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CalAmp Reports Fiscal 2009 Third Quarter Results

01/13/09

OXNARD, Calif.--(BUSINESS WIRE)--Jan. 13, 2009--CalAmp Corp. (Nasdaq:CAMP), a leading provider of wireless products, services and solutions, today reported results for its fiscal 2009 third quarter ended November 30, 2008. Key elements include:

-- Consolidated third quarter revenues of $25.8 million up 11% on a sequential quarter basis driven by the shipment ramp of Direct Broadcast Satellite (DBS) products.
-- GAAP loss from continuing operations of $1.8 million, or $0.07 loss per basic and diluted share, within expectations; Adjusted Basis (non-GAAP) loss from continuing operations of $0.7 million or $0.03 loss per basic and diluted share, also within expectations.
-- Consolidated gross margin percentage of 29.6%; wireless datacom gross margin percentage of 40.0%.
-- Positive third quarter operating cash flow; positive cash flow from operations of $3.3 million for the first nine months of fiscal 2009.

Rick Gold, CalAmp's President and Chief Executive Officer, commented, "I'm encouraged to see sequential growth in revenue during this latest quarter despite the tough macroeconomic conditions. This growth was driven by the resumption of volume shipments of satellite products to what has historically been our largest DBS customer. We are currently rebuilding our competitive position in the DBS market with revenue of $7.4 million in the third quarter, more than two times higher than the previous quarter. However, similar to most of our peers and customers, the global economic downturn is impacting the top line results of our wireless datacom business. Midway through our fiscal third quarter, we started seeing sluggishness in short-term demand with some customers delaying contracts and postponing orders. That said, I continue to be encouraged with our operating execution and our ability to make steady progress within a challenging economic environment. Our recent product development activities have enabled us to extend our portfolio of wireless datacom products and improved our ability to serve existing customers and reach adjacent vertical markets. In addition, we continue to expand our market reach by developing partners and indirect channels. Finally, our intensified focus on inventory management has improved our liquidity position and helped generate $3.3 million in cash flow from operating activities through the first nine months of fiscal 2009."

Mr. Gold continued, "In response to current economic challenges, last week we took certain actions to realign the cost structure of our wireless datacom business. We have reorganized our Public Safety Mobile and Industrial Monitoring and Controls business units by combining the research and development groups, merging sales management and consolidating manufacturing operations. As part of this restructuring we have reduced our work force by 8%, which is expected to yield annualized savings of approximately $2.5 million. This will result in a charge of approximately $800,000 in the fourth quarter. We believe these changes will streamline operations and allow the Company to become more responsive to changing market dynamics and customer demand."

Mr. Gold concluded, "Subsequent to the end of the quarter, we announced the out-of-court settlement of litigation with Rogers Corporation, resulting in a $9 million cash payment to CalAmp. The dispute related to product performance issues involving laminate supplied by Rogers that was included in certain products manufactured by CalAmp and sold to a DBS customer. I am pleased that we have reached a satisfactory resolution of this matter. This settlement significantly improves CalAmp's financial strength and we believe is the best outcome for our shareholders."

Fiscal 2009 Third Quarter Results

Total revenue for the fiscal 2009 third quarter was $25.8 million compared to $32.1 million for the third quarter of fiscal 2008. The reduction in revenues was due primarily to lower sales of the Company's wireless datacom products.

Gross profit for the fiscal 2009 third quarter was $7.6 million, or 29.6% of revenues compared to gross profit of $10.0 million, or 31.3% of revenue for the same period last year. The reduction in gross profit and gross margin percentage in the latest quarter was due primarily to lower wireless datacom revenues. Wireless datacom gross margin percentage in the latest quarter was 40.0%.

Results of operations for the fiscal 2009 third quarter as determined in accordance with Generally Accepted Accounting Principles ("GAAP") was a loss from continuing operations of $1.8 million, or $0.07 loss per basic and diluted share. This compares to a loss from continuing operations of $58.9 million, or $2.49 loss per basic and diluted share, in the third quarter of last year. The lower loss in the current quarter was primarily attributable to a $65.7 million goodwill pretax impairment charge in the third quarter of last year.

