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 September 30, 2009
Or
¨
|
Transition Report Pursuant to
Section 10 or 15(d) of the Securities Exchange Act of
1934
|
For The Transition Period from
to
Commission
File Number 0-15449
__________________
CALIFORNIA
MICRO DEVICES CORPORATION
(Exact
name of registrant as specified in its charter)
__________________
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|
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Delaware
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94-2672609
|
(State
or other jurisdiction of
incorporation
or organization)
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(I.R.S.
Employer
Identification
No.)
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490
N. McCarthy Boulevard #100 Milpitas, California
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95035
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(Address
of principal executive offices)
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(Zip
Code)
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(408)
263-3214
(Registrant’s
telephone number, including area code)
Not
applicable
(Former
name, former address, and former fiscal year if changed since last
report)
__________________
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes
x
No
¨
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 (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). YES
¨
NO
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or smaller reporting
company. See definition of “accelerated filer, large accelerated
filer and smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer
¨
|
Accelerated
filer
x
|
Non-accelerated
filer
¨
|
Smaller
reporting company
¨
|
|
|
(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
¨
No
x
The number of shares of the
registrant’s common stock, $0.001 par value, outstanding as of October 30, 2009
was 22,823,499.
Califo
rnia Micro Devices Corporation
Form
10-Q for the Quarter Ended September 30, 2009
INDEX
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Page
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Item 1.
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3
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3
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4
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5
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6
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Item
2.
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16
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Item
3.
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26
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Item
4.
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26
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Item
1.
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27
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Item
1A.
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27
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Item
2.
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40
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Item
3.
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40
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Item
4.
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41
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Item
5.
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41
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Item
6.
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42
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44
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Califo
rnia Micro Devices Corporation
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In
thousands, except per share amounts)
(Unaudited)
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Three
Months Ended September 30,
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Six
Months Ended September 30,
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2009
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2008
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2009
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2008
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Net
sales
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$
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11,115
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$
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16,343
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$
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20,463
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$
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30,443
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Cost
of sales
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8,184
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11,239
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15,251
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20,595
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Gross
margin
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2,931
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5,104
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5,212
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9,848
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Operating
expenses:
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Research
and development
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1,810
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2,887
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3,927
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5,171
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Selling,
general and administrative
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3,826
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3,832
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7,443
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7,697
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Amortization
of intangible assets
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6
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22
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12
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55
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Restructuring
and asset impairment charges
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717
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-
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717
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-
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Total
operating expenses
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6,359
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6,741
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12,099
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12,923
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Operating
loss
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(3,428
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)
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(1,637
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)
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(6,887
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)
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(3,075
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)
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Other
income (expense), net
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(5
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)
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1,193
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(16
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)
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1,487
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Loss
before income taxes
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(3,433
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)
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(444
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)
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(6,903
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)
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(1,588
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)
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Provision
for income taxes
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41
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1,521
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23
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1,295
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Net
loss
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$
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(3,474
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)
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$
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(1,965
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)
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$
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(6,926
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)
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$
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(2,883
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)
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Net
loss per share–basic and diluted
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$
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(0.15
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)
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$
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(0.08
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)
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$
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(0.30
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)
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$
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(0.12
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Weighted
average common shares outstanding–basic and diluted
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22,892
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23,392
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22,892
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23,379
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See Notes
to Condensed Consolidated Financial Statements.
Ca
lifornia Micro Devices Corporation
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In
thousands, except share data)
(Unaudited)
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September
30,
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March
31,
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2009
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2009
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ASSETS
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Current
assets:
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Cash
and cash equivalents
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$
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44,262
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$
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45,605
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Accounts
receivable, net
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4,425
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4,168
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Inventories
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3,723
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5,228
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Prepaid
expenses and other current assets
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713
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1,272
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Total
current assets
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53,123
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56,273
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Property,
plant and equipment, net
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2,142
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3,525
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Other
long-term assets
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99
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115
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TOTAL
ASSETS
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$
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55,364
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$
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59,913
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LIABILITIES
AND STOCKHOLDERS' EQUITY
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Current
liabilities:
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Accounts
payable
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$
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5,700
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$
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3,775
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Accrued
liabilities
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1,327
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1,585
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Deferred
margin on shipments to distributors
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1,059
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974
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Total
current liabilities
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8,086
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6,334
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Other
long-term liabilities
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193
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221
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Total
liabilities
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8,279
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6,555
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Commitments
and contingencies
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Stockholders'
equity:
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Preferred
stock - 10,000,000 shares authorized; none issued
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and
outstanding as of September 30, 2009 and March 31, 2009
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-
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-
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Common
stock and additional paid-in capital - $0.001 par value;
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50,000,000
shares authorized; 23,677,738 shares issued and
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22,842,649
shares outstanding as of September 30, 2009 and
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23,553,019
shares issued and 22,879,696 shares outstanding
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as
of March 31, 2009
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121,497
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120,383
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Accumulated
deficit
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(72,528
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)
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(65,602
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)
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Total
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48,969
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54,781
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Treasury
stock, at cost; 835,089 shares as of September 30, 2009
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and
673,323 shares as of March 31, 2009
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(1,884
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)
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(1,423
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)
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Total
stockholders' equity
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47,085
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53,358
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TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
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$
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55,364
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$
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59,913
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See Notes
to Condensed Consolidated Financial Statements.
Calif
ornia Micro Devices Corporation
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
thousands)
(Unaudited)
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Six
Months Ended September 30,
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2009
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2008
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Cash
flows from operating activities:
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Net
loss
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$
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(6,926
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)
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$
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(2,883
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)
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Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities:
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Depreciation
and amortization
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1,140
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1,265
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Stock-based
compensation
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905
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1,156
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Impairment
of fixed assets
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322
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-
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Amortization
of intangible assets
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12
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55
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Gain
on sale of fixed assets and intangible assets
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-
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(960
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)
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Accretion
of investment purchase discounts
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-
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(32
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)
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Changes
in operating assets and liabilities:
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Accounts
receivable, net
|
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|
(257
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)
|
|
|
(1,273
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)
|
Inventories
|
|
|
1,505
|
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(505
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)
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Deferred
tax assets
|
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|
-
|
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1,247
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|
Accounts
payable and other current liabilities
|
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|
1,676
|
|
|
|
2,118
|
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Deferred
margin on shipments to distributors
|
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85
|
|
|
|
(77
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)
|
Other
assets and liabilities
|
|
|
535
|
|
|
|
450
|
|
Net
cash provided by (used in) operating activities
|
|
|
(1,003
|
)
|
|
|
561
|
|
|
|
|
|
|
|
|
|
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Cash
flows from investing activities:
|
|
|
|
|
|
|
|
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Capital
expenditures
|
|
|
(88
|
)
|
|
|
(367
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)
|
Sales
and maturities of short-term investments, net of purchases
|
|
|
-
|
|
|
|
9,198
|
|
Proceeds
from sale of fixed assets and intangible assets
|
|
|
-
|
|
|
|
1,146
|
|
Net
cash provided by (used in) investing activities
|
|
|
(88
|
)
|
|
|
9,977
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Repurchase
of outstanding common stock
|
|
|
(461
|
)
|
|
|
(297
|
)
|
Proceeds
from employee stock compensation plans
|
|
|
209
|
|
|
|
271
|
|
Net
cash used in financing activities
|
|
|
(252
|
)
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
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Net
increase (decrease) in cash and cash equivalents
|
|
|
(1,343
|
)
|
|
|
10,512
|
|
Cash
and cash equivalents at beginning of period
|
|
|
45,605
|
|
|
|
32,925
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|
Cash
and cash equivalents at end of period
|
|
$
|
44,262
|
|
|
$
|
43,437
|
|
See Notes
to Condensed Consolidated Financial Statements.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.
Basis of Presentation
The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”) for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by U.S. GAAP for complete financial statements. The condensed
consolidated financial statements should be read in conjunction with the
financial statements included with our annual report on Form 10-K for the fiscal
year ended March 31, 2009. In the opinion of management, the accompanying
unaudited condensed consolidated financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly
the financial position of California Micro Devices Corporation (the “Company”,
“CMD”, “we”, “us” or “our”) as of September 30, 2009, and the results of
operations for the three and six month periods ended September 30, 2009 and
2008, and cash flows for the six month periods ended September 30, 2009 and
2008. Results for the three and six month periods are not necessarily
indicative of the results that may be expected for any other interim period or
for the full fiscal year ending March 31, 2010.
Certain
prior year amounts in the financial statements and notes thereto have been
reclassified to conform to the current 2010 presentation. These
reclassifications were not significant and had no effect on previously reported
total current assets and total assets.
The
unaudited condensed consolidated financial statements include the accounts of
CMD and its wholly owned subsidiary. Intercompany accounts and transactions have
been eliminated.
In
accordance with Accounting Standards Codification Topic No. 855 “
Subsequent Events”
(ASC 855),
the financial statements have been evaluated for subsequent events through
November 9, 2009, the date the financial statements are issued.
2.
Use of Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Our estimates are based on historical
experience, input from sources outside of the Company, and other relevant facts
and circumstances. Actual results could differ from those
estimates.
3.
Recent Accounting Pronouncements
In
June 2009, the FASB issued Accounting Standards Update (“ASU”)
No. 2009-01,
Topic 105 —
Generally Accepted Accounting Principles — amendments based on Statement of
Financial Accounting Standards No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles.
This Accounting Standards Update includes Statement 168 in its entirety,
including the accounting standards update instructions contained in
Appendix B of the Statement. The Codification does not change current U.S.
GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by
providing all the authoritative literature related to a particular topic in one
place. The Codification is effective for interim and annual periods ending after
September 15, 2009, and as of the effective date, all existing accounting
standard documents will be superseded. The Codification is effective for us in
the second quarter of fiscal 2010, and accordingly, this Form 10-Q for the
quarter ended September 30, 2009 and all subsequent public filings will
reference the Codification as the sole source of authoritative
literature.
4.
Cash and Cash Equivalents
Cash and
cash equivalents represent cash and money market funds as follows (in
thousands);
|
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September
30,
|
|
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March
31,
|
|
|
|
2009
|
|
|
2009
|
|
Cash
|
|
$
|
17,101
|
|
|
$
|
740
|
|
Money
market funds
|
|
|
27,161
|
|
|
|
44,865
|
|
Total
cash and cash equivalents
|
|
$
|
44,262
|
|
|
$
|
45,605
|
|
5. Fair Value
Accounting
Standards Codification Topic No. 820 “
Fair Value Measurements and
Disclosures” (ASC 820)
requires that assets and liabilities carried at
fair value be classified and disclosed in one of the three categories noted
below. ASC 820 defines fair value as the price that would be received from
selling an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. When determining the fair
value measurements for assets and liabilities required or permitted to be
recorded at fair value, we consider the principal or most advantageous market in
which we would transact and we consider assumptions that market participants
would use when pricing the asset or liability, such as inherent risk, transfer
restrictions, and risk of nonperformance.
Fair Value
Hierarchy
ASC 820
discusses valuation techniques, such as the market approach (comparable market
prices), the income approach (present value of future income or cash flow), and
the cost approach (cost to replace the service capacity of an asset or
replacement cost). ASC 820 establishes a fair value hierarchy that requires an
entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. A financial instrument’s
categorization within the fair value hierarchy is based upon the lowest level of
input that is significant to the fair value measurement. ASC 820 establishes
three levels of inputs that may be used to measure fair value:
Level 1 -
Valuation is based upon quoted prices for identical instruments traded in active
markets.
Level 2 -
Valuation is based upon quoted prices for similar instruments in active markets,
quoted prices for identical or similar instruments in markets that are not
active, and model-based valuation techniques for which all significant
assumptions are observable in the market.
Level
3
- Valuation is
generated from model-based techniques that use significant assumptions not
observable in the market. These unobservable assumptions reflect own estimates
of assumptions that market participants would use in pricing the asset or
liability. Valuation techniques include use of option pricing models, discounted
cash flow models and similar techniques.
Determination
of Fair Value
As of
September 30, 2009 and March 31, 2009, our cash equivalents of $27.2 million and
$44.9 million, respectively, included money market funds and were
classified as Level 1 because these securities were valued based on unadjusted
quoted market prices in active markets for identical securities.
6.
Intangible Assets
The
intangible assets, net were as follows (in thousands):
|
|
September
30,
|
|
|
March
31,
|
|
|
|
2009
|
|
|
2009
|
|
Developed
and core technology:
|
|
|
|
|
|
|
Gross
carrying amount
|
|
$
|
260
|
|
|
$
|
260
|
|
Less
accumulated amortization
|
|
|
(248
|
)
|
|
|
(237
|
)
|
Net
carrying amount
|
|
$
|
12
|
|
|
$
|
23
|
|
Developed
and core technology is being amortized on a straight-line basis over an
estimated useful life of four years. The amortization expense for intangible
assets was $6,000 and $12,000 for the three and six months ended September 30,
2009, respectively as compared to $22,000 and $55,000 for the three and six
months ended September 30, 2008, respectively.
Based on
intangible assets recorded at September 30, 2009, and assuming no subsequent
additions to, or impairment of, the underlying assets, the future estimated
amortization expense is $12,000 in remainder of fiscal 2010.
7. Balance
Sheet Components
Balance
sheet components were as follows (in thousands):
|
|
September
30,
|
|
|
March
31,
|
|
|
|
2009
|
|
|
2009
|
|
Accounts
receivable, net:
|
|
|
|
|
|
|
Accounts
receivable
|
|
$
|
5,038
|
|
|
$
|
4,265
|
|
Less
sales allowances and return reserves
|
|
|
(613
|
)
|
|
|
(96
|
)
|
Less
allowance for doubtful accounts
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
$
|
4,425
|
|
|
$
|
4,168
|
|
|
|
|
|
|
|
|
|
|
Inventories:
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
$
|
117
|
|
|
$
|
-
|
|
Work
in process
|
|
|
1,629
|
|
|
|
2,812
|
|
Finished
goods
|
|
|
1,977
|
|
|
|
2,416
|
|
|
|
$
|
3,723
|
|
|
$
|
5,228
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment:
|
|
|
|
|
|
|
|
|
Machinery
and equipment
|
|
$
|
11,202
|
|
|
$
|
11,388
|
|
Computer
equipment and related software
|
|
|
4,224
|
|
|
|
4,893
|
|
Construction
in progress
|
|
|
14
|
|
|
|
17
|
|
|
|
|
15,440
|
|
|
|
16,298
|
|
Less:
accumulated depreciation and amortization
|
|
|
(13,298
|
)
|
|
|
(12,773
|
)
|
|
|
$
|
2,142
|
|
|
$
|
3,525
|
|
|
|
|
|
|
|
|
|
|
Accrued
liabilities:
|
|
|
|
|
|
|
|
|
Accrued
salaries and benefits
|
|
$
|
823
|
|
|
$
|
1,043
|
|
Other
accrued liabilities
|
|
|
504
|
|
|
|
542
|
|
|
|
$
|
1,327
|
|
|
$
|
1,585
|
|
8.
Capital Lease Obligations
In
October 2006, we entered into three year software lease agreements with two
vendors for which the capitalized amounts were $362,000 and $34,000,
respectively. The imputed interest rate for each of these leases is 8%. Both
leases have three year durations, with three annual lease payments in October
2006, October 2007 and October 2008, totaling to $132,000 annually. Interest
expense on these leases during the three and six months ended September 30, 2009
and 2008 was immaterial.
Total
fixed assets purchased under capital leases and the associated accumulated
amortization is classified in computer equipment and related software and was as
follows (in thousands):
|
|
September
30,
|
|
|
March
31,
|
|
|
|
2009
|
|
|
2009
|
|
Capitalized
cost
|
|
$
|
34
|
|
|
$
|
396
|
|
Accumulated
amortization
|
|
|
(33
|
)
|
|
|
(319
|
)
|
Net
book value
|
|
$
|
1
|
|
|
$
|
77
|
|
In the
second quarter of fiscal year 2010, the Company implemented a restructuring plan
to discontinue any further development of display controller products. As a
result, we impaired software, which had been purchased under capital lease,
related to display controller products in addition to other assets as further
discussed in Note 12 in the notes to condensed consolidated financial statements
of this Form 10-Q. The impairment charge of $40,000, for software purchased
under capital lease, was recorded in the line item ‘Restructuring and asset
impairment charges’ within operating expenses in the condensed consolidated
statements of operations.
