UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark
One)
x
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
|
|
|
EXCHANGE ACT OF 1934
|
For the quarterly period ended
November 26, 2011
or
c
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
|
|
|
EXCHANGE ACT OF 1934
|
For the transition period
from
to
COMMISSION FILE NUMBER:
0-12182
________________
CALAMP CORP.
(Exact name of Registrant as
specified in its Charter)
Delaware
|
95-3647070
|
(State or other jurisdiction of
|
(I.R.S. Employer
|
incorporation or organization)
|
Identification
No.)
|
1401 N. Rice Avenue
|
|
Oxnard, California
|
93030
|
(Address of principal executive
offices)
|
(Zip Code)
|
(805)
987-9000
(Registrants telephone number, including area
code)
_____________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes
x
No
c
Indicate by check
mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post
such files). Yes
x
No
c
Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated filer and smaller reporting company
in Rule 12b-2 of the Exchange Act.
Large accelerated filer
c
|
Accelerated filer
c
|
Non-accelerated filer
c
|
Smaller reporting company
x
|
(Do not check if a smaller reporting
company)
|
|
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes
c
No
x
The number of
shares outstanding of the registrants common stock as of December 15, 2011 was
28,720,942.
PART I. FINANCIAL
INFORMATION
ITEM 1. FINANCIAL
STATEMENTS
CALAMP
CORP.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR
VALUE)
|
November 30,
|
|
February 28,
|
Assets
|
2011
|
|
2011
|
Current assets:
|
(Unaudited)
|
|
|
|
|
Cash and cash
equivalents
|
$
|
4,393
|
|
|
$
|
4,241
|
|
Accounts receivable, less allowance for doubtful accounts of
|
|
|
|
|
|
|
|
$277 and $290 at November 30, 2011 and February 28, 2011,
respectively
|
|
15,755
|
|
|
|
16,814
|
|
Inventories
|
|
12,409
|
|
|
|
9,890
|
|
Deferred income tax assets
|
|
2,098
|
|
|
|
1,961
|
|
Prepaid expenses and other
current assets
|
|
3,881
|
|
|
|
5,197
|
|
Total current assets
|
|
38,536
|
|
|
|
38,103
|
|
|
Property, equipment and improvements, net
of
|
|
|
|
|
|
|
|
accumulated depreciation and amortization
|
|
1,630
|
|
|
|
1,877
|
|
Deferred income tax assets, less current portion
|
|
9,733
|
|
|
|
9,887
|
|
Intangible assets, net
|
|
3,041
|
|
|
|
4,012
|
|
Other assets
|
|
865
|
|
|
|
1,606
|
|
|
$
|
53,805
|
|
|
$
|
55,485
|
|
Liabilities and Stockholders'
Equity
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Bank working capital line of
credit
|
$
|
3,476
|
|
|
$
|
7,489
|
|
Current
portion of long-term debt
|
|
800
|
|
|
|
-
|
|
Accounts payable
|
|
12,081
|
|
|
|
14,103
|
|
Accrued
payroll and employee benefits
|
|
3,569
|
|
|
|
3,341
|
|
Deferred revenue
|
|
5,512
|
|
|
|
5,796
|
|
Other
current liabilities
|
|
2,575
|
|
|
|
2,140
|
|
Total current liabilities
|
|
28,013
|
|
|
|
32,869
|
|
Long-term debt
|
|
2,200
|
|
|
|
4,460
|
|
Other non-current liabilities
|
|
911
|
|
|
|
554
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
Preferred stock, $.01 par
value; 3,000 shares authorized;
|
|
|
|
|
|
|
|
no shares issued or outstanding
|
|
-
|
|
|
|
-
|
|
Common
stock, $.01 par value; 40,000 shares authorized;
|
|
|
|
|
|
|
|
28,713 and 28,147 shares issued and outstanding
|
|
|
|
|
|
|
|
at November 30, 2011 and February 28, 2011, respectively
|
|
287
|
|
|
|
281
|
|
Additional paid-in
capital
|
|
153,831
|
|
|
|
153,135
|
|
Accumulated deficit
|
|
(131,372
|
)
|
|
|
(134,948
|
)
|
Accumulated other
comprehensive loss
|
|
(65
|
)
|
|
|
(866
|
)
|
Total stockholders' equity
|
|
22,681
|
|
|
|
17,602
|
|
|
$
|
53,805
|
|
|
$
|
55,485
|
|
See accompanying notes to
consolidated financial statements.
2
CALAMP
CORP.
CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
|
Three Months Ended
|
|
Nine Months Ended
|
|
November
30,
|
|
November
30,
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
Revenues
|
$
|
32,752
|
|
|
$
|
29,553
|
|
|
$
|
101,107
|
|
|
$
|
85,389
|
|
Cost
of revenues
|
|
22,583
|
|
|
|
21,854
|
|
|
|
69,681
|
|
|
|
64,199
|
|
Gross profit
|
|
10,169
|
|
|
|
7,699
|
|
|
|
31,426
|
|
|
|
21,190
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
2,622
|
|
|
|
2,733
|
|
|
|
8,405
|
|
|
|
8,275
|
|
Selling
|
|
2,731
|
|
|
|
2,573
|
|
|
|
8,175
|
|
|
|
7,870
|
|
General
and administrative
|
|
2,606
|
|
|
|
1,981
|
|
|
|
8,135
|
|
|
|
6,690
|
|
Intangible asset
amortization
|
|
310
|
|
|
|
275
|
|
|
|
972
|
|
|
|
857
|
|
Total operating expenses
|
|
8,269
|
|
|
|
7,562
|
|
|
|
25,687
|
|
|
|
23,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
1,900
|
|
|
|
137
|
|
|
|
5,739
|
|
|
|
(2,502
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
(71
|
)
|
|
|
(354
|
)
|
|
|
(1,216
|
)
|
|
|
(1,090
|
)
|
Other
income (expense), net
|
|
(101
|
)
|
|
|
38
|
|
|
|
(904
|
)
|
|
|
6
|
|
Total non-operating expense
|
|
(172
|
)
|
|
|
(316
|
)
|
|
|
(2,120
|
)
|
|
|
(1,084
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
1,728
|
|
|
|
(179
|
)
|
|
|
3,619
|
|
|
|
(3,586
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
(28
|
)
|
|
|
-
|
|
|
|
(43
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
1,700
|
|
|
$
|
(179
|
)
|
|
$
|
3,576
|
|
|
$
|
(3,586
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per
share
|
$
|
0.06
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.13
|
|
|
$
|
(0.13
|
)
|
|
Shares used in computing earnings (loss) per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
27,869
|
|
|
|
27,321
|
|
|
|
27,583
|
|
|
|
27,133
|
|
Diluted
|
|
28,800
|
|
|
|
27,321
|
|
|
|
28,445
|
|
|
|
27,133
|
|
See accompanying notes to
consolidated financial statements.
