 31, 2016 were excluded from the computation of
diluted earnings per share for the six month period then ended because the
Company reported a net loss and the effect of inclusion would be antidilutive.
Shares subject to anti-dilutive stock options and restricted stock-based awards
of 450,000 at August 31, 2016 were excluded from the calculations of diluted
earnings per share for the three months then ended. Shares subject to
anti-dilutive stock options and restricted stock-based awards of 238,000 at
August 31, 2015 were excluded from the calculations of diluted earnings per
share for the three and six month periods then ended.
The Company has the option
to pay cash, issue shares of common stock or any combination thereof for the
aggregate amount due upon conversion of the Notes. The Companys intent is to
settle the principal amount of the Notes in cash upon conversion. As a result,
only the shares issuable for the conversion value, if any, in excess of the
principal amounts of the Notes would be included in diluted earnings per share.
From the time of the issuance of Notes, the average market price of the
Companys common stock has been less than the $27.594 initial conversion price
of the Notes, and consequently no shares have been included in diluted earnings
per share for the conversion value of the Notes.
NOTE 10 COMPREHENSIVE
INCOME
Comprehensive income
consists of two components, net income (loss) and other comprehensive income
(loss) (OCI). OCI refers to revenue, expenses and gains and losses that under
U.S. Generally Accepted Accounting Principles (GAAP) are recorded as an element
of stockholders equity but are excluded from net income (loss). The Companys
OCI consists of foreign currency translation adjustments from those subsidiaries
not using the U.S. dollar as their functional currency and unrealized gains and
losses on marketable securities classified as available-for-sale.
The following table shows
the changes in Accumulated Other Comprehensive Loss by component for the six
months ended August 31, 2016 (in thousands):
|
|
Cumulative
|
|
Unrealized
|
|
|
|
|
|
|
Foreign
|
|
Gains/Losses
on
Marketable
|
|
|
|
|
|
|
Currency
|
|
|
|
|
|
|
|
Translation
|
|
Securities
|
|
Total
|
Balances at February 29, 2016
|
|
$
|
(226
|
)
|
|
$
|
-
|
|
|
$
|
(226
|
)
|
Other comprehensive loss, net of tax
|
|
|
(624
|
)
|
|
|
(8
|
)
|
|
|
(632
|
)
|
Balances at August 31, 2016
|
|
$
|
(850
|
)
|
|
$
|
(8
|
)
|
|
$
|
(858
|
)
|
NOTE 11 STOCKHOLDERS
EQUITY
Stock Repurchase
In June 2016, the Companys
Board of Directors authorized a share repurchase program, under which the
Company may repurchase up to $25 million of its outstanding common stock. Under
the stock repurchase program, the Company may repurchase shares in open market
purchases in accordance with all applicable securities laws and regulations,
including Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The
extent to which CalAmp repurchases its shares, and the timing of such
repurchases, will depend upon a variety of factors, including market conditions,
regulatory requirements and other corporate considerations, as determined by CalAmps management team. The repurchase
program may be suspended or discontinued at any time. The Company expects to
finance the purchases with existing cash balances.
15
During the three and six
months ended August 31, 2016, the Company repurchased 0.6 million shares of its
common stock at an average share cost of $14.57, including commissions. The
total cost of the share repurchases during the three and six months ended August
31, 2016 was $8.5 million. All of the share repurchases were paid for as of
August 31, 2016. All common stock repurchased was retired as of August 31, 2016.
Of the $25 million authorized for share repurchases, $16.5 million is remaining
as of August 31, 2016.
Equity Awards
Stock-based compensation
expense is included in the following captions of the unaudited consolidated
statements of comprehensive income (loss) (in thousands):
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
August
31,
|
|
August
31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Cost
of revenues
|
|
$
|
68
|
|
$
|
54
|
|
$
|
132
|
|
$
|
119
|
Research and development
|
|
|
356
|
|
|
198
|
|
|
537
|
|
|
362
|
Selling
|
|
|
403
|
|
|
295
|
|
|
698
|
|
|
495
|
General and administrative
|
|
|
794
|
|
|
842
|
|
|
2,238
|
|
|
1,633
|
|
|
$
|
1,621
|
|
$
|
1,389
|
|
$
|
3,605
|
|
$
|
2,609
|
Changes in the Companys
outstanding stock options during the six months ended August 31, 2016 were as
follows (options in thousands):
|
|
|
|
Weighted
|
|
Number of
|
|
Average
|
|
Options
|
|
Exercise
Price
|
Outstanding at February 29, 2016
|
860
|
|
|
$
|
6.96
|
|
|
|
|
|
|
|
|
Granted
|
227
|
|
|
|
14.49
|
|
Exercised
|
(73
|
)
|
|
|
10.66
|
|
Forfeited or expired
|
(4
|
)
|
|
|
(15.43
|
)
|
Outstanding at August 31, 2016
|
1,010
|
|
|
$
|
8.35
|
|
|
|
|
|
|
|
|
Exercisable at August 31, 2016
|
679
|
|
|
$
|
4.95
|
|
Changes in the Companys
outstanding restricted stock shares, performance stock units (PSUs) and
restricted stock units (RSUs) during the six months ended August 31, 2016 were
as follows (shares, PSUs and RSUs in thousands):
|
Number of
|
|
|
|
|
Restricted
|
|
Weighted
|
|
Shares,
|
|
Average Grant
|
|
PSUs and
|
|
Date Fair
|
|
RSUs
|
|
Value
|
Outstanding at February 29, 2016
|
953
|
|
|
$
|
16.66
|
|
|
|
|
|
|
Granted
|
726
|
|
|
|
14.57
|
Vested
|
(317
|
)
|
|
|
14.65
|
Forfeited
|
(68
|
)
|
|
|
15.73
|
Outstanding at August 31, 2016
|
1,294
|
|
|
$
|
16.03
|
16
During the six months ended
August 31, 2016, the Company retained 97,267 shares of vested restricted stock
and RSUs to satisfy the minimum required statutory amount of employee
withholding taxes.
