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Dear Fellow Stockholders:
Fiscal 2011 was a year of significant achievement for CalAmp. During the year we generated
steadily improving financial performance, built leading positions in key wireless datacom markets,
enhanced our satellite business with important structural changes, and continued to invest in product
development initiatives to bring differentiated and innovative technology offerings to the
marketplace. Now more than ever, I believe CalAmp is well positioned to serve the needs of
customers and deliver profitable growth.
Although total revenue in fiscal 2011 of $114 million was up only 2% compared to fiscal
2010, our wireless datacom segment generated significant momentum over the course of the year.
Full year wireless datacom revenues of $78 million increased an impressive 37% year-over-year and
more than offset softer demand for our satellite products. Consolidated gross profit as a percentage of
revenues increased to 26% in fiscal 2011 from 20% in fiscal 2010, reflecting a favorable product mix
and our ongoing focus on operational efficiencies and cost reduction initiatives. At the bottom line,
after three years of losses our performance improved steadily in each quarter of fiscal 2011,
culminating in a profitable second half of the year.
Growth in the wireless datacom business is being fueled by our ability to effectively and
economically market a wide range of products that enable end users to both lower their operating
expenses and enhance the efficiency of their operations by deploying our solutions. Within this
segment, we are focusing our activities in two growing market areas: Mobile Resource Management
(MRM) and Wireless Networks. Our MRM unit has established leading positions in applications such
as local fleet management, school bus/pupil tracking, collateralized asset recovery, trailer and
container tracking, and remote car start. We are also pursuing several promising emerging
applications including stolen vehicle recovery and pay-as-you-drive automobile insurance, among
others. In our Wireless Networks unit, demand increased sharply during the second half of fiscal
2011 with significant contributions from several large projects in the public safety and rail transport
sectors. Additionally, our growing pipeline of opportunities in the energy sector offers an exciting
growth opportunity for CalAmp. During fiscal 2011 we initiated over 30 pilot projects for U.S. utility
companies where we are demonstrating the performance of our technology in providing data
connectivity for Smart Grid infrastructure solutions.
Demand for our satellite products moderated in fiscal 2011 due to the evolving requirements
of a key Direct Broadcast Satellite (DBS) customer. In response, we took actions during the year that
we believe will enhance operational flexibility and improve profitability of our satellite business. We
have transitioned the satellite business to a more variable cost model with more functions performed
by our manufacturing partners. This should allow us to better respond to rapid shifts in demand,
while also reducing our fixed overhead costs and lowering our breakeven point. We expect these
changes will have a positive impact on our satellite business profitability in fiscal 2012 and beyond.
We continue to make significant investments in research and development and new product
introductions that differentiate our offerings and bring to market best-of-breed products. During the
last 3 years we invested a total of $35 million in research and development, and in the last 2 years we
introduced 30 new products. CalAmp will continue to make investments in products and solutions
for the most attractive applications in order to expand our served markets and maximize return on
investment.
Subsequent to the end of the fiscal year, in June 2011 the Company announced changes to its
executive management team. I was appointed President and Chief Executive Officer succeeding Rick
Gold, who will continue to serve CalAmp in a new role as Vice Chairman of the Board of Directors
and will focus on supporting the Company’s strategic initiatives. Having worked closely with Rick
for more than three years during his tenure as CEO, we have a shared vision for CalAmp and a strong
belief in the Company’s excellent long term growth prospects.
I would like to thank Rick for his steadfast leadership of the last few years, as well as our
employees for their determined efforts to restore CalAmp to financial health and profitability. I look
forward to serving CalAmp in my new role as CEO during this very exciting time in the Company’s
history. CalAmp is a fabulous enterprise, with talented employees and great technology serving
attractive markets. As our growth strategy plays out in fiscal 2012 and beyond, I firmly believe that
our efforts will further enhance shareholder value. Quite simply, our future has never been brighter.
Sincerely,
Michael Burdiek
President & Chief Executive Officer
June 16, 2011
2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 28, 2011
COMMISSION FILE NUMBER: 0-12182
________________
CALAMP CORP.
(Exact name of Registrant as specified in its Charter)
Delaware 95-3647070
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1401 N. Rice Avenue
Oxnard, California 93030
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (805) 987-9000
________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
$.01 par value Common Stock
(Title of Class) (Name of each exchange on which registered)
Nasdaq Global Select Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X].
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X].
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. (Check one):
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller Reporting Company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
The aggregate market value of voting and non-voting common stock held by non-affiliates of the registrant as of August 28, 2010 was
approximately $67,120,000. As of March 31, 2011, there were 28,128,304 shares of the Company's common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive Proxy Statement for the Annual Meeting of Stockholders to be held on July 28, 2011 are incorporated by
reference into Part III, Items 10, 11, 12, 13 and 14 of this Form 10-K. This Proxy Statement will be filed within 120 days after the end of the fiscal
year covered by this report.
ITEM 1. BUSINESS
THE COMPANY
PART I
CalAmp Corp. ("CalAmp" or the "Company") develops and markets wireless communications solutions that
deliver data, voice and video for critical networked communications and other applications. The Company's two
business segments are Wireless DataCom, which serves utility, governmental and enterprise customers, and Satellite,
which focuses on the North American Direct Broadcast Satellite ("DBS") market.
WIRELESS DATACOM
The Wireless DataCom segment provides wireless communications technologies, products and services to the
wireless networks and mobile resource management markets for a wide range of applications including:
• Optimizing and automating electricity distribution and ancillary utility functions;
• Facilitating communication and coordination among emergency first-responders;
•
•
• Enabling novel applications in a wirelessly connected world.
Increasing productivity and optimizing activities of mobile workforces;
Improving management control over valuable remote and mobile assets; and
CalAmp has expertise in designing and providing solutions involving various combinations of private and public
(cellular infrastructure) networks, narrow-band and broad-band frequencies, licensed and unlicensed radio spectrum, and
mobile and fixed-remote communications. The Company's Wireless DataCom segment is comprised of a Wireless
Networks business and a Mobile Resource Management ("MRM") business, as described further below.
Wireless Networks
CalAmp's Wireless Networks business provides products and systems to state and local governmental entities and
industrial/utility/transportation enterprises for deployment where the ability to communicate with mobile personnel or to
command and control remote assets is crucial. The Company's wireless technology solutions play a strategic role in
support of North American Homeland Security initiatives and electrical grid modernization.
Municipal, county and state governments, public safety agencies and emergency first-responders rely on CalAmp
solutions for public safety mobile communications. CalAmp designs and builds multi-network wireless systems that
permit first-responder fire, police and Emergency Medical Services personnel to access data and communicate remotely
with colleagues, dispatchers and back-office databases.
Utilities, oil and gas, mining, railroad and security companies rely on CalAmp products for wireless data
communications to and from outlying locations, permitting real-time monitoring, activation and control of remote
equipment. Applications include remotely measuring freshwater and wastewater flows, pipeline flow monitoring for oil
and gas transport, automated utility meter reading, remote internet access and perimeter monitoring. CalAmp is among
the leaders in the application of wireless communications technology to Smart Grid power distribution automation for
electric utilities.
Mobile Resource Management (MRM)
CalAmp's MRM business addresses the need for location awareness and control of assets on the move. MRM
wireless solutions typically include Global Positioning System ("GPS") location, cellular data modems and
programmable events-based notification firmware as key components, allowing customers to know where and how their
assets are performing, no matter where those mobile assets are located. Commercial organizations, vehicle finance
companies, city and county governments, and a wide range of other enterprises rely on CalAmp products and systems to
optimize delivery of services and protect valuable assets. Applications include fleet management, asset tracking, student
and school bus tracking and route optimization, stolen vehicle recovery, remote asset security, remote start, and machine-
to-machine communications. In addition to functioning as an OEM supplier of location and communications hardware
for MRM applications, CalAmp is a total solutions provider of turn-key systems incorporating location and
communications hardware, cellular airtime and Web-based remote asset management tools and interfaces.
2
SATELLITE
The Satellite segment develops, manufactures and sells DBS outdoor customer premise equipment for digital and
high definition satellite TV reception. CalAmp's DBS products have been sold primarily to the two U.S. DBS system
operators, EchoStar and DirecTV, for incorporation into complete subscription satellite television systems.
The Company's DBS reception products are installed at subscriber premises to receive television programming
signals transmitted from orbiting satellites. These DBS reception products consist principally of outdoor electronics that
receive, process, amplify and switch satellite television signals for distribution over coaxial cable to multiple set-top
boxes inside the home that can acquire, recognize and process the signal to create a picture.
MANUFACTURING
Electronic devices, components and made-to-order assemblies used in the Company's products are generally
obtained from a number of suppliers, although certain components are obtained from sole source suppliers. Some
devices or components are standard items while others are manufactured to the Company's specifications by its suppliers.
The Company believes that most raw materials are available from alternative suppliers. However, any significant
interruption in the delivery of such items, particularly those that are sole source materials or components, could have an
adverse effect on the Company's operations.
For the past several years, the Company has outsourced printed circuit board assembly to contract manufacturers
in the Pacific Rim. Historically, the Company has performed final assembly and final test of its satellite products and
some Wireless DataCom products at its principal facility in Oxnard, California. However, the Company is currently
transitioning its principal satellite products to full turn-key production by off-shore contractors. The Company performs
additional final assembly and tests on other Wireless DataCom products at its facility in Waseca, Minnesota. Printed
circuit assemblies are mounted in various metal and plastic housings, electronically tested, and subjected to additional
environmental tests prior to packaging and shipping.
A substantial portion of the Company's components, and substantially all printed circuit board assemblies and
housings, are procured from foreign suppliers and contract manufacturers located primarily in mainland China, Taiwan,
and other Pacific Rim countries. Any significant shift in U.S. trade policy toward these countries, or a significant
downturn in the economic or financial condition of, or any political instability in, these countries, could cause disruption
of the Company's supply chain or otherwise disrupt the Company's operations, which could adversely impact the
Company's business.
ISO 9001 INTERNATIONAL CERTIFICATION
The Company became registered to ISO 9001:1994 in 1995. The Company upgraded its registration to ISO
9001:2000 in 2003 and upgraded once again to ISO 9001:2008, in 2010. ISO 9001:2008 is the widely recognized
international standard for quality management in product design, manufacturing, quality assurance and marketing. The
Company believes that ISO certification is important to its business because most of the Company's key customers
expect their suppliers to have and maintain ISO certification. Registration assessments are performed by Underwriters
Laboratories Inc. ("UL") according to the ISO 9001:2008 International Standard. The Company continually performs
internal audits to ensure compliance with this quality standard. In addition, UL performs an annual external Compliance
Assessment, with the next assessment scheduled for July 2011. The Company has maintained its ISO certification
through each Compliance Assessment. Every three years, UL performs a full system Recertification Assessment. The
next Recertification Assessment is scheduled for July 2013.
RESEARCH AND DEVELOPMENT
Each of the markets in which the Company competes is characterized by rapid technological change, evolving
industry standards, and new product features to meet market requirements. During the last three years, the Company has
focused its research and development resources primarily on satellite DBS products, wireless communication systems for
utilities, public safety and industrial monitoring and controls for mobile and fixed location IP data communication
applications, and cellular tracking products and services for mobile resource management applications. The Company
has developed key technology platforms that can be leveraged across many of its businesses and applications. These
include communications technology platforms based on proprietary licensed narrowband UHF and VHF frequency
radios and modems, standards-based unlicensed broadband wireless IP router/radio modems, and cellular network based
tracking units. In addition, development resources have been allocated to broadening existing product lines, reducing
product costs and improving performance through product redesign efforts.
3
Research and development expenses in fiscal years 2011, 2010 and 2009 were $11,125,000, $10,943,000 and
$12,899,000, respectively. During this three year period, the Company's research and development expenses have
ranged between 10% and 13% of annual consolidated revenues.
SALES AND MARKETING
The Company's revenues are derived mainly from customers in the United States, which represented 91%, 93%
and 89% of consolidated revenues in fiscal 2011, 2010 and 2009, respectively.
The Wireless DataCom segment sells its products and services through dedicated direct and indirect sales
channels with employees distributed across the U.S. The sales and marketing functions for the MRM business are
managed out of our Carlsbad and Irvine, California offices. The sales and marketing functions for the Wireless
Networks business are managed out of our Waseca, Minnesota and Atlanta, Georgia offices. In addition, the Wireless
DataCom segment’s sales and marketing activities are supported internationally with presence in Canada, France, Israel
and the United Kingdom.
The Satellite segment has historically sold its products primarily to the two DBS system operators in the U.S. for
incorporation into complete subscription satellite television systems. The sales and marketing functions for the Satellite
segment are located at the Company's corporate headquarters in Oxnard, California.
Customers that accounted for 10% or more of consolidated annual sales in any one of the last three years are as
follows:
Customer Segment
Satellite
EchoStar
Satellite
DirecTV
Year Ended February 28,
2010
48.6%
-
2009
15.7%
10.3%
2011
31.0%
-
EchoStar and DirecTV serve the North American DBS market. The Company believes that the loss of Echostar
as a customer could have a material adverse effect on the Company’s financial position and results of operations. During
fiscal years 2010 and 2011 the Company did not make any sales to DirecTV because of pricing and competitive
pressures. In light of these factors, at the present time it is uncertain when, or if, the Company will resume product
shipments to DirecTV.
COMPETITION
The Company's markets are highly competitive. In addition, if the markets for the Company's products grow, the
Company anticipates increased competition from new companies entering such markets, some of whom may have
financial and technical resources substantially greater than those of the Company. The Company believes that
competition in its markets is based primarily on performance, reputation, product reliability, technical support and price.
The Company's continued success in these markets will depend in part upon its ability to continue to design and
manufacture quality products at competitive prices.
Wireless DataCom
The Company believes that the principal competitors for its wireless products include Motorola, GE-MDS,
Freewave, Sierra Wireless, GenX, Procon GPS, Novatel Wireless-Enfora and Xirgo.