3
CALAMP
CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(IN
THOUSANDS)
|
Nine Months Ended
|
|
November
30,
|
|
2011
|
|
2010
|
CASH FLOWS FROM OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
|
Net
income (loss)
|
$
|
3,576
|
|
|
$
|
(3,586
|
)
|
Adjustments to reconcile net income
(loss)
|
|
|
|
|
|
|
|
to net
cash provided by operating activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
1,899
|
|
|
|
1,860
|
|
Stock-based compensation expense
|
|
1,737
|
|
|
|
1,559
|
|
Non-cash interest
expense
|
|
733
|
|
|
|
402
|
|
Write-off of currency translation account of foreign subsidiary
|
|
801
|
|
|
|
-
|
|
Deferred tax assets,
net
|
|
-
|
|
|
|
807
|
|
Other
|
|
1
|
|
|
|
9
|
|
Changes in operating assets
and liabilities:
|
|
|
|
|
|
|
|
Accounts receivable
|
|
1,059
|
|
|
|
3,471
|
|
Inventories
|
|
(2,519
|
)
|
|
|
848
|
|
Prepaid expenses and other assets
|
|
1,498
|
|
|
|
(492
|
)
|
Accounts payable
|
|
(2,022
|
)
|
|
|
(3,929
|
)
|
Accrued liabilities
|
|
1,020
|
|
|
|
(453
|
)
|
Deferred revenue
|
|
(284
|
)
|
|
|
310
|
|
NET CASH PROVIDED BY OPERATING
ACTIVITIES
|
|
7,499
|
|
|
|
806
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
Capital expenditures
|
|
(682
|
)
|
|
|
(884
|
)
|
Collections on note receivable
|
|
431
|
|
|
|
348
|
|
NET
CASH USED IN INVESTING ACTIVITIES
|
|
(251
|
)
|
|
|
(536
|
)
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
Net proceeds (repayments) of
bank line of credit
|
|
(4,013
|
)
|
|
|
1,398
|
|
Proceeds from bank term loan
|
|
3,000
|
|
|
|
-
|
|
Repayment of subordinated
notes payable
|
|
(5,000
|
)
|
|
|
-
|
|
Payment
of debt issue costs
|
|
(65
|
)
|
|
|
-
|
|
Taxes paid related to net
share settlement of vested equity awards
|
|
(1,032
|
)
|
|
|
(403
|
)
|
Proceeds from exercise of stock options
|
|
14
|
|
|
|
-
|
|
NET
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
|
(7,096
|
)
|
|
|
995
|
|
|
Net change in cash and cash
equivalents
|
|
152
|
|
|
|
1,265
|
|
Cash
and cash equivalents at beginning of period
|
|
4,241
|
|
|
|
2,986
|
|
Cash and cash equivalents at end of
period
|
$
|
4,393
|
|
|
$
|
4,251
|
|
See accompanying notes to
consolidated financial statements.
4
CALAMP CORP.
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED NOVEMBER 30, 2011 AND
2010
NOTE 1 - DESCRIPTION OF
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
CalAmp Corp. ("CalAmp" or the "Company") develops and markets wireless
communications solutions that deliver data, voice and video for critical
networked applications. The Company's two business segments are Wireless
DataCom, which serves utility, government and enterprise customers, and
Satellite, which focuses on the North American Direct Broadcast Satellite
market.
The Company uses a
52-53 week fiscal year ending on the Saturday closest to February 28, which for
fiscal 2011 fell on February 26, 2011. The actual interim periods ended on
November 26, 2011 and November 27, 2010. In the accompanying unaudited
consolidated financial statements, the 2011 fiscal year end is shown as February
28 and the interim period end for both years is shown as November 30 for clarity
of presentation.
Certain notes and
other information are condensed or omitted from the interim financial statements
presented in this Quarterly Report on Form 10-Q. Therefore, these financial
statements should be read in conjunction with the Company's 2011 Annual Report
on Form 10-K as filed with the Securities and Exchange Commission on April 28,
2011.
In the opinion of
the Company's management, the accompanying unaudited consolidated financial
statements reflect all adjustments (consisting of normal recurring adjustments)
considered necessary to present fairly the Company's financial position at
November 30, 2011 and its results of operations for the three and nine months
ended November 30, 2011 and 2010. 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, 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 do not have rights of return except for defective products returned
during the warranty period.
The Company defers
the recognition of revenues for products sold with accompanying data
communication services because the services are essential to the functionality
of the products, and accordingly, the associated product costs are recorded as
deferred costs. The deferred product revenue and deferred product cost amounts
are recognized on a straight-line basis over the minimum contractual service
period of one year. Revenues from renewals of data communication services after
the initial one year term are recognized as the services are provided. When
customers prepay data communication service renewals, such amounts are recorded
as deferred revenues and are recognized over the renewal term.
The Company also
undertakes projects that include the design and development of communication
systems used in the public safety and transportation sectors that are customized
to customers' specifications or that involve fixed site construction. Sales
under such contracts are recorded under the percentage-of-completion method.
Costs and estimated revenues are recorded as work is performed based on the
percentage that incurred costs bear to estimated total costs utilizing the most
recent estimates of costs. If the current contract estimate indicates a loss,
provision is made for the total anticipated loss in the current
period.
5
Disclosures About Fair
Value of Financial Instruments
The following methods and assumptions were used to estimate the fair
value of each class of financial instrument for which it is practicable to
estimate:
Cash and cash equivalents, accounts receivable and accounts payable - The
carrying amount is a reasonable estimate of fair value given the short maturity
of these instruments.
Debt - The estimated fair value of the Company's bank debt approximates
the carrying value of such debt because the interest rate is variable and is
market-based.