As of August 31, 2016,
there was $21.0 million of total unrecognized stock-based compensation cost
related to outstanding nonvested equity awards that is expected to be recognized
as expense over a weighted-average remaining vesting period of 3.1
years.
NOTE 12 - CONCENTRATION
OF RISK
One Wireless DataCom
customer in the heavy equipment industry accounted for 9% and 15% of
consolidated accounts receivable at August 31, 2016 and February 29, 2016,
respectively. The sole customer of the Companys Satellite segment accounted for
6% and 10% of consolidated accounts receivable at August 31, 2016 and February
29, 2016.
The Company has contract
manufacturing arrangements with sole source suppliers for LoJack tracking units
and transmission towers. As of August 31, 2016, these suppliers accounted for
less than 10% of the Companys total accounts payable. Some of the Companys
other components, assemblies and electronic manufacturing services are also
purchased from sole source suppliers. In addition, a substantial portion of the
Companys inventory is purchased from one supplier that functions as an
independent foreign procurement agent and contract manufacturer. This supplier
accounted for 41% and 56% of the Companys total inventory purchases in the six
months ended August 31, 2016 and 2015, respectively. As of August 31, 2016, this
supplier accounted for 42% of the Companys total accounts payable. Another
supplier accounted for 11% and 16% of the Companys total inventory purchases in
the six months ended August 31, 2016 and 2015, respectively, and 17% of the
Companys total accounts payable as of August 31, 2016.
NOTE 13 - PRODUCT
WARRANTIES
The Company generally
warrants its products against defects over periods ranging from 12 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
fiscal quarter, the Company adjusts its liability for warranty claims based on
its actual warranty claims experience as a percentage of revenues for the
preceding one to two years and also considers the impact of the known
operational issues that may have a greater impact than historical trends. The
warranty reserve is included in Other Current Liabilities in the unaudited
consolidated balance sheets. Activity in the accrued warranty costs liability
for the six months ended August 31, 2016 and 2015 is as follows (in
thousands):
|
Six Months Ended
|
|
August 31,
|
|
2016
|
|
2015
|
Balance at
beginning of period
|
$
|
1,892
|
|
|
$
|
1,819
|
|
Assumed from
acquisition of LoJack
|
|
1,883
|
|
|
$
|
-
|
|
Charged to
costs and expenses
|
|
530
|
|
|
|
511
|
|
Deductions
|
|
(1,075
|
)
|
|
|
(531
|
)
|
Balance at
end of period
|
$
|
3,230
|
|
|
$
|
1,799
|
|
In September 2014, LoJack
commenced a quality assurance program in the U.S. related to a battery
performance issue in self-powered LoJack units under base or extended warranty.
LoJack also entered into agreements to support quality assurance programs with
all major international licensees that identified performance issues in certain
self-powered units equipped with the battery pack. At August 31, 2016, the
Company had a reserve of $1.1 million, which is included in the accrued warranty
costs liability, for certain costs associated with this program, quality
assurance programs in other countries and markets, and other business
concessions related to the battery performance matter as further described in
Note 16. CalAmp anticipates that the U.S. quality assurance program will be
completed by the end of fiscal 2018.
17
NOTE 14 OTHER
FINANCIAL INFORMATION
Supplemental Balance
Sheet Information
Other non-current
liabilities consist of the following (in thousands):
|
August 31,
|
|
February 29,
|
|
2016
|
|
2016
|
Deferred
compensation plan liability
|
$
|
5,265
|
|
$
|
3,392
|
Deferred
revenue
|
|
6,087
|
|
|
1,070
|
Deferred
rent
|
|
458
|
|
|
559
|
Acquisition-related contingent
consideration
|
|
583
|
|
|
530
|
Other
|
|
1,107
|
|
|
-
|
|
$
|
13,500
|
|
$
|
5,551
|
The acquisition-related
contingent consideration is comprised of the estimated earn-out payable to the
sellers in conjunction with the Companys April 2015 acquisition of
Crashboxx.
Supplemental Statements
of Comprehensive Income (Loss) Information
Investment income consists
of the following (in thousands):
|
Three Months Ended
|
|
Six Months Ended
|
|
August 31,
|
|
August 31,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Investment
income on cash equivalents and marketable securities
|
$
|
153
|
|
$
|
154
|
|
|
$
|
329
|
|
$
|
150
|
|
Investment
income (loss) on deferred compensation plan Rabbi Trust assets
|
|
188
|
|
|
(197
|
)
|
|
|
465
|
|
|
(165
|
)
|
Dividend
income
|
|
114
|
|
|
-
|
|
|
|
114
|
|
|
-
|
|
Total
investment income (loss)
|
$
|
455
|
|
$
|
(43
|
)
|
|
$
|
908
|
|
$
|
(15
|
)
|
Interest expense consists
of the following (in thousands):
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
August 31,
|
|
August 31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Interest
expense on convertible senior unsecured notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stated
interest at 1.625% per annum
|
|
$
|
701
|
|
$
|
701
|
|
$
|
1,402
|
|
$
|
882
|
Amortization of note discount
|
|
|
1,562
|
|
|
1,353
|
|
|
3,069
|
|
|
1,736
|
Amortization of debt issue costs