Satellite
The Company believes that the principal competitors for its DBS products include Sharp, Wistron NeWeb
Corporation, Microelectronics Technology and Pro Brand. Because the Company is typically not the sole source
supplier of its satellite products, it is exposed to increased price and margin pressures in this business.
BACKLOG
The Company's products are sold to customers that do not usually enter into long-term purchase agreements, and
as a result, the Company's backlog at any given date is not generally significant in relation to its annual sales. In
addition, because of customer order modifications, cancellations, or orders requiring wire transfers or letters of credit
from international customers, the Company's backlog at any point in time may not be indicative of sales for any future
period.
4
INTELLECTUAL PROPERTY
At February 28, 2011, the Company had 19 U.S. patents and 11 foreign patents in its Wireless DataCom business.
In addition to its awarded patents, the Company has 5 patent applications in process.
Trademarks
CalAmp and Dataradio are federally registered trademarks of the Company.
EMPLOYEES
At February 28, 2011, the Company had approximately 380 employees and approximately 60 contracted
production workers. None of the Company's employees are represented by a labor union. The contracted production
workers are engaged through independent temporary labor agencies.
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
NAME
Richard Gold
Michael Burdiek
Garo Sarkissian
Richard Vitelle
AGE
56
51
44
57
POSITION
Director and Chief Executive Officer
President and Chief Operating Officer
Vice President, Corporate Development
Vice President, Finance, Chief Financial Officer and Corporate Secretary
RICHARD GOLD joined the Company in February 2008 and was appointed President and Chief Executive
Officer in March 2008. In April 2010, Mr. Gold relinquished the title of President but retained the title of CEO in
conjunction with the promotion of Mr. Burdiek to President and COO. Mr. Gold has been a director of the Company
since December 2000 and served as Chairman of the Board from July 2004 to February 2008. Prior to joining the
Company, Mr. Gold was a Managing Director of InnoCal Venture Capital, a position he held since May 2004. From
December 2002 until May 2004, he served as President and Chief Executive Officer of Nova Crystals, Inc., a supplier of
optical sensing equipment. He was Chairman of Radia Communications, Inc., a supplier of wireless communications
semiconductors, from June 2002 to July 2003. Prior to this, he was the President and Chief Executive Officer of Genoa
Corp. and Pacific Monolithics, Inc., and Vice President and General Manager of Adams Russell Semiconductor. He
began his career as an engineer with Hewlett-Packard Co.
MICHAEL BURDIEK joined the Company as Executive Vice President in June 2006 and was appointed
President of the Company's Wireless DataCom segment in March 2007. Mr. Burdiek was appointed Chief Operating
Officer in June 2008 and was promoted to President and COO in April 2010. Prior to joining the Company, Mr. Burdiek
was the President and CEO of Telenetics Corporation, a publicly held manufacturer of data communications products.
From 2004 to 2005, he worked as an investment partner and advisor to the Kasten Group in the private equity sector.
From 1987 to 2003, Mr. Burdiek held a variety of technical and general management positions with Comarco, Inc., a
publicly held company, most recently as Senior Vice President and General Manager of Comarco's Wireless Test
Systems unit. Mr. Burdiek began his career as a design engineer with Hughes Aircraft Company.
GARO SARKISSIAN joined the Company as Vice President, Corporate Development in October 2005 and was
appointed an executive officer in July 2006. Prior to joining the Company, from 2003 to 2005 he served as Principal and
Vice President of Business Development for Global Technology Investments (GTI), a private equity firm. Prior to GTI,
from 1999 to 2003, Mr. Sarkissian held senior management and business development roles at California Eastern
Laboratories, a private company developing and marketing radio frequency (RF), microwave and optical components.
Mr. Sarkissian began his career as an RF engineer in 1988 and developed state-of-the-art RF power products over a span
of 10 years for M/A Com (Tyco) and NEC.
RICHARD VITELLE joined the Company as Vice President, Finance, Chief Financial Officer and Corporate
Secretary in July 2001. Prior to joining the Company, he served as Vice President of Finance and CFO of SMTEK
International, Inc., a publicly held electronics manufacturing services provider, where he was employed for a total of 11
years. Earlier in his career Mr. Vitelle served as a senior manager with Price Waterhouse.
The Company's executive officers are appointed by and serve at the discretion of the Board of Directors.
5
AVAILABLE INFORMATION
The Company's primary Internet address is www.calamp.com. The Company makes its Securities and Exchange
Commission ("SEC") periodic reports (Forms 10-Q and Forms 10-K) and current reports (Forms 8-K) available free of
charge through its website as soon as reasonably practicable after they are filed electronically with the SEC.
Materials that the Company files with the SEC may be read and copied at the SEC's Public Reference Room at
100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be
obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website at www.sec.gov that
contains reports, proxy and information statements, and other information regarding the Company that the Company files
electronically with the SEC.
ITEM 1A. RISK FACTORS
The following list describes several risk factors which are unique to our Company:
The Company is dependent on a significant customer, the loss of which could have a material adverse effect on the
Company’s future sales and its ability to grow.
EchoStar accounted for about one-third of the Company’s consolidated revenues for fiscal 2011. The loss of
EchoStar as a customer, deterioration in its overall business, or a decrease in its volume of sales, could result in
decreased sales for us and could have a material adverse impact on our ability to grow our business. A substantial
decrease or interruption in business from this key customer could result in write-offs or in the loss of future business and
could have a material adverse effect on the Company’s business, financial condition or results of operations.
We do not currently have long-term contracts with customers and our customers may cease purchasing products at
any time, which could significantly harm our revenues.
We generally do not have long-term contracts with our customers. As a result, our agreements with our customers
do not currently provide us with any assurance of future sales. These customers can cease purchasing products from us at
any time without penalty, they are free to purchase products from our competitors, they may expose us to competitive
price pressure on each order and they are not required to make minimum purchases. Any of these actions taken by our
customers could have a material adverse effect on the Company’s business, financial condition or results of operations.
Because the markets in which we compete are highly competitive and many of our competitors have greater resources
than us, we cannot be certain that our products will continue to be accepted in the marketplace or capture increased
market share.
The market for our products is intensely competitive and characterized by rapid technological change, evolving
standards, short product life cycles, and price erosion. We expect competition to intensify as our competitors expand
their product offerings and new competitors enter the market. Given the highly competitive environment in which we
operate, we cannot be sure that any competitive advantages currently enjoyed by our products will be sufficient to
establish and sustain our products in the market. Any increase in price or other competition could result in erosion of our
market share, to the extent we have obtained market share, and could have a negative impact on our financial condition
and results of operations. We cannot provide assurance that we will have the financial resources, technical expertise or
marketing and support capabilities to compete successfully.
Information about the Company’s competitors is included Part I, Item 1 of this Annual Report on Form 10-K
under the heading "COMPETITION".
Our business is subject to many factors that could cause our quarterly or annual operating results to fluctuate and
our stock price to be volatile.
Our quarterly and annual operating results have fluctuated in the past and may fluctuate significantly in the future
due to a variety of factors, many of which are outside of our control. Some of the factors that could affect our quarterly
or annual operating results include:
6
•
•
•
•
•
•
•
•
•
•
•
the timing and amount of, or cancellation or rescheduling of, orders for our products;
our ability to develop, introduce, ship and support new products and product enhancements and manage product
transitions;
announcements, new product introductions and reductions in the price of products offered by our competitors;
our ability to achieve cost reductions;
our ability to obtain sufficient supplies of sole or limited source components for our products;
our ability to achieve and maintain production volumes and quality levels for our products;
our ability to maintain the volume of products sold and the mix of distribution channels through which they are
sold;
the loss of any one of our major customers or a significant reduction in orders from those customers;
increased competition, particularly from larger, better capitalized competitors;
fluctuations in demand for our products and services; and
telecommunications and wireless market conditions specifically and economic conditions generally.
Due in part to factors such as the timing of product release dates, purchase orders and product availability,
significant volume shipments of products could occur close to the end of a fiscal quarter. Failure to ship products by the
end of a quarter may adversely affect operating results. In the future, our customers may delay delivery schedules or
cancel their orders without notice. Due to these and other factors, our quarterly revenue, expenses and results of
operations could vary significantly in the future, and period-to-period comparisons should not be relied upon as
indications of future performance.
Because some of our components, assemblies and electronics manufacturing services are purchased from sole source
suppliers or require long lead times, our business is subject to unexpected interruptions, which could cause our
operating results to suffer.
Some of our key components are complex to manufacture and have long lead times. Also, our DBS outdoor
receiver housings, subassemblies and some of our electronic components are purchased from sole source vendors for
which alternative sources are not readily available. In the event of a reduction or interruption of supply, or degradation
in quality, it could take up to six months to begin receiving adequate supplies from alternative suppliers, if any. As a
result, product shipments could be delayed and revenues and results of operations could suffer. Furthermore, if we
receive a smaller allocation of component parts than is necessary to manufacture products in quantities sufficient to meet
customer demand, customers could choose to purchase competing products and we could lose market share. Any of
these events could have a material adverse effect on the Company’s business, financial condition or results of operations.
If we do not meet product introduction deadlines, our business could be adversely affected.
In the past, we have experienced design and manufacturing difficulties that have delayed the development,
introduction or marketing of new products and enhancements and which caused us to incur unexpected expenses. In
addition, some of our existing customers have conditioned their future purchases of our products on the addition of new
product features. In the past, we have experienced delays in introducing some new product features. Furthermore, in
order to compete in some markets, we will have to develop different versions of existing products that operate at
different frequencies and comply with diverse, new or varying governmental regulations in each market. Our inability to
develop new products or product features on a timely basis, or the failure of new products or product features to achieve
market acceptance, could adversely affect our business.
7
If demand for our products fluctuates rapidly and unpredictably, it may be difficult to manage the business efficiently,
which may result in reduced gross margins and profitability.
Our cost structure is based in part on our expectations for future demand. Many costs, particularly those relating
to capital equipment and manufacturing overhead, are relatively fixed. Rapid and unpredictable shifts in demand for our
products may make it difficult to plan production capacity and business operations efficiently. If demand is significantly
below expectations, we may be unable to rapidly reduce these fixed costs, which can diminish gross margins and cause
losses. A sudden downturn may also leave us with excess inventory, which may be rendered obsolete if products evolve
during the downturn and demand shifts to newer products. Our ability to reduce costs and expenses may be further
constrained because we must continue to invest in research and development to maintain our competitive position and to
maintain service and support for our existing customer base. Conversely, in the event of a sudden upturn, we may incur
significant costs to rapidly expedite delivery of components, procure scarce components and outsource additional
manufacturing processes. These costs could reduce our gross margins and overall profitability. Any of these results
could adversely affect our business.
Because we currently sell, and we intend to grow the sales of, certain of our products in countries other than the
United States, we are subject to different regulatory policies. We may not be able to develop products that comply
with the standards of different countries, which could result in our inability to sell our products and, further, we may
be subject to political, economic, and other conditions affecting such countries, which could result in reduced sales of
our products and which could adversely affect our business.
If our sales are to grow in the longer term, we believe we must grow our international business. Many countries
require communications equipment used in their country to comply with unique regulations, including safety regulations,
radio frequency allocation schemes and standards. If we cannot develop products that work with different standards, we
will be unable to sell our products in those locations. If compliance proves to be more expensive or time consuming than
we anticipate, our business would be adversely affected. Some countries have not completed their radio frequency
allocation process and therefore we do not know the standards with which we would be required to comply.
Furthermore, standards and regulatory requirements are subject to change. If we fail to anticipate or comply with these
new standards, our business and results of operations will be adversely affected.
Sales to customers outside the U.S. accounted for 9%, 7%, and 11% of CalAmp’s total sales for the fiscal years
ended February 28, 2011, 2010 and 2009, respectively. Assuming that we continue to sell our products to foreign
customers, we will be subject to the political, economic and other conditions affecting countries or jurisdictions other
than the U.S., including in Africa, the Middle East, Europe and Asia. Any interruption or curtailment of trade between
the countries in which we operate and our present trading partners, changes in exchange rates, significant shift in U.S.
trade policy toward these countries, or significant downturn in the political, economic or financial condition of these
countries, could cause demand for and sales of our products to decrease, or subject us to increased regulation including
future import and export restrictions, any of which could adversely affect our business.
Additionally, a substantial portion of our components and subassemblies are currently procured from foreign
suppliers located primarily in Hong Kong, mainland China, Taiwan, and other Pacific Rim countries. Any significant
shift in U.S. trade policy toward these countries or a significant downturn in the political, economic or financial
condition of these countries could cause disruption of our supply chain or otherwise disrupt operations, which could
adversely affect our business. In addition, if the Chinese government allows the value of its currency to rise vis-à-vis the
U.S. dollar, our product housings and subassemblies that are sourced in China could become more expensive, putting
pressure on our profit margins.
We may not be able to adequately protect our intellectual property, and our competitors may be able to offer similar
products and services that would harm our competitive position.
Other than in our Satellite products business, which currently does not depend upon patented technology, our
ability to succeed in wireless data communications markets may depend, in large part, upon our intellectual property for
some of our wireless technologies. We currently rely primarily on patents, trademark and trade secret laws,
confidentiality procedures and contractual provisions to establish and protect our intellectual property. However, these
mechanisms provide us with only limited protection. We currently hold 30 patents. As part of our confidentiality
procedures, we enter into non-disclosure agreements with all employees, including officers, managers and engineers.
Despite these precautions, third parties could copy or otherwise obtain and use our technology without authorization, or
develop similar technology independently. Furthermore, effective protection of intellectual property rights is unavailable
8
or limited in some foreign countries. The protection of our intellectual property rights may not provide us with any legal
remedy should our competitors independently develop similar technology, duplicate our products and services, or design
around any intellectual property rights we hold.