NOTE 2 - INVENTORIES
Inventories
consist of the following (in thousands):
|
November 30,
|
|
February 28,
|
|
2011
|
|
2011
|
Raw materials
|
$
|
9,803
|
|
$
|
8,663
|
Work
in process
|
|
260
|
|
|
85
|
Finished goods
|
|
2,346
|
|
|
1,142
|
|
$
|
12,409
|
|
$
|
9,890
|
NOTE 3 - INTANGIBLE
ASSETS
Intangible assets are comprised as follows (in thousands):
|
|
|
November 30,
2011
|
|
February 28,
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
Amortization
|
|
Carrying
|
|
Accumulated
|
|
|
|
|
Carrying
|
|
Accumulated
|
|
|
|
|
Period
|
|
Amount
|
|
Amortization
|
|
Net
|
|
Amount
|
|
Amortization
|
|
Net
|
Developed/core technology
|
5-7 years
|
|
$
|
2,853
|
|
$
|
2,009
|
|
$
|
844
|
|
$
|
3,101
|
|
$
|
1,783
|
|
$
|
1,318
|
Dataradio tradename
|
7
years
|
|
|
2,130
|
|
|
228
|
|
|
1,902
|
|
|
2,130
|
|
|
-
|
|
|
2,130
|
Customer lists
|
5-7 years
|
|
|
1,268
|
|
|
1,000
|
|
|
268
|
|
|
1,339
|
|
|
831
|
|
|
508
|
Covenants not to compete
|
4-5
years
|
|
|
115
|
|
|
107
|
|
|
8
|
|
|
138
|
|
|
106
|
|
|
32
|
Patents
|
4-5 years
|
|
|
40
|
|
|
21
|
|
|
19
|
|
|
39
|
|
|
15
|
|
|
24
|
|
|
|
$
|
6,406
|
|
$
|
3,365
|
|
$
|
3,041
|
|
$
|
6,747
|
|
$
|
2,735
|
|
$
|
4,012
|
The Dataradio
tradename, which was originally classified as an indefinite-lived asset at the
time of its acquisition in 2006, was recently determined to have a finite useful
life as a result of managements decision to phase out the use of this tradename
in the future. Effective at the beginning of fiscal 2012, the Company commenced
the amortization of this asset over a period of seven years.
All intangible
asset amortization expense was attributable to the Wireless DataCom segment.
Estimated future amortization expense for the fiscal years ending February 28 is
as follows (in thousands):
|
2012 (remainder)
|
$
|
305
|
|
2013
|
|
1,060
|
|
2014
|
|
464
|
|
2015
|
|
305
|
|
2016
|
|
304
|
|
Thereafter
|
|
603
|
|
|
$
|
3,041
|
6
NOTE 4 - FINANCING
ARRANGEMENTS
On
August 15, 2011, the Company and Square 1 Bank entered into a Fourth Amendment
(the Fourth Amendment) to the Loan and Security Agreement dated as of December
22, 2009 (as amended, the "Amended Loan Agreement"), which provides for
borrowings of up to $12 million. Effective with the Fourth Amendment, the
facility is now comprised of a $3 million term loan facility, which was fully
funded on the date of the Fourth Amendment, and a revolver of up to $12 million.
The maturity date of the Amended Loan Agreement is August 15, 2014. The revolver
borrowing limit is equal to the lesser of (a) $12 million minus the term loan
principal outstanding at any point in time, or (b) 85% of eligible accounts
receivable. The term loan principal is repayable at the rate of $100,000 per
month beginning April 2012. All borrowings under the Amended Loan Agreement bear
interest at Square 1 Bank's prime rate plus 1.0% per annum. Interest is payable
on the last day of each calendar month. The Company paid a loan fee of $60,000
to Square 1 Bank in connection with the Fourth Amendment.
At November 30,
2011, the Company had outstanding borrowings under the revolver of $3,476,000,
and the amount available to borrow at that date amounted to $5,524,000. At
November 30, 2011, the effective interest rate on the revolver and bank term
loan was 4.25%. At February 28, 2011, the effective interest rate on the
revolver was 6.0%.
The Amended Loan
Agreement contains a financial covenant that requires the Company to maintain
minimum levels of earnings before interest, income taxes, depreciation,
amortization and other noncash charges ("EBITDA") on a rolling six-month basis
and a minimum debt coverage ratio. The Amended Loan Agreement also provides for
a number of customary events of default, including a provision that a material
adverse change constitutes an event of default that permits the lender, at its
option, to accelerate the loan. Among other provisions, the Amended Loan
Agreement requires a lock-box and cash collateral account whereby cash
remittances from the Company's customers are directed to the cash collateral
account and which amounts are applied to reduce the revolving loan principal
balance. Borrowings under the Amended Loan Agreement are secured by
substantially all of the assets of the Company and its domestic
subsidiaries.
Long-term debt is
comprised of the following (in thousands):
|
November 30,
|
|
February 28,
|
|
2011
|
|
2011
|
Bank term loan
|
$
|
3,000
|
|
|
$
|
-
|
|
Subordinated promissory notes
|
|
-
|
|
|
|
5,000
|
|
Less unamortized discount on subordinated
notes
|
|
-
|
|
|
|
(540
|
)
|
|
|
3,000
|
|
|
|
4,460
|
|
Less portion due within one year
|
|
(800
|
)
|
|
|
-
|
|
Long-term debt
|
$
|
2,200
|
|
|
$
|
4,460
|
|
On December 22,
2009 and January 15, 2010, the Company raised an aggregate amount of $5,000,000
from the issuance of subordinated promissory notes (the "Subordinated Notes")
that bore interest at 12% per annum and had a maturity date of December 22,
2012. On August 15, 2011, in conjunction with entering into the Fourth Amendment
with Square 1 Bank, the Company paid in full the $5,000,000 outstanding
principal balance of the Subordinated Notes plus accrued interest of
approximately $76,000. The 500,000 common stock purchase warrants that were
issued to the subordinated note holders at the time the notes were issued have
an expiration date of December 22, 2012, and are exercisable at $4.02 per share.
7
Other Non-Current
Liabilities
Other non-current
liabilities consist of the following (in thousands):
|
|
November 30,
|
|
February 28,
|
|
|
2011
|
|
2011
|
|
Deferred rent
|
$
|
270
|
|
$
|
4
|
|
Deferred revenue
|
|
641
|
|
|
550
|
|
|
$
|
911
|
|
$
|
554
|
NOTE 5 - 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. A deferred income tax asset is
recognized if realization of such asset is more likely than not, based upon the
weight of available evidence which includes historical operating performance and
the Company's forecast of future operating performance. The Company evaluates
the realizability of its deferred income tax assets and a valuation allowance is
provided, as necessary. During this evaluation, the Company reviews its
forecasts of income in conjunction with the positive and negative evidence
surrounding the realizability of its deferred income tax assets to determine if
a valuation allowance is needed.