The Adjusted Basis (non-GAAP) loss from continuing operations for the fiscal 2009 third quarter was $0.7 million, or $0.03 loss per basic and diluted share. This compares to Adjusted Basis (non-GAAP) income from continuing operations of $47,000, or zero cents per basic and diluted share, in the same period last year. Adjusted Basis income (loss) from continuing operations excludes the impact of amortization of intangible assets, stock-based compensation expense, in-process research and development and impairment charges, each net of tax to the extent applicable. A reconciliation of the GAAP basis 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, 2008, the Company had total cash of $5.7 million, with $25.2 million in total outstanding bank debt and a $4.5 million note payable to a key DBS customer. Net cash provided by operating activities was $2.5 million for the three months ended November 30, 2008. For the nine month period ended November 30, 2008, net cash generated by operating activities was approximately $3.3 million. During the latest quarter, the principal on the Company's bank term loan was paid down by $750,000 and the principal on the note payable to the DBS customer was paid down by $528,000.

The Company was not in compliance with one of its financial covenants at the end of December 2008 that requires a minimum level of wireless datacom revenues on a rolling three-month basis. The Company has requested a waiver of this covenant violation and is currently in discussions with the banks, but thus far the banks have not waived this noncompliance. Consequently, the Company has classified the entire term loan balance as a current liability in the consolidated balance sheet at November 30, 2008.

On January 12, 2009, the Company received a cash payment of $9 million from Rogers Corporation in an out-of-court litigation settlement. Under the terms of the Company's bank credit agreement as amended, the Company is obligated to pay 50% of the net cash proceeds of this legal settlement, or $4.1 million, to the banks as a reduction of the term loan balance. After giving effect to this principal payment, the balance of the term loan is approximately $20.3 million. The Company is continuing to seek a waiver of the covenant violation referred to above, and expects that it will ultimately refinance the bank debt from the proceeds of an asset-based loan at or before the December 31, 2009 maturity date.

Business Outlook

Commenting on the Company's business outlook for the fourth quarter of fiscal 2009, Mr. Gold said, "We expect to see sequential growth in our satellite business but expect our wireless datacom business to remain sluggish as a result of the difficult economic conditions. We continue to experience customer delays including a postponement of our recently announced driverless train project in Australia. Based on our current forecast, we believe fiscal 2009 fourth quarter consolidated revenues will be in the range of $22 to $26 million, with GAAP basis net income in the range of $0.06 to $0.10 per diluted share. The Adjusted Basis (non-GAAP) results of operations for the fourth quarter, which exclude amortization of intangible assets and stock-based compensation expense net of tax, are expected to be net income of $0.10 to $0.14 per diluted share. The GAAP and non-GAAP expected results for the fourth quarter include per share income net of tax of approximately $0.20 attributable to the $9 million legal settlement and the workforce reduction charge of $800,000. We expect to continue generating positive operating cash flow in the fourth quarter, even without the benefit of the Rogers legal settlement."

Conference Call and Webcast

A conference call and simultaneous webcast to discuss fiscal 2009 third quarter financial results and business outlook will be held today at 4:30 p.m. Eastern / 1:30 p.m. Pacific. CalAmp's President and CEO Rick Gold and CFO Rick Vitelle will host the conference call. Participants can dial into the live conference call by calling 800-219-6110 or 303-205-0033. An audio replay will be available through January 20, 2009, by calling 800-405-2236 or 303-590-3000, and entering pass code 11124755.

Additionally, a 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. 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.

About CalAmp Corp.

CalAmp provides wireless communications solutions that enable anytime/anywhere access to critical data and content. The Company serves customers in the public safety, industrial monitoring and controls, mobile resource management and direct broadcast satellite markets. The Company's products are marketed under the CalAmp, Dataradio, SmartLink, Aercept, LandCell and Omega trade names. For more information, please visit www.calamp.com.

Forward-Looking Statements

Statements in this press release that are not historical in nature are forward-looking statements that 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, the risk that the ultimate cost of resolving a product performance issue with one of the Company's key DBS customers may exceed the amount of reserves established for that purpose, the Company's ability to obtain a waiver from its banks under its Credit Agreement of an event of default arising from a financial covenant violation that arose at the end of December 2008, the length and extent of the U.S. market downturn stemming from the recent tightening of credit markets that may impact the Company's business and that of its customers and which may constrain the Company's ability to refinance its bank term loan, and other risks or uncertainties that are described in the Company's Annual Report on Form 10-K for fiscal 2008 and Form 10-Q for the fiscal 2009 third quarter as filed with the Securities and Exchange Commission on May 15, 2008 and January 13, 2009, respectively. 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,