We may be subject to infringement claims that may disrupt the conduct of our business and affect our profitability.
We may be subject to legal proceedings and claims from time to time relating to the intellectual property of
others, even though we take steps to assure that neither our employees nor our contractors knowingly incorporate
unlicensed copyrights, trade secrets or other intellectual property into our products. It is possible that third parties may
claim that our products and services infringe upon their trademark, patent, copyright, or trade secret rights. Any such
claims, regardless of their merit, could be time consuming, expensive, cause delays in introducing new or improved
products or services, require us to enter into royalty or licensing agreements or require us to stop using the challenged
intellectual property. Successful infringement claims against us may materially disrupt the conduct of our business and
affect profitability.
Availability of radio frequencies may restrict the growth of the wireless communications industry and demand for our
products.
Radio frequencies are required to provide wireless services. The allocation of frequencies is regulated in the
United States and other countries throughout the world and limited spectrum space is allocated to the various wireless
services. The growth of the wireless communications industry may be affected if adequate frequencies are not allocated
or, alternatively, if new technologies are not developed to better utilize the frequencies currently allocated for such use.
Industry growth has been and may continue to be affected by the availability of licenses required to use
frequencies and related costs. Over the last several years, network deployments for public safety mobile broadband data
communications has been slowed due to the unavailability of the portion of the 700MHz spectrum intended for public
safety use. Demand for our products may continue to be adversely affected so long as the rules for utilizing such
spectrum, which are determined by governmental agencies, remain unclear.
We depend to some extent upon wireless networks owned and controlled by others, unproven business models, and
emerging wireless carrier models to deliver existing services and to grow.
If we do not have continued access to sufficient capacity on reliable networks, we may be unable to deliver
services and our sales could decrease. Our ability to grow and achieve profitability partly depends on our ability to buy
sufficient capacity on the networks of wireless carriers and on the reliability and security of their systems. Some of our
wireless services are delivered using airtime purchased from third parties. We depend on these third parties to provide
uninterrupted service free from errors or defects and would not be able to satisfy our customers’ needs if they failed to
provide the required capacity or needed level of service. In addition, our expenses would increase and profitability could
be materially adversely affected if wireless carriers were to significantly increase the prices of their services. Our
existing agreements with the wireless carriers generally have one-year terms. Some of these wireless carriers are, or
could become, our competitors, and if they compete with us, they may refuse to provide us with airtime on their
networks.
Our business could be adversely impacted by the interruption, failure or corruption of our proprietary Internet-based
systems that are used to configure and communicate with the wireless tracking and monitoring devices that we sell.
Our Mobile Resource Management business depends upon several Internet-based systems that are proprietary to
our Company. These applications, which are hosted by a Tier 1 Data Center and are connected via access points to
cellular networks, are used by our customers and by us to configure and communicate with wireless devices for purposes
of determining location, speed or other conditions, and to deliver configuration code or executable commands to the
devices. If these Internet-based systems failed or were otherwise compromised in some way, it could adversely affect
the proper functioning of the wireless tracking and monitoring devices that we sell, and could result in damages being
incurred by us as a result of the temporary or permanent inability of our customers to wirelessly communicate with these
devices.
9
New laws and regulations that impact our industry could increase costs or reduce opportunities for us to earn
revenue.
Except as described below under “Governmental Regulation," we are not currently subject to direct regulation by
the Federal Communications Commission (“FCC”) or any other governmental agency, other than regulations applicable
to Delaware corporations of similar size that are headquartered in California. However, in the future, we may become
subject to regulation by the FCC or another regulatory agency. In addition, the wireless carriers that supply airtime and
certain hardware suppliers are subject to regulation by the FCC, and regulations that affect them could increase our costs
or reduce our ability to continue selling and supporting our services.
CalAmp’s products are subject to mandatory regulatory approvals in the United States and other countries that are
subject to change, making compliance costly and unpredictable.
CalAmp’s products are subject to certain mandatory regulatory approvals in the United States, Canada and other
countries in which it operates. In the United States, the FCC regulates many aspects of communication devices,
including radiation of electromagnetic energy, biological safety and rules for devices to be connected to the telephone
network. In Canada, similar regulations are administered by Industry Canada. Although CalAmp has obtained
necessary FCC and Industry Canada approvals for all products it currently sells, there can be no assurance that such
approvals can be obtained for future products on a timely basis, or at all. In addition, such regulatory requirements may
change or the Company may not in the future be able to obtain all necessary approvals from countries other than Canada
or the United States in which it currently sells its products or in which it may sell its products in the future.
The FCC and Industry Canada may be slow in adopting new regulations allowing private wireless networks to
deliver higher data rates in licensed frequency bands for public safety applications. This could adversely affect demand
for private networks as traditional private network users may opt for public network connections for all or part of their
wireless communication needs. This could have a material adverse effect on the Company’s business, results of
operations and financial condition since the Company’s Wireless Networks data products are currently used in private
networks.
Reduced consumer or corporate spending due to the global economic downturn that began in 2008 and other
uncertainties in the macroeconomic environment have affected and could continue to adversely affect our revenues
and cash flow.
We depend on demand from the consumer, original equipment manufacturer, industrial, automotive and other
markets we serve for the end market applications of our products. Our revenues are based on certain levels of consumer
and corporate spending. If the significant reductions in consumer or corporate spending as a result of uncertain
conditions in the macroeconomic environment continue, our revenues, profitability, ability to make debt payments and
cash flow could be adversely affected.
Our ability to make payments of principal and interest on our indebtedness depends upon our future financial
performance and ability to generate positive operating cash flows, which is subject to general economic conditions,
industry cycles and financial, business and other factors affecting our consolidated operations, many of which are
beyond our control.
If we are unable to generate sufficient cash flow from operations in the future to service our debt, we may be
required to, among other things:
•
•
•
•
•
refinance or restructure all or a portion of our indebtedness;
obtain additional financing in the debt or equity markets;
sell selected assets or businesses;
reduce or delay planned capital expenditures; or
reduce or delay planned operating expenditures.
10
Such measures might not be sufficient to enable us to service our debt, and, if not, we could then be in default
under the applicable terms governing our debt, which could have a material adverse effect on us. In addition, any such
financing, refinancing or sale of assets might not be available on economically favorable terms, if at all.
Rises in interest rates could adversely affect our financial condition.
An increase in prevailing interest rates could have an immediate effect on the interest rates charged on our
variable rate bank debt with Square 1 Bank, which rise and fall, subject to a minimum monthly interest payment, upon
changes in interest rates on a periodic basis. Any increased interest expense associated with increases in interest rates
affects our cash flow and could affect our ability to service our debt.
Risks Relating to Our Common Stock and the Securities Market
Anti-takeover defenses in our charter and under Delaware law could prevent us from being acquired or limit the price
that investors might be willing to pay for our common stock in an acquisition.
Section 203 of the Delaware General Corporation Law prohibits a Delaware corporation from engaging in any
business combination with any interested stockholder for a period of three years from the time the person became an
interested stockholder, unless specific conditions are met. In addition, we have in place various protections which would
make it difficult for a company or investor to buy the Company without the approval of our Board of Directors,
including a stockholder rights plan, authorized but undesignated preferred stock and provisions requiring advance notice
of board nominations and other actions to be taken at stockholder meetings. All of the foregoing could hinder, delay or
prevent a change in control and could limit the price that investors might be willing to pay in the future for shares of our
common stock.
The trading price of shares of our common stock may be affected by many factors and the price of shares of our
common stock could decline.
As a publicly traded company, the trading price of our common stock has fluctuated significantly in the past. The
future trading price of our common stock may be volatile and could be subject to wide price fluctuations in response to
such factors, including:
•
•
•
•
•
•
•
•
•
•
•
actual or anticipated fluctuations in revenues or operating results;
failure to meet securities analysts’ or investors’ expectations of performance;
changes in key management personnel;
announcements of technological innovations or new products by CalAmp or its competitors;
developments in or disputes regarding patents and proprietary rights;
proposed and completed acquisitions by us or our competitors;
the mix of products and services sold;
the timing, placement and fulfillment of significant orders;
product and service pricing and discounts;
acts of war or terrorism; and
general economic conditions.
11
Our stock price has been highly volatile in the past and could be highly volatile in the future.
The market price of our stock has been highly volatile due to the risks and uncertainties described in this Annual
Report, as well as other factors, including:
•
•
•
substantial volatility in quarterly revenues and earnings due to our current dependence on a small number of
major customers;
comments by securities analysts; and
our failure to meet market expectations.
Over the two-year period ended February 28, 2011, the price of CalAmp common stock as reported on The
Nasdaq Stock Market ranged from a high of $3.77 to a low of $0.37. The stock market has from time to time
experienced extreme price and volume fluctuations that were unrelated to the operating performance of particular
companies. In the past, companies that have experienced volatility have sometimes subsequently become the subject of
securities class action litigation. If litigation were instituted on this basis, it could result in substantial costs and a
diversion of management’s attention and resources.
Lack of expected dividends may make our stock less attractive as an investment.
We intend to retain all future earnings for use in the development of our business. We do not anticipate paying
any cash dividends on our common stock in the foreseeable future. Generally, stocks that pay regular dividends
command higher market trading prices, and so our stock price may be lower as a result of our dividend policy.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
The Company's principal facilities, all leased, are as follows:
Square
Location
Footage
Use
Oxnard, California 98,000
Corporate office, Satellite segment
offices and manufacturing plant
Carlsbad, California 11,000
Wireless DataCom offices
Irvine, California 7,000
Wireless DataCom offices
Atlanta, Georgia 6,000
Wireless DataCom offices
Chaska, Minnesota 4,000
Product design facility
Waseca, Minnesota 34,000
Wireless DataCom offices and
manufacturing plant
Montreal, Quebec, Canada 8,000 Wireless DataCom offices
12
ITEM 3. LEGAL PROCEEDINGS
We are not currently involved in any material pending legal proceedings.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company's Common Stock trades on the NASDAQ Global Select Market under the ticker symbol CAMP.
The following table sets forth, for the last two years, the quarterly high and low sale prices for the Company's Common
Stock as reported by NASDAQ:
Fiscal Year Ended February 28, 2011
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Fiscal Year Ended February 28, 2010
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
LOW HIGH
$ 1.96
2.00
2.34
2.46
$ 0.37
0.71
1.91
2.46
$ 3.60
2.68
3.00
3.39
$ 1.22
2.27
3.61
3.77
At March 31, 2011 the Company had approximately 1,800 stockholders of record. The number of stockholders of
record does not include the number of persons having beneficial ownership held in "street name" which are estimated to
approximate 6,200. The Company has never paid a cash dividend and has no current plans to pay cash dividends on its
Common Stock. The Company's bank credit agreement prohibits payment of dividends without the prior written consent
of the bank.
13
ITEM 6. SELECTED FINANCIAL DATA
OPERATING DATA
Revenues
Year Ended February 28,
2011
2010
2009
2008
2007
(In thousands except per share amounts)
$
114,333
$
112,113
$
98,370
$
140,907
$
211,714
Cost of revenues
84,775
89,723
60,244
122,412
166,279
Gross profit
29,558
22,390
38,126
18,495
45,435
Operating expenses:
Research and development
Selling
General and administrative
Intangible asset amortization
Write-off of acquired in-process
research and development
Impairment loss
11,125
10,503
8,858
1,132
-
-
10,943
9,542
10,523
1,367
-
-
Total operating expenses
31,618
32,375
12,899
8,959
12,087
4,429
-
44,736
83,110
15,710
10,633
14,966
6,418
310
71,276
119,313
12,989
6,765
9,792
3,463
6,850
-
39,859
Operating income (loss)
(2,060)
(9,985)
(44,984)
(100,818)
5,576
Non-operating income (expense), net
(1,395)
(2,240)
(911)
(2,472)
591
Income (loss) from continuing operations
before income taxes
(3,455)
(12,225)
(45,895)
(103,290)
6,167
Income tax benefit (provision)
172
1,374
(3,770)
20,940
(4,716)
Income (loss) from continuing operations
(3,283)
(10,851)
(49,665)
(82,350)
1,451
Loss from discontinued operations,
net of tax
Loss on sale of discontinued operations,
net of tax
Net loss
Basic earnings (loss) per share from:
-
-
-
-
-
-
(597)
(32,639)
(1,202)
-
$
(3,283)
$
(10,851)
$
(49,665)
$
(84,149)
$
(31,188)
Continuing operations
$
(0.12)
$
(0.43)
$
(2.01)
$
(3.45)
$
0.06
Discontinued operations
-
-
-
(0.08)
(1.40)
Total basic loss per share
$
(0.12)
$
(0.43)
$
(2.01)
$
(3.53)
$
(1.34)
Diluted earnings (loss) per share from:
Continuing operations
$
(0.12)
$
(0.43)
$
(2.01)
$
(3.45)
$
0.06
Discontinued operations
-
-
-
(0.08)
(1.40)
Total diluted loss per share
$
(0.12)
$
(0.43)
$
(2.01)
$
(3.53)
$
(1.34)
14
BALANCE SHEET DATA
Current assets
Current liabilities
Working capital
Current ratio
Total assets
Long-term debt
February 28,
2011
2010
2009
2008
2007
(In thousands)
$
38,103
$
37,490
$
44,175
$
66,767
$
113,524
$
32,869
$
33,095
$
45,458
$
40,059
$
38,637
$
5,234
$
4,395
$
(1,283)
$
26,708
$
74,887
1.2
1.1
1.0
1.7
2.9
$
55,485
$
56,953
$
69,647
$
143,041
$
229,703
$
4,460
$
4,170
$
-
$
27,187
$
31,314
Stockholders' equity
$
17,602
$
19,199
$
23,199
$
73,420
$
151,251
Factors affecting the year-to-year comparability of the Selected Financial Data include business acquisitions,
significant operating charges and adoption of new accounting standards, as follows:
•
•
•
•
•
•
In fiscal 2009, the Company recorded a Satellite segment impairment charge of $2.3 million, a Wireless
DataCom segment impairment charge of $41.3 million and an investment impairment charge of $1.1 million.