The Company files
income tax returns in the U.S. federal jurisdiction, various U.S. states, Canada
and France. Income tax returns filed for fiscal years 2006 and earlier are not
subject to examination by U.S. federal and state tax authorities. Certain income
tax returns for fiscal years 2007 through 2011 remain open to examination by
U.S. federal and state tax authorities. Income tax returns for fiscal years 2008
through 2011 remain open to examination by tax authorities in Canada and France.
The Company believes that it has made adequate provision for all income tax
uncertainties pertaining to these open tax years.
At November 30,
2011, the Company had a net deferred income tax asset balance of $11.8 million,
comprised of a gross deferred tax asset of $52.0 million and a valuation
allowance of $40.2 million. The current portion of the net deferred tax assets
is $2.1 million and the noncurrent portion is $9.7 million.
No income tax
provision, other than minimum state and federal income taxes, was recorded
during the three- and nine-month periods ended November 30, 2011 because of the
existence of net operating loss carryforwards that offset the pre-tax income. No
tax benefit was recorded during the three and nine-month periods ended November
30, 2010, when the Company had a pretax loss, because the future realizability
of such benefit was not considered to be more likely than not.
NOTE 6 - EARNINGS (LOSS)
PER SHARE
Basic earnings
(loss) per share is computed by dividing net income (loss) available to common
stockholders by the weighted average number of common shares outstanding during
the period. Diluted earnings per share reflects the potential dilution, using
the treasury stock method, that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the earnings of the Company. In
computing diluted earnings per share, the treasury stock method assumes that
outstanding options are exercised and the proceeds are used to purchase common
stock at the average market price during the period. Options will have a
dilutive effect under the treasury stock method only when the Company reports
net income and the average market price of the common stock during the period
exceeds the exercise price of the options.
8
The following is a
summary of the calculation of weighted average shares used in the computation of
basic and diluted earnings (loss) per share (in thousands):
|
Three Months Ended
|
|
Nine Months Ended
|
|
November
30,
|
|
November
30,
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
Basic weighted average number of
common
|
|
|
|
|
|
|
|
shares
outstanding
|
27,869
|
|
27,321
|
|
27,583
|
|
27,133
|
Effect of stock options, restricted stock,
|
|
|
|
|
|
|
|
restricted stock units and
warrants
|
|
|
|
|
|
|
|
computed on treasury stock
method
|
931
|
|
-
|
|
862
|
|
-
|
Diluted weighted average number of
common
|
|
|
|
|
|
|
|
shares
outstanding
|
28,800
|
|
27,321
|
|
28,445
|
|
27,133
|
Shares underlying
stock options and warrants amounting to 1,737,000 at November 30, 2011 were
excluded from the calculations of diluted earnings per share for the three and
nine months then ended because based on the exercise prices of these derivative
securities their inclusion would have been anti-dilutive under the treasury
stock method.
Shares underlying
stock awards and warrants amounting to 5,043,000 at November 30, 2010 were
excluded from the computation of diluted earnings per share because the Company
reported a net loss during the three- and nine-month periods then ended and the
effect of inclusion would be anti-dilutive (i.e., including such securities
would result in a lower loss per share).
NOTE 7 - COMPREHENSIVE
INCOME (LOSS
)
Comprehensive
income (loss) is defined as the total of net income (loss) and all non-owner
changes in equity. The following table details the components of comprehensive
income (loss) for the three and nine months ended November 30, 2011 and 2010 (in
thousands):
|
Three Months Ended
|
|
Nine Months Ended
|
|
November
30,
|
|
November
30,
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
Net income (loss)
|
$
|
1,700
|
|
$
|
(179
|
)
|
|
$
|
3,576
|
|
$
|
(3,586
|
)
|
Reclassification adjustment for write-off
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of currency translation
account
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of foreign
subsidiary
|
|
-
|
|
|
-
|
|
|
|
801
|
|
|
-
|
|
Comprehensive income (loss)
|
$
|
1,700
|
|
$
|
(179
|
)
|
|
$
|
4,377
|
|
$
|
(3,586
|
)
|
During the second
quarter of fiscal 2012, the Company wrote off $801,000 of cumulative foreign
currency translation losses related to its French subsidiary as a result of the
decision to shut down this subsidiary.
9
NOTE 8 STOCK-BASED
COMPENSATION
Stock-based compensation expense is included in the following captions of
the unaudited consolidated statements of operations (in thousands):
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
November
30,
|
|
November
30,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Cost of revenues
|
$
|
30
|
|
$
|
40
|
|
$
|
70
|
|
$
|
113
|
|
Research and development
|
|
107
|
|
|
93
|
|
|
283
|
|
|
246
|
|
Selling
|
|
55
|
|
|
55
|
|
|
148
|
|
|
155
|
|
General and administrative
|
|
446
|
|
|
367
|
|
|
1,236
|
|
|
1,045
|
|
|
$
|
638
|
|
$
|
555
|
|
$
|
1,737
|
|
$
|
1,559
|
Changes in the Company's outstanding stock options during the nine months
ended November 30, 2011 were as follows (options in thousands):
|
|
|
|
|
Weighted
|
|
|
Number of
|
|
Average
|
|
|
Options
|
|
Option
Price
|
|
Outstanding at February 28, 2011
|
2,108
|
|
|
$
|
4.87
|
|
Granted
|
164
|
|
|
|
3.42
|
|
Exercised
|
(8
|
)
|
|
|
1.68
|
|
Forfeited or expired
|
(92
|
)
|
|
|
4.98
|
|
Outstanding at November 30, 2011
|
2,172
|
|
|
$
|
4.77
|
|
Exercisable at November 30, 2011
|
1,586
|
|
|
$
|
5.63
|
Changes in the Company's unvested restricted stock shares and restricted
stock units (RSUs) during the nine months ended November 30, 2011 were as
follows (shares and RSUs in thousands):
|
|
Number of
|
|
Weighted
|
|
|
Restricted
|
|
Average Grant
|
|
|
Shares and
|
|
Date Fair
|
|
|
RSUs
|
|
Value
|
|
Outstanding at February 28, 2011
|
2,045
|
|
|
$
|
2.16
|
|
Granted
|
757
|
|
|
|
3.58
|
|
Vested
|
(817
|
)
|
|
|
2.21
|
|
Forfeited
|
(56
|
)
|
|
|
1.93
|
|
Outstanding at November 30, 2011
|
1,929
|
|
|
$
|
2.71
|
During the nine months ended November 30, 2011, the Company retained
279,000 of the 817,000 vested restricted stock shares and RSUs to cover the
minimum statutory required amount of employee withholding taxes.