Amortization
expense for fixed assets purchased under capital leases is included in the line
item titled “Depreciation and amortization” on our condensed consolidated
statements of cash flows.
9.
Employee Stock Benefit Plans
Our
equity incentive program is a long-term retention program that is intended to
attract and retain qualified management and technical employees and align
stockholder and employee interests. Under our current equity incentive program,
stock options have varying vesting periods typically over four years and are
generally exercisable for a period of ten years from the date of issuance and
are granted at prices equal to the fair market value of the Company’s common
stock at the grant date. These plans are described fully in the notes to
consolidated financial statements in our Annual Report on Form 10-K for the
fiscal year ended March 31, 2009.
Stock
Options
Stock
option activity for the six months ended September 30, 2009, is as
follows:
|
|
Stockholder
|
|
|
Non-Stockholder
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approved
Plans
|
|
|
Approved
Options
|
|
|
All
Options
|
|
|
|
Shares
(in
thousands)
|
|
|
Weighted
Average
Exercise
Pric
|
|
|
Shares
(in
thousands)
|
|
|
Weighted
Average Exercise Price
|
|
|
Shares
(in
thousands)
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Term
(in
years)
|
|
|
Aggregate
Intrinsic
Value
(in
thousands)
|
|
Balance
at March 31, 2009
|
|
|
4,887
|
|
|
$
|
4.97
|
|
|
|
526
|
|
|
$
|
5.60
|
|
|
|
5,413
|
|
|
$
|
5.03
|
|
|
|
|
|
|
|
Granted
|
|
|
167
|
|
|
|
2.96
|
|
|
|
-
|
|
|
|
-
|
|
|
|
167
|
|
|
|
2.96
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
Canceled/Forfeited/Expired
|
|
|
(478
|
)
|
|
|
3.96
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(478
|
)
|
|
|
3.96
|
|
|
|
|
|
|
|
Balance
at September 30, 2009
|
|
|
4,576
|
|
|
$
|
5.00
|
|
|
|
526
|
|
|
$
|
5.60
|
|
|
|
5,102
|
|
|
$
|
5.06
|
|
|
|
5.78
|
|
|
$
|
232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,609
|
|
|
$
|
5.74
|
|
|
|
4.67
|
|
|
$
|
50
|
|
The
aggregate intrinsic value in the table above represents the total pretax
intrinsic value, based on options with an exercise price less than the Company’s
closing stock price of $3.22 as of September 30, 2009, which would have been
received by the option holders had all option holders with in-the-money options
exercised and sold their options as of that date.
There
were no exercises of stock options during the three and six months ended
September 30, 2009 and 2008.
The
following table summarizes the ranges of the exercise prices of outstanding and
exercisable options at September 30, 2009:
|
|
|
|
|
|
|
|
|
Options
Outstanding
|
|
|
Options
Exercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Remaining
|
|
|
Average
|
|
|
Number
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Exercisable
|
|
|
Exercise
|
|
Range
of Exercise Prices
|
|
(thousands)
|
|
|
Life
|
|
|
Price
|
|
|
(thousands)
|
|
|
Price
|
|
$
|
1.78
|
|
|
|
-
|
|
|
$
|
4.00
|
|
|
|
2,260
|
|
|
|
7.82
|
|
|
$
|
3.33
|
|
|
|
949
|
|
|
$
|
3.45
|
|
|
4.01
|
|
|
|
-
|
|
|
|
6.00
|
|
|
|
1,280
|
|
|
|
5.07
|
|
|
|
4.98
|
|
|
|
1,110
|
|
|
|
5.07
|
|
|
6.01
|
|
|
|
-
|
|
|
|
8.00
|
|
|
|
1,271
|
|
|
|
3.71
|
|
|
|
6.69
|
|
|
|
1,260
|
|
|
|
6.68
|
|
|
8.01
|
|
|
|
-
|
|
|
|
10.00
|
|
|
|
147
|
|
|
|
2.42
|
|
|
|
8.27
|
|
|
|
147
|
|
|
|
8.27
|
|
|
10.01
|
|
|
|
-
|
|
|
|
22.50
|
|
|
|
144
|
|
|
|
1.73
|
|
|
|
15.29
|
|
|
|
144
|
|
|
|
15.29
|
|
$
|
1.78
|
|
|
|
-
|
|
|
$
|
22.50
|
|
|
|
5,102
|
|
|
|
5.78
|
|
|
$
|
5.06
|
|
|
|
3,609
|
|
|
$
|
5.74
|
|
Employee
Stock Purchase Plan (ESPP)
Our ESPP
provides that eligible employees may contribute up to 15% of their eligible
earnings, through accumulated payroll deductions, toward the semi-annual
purchase of our common stock at 85% of the fair market value of the common stock
at certain defined points in the plan offering periods. There were no shares
issued under the ESPP during the three months ended September 30, 2009 and 2008.
We issued 124,719 and 106,646 shares under the ESPP during the six months ended
September 30, 2009 and 2008, respectively. Net cash proceeds from the ESPP were
$209,000 and $271,000 for the six months ended September 30, 2009 and 2008,
respectively.
Shares
Available for Future Issuance under Employee Benefit Plans
As of
September 30, 2009, 1,551,858 shares were available for future issuance, which
included 1,201,312 shares of common stock available for issuance under our 2004
Omnibus Incentive Compensation Plan, 341,546 under our ESPP and 9,000 under our
UK Sub-Plan.
Stock-Based
Compensation Expense
The
following table sets forth the total stock-based compensation expense for the
three and six months ended September 30, 2009 and 2008 resulting from employee
stock options and our ESPP included in our condensed consolidated statements of
operations in accordance with Accounting Standards Codification Topic No. 718
“
Compensation - Stock
Compensation”
(ASC 718) (in thousands):
|
|
Three
Months Ended September 30,
|
|
|
Six
Months Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Cost
of sales
|
|
$
|
107
|
|
|
$
|
121
|
|
|
$
|
167
|
|
|
$
|
201
|
|
Research
and development
|
|
|
136
|
|
|
|
165
|
|
|
|
231
|
|
|
|
317
|
|
Selling,
general and administrative
|
|
|
266
|
|
|
|
306
|
|
|
|
507
|
|
|
|
638
|
|
Stock-based
compensation expense
|
|
$
|
509
|
|
|
$
|
592
|
|
|
$
|
905
|
|
|
$
|
1,156
|
|
The
effect of recording employee stock-based compensation expense for the three and
six months ended September 30, 2009 and 2008 was as follows (in thousands,
except per share amounts):
|
|
Three
Months Ended September 30,
|
|
|
Six
Months Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Impact
on loss before income taxes
|
|
$
|
(509
|
)
|
|
$
|
(592
|
)
|
|
$
|
(905
|
)
|
|
$
|
(1,156
|
)
|
Impact
on net loss
|
|
|
(509
|
)
|
|
|
(592
|
)
|
|
|
(905
|
)
|
|
|
(1,156
|
)
|
Impact
on basic and diluted net loss per share
|
|
$
|
(0.02
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.05
|
)
|
No income
tax benefit was realized from ESPP purchases during the three and six months
ended September 30, 2009 and 2008.
The fair
value of stock-based awards was estimated using the Black-Scholes model with the
following weighted average assumptions for the three and six months ended
September 30, 2009 and 2008:
|
|
Three
Months Ended September 30,
|
|
|
Six
Months Ended September 30,
|
|
Employee
Stock Options:
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Weighted
average fair value
|
|
$
|
1.53
|
|
|
$
|
1.55
|
|
|
$
|
1.47
|
|
|
$
|
1.55
|
|
Expected
life in years
|
|
|
4.39
|
|
|
|
4.39
|
|
|
|
4.39
|
|
|
|
4.35
|
|
Volatility
|
|
|
0.63
|
|
|
|
0.63
|
|
|
|
0.63
|
|
|
|
0.63
|
|
Risk-free
interest rate
|
|
|
1.95
|
%
|
|
|
2.94
|
%
|
|
|
1.95
|
%
|
|
|
2.91
|
%
|
Dividend
Yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ESPP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average fair value
|
|
$
|
0.96
|
|
|
$
|
0.92
|
|
|
$
|
0.96
|
|
|
$
|
0.92
|
|
Expected
life in years
|
|
|
0.50
|
|
|
|
0.50
|
|
|
|
0.50
|
|
|
|
0.50
|
|
Volatility
|
|
|
0.69
|
|
|
|
0.59
|
|
|
|
0.69
|
|
|
|
0.59
|
|
Risk-free
interest rate
|
|
|
0.30
|
%
|
|
|
1.74
|
%
|
|
|
0.30
|
%
|
|
|
1.74
|
%
|
Dividend
Yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
We
currently estimate our forfeiture rate to be 19%, which is based on an analysis
of expected forfeiture data using our current demographics and probabilities of
employee turnover.
As of
September 30, 2009, we had $0.8 million of total unrecognized compensation
expense, net of estimated forfeitures, related to stock options that will be
recognized over the weighted average period of 1.6 years.
10.
Stock Issuances
There
were no shares issued during the three months ended September 30, 2009 and 2008.
During the six months ended September 30, 2009 and 2008, we issued the following
shares of common stock under our ESPP:
|
|
Six
Months Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
Shares
issued
|
|
|
124,719
|
|
|
|
106,646
|
|
Total
proceeds
|
|
$
|
209,000
|
|
|
$
|
271,000
|
|
11.
Stock Repurchase Program; Treasury Shares
In the second quarter of
fiscal 2009, the Company announced that its board of directors had authorized a
program to repurchase up to 1 million shares of its outstanding common stock,
the exact amount and timing of which will be subject to market conditions, legal
requirements and management's judgment as well as other factors. The repurchase
transactions may take place in the open market or via private negotiations. The
repurchase program may be modified, extended or terminated by the board of
directors at any time. During the three and six months ended September 30, 2009,
we repurchased 75,265 shares and 161,766 shares, respectively under this program
for $223,000 and $460,000, respectively. As of September 30, 2009, 164,911
shares of common stock remain authorized for repurchase under our repurchase
program.
12.
Restructuring and asset impairment charges
In the
second quarter of fiscal year 2010, the Company implemented a restructuring plan
to discontinue any further development of display controller products. As a
result, we have reduced our workforce through involuntary terminations and
impaired some of our assets related to display controller products.
Restructuring
and asset impairment charges during three and six months ended September 30,
2009 were as follows (in thousands):
|
|
Amount
|
|
Employee
severance
|
|
$
|
214
|
|
Contract
termination costs
|
|
|
51
|
|
Asset
impairment charges
|
|
|
452
|
|
Total
|
|
$
|
717
|
|
Restructuring
charges incurred during the three and six months ended September 30, 2009 were
recorded in the line item ‘Restructuring and asset impairment charges’ within
operating expenses in the condensed consolidated statements of operations. There
were no restructuring charges incurred during the three and six months ended
September 30, 2008.
The
following table summarizes the restructuring and asset impairment activities
through September 30, 2009 (in thousands):
|
|
Employee
|
|
|
Contract
|
|
|
Asset
|
|
|
|
|
|
|
Severance
|
|
|
Termination
|
|
|
Impairment
|
|
|
Total
|
|
Accrued
restructuring balance as of July 1, 2009
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total
charges
|
|
|
214
|
|
|
|
51
|
|
|
|
452
|
|
|
|
717
|
|
Cash
payments
|
|
|
(174
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(174
|
)
|
Non-cash
settlements
|
|
|
-
|
|
|
|
-
|
|
|
|
(452
|
)
|
|
|
(452
|
)
|
Accrued
restructuring balance as of September 30, 2009
|
|
$
|
40
|
|
|
$
|
51
|
|
|
$
|
-
|
|
|
$
|
91
|
|
As of
September 30, 2009, we had $91,000 of accrued restructuring liability included
in the line item ‘Accrued liabilities’ within current liabilities on the
condensed consolidated balance sheet.
13.
Income Taxes
We
determine the amount of unrecognized tax benefits in accordance with Accounting
Standard Codification Topic No. 740 “
Income Taxes
” (ASC 740). The
amount of unrecognized tax benefits as of April 1, 2009 was $255,000, including
interest. For the six months ended September 30, 2009, we recorded a net
increase of $2,000 of unrecognized tax benefits, including
interest.
Our
policy is to include interest and penalties accrued on any unrecognized tax
benefits as a component of income tax expense. The amount of interest and
penalties as of April 1, 2009 was $62,000. The additional amount of interest and
penalties for the six months ended September 30, 2009 was $5,000.
We
estimated that it is more likely than not that the deferred tax assets as of
September 30, 2009 and March 31, 2009 will not be realized in the following
year. As of September 30, 2009, a full valuation allowance of approximately
$29.2 million was recorded against the deferred tax assets. The valuation
allowance is increased by approximately $3.0 million during the six months ended
September 30, 2009 due to our anticipated inability to realize additional
deferred tax assets generated during the six months ended September 30,
2009.
We file
income tax returns in the U.S. federal jurisdiction and in several states and
foreign jurisdictions. As of September 30, 2009, the federal returns for the
years ended March 31, 2006 through the current period and certain state returns
for the years ended March 31, 2005 through the current period are still open to
examination. However, due to the fact the Company had net operating losses and
credits carried forward in most jurisdictions, certain items attributable to
technically closed years are still subject to adjustment by the relevant taxing
authority through an adjustment to tax attributes carried forward to open
years.
14.
Net Loss Per Share
The
following table sets forth the computation of basic and diluted net loss per
share (in thousands, except per share data):
|
|
Three
Months Ended September 30,
|
|
|
Six
Months Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Net
loss
|
|
$
|
(3,474
|
)
|
|
$
|
(1,965
|
)
|
|
$
|
(6,926
|
)
|
|
$
|
(2,883
|
)
|
Weighted
average common shares outstanding used in the calculation
of net loss per share - basic and diluted
|
|
|
22,892
|
|
|
|
23,392
|
|
|
|
22,892
|
|
|
|
23,379
|
|
Net
loss per share - basic and diluted
|
|
$
|
(0.15
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.30
|
)
|
|
$
|
(0.12
|
)
|
Basic and
diluted net loss per share was computed using the net loss and weighted average
number of common shares outstanding during the period. Due to our net loss for
the three and six months ended September 30, 2009 and 2008, all of our stock
options outstanding, as of September 30, 2009 and 2008, to purchase 5,102,000
and 5,516,000, respectively, of the Company’s common stock were excluded from
the diluted net loss per share calculation because their inclusion would have
been anti-dilutive.
15.
Comprehensive Loss
Comprehensive
loss is comprised of net loss and unrealized gain (loss) on our available for
sale securities. Comprehensive loss for the three and six months ended September
30, 2009 and 2008 was as follows (in thousands):
|
|
Three
Months Ended September 30,
|
|
|
Six
Months Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Net
loss
|
|
$
|
(3,474
|
)
|
|
$
|
(1,965
|
)
|
|
$
|
(6,926
|
)
|
|
$
|
(2,883
|
)
|
Unrealized
gain (loss) on available for sale securities
|
|
|
-
|
|
|
|
9
|
|
|
|
-
|
|
|
|
(29
|
)
|
Comprehensive
loss
|
|
$
|
(3,474
|
)
|
|
$
|
(1,956
|
)
|
|
$
|
(6,926
|
)
|
|
$
|
(2,912
|
)
|
16.
Concentration and Segment Information
Our
operations are classified into one operating segment. A significant portion of
our net sales is derived from a relatively small number of customers. Our
net sales from customers and distributors, individually representing more than
10% of total net sales during the three and six months ended September 30, 2009
and 2008 were as follows:
|
|
Three
Months Ended September 30,
|
|
|
Six
Months Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Original
Equipment Manufacturers:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
A
|
|
|
16
|
%
|
|
|
26
|
%
|
|
|
17
|
%
|
|
|
21
|
%
|
Customer
B
|
|
|
*
|
|
|
|
21
|
%
|
|
|
*
|
|
|
|
21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributor
A
|
|
|
13
|
%
|
|
|
*
|
|
|
|
12
|
%
|
|
|
*
|
|
Distributor
B
|
|
|
*
|
|
|
|
10
|
%
|
|
|
*
|
|
|
|
12
|
%
|
______________
*
Customer/distributor accounted for less than 10% of total net sales during the
period.