|
|
|
199
|
|
|
173
|
|
|
391
|
|
|
221
|
|
|
|
2,462
|
|
|
2,227
|
|
|
4,862
|
|
|
2,839
|
Other
interest expense
|
|
|
12
|
|
|
53
|
|
|
36
|
|
|
89
|
Total
interest expense
|
|
$
|
2,474
|
|
$
|
2,280
|
|
$
|
4,898
|
|
$
|
2,928
|
Supplemental Cash Flow
Information
Net cash provided by
operating activities includes cash payments for interest and income taxes as
follows (in thousands):
|
Six Months Ended
|
|
August 31,
|
|
2016
|
|
2015
|
Interest
expense paid
|
$
|
1,447
|
|
$
|
38
|
Income tax
paid
|
$
|
979
|
|
$
|
337
|
18
Following is the
supplemental schedule of non-cash investing and financing activities (in
thousands):
|
Six Months Ended
|
|
August 31,
|
|
2016
|
|
2015
|
Acquisition
of Crashboxx in April 2015:
|
|
|
|
|
|
Accrued
liability for earn-out consideration
|
$
|
-
|
|
$
|
455
|
NOTE 15 - SEGMENT
INFORMATION
Segment information for the
three and six months ended August 31, 2016 and 2015 is as follows (dollars in
thousands):
|
|
Three Months Ended August 31,
2016
|
|
Three Months Ended August 31,
2015
|
|
|
Operating
Segments
|
|
|
|
|
|
|
|
|
|
Operating
Segments
|
|
|
|
|
|
|
|
|
|
|
Wireless
|
|
|
|
Corporate
|
|
|
|
|
|
Wireless
|
|
|
|
Corporate
|
|
|
|
|
|
|
DataCom
|
|
Satellite
|
|
Expenses
|
|
Total
|
|
DataCom
|
|
Satellite
|
|
Expenses
|
|
Total
|
Revenues
|
|
$
|
83,807
|
|
|
$
|
6,672
|
|
|
|
|
|
|
$
|
90,479
|
|
|
$
|
61,819
|
|
|
$
|
7,989
|
|
|
|
|
|
|
$
|
69,808
|
|
Gross
profit
|
|
$
|
36,209
|
|
|
$
|
1,405
|
|
|
|
|
|
|
$
|
37,614
|
|
|
$
|
23,098
|
|
|
$
|
2,205
|
|
|
|
|
|
|
$
|
25,303
|
|
Gross
margin
|
|
|
43.2
|
%
|
|
|
21.1
|
%
|
|
|
|
|
|
|
41.6
|
%
|
|
|
37.4
|
%
|
|
|
27.6
|
%
|
|
|
|
|
|
|
36.2
|
%
|
Operating
income
|
|
$
|
5,035
|
|
|
$
|
139
|
|
|
$
|
(1,268
|
)
|
|
$
|
3,906
|
|
|
$
|
7,529
|
|
|
$
|
1,557
|
|
|
$
|
(1,188
|
)
|
|
$
|
7,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended August 31,
2016
|
|
Six Months Ended August 31,
2015
|
|
|
Operating
Segments
|
|
|
|
|
|
|
|
|
|
Operating
Segments
|
|
|
|
|
|
|
|
|
|
|
Wireless
|
|
|
|
Corporate
|
|
|
|
|
|
Wireless
|
|
|
|
Corporate
|
|
|
|
|
|
|
DataCom
|
|
Satellite
|
|
Expenses
|
|
Total
|
|
DataCom
|
|
Satellite
|
|
Expenses
|
|
Total
|
Revenues
|
|
$
|
166,557
|
|
|
$
|
15,069
|
|
|
|
|
|
|
$
|
181,626
|
|
|
$
|
119,645
|
|
|
$
|
15,592
|
|
|
|
|
|
|
$
|
135,237
|
|
Gross
profit
|
|
$
|
68,719
|
|
|
$
|
3,729
|
|
|
|
|
|
|
$
|
72,448
|
|
|
$
|
44,686
|
|
|
$
|
4,143
|
|
|
|
|
|
|
$
|
48,829
|
|
Gross
margin
|
|
|
41.3
|
%
|
|
|
24.7
|
%
|
|
|
|
|
|
|
39.9
|
%
|
|
|
37.3
|
%
|
|
|
26.6
|
%
|
|
|
|
|
|
|
36.1
|
%
|
Operating
income
|
|
$
|
6,072
|
|
|
$
|
1,547
|
|
|
$
|
(5,751
|
)
|
|
$
|
1,868
|
|
|
$
|
14,419
|
|
|
$
|
2,777
|
|
|
$
|
(2,254
|
)
|
|
$
|
14,942
|
|
The Company considers
operating income to be a primary measure of operating performance of its
business segments. The amount shown for each period in the Corporate Expenses
column above consists of expenses that are not allocated to the business
segments. These non-allocated corporate expenses include salaries and benefits
of certain corporate staff and expenses such as audit fees, investor relations,
stock listing fees, director and officer liability insurance, and director fees
and expenses.
Products of the Company's
Satellite segment were sold to EchoStar. In August 2016, EchoStar ceased
purchasing products from CalAmp and the Satellite business was shut down
effective August 31, 2016. Historically, shared service expenses for accounting,
human resources, information technology and legal administration have been
allocated to the two reporting segments. Any such shared expenses that will not
be eliminated in future periods as a result of the shutdown of the Satellite
business have been reclassified in the segment information for all periods
presented from the Satellite segment to the Wireless DataCom segment, with no
effect on total operating income.
In fiscal 2016 and the
first half of fiscal 2017, Satellite segment revenues accounted for only 14% and
8%, respectively, of the Companys consolidated revenues. After giving
retroactive effect to the reclassification of general and administration expense
from the Satellite segment to the Wireless DataCom segment for shared service
expenses that will not be eliminated as a result of the Satellite business
shutdown, Satellite segment operating income in fiscal 2016 and the first half
of fiscal 2017 represented 23% and 20%, respectively, of total business unit
operating income, excluding corporate expenses not allocated to the business
units of $6,480,000 and $5,751,000 in fiscal 2016 and the first half of fiscal
2017. Also, as a result of transitioning the Satellite business to a
variable cost operating model in fiscal 2012, in which all DBS product
manufacturing was moved to a contract manufacturer, assets and liabilities of
the Satellite segment represented only about 2% of consolidated assets and
liabilities at the end of fiscal 2016. Accordingly, CalAmp believes that the shutdown of the Satellite segment does not qualify for discontinued operations accounting treatment because it represents neither a strategic shift nor did it have or will it have a major impact on the Companys business or consolidated financial statements.