As of November 30,
2011, the total unrecognized stock-based compensation cost related to nonvested
stock options, restricted stock and RSUs amounted to $5.0 million. This cost is
expected to be recognized as an expense over a weighted-average remaining
vesting period of 2.8 years.
NOTE 9 - CONCENTRATION
OF RISK
Because some of
the markets that the Company sells into are dominated by a few large service
providers, a significant percentage of consolidated revenues and consolidated
accounts receivable relate to a small number of customers. One customer of the
Company's Satellite business unit accounted for 21% and 28% of consolidated
revenues for the quarters ended November 30, 2011 and 2010, respectively, and
accounted for 27% and 35% of consolidated revenues for the respective nine-month
periods then ended. In addition, this customer accounted for 17% and 28% of
consolidated net accounts receivable at November 30, 2011 and February 28, 2011,
respectively. One other customer accounted for 18% of consolidated net accounts
receivable at November 30, 2011.
10
Some of the Companys components, assemblies and electronic manufacturing
services are purchased from sole source suppliers. One supplier, which functions
as an independent foreign procurement agent, accounted for approximately 50% of
the Company's total inventory purchases in the nine months ended November 30,
2011 and 2010. At November 30, 2011, this supplier accounted for 50% of the
Company's total accounts payable balance.
NOTE 10 - 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 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. In adjusting the warranty reserve the Company also
considers the impact of the known operational issues that may have a greater
impact than historical trends. Activity in the accrued warranty costs liability
for the nine months ended November 30, 2011 and 2010 is as follows (in
thousands):
|
|
Nine Months Ended
|
|
|
November
30,
|
|
|
2011
|
|
2010
|
|
Balance at beginning of period
|
$
|
700
|
|
|
$
|
1,231
|
|
|
Charged to costs and expenses
|
|
664
|
|
|
|
650
|
|
|
Deductions
|
|
(356
|
)
|
|
|
(1,060
|
)
|
|
Balance at end of period
|
$
|
1,008
|
|
|
$
|
821
|
|
The accrued
warranty cost liability is included in Other Current Liabilities in the
consolidated balance sheets at November 30, 2011 and February 28, 2011.
NOTE 11 OTHER
FINANCIAL INFORMATION
"Net cash provided
by operating activities" in the unaudited consolidated statements of cash flows
includes cash payments for interest and income taxes as follows (in thousands):
|
|
Nine Months Ended
|
|
|
November
30,
|
|
|
2011
|
|
2010
|
|
Interest expense paid
|
$
|
696
|
|
|
$
|
665
|
|
|
Income taxes paid (refunds received)
|
$
|
(80
|
)
|
|
$
|
(806
|
)
|
11
NOTE 12 - SEGMENT
INFORMATION
Segment
information for the three and nine months ended November 30, 2011 and 2010 is as
follows (dollars in thousands):
|
|
Three Months
Ended November 30, 2011
|
|
Three Months
Ended November 30, 2010
|
|
|
Operating
Segments
|
|
|
|
|
|
|
|
|
|
Operating
Segments
|
|
|
|
|
|
|
|
|
|
|
Wireless
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DataCom
|
|
Satellite
|
|
Corporate
|
|
Total
|
|
DataCom
|
|
Satellite
|
|
Corporate
|
|
Total
|
Revenues
|
|
$
|
25,905
|
|
|
$
|
6,847
|
|
|
|
|
|
|
$
|
32,752
|
|
|
$
|
21,180
|
|
|
$
|
8,373
|
|
|
|
|
|
|
$
|
29,553
|
|
Gross profit
|
|
$
|
9,503
|
|
|
$
|
666
|
|
|
|
|
|
|
$
|
10,169
|
|
|
$
|
7,508
|
|
|
$
|
191
|
|
|
|
|
|
|
$
|
7,699
|
|
Gross margin
|
|
|
36.7
|
%
|
|
|
9.7
|
%
|
|
|
|
|
|
|
31.0
|
%
|
|
|
35.4
|
%
|
|
|
2.3
|
%
|
|
|
|
|
|
|
26.1
|
%
|
Operating income (loss)
|
|
$
|
2,999
|
|
|
$
|
(156
|
)
|
|
$
|
(943
|
)
|
|
$
|
1,900
|
|
|
$
|
1,700
|
|
|
$
|
(821)
|
|
|
$
|
(742
|
)
|
|
$
|
137
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended November 30, 2011
|
|
|
Nine Months
Ended November 30, 2010
|
|
|
|
Operating
Segments
|
|
|
|
|
|
|
|
|
|
Operating
Segments
|
|
|
|
|
|
|
|
|
|
|
Wireless
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DataCom
|
|
Satellite
|
|
Corporate
|
|
Total
|
|
DataCom
|
|
Satellite
|
|
Corporate
|
|
Total
|
Revenues
|
|
$
|
73,465
|
|
|
$
|
27,642
|
|
|
|
|
|
|
$
|
101,107
|
|
|
$
|
55,073
|
|
|
$
|
30,316
|
|
|
|
|
|
|
$
|
85,389
|
|
Gross profit
|
|
$
|
29,487
|
|
|
$
|
1,939
|
|
|
|
|
|
|
$
|
31,426
|
|
|
$
|
19,061
|
|
|
$
|
2,129
|
|
|
|
|
|
|
$
|
21,190
|
|
Gross margin
|
|
|
40.1
|
%
|
|
|
7.0
|
%
|
|
|
|
|
|
|
31.1
|
%
|
|
|
34.6
|
%
|
|
|
7.0
|
%
|
|
|
|
|
|
|
24.8
|
%
|
Operating income (loss)
|
|
$
|
9,528
|
|
|
$
|
(891)
|
|
|
$
|
(2,898
|
)
|
|
$
|
5,739
|
|
|
$
|
1,564
|
|
|
$
|
(1,388)
|
|
|
$
|
(2,678
|
)
|
|
$
|
(2,502
|
)
|
The Company considers operating income (loss) to be the primary measure
of profit or loss of its business segments. The amount shown for each period in
the "Corporate" column above for operating income (loss) consists of corporate
expenses that are not allocated to the business segments. These non-allocated
corporate expenses include salaries and benefits of certain executive officers
and expenses such as audit fees, investor relations, stock listing fees,
director and officer liability insurance, and director fees and expenses.