In fiscal 2009, the Company received $9 million in a legal settlement with Rogers Corporation, a supplier of
laminate materials that are part of the Company's DBS products. This was recorded as a reduction of Satellite
cost of revenues.
In fiscal 2008, the Company recorded a $17.9 million charge for estimated expenses to resolve a product
performance issue involving a key DBS customer.
In fiscal 2008, the Company recorded a Satellite goodwill impairment charge of $44.4 million and a Wireless
DataCom goodwill impairment charge of $26.9 million.
In fiscal 2007, the Company acquired Dataradio Inc. and the TechnoCom MRM product line. In fiscal 2008,
the Company acquired the Aercept vehicle tracking business and the Smartlink business.
In fiscal 2007, the Company recorded charges of $6,850,000 for the write-off of in-process research and
development costs in connection with the Dataradio acquisition and $29,848,000 for the impairment of goodwill
and other intangible assets of the discontinued Solutions business. The $29.9 million impairment charge of
fiscal 2007 is included in loss from discontinued operations for that year.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward Looking Statements
Forward looking statements in this Form 10-K which include, without limitation, statements relating to the
Company's plans, strategies, objectives, expectations, intentions, projections and other information regarding future
performance, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
The words "may", "will", "could", "plans", "intends", "seeks", "believes", "anticipates", "expects", "estimates",
"judgment", "goal", and variations of these words and similar expressions, are intended to identify forward-looking
statements. These forward-looking statements reflect the Company's current views with respect to future events and
financial performance and are subject to certain risks and uncertainties, including, without limitation, product demand,
market growth, competitive pressures and pricing declines in the Company's Satellite and Wireless markets, supplier
constraints, manufacturing yields, the length and extent of the global economic downturn that has and may continue to
adversely affect the Company's business, and other risks and uncertainties that are set forth under the caption "Risk
Factors" in Part I, Item 1A of this Annual Report on Form 10-K. Such risks and uncertainties could cause actual results
to differ materially from historical or anticipated results. Although the Company believes the expectations reflected in
such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations
will be attained. The Company undertakes no obligation to update or revise any forward-looking statements, whether as
a result of new information, future events or otherwise.
15
Basis of Presentation
The Company uses a 52-53 week fiscal year ending on the Saturday closest to February 28, which for fiscal years
2011, 2010 and 2009 fell on February 26, 2011, February 27, 2010, and February 28, 2009, respectively. In these
consolidated financial statements, the fiscal year end for all years is shown as February 28 for clarity of presentation.
Fiscal years 2011, 2010 and 2009 each consisted of 52 weeks.
Overview
CalAmp Corp. ("CalAmp" or the "Company") develops and markets wireless communications solutions that
deliver data, voice and video for critical networked communications and other applications.
The Company's two business segments are Wireless DataCom, which serves utility, governmental and enterprise
customers, and Satellite, which focuses on the North American Direct Broadcast Satellite market.
WIRELESS DATACOM
The Wireless DataCom segment provides wireless communications technologies, products and services to the
wireless networks and mobile resource management markets for a wide range of applications. CalAmp has expertise in
designing and providing applications involving various combinations of private and public (cellular infrastructure)
networks, narrow-band and broad-band frequencies, licensed and unlicensed radio spectrum, and mobile and fixed-
remote communications. The Company's Wireless DataCom segment is comprised of a Wireless Networks business and
a Mobile Resource Management business.
SATELLITE
The Company's DBS reception products have historically been sold to the two U.S. DBS system operators,
EchoStar and DirecTV, for incorporation into complete subscription satellite television systems. Revenue of the
Company’s Satellite segment amounted to $35.9 million, $54.7 million and $26.3 million in fiscal years 2011, 2010 and
2009, respectively. In fiscal years 2010 and 2011, the Company did not make any sales to DirecTV because of pricing
and competitive pressures. In light of these factors, at the present time it is uncertain when, or if, the Company will
resume product shipments to DirecTV.
Critical Accounting Policies
The Company's discussion and analysis of its financial condition and results of operations are based upon the
Company's consolidated financial statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these financial statements requires management
to make estimates and assumptions that 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 sales and expenses during the
reporting periods. Areas where significant judgments are made include, but are not limited to: the allowance for doubtful
accounts, inventory valuation, product warranties, the deferred tax asset valuation allowance, and the valuation of long-
lived assets. Actual results could differ materially from these estimates.
Allowance for Doubtful Accounts
The Company establishes an allowance for estimated bad debts based upon a review and evaluation of specific
customer accounts identified as known and expected collection problems, based on historical experience, or due to
insolvency or other collection issues. As further described in Note 1 to the accompanying consolidated financial
statements, the Company's customer base is concentrated, with one customer accounting for almost one-third of the
Company's fiscal 2011 sales. Changes in either a key customer's financial position, or the economy as a whole, could
cause actual write-offs to be materially different from the recorded allowance amount.
Inventories
The Company evaluates the carrying value of inventory on a quarterly basis to determine if the carrying value is
recoverable at estimated selling prices. To the extent that estimated selling prices do not exceed the associated carrying
values, inventory carrying amounts are written down. In addition, the Company generally treats inventory on hand or
committed with suppliers, that is not expected to be sold within the next 12 months, as excess and thus appropriate write-
downs of the inventory carrying amounts are established through a charge to cost of revenues. Estimated usage in the
next 12 months is based on firm demand represented by orders in backlog at the end of the quarter and management's
16
estimate of sales beyond existing backlog, giving consideration to customers' forecasted demand, ordering patterns and
product life cycles. Significant reductions in product pricing, or changes in technology and/or demand may necessitate
additional write-downs of inventory carrying value in the future.
Product Warranties
The Company initially provides for the estimated cost of product warranties at the time revenue is recognized.
While it engages in extensive product quality programs and processes, the Company's warranty obligation is affected by
product failure rates and material usage and service delivery costs incurred in correcting a product failure. Should actual
product failure rates, material usage or service delivery costs differ from management's estimates, revisions to the
estimated warranty liability would be required.
Deferred Income Tax and Uncertain Tax Positions
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets
and liabilities for financial reporting purposes and for income tax purposes. A deferred income tax asset is recognized if
realization of such asset is more likely than not, based upon the weight of available evidence that includes historical
operating performance and the Company's forecast of future operating performance. The Company evaluates the
realizability of its deferred income tax assets and a valuation allowance is provided, as necessary. During this
evaluation, the Company reviews its forecasts of income in conjunction with the positive and negative evidence
surrounding the realizability of its deferred income tax assets to determine if a valuation allowance is needed.
In 2007, the Company adopted an accounting pronouncement related to Financial Accounting Standards Board
Accounting Standards Codification ("FASB ASC") Topic 740, “Income Taxes” (formerly FASB Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes” (“FIN 48”)) which established a framework for determining the
appropriate level of tax reserves to maintain for “uncertain tax positions”. FASB ASC Topic 740 uses a two-step
approach in which a tax benefit is recognized if a position is more likely than not to be sustained. The amount of the
benefit is then measured as the highest tax benefit that is greater than 50% likely to be realized upon settlement. At
February 28, 2011, the Company had unrecognized tax benefits of $1,265,000.
At February 28, 2011, the Company had a net deferred income tax asset balance of $11.8 million. The current
portion of this deferred tax asset is $2.0 million and the noncurrent portion is $9.9 million. The net deferred income tax
asset balance is comprised of a gross deferred tax asset of $53.0 million and a valuation allowance of $41.2 million.
Impairment Assessments of Purchased Intangible Assets and Other Long-Lived Assets
At February 28, 2011, the Company had $4.0 million in other intangible assets on its consolidated balance sheet.
The Company believes the estimate of its valuation of long-lived assets is a "critical accounting estimate" because if
circumstances arose that led to a decrease in the valuation it could have a material impact on the Company's results of
operations.
The Company makes judgments about the recoverability of non-goodwill intangible assets and other long-lived
assets whenever events or changes in circumstances indicate that an impairment in the remaining value of the assets
recorded on the balance sheet may exist.
In order to estimate the fair value of long-lived assets, the Company typically makes various assumptions about
the future prospects for the business that the asset relates to, considers market factors specific to that business and
estimates future cash flows to be generated by that business. These assumptions and estimates are necessarily subjective
and based on management's best estimates based on the information available at the time such estimates are made.
Based on these assumptions and estimates, the Company determines whether it needs to record an impairment charge to
reduce the value of the asset stated on the balance sheet to reflect its estimated fair value determined by a discounted
cash flow analysis. Assumptions and estimates about future values and remaining useful lives are complex and often
subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends,
and internal factors such as changes in the Company's business strategy and its internal forecasts. Although management
believes the assumptions and estimates that have been made in the past have been reasonable and appropriate, different
assumptions and estimates could materially impact the Company's reported financial results. More conservative
assumptions of the anticipated future benefits from these businesses could result in impairment charges in the statement
of operations, and lower asset values on the balance sheet. Conversely, less conservative assumptions could result in
smaller or no impairment charges.
17
Stock-Based Compensation Expense
The Company measures stock-based compensation expense at the grant date, based on the fair value of the award,
and recognizes the expense over the employee's requisite service (vesting) period using the straight-line method. The
measurement of stock-based compensation expense is based on several criteria including, but not limited to, the
valuation model used and associated input factors, such as expected term of the award, stock price volatility, risk free
interest rate and forfeiture rate. Certain of these inputs are subjective to some degree and are determined based in part on
management's judgment. The Company recognizes the compensation expense on a straight-line basis for its graded-
vesting awards. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. However, the cumulative compensation expense recognized at any point in time
must at least equal the portion of the grant-date fair value of the award that is vested at that date. As used in this context,
the term "forfeitures" is distinct from "cancellations" or "expirations", and refers only to the unvested portion of the
surrendered equity awards.
Revenue Recognition
The Company recognizes revenue from product sales when persuasive evidence of an arrangement exists,
delivery has occurred, the sales price is fixed or determinable and collection of the sales price is reasonably assured. In
cases where terms of sale include subjective customer acceptance criteria, revenue is deferred until the acceptance
criteria are met. Critical judgments made by management related to revenue recognition include the determination of
whether or not customer acceptance criteria are perfunctory or inconsequential. The determination of whether or not the
customer acceptance terms are perfunctory or inconsequential impacts the amount and timing of revenue recognized.
Critical judgments also include estimates of warranty reserves, which are established based on historical experience and
knowledge of the product.
The Company defers revenues from products sold with data communication services because the services are
essential to the functionality of the products, and accordingly, the associated product costs are recorded as deferred costs.
These deferred amounts are recognized over the minimum contractual term of one year on a straight-line basis.
Revenues from renewals of the services after the initial one year term are recognized when services are performed. In
certain instances where customers prepay the renewals, such amounts are recorded as deferred revenues and are
recognized over future periods in accordance with the renewal term.
The Company also undertakes projects that include the design, development and manufacture of communication
systems used in the public safety and transportation sectors that are specially customized to customers' specifications or
that involve fixed site construction. Sales under such contracts are recorded under the percentage-of-completion method.
Estimated revenues and costs are recorded as work is performed based on the percentage that incurred costs bear to
estimated total costs utilizing the most recent estimates of costs. If the current contract estimate indicates a loss,
provision is made for the total anticipated loss in the current period. Critical estimates made by management related to
revenue recognition under the percentage-of-completion method include the estimation of costs at completion and the
determination of the overall margin rate on the specific project.
18
Results of Operations, Fiscal Years 2009 Through 2011
The following table sets forth, for the periods indicated, the percentage of revenues represented by items included
in the Company's consolidated statements of operations:
Year Ended February 28,
2010
2009
2011
Revenues
Cost of revenues
Gross profit
Operating expenses:
Research and development
Selling
General and administrative
Intangible asset amortization
Impairment loss
Operating loss
Other expense, net
Loss before income taxes
Income tax benefit (provision)
Net loss
100.0%
74.1
25.9
100.0%
80.0
20.0
100.0%
61.3
38.7
9.7
9.2
7.7
1.0
-
(1.7)
(1.3)
(3.0)
0.2
(2.8%)
9.8
8.5
9.4
1.2
-
(8.9)
(2.0)
(10.9)
1.2
(9.7%)
13.1
9.1
12.2
4.5
45.5
(45.7)
(0.9)
(46.6)
(3.9)
(50.5%)
The Company's revenue, gross profit and operating income (loss) by business segment for the last three years are
as follows:
REVENUE BY SEGMENT
Year ended February 28,
2011
2010
2009
Segment
Satellite
Wireless DataCom
Total
Segment
Satellite
Wireless DataCom
Total
% of
Total
26.8%
73.2%
100.0%
% of
Total
26.9%
73.1%
100.0%
$000s
$
35,899
78,434
114,333
$
% of
Total
31.4%
68.6%
100.0%
$000s
$
54,715
57,398
112,113
$
% of
Total
48.8%
51.2%
100.0%
$000s
$
$
26,327
72,043
98,370
GROSS PROFIT BY SEGMENT
Year ended February 28,
2011
2010
2009
$000s
$
$
1,636
27,922
29,558
% of
Total
5.5%
94.5%
100.0%
$000s
$
$
4,258
18,132
22,390
% of
Total
19.0%
81.0%
100.0%
$000s
$
$
10,254
27,872
38,126
19
OPERATING INCOME (LOSS) BY SEGMENT
Year ended February 28,
2011
2010
2009
% of
Total
Revenue
(2.2%)
4.3%
(4.0%)
(1.8%)
% of
Total
Revenue
(0.1%)
(5.2%)
(3.6%)
(8.9%)
$000s
$
(111)
(5,867)
(4,007)
(9,985)
$000s
$
(2,460)
4,922
(4,522)
(2,060)
$
$
$
$000s
$
3,616
(42,206)
(6,394)
(44,984)
% of
Total
Revenue
3.7%
(42.9%)
(6.5%)
(45.7%)
Segment
Satellite
Wireless DataCom
Corporate expenses
Total
Satellite's gross profit of $10.3 million and operating income of $3.6 million in fiscal 2009 includes a $9 million
gain recorded as a reduction of cost of revenues from a legal settlement with a supplier in January 2009. The operating
income of $3.6 million for that period also includes a goodwill impairment charge of $2.3 million.