19
NOTE 16 - COMMITMENTS
AND CONTINGENCIES
Lease Commitments
A summary of future
payments of operating lease commitments is as follows (dollars in thousands):
2017
(remainder)
|
$
|
3,621
|
2018
|
|
6,109
|
2019
|
|
4,656
|
2020
|
|
3,013
|
2021
|
|
1,559
|
Thereafter
|
|
3,712
|
Total
|
$
|
22,670
|
Legal Proceedings
Omega patent
infringement claim
In December 2013, a patent
infringement lawsuit was filed against the Company by Omega Patents, LLC,
(Omega), a non-practicing entity. Omega alleged that certain of the Companys
vehicle tracking products infringed on certain patents asserted by Omega. On
February 24, 2016, a jury in the U.S. District Court for the Middle District of
Florida awarded Omega damages of $2.9 million, for which CalAmp recorded a full
reserve in the fiscal 2016 fourth quarter. Following trial, Omega brought a
motion seeking entry of judgment, an injunction and requesting the court to
exercise its discretion to treble damages and assess attorneys fees. The
Company filed an opposition to Omegas motion, and the judges ruling has not
yet been rendered. Motions for judgment as a matter of law and a new trial have
not yet been filed because no judgment has been entered. If, following
resolution of all post-trial motions, judgment is ultimately entered in Omegas
favor, CalAmp intends to pursue an appeal at the Court of Appeals for the
Federal Circuit. In addition to its appeal, CalAmp is seeking to invalidate a
number of Omegas patents in actions filed with the U.S. Patent and Trademark
Office. Notwithstanding the adverse jury verdict, the Company continues to
believe that its products do not infringe Omegas patents and that Omegas
patents are not valid, and accordingly CalAmp intends to continue pursuing its
judicial and administrative options. While it is not feasible to predict with a
high degree of certainty the outcome of this litigation, its ultimate resolution
could be material to CalAmps cash flows and results of operations. Furthermore,
if an injunction is issued by the court, the Company could be prevented from
manufacturing and selling a number of its products, which could have a material
adverse effect on the Companys business, results of operations, financial
condition and cash flows.
Orbcomm patent
infringement claim
On April 7, 2016, a patent
infringement lawsuit was filed against the Company by Orbcomm Inc. (Orbcomm)
in the U.S. District Court for the Eastern District of Virginia. Orbcomm alleged
that certain of the Companys systems for tracking, monitoring, and controlling
vehicles, machinery, and other assets infringed on certain patents asserted by
Orbcomm. Orbcomm has not yet made a specific damages claim, but seeks
compensatory damages, treble damages, and an injunction. The Company believes
that its products and services do not infringe Orbcomms patents
and/or
that Orbcomms patents are invalid. On May 27, 2016, the Company filed a motion
to dismiss Orbcomms claims on the basis,
inter alia
, that Orbcomms
patents are directed at ineligible subject matter and are therefore invalid
under 35 U.S.C. § 101. On July 22, 2016, the court denied CalAmps motion;
however, in light of new Federal Circuit case law, CalAmp filed a motion for
reconsideration of its motion to dismiss, and the court has received briefs and
scheduled an oral argument, regarding certain aspects of CalAmps motion, for
October 13, 2016. Regardless of the outcome of its motion to dismiss, the
Company intends to vigorously defend itself against Orbcomms claims. In
addition, on July 19, 2016, CalAmp filed with the court its first amended answer
to Orbcomms complaint, which included an affirmative defense and a counterclaim
alleging that Orbcomms patents were unenforceable due to inequitable conduct.
Orbcomm then filed a motion to dismiss CalAmps inequitable conduct counterclaim
and to strike CalAmps inequitable conduct defense. On September 9, 2016, the
court denied Orbcomms motion to dismiss and strike. At this early stage of the
lawsuit, it is not feasible to predict with any certainty the outcome of this
litigation, and the Company has made no accrual for this claim.
20
G.L.M. contract
claim
On October 13, 2010, a suit
was filed by G.L.M. Security & Sound, Inc. (G.L.M.) against LoJack in the
United States District Court for the Eastern District of New York (the Court)
alleging breach of contract, misrepresentation, and violation of the New York
franchise law, Mass. Gen. Laws c. 93A and the Robinson-Patman Act, among other
claims. G.L.M. sought damages of $10,000,000, punitive damages, interest and
attorneys fees, and treble damages. On September 19, 2014, the Court entered
summary judgment in favor of LoJack on G.L.Ms three remaining claims for breach
of contract, breach of the duty of good faith and fair dealing, and violation of
Mass. Gen. Laws c. 93A. The Court denied G.L.M.s attempt to amend its complaint
on the basis of futility and undue delay. The Court also entered summary
judgment in favor of LoJack on its counterclaim for breach of contract. On
August 21, 2015, the Court issued a Memorandum and Opinion with respect to
LoJacks claim for damages on its breach of contract counterclaim. The Court
found that LoJack is entitled to recover damages and interest on its
counterclaim in the total amount of $1.9 million. The Court ordered that
judgment enter in that amount and that the case be closed. On August 25, 2015,
the clerk of the Court entered judgment in LoJacks favor. On September 23,
2015, G.L.M. filed a notice of appeal in the Court of Appeals for the Second
Circuit. On August 2, 2016, the Second Circuit issued a Mandate on the Summary
Order affirming the Courts August 15, 2015 judgment. The Company is now
embarking on collecting its judgment, but there can be no assurances that the
Company will be able to recover the full amount of the judgment, if any.
