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CalAmp Reports Fiscal 2008 Third Quarter Results

01/15/08

OXNARD, Calif.--(BUSINESS WIRE)--Jan. 15, 2008--CalAmp Corp. (Nasdaq:CAMP), a leading provider of wireless products, services, and solutions, today reported results for its fiscal 2008 third quarter ended November 30, 2007. Key elements include:

  • Consolidated third quarter revenues of $32.1 million within expectations; Wireless DataCom Division revenues of $23.7 million nearly 70% higher than prior year.
  • Third quarter GAAP loss from continuing operations of $58.9 million, or $2.49 per diluted share, includes non-cash pre-tax charge of $65.7 million for goodwill impairment; Adjusted basis (non-GAAP) income from continuing operations of $67,000 or $------ per share exceeded guidance.
  • Completed settlement agreement with key Direct Broadcast Satellite (DBS) customer.

     


Fred Sturm, CalAmp's President and Chief Executive Officer, commented, "Overall, operational performance in the third quarter was within expectations. I am pleased with our continued progress in executing our strategy to profitably grow our Wireless DataCom business, which has been our strategic growth initiative for the past two years. During the third quarter our Wireless DataCom Division generated record revenues of $23.7 million driven by sequential quarter growth in our public safety, industrial monitoring and controls and OEM businesses. Additionally, Wireless DataCom gross margins benefited from higher margin new products introduced in 2007."

Mr. Sturm added, "Reaching a settlement agreement last month with a key DBS customer was an important step in getting our Satellite Division back to profitability. The agreement is structured in a way that reduces CalAmp's future cash requirements, and more closely aligns the interests of our two companies. We are continuing to work closely with this valued customer to requalify our products, and we expect increasing revenues throughout fiscal year 2009."

Mr. Sturm concluded, "The settlement agreement with this key DBS customer has allowed CalAmp to start meaningful negotiations with our lenders to address the previously announced noncompliance related to financial covenants under our credit facility. We are working to resolve this matter expeditiously, but we do not believe that the current restriction on borrowing under the credit facility will adversely impact our near term operations."

Fiscal 2008 Third Quarter Results

Total revenue for the fiscal 2008 third quarter was $32.1 million compared to $59.1 million for the third quarter of fiscal 2007. Lower sales of Satellite Division products in the latest quarter were partially offset by higher Wireless DataCom Division revenues.

Gross profit for the fiscal 2008 third quarter was $10.0 million, or 31.3% of revenues compared to $12.0 million or 20.4% of revenues for the same period last year. The reduction in gross profit was primarily the result of lower sales of Satellite Division products. The improvement in gross margin percentage was due primarily to a change in product mix favoring increased sales of higher margin Wireless DataCom products.

Results of operations for the fiscal 2008 third quarter as determined in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") was a net loss from continuing operations of $58.9 million, or $2.49 per diluted share. As a result of a significant decrease in recent business with a key DBS customer due to a product performance issue, coupled with the substantial decline in the Company's market capitalization, the Company conducted an interim goodwill impairment analysis as of November 30, 2007. This analysis indicated that goodwill in the aggregate amount of $65.7 million was impaired, comprised of impairments in the Satellite and Wireless DataCom divisions of $43.2 million and $22.5 million, respectively. The Wireless DataCom Division's revenue and gross profit are higher in the current three and nine-month periods than the comparable periods of the prior year. Nonetheless, both reporting segments were determined to be impaired because of the decline in the Company's market capitalization.

The Adjusted Basis (non-GAAP) income from continuing operations for the fiscal 2008 third quarter was $67,000 or breakeven per diluted share compared to Adjusted Basis income from continuing operations of $2.3 million or $0.10 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 the impairment loss, each net of tax to the extent 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.

Liquidity

At November 30, 2007, the Company had total cash of $5.0 million, with $32.0 million in total outstanding debt. As previously disclosed, the net loss reported in the first quarter of fiscal 2008 caused the Company to become noncompliant with the financial covenants under its bank credit agreement, and as a result the Company cannot borrow under the working capital revolver of this credit agreement until it 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 $32.0 million outstanding balance of the bank loan is classified as a current liability in the November 30, 2007 balance sheet.

Net cash used in operating activities was $4.9 million for the nine months ended November 30, 2007. Inventory was $27.7 million at the end of the third quarter, representing annualized turns of approximately 3 times. Accounts receivable outstanding at the end of the third quarter represents a 60 day average collection period.

Business Outlook

Commenting on the Company's business outlook, Mr. Sturm said, "Based on our current projections, we believe fiscal 2008 fourth quarter consolidated revenues will be in the range of $29 to $33 million, with a GAAP basis loss from continuing operations in the range of ($0.06) to ($0.10) per diluted share. The Adjusted Basis (non-GAAP) loss from continuing operations for the fourth quarter, which excludes amortization of intangible assets and stock-based compensation expense net of tax, is expected to be ($0.01) to ($0.05) per diluted share. During the fourth quarter, we expect revenue contributions from our Wireless DataCom Division in the range of $20 million to $24 million."