Wireless DataCom's operating loss of $42.2 million in fiscal 2009 includes impairment charges aggregating $41.3
million.
Corporate expenses in fiscal 2009 include an impairment charge of $1.1 million on an investment in preferred
stock of a privately held company.
Fiscal Year 2011 compared to Fiscal Year 2010
Revenue
Satellite revenue declined by $18.8 million, or 34%, to $35.9 million in fiscal 2011 from $54.7 million in fiscal
2010 because of reduced demand for the older generation DBS products that the Company is still producing. The
Company recently received product approval from Echostar of a next generation product, and has three other products in
development for this customer. On the basis of these new products, the Company expects that its Satellite revenues will
improve in fiscal 2012.
Wireless DataCom revenue increased by $21.0 million, or 37%, to $78.4 million in fiscal 2011 compared to $57.4
million in fiscal 2010. The revenue increase was predominantly related to the MRM product line and was attributable to
the addition of new customers and growth in orders from existing customers.
Gross Profit and Gross Margins
Satellite gross profit was $1.6 million in fiscal 2011 compared to $4.3 million in the previous year. The decrease
in gross profit is primarily attributable to the decrease in revenue. Satellite gross margin decreased to 4.6% in fiscal
2011 from 7.8% in fiscal 2010. The decline in gross margin was primarily due to lower absorption of fixed costs on
lower revenue, partially offset by the benefits in fiscal 2011 from (i) $521,000 associated with the sale of Satellite
products for which the inventory cost had been written off in a prior year; a partial reversal of a vendor commitment
liability due to consumption of materials of $218,000; and (iii) royalty income of $200,000 that had no corresponding
cost of revenue.
Wireless DataCom gross profit increased by $9.8 million to $27.9 million in fiscal 2011 compared to $18.1
million in fiscal 2010. Wireless DataCom gross margin improved to 35.6% in fiscal 2011 from 31.6% in fiscal 2010 due
primarily to increased absorption of fixed manufacturing costs on higher revenue.
See also Note 12 to the accompanying consolidated financial statements for additional operating data by business
segment.
20
Operating Expenses
Consolidated research and development (“R&D”) expense increased by 2% to $11.1 million in fiscal 2011 from
$10.9 million in the previous year. R&D spending as a percent of revenues remained flat at 10%.
Consolidated selling expenses increased from $9.5 million in fiscal 2010 to $10.5 million in fiscal 2011, primarily
because of higher incentive and commission expense on the higher Wireless DataCom revenue level, increased salaries
expense and higher travel expenses.
Consolidated general and administrative (“G&A”) expense declined by $1.7 million to $8.9 million in fiscal
2011. Legal expense was $847,000 lower in fiscal 2011 than in fiscal 2010 due in part to the Company’s receipt of
$230,000 from another company for the reimbursement of legal defense costs incurred in prior years related to a patent
infringement claim. Also contributing to the decrease in G&A expense were lower payroll costs due to workforce
reductions and other cost cutting actions implemented by the Company.
Amortization of intangibles decreased from $1.4 million in fiscal 2010 to $1.1 million in fiscal 2011. The
reduction is attributable to some intangible assets becoming fully amortized during the current fiscal year.
Non-operating Expense
Non-operating expense was $1.4 million for fiscal 2011, compared to $2.2 million for fiscal 2010. The decrease
was due to the presence in fiscal 2010 of a $1.0 million loss on the sale of an investment in the preferred stock of a
privately held company and a $288,000 foreign currency loss, partially offset by a year-over-year increase in net interest
expense of $505,000. The higher interest expense in fiscal 2011 was attributable to the higher effective interest rate on
the Company’s borrowings due to the 6% minimum interest on the bank revolving credit facility and the 12% interest on
the Subordinated Notes in the principal amount of $5 million, as well as interest expense from amortization of debt issue
costs and debt discount as discussed in Note 5 to the accompanying consolidated financial statements.
Income Tax Benefit
The tax benefit of $172,000 in fiscal 2011 was related to the carryback of net operating losses of the Company’s
French subsidiary.
The tax benefit of $1.4 million in fiscal 2010 was related to the reversal of an uncertain tax position which was
resolved. This uncertain tax position reversal was recorded as an income tax benefit because the benefit had been
recognized in the applicable income tax returns but had not previously been recognized in the consolidated statement of
operations.
No other tax benefit was recorded in fiscal 2011 and 2010 because future realizability of such tax benefits is not
considered to be more likely than not.
Fiscal Year 2010 compared to Fiscal Year 2009
Revenue
Satellite revenue increased $28.4 million, or 108%, to $54.7 million in fiscal 2010 from $26.3 million in fiscal
2009. The Company's historically largest DBS customer put on hold all orders with the Company in late May 2007,
including orders for newer generation products, pending a requalification of all products manufactured by CalAmp for
this customer. In January 2008, the customer requalified CalAmp's designs for the affected products and in late May
2008 the Company resumed product shipments to this customer. Revenues from this DBS customer were $39.1 million
higher for fiscal 2010 compared to the previous year. However, there were no sales to the Company's other U.S. DBS
service provider in fiscal 2010 compared to sales of $10.2 million in the previous year due to pricing and competitive
pressures on older generation products and the time required to get the next generation products qualified with this
customer.
Wireless DataCom revenue declined by $14.6 million, or 20%, to $57.4 million in fiscal 2010 compared to $72.0
million in fiscal 2009. The decrease in revenue is due to lower sales by the Wireless DataCom business units as the
result of the global economic downturn.
21
Gross Profit and Gross Margins
Satellite gross profit was $4.3 million in fiscal 2010 compared to $10.3 million in the previous year. The gross
profit in fiscal 2009 was benefited by (i) a $9.0 million gain from a legal settlement with a supplier that was recorded as
a reduction of cost of revenues; (ii) $0.6 million associated with the sale of Satellite products for which the inventory
cost had been fully reserved in the prior fiscal year; and (iii) a reduction of $1.1 million in estimated costs to correct a
product performance issue. The increase in gross profit in fiscal 2010 compared to the previous year (after excluding the
aforementioned benefits) was due primarily to higher satellite revenue.
Wireless DataCom gross profit decreased 35% to $18.1 million in fiscal 2010, compared to $27.9 million in fiscal
2009. Wireless DataCom gross margin decreased to 31.6% in fiscal 2010 from 38.7% in fiscal 2009, due primarily to
the decline in revenue and partly to the $1.5 million patent sale in fiscal 2009 for which there was no associated cost.
Excluding the patent sale, Wireless DataCom gross margin was 37.4% in fiscal 2009.
See also Note 12 to the accompanying consolidated financial statements for additional operating data by business
segment.
Operating Expenses
Consolidated R&D expense decreased by $2.0 million to $10.9 million in fiscal 2010 from $12.9 million in fiscal
2009. This decrease was primarily due to personnel reductions in the Wireless Networks business unit of the Wireless
DataCom segment.
Consolidated selling expenses increased from $9.0 million in fiscal 2009 to $9.5 million in fiscal 2010, primarily
because selling expenses in fiscal 2009 were benefited by bad debt reserve reductions of $927,000 related to a Wireless
DataCom customer.
Consolidated G&A decreased from $12.1 million in fiscal 2009 to $10.5 million in fiscal 2010 due to cost
reduction actions implemented by the Company. Other factors contributing to the decrease were: (i) a $247,000 decrease
in legal expense in fiscal 2010 compared to fiscal 2009; and (ii) a $303,000 charge for severance costs of the Company's
former Satellite Division president in fiscal 2009. Partially offsetting the effect of these year-over-year expense
reductions in G&A was an increase of $552,000 in stock-based compensation expense because the G&A in fiscal 2009
included a reduction of stock compensation expense as the result of the forfeiture of unvested stock options upon the
resignation of the Company's former President and Chief Executive Officer in March 2008.
Amortization of intangibles decreased from $4.4 million in fiscal 2009 to $1.4 million in fiscal 2010. These
reductions are attributable to the lower carrying value of intangible assets as a result of the impairment write-down
recorded in the fourth quarter of fiscal 2009.
Non-operating Expense
Non-operating expense was $2.2 million for fiscal 2010, compared to $0.9 million for fiscal 2009. The increase
was due to the loss on the sale of an investment in the preferred stock of a privately held company of $1.0 million in
fiscal 2010 and a $288,000 foreign currency loss also in fiscal 2010, compared to a foreign currency gain of $177,000
gain in fiscal 2009. These losses were partially offset by a decrease in net interest expense of $151,000 as a result of
lower average outstanding bank debt during fiscal 2010.
Income Tax Benefit (Provision)
The income tax benefit of $1.4 million in fiscal 2010 was related to the reversal of an uncertain tax position
which was resolved. This uncertain tax position reversal was recorded as an income tax benefit because the benefit had
been recognized in the applicable income tax returns but had not previously been recognized in the consolidated
statement of operations. No other tax benefit was recorded in fiscal 2010 because future realizability of such tax benefits
is not considered to be more likely than not. An income tax provision of $3.8 million was recorded in fiscal 2009
because the Company had taxable income after excluding that portion of the fiscal 2009 impairment loss that was not
deductible for income taxes.
22
Liquidity and Capital Resources
The Company's primary sources of liquidity are its cash and cash equivalents, which amounted to $4,241,000 at
February 28, 2011, and the working capital line of credit with Square 1 Bank. During fiscal year 2011, cash and cash
equivalents increased by $1,255,000. Cash was provided by operations in the amount of $857,000, net borrowings on
the bank line of credit of $1,588,000 and collections on a note receivable of $428,000, partially offset by capital
expenditures of $1,245,000 and employee withholding taxes paid related to net share settlement of vested equity awards
of $405,000.
On December 22, 2009, the Company entered into a Loan and Security Agreement (the "Loan Agreement") with
Square 1 Bank. This revolving credit facility expires on December 22, 2011 and provides for borrowings up to the lesser
of $12 million or 85% of the Company's eligible accounts receivable. Outstanding borrowings under this facility bear
interest at Square 1 Bank's prime rate plus 2.0%, subject to minimum interest of 6.0% per annum or $20,000 per month,
whichever is greater. Interest is payable on the last day of each calendar month. The Company paid a loan fee of
$120,000 to Square 1 Bank in connection with this credit facility. At February 28, 2011, the Company had outstanding
borrowings under this facility of $7,489,000, and the amount available to borrow at that date amounted to $3,815,000.
The Loan Agreement contains a financial covenant that requires the Company to maintain minimum levels of
earnings before interest, income taxes, depreciation, amortization and other noncash charges ("EBITDA"). The Loan
Agreement also provides for a number of standard events of default, including a provision that a material adverse change
constitutes an event of default that permits the lender, at its option, to accelerate the loan. Among other provisions, the
Loan Agreement also requires a lock-box and cash collateral account whereby cash remittances from the Company's
customers are directed to the cash collateral account and which amounts are applied to reduce the revolving loan
principal balance. Borrowings under the Loan Agreement are secured by substantially all of the assets of the Company
and its domestic subsidiaries.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Contractual Obligations
Following is a summary of the Company's contractual cash obligations as of February 28, 2011 (in thousands):
Payments Due by Period
Contractual Obligations
Less than
1 year
1-3 years
3-5 years
More
than 5
years
Total
Bank line of credit principal
$
7,489
$
-
$
-
$
-
$
7,489
Minimum contractual interest
on bank line of credit
Subordinated notes principal
Subordinated notes interest
Operating leases
Purchase obligations
194
-
600
1,785
20,596
-
5,000
585
1,749
-
-
-
-
1,584
-
-
-
-
285
-
194
5,000
1,185
5,403
20,596
Total contractual obligations
$
30,664
$
7,334
$
1,584
$
285
$
39,867
Purchase obligations consist of obligations under non-cancelable purchase orders, primarily for inventory
purchases of raw materials, components and subassemblies.
23
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Risk
The Company has international operations, giving rise to exposure to market risks from changes in foreign
exchange rates. A cumulative foreign currency translation loss of $866,000 related to the Company's Canadian and
French subsidiaries is included in accumulated other comprehensive loss in the stockholders' equity section of the
consolidated balance sheets at February 28, 2011 and 2010. Foreign currency gains (losses) included in the consolidated
statements of operations were $40,000, $(288,000) and $177,000 in fiscal 2011, 2010 and 2009, respectively.
Interest Rate Risk
The Company has variable-rate bank debt. A fluctuation of one percent in the interest rate on the $12 million
revolving credit facility with Square 1 Bank would have an annual impact of approximately $70,000 net of tax on the
Company's consolidated statement of operations assuming that the full amount of the facility was borrowed. The
Subordinated Notes in the aggregate principal amount of $5,000,000 bear a fixed rate of interest of 12% and hence are
not subject to interest rate risk.
24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
CalAmp Corp. and Subsidiaries
We have audited the accompanying consolidated balance sheets of CalAmp Corp. and subsidiaries as of February 28,
2011 and 2010, and the related consolidated statements of operations, stockholders' equity and comprehensive loss, and
cash flows for each of the three years in the period ended February 28, 2011. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to
perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of CalAmp Corp. and subsidiaries as of February 28, 2011 and 2010, and the results of their operations and their
cash flows for each of the three years in the period ended February 28, 2011 in conformity with U.S. generally accepted
accounting principles.