Net sales
to geographic regions reported below are based on the customers’ ship to
locations (amounts in millions):
|
|
Three
Months Ended September 30,
|
|
|
Six
Months Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
%
of
|
|
|
|
|
|
%
of
|
|
|
|
|
|
%
of
|
|
|
|
|
|
%
of
|
|
|
|
Amount
|
|
|
Total
|
|
|
Amount
|
|
|
Total
|
|
|
Amount
|
|
|
Total
|
|
|
Amount
|
|
|
Total
|
|
United
States
|
|
$
|
1.2
|
|
|
|
11
|
%
|
|
$
|
2.0
|
|
|
|
13
|
%
|
|
$
|
2.7
|
|
|
|
13
|
%
|
|
$
|
3.9
|
|
|
|
13
|
%
|
China
|
|
|
4.7
|
|
|
|
42
|
%
|
|
|
6.4
|
|
|
|
39
|
%
|
|
|
8.4
|
|
|
|
41
|
%
|
|
|
10.0
|
|
|
|
33
|
%
|
Taiwan
|
|
|
2.6
|
|
|
|
23
|
%
|
|
|
2.5
|
|
|
|
15
|
%
|
|
|
4.3
|
|
|
|
21
|
%
|
|
|
5.4
|
|
|
|
18
|
%
|
Korea
|
|
|
1.1
|
|
|
|
10
|
%
|
|
|
3.9
|
|
|
|
24
|
%
|
|
|
2.2
|
|
|
|
11
|
%
|
|
|
7.4
|
|
|
|
24
|
%
|
Others
|
|
|
1.5
|
|
|
|
14
|
%
|
|
|
1.5
|
|
|
|
9
|
%
|
|
|
2.9
|
|
|
|
14
|
%
|
|
|
3.7
|
|
|
|
12
|
%
|
Total
net sales
|
|
$
|
11.1
|
|
|
|
100
|
%
|
|
$
|
16.3
|
|
|
|
100
|
%
|
|
$
|
20.5
|
|
|
|
100
|
%
|
|
$
|
30.4
|
|
|
|
100
|
%
|
Property,
plant and equipment including equipment on consignment are stated at cost and
depreciated over their estimated useful lives using the straight-line method.
For equipment on consignment, the Company requires an agreement with the
consignee. A detailed list of the consigned equipment, if any, must be
included with the agreement. In fiscal 2008, we entered into an agreement with
SPEL, one of our sub-contractors in India, consigning test and packaging
equipment to them, in order to increase their production capacity, in return for
periodic repayments and lower product pricing. As of September 30, 2009, we have
$0.8 million, $0.4 million and $0.2 million of equipment on consignment in
India, Thailand and China, respectively. Property, plant and equipment, net
by geographic location are summarized as follows (in millions):
|
|
|
Net
Book Value as of,
|
|
|
|
|
September
30, 2009
|
|
|
March
31, 2009
|
|
United
States
|
|
$
|
0.7
|
|
|
$
|
1.4
|
|
India
|
|
|
|
0.8
|
|
|
|
1.2
|
|
Thailand
|
|
|
0.4
|
|
|
|
0.5
|
|
China
|
|
|
0.2
|
|
|
|
0.4
|
|
|
Total
|
|
$
|
2.1
|
|
|
$
|
3.5
|
|
17.
Contingencies
Environmental
We have
been subject to a variety of federal, state and local regulations in connection
with the discharge and storage of certain chemicals used in our manufacturing
processes, which are now fully outsourced to independent contract manufacturers.
We have obtained all necessary permits for such discharges and storage, and we
believe that we have been in substantial compliance with the applicable
environmental regulations. Industrial waste generated at our facilities was
either processed prior to discharge or stored in double-lined barrels until
removed by an independent contractor. With the completion of our Milpitas site
remediation and the closure of our Tempe facility during fiscal 2005, we now
expect our environmental compliance costs to be minimal.
Indemnification
Obligations
We enter
into certain types of contracts from time to time that require us to indemnify
parties against third party claims. These contracts primarily relate to (1)
certain agreements with our directors and officers under which we may be
required to indemnify them for the liabilities arising out of their efforts on
behalf of the Company; and (2) agreements under which we have agreed to
indemnify our contract manufacturers and customers for claims arising from
intellectual property infringement or in some instances from product defects or
other issues. The conditions of these obligations vary and generally
a maximum obligation is not explicitly stated. Because the obligated amounts
under these types of agreements often are not explicitly stated, the overall
maximum amount of the obligations cannot be reasonably estimated. We have not
historically paid out any amounts related to these indemnification obligations
and have no pending claims for indemnification; therefore we have not recorded
any associated obligations at September 30, 2009, and March 31,
2009. We carry coverage under certain insurance policies to protect
ourselves in the case of any unexpected liability; however, this coverage may
not be sufficient.
Product
Warranty
We
typically provide a one-year warranty that our products will be free from
defects in material and workmanship and will substantially conform in all
material respects to our most recently published applicable specifications
although sometimes we provide shorter or longer warranties. We have experienced
minimal warranty claims in the past, and we accrue for such contingencies in our
sales allowances and return reserves.
18. Subsequent
Event
During
the third quarter of fiscal 2010, stockholder Dialectic Capital Management
requested that the Company reimburse its expenses incurred in the proxy contest
in which its three nominees, including a party related to Dialectic Capital,
were elected to our board of directors. The amount requested is approximately
$430,000. Our board of directors has not yet decided whether to grant this
request and the matter is under consideration.
ITEM 2.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
In this
discussion, “Company”, “CMD,” “we,” “us” and “our” refer to California Micro
Devices Corporation. All trademarks appearing in this discussion are the
property of their respective owners. This discussion should be read in
conjunction with the other financial information and financial statements and
related notes contained elsewhere in this report.
Forward-Looking
Statements
This
report contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities Act of
1934, as amended. Such forward-looking statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are not historical facts and are based on current
expectations, estimates, and projections about our industry; our beliefs and
assumptions; and our goals and objectives. Words such as “anticipates,”
“expects,” “intends,” “plans,” “believes,” “seeks,” and “estimates,” and
variations of these words and similar expressions are intended to identify
forward-looking statements. Examples of the kinds of forward-looking statements
in this report include statements regarding the following: (1) our expectation
that our ASP (“Average Selling Prices”) for similar products, based on a
constant mix of products, will decline at the rate of 10% to 15% per
year; (2) our having a long-range gross margin target of 35% to 40%; (3) our
expectation that our future environmental compliance costs will be minimal; (4)
our anticipation that our existing cash and cash equivalents will be sufficient
to meet our anticipated cash needs over the next 12 months; (5) our expectation
of research and development expenses, both as a percentage of sales and in
dollars, to reduce significantly starting with the third quarter of fiscal 2010
primarily as a result of discontinuance of further development of display
controller products and having a long term target for research and development
expenses of 9% to 11% of sales; (6) our having a long term target for
selling, general and administrative expenses of 16% to 20% of sales; (7) our
expectation of future interest income to continue to be at a reduced level
unless interest rates increase materially or we change the instruments in which
we invest; (8) our expectation that we will not pay within one year any of our
liability for uncertain tax positions or associated interest and tax penalties;
and (9) our expectation that we will fund our contractual obligations and
liability for uncertain tax positions with cash on hand or cash provided from
operations. These statements are only predictions, are not guarantees of future
performance, and are subject to risks, uncertainties, and other factors, some of
which are beyond our control, are difficult to predict, and could cause actual
results to differ materially from those expressed or forecasted in the
forward-looking statements. These risks and uncertainties include, but are not
limited to, whether our target markets continue to experience their forecasted
growth and whether such growth continues to require the devices we supply;
whether we will be able to increase our market share; whether our product mix
changes, our unit volume decreases materially, we experience price erosion due
to competitive pressures, or our contract manufacturers and assemblers raise
their prices to us or we experience lower yields from them or we are unable to
realize expected cost savings in certain manufacturing and assembly processes;
whether there will be any changes in tax accounting rules; whether we will be
successful in developing new products which our customers will design into their
products and whether our bookings will translate into orders; whether we
encounter any unexpected environmental clean-up issues with our former Tempe
facility; whether we discover any further contamination at our former Topaz
Avenue Milpitas facility; whether we will incur any large unanticipated
expenses; and whether we will have large unanticipated cash requirements, as
well as other risk factors detailed in this report, especially under Item 1A,
Risk Factors. Except as required by law, we undertake no obligation to update
any forward-looking statement, whether as a result of new information, future
events, or otherwise.
Executive
Overview
We design
and sell application specific protection devices for high volume applications in
the mobile handset, High Brightness LED (HBLED), digital consumer electronics
and personal computer markets. These protection devices provide Electromagnetic
Interference (EMI) filtering and Electrostatic Discharge (ESD) protection. End
customers for our semiconductor products are original equipment manufacturers
(OEMs). We sell to some of these end customers through original design
manufacturers (ODMs) and contract electronics manufacturers (CEMs). We use a
direct sales force, manufacturers’ representatives and distributors to sell our
products. Our manufacturing is completely outsourced and we use merchant
foundries to fabricate our wafers and subcontractors to do backend processing
and to ship to our customers. We have one operating segment and most of our
physical assets are located outside the United States. Assets located outside
the United States include product inventories and manufacturing equipment
consigned to our wafer foundries and backend subcontractors.
Results
of Operations
The table
below shows our net sales, cost of sales, gross margin, expenses and net loss,
both in dollars and as a percentage of net sales, for the three and six months
ended September 30, 2009 and 2008 (amounts in thousands):
|
|
Three
Months Ended September 30,
|
|
|
Six
Months Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
%
of
|
|
|
|
|
|
%
of
|
|
|
|
|
|
%
of
|
|
|
|
|
|
%
of
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
Net
|
|
|
|
|
|
Net
|
|
|
|
|
|
Net
|
|
|
|
Amount
|
|
|
Sales
|
|
|
Amount
|
|
|
Sales
|
|
|
Amount
|
|
|
Sales
|
|
|
Amount
|
|
|
Sales
|
|
Net
sales
|
|
$
|
11,115
|
|
|
|
100
|
%
|
|
$
|
16,343
|
|
|
|
100
|
%
|
|
$
|
20,463
|
|
|
|
100
|
%
|
|
$
|
30,443
|
|
|
|
100
|
%
|
Cost
of sales
|
|
|
8,184
|
|
|
|
74
|
%
|
|
|
11,239
|
|
|
|
69
|
%
|
|
|
15,251
|
|
|
|
75
|
%
|
|
|
20,595
|
|
|
|
68
|
%
|
Gross
margin
|
|
|
2,931
|
|
|
|
26
|
%
|
|
|
5,104
|
|
|
|
31
|
%
|
|
|
5,212
|
|
|
|
25
|
%
|
|
|
9,848
|
|
|
|
32
|
%
|
Research
and development
|
|
|
1,810
|
|
|
|
16
|
%
|
|
|
2,887
|
|
|
|
18
|
%
|
|
|
3,927
|
|
|
|
19
|
%
|
|
|
5,171
|
|
|
|
17
|
%
|
Selling,
general and administrative
|
|
|
3,826
|
|
|
|
34
|
%
|
|
|
3,832
|
|
|
|
23
|
%
|
|
|
7,443
|
|
|
|
36
|
%
|
|
|
7,697
|
|
|
|
25
|
%
|
Amortization
of intangible assets
|
|
|
6
|
|
|
|
0
|
%
|
|
|
22
|
|
|
|
0
|
%
|
|
|
12
|
|
|
|
0
|
%
|
|
|
55
|
|
|
|
0
|
%
|
Restructuring
charges, assets impairment and others
|
|
|
717
|
|
|
|
7
|
%
|
|
|
-
|
|
|
|
0
|
%
|
|
|
717
|
|
|
|
4
|
%
|
|
|
-
|
|
|
|
0
|
%
|
Total
operating expenses
|
|
|
6,359
|
|
|
|
57
|
%
|
|
|
6,741
|
|
|
|
41
|
%
|
|
|
12,099
|
|
|
|
59
|
%
|
|
|
12,923
|
|
|
|
42
|
%
|
Operating
loss
|
|
|
(3,428
|
)
|
|
|
(31
|
%)
|
|
|
(1,637
|
)
|
|
|
(10
|
%)
|
|
|
(6,887
|
)
|
|
|
(34
|
%)
|
|
|
(3,075
|
)
|
|
|
(10
|
%)
|
Other
income (expense), net
|
|
|
(5
|
)
|
|
|
(0
|
%)
|
|
|
1,193
|
|
|
|
7
|
%
|
|
|
(16
|
)
|
|
|
(0
|
%)
|
|
|
1,487
|
|
|
|
5
|
%
|
Loss
before income taxes
|
|
|
(3,433
|
)
|
|
|
(31
|
%)
|
|
|
(444
|
)
|
|
|
(3
|
%)
|
|
|
(6,903
|
)
|
|
|
(34
|
%)
|
|
|
(1,588
|
)
|
|
|
(5
|
%)
|
Provision
for income taxes
|
|
|
41
|
|
|
|
0
|
%
|
|
|
1,521
|
|
|
|
9
|
%
|
|
|
23
|
|
|
|
0
|
%
|
|
|
1,295
|
|
|
|
4
|
%
|
Net
loss
|
|
$
|
(3,474
|
)
|
|
|
(31
|
%)
|
|
$
|
(1,965
|
)
|
|
|
(12
|
%)
|
|
$
|
(6,926
|
)
|
|
|
(34
|
%)
|
|
$
|
(2,883
|
)
|
|
|
(9
|
%)
|
Net
sales
Net sales
by market during the three months ended September 30, 2009 and 2008 were as
follows (amounts in millions):
|
|
Three
Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
As
% of
|
|
|
|
|
|
As
% of
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
$
|
|
|
|
%
|
|
|
|
Amount
|
|
|
Sales
|
|
|
Amount
|
|
|
Sales
|
|
|
Change
|
|
|
Change
|
|
Mobile
handset
|
|
$
|
6.3
|
|
|
|
57
|
%
|
|
$
|
10.7
|
|
|
|
66
|
%
|
|
$
|
(4.4
|
)
|
|
|
(41
|
%)
|
Digital
consumer electronics and personal computers
|
|
|
4.0
|
|
|
|
36
|
%
|
|
|
4.3
|
|
|
|
26
|
%
|
|
|
(0.3
|
)
|
|
|
(7
|
%)
|
HBLED
|
|
|
0.8
|
|
|
|
7
|
%
|
|
|
1.3
|
|
|
|
8
|
%
|
|
|
(0.5
|
)
|
|
|
(38
|
%)
|
Total
|
|
$
|
11.1
|
|
|
|
100
|
%
|
|
$
|
16.3
|
|
|
|
100
|
%
|
|
$
|
(5.2
|
)
|
|
|
(32
|
%)
|
Net sales
during the three months ended September 30, 2009 were $11.1 million, a decrease
of $5.2 million or 32% from $16.3 million of net sales in the same period a year
ago. Sales from products for the mobile handset market decreased by $4.4 million
or 41% during the three months ended September 30, 2009 as compared to the same
period a year ago primarily due to lower sales of our protection products to one
of the top five handset manufacturers and lower sales of our display controller
products. Sales from products for the digital consumer electronics and personal
computers markets decreased to $4.0 million during the three months ended
September 30, 2009 from $4.3 million in the same period a year ago, down $0.3
million or 7% due to decrease sales of our mature products partially offset by
an increase in sales of our low capacitance products particularly PicoGuard®.
Sales from products for the HBLED market decreased to $0.8 million during the
three months ended September 30, 2009 from $1.3 million in the same period a
year ago, down $0.5 million or 38% primarily due to inventory adjustment at a
major customer.