Conference Call, Webcast and Form 10-Q Filing

A conference call and simultaneous webcast to discuss fiscal 2008 third 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 an amendment of its bank credit agreement to eliminate the event of default under the credit agreement, the Company's ability to successfully requalify certain newer generation products and resume selling these 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 filed on May 17, 2007 with the Securities and Exchange Commission (SEC) and in the Quarterly Report on Form 10-Q filed today with the SEC. 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        Nine Months Ended
                                November 30,        November 30,
                             ------------------ -------------------
                               2007      2006     2007      2006
                             --------- -------- --------- ---------

Revenues                     $ 32,061  $59,103  $111,122  $156,689

Cost of revenues               22,033   47,062   100,165   121,904
                             --------- -------- --------- ---------

Gross profit                   10,028   12,041    10,957    34,785
                             --------- -------- --------- ---------

Operating expenses:
  Research and
   development                  3,868    3,404    11,982     9,523
  Selling                       2,577    1,959     7,219     4,683
  General and
   administrative               3,498    2,762    10,157     7,417
  Intangible asset
   amortization                 1,558    1,077     4,860     2,386
  In-process research and
   development                      -        -       310     6,850
  Impairment loss              65,745        -    65,745         -
                             --------- -------- --------- ---------
                               77,246    9,202   100,273    30,859
                             --------- -------- --------- ---------

Operating income (loss)       (67,218)   2,839   (89,316)    3,926

Non-operating income
 (expense), net                  (622)    (136)   (1,712)      591
                             --------- -------- --------- ---------

  Income (loss) from
   continuing operations
   before income taxes        (67,840)   2,703   (91,028)    4,517

Income tax benefit
 (provision)                    8,909   (1,264)   17,894    (4,789)
                             --------- -------- --------- ---------

Income (loss) from
 continuing operations        (58,931)   1,439   (73,134)     (272)

Loss from discontinued
 operations, net of tax             -     (543)     (597)  (31,648)(a)

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

Net income (loss)            $(58,931) $   896  $(74,666) $(31,920)
                             ========= ======== ========= =========


Basic and diluted
 earnings (loss) per
 share:
  Income (loss) from
   continuing operations     $  (2.49) $  0.06  $  (3.10) $  (0.01)
  Loss from discontinued
   operations                       -    (0.02)    (0.06)    (1.36)
                             --------- -------- --------- ---------

        Total basic and
         diluted earnings
         (loss) per share    $  (2.49) $  0.04  $  (3.16) $  (1.37)
                             ========= ======== ========= =========


Shares used in per share
 calculations:
  Basic                        23,640   23,414    23,621    23,290
  Diluted                      23,640   23,679    23,621    23,290


(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        Nine Months Ended
                       November 30,              November 30,
                 ------------------------ -------------------------
                   2007            2006     2007            2006
                 ---------       -------- ---------       ---------
Revenue
  Satellite
   Division      $  8,353        $45,045  $ 41,235        $118,091
  Wireless
   DataCom
   Division        23,708         14,058    69,887          38,598
                 ---------       -------- ---------       ---------

    Total
     revenue     $ 32,061        $59,103  $111,122        $156,689
                 =========       ======== =========       =========

Gross profit
 (loss)
  Satellite
   Division      $    221        $ 6,514  $(15,530)(a)    $ 19,561
  Wireless
   DataCom
   Division         9,807          5,527    26,487          15,224
                 ---------       -------- ---------       ---------

    Total gross
     profit      $ 10,028        $12,041  $ 10,957        $ 34,785
                 =========       ======== =========       =========

Operating income
 (loss)
  Satellite
   Division      $(44,061)(a)(b) $ 5,154  $(62,356)(a)(b) $ 14,812
  Wireless
   DataCom
   Division       (21,842)(c)       (727)  (22,988)(c)      (6,487)(d)
  Corporate
   expenses        (1,315)        (1,588)   (3,972)         (4,399)
                 ---------       -------- ---------       ---------

    Total
     operating
     income
     (loss)      $(67,218)       $ 2,839  $(89,316)       $  3,926
                 =========       ======== =========       =========


(a) Includes charges for estimated product warranty and related costs
 in the three and nine-month periods ended November 30, 2007 of $0.1
 million and $17.9 million, respectively.

(b) Includes a Satellite Division goodwill impairment charge of $43.2
 million.

(c) Includes a Wireless DataCom Division goodwill impairment charge of
 $22.5 million.