SINGERLEWAK LLP
/s/ SINGERLEWAK LLP
Los Angeles, California
April 28, 2011
25
CALAMP CORP.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, less allowance for doubtful accounts of
$290 and $413 at February 28, 2011 and 2010, respectively
Inventories
Deferred income tax assets
Prepaid expenses and other current assets
Total current assets
Property, equipment and improvements, net of
accumulated depreciation and amortization
Deferred income tax assets, less current portion
Intangible assets, net
Other assets
Liabilities and Stockholders' Equity
Current liabilities:
Bank working capital line of credit
Accounts payable
Accrued payroll and employee benefits
Deferred revenue
Other current liabilities
Total current liabilities
Long-term debt
Other non-current liabilities
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 3,000 shares authorized;
no shares issued or outstanding
Common stock, $.01 par value; 40,000 shares authorized;
28,147 and 27,662 shares issued and outstanding
at February 28, 2011 and 2010, respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Total stockholders' equity
February 28,
2011
2010
$
4,241
$
2,986
16,814
9,890
1,961
5,197
38,103
1,877
9,887
4,012
1,606
16,520
10,608
2,656
4,720
37,490
2,055
10,017
5,144
2,247
$
55,485
$
56,953
$
7,489
14,103
3,341
5,796
2,140
32,869
$
5,901
16,186
2,742
4,740
3,526
33,095
4,460
554
4,170
489
-
-
281
153,135
(134,948)
(866)
17,602
55,485
$
277
151,453
(131,665)
(866)
19,199
56,953
$
See accompanying notes to consolidated financial statements.
26
CALAMP CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Year Ended February 28,
2010
2009
2011
Revenues
Cost of revenues
Gross profit
Operating expenses:
Research and development
Selling
General and administrative
Intangible asset amortization
Impairment loss
Total operating expenses
Operating loss
Non-operating income (expense):
Interest expense, net
Loss on sale of investment
Other income (expense), net
Total non-operating expense
Loss before income taxes
Income tax benefit (provision)
$
114,333
$
112,113
$
98,370
84,775
29,558
11,125
10,503
8,858
1,132
-
31,618
89,723
22,390
10,943
9,542
10,523
1,367
-
32,375
60,244
38,126
12,899
8,959
12,087
4,429
44,736
83,110
(2,060)
(9,985)
(44,984)
(1,445)
-
50
(1,395)
(940)
(1,008)
(292)
(2,240)
(1,091)
-
180
(911)
(3,455)
(12,225)
(45,895)
172
1,374
(3,770)
Net loss
$
(3,283)
$
(10,851)
$
(49,665)
Total basic and diluted loss per share
$
(0.12)
$
(0.43)
$
(2.01)
Shares used in computing basic and diluted loss per share:
27,181
25,309
24,765
See accompanying notes to consolidated financial statements.
27
CALAMP CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE LOSS
(In thousands )
C om m on S tock
S h are s
Am ou n t
Addi ti on al
Pai d-i n
C api tal
Re tai n e d
Earn i n gs
(Accu m u l at
e d De fi ci t)
Accu m u l ate
d O th e r
C om pre h e n -
si ve Loss
Total
S tock h ol de rs'
Equ i ty
Balances at February 28, 2008
25,041
$
250
$
144,318
$
(71,149)
$
1
$
73,420
(49,665)
(1,121)
Net loss
Foreign currency trans lation adjustments
Comprehens ive loss
Stock-based compens ation expens e
Iss uance of s hares for res tricted
s tock awards
Shares retained on net s hare s ettlement
of equity awards
Exercise of stock options
Other
222
(62)
16
1,268
2
(2)
-
-
(140)
-
(563)
Balances at February 28, 2009
25,217
252
144,881
(120,814)
(1,120)
(10,851)
254
Net loss
Foreign currency trans lation adjustments
Comprehens ive loss
Stock-based compens ation expens e
Iss uance of s hares for res tricted
s tock awards
Shares retained on net s hare s ettlement
of equity awards
Exercise of stock options
Sale of stock
Iss uance of warrants
Other
583
(71)
1
1,932
7
(1)
-
19
1,981
(7)
(122)
1
3,948
870
(99)
Balances at February 28, 2010
27,662
277
151,453
(131,665)
(866)
Net loss and comprehensive loss
Stock-based compens ation expens e
Iss uance of s hares for res tricted
s tock awards
Shares retained on net s hare s ettlement
of equity awards
Other
655
(170)
6
(2)
(3,283)
2,109
(6)
(403)
(18)
(49,665)
(1,121)
(50,786)
1,268
-
(140)
-
(563)
23,199
(10,851)
254
(10,597)
1,981
-
(123)
1
3,967
870
(99)
19,199
(3,283)
2,109
-
-
(405)
(18)
Balances at February 28, 2011
28,147
$
281
$
153,135
$
(134,948)
$
(866)
$
17,602
See accompanying notes to consolidated financial statements.
28
CALAMP CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended February 28,
2010
2009
2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization
Stock-based compensation expense
Amortization of debt issue costs and discount
Impairment loss
Loss on sale of investment
Deferred tax assets, net
Other
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses and other assets
Accounts payable
Accrued liabilities
Deferred revenue
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
Proceeds from sale of property and equipment
Proceeds from sale of investment
Collections on note receivable
Acquisition of Smartlink
Acquisition of TechnoCom product line
Other
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings on lines of credit
Proceeds from issuance of subordinated debt and warrants
Net proceeds from sale of common stock
Debt repayments
Payment of debt issue costs
Taxes paid related to net share settlement of equity awards
Proceeds from exercise of stock options
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES
EFFECT OF EXCHANGE RATE CHANGES ON CASH
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
$
(3,283)
$
(10,851)
$
(49,665)
2,543
2,109
536
-
-
807
(20)
(294)
718
(510)
(2,083)
(722)
1,056
857
(1,245)
32
-
428
-
-
-
(785)
1,588
-
-
-
-
(405)
-
1,183
-
1,255
2,986
2,522
1,981
-
-
1,008
39
104
(2,780)
4,626
42
10,764
(5,991)
1,131
2,595
(1,066)
2
992
325
-
-
(38)
215
7,551
5,000
3,967
(22,728)
(544)
(123)
1
(6,876)
139
(3,927)
6,913
6,549
1,268
-
44,736
-
3,373
-
6,288
9,442
2,679
(5,453)
(4,921)
(396)
13,900
(831)
-
-
465
296
(1,183)
(188)
(1,441)
-
-
-
(11,452)
-
(140)
-
(11,592)
(542)
325
6,588
Cash and cash equivalents at end of year
$
4,241
$
2,986
$
6,913
See accompanying notes to consolidated financial statements.
29
CALAMP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
CalAmp Corp. ("CalAmp" or the "Company") develops and markets wireless communications solutions that
deliver data, voice and video for critical networked communications and other applications. The Company's two
business segments are Wireless DataCom, which serves utility, governmental and enterprise customers, and Satellite,
which focuses on the North American Direct Broadcast Satellite market.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company (a Delaware corporation) and its
subsidiaries, all of which are wholly-owned. All significant intercompany transactions have been eliminated in
consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States 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. Actual results could differ from those estimates. Areas where
significant judgments are made include, but are not necessarily limited to: allowance for doubtful accounts; inventory
valuation; product warranties; deferred income tax asset valuation allowances; valuation of purchased intangible assets
and other long-lived assets; stock-based compensation; and revenue recognition.
Fiscal Year
The Company uses a 52-53 week fiscal year ending on the Saturday closest to February 28, which for fiscal years
2011, 2010 and 2009 fell on February 26, 2011, February 27, 2010, and February 28, 2009, respectively. In these
consolidated financial statements, the fiscal year end for all years is shown as February 28 for clarity of presentation.
Fiscal years 2011, 2010 and 2009 each consisted of 52 weeks.
Revenue Recognition
The Company recognizes revenue from product sales when persuasive evidence of an arrangement exists,
delivery has occurred, the sales price is fixed or determinable and collection of the sales price is reasonably assured.
Generally, these criteria are met at the time product is shipped, except for shipments made on the basis of "FOB
Destination" terms, in which case title transfers to the customer and the revenue is recorded by the Company when the
shipment reaches the customer. Customers do not have rights of return except for defective products returned during the
warranty period.
The Company defers revenues from products sold with data communication services because the services are
essential to the functionality of the products, and accordingly, the associated product costs are recorded as deferred costs.
These deferred amounts are recognized on a straight-line basis over the minimum contractual service period of one year.
Revenues from renewals of airtime services after the initial one year term are recognized as the services are provided.
When customers prepay the airtime renewals, such amounts are recorded as deferred revenues and are recognized over
the renewal term.
The Company also undertakes projects that include the design and development of communication systems used
in the public safety and transportation sectors that are specially customized to customers' specifications or that involve
fixed site construction. Sales under such contracts are recorded under the percentage-of-completion method. Costs and
estimated revenues are recorded as work is performed based on the percentage that incurred costs bear to estimated total
costs utilizing the most recent estimates of costs. If the current contract estimate indicates a loss, provision is made for
the total anticipated loss in the current period.
30
Cash and Cash Equivalents
The Company considers all highly liquid investments with remaining maturities at date of purchase of three
months or less to be cash equivalents.
Concentrations of Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of
cash equivalents and trade receivables.
Because the Company sells into markets dominated by a few large service providers, a significant percentage of
consolidated revenues and consolidated accounts receivable relate to a small number of customers. Customers that
accounted for 10% or more of consolidated annual revenues in any one of the last three years are as follows:
Customer
A
B
Year ended February 28,
2010
48.6%
-
2009
15.7%
10.3%
2011
31.0%
-
Customers that accounted for 10% or more of consolidated net accounts receivable in any one of the last two
years are as follows:
Customer
A
C
February 28,
2011
27.6%
12.4%
2010
47.9%
-
Customers A and B are customers of the Company's Satellite segment. Customer C is a customer of the
Company’s Wireless DataCom segment.
A substantial portion of the Company’s inventory is purchased from one supplier, which functions as an
independent foreign procurement agent, and accounted for 49% and 51% of Company's total inventory purchases in
fiscal 2011 and 2010, respectively. As of February 28, 2011, this supplier accounted for 63% of the Company's total
accounts payable.
Some of the Company's components, assemblies and electronic manufacturing services are purchased from sole
source suppliers.
Allowance for Doubtful Accounts
The Company establishes an allowance for estimated bad debts based upon a review and evaluation of specific
customer accounts identified as known and expected collection problems, based on historical experience, or due to
insolvency, disputes or other collection issues.
Inventories
Inventories include costs of materials, labor and manufacturing overhead. Inventories are stated at the lower of
cost or net realizable value, with cost determined principally by the use of the first-in, first-out method.
Property, equipment and improvements
Property, equipment and improvements are stated at the lower of cost or fair value determined through periodic
impairment analyses. The Company follows the policy of capitalizing expenditures that increase asset lives, and
expensing ordinary maintenance and repairs as incurred. When assets are sold or disposed of, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or loss is included in general and
administrative expense.
Depreciation and amortization are based upon the estimated useful lives of the related assets using the straight-
line method. Plant equipment and office equipment are depreciated over useful lives ranging from two to five years,
31
while tooling is depreciated over 18 months. Leasehold improvements are amortized over the shorter of the lease term or
the useful life of the improvements.
Operating Leases
Rent expense under operating leases is recognized on a straight-line basis over the lease term. The difference
between the rent expense and the rent payment is recorded as an increase or decrease in deferred rent liability.
The Company accounts for tenant allowances in lease agreements as a deferred rent credit. The deferred credit is
then amortized on a straight-line basis over the lease term as a reduction of rent expense.
Intangible Assets
The cost of definite-lived identified intangible assets is amortized over the assets' estimated useful lives ranging
from one to seven years on a straight-line basis as no other discernable pattern of usage is more readily determinable.
Accounting for Long-Lived Assets
The Company reviews property and equipment and other long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amounts of an asset may not be recoverable. Recoverability is
measured by comparison of the asset's carrying amount to the undiscounted future net cash flows an asset is expected to
generate. If a long-lived asset or group of assets is considered to be impaired, the impairment to be recognized is
measured as the amount by which the carrying amount of the asset or asset group exceeds the discounted future cash
flows that are projected to be generated by the asset or asset group.
Disclosures About Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instrument
for which it is practicable to estimate:
Cash and cash equivalents, accounts receivable and accounts payable - The carrying amount is a reasonable
estimate of fair value given the short maturity of these instruments.
Debt - The estimated fair value of the Company's bank debt approximates the carrying value of such debt because
the interest rate is variable and is market-based. The estimated fair value of the Company's 12% subordinated
promissory notes due December 22, 2012 approximates the carrying value of this debt, such carrying value
consisting of the $5 million face amount of the notes less a debt discount comprised of the unamortized fair value
of the stock purchase warrants that were issued with the notes.
Warranty
The Company generally warrants its products against defects over periods ranging from 3 to 24 months. An
accrual for estimated future costs relating to products returned under warranty is recorded as an expense when products
are shipped. At the end of each quarter, the Company adjusts its liability for warranty claims based on its actual
warranty claims experience as a percentage of revenues for the preceding three years and also considers the impact of the
known operational issues that may have a greater impact than historical trends. Warranty reserve is included in Other
Current Liabilities in the balance sheets. See Note 9 for a table of annual increases in and reductions of the warranty
reserve for the last three years.
Deferred Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets
and liabilities for financial reporting purposes and for income tax purposes. A deferred income tax asset is recognized if
realization of such asset is more likely than not, based upon the weight of available evidence which includes historical
operating performance and the Company's forecast of future operating performance. The Company evaluates the
realizability of its deferred income tax assets and a valuation allowance is provided, as necessary. During this
evaluation, the Company reviews its forecasts of income in conjunction with the positive and negative evidence
surrounding the realizability of its deferred income tax assets to determine if a valuation allowance is needed.