Net sales
by market during the six months ended September 30, 2009 and 2008 were as
follows (amounts in millions):
|
|
Six
Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
As
% of
|
|
|
|
|
|
As
% of
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
$
|
|
|
|
%
|
|
|
|
Amount
|
|
|
Sales
|
|
|
Amount
|
|
|
Sales
|
|
|
Change
|
|
|
Change
|
|
Mobile
handset
|
|
$
|
11.0
|
|
|
|
54
|
%
|
|
$
|
18.9
|
|
|
|
62
|
%
|
|
$
|
(7.9
|
)
|
|
|
(42
|
%)
|
Digital
consumer electronics and personal computers
|
|
|
7.7
|
|
|
|
37
|
%
|
|
|
8.9
|
|
|
|
29
|
%
|
|
|
(1.2
|
)
|
|
|
(13
|
%)
|
HBLED
|
|
|
1.8
|
|
|
|
9
|
%
|
|
|
2.6
|
|
|
|
9
|
%
|
|
|
(0.8
|
)
|
|
|
(31
|
%)
|
Total
|
|
$
|
20.5
|
|
|
|
100
|
%
|
|
$
|
30.4
|
|
|
|
100
|
%
|
|
$
|
(9.9
|
)
|
|
|
(33
|
%)
|
Net sales
during the six months ended September 30, 2009 were $20.5 million, a decrease of
$9.9 million or 33% from $30.4 million of net sales in the same period a year
ago. Sales from products for the mobile handset market decreased by $7.9 million
or 42% during the six months ended September 30, 2009 as compared to the same
period a year ago primarily due to lower sales of our protection products to one
of the top five handset manufacturers. Sales from products for the digital
consumer electronics and personal computer market decreased to $7.7 million
during the six months ended September 30, 2009 from $8.9 million in the same
period a year ago, down $1.2 million or 13% due to decrease sales of our mature
products partially offset by an increase in sales of our low capacitance
products particularly PicoGuard®. Sales from products for HBLED market decreased
to $1.8 million during the six months ended September 30, 2009 from $2.6 million
in the same period a year ago, down $0.8 million or 31% primarily due to
inventory adjustment at a major customer.
Gross
Margin
Gross
margin decreased by $2.2 million and $4.6 million during the three and six
months ended September 30, 2009 as compared to the same periods a year ago, due
to the following reasons:
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
Gross
margin increase (decrease) compared to prior periods (in
millions):
|
|
September
30, 2009
|
|
|
September
30, 2009
|
|
Price
change of products based on a constant mix
|
|
$
|
(1.5
|
)
|
|
$
|
(3.1
|
)
|
Direct
cost reductions of our products based on a constant mix
|
|
|
0.7
|
|
|
|
1.3
|
|
Volume,
mix and other factors
|
|
|
(1.4
|
)
|
|
|
(2.8
|
)
|
|
|
$
|
(2.2
|
)
|
|
$
|
(4.6
|
)
|
The gross
margin decrease was primarily driven by price declines of our products and lower
shipments partially offset by product cost reductions. Our ASP
declined 12% based on a constant mix of products in the second quarter of fiscal
2010 as compared to the same period a year ago. In the future we expect our ASP
for similar products, based on a constant mix of products, to decline at the
rate of 10% to 15% per year. The cost reductions of our products were
primarily driven by outsourcing with lower cost
subcontractors, migrating from 6" to 8" wafer size and continued
improvement in our assembly and testing processes.
As a
percentage of sales, gross margin decreased to 26% and 25%, respectively for the
three and six months ended September 30, 2009 as compared to 31% and 32%,
respectively for the same periods a year ago. Our long-range gross margin target
is 35% to 40%. Our gross margin has been and will continue to be affected by a
variety of factors, including average selling price of our products, the product
volume and mix, the timing of cost reductions for our wafer and assembly and
test as well as inventory valuation charges.
Research
and Development
Research
and development expenses consist primarily of compensation and related costs for
employees, prototypes, masks and other expenses for the development of new
products, process technology and packages. The change in research and
development expenses for the three and six months ended September 30, 2009,
compared to the same periods a year ago, is as follows:
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
Expense
increase (decrease) compared to prior periods (in
thousands):
|
|
September
30, 2009
|
|
|
September
30, 2009
|
|
Outside
services
|
|
$
|
(466
|
)
|
|
$
|
(740
|
)
|
Salaries
and benefits
|
|
|
(206
|
)
|
|
|
(342
|
)
|
Product
related costs
|
|
|
(306
|
)
|
|
|
(151
|
)
|
Other
costs
|
|
|
(99
|
)
|
|
|
(11
|
)
|
|
|
$
|
(1,077
|
)
|
|
$
|
(1,244
|
)
|
Research
and development expenses decreased by $1.1 million or 37% and $1.2 million or
24%, respectively during the three and six months ended September 30, 2009, as
compared to the same periods a year ago, primarily as a result of discontinuance
of further development of display controller products during the second quarter
of fiscal 2010.
As a
percentage of sales, research and development expenses decreased to 16% during
the three months ended September 30, 2009 from 18% during the same period a year
ago. Despite a decrease in research and development expenses, as a percentage of
sales, research and development expenses increased to 19% during the six months
ended September 30, 2009 from 17% during the same period a year ago primarily
due to the decrease in net sales. We expect the research and development
expenses, both as a percentage of sales and in dollars, to decline significantly
starting with the third quarter of fiscal 2010 primarily as a result of
discontinuance of further development of display controller products. Our long
term target for research and development expenses is 9% to 11% of
sales.
Selling,
General and Administrative
Selling,
general and administrative expenses consist primarily of compensation and other
employee related costs; sales commissions; marketing expenses; legal,
accounting, and other professional fees; and information technology expenses.
The change in selling, general, and administrative expenses for the three and
six months ended September 30, 2009, compared to the same periods a year ago, is
as follows:
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
Expense
increase (decrease) compared to prior periods (in
thousands):
|
|
September
30, 2009
|
|
|
September
30, 2009
|
|
Salaries
and benefits
|
|
$
|
(369
|
)
|
|
$
|
(465
|
)
|
Sales
Commissions
|
|
|
(116
|
)
|
|
|
(220
|
)
|
Travel
expenses
|
|
|
(47
|
)
|
|
|
(128
|
)
|
Stock
based compensation charge
|
|
|
(40
|
)
|
|
|
(131
|
)
|
Other
expenses
|
|
|
(16
|
)
|
|
|
4
|
|
Proxy
related expenses
|
|
|
582
|
|
|
|
686
|
|
|
|
$
|
(6
|
)
|
|
$
|
(254
|
)
|
Selling,
general and administrative expenses decreased by $6,000 or 0% and $254,000 or
3%, respectively during the three and six months ended September 30, 2009 as
compared to the same periods a year ago primarily due to decreases in salaries
and benefits, sales commissions, travel expenses and stock based compensation
charge which was largely offset by an increase in proxy related
expenses.
Decrease
in salaries and benefits was primarily the result of headcount reduction, no
target bonus payouts and mandatory time off for all employees of the Company;
decrease in sales commission was due to reduced sales during the three and six
months ended September 30, 2009 as compared to the same periods a year ago; and
decrease in travel expenses was the result of cost cutting measures taken by the
Company to reduce discretionary spending.
During
the three and six months ended September 30, 2009, we incurred additional proxy
expenses of $0.6 million and $0.7 million, respectively as compared to the same
periods a year ago, primarily due to the contested solicitation for election of
directors in the 2009 annual meeting of shareholders.
As a
percentage of sales, selling, general and administrative expenses increased to
34% and 36%, respectively during the three and six months ended September 30,
2009 from 23% and 25%, respectively during the same periods a year ago,
primarily due to additional proxy related expenses as a result of contested
solicitation for election of directors. Our long term target for selling,
general and administrative expenses is 16% to 20% of sales.
Amortization
of Intangible Assets
Amortization
of intangible assets was $6,000 and $12,000, respectively during the three and
six months ended September 30, 2009 as compared to $22,000 and $55,000,
respectively during the same periods a year ago. The decrease in amortization
expense during the three and six months ended September 30, 2009 as compared to
the same periods a year ago was due to the intervening sale of certain
intangible assets and partial impairment of others. For additional information
regarding intangible assets, see Note 6 of notes to condensed consolidated
financial statements in this Form 10-Q.
Restructuring
and asset impairment charges
In the
second quarter of fiscal year 2010, we implemented a restructuring plan to
discontinue any further development of display controller products. As a result,
we have reduced our workforce through involuntary terminations and impaired some
of our assets related to display controller products. During the three and six
months ended September 30, 2009, restructuring and asset impairment charges were
$717,000, out of which employee severance, contract termination costs and asset
impairment charges were $214,000, $51,000 and $452,000 respectively. As of
September 30, 2009, we had $91,000 of accrued restructuring liability which is
expected to be paid during the remainder of current fiscal year 2010. We expect
to fund the obligations with cash on hand.
There
were no restructuring charges incurred during the three and six months ended
September 30, 2008.
Other
Income (Expense), Net
Other
income (expense), net, mainly includes interest income, interest expense and
other non-operating income and expense.
Interest
income decreased by $0.2 million and $0.5 million, respectively during the three
and six months ended September 30, 2009, as compared to the same periods a year
ago primarily as a result of the overall decline in interest rates and our
moving our short-term investments into money market funds and to a lesser extent
due to our reduced total amount of cash, cash equivalents and short-term
investments. We expect interest income, in the near future, to remain at this
reduced level unless interest rates increase materially or we change the
instruments in which we invest.
Interest
expense was immaterial during the three and six months ended September 30, 2009
and 2008.
Other
non-operating income decreased by $1.0 million during the three and six months
ended September 30, 2009, as compared to the same periods a year ago primarily
due to the gain on sale of LED Driver intellectual property and related fixed
assets during the second quarter of fiscal 2009.
Income
Taxes
During
the three and six months ended September 30, 2009, we recorded an income tax
expense of $41,000 and $23,000 respectively as compared to $1.5 million and $1.3
million, respectively during the same periods a year ago. Our income tax expense
decreased during the three and six months ended September 30, 2009 compared to
the same periods a year ago, primarily as a result of our changed estimates of
our ability to utilize loss carryforwards and the increased valuation allowance
against our deferred tax assets. See Note 13 in the notes to condensed
consolidated financial statements of this Form 10-Q for further
discussion.
Critical
Accounting Policies and Estimates
The
preparation of financial statements, in conformity with U.S. GAAP, requires
management to make estimates and assumptions that affect amounts reported in our
financial statements and accompanying notes. We base our estimates on historical
experience and the known facts and circumstances that we believe are relevant.
We have not made any material changes in the accounting methodology used to
establish our estimates and assumptions during the second quarter of fiscal
2010. We do not believe there is a reasonable likelihood that there will be
a material change in the accounting methodology used to establish our estimates
or assumptions. However, actual results may differ materially from our
estimates. Our significant accounting policies are described in Note 2 of notes
to consolidated financial statements in our annual report on Form 10-K for
fiscal year ended March 31, 2009. The significant accounting policies that we
believe are critical, either because they relate to financial line items that
are key indicators of our financial performance such as revenue or because their
application requires significant management judgment, are described in the
following paragraphs:
Revenue
Recognition
We
recognize revenue when persuasive evidence of an arrangement exists, delivery or
customer acceptance, where applicable, has occurred, the fee is fixed or
determinable, and collection is reasonably assured.
Revenue
from product sales to end user customers, or to distributors that do not receive
price concessions and do not have return rights, is recognized upon shipment and
transfer of risk of loss, if we believe collection is reasonably assured and all
other revenue recognition criteria are met. We assess the probability of
collection based on a number of factors, including past transaction history and
customer credit worthiness. If we determine that collection of a receivable is
not probable, we defer recognition of revenue until the collection becomes
probable, which is generally upon receipt of cash. Reserves for sales returns
and allowances from end user customers are estimated based on historical
experience and management judgment, and are provided for at the time of
shipment. The sufficiency of the reserves for sales return and allowances is
assessed at the end of each reporting period.
Revenue
from sales of our standard products to distributors, for which we provide price
concessions or product return rights, is recognized when the distributor sells
the product to an end customer. When we sell such products to distributors, we
defer our gross selling price of the product shipped and its related cost and
reflect such net amounts on our balance sheet as a current liability entitled
“deferred margin on shipments to distributors”. We receive periodic reports from
our distributors of their inventory of our products and when we test our
inventory in order to determine the extent, if any, to which we have excess or
obsolete inventory, we also test the inventory held by our distributors. For our
custom products and end of life products, if we believe that collection is
probable, we recognize revenue upon shipment to the distributor, because our
contractual arrangements provide for no right of return or price concessions for
those products.
We
typically have written agreements with our distributors which provide that (1)
if we lower our distributor list price, our distributors may request
for a limited time period a credit for the differential of
eligible product in the distributor's inventory and (2) periodically, our
distributors have the right to return eligible product to us, provided
that the amount returned must be limited to a certain
agreed percentage of the value of our shipments to them during such
period. Product over a certain age may not be returned and there is a restocking
charge if the distributor has not placed a recent commensurate replacement
stocking order.
Inventories
Forecasting
customer demand is the factor in our inventory policy that involves significant
judgments and estimates. We estimate excess and obsolete inventory based on a
comparison of the quantity and cost of inventory on hand to management’s
forecast of customer demand for the next twelve months. In forecasting customer
demand, we make estimates as to, among other things, the timing of sales, the
mix of products sold to customers, the timing of design wins and related volume
purchases by new and existing customers, and the timing of existing customers’
transition to new products. We also use historical trends as a factor in
forecasting customer demand, especially that from our distributors. We review
our excess and obsolete inventory on a quarterly basis considering the known
facts. Once inventory is written down, it is valued as such until it is sold or
otherwise disposed of. To the extent that our forecast of customer demand
materially differs from actual demand, our cost of sales and gross margin could
be impacted.
Impairment
of long lived assets
Long
lived assets are reviewed for impairment whenever events indicate that their
carrying value may not be recoverable. An impairment loss is recognized if the
sum of the expected undiscounted cash flows from the use of the asset is less
than the carrying value of the asset. The amount of impairment loss is measured
as the difference between the carrying value of the assets and their estimated
fair value.
Stock-based
Compensation
In
accordance with the fair value recognition provisions of Accounting Standards
Codification Topic No. 718 “
Compensation – Stock
Compensation
” (ASC 718), we estimate the stock-based compensation cost at
the grant date based on the fair value of the award and recognize it as an
expense on a graded vesting schedule over the requisite service period of the
award.
We
estimate the value of employee stock options on the date of grant using the
Black-Scholes model. The determination of fair value of stock-based payment
awards on the date of grant using an option-pricing model is affected by our
stock price as well as assumptions regarding a number of highly complex and
subjective variables. These variables include, but are not limited to, the
expected stock price volatility over the term of the awards and actual and
projected employee stock option exercise behaviors. The use of the Black-Scholes
model requires the use of extensive actual employee exercise behavior data and a
number of complex assumptions including expected volatility, risk-free interest
rate and expected dividends.
Our
computation of expected volatility is based on a combination of historical and
market-based implied volatility. Our computation of expected life is based on a
combination of historical exercise patterns and certain assumptions regarding
the exercise life of unexercised options adjusted for job level and
demographics. The interest rate for periods within the contractual life of the
award is based on the U.S. Treasury yield curve in effect at the time of grant.
The dividend yield assumption is based on our history and expectation of
dividend payouts.
As
stock-based compensation expense recognized in the condensed consolidated
statements of operations for the three and six months ended September 30, 2009
and 2008 is based on awards ultimately expected to vest, it has been reduced for
estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time
of grant and revised, if necessary, in subsequent periods if actual forfeitures
differ from those estimates. Forfeitures were estimated based on an average of
historical forfeitures. The expense that we recognize in future periods could
differ significantly from the current period and/or our forecasts due to
adjustments in assumed forfeiture rates or change in our
assumptions.
Income
Taxes
We
account for income taxes under the asset and liability method; which requires
significant judgments in making estimates for determining certain tax
liabilities and recoverability of certain deferred tax assets, including the tax
effects attributable to net operating loss carryforwards and temporary
differences between the tax and financial statement recognition of revenue and
expenses, as well as the interest and penalties relating to these uncertain tax
positions.
On a
quarterly basis, we evaluate our ability to recover our deferred tax assets,
including but not limited to our past operating results, the existence of
cumulative losses in the most recent fiscal years, and our forecast of future
taxable income on a jurisdiction by jurisdiction basis. In the event that actual
results differ from our estimates in the future, we will adjust the amount of
the valuation allowance that may result in a decrease or increase in income tax
expense in those periods.
