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CalAmp Reports Fiscal 2008 Second Quarter Results

10/11/07

OXNARD, Calif.--(BUSINESS WIRE)--Oct. 11, 2007--CalAmp Corp. (Nasdaq:CAMP), a leading provider of wireless communications products, today reported results for its fiscal 2008 second quarter ended August 31, 2007. Key elements include:

  • Second quarter revenues of $32.7 million, GAAP loss from continuing operations of $0.14 per diluted share and Adjusted Basis (non-GAAP) loss from continuing operations of $0.08 per diluted share.
  • Wireless DataCom second quarter revenues of $22.8 million nearly 50% higher than prior year.
  • Completed the sale of the TelAlert software business in a transaction valued at approximately $9.4 million.

     

"Similar to last quarter, our operating results were driven by the continued strength of our Wireless DataCom Division, which generated revenues of $22.8 million--a 46% increase compared to the same period last year," commented Fred Sturm, CalAmp's President and Chief Executive Officer. "During the second quarter, the Wireless DataCom Division benefited from contributions by the recent acquisitions of SmartLink Radio Networks and AirIQ's Vehicle Tracking business. Furthermore, we are pleased that several new wireless communications products that the Company recently developed and launched earlier in calendar year 2007 for mobile resource management (MRM) applications are achieving increased market penetration and are producing solid revenue growth. We continue to believe that our wireless datacom business provides significant growth opportunities and enhances CalAmp's overall profitability and competitiveness."

Regarding the previously announced product performance issues with a key DBS customer that resulted in the customer suspending orders for new products, Mr. Sturm stated, "We are still in discussions with this customer working towards resolution of this matter, and although it is taking longer than previously anticipated, we expect that we will soon achieve that resolution and resume making volume shipments to this customer."

Fiscal 2008 Second Quarter Results

Total revenue for the fiscal 2008 second quarter was $32.7 million compared to $54.6 million for the second quarter of fiscal 2007. Lower revenue from the Satellite Division in the latest quarter was partially offset by growth in the Company's Wireless DataCom Division, which was driven by recent acquisitions and organic growth.

The net loss for the fiscal 2008 second quarter was $4.4 million or $0.19 per diluted share compared to net income of $1.2 million or $0.05 per diluted share for the second quarter of last year. As noted above, during the fiscal 2008 second quarter, the Company completed the sale of its TelAlert software business, the last remaining business within the Solutions Division, in a transaction valued at approximately $9.4 million. The operating results of the Solutions Division have been presented in the accompanying consolidated statement of operations as a discontinued operation for all periods presented. Excluding the effect of discontinued operations, the fiscal 2008 second quarter loss from continuing operations was $3.3 million or $0.14 per diluted share compared to income from continuing operations of $1.7 million, or $0.07 per diluted share, for the same period last year.

The Adjusted Basis (non-GAAP) loss from continuing operations for the fiscal 2008 second quarter was $2.0 million or $0.08 per diluted share compared to Adjusted Basis income from continuing operations of $2.8 million or $0.12 per diluted share for the same period last year. Adjusted Basis income (loss) from continuing operations excludes the impact of amortization of intangible assets, stock-based compensation expense and write-off of acquired in-process research and development costs, each net of tax where applicable. A reconciliation of the GAAP basis income (loss) from continuing operations to Adjusted Basis income (loss) from continuing operations is provided in the table at the end of this press release. Excluding the effect of discontinued operations, both GAAP-basis EPS and Adjusted Basis (non-GAAP) EPS for the fiscal 2008 second quarter would have been within previously announced guidance.

Gross profit for the fiscal 2008 second quarter was $6.3 million, or 19.3% of revenues compared to $12.7 million or 23.2% of revenues for the same period last year. The reduction in gross profit and gross margin were primarily the result of lower sales of Satellite Division products.

Liquidity

At August 31, 2007, the Company had total cash of $8.4 million, with $32.8 million in total outstanding debt. As previously disclosed, the loss recorded in the first quarter of fiscal 2008 has caused the Company to become noncompliant with the financial covenants under the Company's bank credit agreement that preclude additional borrowing under the revolving credit facility until the Company is able to obtain a waiver from its lenders and/or an amendment of the credit agreement. The Company is in discussions with its lenders to resolve the issue. In the near term the Company believes that it has sufficient liquidity such that the restriction on borrowing under the revolving credit facility will not materially affect its operations. However, if the lenders are unwilling to agree to a waiver or an amendment or exercise their rights to accelerate borrowings outstanding under the credit agreement, the inability to borrow under the revolving credit facility and/or the acceleration of such indebtedness could materially adversely affect the Company's financial position and operations, including its ability to fund its currently anticipated working capital and capital expenditure needs.