32
Foreign Currency Translation and Accumulated Other Comprehensive Income (Loss) Account
The Company's French subsidiary uses the U.S. dollar as its functional currency. As a result of changing the
functional currency of the Company's French subsidiary from the French franc to the U.S. dollar in 2002, the foreign
currency translation loss of $801,000 that is included in accumulated other comprehensive loss will remain unchanged
for such time that the French subsidiary continues to be part of the Company's consolidated financial statements.
The Company's Canadian subsidiary changed its functional currency from the Canadian dollar to the U.S. dollar
effective at the end of fiscal 2010. The cumulative foreign currency translation loss of $65,000 that is included in
accumulated other comprehensive loss will remain unchanged for such time that the Canadian subsidiary continues to be
part of the Company's consolidated financial statements.
The aggregate foreign transaction exchange gains (losses) included in determining income (loss) from continuing
operations before income taxes were $40,000, $(288,000) and $177,000 in fiscal 2011, 2010 and 2009, respectively.
Earnings Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by
the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the
potential dilution, using the treasury stock method, that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the
earnings of the Company. In computing diluted earnings per share, the treasury stock method assumes that outstanding
options are exercised and the proceeds are used to purchase common stock at the average market price during the period.
Options will have a dilutive effect under the treasury stock method only when the Company reports net income and the
average market price of the common stock during the period exceeds the exercise price of the options.
Accounting for Stock Options
The Company measures stock-based compensation expense at the grant date, based on the fair value of the award,
and recognizes the expense over the employee's requisite service (vesting) period using the straight-line method. The
measurement of stock-based compensation expense is based on several criteria including, but not limited to, the
valuation model used and associated input factors, such as expected term of the award, stock price volatility, risk free
interest rate and forfeiture rate. Certain of these inputs are subjective to some degree and are determined based in part on
management's judgment. The Company recognizes the compensation expense on a straight-line basis for its graded-
vesting awards. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. However, the cumulative compensation expense recognized at any point in time
must at least equal the portion of the grant-date fair value of the award that is vested at that date. As used in this context,
the term "forfeitures" is distinct from "cancellations" or "expirations", and refers only to the unvested portion of the
surrendered equity awards.
Reclassifications
Certain amounts in the financial statements of prior years have been reclassified to conform to the fiscal 2011
presentation with no effect on net earnings.
NOTE 2 - INVENTORIES
Inventories consist of the following (in thousands):
February 28,
2011
2010
Raw materials
Work in process
Finished goods
$
$
8,663
85
1,142
9,890
9,483
209
916
10,608
$
$
33
NOTE 3 - PROPERTY, EQUIPMENT AND IMPROVEMENTS
Property, equipment and improvements consist of the following (in thousands):
February 28,
2011
2010
Leasehold improvements
Plant equipment and tooling
Office equipment, computers and furniture
Less accumulated depreciation and amortization
$
$
1,487
12,941
2,706
17,134
(15,257)
1,877
1,498
12,380
2,083
15,961
(13,906)
2,055
$
$
NOTE 4 - INTANGIBLE ASSETS
Intangible assets are comprised as follows (in thousands):
Fe bruary 28, 2011
Fe bruary 28, 2010
Amortiz ation
Life
Gross
C arrying
Amount
Accum-
ulate d
Amortiz -
ation
Gross
C arrying
Amount
Accum-
ulate d
Amortiz -
ation
Ne t
Ne t
Developed/core technology 5-7 years
$
3,101
$
1,783
$
1,318
$
3,101
$
1,054
$
2,047
Customer lists
5-7 years
Cov enants not to compete
4-5 years
Patents
T radename
4-5 years
Indefinite
1,339
138
39
2,130
831
106
15
-
508
32
24
1,339
138
39
2,130
2,130
475
66
8
-
864
72
31
2,130
$
6,747
$
2,735
$
4,012
$
6,747
$
1,603
$
5,144
Amortization expense of intangible assets was $1,132,000, $1,367,000, and $4,429,000 for the years ended
February 28, 2011, 2010 and 2009, respectively. All intangible asset amortization expense is attributable to the Wireless
DataCom segment.
Estimated amortization expense in future fiscal years is as follows (in thousands):
2012
2013
2014
$ 973
$ 749
$ 160
NOTE 5 - FINANCING ARRANGEMENTS AND CONTRACTUAL CASH OBLIGATIONS
Bank Working Capital Line of Credit
On December 22, 2009, the Company entered into a Loan and Security Agreement (the "Loan Agreement") with
Square 1 Bank. This revolving credit facility expires on December 22, 2011 and provides for borrowings up to the lesser
of $12 million or 85% of the Company's eligible accounts receivable. Outstanding borrowings under this facility bear
interest at Square 1 Bank's prime rate plus 2.0%, subject to minimum interest of 6.0% per annum or $20,000 per month,
whichever is greater. Interest is payable on the last day of each calendar month. At February 28, 2011, the Company
had outstanding borrowings under this facility of $7,489,000, and the amount available to borrow at that date amounted
to $3,815,000. At February 28, 2011 and February 28, 2010, the effective interest rate on the revolver was 6.0%.
The Loan Agreement contains a financial covenant that requires the Company to maintain minimum levels of
earnings before interest, income taxes, depreciation, amortization and other noncash charges ("EBITDA") on a rolling
six-month basis. The Loan Agreement also provides for a number of customary events of default, including a provision
that a material adverse change constitutes an event of default that permits the lender, at its option, to accelerate the loan.
Among other provisions, the Loan Agreement requires a lock-box and cash collateral account whereby cash remittances
34
from the Company's customers are directed to the cash collateral account and which amounts are applied to reduce the
revolving loan principal balance. Borrowings under the Loan Agreement are secured by substantially all of the assets of
the Company and its domestic subsidiaries.
Fiscal 2010 Refinancing
On December 22, 2009 and January 15, 2010, the Company raised an aggregate amount of $5,000,000 from the
issuance of subordinated promissory notes (the "Subordinated Notes"), which included Subordinated Notes totaling
$325,000 that were purchased by two officers and one director of the Company. The Subordinated Notes bear interest at
12% per annum and have a maturity date of December 22, 2012. Interest is payable semiannually on the last day of June
and December, and all Subordinated Notes principal is payable at the maturity date. The Company also issued a total of
500,000 common stock purchase warrants (the "Warrants") to the Subordinated Note holders at an exercise price of
$4.02 per share, which represents a 20% premium to the average closing price of the Company's common stock for the
20 consecutive trading days prior to December 22, 2009. The Warrants’ fair value of $870,000 was determined using the
Black-Scholes option pricing model, and is classified as a debt discount. This discount is being amortized on a straight-
line basis to interest expense over the 3-year term of the Subordinated Notes.
Also on December 22, 2009, the Company sold 1,931,819 shares of common stock for $4,250,000 in a private
placement with 13 investors, none of whom were officers, directors, or other affiliates of the Company.
The Company also incurred debt issue costs of $543,000 on the Square 1 Bank credit facility and the
Subordinated Notes, which is being amortized on a straight-line basis to interest expense over an average period of
approximately 2.8 years. These debt issue costs, net of amortization, are included in Other Assets in the consolidated
balance sheets as of February 28, 2011 and 2010.
B. Riley & Co. LLC, the Company's financial advisor, was paid a placement fee of $254,000 in connection with
the Square 1 Bank Loan Agreement and the Subordinated Note and Warrant Purchase Agreement and a fee of $161,000
in connection with the equity private placement. B. Riley & Co. LLC, its officers and employees or its employee
retirement trust purchased a total of $300,000 of the Subordinated Notes and 329,546 common stock shares in the private
placement.
And finally on December 22, 2009, the Company paid in full the $13,955,000 outstanding principal balance of its
credit facility with Bank of Montreal and two other banks, which had a maturity date of December 31, 2009. The funds
for this payoff were provided by a drawdown of $7,780,000 under the revolving credit facility with Square 1 Bank and
proceeds of $1,925,000 from the issuance of subordinated debt, supplemented by proceeds of $4,250,000 from the
private placement of common stock. As a result of this payoff, the credit facility with Bank of Montreal and the two
other banks was terminated.
Long-Term Debt
Long-term debt is comprised of the following (in thousands):
February 28,
2011
2010
Subordinated Notes
Less unamortized discount
Other Non-Current Liabilities
$
$
$
$
5,000
(540)
4,460
5,000
(830)
4,170
Other non-current liabilities consist of the following (in thousands):
February 28,
Deferred rent
Deferred revenue
2011
4
$
550
554
$
35
2010
$
$
88
401
489
Contractual Cash Obligations
Following is a summary of the Company's contractual cash obligations as of February 28, 2011 (in thousands):
Contractual Obligations
2012
2013
2014
2015
2016
There-
after
Total
Bank line of credit principal
$
7,489
$
-
$
-
$
-
$
-
$
-
$
7,489
Future Cash Payments Due by Fiscal Year
Minimum contractual interest
on bank line of credit
Subordinated notes principal
Subordinated notes interest
Operating leases
Purchase obligations
194
-
600
1,785
20,596
-
5,000
585
920
-
-
-
-
829
-
-
-
-
795
-
-
-
-
789
-
-
-
-
285
-
194
5,000
1,185
5,403
20,596
Total contractual obligations
$
30,664
$
6,505
$
829
$
795
$
789
$
285
$
39,867
Purchase obligations consist of obligations under non-cancelable purchase orders, primarily for raw materials,
components and subassemblies. Rent expense under operating leases was $1,918,000, $1,962,000 and $2,309,000 in
fiscal years 2011, 2010 and 2009, respectively.
NOTE 6 - INCOME TAXES
The Company's loss before income taxes consists of the following (in thousands):
Year Ended February 28,
2010
2009
2011
Domestic
Foreign
$
$
$
(3,314)
(141)
(3,455)
(9,587)
(2,638)
(12,225)
$
$
$
(43,940)
(1,955)
(45,895)
The income tax benefit (provision) consists of the following (in thousands):
Current:
Federal
State
Foreign
Total current
Deferred:
Federal
State
Total deferred
Year Ended February 28,
2010
2009
2011
-
$
-
172
172
-
$
-
-
-
-
$
-
(279)
(279)
-
-
-
1,098
276
1,374
(2,801)
(690)
(3,491)
$
172
$
1,374
$
(3,770)
36
Differences between the income tax benefit (provision) reported in the consolidated statements of operations and
the income tax amount computed using the statutory U.S. federal income tax rate are as follows (in thousands):
Year Ended February 28,
2010
2009
2011
$
$
$
Income tax benefit at U.S. statutory federal rate of 35%
State income tax benefit, net of federal income tax effect
Foreign taxes
Nondeductible goodwill
Valuation allowance
Tax deduction for stock basis in dissolved subsidiaries
Other, net
Income tax benefit (provision)
1,209
108
123
-
(1,652)
-
384
172
4,278
760
84
-
(24,074)
18,089
2,237
1,374
$
$
$
16,063
1,793
64
(4,627)
(17,424)
-
361
(3,770)
The components of net deferred income tax assets are as follows (in thousands):
February 28,
2011
2010
$
$
Depreciation, amortization and impairments
Net operating loss carryforwards
Capital loss carryforward
Research and development credits
Other tax credits
Warranty reserve
Stock-based compensation
Payroll and Employee Benefit Accruals
Inventory reserve
Allowance for doubtful accounts
Other, net
Gross deferred tax assets
Valuation allowance
Net deferred tax assets
Less current portion
Non-current portion
12,180
30,250
848
4,804
1,064
277
1,929
477
700
113
388
53,030
(41,182)
11,848
1,961
9,887
13,508
29,208
848
4,277
1,875
495
1,621
617
951
163
407
53,970
(41,297)
12,673
2,656
10,017
$
$
The Company believes that it is more likely than not that the results of future operations will generate sufficient
taxable income to realize the net deferred tax assets.
At February 28, 2011, the Company had net operating loss carryforwards ("NOLs") of approximately $75.2
million and $89.0 million for federal and state purposes, respectively, expiring at various dates through fiscal 2031. If
certain substantial changes in the Company’s ownership occur, there would be an annual limitation on the amount of the
carryforwards that can be utilized.
As of February 28, 2011, the Company had foreign tax credit carryforwards of $634,000 expiring at various dates
through 2013 and research and development tax credit carryforwards of $4.0 million and $3.1 million for federal and
state income tax purposes, respectively, expiring at various dates through 2031.
In 2007, the Company adopted FASB ASC Topic 740, “Income Taxes,” which clarifies the accounting for
income taxes by prescribing a minimum recognition threshold that a tax position is required to meet before being
recognized in the financial statements. Management determined based on its evaluation of the Company’s income tax
positions that it has one uncertain tax position relating to federal research and development (“R&D”) tax credits of $1.3
million at February 28, 2011 and February 28, 2010 for which the Company has not yet recognized an income tax benefit
for financial reporting purposes. Assuming these tax benefits had been recognized as of February 28, 2011, such benefit
would have been fully negated by a corresponding increase in the deferred income tax valuation allowance because the
37
Company has recorded a full valuation allowance against its recognized federal R&D tax credits of $2.7 million due to
uncertainty as to future realization.
A reconciliation of the beginning and ending amount of unrecognized tax benefits for uncertain tax position is as
follows (in thousands):
Balance at February 28, 2009
Decrease in fiscal 2010
Balance at February 28, 2010
Decrease in fiscal 2011
Balance at February 28, 2011
$
$
6,449
(5,184)
1,265
-
1,265
During fiscal 2010, the Company recorded an increase in deferred income tax assets of $18.1 million that was
attributable to the unrecovered cost basis in an inactive subsidiary that was dissolved. A corresponding increase in the
deferred tax asset valuation allowance was also recorded because future realization of such tax benefits is not considered
to be more likely than not. In connection with recording this increase in deferred tax assets for the unrecovered cost
basis in the inactive subsidiary that was dissolved, the Company reversed an uncertain tax position of $3,810,000 from
income taxes payable with a corresponding reduction of deferred income tax assets. This reversal pertained to that
portion of a tax loss carryforward of the liquidated subsidiary that was cancelled as a result of taking an income tax
deduction for the unrecovered cost basis of that subsidiary.
