CalAmp Announces Updated Financial Outlook for Fiscal 2008 First Quarter
July 11 2007 - 4:30PM
Business Wire
CalAmp Corp. (NASDAQ: CAMP), a leading provider of wireless
products, today announced updated financial guidance for the fiscal
2008 first quarter ended May 31, 2007 as a result of recent
developments regarding a previously disclosed product performance
issue with a key Direct Broadcast Satellite (DBS) customer. As
previously disclosed, certain products shipped by CalAmp to a key
DBS customer during calendar years 2004 to 2006 experienced a field
performance issue as a result of the premature deterioration of
printed circuit board (PCB) laminate material provided by another
vendor. In addressing this matter, the DBS customer returned
product to CalAmp for corrective action and put on hold all orders
for CalAmp equipment, including newer generation products, pending
the requalification of all products manufactured by CalAmp for this
customer. CalAmp has generated revenues of approximately $325
million with this customer during the last three fiscal years. As a
result of a meeting with the DBS customer on July 5, 2007, CalAmp
anticipates that the customer will soon requalify the latest
generation product that supports expanded HDTV content delivery.
However, based on this meeting CalAmp now believes that the
corrective action plan for previous generation products will be
significantly more extensive than previously contemplated. While it
is not possible to fully quantify the ultimate financial impact on
CalAmp of completely satisfying its customer�s requirements pending
final resolution of all issues, CalAmp expects to incur additional
expenses of $16 million for which the Company will take a charge in
its fiscal 2008 first quarter. This charge represents the Company's
best estimate of additional expenses associated with warranty
repairs, inventory modifications and reserving for materials that
are expected to be unusable. The cash impact of this charge is
anticipated to occur over the next several years. Earlier, during
the fiscal 2007 fourth quarter, CalAmp had increased its accrued
warranty costs by $500,000 for this matter. This amount was
predicated on the customer accepting a planned corrective action
procedure that CalAmp had developed for existing and projected
future product returns. Under this planned corrective action,
CalAmp expected that the field performance issue could be resolved
by retuning the circuitry as a lower cost alternative to replacing
certain parts and materials. The increased reserve amount that the
Company will record in the fiscal 2008 first quarter assumes that
the customer accepts the revised corrective procedure for the
previous generation products that are currently under discussion
and that the quantity of product returns approximates CalAmp�s
estimate of the most likely return scenario. These additional costs
and expenses encompass activities such as: Extending corrective
measures to cover all products returned within three years of
initial shipment that utilize the aforementioned laminate;
Performing substantial corrective measures on previous generation
products by replacing the PCB material and components; and
Reserving for materials that are expected to be unusable. While
CalAmp believes that $16 million is the best estimate of the
additional expenses necessary to resolve this matter based on the
facts and circumstances of which the Company is currently aware, no
assurances can be given that the final charges will not materially
increase from the current estimate. As previously reported CalAmp
filed suit against the supplier of the PCB laminate material that
CalAmp believes resulted in the field performance issues and
related first quarter charges. CalAmp expects to vigorously pursue
all legal options to recover its damages from that supplier. As a
result of this $16 million pre-tax charge, which is $0.41 per share
net of tax, CalAmp now anticipates it will record a net loss for
the fiscal 2008 first quarter in the range of ($0.47) to ($0.49)
per diluted share. Adjusted Basis (Non-GAAP) net loss for the first
quarter, which excludes amortization of intangible assets,
stock-based compensation expense and write-off of acquired research
and development costs�each net of tax�is expected to be ($0.40) to
($0.42) per diluted share. In addition, the Company estimates first
quarter consolidated revenues to be $47.4 million, which exceeds
the previous first quarter guidance range of $44 to $47 million.
The first quarter loss that resulted from the $16 million charge
has caused an event of default with respect to the financial
covenants under the Company�s bank credit agreement, that will
preclude additional borrowing under the revolving credit facility
thereunder until the Company is able to obtain a waiver from its
lenders and/or an amendment of the credit agreement. The Company
has notified its lenders and is in discussions with them to resolve
the issue. In the near term the Company believes that it has
sufficient liquidity such that the restriction on borrowing under
the revolving credit facility will not adversely affect its
operations. However, if the lenders are unwilling to agree to a
waiver or an amendment or exercise their rights to accelerate
borrowings outstanding under the credit agreement, the inability to
borrow under the revolving credit facility and/or the acceleration
of such indebtedness could materially adversely affect the
Company�s financial position and operations, including its ability
to fund its currently anticipated working capital and capital
expenditure needs. Furthermore, because the lenders will have the
right to call the loan until such time as a waiver is obtained, $30
million of debt previously classified as a long-term liability will
need to be reclassified to current liabilities in the balance sheet
as of the end of the fiscal 2008 first quarter. As a result of the
above mentioned developments, the Company plans to file�a
notification with the Securities and Exchange Commission�on Form
12b-25 and will utilize�the�5-day�extension�to file�its�Form�10-Q
for the quarter ended May 31, 2007. The�new expected filing
date�is�July 17, 2007. In addition, the Company�has
rescheduled�its�previously announced fiscal 2008 first quarter
earnings�press release�and conference call. The�press release�will
be�issued after the close of market on July 17, 2007, followed by a
live audio webcast of its quarterly conference call�at 1:30�p.m.
Pacific Time. The conference call can be accessed on the Company's
web site, www.calamp.com. This link requires listeners to install
either RealPlayer or Windows Media Player to access the event. An
online replay of the audio broadcast will be available on the
Company�s web site after the completion of the live call. About
CalAmp Corp. CalAmp is a leading provider of wireless
communications products that enable anytime/anywhere access to
critical information, data and entertainment content. With
comprehensive capabilities ranging from product design and
development through volume production, CalAmp delivers
cost-effective high quality solutions to a broad array of customers
and end markets. CalAmp is a supplier of Direct Broadcast Satellite
(DBS) outdoor customer premise equipment to the U.S. satellite
television market. The Company also provides wireless data
communication solutions for the telemetry and asset tracking
markets, private wireless networks, public safety communications
and critical infrastructure and process control applications. For
additional information, please visit the Company�s website at
www.calamp.com. Forward-Looking Statement Statements in this press
release that are not historical in nature are forward-looking
statements, which involve known and unknown risks and
uncertainties. Words such as "may", "will", "expect", "intend",
"plan", "believe", "seek", "could", "estimate", "judgment",
"targeting", "should", "anticipate", "goal" and variations of these
words and similar expressions, are intended to identify
forward-looking statements. Actual results could differ materially
from those implied by such forward-looking statements due to a
variety of factors, including general and industry economic
conditions, product demand, increased competition, competitive
pricing and continued pricing declines in the DBS market, the
timing of customer approvals of new product designs, operating
costs, the Company's ability to efficiently and cost-effectively
integrate its acquired businesses, and other risks or uncertainties
that are described in the Company's fiscal 2007 Annual Report on
Form 10-K filed on May 17, 2007 with the Securities and Exchange
Commission. Although the Company believes the expectations
reflected in such forward-looking statements are based upon
reasonable assumptions, it can give no assurance that its
expectations will be attained. The Company undertakes no obligation
to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
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