Corporate expenses include stock-based compensation expense of $234,000 and
$181,000 in the three-month periods ended November 30, 2011 and 2010,
respectively, and $663,000 and $511,000, respectively, in the nine-month periods
then ended.
Effective with the
fiscal 2012 first quarter, certain general and administrative expenses that were
previously treated as non-allocated corporate expenses were allocated to the
operating segments. In the above segment information table, the operating income
(loss) amounts for the three- and nine-month periods ended November 30, 2010
have been reclassified to conform with the fiscal 2012 presentation. These
changes had no effect on consolidated general and administrative expenses.
NOTE 13 - COMMITMENTS
AND CONTINGENCIES
Legal Proceedings
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
Company's consolidated financial position or results of operations.
12
ITEM 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The Company's discussion and analysis of its financial condition and
results of operations are based upon the Company's consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires management to make estimates and assumptions that
may affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of sales 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 (MD&A) under Part
II, Item 7 of the Companys Annual Report on Form 10-K for the year ended
February 28, 2011, as filed with the Securities and Exchange Commission on April
28, 2011, 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 purchased
intangible assets and other long-lived assets;
-
Stock-based compensation expense;
and
-
Revenue recognition.
RESULTS OF OPERATIONS
Overview
CalAmp Corp.
("CalAmp" or the "Company") develops and markets wireless communications
solutions that deliver data, voice and video for critical networked applications
and other purposes. The Company's two business segments are Wireless DataCom,
which serves utility, government and enterprise customers, and Satellite, which
focuses on the North American Direct Broadcast Satellite market.
Wireless DataCom
The Wireless
DataCom segment provides wireless communications technologies, products and
services for a wide range of commercial and industrial applications. CalAmp has
expertise in designing and providing applications involving various combinations
of private and public (cellular infrastructure) networks, narrow-band and
broad-band frequencies, licensed and unlicensed radio spectrum, and mobile and
fixed-remote communications. The Company's Wireless DataCom segment is comprised
of a Wireless Networks business and a Mobile Resource Management (MRM)
business.
Satellite
The Company's DBS
reception products are primarily sold to EchoStar Corporation, an affiliate of
Dish Network, for incorporation into complete subscription satellite television
systems.
13
Operating Results by
Business Segment
The Company's
revenue, gross profit and operating income (loss) by business segment are as
follows:
|
|
REVENUE BY SEGMENT
|
|
|
Three Months
Ended November 30,
|
|
Nine Months
Ended November 30,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
% of
|
|
|
|
|
% of
|
|
|
|
|
% of
|
|
|
|
|
% of
|
|
|
$000s
|
|
Total
|
|
$000s
|
|
Total
|
|
$000s
|
|
Total
|
|
$000s
|
|
Total
|
Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless DataCom
|
|
$
|
25,905
|
|
79.1
|
%
|
|
|
21,180
|
|
71.7
|
%
|
|
$
|
73,465
|
|
72.7
|
%
|
|
$
|
55,073
|
|
64.5
|
%
|
Satellite
|
|
|
6,847
|
|
20.9
|
%
|
|
|
8,373
|
|
28.3
|
%
|
|
|
27,642
|
|
27.3
|
%
|
|
|
30,316
|
|
35.5
|
%
|
Total
|
|
$
|
32,752
|
|
100.0
|
%
|
|
$
|
29,553
|
|
100.0
|
%
|
|
$
|
101,107
|
|
100.0
|
%
|
|
$
|
85,389
|
|
100.0
|
%
|
|
|
GROSS PROFIT BY SEGMENT
|
|
|
Three Months
Ended November 30,
|
|
Nine Months
Ended November 30,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
% of
|
|
|
|
|
% of
|
|
|
|
|
% of
|
|
|
|
|
% of
|
|
|
$000s
|
|
Total
|
|
$000s
|
|
Total
|
|
$000s
|
|
Total
|
|
$000s
|
|
Total
|
Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless DataCom
|
|
$
|
9,503
|
|
93.5
|
%
|
|
$
|
7,508
|
|
97.5
|
%
|
|
$
|
29,487
|
|
93.8
|
%
|
|
$
|
19,061
|
|
90.0
|
%
|
Satellite
|
|
|
666
|
|
6.5
|
%
|
|
|
191
|
|
2.5
|
%
|
|
|
1,939
|
|
6.2
|
%
|
|
|
2,129
|
|
10.0
|
%
|
Total
|
|
$
|
10,169
|
|
100.0
|
%
|
|
$
|
7,699
|
|
100.0
|
%
|
|
$
|
31,426
|
|
100.0
|
%
|
|
$
|
21,190
|
|
100.0
|
%
|
|
|
OPERATING INCOME (LOSS) BY SEGMENT
|
|
|
Three Months
Ended November 30,
|
|
Nine Months
Ended November 30,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
$000s
|
|
Revenue
|
|
$000s
|
|
Revenue
|
|
$000s
|
|
Revenue
|
|
$000s
|
|
Revenue
|
Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless DataCom
|
|
$
|
2,999
|
|
|
9.2
|
%
|
|
$
|
1,700
|
|
|
5.8
|
%
|
|
$
|
9,528
|
|
|
9.4
|
%
|
|
$
|
1,564
|
|
|
1.8
|
%
|
Satellite
|
|
|
(156
|
)
|
|
(0.5
|
%)
|
|
|
(821
|
)
|
|
(2.8
|
%)
|
|
|
(891
|
)
|
|
(0.9
|
%)
|
|
|
(1,388
|
)
|
|
(1.6
|
%)
|
Corporate expenses
|
|
|
(943
|
)
|
|
(2.9
|
%)
|
|
|
(742
|
)
|
|
(2.5
|
%)
|
|
|
(2,898
|
)
|
|
(2.9
|
%)
|
|
|
(2,678
|
)
|
|
(3.1
|
%)
|
Total
|
|
$
|
1,900
|
|
|
5.8
|
%
|
|
$
|
137
|
|
|
0.5
|
%
|
|
$
|
5,739
|
|
|
5.7
|
%
|
|
$
|
(2,502
|
)
|
|
(2.9
|
%)
|
Revenue
Wireless DataCom revenue increased by $4.7 million, or 22%, to $25.9
million in the third quarter of fiscal 2012 compared to the fiscal 2011 third
quarter. For the nine months ended November 30, 2011, Wireless DataCom revenue
increased by $18.4 million, or 33%, to $73.5 million compared to the same period
of the prior year. The MRM business contributed significantly to the increased
revenue through the addition of new customers, growth in orders from existing
customers, and revenue of $3.0 million from the sale of patents in the second
quarter of fiscal 2012. The remaining Wireless DataCom revenue increase was
attributable to higher sales of the Wireless Networks business, with significant
contribution from a Positive Train Control project for which the Company started
delivering initial pre-production radios in the fiscal 2012 third
quarter.