EVE battery
claim
LoJack was notified in 2013
by some of its international licensees that some of the batteries manufactured
by LoJacks former battery supplier, EVE Energy Co., Ltd. (EVE), and included
in self-powered LoJack units these licensees had purchased from LoJack,
exhibited degraded performance below LoJacks quality standards. These
notifications led LoJack to perform its own investigation. As a result of this
investigation, LoJack confirmed that batteries manufactured by EVE that were
included in certain self-powered LoJack units sold in the United States and to
LoJacks international licensees were exhibiting a failure to power over a
period of time that could impact the ability of the LoJack unit to transmit a
signal when called upon for stolen vehicle recovery. LoJack manufactures both
vehicle and self-powered (battery) units and this degraded performance
potentially affects only the transmit battery pack in the self-powered units. As
of the date of this report, the majority of LoJack units in circulation are
vehicle powered.
LoJack has incurred, and
expects to continue to incur, costs and expenses related to the actions that it
decided to take to address this matter. These costs and expenses may include,
among others, those related to quality assurance programs, product or battery
replacements, warranty claims, extension of product warranties, legal and other
professional fees, litigation, and payments or other business concessions to
LoJacks customers. Because of the ongoing nature of this matter, the Company
cannot predict what other actions will be required, nor can it predict the
outcome nor estimate the possible loss or range of loss with respect to any such
actions. See Note 13 for the accrued warranty cost liability related to this matter.
LoJack filed a formal claim
under its relevant insurance policy and was paid $5,000,000.
On October 27, 2014, LoJack
and its wholly-owned subsidiary LoJack Ireland commenced arbitration proceedings
against EVE by filing a notice of arbitration with a tribunal of with the Hong
Kong International Arbitration Centre (the Tribunal). The filing alleges that
EVE breached representations and warranties made in a supply agreement relating
to the quality and performance of batteries supplied by EVE. The arbitration
proceedings against EVE were held in Hong Kong on June 6 to 24, 2016. The
Tribunal held an additional hearing on September 15 to 16, 2016, and the
Tribunal has scheduled an additional hearing for January 9 to 10, 2017, focused on damages. The Company cannot predict the
ultimate outcome of the arbitration proceedings or the amount of damages, if
any, that the Company may be awarded by the Tribunal.
21
In addition to the
foregoing matters, from time to time as a normal consequence of doing business,
various claims and litigation may be asserted or commenced against the Company.
In particular, the Company in the ordinary course of business may receive claims
concerning contract performance, or claims that its products or services
infringe the intellectual property of third parties. While the outcome of any
such claims or litigation cannot be predicted with certainty, management does
not believe that the outcome of any of such matters existing at the present time
would have a material adverse effect on the Companys business, results of
operations, financial condition and cash flows.
LoJack Financing Recourse Agreement
LoJacks financing recourse
agreement to certain automobile dealers represents the maximum potential amount of future payments under an agreement with
a certain financing company. Pursuant to the recourse agreement, the Company will reimburse participating dealers the
unamortized dealer cost of LoJack units purchased by customers via auto loans underwritten by the financing company upon
a borrowers default within the initial 18 months of the auto loan. This agreement was renewed for the year
ending December 31, 2016. Based on the unamortized cost of units sold and assuming the default of all borrowers, the
Companys maximum potential amount of future payments under this agreement is $4.2 million as of August 31, 2016. The
expected obligation is accrued based on sales to the participating dealers and historical loss experience. As of August 31, 2016, the
Company had accrued $73,000 under these guarantees. Accruals for the financing recourse agreement are recorded as a reduction of revenue in
the consolidated statement of operations.
ITEM 2.
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
|
The Companys discussion
and analysis of its financial condition and results of operations are based upon
the Companys 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 may affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported amounts
of revenues, costs and expenses during the reporting periods. Actual results
could differ materially from these estimates. The critical accounting policies
listed below involve the Companys more significant accounting judgments and
estimates that are used in the preparation of the consolidated financial
statements. These policies are described in greater detail in Managements
Discussion and Analysis of Financial Condition and Results of Operations
(MD&A) under Part II, Item 7 of the Companys Annual Report on Form 10-K
for the year ended February 29, 2016, as filed with the Securities and Exchange
Commission on April 20, 2016, and include the following areas:
●
|
Allowance for doubtful accounts;
|
●
|
Inventory write-downs;
|
●
|
Product warranties;
|
●
|
Deferred income tax
assets and uncertain tax positions;
|
●
|
Impairment
assessments of goodwill, purchased intangible assets and other long-lived
assets;
|
●
|
Stock-based compensation expense; and
|
●
|
Revenue recognition.
|
RESULTS OF OPERATIONS
OUR COMPANY
The Company is a leading
provider of wireless communications products, services and solutions for a broad
array of applications to customers globally. The Companys business activities
are organized into our Wireless DataCom and Satellite business segments.
22
WIRELESS
DATACOM
The Companys Wireless
DataCom segment offers an extensive portfolio of intelligent communications
devices, robust and scalable cloud service platform, and targeted software
applications to streamline otherwise complex Machine-to-Machine (M2M)
deployments. In March 2016, the Company completed the acquisition of LoJack.
LoJack focuses on providing a differentiated range of connected vehicle
solutions including the industrys benchmark system for effective stolen vehicle
recovery. CalAmp products, services and solutions enable customers to optimize
their operations by collecting, monitoring and efficiently reporting business
critical data and desired intelligence from high-value mobile and remote
assets.
SATELLITE
Up to and including the
quarter ended August 31, 2016, products of the Company's Satellite segment were
sold to EchoStar, an affiliate of Dish Network, for incorporation into complete
subscription Direct Broadcast Satellite (DBS) television systems. From fiscal
2000 through fiscal 2007, the Satellite segment represented CalAmps core
business, reaching a concentration peak in fiscal 2004 when it accounted for 94%
of the Companys consolidated revenue. To diversify away from the Companys
dependence on the lower margin U.S. DBS products industry, during a 36 month
period beginning in April 2004 CalAmp consummated six business and product line
acquisitions to grow its Wireless DataCom business. As a result of these and
subsequent acquisitions and organic growth in this segment, combined with a
substantial decline in sales to EchoStar as a result of a DBS product
performance issue in fiscal 2008, Wireless DataCom revenues surpassed Satellite
revenues for the first time in fiscal 2008, and from that year through fiscal
2016 Wireless DataCom annual revenues have ranged between two and six times the
amount of Satellite segment revenues, with the exception of the
recession-impacted fiscal 2010.