We
recognize liabilities for uncertain tax positions based on a two-step process
prescribed in ASC 740. The first step is to evaluate the tax position for
recognition by determining if the weight of available evidence indicates that it
is more likely than not that the position will be sustained on examination,
including resolution of any related appeals or litigation processes, if any. The
second step requires us to estimate and measure the tax benefit as the largest
amount that is more than 50% likely of being realized upon ultimate
settlement.
It is
inherently difficult and subjective to estimate such amounts, as this requires
us to determine the probability of various possible outcomes. We will evaluate
these uncertain tax positions on a quarterly basis. A change in recognition or
measurement in the future may result in the recognition of a tax benefit or an
additional charge to the tax provision in the period.
See Note
13 in the notes to condensed consolidated financial statements of this Form 10-Q
for further discussion.
Litigation
We are,
on occasion, a party to lawsuits, claims, investigations, and proceedings,
including commercial and employment matters, which are being addressed in the
ordinary course of business. We review the current status of any pending or
threatened proceedings with our outside counsel on a regular basis and,
considering all the known relevant facts and circumstances, we recognize any
loss that we consider probable and estimable as of the balance sheet date. For
these purposes, we consider settlement offers we may make to be indicative of
such a loss under certain circumstances. As of September 30, 2009,
there was no accrual for litigation related matters.
Liquidity
and Capital Resources
We have
historically financed our operations through a combination of debt and equity
financing and cash generated from operations. As highlighted in the condensed
consolidated statements of cash flows, the Company’s liquidity and available
capital resources are impacted by the following key components: (i) cash and
cash equivalents, (ii) operating activities, (iii) investing activities, and
(iv) financing activities.
|
|
Six
Months Ended September 30,
|
|
(In
thousands)
|
|
2009
|
|
|
2008
|
|
Cash
provided by (used in) operating activities
|
|
$
|
(1,003
|
)
|
|
$
|
561
|
|
Cash
provided by (used in) investing activities
|
|
|
(88
|
)
|
|
|
9,977
|
|
Cash
used in financing activities
|
|
|
(252
|
)
|
|
|
(26
|
)
|
Net
increase (decrease) in cash and cash equivalents
|
|
$
|
(1,343
|
)
|
|
$
|
10,512
|
|
Cash
and cash equivalents
Cash and
cash equivalents were $44.3 million as of September 30, 2009 compared to $45.6
million as of March 31, 2009, a decrease of $1.3 million primarily due to cash
used in operating activities.
Operating
activities
Cash
provided by (used in) operating activities consists of net loss adjusted for
certain non-cash items and changes in operating assets and
liabilities.
During
the six months ended September 30, 2009, cash used in operating activities was
$1.0 million. The net loss of $6.9 million included non-cash items, such as
employee stock-based compensation expense of $0.9 million, depreciation and
amortization of $1.1 million and impairment of fixed assets of $0.3 million.
Accounts receivable increased to $4.4 million at September 30, 2009 as compared
to $4.2 million at March 31, 2009. Annualized receivables days of sales
outstanding were 38 days at September 30, 2009 and March 31, 2009. Net inventory
reduced to $3.7 million as of September 30, 2009 as compared to $5.2 million as
of March 31, 2009. Annualized inventory turns were 6.8 at September 30,
2009 and 5.9 at March 31, 2009. Accounts payable and accrued liabilities
increased to $7.0 million at September 30, 2009 as compared to $5.4 million at
March 31, 2009. Annualized days payables outstanding were 50 days and 48 days at
September 30, 2009 and March 31, 2009, respectively. Deferred margin on
shipments to distributors was $1.1 million as of September 30, 2009 compared to
$1.0 million as of March 31, 2009.
During
six months ended September 30, 2008, cash provided by operating activities was
$0.6 million. The net loss of $2.9 million during the six months ended September
30, 2008 included non-cash items, such as employee stock-based compensation
expense of $1.2 million, and depreciation and amortization of $1.3 million.
Accounts receivable increased to $7.4 million at September 30, 2008 compared to
$6.2 million at March 31, 2008, mainly as a result of change in our customer
mix. Receivables days of sales outstanding were 42 days and 38 days
at September 30, 2008 and March 31, 2008, respectively. Net inventory was $6.9
million as of September 30, 2008, compared to $6.4 million as of March 31,
2008. Annualized inventory turns were 6.2 at September 30, 2008 as compared to
6.8 at March 31, 2008. Accounts payable and accrued liabilities totaled $10.5
million at September 30, 2008 compared to $8.3 million at March 31, 2008.
Annualized days payable outstanding increased to 57 at September 30, 2008
from 50 at March 31, 2008. Deferred margin on shipments to distributors
decreased to $1.8 million as of September 30, 2008 from $1.9 million as of March
31, 2008.
Investing
activities
Investing
activities during the six months ended September 30, 2009 used $88,000 of cash,
due to payments for capital expenditures.
Investing
activities during the six months ended September 30, 2008 provided $10.0 million
of cash, primarily due to $9.2 million of proceeds from net maturities of
short-term investments and $1.15 million of proceeds from the sale of LED Driver
intellectual property and related fixed assets partially offset by payments for
capital expenditures.
Financing
activities
Net cash
used in financing activities for the six months ended September 30, 2009 was
$252,000, as a result of repurchase of $461,000 of the Company’s outstanding
common stock under the stock repurchase program partially offset by proceeds of
$209,000 from the issuance of common stock under the employee stock purchase
plan.
Net cash
used in financing activities for the six months ended September 30, 2008 was
$26,000 and was the result of repurchase of $297,000 of the Company’s
outstanding common stock under the stock repurchase program largely offset by
proceeds of $271,000 from the issuance of common stock under the employee stock
purchase plan.
Contractual
Obligations and Cash Requirements
The
following table summarizes our contractual obligations as of September 30, 2009
(fiscal years ended March 31, in thousands):
|
|
Payments
due by period
|
|
|
|
Remainder
of
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
Beyond
|
|
|
|
|
|
|
Fiscal
2010
|
|
|
2011
|
|
|
2012
|
|
|
2012
|
|
|
Total
|
|
Operating
lease obligations
|
|
$
|
151
|
|
|
$
|
266
|
|
|
$
|
25
|
|
|
$
|
-
|
|
|
$
|
442
|
|
Purchase
obligations
|
|
|
656
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
656
|
|
|
|
$
|
807
|
|
|
$
|
266
|
|
|
$
|
25
|
|
|
$
|
-
|
|
|
$
|
1,098
|
|
As of
September 30, 2009, the liability for uncertain tax positions was $257,000 in
addition to the interest and tax penalties of $67,000, of which none is expected
to be paid within one year. We are unable to estimate when cash settlement with
a taxing authority may occur.
We expect
to fund all of these obligations with cash on hand or cash provided from
operations.
We
anticipate that our existing cash and cash equivalents of $44.3 million as of
September 30, 2009 will be sufficient to meet our anticipated cash needs for the
next twelve months. Should we desire to expand our level of operations more
quickly, either through increased internal development or through the
acquisition of product lines from other entities, we may need to raise
additional funds through public or private equity or debt financing. The funds
may not be available to us, or if available, we may not be able to obtain them
on terms favorable to us.
Recent
Accounting Pronouncements
Refer to
Note 3 in the notes to condensed consolidated financial statements in this Form
10-Q for a discussion of the expected impact of recently issued accounting
pronouncements.
Off-Balance
Sheet Arrangements
We do not
have off balance sheet arrangements as defined in Item 303(a)(4)(ii) of SEC
Regulation S-K that have, or are reasonably likely to have, a current or future
effect upon our financial condition, revenue, expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to our
investors, other than contractual obligations shown above.
We have
evaluated the estimated fair value of our financial instruments. The amounts
reported as cash and cash equivalents, accounts receivable and accounts payable
approximate fair value due to their short term maturities.
We have
little exposure to foreign currency risk as all our sales are denominated in US
dollars as is most of our spending.
We are
exposed to financial market risks primarily due to the impact of changes in
interest rates on our cash and cash equivalents. We do not use
derivatives to alter the interest characteristics of our investment
securities.
ITEM 4
. Controls and Procedures
(a)
Disclosure Controls and Procedures.
(i)
Disclosure
Controls and Procedures
.
We
maintain disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) that are designed to ensure that information required
to be disclosed by us in reports that we file or submit under the Securities
Exchange Act of 1934 is recorded, processed, summarized, and reported within the
time periods specified in Securities and Exchange Commission rules and forms,
and that such information is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required
disclosure.
(ii)
Limitations
on the Effectiveness of Disclosure Controls.
In designing and
evaluating our disclosure controls and procedures, management recognized that
disclosure controls and procedures, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of the
disclosure controls and procedures are met, taking into account the totality of
the circumstances. Our disclosure controls and procedures have been designed to
meet the reasonable assurance standards. Additionally, in designing
disclosure controls and procedures, our management necessarily was required to
apply its judgment in evaluating the cost-benefit relationship of possible
disclosure controls and procedures. The design of any disclosure
controls and procedures also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future
conditions.
(iii)
Evaluation
of Disclosure Controls and Procedures.
Our Chief
Executive Officer and Chief Financial Officer have evaluated our disclosure
controls and procedures as of September 30, 2009, and have determined that they
were effective at the reasonable assurance level.
(b)
Changes in Internal Control Over Financial Reporting
Our
internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) is designed to provide reasonable assurance regarding
the reliability of our financial reporting and preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles. There was no change in our internal control
over financial reporting identified in connection with the evaluation described
in Item 4(a)(iii) above that occurred during our second quarter of fiscal 2010
that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
None
A revised
description of the risk factors associated with our business is set forth below.
This description supersedes the description of the risk factors associated with
our business previously disclosed in Part II, Item 1A of our Form 10-Q for
fiscal quarter ended June 30, 2009. Because of these risk factors, as well as
other factors affecting the Company’s business and operating results and
financial condition, including those set forth elsewhere in this report, our
actual future results could differ materially from the results contemplated by
the forward-looking statements contained in this report and our past financial
performance should not be considered to be a reliable indicator of future
performance, so that investors should not use historical trends to anticipate
results or trends in future periods.
Our
operating results may fluctuate significantly for a variety of reasons,
including some of those described in the risk factors below, many of which are
difficult to control or predict. While we believe that quarter to quarter and
year to year comparisons of our revenue and operating results are not
necessarily meaningful or accurate indicators of future performance, our stock
price historically has been susceptible to large swings in response to short
term fluctuations in our operating results. Should our future operating results
fall below our guidance or the expectations of securities analysts or investors,
the likelihood of which is increased by the fluctuations in our operating
results, the market price of our common stock may decline.
We
had losses in the last six fiscal quarters and in eight out of the last twelve
most recent fiscal quarters. We may not be able to attain or sustain
profitability in the future.
There are
many factors that affect our ability to sustain profitability including the
health of the mobile handset, HBLED, digital consumer electronics and personal
computer markets on which we focus, continued demand for our products from our
key customers, availability of capacity from our manufacturing subcontractors,
ability to reduce manufacturing costs faster than price decreases thereby
attaining a healthy gross margin, continued product innovation and design wins,
competition, interest rates and our continued ability to manage our operating
expenses. In order to obtain and sustain profitability in the long term, we will
need to continue to grow our business in our target markets and to reduce our
product costs rapidly enough to maintain our gross margin. The semiconductor
industry has historically been cyclical, and we may be subject to such
cyclicality, which could lead to our incurring losses again.
We
currently are concentrated in terms of product types (protection devices),
markets (mobile handsets), and customers (certain top tier OEMs). Our
revenue could suffer materially if the demand or price for protection devices
decreases, if the market for mobile handsets stops growing, or if our key
customers lose market share.
Our
revenues in recent periods have been derived primarily from sales of circuit
protection devices. For example, during second quarter of fiscal
2010, 87% of our revenue was derived from such sales and we expect this
percentage to increase as we exit the display controller market. Should the
need for circuit protection devices decline, for example because of changes in
input and output circuitry, or integration of circuit protection functionality
into other circuit elements, our revenues could decline.
During
second quarter of fiscal 2010, 57% of our revenue was from sales to the mobile
handset market, with the balance coming from digital consumer electronics and
personal computers and peripherals and HBLED markets. In order for us
to be successful, we must continue to penetrate these markets, both by obtaining
more business from our current customers and by obtaining new customers. Due to
our relatively narrow market focus, we are susceptible to materially lower
revenues due to material adverse changes to one of these markets, particularly
the mobile handset market. We expect much of our future revenue
growth to be in the mobile handset market where more complex mobile handsets
have meant increased adoption of and demand for protection devices. Should the
rate of adoption of protection devices decelerate in the mobile handset market,
our planned rate of increase in penetration of that market would also decrease,
thereby reducing our future growth in that market. In addition, a
reduction in our market share of protection devices sold into
that market would also decrease our future growth and could even lead to
declining revenue from that market.
Our sales
strategy has been to focus on customers with large market share in their
respective markets. As a result, we have several large customers. During the
second quarter of fiscal 2010, one customer represented 16% of our net sales and
in the future we expect to continue to increase net sales to a top five OEM
mobile handset customer we began selling to during the second half of fiscal
2008. There can be no assurance that these customers will purchase our products
in the future in the quantities we have forecasted, or at
all.
During
the second quarter of fiscal 2010, one distributor represented 13% of our net
sales. If we were to lose the distributor, we might not be able to obtain other
distributors to represent us or the new distributors might not have sufficiently
strong relationships with the current end customers to maintain our current
level of net sales. Additionally, the time and resources involved with the
changeover and training could have an adverse impact on our business in the
short term.
The
markets in which we participate are intensely competitive and our products are
not sold pursuant to long term contracts, enabling our customers to replace us
with our competitors if they choose. In addition, our competitors
have in the past and may in the future reverse engineer our most successful
products and become second sources for our customers, which could decrease our
revenues and gross margins.
Our
target markets are intensely competitive. Our ability to compete successfully in
our target markets depends upon our being able to offer attractive, high quality
products to our customers that are properly priced and dependably supplied. Our
customer relationships do not generally involve long term binding commitments
making it easier for customers to change suppliers and making us more vulnerable
to competitors. Our customer relationships instead depend upon our past
performance for the customer, their perception of our ability to meet their
future need, including price and delivery and the timely development of new
devices, the lead time to qualify a new supplier for a particular product, and
interpersonal relationships and trust. Furthermore, many of our
customers are striving to limit the number of vendors they do business with and
because of our small size and limited product portfolio they could decide to
stop doing business with us.
Our most
successful products are not covered by patents and have in the past and may in
the future be reverse engineered. Thus, our competitors can become second
sources of these products for our customers or our customers’ competitors, which
could decrease our unit sales or our ability to increase unit sales and also
could lead to price competition. This price competition could result in lower
prices for our products, which would also result in lower revenues and gross
margins. Certain of our competitors have announced products that are pin
compatible with some of our most successful products, especially in the mobile
handset market, where many of our largest revenue generating products have been
second sourced. To the extent that the revenue secured by these competitors
exceeds the expansion in market size resulting from the availability of second
sources, this decreases the revenue potential for our products. Furthermore,
should a second source vendor attempt to increase its market share by dramatic
or predatory price cuts for large revenue products, our revenues and margins
could decline materially.
Because
we operate in different semiconductor product markets, we generally encounter
different competitors in our various market areas. With respect to the
protection devices for the mobile handset, digital consumer electronics and
personal computer markets as well as HBLED market, we compete primarily with
NXP, ON Semiconductor Corporation, Semtech Corporation, STMicroelectronics, N.V.
and Texas Instruments as well as other smaller companies. For EMI filter devices
used in mobile handsets, we also compete with ceramic devices based on high
volume Multi-Layer Ceramic Capacitor (MLCC) technology from companies such as
Amotek Company, Ltd., AVX Corporation, Innochip Technology, Inc., Murata
Manufacturing Co., Ltd., and TDK Corp. MLCC devices are generally low cost and
our revenues would suffer if their features and performance meet the
requirements of our customers and we are unable to reduce the cost of our
protection products sufficiently to be competitive. We have seen ceramic filters
obtain significant design wins for low end applications in the mobile handset
market and we focused on high end applications as a result. However, we have
also begun to see the use of higher performance ceramic filters and if we are
not able to demonstrate superior performance at an acceptable price with our
devices then our revenues would also suffer. Many of our competitors are larger
than we are, have substantially greater financial, technical, marketing,
distribution and other resources than we do and have their own facilities for
the production of semiconductor components.