                                 2008        2007         2008        2007

Revenues                       $ 25,834    $ 32,061     $ 77,043    $ 111,122

Cost of revenues                 18,193      22,033       52,505      100,165

Gross profit                     7,641       10,028       24,538      10,957

Operating expenses:

Research and development         3,199       3,868        9,530       11,982

Selling                          2,656       2,577        6,575       7,219

General and administrative       2,990       3,498        9,352       10,157

Intangible asset amortization    1,240       1,558        3,812       4,860

In-process research and          -           -            -           310
development

Impairment loss                  -           65,745       -           65,745

                                 10,085      77,246       29,269      100,273

Operating loss                   (2,444 )    (67,218 )    (4,731 )    (89,316 )

Non-operating expense, net       (522   )    (622    )    (1,272 )    (1,712  )

Loss from continuing
operations before

income taxes                     (2,966 )    (67,840 )    (6,003 )    (91,028 )

Income tax benefit               1,128       8,909        2,170       17,894

Loss from continuing             (1,838 )    (58,931 )    (3,833 )    (73,134 )
operations

Loss from discontinued           -           -            -           (1,532  )
operations, net of tax

Net loss                       $ (1,838 )  $ (58,931 )  $ (3,833 )  $ (74,666 )

Basic and diluted loss per
share:

Loss from continuing           $ (0.07  )  $ (2.49   )  $ (0.15  )  $ (3.10   )
operations

Loss from discontinued           -           -            -           (0.06   )
operations

Total basic and diluted loss   $ (0.07  )  $ (2.49   )  $ (0.15  )  $ (3.16   )
per share

Shares used in per share
calculations:

Basic                            24,809      23,640       24,750      23,621

Diluted                          24,809      23,640       24,750      23,621



CAL AMP CORP.

BUSINESS SEGMENT INFORMATION

(Unaudited, in thousands)

          Three Months Ended             Nine Months Ended

          November 30,                   November 30,

          2008           2007            2008               2007

Revenue

Satellite $ 7,384        $ 8,353         $     18,201       $ 41,235

Wireless    18,450         23,708              58,842         69,887
DataCom

Total     $ 25,834       $ 32,061        $     77,043       $ 111,122
revenue

Gross
profit
(loss)

Satellite $ 253          $ 221           $     905          $ (15,530 )

Wireless    7,388          9,807               23,633         26,487
DataCom

Total
gross     $ 7,641        $ 10,028        $     24,538       $ 10,957
profit

Operating
income
(loss)

Satellite $ (838   )     $ (44,061 ) (a) $     (2,494 )     $ (62,356 ) (a)(b)
                                     (b)

Wireless    (293   ) (d)   (21,842 ) (c)       1,680    (d)   (22,988 ) (c)(e)
DataCom                              (e)

Corporate   (1,313 )       (1,315  )           (3,917 )       (3,972  )
expenses

Total
operating $ (2,444 )     $ (67,218 )     $     (4,731 )     $ (89,316 )
loss

(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 segment goodwill
impairment charge of $43.2 million.

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

(d) Includes intangible asset amortization
expense in the three and nine-month periods
ended November 30, 2008 of $1.2 million and
$3.8 million, respectively.

(e) Includes intangible asset amortization
expense in the three and nine-month periods
ended November 30, 2007 of $1.6 million and
$4.9 million, respectively.



CAL AMP CORP.

CONSOLIDATED BALANCE SHEETS

(Unaudited - In thousands)

                                               November 30,      February 28,

                                               2008              2008

Assets

Current assets:

Cash and cash equivalents                    $ 5,703           $ 6,588

Accounts receivable, net                       15,337            20,043

Inventories                                    19,368            25,097

Deferred income tax assets                     3,574             5,306

Prepaid expenses and other current assets      8,122             9,733

Total current assets                           52,104            66,767

Equipment and improvements, net                3,897             5,070

Deferred income tax assets, less current       18,995            14,802
portion

Goodwill                                       28,224            28,520

Other intangible assets, net                   20,612            24,424

Other assets                                   3,375             3,458

                                             $ 127,207         $ 143,041

Liabilities and Stockholders' Equity

Current liabilities:

Current portion of long-term                 $ 29,752          $ 5,343
debt

Accounts payable                               7,560             10,875

Accrued payroll and employee benefits          3,336             4,218

Accrued warranty costs                         3,921             3,818

Other accrued liabilities                      9,858             11,800

Deferred revenue                               3,014             4,005

Total current liabilities                      57,441            40,059

Long-term debt, less current                   -                 27,187
portion

Other non-current liabilities                  1,023             2,375

Stockholders' equity:

Common stock                                   252               250

Additional paid-in capital                     144,527           144,318

Accumulated deficit                            (74,982      )    (71,149      )

Accumulated other comprehensive income         (1,054       )    1
(loss)

Total stockholders' equity                     68,743            73,420

                                             $ 127,207         $ 143,041



CAL AMP CORP.