In April 2016, EchoStar
notified the Company that it would stop purchasing products from the Company at
the end of its then-current product demand forecast as a result of a
consolidation of its supplier base. EchoStars product demand forecast with
CalAmp extended through August 2016, and the products covered by this forecast
were substantially all shipped prior to August 31, 2016. In light of the fact
that EchoStar accounted for essentially all of the revenues of the Satellite
segment, and it was not considered feasible to resume doing business with
DirecTV, the only other DBS service provider in the U.S. that CalAmp last sold
product to in fiscal 2009, the Companys Satellite business was shut down
effective August 31, 2016.
In fiscal 2016 and the
first half of fiscal 2017, Satellite segment revenues accounted for only 14% and
8%, respectively, of the Companys consolidated revenues. After giving
retroactive effect to the reclassification of general and administration expense
from the Satellite segment to the Wireless DataCom segment for shared service
expenses that will not be eliminated as a result of the Satellite business
shutdown, Satellite segment operating income in fiscal 2016 and the first half
of fiscal 2017 represented 23% and 20%, respectively, of total business unit
operating income, excluding corporate expenses not allocated to the business
units of $6,480,000 and $5,751,000 in fiscal 2016 and the first half of fiscal
2017. Also, as a result of transitioning the Satellite business to a
variable cost operating model in fiscal 2012, in which all DBS product
manufacturing was moved to a contract manufacturer, assets and liabilities of
the Satellite segment represented only about 2% of consolidated assets and
liabilities at the end of fiscal 2016. Accordingly, CalAmp believes that the shutdown of the Satellite segment does not qualify for discontinued operations
accounting treatment because it represents neither a strategic shift nor did it have or will it have a major impact on the Companys business
or consolidated financial statements.
23
Operating Results by
Reporting Segment
The Company's revenue,
gross profit and operating income by reporting segment are as follows:
REVENUE BY
SEGMENT
|
|
Three Months Ended
August 31,
|
|
Six Months Ended
August 31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
% of
|
|
|
|
|
% of
|
|
|
|
|
% of
|
|
|
|
|
% of
|
|
|
$000s
|
|
Total
|
|
$000s
|
|
Total
|
|
$000s
|
|
Total
|
|
$000s
|
|
Total
|
Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless DataCom
|
|
$
|
83,807
|
|
92.6
|
%
|
|
$
|
61,819
|
|
88.6
|
%
|
|
$
|
166,557
|
|
91.7
|
%
|
|
$
|
119,645
|
|
88.5
|
%
|
Satellite
|
|
|
6,672
|
|
7.4
|
%
|
|
|
7,989
|
|
11.4
|
%
|
|
|
15,069
|
|
8.3
|
%
|
|
|
15,592
|
|
11.5
|
%
|
Total
|
|
$
|
90,479
|
|
100.0
|
%
|
|
$
|
69,808
|
|
100.0
|
%
|
|
$
|
181,626
|
|
100.0
|
%
|
|
$
|
135,237
|
|
100.0
|
%
|
GROSS PROFIT BY
SEGMENT
|
|
Three Months Ended
August 31,
|
|
Six Months Ended
August 31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
% of
|
|
|
|
|
% of
|
|
|
|
|
% of
|
|
|
|
|
% of
|
|
|
$000s
|
|
Total
|
|
$000s
|
|
Total
|
|
$000s
|
|
Total
|
|
$000s
|
|
Total
|
Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless DataCom
|
|
$
|
36,209
|
|
96.3
|
%
|
|
$
|
23,098
|
|
91.3
|
%
|
|
$
|
68,719
|
|
94.9
|
%
|
|
$
|
44,686
|
|
91.5
|
%
|
Satellite
|
|
|
1,405
|
|
3.7
|
%
|
|
|
2,205
|
|
8.7
|
%
|
|
|
3,729
|
|
5.1
|
%
|
|
|
4,143
|
|
8.5
|
%
|
Total
|
|
$
|
37,614
|
|
100.0
|
%
|
|
$
|
25,303
|
|
100.0
|
%
|
|
$
|
72,448
|
|
100.0
|
%
|
|
$
|
48,829
|
|
100.0
|
%
|
OPERATING INCOME BY SEGMENT
|
|
Three Months Ended
August 31,
|
|
Six Months Ended
August 31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
$000s
|
|
Revenue
|
|
$000s
|
|
Revenue
|
|
$000s
|
|
Revenue
|
|
$000s
|
|
Revenue
|
Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless DataCom
|
|
$
|
5,035
|
|
|
5.6
|
%
|
|
$
|
7,529
|
|
|
10.8
|
%
|
|
$
|
6,072
|
|
|
3.3
|
%
|
|
$
|
14,419
|
|
|
10.7
|
%
|
Satellite
|
|
|
139
|
|
|
0.2
|
%
|
|
|
1,557
|
|
|
2.2
|
%
|
|
|
1,547
|
|
|
0.9
|
%
|
|
|
2,777
|
|
|
2.1
|
%
|
Corporate expenses
|
|
|
(1,268
|
)
|
|
(1.4
|
%)
|
|
|
(1,188
|
)
|
|
(1.7
|
%)
|
|
|
(5,751
|
)
|
|
(3.2
|
%)
|
|
|
(2,254
|
)
|
|
(1.7
|
%)
|
Total
|
|
$
|
3,906
|
|
|
4.4
|
%
|
|
$
|
7,898
|
|
|
11.3
|
%
|
|
$
|
1,868
|
|
|
1.0
|
%
|
|
$
|
14,942
|
|
|
11.1
|
%
|
Revenue
Wireless DataCom revenue
increased by $22.0 million, or 36%, to $83.8 million in the second quarter of
fiscal 2017 compared to the fiscal 2016 second quarter. This increase was due to
the revenue contribution of the newly acquired LoJack business, which accounted
for revenue of $31.9 million in the second quarter, offset by a decrease in
Mobile Resource Management (MRM) product revenues. For the six months ended
August 31, 2016, Wireless DataCom revenue increased by $46.9 million, or 39%, to
$166.6 million compared to the same period in the prior year. This increase was
due to the LoJack business, which contributed $59.8 million to revenue, and a
$5.9 million increase in revenue from our heavy equipment customer, offset by
decreases in revenue of our other lines of business, primarily MRM product
revenues.