Adverse
and uncertain global economic conditions make forecasting demand difficult and
may harm our business
Unfavorable
global economic conditions, including the recession and recent disruptions to
the credit and financial markets, could cause consumer and capital spending to
continue to slow down, which may decrease demand for our customers’ products and
hence our products and our revenues would be adversely affected. In addition,
during challenging economic times, our customers may face issues gaining timely
access to sufficient credit, which may impair the ability of our customers to
pay for products they have purchased which could cause us to increase our
allowance for doubtful accounts and write-offs of accounts
receivable. Furthermore, the uncertainty in when the global
economy will recover means uncertain demand for our products which makes it more
difficult to manage inventories so that we can timely respond to our customers
if and when their demand for our products increases and may lead to greater
write-offs of inventory. In addition, such uncertainty in demand
makes planning more difficult and subject to error which could impact our
decision-making and have a material adverse effect on our business, results of
operations, financial condition and cash flows.
Our
revenues are subject to macroeconomic cycles and therefore are more likely to
decline if the current economy worsens or if there is another economic
downturn.
As our
mobile handset protection devices penetration have increased, our revenues have
become increasingly susceptible to macroeconomic cycles because our revenue
growth has become more dependent on growth in the overall market as well as on
increased penetration.
Our
reliance on foreign customers could cause fluctuations in our operating
results.
During
second quarter of fiscal 2010, international sales accounted for 89% of our net
sales. International sales include sales to U.S. based customers if the product
was delivered outside the United States.
International
sales subject us to the following risks:
|
•
|
|
changes
in regulatory requirements;
|
|
•
|
|
tariffs
and other barriers;
|
|
•
|
|
timing
and availability of export
licenses;
|
|
•
|
|
political
and economic instability;
|
|
•
|
|
the
impact of regional and global illnesses or natural
disasters;
|
|
•
|
|
difficulties
in accounts receivable collections;
|
|
•
|
|
difficulties
in staffing and managing foreign
operations;
|
|
•
|
|
difficulties
in managing distributors;
|
|
•
|
|
difficulties
in obtaining foreign governmental approvals, if those approvals should
become required for any of our
products;
|
|
•
|
|
limited
intellectual property protection;
|
|
•
|
|
foreign
currency exchange fluctuations;
|
|
•
|
|
the
burden of complying with and the risk of violating a wide variety of
complex foreign laws and treaties;
and
|
|
•
|
|
potentially
adverse tax consequences.
|
Because
sales of our products have been denominated in United States dollars, increases
in the value of the U.S. dollar could increase the relative price of our
products so that they become more expensive to customers in the local currency
of a particular country. Furthermore, because some of our customer purchase
orders and agreements are influenced, if not governed, by foreign laws, we may
be limited in our ability to enforce our rights under these agreements and to
collect damages, if awarded.
Due
to the volatility of demand for our products, our inventory may from time to
time be in excess of our needs, which could cause write downs of our inventory
or of inventory held by our distributors.
Generally
our products are sold pursuant to short-term releases of customer purchase
orders and some orders must be filled on an expedited basis. Our backlog is
subject to revisions and cancellations and anticipated demand is constantly
changing. Because of the short life cycles involved with our customers’
products, the order pattern from individual customers can be erratic, with
inventory accumulation and liquidation during phases of the life cycle for our
customers’ products. We face the risk of inventory write-offs if we manufacture
products in advance of orders. However, if we do not make products in advance of
orders, we may be unable to fulfill some or all of the demand to the detriment
of our customer relationships because we have insufficient inventory on hand and
at our distributors to fill unexpected orders and because the time required to
make the product may be longer than the time that certain customers will wait
for the product.
We
typically plan our production and our inventory levels, and the inventory levels
of our distributors, based on internal forecasts of customer demand, which are
highly unpredictable and can fluctuate substantially. Therefore, we often order
materials and at least partially fabricate product in anticipation of customer
requirements. Furthermore, due to long manufacturing lead times, in order to
respond in a timely manner to customer demand, we may also make products or have
products made in advance of orders to keep in our inventory, and we may
encourage our distributors to order and stock products in advance of orders that
are subject to their right to return them to us.
In the
last few years, there has been a trend toward vendor managed inventory among
some large customers. In such situations, we do not recognize revenue until the
customer withdraws inventory from stock or otherwise becomes obligated to retain
our product. This imposes the burden upon us of carrying additional inventory
that is stored on or near our customers’ premises and is subject in many
instances to return to our premises if not used by the customer.
We value
our inventories on a part by part basis to appropriately consider excess
inventory levels and obsolete inventory primarily based on backlog and
forecasted customer demand, and to consider reductions in sales price. For the
reasons described above, we may end up carrying more inventory than we need in
order to meet our customers’ orders, in which case we may incur charges when we
write down the excess inventory to its net realizable value, if any, should our
customers for whatever reason not order the product in our
inventory.
We
have outsourced our wafer fabrication, and assembly and test
operations. Due to our size, we depend on a limited number of foundry
partners and assembly and test subcontractors and there is limited available
capacity for plastic package assembly and test contractors which limits our
choices. As a result, we are exposed to a risk of manufacturing
disruption or uncontrolled price changes and we may encounter difficulties in
expanding our capacity.
We have
adopted a fabless manufacturing model that involves the use of foundry partners
and assembly and test subcontractors to provide our production capacity. We
chose this model in order to reduce our overall manufacturing costs and thereby
increase our gross margin, reduce the impact of fixed costs when volume is low,
provide us with upside capacity in case of short-term demand increases and
provide us with access to newer process technology, production facilities and
equipment. During the past four years we have outsourced our wafer manufacturing
and assembly and test operations overseas in Asia and we continue to seek
additional foundry and assembly and test capacity to provide for growth and
lower cost. If we experience delays in securing additional or replacement
capacity at the time we need it, we may not have sufficient product to fully
meet the demand of our customers.
Given the
current size of our business, we believe it is impractical for us to use more
than a limited number of foundry partners and assembly and test subcontractors
as it would lead to significant increases in our costs. Currently, we have five
foundry partners and rely on limited number of subcontractors. Some
of our products are sole sourced at one of our foundry partners in China, Japan
or Taiwan. There is also a limited cost effective capacity of plastic assembly
and test contractors, especially for Thin Dual Flat No-Lead Plastic Package
(TDFN) and Ultra-Thin Dual Flat No-Lead Plastic Package (UDFN), for which
customer demand is increasing. Our ability to secure sufficient plastic assembly
and test capacity, especially the fast ramping TDFN and UDFN offerings, may
limit our ability to satisfy our customers’ demand. If the operations
of one or more of our partners or subcontractors should be disrupted, or if they
should choose not to devote capacity to our products in a timely manner, our
business could be adversely impacted as we might be unable to manufacture some
of our products on a timely basis. In addition, the cyclicality of the
semiconductor industry has periodically resulted in shortages of wafer
fabrication, assembly and test capacity and other disruption of supply. We may
not be able to find sufficient capacity at a reasonable price or at all if such
disruptions occur. As a result, we face significant risks, including:
|
•
|
|
reduced
control over delivery schedules and
quality;
|
|
•
|
|
the
impact of regional and global illnesses such as SARS or Avian flu
pandemic;
|
|
•
|
|
the
potential lack of adequate capacity during periods when industry demand
exceeds available capacity;
|
|
•
|
|
difficulties
finding and integrating new
subcontractors;
|
|
•
|
|
limited
warranties on products supplied to
us;
|
|
•
|
|
potential
increases in prices due to capacity shortages, currency exchange
fluctuations and other factors; and
|
|
•
|
|
potential
misappropriation of our intellectual
property.
|
We
rely upon foreign suppliers and have consigned substantial equipment at our
foreign subcontractors in order to obtain price concessions. This
exposes us to risks associated with international operations, including the risk
of losing this equipment should the foreign subcontractor go out of
business.
We use
foundry partners and assembly and test subcontractors in Asia, primarily in
China, India, Japan, Korea, Philippines, Taiwan and Thailand for our products.
Our dependence on these foundries and subcontractors involves the following
substantial risks:
|
•
|
|
political
and economic instability;
|
|
•
|
|
changes
in our cost structure due to changes in local currency values relative to
the U.S. dollar;
|
|
•
|
|
potential
difficulty in enforcing agreements and recovering damages for their
breach;
|
|
•
|
|
inability
to obtain and retain manufacturing capacity and priority for our business,
especially during industry-wide times of capacity
shortages;
|
|
•
|
|
exposure
to greater risk of misappropriation of intellectual
property;
|
|
•
|
|
disruption
to air transportation from Asia;
and
|
|
•
|
|
changes
in tax laws, tariffs and freight
rates.
|
These
risks may lead to delayed product delivery or increased costs, which would harm
our profitability, financial results and customer relationships. In addition, we
maintain significant inventory at our foreign subcontractors that could be at
risk.
We also
drop ship product from some of these foreign subcontractors directly to
customers. This increases our exposure to disruptions in operations that are not
under our direct control and may require us to continue to enhance our computer
and information systems to coordinate this remote activity.
In order
to obtain price concessions, we have consigned substantial equipment at our
foreign contractors. For example, we have $0.8 million, $0.4 million
and $0.2 million of test or packaging equipment on consignment in India,
Thailand and China, respectively as of September 30, 2009. Should our
business relationship with these partners cease, whether due to our switching to
alternate lower cost suppliers, quality or capacity issues with our current
partners, or if they experience a natural disaster or financial difficulty, we
may have trouble repossessing this equipment. Even if we are able to
repossess this equipment, it may not be in good condition and we may not be able
to realize the dollar value of this equipment then recorded on our
books. Any such inability to repossess consigned equipment or to
realize its recorded value on our books would reduce our assets.
Our
markets are subject to rapid technological change. Therefore, our success
depends on our ability to develop and introduce new
products. It is possible that a significant portion our
research and development expenditures will not yield products with meaningful
future revenue.
The
markets for our products are characterized by:
|
•
|
|
rapidly
changing technologies;
|
|
•
|
|
changing
customer needs;
|
|
•
|
|
evolving
industry standards;
|
|
•
|
|
frequent
new product introductions and
enhancements;
|
|
•
|
|
increased
integration with other functions;
and
|
|
•
|
|
rapid
product obsolescence.
|
Our
competitors or customers may offer new products based on new technologies,
industry standards or end user or customer requirements, including products that
have the potential to replace or provide lower cost or higher performance
alternatives to our products. The introduction of new products by our
competitors or customers could render our existing and future products obsolete
or unmarketable. In addition, our competitors and customers may introduce
products that eliminate the need for our products. Our customers are constantly
developing new products that are more complex and miniature, increasing the
pressure on us to develop products to address the increasingly complex
requirements of our customers’ products in environments in which power usage,
lack of interference with neighboring devices and miniaturization are
increasingly important.
To
develop new products for our target markets, we must develop, gain access to,
and use new technologies in a cost effective and timely manner, and continue to
expand our technical and design expertise. In addition, we must have our
products designed into our customers’ future products and maintain close working
relationships with key customers in order to develop new products that meet
their changing needs.
We may
not be able to identify new product opportunities, to develop or use new
technologies successfully, to develop and bring to market new products, or to
respond effectively to new technological changes or product announcements by our
competitors. There can be no assurance even if we are able to do so that our
customers will design our products into their products or that our customers’
products will achieve market acceptance. Our pursuit of necessary technological
advances may require substantial time and expense and involve engineering risk.
Failure in any of these areas could harm our operating results.
We
may be unable to reduce the costs associated with our products quickly enough
for us to meet our margin targets or to retain market share.
In the
mobile handset market our competitors have been second sourcing many of our
products and as a result this market has become more price competitive. We are
seeing the same trend develop in our low capacitance ESD devices for digital
consumer electronics, personal computers and peripherals as well as application
specific protection devices in the HBLED market. We need to be able to reduce
the costs associated with our products in order to achieve our target gross
margins. We have in the past achieved and may attempt in the future to achieve
cost reductions by obtaining reduced prices from our manufacturing
subcontractors, using larger sized wafers, adopting simplified processes, and
redesigning parts to require fewer pins or to make them smaller. There can be no
assurance that we will be successful in achieving cost reductions through any of
these methods, in which case we will experience lower margins and/or we will
experience lower sales as our customers switch to our competitors.
The
majority of our operating expenses with respect to a given product line or
market cannot be reduced quickly in response to revenue shortfalls without
impairing our ability to effectively conduct business in that product line or
market.
The
majority of our operating expenses with respect to a given product line or
market
are labor
related and therefore cannot be reduced quickly without impairing our ability to
effectively conduct business in that product line or market. Much of the
remainder of our operating costs such as rent is relatively fixed. Therefore, we
have limited ability to reduce expenses quickly in response to any revenue
shortfalls. Consequently, our operating results will be harmed if our revenues
do not meet our projections. We may experience revenue shortfalls for the
following and other reasons:
|
•
|
|
significant
pricing pressures that occur because of competition or customer
demands;
|
|
•
|
|
sudden
shortages of raw materials or fabrication, test or assembly capacity
constraints that lead our suppliers to allocate available supplies or
capacity to other customers and, in turn, harm our ability to meet our
sales obligations; and
|
|
•
|
|
rescheduling
or cancellation of customer orders due to a softening of the demand for
our customers’ products, replacement of our parts by our competitors or
other reasons.
|
If
our distributors experience financial difficulty and become unable to pay us or
choose not to promote our products, our business could be harmed.
During
second quarter of fiscal 2010, 55% of our sales were through distributors,
primarily in Asia. Our distributors could reduce or discontinue sales of our
products or sell our competitors’ products. They may not devote the resources
necessary to sell our products in the volumes and within the time frames that we
expect. In addition, we are dependent on their continued financial viability,
and some of them are small companies with limited working capital. If our
distributors experience financial difficulties and become unable to pay our
invoices, or otherwise become unable or unwilling to promote and sell our
products, our business could be harmed.
Our
future success depends in part on the continued service of our key engineering
and management personnel and our ability to identify, hire and retain additional
personnel.
There is
intense competition for qualified personnel in the semiconductor industry, in
particular for the highly skilled design, applications and test engineers
involved in the development of new analog integrated circuits. Competition is
especially intense in the San Francisco Bay area, where our corporate
headquarters and a portion of our engineering group is
located. For that reason, in part, we have opened a design
center in Phoenix focused on protection devices. We may not be able
to continue to attract and retain engineers or other qualified personnel
necessary for the development of our business or to replace engineers or other
qualified personnel who may leave our employment, or the employment of our India
design center in the future. This is especially true for analog chip designers
since competition is fierce for experienced engineers in this discipline. Growth
is expected to place increased demands on our resources and will likely require
the addition of management and engineering personnel, and the development of
additional expertise by existing management personnel. The loss of services
and/or changes in our management team, in particular our CEO, or our key
engineers, or the failure to recruit or retain other key technical and
management personnel, could cause additional expense, potentially reduce the
efficiency of our operations and could harm our
business.
Our
design wins may not result in customer products utilizing our devices and our
backlog may not result in future shipments of our devices. During a typical
quarter, a substantial portion of our shipments are not in our backlog at the
start of the quarter, which limits our ability to forecast in the near
term.
Not all
of our design wins will result in revenue as a customer may cancel an end
product for a variety of reasons or subsequently decide not to use our part in
it. Even if the customer’s end product does go into production with our part, it
may not result in material annual product sales by us and the customer’s product
may have a shorter life than expected. In addition, the length of time from
design win to production will vary based on the customer’s development schedule.
Finally, the revenue from design wins varies significantly.