Satellite revenue
decreased by $1.5 million, or 18%, to $6.9 million in the three months ended
November 30, 2011 from $8.4 million for the same period in the previous fiscal
year. For the nine months ended November 30, 2011, Satellite revenue decreased
by $2.7 million, or 9%, to $27.6 million from $30.3 million for the same period
of the prior year. The year-over-year revenue decreases were due to changes in
product mix and product transitions. The Company began shipping a new home video
and data networking product to its key satellite customer in the fourth quarter
of fiscal 2012, and expects meaningful revenue contributions from this product
beginning in this fourth quarter and extending into the next fiscal year.
Gross
Profit and Gross Margins
Wireless DataCom
gross profit increased by $2.0 million to $9.5 million in the fiscal 2012 third
quarter compared to $7.5 million in the third quarter of last year, and gross
margin improved to 36.7% in the third quarter of fiscal 2012 from 35.4% in the
third quarter of fiscal 2011. These increases were due primarily to higher
revenue.
Wireless DataCom
gross profit increased 55% to $29.5 million in the nine months ended November
30, 2011 compared to $19.1 million for the same period of the prior year, and
gross margin increased to 40% in the nine months ended November 30, 2011 from
35% for the same period of the prior year. These increases were due primarily to
higher revenue and the $3.0 million sale of patents in the fiscal 2012 second
quarter for which there was no corresponding cost of sales.
14
Satellite gross
profit increased by $475,000 to $666,000 in the fiscal 2012 third quarter
compared to the third quarter of last year. Satellite's gross margin increased
to 9.7% in the fiscal 2012 third quarter from 2.3% in the third quarter of last
year as a result of the Companys recent transition to a variable cost operating
model in which substantially all of the satellite products are manufactured by
off-shore subcontractors.
The Satellite
segment had gross profit of $1.9 million for the nine months ended November 30,
2011, compared with gross profit of $2.1 million for the same period last year,
with gross margin of 7% for both periods.
See also Note 12
to the accompanying unaudited consolidated financial statements for additional
operating data by business segment.
Operating
Expenses
Consolidated
research and development (R&D) expense decreased by $111,000 to $2,622,000
in the third quarter of fiscal 2012 from $2,733,000 in the third quarter of last
year due primarily to personnel reductions in the Satellite business during the
fiscal 2012 first quarter. For the nine-month year-to-date periods, R&D
expenses increased by $130,000 from $8,275,000 last year to $8,405,000 due to
severance costs arising from personnel reductions in the Satellite business
($116k) and higher 401K plan employer contribution ($84k), partially offset by lower
payroll expense as a result of the aforementioned positions eliminated in the
first quarter.
Consolidated
selling expenses increased by $158,000 to $2,731,000 in the third quarter of
this year from $2,573,000 last year. For the nine-month year-to-date periods,
selling expenses increased by $305,000 from $7,870,000 last year to $8,175,000
this year. These year-over-year increases are due primarily to higher payroll
expense as a result of additional sales personnel.
Consolidated
general and administrative expenses ("G&A") increased by $625,000 to $2,606,000 in the third quarter of this
year compared to the prior year due to higher legal and payroll expenses. Legal expense was higher by approximately
$250,000 in the latest quarter compared to the fiscal 2011 third quarter because last years legal expense was reduced
by $230,000 due to an indemnification settlement entered into with another company involving defense costs. For the
nine-month periods, consolidated G&A increased by $1,445,000 to $8,135,000 for fiscal 2012 from $6,690,000 last year due
to higher legal and payroll expenses. Higher legal expense in the latest nine-month period is due to the prior year defense
cost recovery discussed above plus legal expense incurred in the second quarter of this year in
connection with the shut-down of the Companys French subsidiary. Higher year-over-year G&A payroll expense is
primarily due to incentive expenses recorded in the current year as a result of the Companys improving profitability
and hiring additional personnel.
Amortization of
intangibles increased from $275,000 in the third quarter of last year to
$310,000 in the third quarter of this year. For the nine-month periods,
amortization of intangibles increased to $972,000 this year from $857,000 last
year. The increase is attributable to the amortization of the Dataradio
tradename asset over a period of seven years commencing in the first quarter of
fiscal 2012. Previously this tradename asset was classified as indefinite-lived
asset and accordingly it was not being amortized prior to fiscal 2012.
Non-operating Expense, Net
Non-operating
expense decreased $144,000 from the third quarter of last year to the third
quarter of this year due primarily from lower interest expense as a result of
the amendment to the bank loan agreement in August 2011 and the concurrent
payoff of the Companys 12% Subordinated Notes.
Non-operating
expense increased from $1,084,000 in the nine months ended November 30, 2010 to
$2,120,000 in the nine months ended November 30, 2011. This increase was
primarily due to $801,000 cumulative foreign currency translation account losses
related to the Companys investment in its French subsidiary that were written
off in the second quarter of fiscal 2012, as a result of the decision to shut
down this subsidiary.
15
Income Tax Provision
No income tax
provision, other than minimum state and federal income taxes, was recorded
during the three- and nine-month periods ended November 30, 2011 because of the
existence of net operating loss carryforwards that offset the pre-tax income. No
tax benefit was recorded during the three and nine-month periods ended November
30, 2010, when the Company had a pretax loss, because the future realizability
of such benefit was not considered to be more likely than not.