Satellite revenue decreased
by $1.3 million, or 16%, to $6.7 million in the three months ended August 31,
2016 compared to the same period last year and for the six months ended August
31, 2016, Satellite revenue decreased by $0.5 million, or 3%, to 15.1 million
from $15.6 million for the same period of the prior year. These decreases were
due to the fluctuation and eventual ceasing in product demand on the part of
EchoStar, the Satellite segments sole customer which, as explained above, led
the Company to shut down its Satellite business.
Gross Profit and Gross
Margins
Wireless DataCom gross
profit increased by $13.1 million to $36.2 million in the fiscal 2017 second
quarter compared to $23.1 million in the second quarter of last year primarily
as a result of higher revenue. Gross margin
increased to 43.2% in the second quarter of fiscal 2017 from 37.4% in the second
quarter of fiscal 2016. These improvements were primarily due to higher margins
for the LoJack business acquired in March 2016.
24
Wireless DataCom gross
profit increased 54% to $68.7 million in the six months ended August 31, 2016,
compared to $44.7 million for the same period of the prior year primarily due to
increased revenue. Gross margin increased to 41.3% in the six months ended
August 31, 2016 from 37.3% for the same period of the prior year primarily due
to higher margins for the LoJack business.
Satellite gross profit
decreased by $0.8 million in the fiscal 2017 second quarter compared to the
second quarter of last year due to lower revenue and the closing of the
Satellite business. Satellites gross margin decreased to 21.1% in the second
quarter of fiscal 2017 from 27.6% in the second quarter of fiscal 2016.
The Satellite segment had
gross profit of $3.7 million for the six months ended August 31, 2016, compared
to gross profit of $4.1 million for the same period of last year. Satellites
gross margin decreased to 24.7% in the first half of fiscal 2017 compared to
26.6% in the first half of fiscal 2016. These decreases were due to lower
revenue and changes in product mix.
Operating Expenses
Consolidated research and
development (R&D) expense increased by $0.9 million to $5.9 million in the
second quarter of fiscal 2017 from $5.0 million in the second quarter of last
year. For the six-month year-to-date periods, R&D increased by $2.4 million
from $9.6 million last year to $12.0 million this year. These increases were due
primarily to LoJack R&D expense.
Consolidated selling
expense increased by $6.8 million to $12.7 million in the second quarter of this
year compared to $5.8 million in the second quarter of last year due primarily
to the LoJack acquisition, which accounted for $6.6 million of the increase. The
remaining increase was due to higher payroll expense as a result of additional
sales and marketing personnel and stock compensation expenses. For the six month
year-to-date periods, selling expenses increased by $12.6 million to $24.0
million due to the same factors cited above for the three month periods. The
LoJack acquisition accounted for $11.6 million of the increase for the six month
year-to-date periods.
Consolidated general and
administrative (G&A) expenses increased by $6.4 million to $11.3 million
in the second quarter of this year compared to $4.9 million in the second
quarter of last year due primarily to the LoJack G&A expenses, which
accounted for $5.6 million of the increase. The remaining increase in G&A
expenses was due to higher legal expenses related to two patent infringement
lawsuits. For the six month periods, consolidated G&A increased from last
year by $17.6 million to $27.3 million this year due primarily to the LoJack
G&A expenses, which accounted for $11.7 million of the increase. Also,
transaction and integration expenses for the LoJack acquisition were $3.5
million in the first half of this year. The remaining increase in G&A
expenses for the six month periods was due to higher legal expenses related to
two patent infringement lawsuits and higher stock compensation expenses.
Amortization of intangibles
increased from $1.7 million in the second quarter of last year to $3.9 million
in the second quarter of this year. For the six month periods, amortization of
intangibles increased from $3.3 million last year to $7.3 million this year. These
increases were due to the amortization of new intangibles associated with the
acquisition of LoJack in the fiscal 2017 first quarter.
Non-operating Expense,
Net
Investment income was
$455,000 in the second quarter of this year compared to investment loss of
$43,000 last year, due to investment income on Rabbi Trust assets and dividend
income of $114,000 received from a minority-owned LoJack licensee. Investment
income increased to $908,000 in the six months ended August 31, 2016 compared to
investment loss of $15,000 in the comparable period of the prior year for the
same reasons cited above for the three month periods, in addition to an increase
in investment income on cash equivalents and marketable securities.
Interest expense increased
to $2.5 million in the second quarter of this year compared to $2.3 million in
the second quarter of last year, and increased to $4.9 million in the six months
ended August 31, 2016 compared to $2.9 million in the six months ended August
31, 2015 due to interest expense associated with the convertible notes issued in
May 2015.
25
See Note 14 to the
accompanying unaudited consolidated financial statements for additional
information on investment income and interest expense.
Income Tax Provision
The Company evaluates its estimated annual effective tax rate (ETR) on a quarterly basis based on current and forecasted operating results. The relationship between the Companys income tax provision or benefit and its pretax book income or loss can vary significantly from period to period considering, among other factors, the overall level of pretax book income or loss and changes in the blend of income or loss that is taxed at high effective rates domestically versus pretax book income or loss that is taxed at low effective rates internationally. Consequently, the Companys ETR may fluctuate significantly period to period and may make quarterly comparisons less than meaningful.