Because the lenders have the right to call the loan until such time as a waiver is obtained, the entire $32.8 million outstanding balance of the bank loan is classified as a current liability in the August 31, 2007 balance sheet.

Net cash used in operating activities was $2.1 million for the six months ended August 31, 2007. Inventory was $27.0 million at the end of the second quarter, representing annualized turns of approximately 4 times. Accounts receivable outstanding of $24.8 million at the end of the second quarter represents a 67 day average collection period.

Business Outlook

Commenting on the Company's business outlook, Mr. Sturm said, "Based on our current forecast, we believe fiscal 2008 third quarter consolidated revenues will be in the range of $32 to $35 million, with a loss from continuing operations in the range of $0.07 to $0.11 per diluted share. The Adjusted Basis (non-GAAP) loss from continuing operations for the second quarter, which excludes amortization of intangible assets, stock-based compensation expense and write-off of acquired research and development costs--each net of tax--is expected to be $0.01 to $0.05 per diluted share. During the third quarter, we expect revenue contributions from our Wireless DataCom Division in the range of $22 million to $25 million."

Conference Call, Webcast and Form 10-Q Filing

A conference call and simultaneous webcast to discuss fiscal 2008 second quarter financial results and business outlook will be held today at 4:30 p.m. Eastern / 1:30 p.m. Pacific. The live webcast of the call is available on CalAmp's web site at www.calamp.com. Participants are encouraged to visit the web site at least 15 minutes prior to the start of the call to register, download and install any necessary audio software.

CalAmp's President and CEO Fred Sturm and CFO Rick Vitelle will host the conference call. After the live webcast, a replay will remain available until the next quarterly conference call in the Investor Relations section of CalAmp's web site.

The reader is also referred to the Company's Quarterly Report on Form 10-Q, filed today with the Securities and Exchange Commission.

About CalAmp Corp.

CalAmp is a leading provider of wireless communications products that enable anytime/anywhere access to critical information, data and entertainment content. With comprehensive capabilities ranging from product design and development through volume production, CalAmp delivers cost-effective high quality solutions to a broad array of customers and end markets. CalAmp is a supplier of Direct Broadcast Satellite (DBS) outdoor customer premise equipment to the U.S. satellite television market. The Company also provides wireless data communication solutions for the telemetry and asset tracking markets, private wireless networks, public safety communications and critical infrastructure and process control applications. For additional information, please visit the Company's website at www.calamp.com.

Forward-Looking Statement

Statements in this press release that are not historical in nature are forward-looking statements, which involve known and unknown risks and uncertainties. Words such as "may", "will", "expect", "intend", "plan", "believe", "seek", "could", "estimate", "judgment", "targeting", "should", "anticipate", "goal" and variations of these words and similar expressions, are intended to identify forward-looking statements. Actual results could differ materially from those implied by such forward-looking statements due to a variety of factors, including general and industry economic conditions, product demand, increased competition, competitive pricing and continued pricing declines in the DBS market, the timing of customer approvals of new product designs, operating costs, the Company's ability to efficiently and cost-effectively integrate its acquired businesses, the Company's ability to obtain a waiver from the lenders under its bank credit agreement of the event of default under the credit agreement, the Company's ability to successfully requalify with respect to the sale of newer generation products to one of its key DBS customers, the risk that the ultimate cost of resolving a product performance issue with that DBS customer may exceed the amount of reserves established for that purpose, and other risks or uncertainties that are described in the Company's fiscal 2007 Annual Report on Form 10-K on May 17, 2007 today with the Securities and Exchange Commission. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be attained. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

                            CAL AMP CORP.
                CONSOLIDATED STATEMENTS OF OPERATIONS
          (Unaudited, in thousands except per share amounts)


                                Three Months
                                    Ended        Six Months Ended
                                 August 31 ,        August 31 ,
                              ----------------- -------------------
                                2007     2006     2007      2006
                              -------- -------- --------- ---------