LIQUIDITY AND CAPITAL
RESOURCES
The Company's
primary sources of liquidity are its cash and cash equivalents, which amounted
to $4,393,000 at November 30, 2011, and the revolving line of credit with Square
1 Bank. During the nine months ended November 30, 2011, cash and cash
equivalents increased by $152,000. During this period, cash was provided by
operations in the amount of $7,499,000, proceeds from the bank term loan of
$3,000,000 and collections on a note receivable of $431,000, partially offset by
repayment of subordinated notes payable of $5,000,000, net repayments on the
bank working capital line of credit of $4,013,000, capital expenditures of
$682,000 and payment of employee withholding taxes on the net share settlement
of vested equity awards of $1,032,000.
On August 15,
2011, the Company and Square 1 Bank entered into a Fourth Amendment (the Fourth
Amendment) to the Loan and Security Agreement dated as of December 22, 2009 (as
amended, the "Loan Agreement"), which provides for borrowings of up to $12
million. Effective with the Fourth Amendment, the facility is now comprised of a
$3 million term loan facility, which was fully funded on the date of the Fourth
Amendment, and a revolver of up to $12 million. The maturity date of the Amended
Loan Agreement is August 15, 2014. The revolver borrowing limit is equal to the
lesser of (a) $12 million minus the term loan principal outstanding at any point
in time, or (b) 85% of eligible accounts receivable. The term loan principal is
repayable at the rate of $100,000 per month beginning April 2012. All borrowings
under the Loan Agreement bear interest at Square 1 Bank's prime rate plus 1.0%
per annum. Interest is payable on the last day of each calendar month. The
Company paid a loan fee of $60,000 to Square 1 Bank in connection with the
Fourth Amendment.
The Amended Loan
Agreement contains a financial covenant that requires the Company to maintain
minimum levels of earnings before interest, income taxes, depreciation,
amortization and other noncash charges ("EBITDA") on a rolling six-month basis
and a minimum debt coverage ratio. The Amended Loan Agreement also provides for
a number of customary events of default, including a provision that a material
adverse change constitutes an event of default that permits the lender, at its
option, to accelerate the loan. Among other provisions, the Amended Loan
Agreement requires a lock-box and cash collateral account whereby cash
remittances from the Company's customers are directed to the cash collateral
account and which amounts are applied to reduce the revolving loan principal
balance. Borrowings under the Amended Loan Agreement are secured by
substantially all of the assets of the Company and its domestic
subsidiaries.
FORWARD LOOKING
STATEMENTS
Forward looking
statements in this Form 10-Q which include, without limitation, statements
relating to the Company's plans, strategies, objectives, expectations,
intentions, projections and other information regarding future performance, are
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The words "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
Company's current views at the time they were made with respect to future events
and financial performance and are subject to certain risks and uncertainties,
including, without limitation, product demand, market growth, competitive
pressures and pricing declines in the Company's Satellite and Wireless markets,
supplier constraints, manufacturing yields, the length and extent of the global
economic downturn that has and may continue to adversely affect the Company's
business, and other risks and uncertainties that are set forth under the caption
"Risk Factors" in Part I, Item 1A of the Annual Report on Form 10-K for the year
ended February 28, 2011 as filed with the Securities and Exchange Commission on
April 28, 2011. 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.
16
ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Risk
The Company has international operations that give rise to exposure to
market risks from changes in foreign exchange rates. A cumulative foreign
currency translation loss of $65,000 related to the Company's Canadian
subsidiary is included in accumulated other comprehensive loss in the
stockholders' equity section of the consolidated balance sheets at November 30,
2011. A foreign currency loss of $103,000 and a foreign currency gain of $37,000
were included in the consolidated statements of operations for the three months
ended November 30, 2011 and 2010, respectively. Foreign currency losses of
$116,000 and $4,000 were included in the consolidated statements of operations
for the nine months ended November 30, 2011 and 2010, respectively. In addition,
during the second quarter of fiscal 2012, the Company wrote off $801,000 of
cumulative foreign currency translation losses related to its French subsidiary
as a result of the decision to shut down this subsidiary.
Interest Rate Risk
The Company has
variable-rate bank debt. A fluctuation of one percent in the interest rate on
the $12 million loan facility with Square 1 Bank would have an annual impact of
approximately $120,000 on the Company's consolidated statement of operations
assuming that the full amount of the facility was borrowed.
ITEM 4. CONTROLS AND
PROCEDURES
Disclosure Controls and
Procedures
The Company's
principal executive officer and principal financial officer have concluded,
based on their evaluation of disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, (the
"Exchange Act")) as of the end of the period covered by this Report, that the
Company's disclosure controls and procedures are effective to ensure that the
information required to be disclosed in reports that are filed or submitted
under the Exchange Act is accumulated and communicated to management, including
the principal executive officer and principal financial officer, as appropriate,
to allow timely decisions regarding required disclosure and that such
information is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the Securities Exchange
Commission.
Internal Control Over
Financial Reporting
There was no
change in the Company's internal control over financial reporting during the
Company's most recently completed fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the Company's internal control
over financial reporting.
17
PART II. OTHER
INFORMATION
ITEM 1. LEGAL
PROCEEDINGS
The Company is not currently involved in any material pending legal
proceedings.
ITEM 1A. RISK FACTORS
The reader is
referred to Part I, "Item 1A. Risk Factors" in the Company's Annual Report on
Form 10-K for the year ended February 28, 2011, for a discussion of factors that
could materially affect the Company's business, financial condition or future
results. Additional risks not currently known or not currently believed to be
material to CalAmp may also harm the Companys business.
ITEM 6.
EXHIBITS
|
Exhibit 31.1 -
Chief
Executive Officer Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
Exhibit 31.2 -
Chief
Financial Officer Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
Exhibit 32 -
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
|
|
|
|
101.INS
|
|
XBRL
Instance Document
|
|
|
|
101.SCH
|
|
XBRL
Taxonomy Extension Schema Document
|
|
|
|
101.CAL
|
|
XBRL
Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.LAB
|
|
XBRLTaxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE
|
|
XBRL
Taxonomy Extension Presentation Linkbase Document
|
|
|
|
101.DEF
|
|
XBRL
Taxonomy Extension Definition Linkbase Document
|
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
December 22, 2011
|
/s/ Richard Vitelle
|
Date
|
Richard Vitelle
|
|
Vice
President Finance & CFO
|
|
(Principal Financial Officer and
|
|
Chief Accounting Officer)
|
18
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