The effective income tax
rate was 15% in the six months ended August 31, 2016, which is lower
than the statutory U.S. federal income tax rate of 35% due primarily to certain
undistributed foreign earnings, a substantial portion of which was generated by
the Companys Ireland subsidiary, for which no U.S. taxes are provided because
such earnings are intended to be indefinitely reinvested outside the U.S. The
lower effective tax rate during the second quarter and first six months of
fiscal 2017 as compared to the same periods in fiscal 2016 is due primarily to a
different geographic mix of earnings.
LIQUIDITY AND CAPITAL
RESOURCES
In June 2016, the Companys
Board of Directors authorized a share repurchase program, under which the
Company may repurchase up to $25 million of its outstanding common stock. Under
the stock repurchase program, the Company may repurchase shares in open market
purchases in accordance with all applicable securities laws and regulations,
including Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The
extent to which CalAmp repurchases its shares, and the timing of such
repurchases, will depend upon a variety of factors, including market conditions,
regulatory requirements and other corporate considerations, as determined by
CalAmps management team. The repurchase program may be suspended or
discontinued at any time. The Company expects to finance the purchases with
existing cash balances.
During the three and six
months ended August 31, 2016, the Company repurchased 0.6 million shares of its
common stock at an average share cost of $14.57, including commissions. The
total cost of the share repurchases during the three and six months ended August
31, 2016 was $8.5 million. All of the share repurchases were paid for as of
August 31, 2016. All common stock repurchased was retired as of August 31, 2016.
Of the $25 million authorized for share repurchases, $16.5 million is remaining
as of August 31, 2016.
In March 2016 the Company
completed the acquisition of LoJack. The Company funded the acquisition from
cash on hand. The total purchase price was $131.7 million which included the
$5.5 million fair value of 850,100 shares of LoJack common stock that were
purchased by CalAmp in the open market in November and December 2015, prior to
entering into a definitive acquisition agreement with LoJack.
In May 2015, the Company
issued $172.5 million aggregate principal amount of 1.625% convertible senior
unsecured notes due May 15, 2020. The Company has used, and expects to continue
to use, the remaining net proceeds from the offering of the convertible notes
for general corporate purposes including, but not limited to, acquisitions or
other strategic transactions, working capital and repurchases of the Companys
stock.
The Company has a credit
facility with Square 1 Bank that provides for borrowings up to $15 million or
85% of eligible accounts receivable, whichever is less. The credit facility
expires on March 1, 2017. Borrowings under this line of credit bear interest at
the banks prime rate. There were no borrowings outstanding under this credit
facility at August 31, 2016 or February 29, 2016.
The Square 1 Bank credit
facility contains financial covenants that require the Company to maintain a
minimum level of earnings before interest, income taxes, depreciation,
amortization and other noncash charges (EBITDA) and a minimum debt coverage ratio, both measured monthly on a
rolling 12-month basis. At August 31, 2016, the Company was in compliance with
its debt covenants under the credit facility.
26
The Companys primary
sources of liquidity are its cash, cash equivalents, marketable securities and
the line of credit with Square 1 Bank. During the six months ended August 31,
2016, cash and cash equivalents decreased by $44.7 million. The decrease was
primarily due to the cash used for the acquisition of LoJack, net of cash
acquired, of $117.0 million. Other uses of cash were common stock repurchases of
$8.5 million, capital expenditures of $3.5 million, taxes paid related to net
share settlement of vested equity awards of $1.4 million, and advances to an
unconsolidated affiliate of $0.7 million. Offsetting these uses of cash and cash
equivalents was cash provided by operations of $19.3 million, proceeds from
maturities of marketable securities of $66.4 million, and proceeds from stock
option exercises of $0.8 million.
Contractual Cash
Obligations
The following is a summary of the Companys
contractual cash obligations at August 31, 2016 (in thousands):
|
|
Future Estimated Cash
Payments Due by Fiscal Year
|
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(remainder)
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
|
Total
|
Convertible senior notes principal
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
172,500
|
|
$
|
-
|
|
$
|
172,500
|
Convertible senior notes stated interest
|
|
|
1,402
|
|
|
2,803
|
|
|
2,803
|
|
|
2,803
|
|
|
1,402
|
|
|
-
|
|
|
11,213
|
Operating leases
|
|
|
3,621
|
|
|
6,109
|
|
|
4,656
|
|
|
3,013
|
|
|
1,559
|
|
|
3,712
|
|
|
22,670
|
Purchase obligations
|
|
|
30,325
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
30,325
|
Other contractual commitments
|
|
|
2,650
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,650
|
Total contractual obligations
|
|
$
|
37,998
|
|
$
|
8,912
|
|
$
|
7,459
|
|
$
|
5,816
|
|
$
|
175,461
|
|
$
|
3,712
|
|
$
|
239,358
|
Purchase obligations consist primarily of
inventory purchase commitments.
FORWARD LOOKING
STATEMENTS
Forward looking statements
in this Form 10-Q which include, without limitation, statements relating to the
Companys 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 may, will, could, plans, intends, seeks, believes,
anticipates, expects, estimates, judgment, goal, and variations of
these words and similar expressions, are intended to identify forward-looking
statements. These forward-looking statements reflect the Companys current views
with respect to future events and financial performance and are subject to
certain risks and uncertainties, including, without limitation, product demand,
competitive pressures and pricing declines in the Companys markets, the timing
of customer approvals of new product designs, intellectual property infringement
claims, interruption or failure of our Internet-based systems used to wirelessly
configure and communicate with the tracking and monitoring devices that we sell,
the risk that we do not repurchase some or all of the shares we anticipate
purchasing pursuant to our repurchase program and other risks and uncertainties
that are set forth in Part I, Item 1A of the Annual Report on Form 10-K for the
year ended February 29, 2016 as filed with the Securities and Exchange
Commission on April 20, 2016. Such risks and uncertainties could cause actual
results to differ materially from historical or anticipated results. 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.
27