Due to
possible customer changes in delivery schedules and cancellations of orders, our
backlog at any particular point in time is not necessarily indicative of actual
sales for any succeeding period. A reduction of backlog during any particular
period, or the failure of our backlog to result in future shipments, could harm
our business. Much of our revenue is based upon orders placed with us that have
short lead time until delivery or sales by our distributors to their customers
(in most cases, we do not recognize revenue on sales to our distributors until
the distributor sells the product to its customers). As a result, our ability to
forecast our future shipments and our ability to increase manufacturing capacity
quickly may limit our ability to fulfill customer orders with short lead
times.
We
may not be able to protect our intellectual property rights adequately and we
may be harmed by litigation involving our intellectual property
rights.
Our
ability to compete is affected by our ability to protect our intellectual
property rights. We rely on a combination of patents, trademarks, copyrights,
mask work registrations, trade secrets, confidentiality procedures and
nondisclosure and licensing arrangements to protect our intellectual property
rights. Despite these efforts, the steps we take to protect our proprietary
information may not be adequate to prevent misappropriation of our technology,
and our competitors may independently develop technology that is substantially
similar or superior to our technology.
To the
limited extent that we are able to seek patent protection for our products or
processes, our pending patent applications or any future applications may not be
approved. Any issued patents may not provide us with competitive advantages and
may be challenged by third parties. If challenged, our patents may be found to
be invalid or unenforceable, and the patents of others may have an adverse
effect on our ability to do business. Furthermore, others may independently
develop similar products or processes, duplicate our products or processes, or
design around any patents that may be issued to us.
As a
general matter, the semiconductor and related industries are characterized by
substantial litigation regarding intellectual property rights, and in
particular patents. We may be accused of infringing the intellectual property
rights of third parties. Furthermore, we may have certain indemnification
obligations to customers with respect to the infringement of third party
intellectual property rights by our products. Infringement claims by third
parties or claims for indemnification by customers or end users of our products
resulting from infringement claims may be asserted in the future and such
assertions, if proven to be true, may harm our business.
Any
litigation relating to the intellectual property rights of third parties,
whether or not determined in our favor or settled by us, would at a minimum be
costly and could divert the efforts and attention of our management and
technical personnel. In the event of any adverse ruling in any such litigation,
we could be required to pay substantial damages, cease the manufacturing, use
and sale of infringing products, discontinue the use of certain processes or
obtain a license under the intellectual property rights of the third party
claiming infringement. A license might not be available on reasonable terms, or
at all.
Our
stock price may continue to be volatile, and our trading volume may continue to
be relatively low and limit liquidity and market efficiency. Should significant
stockholders desire to sell their shares within a short period of time, our
stock price could decline.
The
market price of our common stock has fluctuated significantly. In the future,
the market price of our common stock could be subject to significant
fluctuations due to general market conditions and in response to quarter to
quarter variations in:
|
•
|
|
our
anticipated or actual operating
results;
|
|
•
|
|
announcements
or introductions of new products by us or our
competitors;
|
|
|
|
|
|
•
|
|
decreased
market share of our major
customers;
|
|
•
|
|
technological
innovations or setbacks by us or our
competitors;
|
|
•
|
|
conditions
in the semiconductor and passive components
markets;
|
|
•
|
|
the
commencement of litigation;
|
|
•
|
|
changes
in estimates of our performance by securities
analysts;
|
|
•
|
|
announcements
of merger or acquisition transactions;
and
|
|
•
|
|
general
economic and market conditions.
|
In
addition, the stock market in recent years has experienced extreme price and
volume fluctuations that have affected the market prices of many high technology
companies, particularly semiconductor companies, that have often been unrelated
or disproportionate to the operating performance of the companies. These
fluctuations, as well as general economic and market conditions, may harm the
market price of our common stock. Furthermore, our trading volume is often
small, meaning that a few trades have disproportionate influence on our stock
price. In addition, someone seeking to liquidate a sizable position in our stock
may have difficulty doing so except over an extended period or privately at a
discount. Thus, if a stockholder were to sell or attempt to sell a large number
of its shares within a short period of time, this sale or attempt could cause
our stock price to decline. Our stock is followed by a relatively small number
of analysts and any changes in their rating of our stock could cause significant
swings in its market price.
We have four relatively new directors
on our seven-person board, including three nominees of one of our larger
stockholders who were recently elected after a proxy
contest.
Three
nominees of one of our larger stockholders were recently elected to our
seven-member board after a proxy contest. The board also added
another new director recently, bringing the total number of new directors in
this fiscal year to four. Therefore, the current seven member board
consists of a majority of new directors who may need time to become thoroughly
familiar with the Company's business and strategy and to develop effective
working relationships as a board and with management. This could result in
a board which moves more carefully and deliberately on some issues, which could
be an impediment to quick action.
Provisions
in our certificate of incorporation authorizing “blank check” preferred stock
and in our bylaws requiring advance notice of stockholder proposals and
nominations, may delay, defer or prevent a change of control.
Our board
of directors has the authority to issue up to 10,000,000 shares of preferred
stock and to determine the price, rights, preferences and privileges and
restrictions, including voting rights of those shares without any further vote
or action by our stockholders. The rights of the holders of common stock will be
subject to, and may be harmed by, the rights of the holders of any shares of
preferred stock that may be issued in the future, including the preferred shares
covered by the stockholder rights plan. The issuance of preferred stock may
delay, defer or prevent a change in control. The terms of the preferred stock
that might be issued could potentially make more difficult or expensive our
consummation of any merger, reorganization, sale of substantially all of our
assets, liquidation or other extraordinary corporate transaction. In addition,
the issuance of preferred stock could have a dilutive effect on our
stockholders.
Further,
our stockholders must give written notice delivered to our executive offices no
less than 120 days before the one year anniversary of the date our proxy
statement was released to stockholders in connection with the previous year’s
annual meeting to nominate a candidate for director or present a proposal to our
stockholders at a meeting. These notice requirements could inhibit a takeover by
delaying stockholder action.
A
decline in our stock price could result in securities class action litigation
against us which could divert management attention and harm our
business.
In the
past, securities class action litigation has often been brought against public
companies after periods of volatility in the market price of their securities.
Due in part to our historical stock price volatility, we could in the future be
a target of such litigation. Securities litigation could result in substantial
costs and divert management’s attention and resources, which could harm our
ability to execute our business plan.
If
our products contain defects, fail to achieve industry reliability standards, or
infringe third party intellectual rights or if there are delays in delivery or
other unforeseen events which lead to our customers incurring damages, then our
reputation may be harmed, and we may incur significant unexpected expenses and
lose sales
.
We face
an inherent business risk of exposure to claims in the event that our products
fail to perform as warranted or expected or if we are late in delivering them.
Our customers might seek to recover from us any perceived losses, both direct
and indirect, which could include their lost sales or profit, a recall of their
products, or defending them against third party intellectual property claims.
Such claims might be for dollar amounts significantly higher than the revenues
and profits we receive from the sale of our products involved as we are usually
a component supplier with limited value content relative to the value of the
ultimate end-product.
We
attempt to protect ourselves through a combination of quality controls,
contractual provisions, business insurance, and self insurance. We are sometimes
not able to limit our liability contractually as much as we desire and believe
is reasonable and there can be no assurances that any such limits that we
negotiate will be enforceable. There can be no assurance that we will obtain the
insurance coverage we seek, both in terms of dollar amount insured or scope of
exclusions to the coverage, or that our insurers will handle any claims on the
basis we desire, or that the self insured claims will not be larger than we
expect. A successful claim against us could have material adverse effects
on our results of operations and financial condition. Beyond the potential
direct cost, loss of confidence by major customers could cause sales of our
other products to drop significantly and harm our business.
Earthquakes,
other natural disasters and shortages, or man-caused disasters such as future
terrorist activity, may damage our business.
Our
California facilities and some of our suppliers are located near major
earthquake faults that have experienced earthquakes in the past. In the event of
a major earthquake or other natural disaster near our headquarters, our
operations could be harmed. Similarly, a major earthquake or other natural
disaster near one or more of our major suppliers, like the ones that occurred in
Taiwan in September 1999 and in Japan in October 2004, could disrupt the
operations of those suppliers, limit the supply of our products and harm our
business. The October 2004 earthquake in Japan temporarily shut down operations
at one of the wafer fabrication facilities at which our products were being
produced. We have since transferred that capacity to other fabs. Power shortages
have occurred in California in the past and a wafer fabrication contractor of
ours in China experienced a power outrage during 2007. We cannot assure that if
power interruptions or shortages occur in the future, they will not adversely
affect our business. The September 11, 2001 attack may have adversely
affected the demand for our customers’ products, which in turn reduced their
demand for our products. In addition, terrorist activity interfered with
communications and transportation networks, which adversely affected us. Future
terrorist activity or war could similarly adversely impact our
business.
In
the future we may make strategic acquisitions of technology, product lines, or
companies and any future acquisitions and strategic alliances may harm our
operating results or cause us to incur debt or assume contingent
liabilities.
We may in
the future acquire, or form strategic alliances relating to, other businesses,
product lines or technologies. Successful acquisitions and alliances in the
semiconductor industry are difficult to accomplish because they require, among
other things, efficient integration and alignment of product offerings and
manufacturing operations and coordination of sales and marketing and research
and development efforts. We have no recent successful experience in making such
acquisitions or alliances. The difficulties of integration and alignment may be
increased by the necessity of coordinating geographically separated
organizations, the complexity of the technologies being integrated and aligned
and the necessity of integrating personnel with disparate business backgrounds
and combining different corporate cultures. The integration and alignment of
operations following an acquisition or alliance requires the dedication of
management resources that may distract attention from the day to day business,
and may disrupt key research and development, marketing or sales
efforts. In connection with future acquisitions and alliances, we may
not only acquire assets which need to be expensed or amortized, but we may also
incur debt or assume contingent liabilities which could harm our operating
results. Without strategic acquisitions and alliances we may have difficulty
meeting future customer product and service requirements.
By
supplying parts in the past which were used in medical devices that help sustain
human life, we are vulnerable to product liability claims.
We have
in the past supplied products predominantly to Guidant and to a much lesser
extent to Medtronic for use in implantable defibrillators and pacemakers, which
help sustain human life. While we have not sold products into the Medical market
since fiscal year 2005, large numbers of our products are or will be used in
implanted medical devices, which could fail and expose us to claims. Should our
products cause failure in the implanted devices, we may be sued and ultimately
have liability, although under federal law Guidant and Medtronic would be
required to defend and take responsibility in such instances until their
liability was established, in which case we could be liable for that part of
those damages caused by our willful misconduct or, in the case of Medtronic
only, our negligence.
Our
failure to comply with environmental regulations or the discovery of
contaminants at our prior manufacturing sites could result in substantial
liability to us.
We are
subject to a variety of federal, state and local laws, rules and regulations
relating to the protection of health and the environment. These include laws,
rules and regulations governing the use, storage, discharge, release, treatment
and disposal of hazardous chemicals during and after manufacturing, research and
development and sales demonstrations, as well as the maintenance of healthy and
environmentally sound conditions within our facilities. If we fail to comply
with applicable requirements, we could be subject to substantial liability for
cleanup efforts, property damage, personal injury and fines or suspension or
cessation of our operations. Should contaminants be found at either of our
prior manufacturing sites at a future date, a government agency or future owner
could attempt to hold us responsible, which could result in material
expenses.
Implementation
of the new FASB rules and the issuance of new laws or other accounting
regulations, or reinterpretation of existing laws or regulations, could
materially impact our stated results.
From time
to time, the government, courts and financial accounting boards issue new laws
or accounting regulations, or modify or reinterpret existing
ones. For example, starting with the first quarter of fiscal 2007, we
implemented
Accounting
Standards Codification Topic No. 718 “
Compensation
– Stock Compensation
” (ASC 718)
for the
accounting for share based payments which caused us to recognize an
expense associated with our employee equity awards
that decreased our earnings. There may be other future
changes in FASB rules or in laws, interpretations or regulations that
would affect our financial results or the way in which we present
them. Additionally, changes in the laws or regulations could have adverse
effects on our business that would affect our ability to compete, both
nationally and internationally.
Deficiencies
in our internal controls could cause us to have material errors in our financial
statements, which could require us to restate them. Such restatement could have
adverse consequences on our stock price, potentially limiting our access to
financial markets.
Management
assessed and determined, and the auditors attested, that there was no material
weakness in our internal control over financial reporting as of March 31, 2009,
2008 and 2007. However, should we or our auditors discover that we have a
material weakness in our internal control over financial reporting at another
time in the future, investors could lose confidence in the accuracy and
completeness of our financial reports, which could have an adverse effect on our
stock price.
We
believe that we will not have a material weakness in our internal control over
financial reporting which would lead to material errors in our financial
statements. Nonetheless, there can be no assurance that we will not have
errors in our financial statements. Such errors, if material, could
require us to restate our financial statements, having adverse effects on our
stock price, potentially causing additional expense, and could limit our access
to financial markets.
We
may incur increased costs as a result of future changes in laws and regulations
relating to corporate governance matters and public disclosure.
There
have been and continue to be changes in the laws and regulations affecting
public companies, including the provisions of the Sarbanes-Oxley Act of 2002,
rules adopted or proposed by the SEC and by the NASDAQ National Market and new
accounting pronouncements. These often have in the past and may in the future
result in increased general and administrative expenses and a diversion of
management time and attention from strategic revenue generating and cost
management activities. In addition, these new laws and regulations
could make it more difficult or more costly for us to obtain certain types of
insurance and to attract and retain qualified persons to serve on our board of
directors or as executive officers.
ITEM
2. Unregistered Sales of Equity Securities and Use of
Proceeds
Purchases
of Equity Securities by the Issuer and Affiliated Purchasers
The table
below shows purchases of equity securities by us during the second quarter of
fiscal 2010:
Issuer
Purchases of Equity Securities
|
|
|
|
|
|
|
|
|
|
Total
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
Purchased as
|
|
|
Maximum
Number of
|
|
|
|
|
|
|
|
|
|
Part
of Publicly
|
|
|
Shares
that May Yet be
|
|
|
|
Total
Number of
|
|
|
Average
Price
|
|
|
Announced
Plans or
|
|
|
Purchased
Under the
|
|
Period
|
|
Shares
Purchased (1)
|
|
|
Paid
Per Share
|
|
|
Programs
|
|
|
Plans
or Programs
|
|
7/1/09
- 7/31/09
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
240,176
|
|
8/1/09
- 8/31/09
|
|
|
40,717
|
|
|
|
2.87
|
|
|
|
40,717
|
|
|
|
199,459
|
|
9/1/09
- 9/30/09
|
|
|
34,548
|
|
|
|
3.08
|
|
|
|
34,548
|
|
|
|
164,911
|
|
|
|
|
75,265
|
|
|
$
|
2.97
|
|
|
|
75,265
|
|
|
|
164,911
|
|
(1) Our
current share repurchase program, under which we repurchased 75,265 shares
during the three months ended September 30, 2009, has been in place since August
21, 2008, when it was adopted by our board of directors and was publicly
announced. These shares were purchased in open market transactions. This
repurchase program has no expiration date, other than, unless extended, when an
aggregate of 1,000,000 shares have been repurchased. Neither this program nor
any other repurchase program or plan has expired during the second quarter of
fiscal 2010 ended September 30, 2009 nor have we decided to terminate any
repurchase plan or program prior to expiration. There are no existing repurchase
plans or programs under which we do not intend to make further
purchases.
We did
not issue any securities that had not been registered under the Federal
Securities Act of 1933, as amended, during our second quarter of fiscal
2010.
I
TEM
3. Defaults upon Senior Securities
None.
The
Company held its annual meeting of stockholders on September 17, 2009. Of the
22,917,914 shares of common stock outstanding as of the record date of July 20,
2009, a total of 19,149,267
shares were
voted in person or by proxy, representing 83.55% of the total votes eligible to
be cast, constituting a majority and more than a quorum of the outstanding
shares entitled to vote. At the meeting the following votes were taken on the
following matters:
A.
Election of Directors.