Revenues                      $32,668  $54,629  $ 79,061  $ 97,586

Cost of revenues               26,353   41,973    78,132    74,842
                              -------- -------- --------- ---------

Gross profit                    6,315   12,656       929    22,744
                              -------- -------- --------- ---------

Operating expenses:
  Research and development      3,795    3,613     8,114     6,119
  Selling                       2,373    2,067     4,642     2,724
  General and administrative    3,457    2,600     6,659     4,655
  Intangible asset
   amortization                 1,558    1,150     3,302     1,309
  In-process research and
   development                      -        -       310     6,850
                              -------- -------- --------- ---------
                               11,183    9,430    23,027    21,657
                              -------- -------- --------- ---------

Operating income (loss)        (4,868)   3,226   (22,098)    1,087

Non-operating income
 (expense), net                  (507)    (237)   (1,090)      727
                              -------- -------- --------- ---------

Income (loss) from continuing
 operations
  before income taxes          (5,375)   2,989   (23,188)    1,814

Income tax benefit
 (provision)                    2,117   (1,291)    8,985    (3,525)
                              -------- -------- --------- ---------

Income (loss) from continuing
 operations                    (3,258)   1,698   (14,203)   (1,711)

Loss from discontinued
 operations, net of tax          (180)    (463)     (597)  (31,105)(a)

Loss on sale of discontinued
 operations,
  net of tax                     (935)       -      (935)        -
                              -------- -------- --------- ---------

Net income (loss)             $(4,373) $ 1,235  $(15,735) $(32,816)
                              ======== ======== ========= =========


Basic and diluted earnings
 (loss) per share:
  Income (loss) from
   continuing operations      $ (0.14) $  0.07  $  (0.60) $  (0.07)
  Loss from discontinued
   operations                   (0.01)   (0.02)    (0.03)    (1.34)
  Loss on sale of
   discontinued operations      (0.04)       -     (0.04)        -
                              -------- -------- --------- ---------
      Total basic and diluted
       earnings (loss)
        per share             $ (0.19) $  0.05  $  (0.67) $  (1.41)
                              ======== ======== ========= =========


Shares used in per share
 calculations:
  Basic                        23,623   23,337    23,612    23,230
  Diluted                      23,623   23,689    23,612    23,230




(a) Includes a goodwill and intangible asset impairment charge of
 $29.8 million on discontinued operations in the quarter ended May 31,
 2006.

                            CAL AMP CORP.
                     BUSINESS SEGMENT INFORMATION
          (Unaudited, in thousands except per share amounts)



                           Three Months Ended    Six Months Ended
                               August 31 ,         August 31 ,
                           ------------------- --------------------
                             2007       2006     2007        2006
                           --------   -------- ---------   --------
Revenue
  Satellite Division       $ 9,851    $38,955  $ 32,882    $73,046
  Wireless DataCom
   Division                 22,817     15,674    46,179     24,540
                           --------   -------- ---------   --------

    Total revenue          $32,668    $54,629  $ 79,061    $97,586
                           ========   ======== =========   ========

Gross profit (loss)
  Satellite Division       $(1,835)(a)$ 6,123  $(15,751)(a)$13,047
  Wireless DataCom
   Division                  8,150      6,533    16,680      9,697
                           --------   -------- ---------   --------

    Total gross profit     $ 6,315    $12,656  $    929    $22,744
                           ========   ======== =========   ========

Operating income (loss)
  Satellite Division       $(3,064)(a)$ 4,232  $(18,295)(a)$ 9,249
  Wireless DataCom
   Division                   (500)(b)    523    (1,146)(b) (5,351)(c)
  Corporate expenses        (1,304)    (1,529)   (2,657)    (2,811)
                           --------   -------- ---------   --------

    Total operating income
     (loss)                $(4,868)   $ 3,226  $(22,098)   $ 1,087
                           ========   ======== =========   ========


(a) Includes charges for estimated product warranty and related costs
 in the three and six-month periods ended August 31, 2007 of $1.5
 million and $17.8 million, respectively.

(b) Includes intangible asset amortization expense in the three and
 six-month periods ended August 31, 2007 of $1.6 million and $3.3
 million, respectively.

(c) Includes a charge of $6.85 million in the quarter ended May 31,
 2006 for the write-off of in-process research and development costs
 associated with the acquisition of Dataradio.