CONSOLIDATED CASH FLOW STATEMENTS

(Unaudited - In thousands)

                                                         Nine Months Ended

                                                         November 30,

                                                           2008        2007

Cash flows from operating activities:

 Net loss                                                $ (3,833 )  $ (74,666 )

 Depreciation and amortization                             5,552       7,469

 Stock-based compensation expense                          838         1,605

 Write-off of in-process research and development          -           310
 costs

 Impairment loss                                           -           65,745

 Excess tax benefit from stock-based compensation          -           (64     )

 Deferred tax assets, net                                  (2,371 )    (23,296 )

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

 Gain on sale of investment                                -           (331    )

 Changes in operating working capital                      3,065       18,080

 Other                                                     -           25

 Net cash provided (used) by operating activities          3,251       (4,188  )

Cash flows from investing activities:

 Capital expenditures                                      (650   )    (1,106  )

 Earn-out payments on TechnoCom acquisition                (1,183 )    (703    )

 Proceeds from sale of discontinued operations             420         4,000

 Proceeds from sale of property and equipment              -           8

 Proceeds from sale of investment                          -           1,045

 Acquisition of Aercept                                    -           (19,315 )

 Acquisition of SmartLink, net of refunds from escrow      296         (7,944  )
 fund

 Cash restricted for repayment of debt                     -           (3,340  )

 Net cash used in investing activities                     (1,117 )    (27,355 )

Cash flows from financing activities:

 Debt repayments                                           (2,778 )    (2,210  )

 Proceeds from stock option exercises                      -           206

 Excess tax benefit from stock-based compensation          -           64

 Net cash used in financing activities                     (2,778 )    (1,940  )

Effect of exchange rate changes on cash                    (241   )    982

Net change in cash and cash equivalents                    (885   )    (32,501 )

Cash and cash equivalents at beginning of period           6,588       37,537

Cash and cash equivalents at end of period               $ 5,703     $ 5,036



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 Loss from Continuing Operations and Adjusted Basis Loss from
 Continuing Operations Per Diluted 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 (non-GAAP) Loss
 from Continuing Operations and Adjusted Basis Loss from Continuing Operations
 Per Diluted 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 Loss from Continuing Operations to
 Adjusted Basis (non-GAAP) Loss from Continuing Operations is as follows:

                                Three Months Ended         Nine Months Ended

                                November 30,             November 30,

                                  2008        2007         2008        2007

 GAAP Basis Loss from           $ (1,838 )  $ (58,931 )  $ (3,833 )  $ (73,134 )
 Continuing Operations

 Adjustments to reconcile to
 Adjusted Basis Loss

 from Continuing Operations:

 Amortization of intangible       792         952          2,434       2,968
 assets, net of tax

 Stock-based compensation         305         333          535         928
 expense, net of tax

 In-process R&D, net of tax       -           -            -           189

 Impairment charge                -           57,693       -           57,693

 Adjusted Basis Income (Loss)   $ (741   )  $ 47         $ (864   )  $ (11,356 )
 from Continuing Operations

 Adjusted Basis Loss from
 Continuing

 Operations per Diluted Share   $ (0.03  )  $ -          $ (0.03  )  $ (0.48   )

 Weighted average common shares
 outstanding

 on diluted basis                 24,809      23,640       24,750      23,621

 The reconciling items above are tax effected using the year-to-date effective
 tax rate. The computation of the year-to-date effective income tax rate is as
 follows:

                                                           Nine Months Ended

                                                           November 30,

                                                           2008        2007

 Pretax loss from continuing operations,                 $ (6,003 )  $ (91,028 )
 as reported

 Add back nondeductible portion of                         -           45,056
 impairment loss

 Pretax loss from continuing operations                    (6,003 )    (45,972 )
 before nondeductible item

 Income tax benefit, as                                    2,170       17,894
 reported

 Effective income tax rate                                 36.2   %    38.9    %



 

CONTACT: At the Company:
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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