(d) Includes a charge of $6.8 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)

                                            November 30,  February 28,
                                                2007          2007
                                           ------------- -------------
                    Assets
Current assets:
  Cash and cash equivalents                $     5,036   $     37,537
  Accounts receivable, net                      21,715         38,439
  Inventories                                   27,744         25,729
  Deferred income tax assets                     7,638          4,637
  Prepaid expenses and other current
   assets                                       13,166          7,182
                                           ------------  -------------

       Total current assets                     75,299        113,524

Equipment and improvements, net                  5,461          6,308

Deferred income tax assets, less current
 portion                                         9,949              -

Goodwill                                        35,039         90,001

Other intangible assets, net                    25,982         18,643

Other assets                                     4,288          1,227
                                           ------------  -------------

                                           $   156,018   $    229,703
                                           ============  =============
                    Liabilities and
                     Stockholders' Equity
Current liabilities:
  Current portion of long-term debt        $    32,048   $      2,944
  Accounts payable                              10,990         26,186
  Accrued payroll and employee benefits          3,207          3,478
  Accrued warranty costs                         9,551          1,295
  Other accrued liabilities                     10,601          2,799
  Deferred revenue                               4,626          1,935
                                           ------------  -------------

      Total current liabilities                 71,023         38,637
                                           ------------  -------------

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

Deferred income tax liabilities                      -          7,451

Other non-current liabilities                    5,469          1,050

Stockholders' equity:
  Common stock                                     236            236
  Additional paid-in capital                   141,058        139,175
  Retained earnings (accumulated deficit)      (61,666)        13,000
  Accumulated other comprehensive loss            (102)        (1,160)
                                           ------------  -------------

      Total stockholders' equity                79,526        151,251
                                           ------------  -------------

                                           $   156,018   $    229,703
                                           ============  =============
                            CAL AMP CORP.
                  CONSOLIDATED CASH FLOW STATEMENTS
                      (Unaudited - In thousands)

                                                    Nine Months Ended
                                                       November 30,
                                                   -------------------
                                                     2007      2006
                                                   --------- ---------
Cash flows from operating activities:
 Net loss                                          $(74,666) $(31,920)
 Depreciation and amortization                        7,469     5,027
 Stock-based compensation expense                     1,605     1,614
 Write-off of in-process research and development
  costs                                                 310     6,850
 Impairment loss                                     65,745    29,848
 Excess tax benefit from stock-based compensation       (64)     (392)
 Deferred tax assets, net                           (23,296)    3,555
 Loss on sale of discontinued operations, net of
  tax                                                   935         -
 Gain on sale of investment                            (331)        -
 Changes in operating working capital                18,080    (2,973)
 Other                                                   25        84
                                                   --------- ---------

    Net cash provided (used) by operating
     activities                                      (4,188)   11,693
                                                   --------- ---------

Cash flows from investing activities:
 Capital expenditures                                (1,106)   (2,112)
 Proceeds from sale of property and equipment             8        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               (3,340)        -
 Acquisition of Dataradio net of cash acquired            -   (48,047)
 Acquisition of TechnoCom product line                 (703)   (2,478)
 Proceeds from Vytek escrow distribution                  -       480
                                                   --------- ---------

    Net cash used in investing activities           (27,355)  (52,141)
                                                   --------- ---------

Cash flows from financing activities:
 Proceeds from long-term debt                             -    38,000
 Debt repayments                                     (2,210)  (11,416)
 Proceeds from stock option exercises                   206     1,130
 Excess tax benefit from stock-based compensation        64       392
                                                   --------- ---------

    Net cash provided (used) by financing
     activities                                      (1,940)   28,106
                                                   --------- ---------

Effect of exchange rate changes on cash                 982      (157)
                                                   --------- ---------

Net change in cash and cash equivalents             (32,501)  (12,499)

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

Cash and cash equivalents at end of period         $  5,036  $ 33,284
                                                   ========= =========
                            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
                                         Ended       Nine Months Ended
                                     November 30,      November 30,
                                  ----------------- ------------------
                                    2007      2006    2007      2006
                                  --------- ------- --------- --------

GAAP Basis Income (Loss) from
 Continuing Operations            $(58,931) $ 1,439 $(73,134) $  (272)

Adjustments to reconcile to
 Adjusted Basis
  Income (Loss) from Continuing
   Operations:
     Amortization of intangible
      assets, net of tax               952      623    2,968    1,381
     Stock-based compensation
      expense, net of tax              353      313      980      934
     In-process R&D, net of tax in
      fiscal 2008                        -        -      189    6,850
     Impairment loss, net of tax
      on deductible portion         57,693        -   57,693        -

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

Adjusted Basis Income (Loss) from
 Continuing Operations            $     67  $ 2,375 $(11,304) $ 8,893
                                  ========= ======= ========= ========

Adjusted Basis Income (Loss) from
 Continuing
  Operations per diluted share    $      -  $  0.10 $  (0.48) $  0.38

  Weighted average common shares
   outstanding on diluted basis     23,640   23,679   23,621   23,290

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 and the nondeductible portion of the
 impairment charge in fiscal 2008) 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:


                                                     Nine Months Ended
                                                       November 30,
                                                    ------------------
                                                        2007     2006
                                                    --------- --------
   Pretax income (loss) from
    continuing operations, as
    reported                                        $(91,028) $ 4,517
   Add back nondeductible items:
       In-process research and
        development in fiscal 2007                         -    6,850
       Nondeductible portion of
        impairment loss                               45,056        -
                                                     --------  -------

Pretax income (loss) from continuing
 operations before nondeductible items               (45,972)  11,367
   Income tax benefit (provision)
    as reported                                       17,894   (4,789)
                                                     --------  -------

  Year-to-date effective income
   tax rate as adjusted                                 38.9%    42.1%
                                                     ========  =======

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

SOURCE: CalAmp Corp.

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