                     CONSOLIDATED BALANCE SHEETS
                      (Unaudited - In thousands)

                                                    August    February
                                                       31,       28,
                                                     2007      2007
                                                   --------- ---------
                    Assets
Current assets:
  Cash and cash equivalents                        $  8,370  $ 37,537
  Accounts receivable, net                           24,837    38,439
  Inventories                                        26,987    25,729
  Deferred income tax assets                          1,817     4,637
  Prepaid expenses and other current assets          13,124     7,182
                                                   --------- ---------

       Total current assets                          75,135   113,524

Equipment and improvements, net                       5,952     6,308

Deferred income tax assets, less current portion      6,828         -

Goodwill                                            100,602    90,001

Other intangible assets, net                         27,539    18,643

Other assets                                          4,550     1,227
                                                   --------- ---------

                                                   $220,606  $229,703
                                                   ========= =========
                    Liabilities and
                     Stockholders' Equity
Current liabilities:
  Current portion of long-term debt                $ 32,782  $  2,944
  Accounts payable                                   14,184    26,186
  Accrued payroll and employee benefits               3,194     3,478
  Accrued warranty costs                             11,449     1,295
  Other accrued liabilities                          11,193     2,799
  Deferred revenue                                    5,659     1,935
                                                   --------- ---------

      Total current liabilities                      78,461    38,637
                                                   --------- ---------

Long-term debt, less current portion                      -    31,314
                                                   --------- ---------

Deferred income tax liabilities                           -     7,451
                                                   --------- ---------

Other non-current liabilities                         4,701     1,050
                                                   --------- ---------

Stockholders' equity:
  Common stock                                          236       236
  Additional paid-in capital                        140,423   139,175
  Retained earnings (accumulated deficit)            (2,735)   13,000
  Accumulated other comprehensive loss                 (480)   (1,160)
                                                   --------- ---------

      Total stockholders' equity                    137,444   151,251
                                                   --------- ---------

                                                   $220,606  $229,703
                                                   ========= =========
                            CAL AMP CORP.
                  CONSOLIDATED CASH FLOW STATEMENTS
                      (Unaudited - In thousands)

                                                     Six Months Ended
                                                       August 31 ,
                                                   -------------------
                                                     2007      2006
                                                   --------- ---------
Cash flows from operating activities:
 Net loss                                          $(15,735) $(32,816)
 Depreciation and amortization                        5,201     3,111
 Stock-based compensation expense                     1,027     1,073
 Write-off of in-process research and development
  costs                                                 310     6,850
 Impairment loss                                          -    29,848
 Excess tax benefit from stock-based
  compensation                                          (55)     (258)
 Deferred tax assets, net                           (14,388)     (261)
 Loss on sale of discontinued operations, net of
  tax                                                   935         -
 Gain on sale of investment                            (331)        -
 Changes in operating working capital                20,934    (7,636)
 Other                                                   (2)       58
                                                   --------- ---------

    Net cash used in operating activities            (2,104)      (31)
                                                   --------- ---------

Cash flows from investing activities:
 Capital expenditures                                  (920)   (1,382)
 Proceeds from sale of property and equipment             4        16
 Proceeds from sale of investment                     1,045         -
 Proceeds from sale of discontinued operations        4,000         -
 Acquisition of Aircept                             (19,315)        -
 Acquisition of SmartLink                            (7,944)        -
 Cash restricted for repayment of debt               (3,309)        -
 Acquisition of Dataradio net of cash acquired            -   (48,038)
 Acquisition of TechnoCom product line                    -    (2,478)
 Proceeds from Vytek escrow distribution                  -       480
                                                   --------- ---------

    Net cash used in investing activities           (26,439)  (51,402)
                                                   --------- ---------

Cash flows from financing activities:
 Proceeds from long-term debt                             -    38,000
 Debt repayments                                     (1,476)   (7,658)
 Proceeds from stock option exercises                   157       533
 Excess tax benefit from stock-based
  compensation                                           55       258
                                                   --------- ---------

    Net cash provided (used) by financing
     activities                                      (1,264)   31,133
                                                   --------- ---------

Effect of exchange rate changes on cash                 640         2
                                                   --------- ---------

Net change in cash and cash equivalents             (29,167)  (20,298)