The
following persons received the votes indicated in the election of seven (7)
directors of the Company. The seven persons with an asterisk
following their names (Messrs. Castor, Dickinson, Fichthorn, Gullard, Potashner,
Ross, and Wittrock) received the most votes and were therefore elected as
directors to serve until the Company’s next annual meeting of stockholders or
until their respective successors are elected and qualified, or until their
earlier resignation, removal, or death:
|
|
Votes
|
|
|
Votes
|
|
|
|
For
|
|
|
Withheld
|
|
Jon
S. Castor *
|
|
|
16,771,517
|
|
|
|
2,377,749
|
|
Robert
V. Dickinson *
|
|
|
16,743,326
|
|
|
|
2,405,940
|
|
John
A. Fichthorn *
|
|
|
11,443,266
|
|
|
|
2,480,517
|
|
J.
Michael Gullard *
|
|
|
10,241,933
|
|
|
|
2,078,450
|
|
Wade
F. Meyercord
|
|
|
7,465,716
|
|
|
|
391,067
|
|
Kenneth
F. Potashner *
|
|
|
10,829,065
|
|
|
|
3,094,718
|
|
Dr. Edward C.
Ross *
|
|
|
15,735,861
|
|
|
|
2,385,505
|
|
Dr. David W.
Sear
|
|
|
4,929,886
|
|
|
|
295,597
|
|
Dr. John L.
Sprague
|
|
|
4,908,840
|
|
|
|
316,643
|
|
David
L. Wittrock *
|
|
|
15,734,039
|
|
|
|
2,387,247
|
|
B.
Accountant Selection Ratification.
The
selection of Grant Thornton LLP as the Company’s independent registered public
accountants for the fiscal year ended March 31, 2010 was ratified by the
following vote:
For
|
|
|
18,867,979
|
|
Against
|
|
|
64,473
|
|
Abstain
|
|
|
216,815
|
|
C.
Amendment of Stock Plan.
The
stockholders approved an amendment to the Company’s 1995 Employee Stock Purchase
Plan to increase the total number of shares reserved for issuance thereunder by
200,000 shares from 1,940,000 shares to 2,140,000 by the following
vote:
|
|
|
|
For
|
|
|
15,986,593
|
|
Against
|
|
|
834,316
|
|
Abstain
|
|
|
2,328,357
|
|
There
were no broker non-votes on any of these three matters.
There
were no other matters submitted to a vote of security holders during the period
for which this Form 10-Q is filed.
ITEM
5. Other Information
None.
The following documents are filed as
Exhibits to this report:
31.1
|
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Executive
Officer
|
|
|
31.2
|
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Financial
Officer
|
|
|
32.1
|
|
Section
1350 Certification of Chief Executive Officer
|
|
|
32.2
|
|
Section
1350 Certification of Chief Financial
Officer
|
Exhibit
|
|
|
|
|
Number
|
|
Description
|
|
Incorporated
by reference from
|
3(i)
|
|
Amended
and Restated Certificate of Incorporation.
|
|
Exhibit
3.1 to our Current Report on Form 8-K dated September 15, 2006, filed on
September 21, 2006.
|
|
|
|
|
|
3(ii)
|
|
Amended
and Restated By-laws.
|
|
Exhibit
3.4 to our Current Report on Form 8-K dated September 17, 2009, filed on
September 23, 2009.
|
|
|
|
|
|
4.1*
|
|
1995
Employee Stock Option Plan and 1995 Non-Employee Directors’ Stock Option
Plan, both as most recently amended August 8, 2003 and August 7, 2002,
respectively.
|
|
Exhibit
4.1 to Registration Statement on Form S-8, filed on September 2,
2003.
|
|
|
|
|
|
4.2*
|
|
1995
Employee Stock Purchase Plan, as most recently amended August 8,
2003
|
|
Appendix
B to Definitive Proxy Statement filed on July 2,
2008.
|
|
|
|
|
|
4.3
|
|
Sample
Common Stock Certificate of Registrant
|
|
Exhibit
4.1 to our Current Report on Form 8-K dated April 27, 2004, filed on April
28, 2004.
|
|
|
|
|
|
4.4*
|
|
2004
Omnibus Incentive Compensation Plan, as most recently amended July 6,
2009
|
|
Exhibit
10.34 to our Current Report on Form 8-K dated July 6, 2009, filed on July
9, 2009.
|
|
|
|
|
|
10.12
|
|
Wafer
Manufacturing Agreement between the Company and Advanced Semiconductor
Manufacturing Corporation, dated February 20, 2002.**
|
|
Exhibit
10.12 to the Company’s Annual Report on Form 10-K for the year ended March
31, 2002 filed on June 25, 2002.
|
|
|
|
|
|
10.18
|
|
Wafer
Manufacturing Agreement with Sanyo Electric Co., Ltd. Semiconductor
Company**
|
|
Exhibit
10.18 to our Quarterly Report on Form 10-Q for the quarter ended June 30,
2004, filed on August 6, 2004.
|
|
|
|
|
|
10.2
|
|
Amended
and Restated Loan and Security Agreement with Silicon Valley Bank dated
September 30, 2004.**
|
|
Exhibit
10.20 to our Quarterly Report on Form 10-Q for the quarter ended September
30, 2004, filed on November 8, 2004.
|
|
|
|
|
|
10.21
|
|
Purchase
Agreement between Registrant and Microchip Technology Incorporated dated
May 20, 2005, as amended effective June 15, 2005
|
|
Exhibit
10.21 to our Quarterly Report on Form 10-Q for the quarter ended June 30,
2005, filed on November 9, 2005.
|
|
|
|
|
|
10.22
|
|
Exhibit
10.22, First Amendment to Loan and Security Agreement between Registrant
and Silicon Valley Bank entered into on October 24, 2005.
|
|
Exhibit
10.22 to our Current Report on Form 8-K dated October 24, 2005, filed on
October 27, 2005.
|
Exhibit
|
|
|
|
|
Number
|
|
Description
|
|
Incorporated
by reference from
|
10.23
|
|
Agreement
and Plan of Merger dated March 16, 2006 by and among the Registrant,
Arques Technology, Inc., ARQ Acquisition Corporation and, for purposes of
Article 11 only, Gerome Tseng, as the Representative.
|
|
Exhibit
10.23 to our Current Report on Form 8-K dated March 16, 2006, filed on
March 22, 2006.
|
|
|
|
|
|
10.24*
|
|
Consulting
Agreement dated as of March 17, 2006, between Registrant and Kevin
Berry.
|
|
Exhibit
10.24 to our Current Report on Form 8-K dated March 17, 2006, filed on
March 23, 2006.
|
|
|
|
|
|
10.25*
|
|
Memo
to Employees and Consultants, including David Casey and David Sear,
Accelerating Their Underwater Unvested Options and Imposing Resale
Restrictions.
|
|
Exhibit
10.25 to our Current Report on Form 8-K dated March 28, 2006, filed on
April 3, 2006.
|
|
|
|
|
|
10.26*
|
|
Letter
Agreement dated as of July 7, 2006, between Registrant and Kevin
Berry.
|
|
Exhibit
10.26 to our Current Report on Form 8-K dated July 7, 2006, filed on July
10, 2006.
|
|
|
|
|
|
10.27*
|
|
Supplemental
Employment Terms Agreement during November 2006 between Registrant and an
employee of the registrant
|
|
Exhibit
10.27 to our Quarterly Report on Form 10-Q for the quarter ended December
31, 2006, filed on February 9, 2007
|
|
|
|
|
|
10.28*
|
|
Executive
Severance Plan dated November 9, 2006
|
|
Exhibit
10.28 to our Quarterly Report on Form 10-Q for the quarter ended December
31, 2006, filed on February 9, 2007
|
|
|
|
|
|
10.29**
|
|
Equipment
Acquisition Agreement, as amended, and Post-Consignment Services Pricing
Agreement, with SPEL
|
|
Exhibit
10.29 to our Quarterly Report on Form 10-Q for the quarter ended September
30, 2007 filed on November 9, 2007
|
|
|
|
|
|
10.30*
|
|
Amendment
to Supplemental Employment Terms Agreement dated February 6,
2008
|
|
Exhibit
10.30 to the Company’s Annual Report on Form 10-K for the year ended March
31, 2008 filed on June 11, 2008
|
|
|
|
|
|
10.31*
|
|
Amended
and Restated Executive Severance Plan dated February 6,
2008
|
|
Exhibit
10.31 to the Company’s Annual Report on Form 10-K for the year ended March
31, 2008 filed on June 11, 2008
|
|
|
|
|
|
10.33
|
|
Lease
with The Irvine Company dated May 13, 2005
|
|
Exhibit
10.33 to our Quarterly Report on Form 10-Q for the quarter ended December
31, 2008 filed on February 9, 2009
|
|
|
|
|
|
10.34*
|
|
Amended
and Restated Executive Severance Plan dated June 15, 2009
|
|
Exhibit
10.34 to our Current Report on Form 8-K dated June 15, 2009, filed on June
19, 2009.
|
_________
*
|
Denotes
a management contract or compensatory plan or
arrangement.
|
**
|
Portions
were omitted pursuant to a request for confidential
treatment.
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
|
|
|
|
|
CALIFORNIA
MICRO DEVICES CORPORATION
|
|
|
(Registrant)
|
|
|
|
Date:
November 9, 2009
|
|
By:
|
|
/S/
ROBERT V. DICKINSON
__________________________________________
|
|
|
|
|
Robert
V. Dickinson, President and Chief Executive Officer (Principal Executive
Officer)
|
|
|
|
|
|
|
|
/S/
KEVIN J. BERRY
__________________________________________
|
|
|
|
|
Kevin
J. Berry, Chief Financial Officer
|
|
|
|
|
(Principal
Financial and Accounting Officer)
|
Exhibit
Index
Exhibit
|
|
|
|
|
Number
|
|
Description
|
|
Incorporated
by reference from or Attached
|
3(i)
|
|
Amended
and Restated Certificate of Incorporation.
|
|
Exhibit
3.1 to our Current Report on Form 8-K dated September 15, 2006, filed on
September 21, 2006.
|
|
|
|
|
|
3(ii)
|
|
Amended
and Restated By-laws.
|
|
Exhibit
3.4 to our Current Report on Form 8-K dated September 17, 2009, filed on
September 23, 2009.
|
|
|
|
|
|
4.1*
|
|
1995
Employee Stock Option Plan and 1995 Non-Employee Directors’ Stock Option
Plan, both as most recently amended August 8, 2003 and August 7, 2002,
respectively.
|
|
Exhibit
4.1 to Registration Statement on Form S-8, filed on September 2,
2003.
|
|
|
|
|
|
4.2*
|
|
1995
Employee Stock Purchase Plan, as most recently amended August 8,
2003
|
|
Appendix
B to Definitive Proxy Statement filed on July 2, 2008.
|
|
|
|
|
|
4.3
|
|
Sample
Common Stock Certificate of Registrant
|
|
Exhibit
4.1 to our Current Report on Form 8-K dated April 27, 2004, filed on April
28, 2004.
|
|
|
|
|
|
4.4*
|
|
2004
Omnibus Incentive Compensation Plan, as most recently amended July 6,
2009
|
|
Exhibit
10.34 to our Current Report on Form 8-K dated July 6, 2009, filed on July
9, 2009.
|
|
|
|
|
|
10.12
|
|
Wafer
Manufacturing Agreement between the Company and Advanced Semiconductor
Manufacturing Corporation, dated February 20, 2002.**
|
|
Exhibit
10.12 to the Company’s Annual Report on Form 10-K for the year ended March
31, 2002 filed on June 25, 2002.
|
|
|
|
|
|
10.18
|
|
Wafer
Manufacturing Agreement with Sanyo Electric Co., Ltd. Semiconductor
Company**
|
|
Exhibit
10.18 to our Quarterly Report on Form 10-Q for the quarter ended June 30,
2004, filed on August 6, 2004.
|
|
|
|
|
|
10.2
|
|
Amended
and Restated Loan and Security Agreement with Silicon Valley Bank dated
September 30, 2004.**
|
|
Exhibit
10.20 to our Quarterly Report on Form 10-Q for the quarter ended September
30, 2004, filed on November 8, 2004.
|
|
|
|
|
|
10.21
|
|
Purchase
Agreement between Registrant and Microchip Technology Incorporated dated
May 20, 2005, as amended effective June 15, 2005
|
|
Exhibit
10.21 to our Quarterly Report on Form 10-Q for the quarter ended June 30,
2005, filed on November 9, 2005.
|
|
|
|
|
|
10.22
|
|
Exhibit
10.22, First Amendment to Loan and Security Agreement between Registrant
and Silicon Valley Bank entered into on October 24, 2005.
|
|
Exhibit
10.22 to our Current Report on Form 8-K dated October 24, 2005, filed on
October 27, 2005.
|
|
|
|
|
|
10.23
|
|
Agreement
and Plan of Merger dated March 16, 2006 by and among the Registrant,
Arques Technology, Inc., ARQ Acquisition Corporation and, for purposes of
Article 11 only, Gerome Tseng, as the Representative.
|
|
Exhibit
10.23 to our Current Report on Form 8-K dated March 16, 2006, filed on
March 22, 2006.
|
Exhibit
|
|
|
|
|
Number
|
|
Description
|
|
Incorporated
by reference from or Attached
|
10.24*
|
|
Consulting
Agreement dated as of March 17, 2006, between Registrant and Kevin
Berry.
|
|
Exhibit
10.24 to our Current Report on Form 8-K dated March 17, 2006, filed on
March 23, 2006.
|
|
|
|
|
|
10.25*
|
|
Memo
to Employees and Consultants, including David Casey and David Sear,
Accelerating Their Underwater Unvested Options and Imposing Resale
Restrictions.
|
|
Exhibit
10.25 to our Current Report on Form 8-K dated March 28, 2006, filed on
April 3, 2006.
|
|
|
|
|
|
10.26*
|
|
Letter
Agreement dated as of July 7, 2006, between Registrant and Kevin
Berry.
|
|
Exhibit
10.26 to our Current Report on Form 8-K dated July 7, 2006, filed on July
10, 2006.
|
|
|
|
|
|
10.27*
|
|
Supplemental
Employment Terms Agreement during November 2006 between Registrant and an
employee of the registrant
|
|
Exhibit
10.27 to our Quarterly Report on Form 10-Q for the quarter ended December
31, 2006, filed on February 9, 2007
|
|
|
|
|
|
10.28*
|
|
Executive
Severance Plan dated November 9, 2006
|
|
Exhibit
10.28 to our Quarterly Report on Form 10-Q for the quarter ended December
31, 2006, filed on February 9, 2007
|
|
|
|
|
|
10.29**
|
|
Equipment
Acquisition Agreement, as amended, and Post-Consignment Services Pricing
Agreement, with SPEL
|
|
Exhibit
10.29 to our Quarterly Report on Form 10-Q for the quarter ended September
30, 2007 filed on November 9, 2007
|
|
|
|
|
|
10.30*
|
|
Amendment
to Supplemental Employment Terms Agreement dated February 6,
2008
|
|
Exhibit
10.30 to the Company’s Annual Report on Form 10-K for the year ended March
31, 2008 filed on June 11, 2008
|
|
|
|
|
|
10.31*
|
|
Amended
and Restated Executive Severance Plan dated February 6,
2008
|
|
Exhibit
10.31 to the Company’s Annual Report on Form 10-K for the year ended March
31, 2008 filed on June 11, 2008
|
|
|
|
|
|
10.33
|
|
Lease
with The Irvine Company dated May 13, 2005
|
|
Exhibit
10.33 to our Quarterly Report on Form 10-Q for the quarter ended December
31, 2008 filed on February 9, 2009
|
|
|
|
|
|
10.34*
|
|
Amended
and Restated Executive Severance Plan dated June 15, 2009
|
|
Exhibit
10.34 to our Current Report on Form 8-K dated June 15, 2009, filed on June
19, 2009.
|
|
|
|
|
|
31.1
|
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Executive
Officer
|
|
Attached
|
|
|
|
|
|
31.2
|
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Financial
Officer
|
|
Attached
|
|
|
|
|
|
32.1
|
|
Section
1350 Certification of Chief Executive Officer
|
|
Attached
|
|
|
|
|
|
32.2
|
|
Section
1350 Certification of Chief Financial Officer
|
|
Attached
|
__________
*
|
Denotes
a management contract or compensatory plan or
arrangement.
|
**
|
Portions
were omitted pursuant to a request for confidential
treatment.
|
- 46 of 46 -
___________________________________________________________________________________________________
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