Cash and cash equivalents at beginning of period     37,537    45,783
                                                   --------- ---------

Cash and cash equivalents at end of period         $  8,370  $ 25,485
                                                   ========= =========
                            CAL AMP CORP.
                   NON-GAAP EARNINGS RECONCILIATION
          (Unaudited, in thousands except per share amounts)


 Non-GAAP Earnings Reconciliation
 ---------------------------------------------------------------------
 "GAAP" refers to financial information presented
  in accordance with Generally Accepted Accounting
  Principles in the United States. This press
  release includes historical non-GAAP financial
  measures, as defined in Regulation G promulgated
  by the Securities and Exchange Commission. CalAmp
  believes that its presentation of historical non-
  GAAP financial measures provides useful
  supplementary information to investors. The
  presentation of historical non-GAAP financial
  measures is not meant to be considered in
  isolation from or as a substitute for results
  prepared in accordance with accounting principles
  generally accepted in the United States.


 In this press release, CalAmp reports the non-GAAP
  financial measures of Adjusted Basis Income
  (Loss) from Continuing Operations and Diluted
  Income (Loss) from Continuing Operations Per
  Share. CalAmp uses these non-GAAP financial
  measures to enhance the investor's overall
  understanding of the financial performance and
  future prospects of CalAmp's core business
  activities. Specifically, CalAmp believes that a
  report of Adjusted Basis Income (Loss) from
  Continuing Operations and Diluted Income (Loss)
  from Continuing Operations Per Share provides
  consistency in its financial reporting and
  facilitates the comparison of results of core
  business operations between its current and past
  periods.


 The reconciliation of the GAAP Basis Income (Loss)
  from Continuing Operations to Adjusted Basis
  Income (Loss) from Continuing Operations is as
  follows:

                                     Three Months    Six Months Ended
                                         Ended
                                      August 31,        August 31,
                                   ---------------- ------------------
                                     2007     2006    2007      2006
                                   -------- ------- --------- --------

 GAAP Basis Income (Loss) from
  Continuing Operations            $(3,258) $ 1,698 $(14,203) $(1,711)

 Adjustments to reconcile to
  Adjusted Basis
   Income (Loss) from Continuing
    Operations:
      Amortization of intangible
       assets, net of tax              954      682    2,022      776
      Stock-based compensation
       expense, net of tax             331      387      629      636
      In-process R&D, net of tax in
       fiscal 2008                       -        -      190    6,850

                                   -------- ------- --------- --------

 Adjusted Basis Income (Loss) from
  Continuing Operations            $(1,973) $ 2,767 $(11,362) $ 6,551
                                   ======== ======= ========= ========

 Adjusted Basis Income (Loss) from
  Continuing Operations per diluted
  share                            $ (0.08) $  0.12 $  (0.48) $  0.28

 Weighted average common shares
  outstanding on diluted basis      23,623   23,689   23,612   23,230

 Reconciling items that are not treated as tax deductible in computing
  the GAAP basis income tax provision (in-process research and
  development in fiscal 2007) are not tax-effected in the Non-GAAP
  Earnings Reconciliation. The remaining reconciling items are tax-
  effected using an adjusted year-to-date effective income tax rate
  that is computed by excluding from pretax income (loss) those
  reconciling items that are not treated as tax deductible in
  computing the GAAP basis income tax provision. The computation of
  the adjusted year-to-date effective income tax rate is as follows:



                                                     Six Months Ended
                                                        August 31,
                                                    ------------------
                                                      2007      2006
                                                    --------- --------
    Income (Loss) from Continuing
     Operations Before Income
     Taxes, as reported                             $(23,188) $ 1,814
    Add back nondeductible items:
        In-process research and
         development in fiscal 2007                        -    6,850
                                                     --------  -------
    Pretax income before
     nondeductible items                             (23,188)   8,664
    Income tax benefit (provision)
     as reported                                       8,985   (3,525)
                                                     --------  -------

   Year-to-date effective income
    tax rate as adjusted                                38.8%    40.7%
                                                     ========  =======

CONTACT: CalAmp Corp.
Rick Vitelle, Chief Financial Officer
805-987-9000 or
FINANCIAL RELATIONS BOARD
General Information
Lasse Glassen,
213-486-6546 lglassen@frbir.com

SOURCE: CalAmp Corp.

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