The tax benefit of $1,374,000 that was recorded in fiscal 2010 was attributable to the reversal of an uncertain
tax position which was resolved during that year. This uncertain tax position reversal was recorded as an income tax
benefit because the expense deduction was taken in a previous year’s income tax return but the associated tax benefit
was not previously recognized in the consolidated statement of operations.
In August 2010, the Company received a U.S. federal income tax refund of $807,000 as a result of carrying back
an NOL to recover taxes paid during the five fiscal year period ended February 28, 2007, as provided for by the Worker,
Homeownership, and Business Assistance Act of 2009. The $807,000 tax refund was recorded as a reduction of deferred
income tax assets.
The Company files income tax returns in the U.S. federal jurisdiction, various U.S. states, Canada and France.
Income tax returns filed for fiscal years 2006 and earlier are not subject to examination by U.S. federal and state tax
authorities. Certain income tax returns for fiscal years 2007 through 2011 remain open to examination by U.S federal
and state tax authorities. Income tax returns for fiscal years 2008 through 2011 remain open to examination by tax
authorities in Canada and France. The Company believes that it has made adequate provision for all income tax
uncertainties pertaining to these open tax years.
NOTE 7 - STOCKHOLDERS' EQUITY
Equity Awards
Under the Company's 2004 Incentive Stock Plan (the "2004 Plan"), which was adopted on July 30, 2004 and was
amended effective July 30, 2009, various types of equity awards can be made, including stock options, stock
appreciation rights, restricted stock, restricted stock units (RSUs), phantom stock and bonus stock. Stock options,
restricted stock, RSUs and bonus stock have been granted under the 2004 Plan. Options are granted with exercise prices
equal to market value on the date of grant. Option grants expire 10 years after the date of grant.
Equity awards to officers and other employees become exercisable on a vesting schedule established by the
Compensation Committee of the Board of Directors at the time of grant, generally over a four-year period. The
Company treats an equity award with multiple vesting tranches as a single award for expense attribution purposes and
recognizes compensation cost on a straight-line basis over the requisite service period of the entire award.
38
The following table summarizes stock option activity for fiscal years 2011, 2010 and 2009 (options in thousands):
Outstanding at February 28, 2008
Granted
Exercised
Forfeited or expired
Outstanding at February 28, 2009
Granted
Exercised
Forfeited or expired
Outstanding at February 28, 2010
Granted
Exercised
Forfeited or expired
Outstanding at February 28, 2011
Exercisable at February 28, 2011
Number of
Options
2,382
578
(50)
(1,041)
1,869
Weighted
Average
Option Price
$
9.54
2.42
1.75
8.36
8.20
320
(1)
(165)
2,023
186
-
(101)
2,108
1,360
1.48
1.32
24.39
5.82
2.34
-
19.23
4.87
$
$
6.33
Of the 50,000 stock options exercised during the fiscal 2009, 39,498 shares underlying such exercised options
were retained by the Company in a "net-share" settlement to cover the aggregate exercise price and the required amount
of employee withholding taxes.
Changes in the Company's outstanding restricted stock shares and RSUs during fiscal years 2011, 2010 and 2009
were as follows (shares and RSUs in thousands):
Outstanding at February 28, 2008
Granted
Vested
Forfeited
Outstanding at February 28, 2009
Granted
Vested
Forfeited
Outstanding at February 28, 2010
Granted
Vested
Forfeited
Outstanding at February 28, 2011
Number of
Shares
and RSUs
474
633
(149)
(51)
907
1,147
(231)
(39)
1,784
863
(544)
(58)
2,045
Weighted
Average Grant
Date Fair
Value
$
3.63
2.06
3.76
3.87
2.50
1.81
2.49
2.26
2.06
2.34
2.15
1.78
2.16
$
The Company retained 169,854, 71,293 and 43,430 of the vested restricted stock shares and RSUs to cover the
required amount of employee withholding taxes in fiscal 2011, 2010 and 2009, respectively. In addition, the Company
issued 36,000 bonus stock shares in fiscal 2009, of which 13,242 shares were retained by the Company to cover the
required amount of employee withholding taxes.
As of February 28, 2011, there were 1,272,223 award units in the 2004 Plan that were available for grant.
Under the 2004 Plan as amended, on the day of the annual stockholders meeting, each non-employee director
receives an equity award of up to 20,000 award units. Equity awards granted to non-employee directors vest on the date
of the next annual stockholders meeting or one year from the date of grant, whichever is earlier.
39
The fair value of options at date of grant was estimated using the Black-Scholes option pricing model with the
following assumptions:
Black-Scholes Valuation Assumptions
Expected life (years) (1)
Expected volatility (2)
Risk-free interest rates (3)
Expected dividend yield
Year Ended February 28,
2010
2009
6
74%-79%
2.0%-3.0%
0%
6
63%-64%
2.7%-3.5%
0%
2011
6
74%
2.1%
0%
(1) The expected life of stock options is estimated based on historical experience.
(2) The expected volatility is estimated based on historical volatility of the Company's stock price.
(3) Based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected life of the stock options.
The weighted average fair value for stock options granted in fiscal years 2011, 2010 and 2009 was $1.54, $1.02,
and $1.45, respectively.
The weighted average remaining contractual term and the aggregate intrinsic value of outstanding options as of
February 28, 2011 was 6.0 years and $1,027,000, respectively. The weighted average remaining contractual term and
the aggregate intrinsic value of exercisable options as of February 28, 2011 was 4.7 years and $308,000, respectively.
Stock-based compensation expense for the years ended February 28, 2011, 2010 and 2009 is included in the
following captions of the consolidated statements of operations (in thousands):
Year Ended February 28,
2011
2010
2009
Cost of revenues
$
151
$
164
$
75
Research and development
Selling
General and administrative
339
209
1,410
298
133
1,386
257
102
834
$
2,109
$
1,981
$
1,268
As of February 28, 2011, there was $3.9 million of total unrecognized stock-based compensation cost related to
nonvested equity awards. That cost is expected to be recognized over a weighted-average remaining vesting period of
2.6 years.
Stock Warrants
In fiscal 2010, the Company issued a total of 500,000 common stock purchase warrants to the Subordinated Note
holders at an exercise price of $4.02 per share, which represents a 20% premium to the average closing price of the
Company's common stock for the 20 consecutive trading days prior to December 22, 2009. These warrants are
exercisable until December 22, 2012.
In October 2009, the Company issued 20,000 common stock purchase warrants to a key supplier at an exercise
price of $1.00 per share. These warrants became vested in April 2010 and are exercisable until October 6, 2012.
Preferred Stock Purchase Rights
At February 28, 2011, 28,146,499 preferred stock purchase rights are outstanding. Each right may be exercised to
purchase one-hundredth of a share of Series A Participating Junior Preferred Stock at a purchase price of $50 per right,
subject to adjustment. The rights may be exercised only after commencement or public announcement that a person
(other than a person receiving prior approval from the Company) has acquired or obtained the right to acquire 20% or
more of the Company's outstanding common stock. The rights, which do not have voting rights, may be redeemed by
the Company at a price of $.01 per right within ten days after the announcement that a person has acquired 20% or more
40
of the outstanding common stock of the Company. In the event that the Company is acquired in a merger or other
business combination transaction, provision shall be made so that each holder of a right shall have the right to receive
that number of shares of common stock of the surviving company which at the time of the transaction would have a
market value of two times the exercise price of the right. 750,000 shares of Series A Junior Participating Cumulative
Preferred Stock, $.01 par value, are authorized.
NOTE 8 - EARNINGS PER SHARE
The weighted average number of common shares outstanding was the same amount for both basic and diluted
loss per share for all periods presented. Outstanding warrants and equity awards (options, restricted stock and RSUs) in
the aggregate amounts of 4,673,000, 4,677,000 and 3,126,000 at February 28, 2011, 2010 and 2009, respectively, and
which are potentially dilutive, were excluded from the computation of diluted earnings per share because the Company
reported a net loss in each of these three years and the effect of inclusion would be antidilutive (i.e., including such
securities would result in a lower loss per share).
NOTE 9 - OTHER FINANCIAL INFORMATION
Supplemental Cash Flow Information
"Net cash provided (used) by operating activities" in the consolidated statements of cash flows includes cash
payments for interest expense and cash receipts from income tax refunds as follows (in thousands):
Year Ended February 28,
2010
2009
2011
Interest expense paid
Income tax refunds received
$
(1,076)
$
(942)
$
(1,615)
$
803
$
6
$
792
Valuation and Qualifying Accounts
Following is the Company's schedule of valuation and qualifying accounts for the last three years (in thousands):
Balance at
beginning
of period
Charged
(credited)
to costs and
expenses
Balance at
end of
period
Deductions
$
1,271
$
(507)
$
(212)
$
552
552
413
486
386
(625)
(509)
413
290
$
4,869
$
353
$
(1,936)
$
3,286
3,286
1,231
305
647
(2,360)
(1,178)
1,231
700
Allowance for doubtful accounts:
Fiscal 2009
Fiscal 2010
Fiscal 2011
Warranty reserve:
Fiscal 2009
Fiscal 2010
Fiscal 2011
Deferred Tax Assets Valuation Allowance
Fiscal 2009
Fiscal 2010
Fiscal 2011
$
1,834
$
17,424
$
(1,028)
$
18,230
18,230
41,297
24,074
1,652
(1,007)
(1,767)
41,297
41,182
41
NOTE 10 - COMMITMENTS AND CONTINGENCIES
Operating Lease Commitments
The Company leases a building in Oxnard, California that houses its corporate office and the offices and
manufacturing facilities of its Satellite business under an operating lease that expires June 30, 2016. The lease
agreement requires the Company to pay all maintenance, property taxes and insurance premiums associated with the
building. The Company’s Wireless DataCom business leases facilities in California, Minnesota, Georgia and Canada.
The Company also leases certain manufacturing equipment and office equipment under operating lease arrangements. A
summary of future operating lease commitments is included in the contractual cash obligations table in Note 5.
NOTE 11 - LEGAL PROCEEDINGS
From time to time as a normal consequence of doing business, various claims and litigation may be asserted or
commenced against the Company. In particular, the Company in the ordinary course of business may receive claims that
its products infringe the intellectual property of third parties or claims concerning its contract performance. While the
outcome of any such claims and litigation cannot be predicted with certainty, management does not believe that the
outcome of any of such matters would have a material adverse effect on the Company's consolidated financial position or
results of operations.
NOTE 12 - SEGMENT AND GEOGRAPHIC DATA
Information by business segment is as follows:
Year ende d February 28, 2011
Ye ar e nde d Fe bruary 28, 2010
O pe rating Se gments
O perating Segments
Sate llite
Wire less
DataCom C orporate
Total
Satellite
Wirele ss
DataCom Corporate
Total
Revenues
Gross profit
Gross margin
$
35,899
$
78,434
$
114,333
$
54,715
$
57,398
$
1,636
$
27,922
$
29,558
$
4,258
$
18,132
4.6%
35.6%
25.9%
7.8%
31.6%
$
112,113
$
22,390
20.0%
Operating income (loss)
$
(2,460)
$
4,922
$
(4,522)
$
(2,060)
$
(111)
$
(5,867)
$
(4,007)
$
(9,985)
Ye ar e nde d Fe bruary 28, 2009
O pe rating Se gme nts
Sate llite
Wire le ss
DataC om Corporate
Total
Revenues
Gross profit
Gross margin
$
26,327
$
72,043
$
10,254
$
27,872
38.9%
38.7%
$
98,370
$
38,126
38.8%
Operating income (loss)
$
3,616
$
(42,206)
$
(6,394)
$
(44,984)
The Company considers operating income (loss) to be the primary measure of profit or loss of its business
segments. The amount shown for each period in the "Corporate" column above for operating income (loss) consists of
corporate expenses not allocated to the business segments. Unallocated corporate expenses include salaries for certain
executive officers, and expenses such as audit fees, investor relations, stock listing fees, director and officer liability
insurance, and board of director fees and expenses.
It is not practicable for the Company to report identifiable assets by segment because these businesses share
resources, functions and facilities. The Company does not have significant long-lived assets outside the United States.
42
The Company's revenues were derived mainly from customers in the United States, which represented 91%, 93%
and 89% of consolidated revenues in fiscal 2011, 2010 and 2009, respectively. No single foreign country accounted for
more than 10% of the Company's revenue in fiscal 2011, 2010 or 2009.
In January 2009, the Company received $9 million in cash as a settlement of litigation with a supplier. This
amount was recorded as a reduction of Satellite cost of revenues for fiscal 2009. Excluding this settlement, Satellite
gross profit and gross margin for fiscal 2009 would have been $1,254,000 and 4.8%, respectively.
NOTE 13 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following summarizes certain quarterly statement of operations data for each of the quarters in fiscal years
2011 and 2010 (in thousands, except percentages and per share data):
First
Quarter
Second
Quarter
Fiscal 2011
Third
Quarter
Fourth
Quarter
Total
Revenues
Gross profit
Gross margin
Net income (loss)
Net income (loss) per diluted share
$
26,346
6,123
23.2%
(2,477)
(0.09)
$
29,490
7,368
25.0%
(930)
(0.03)
$
29,553
7,699
26.1%
(179)
(0.01)
$
28,944
8,368
28.9%
303
0.01
$
114,333
29,558
25.9%
(3,283)
(0.12)
First
Quarter
Second
Quarter
Fiscal 2010
Third
Quarter
Fourth
Quarter
Total
Revenues
Gross profit
Gross margin
Net loss
Net loss per diluted share
$
23,000
4,707
20.5%
(3,957)
(0.16)
$
23,940
4,804
20.1%
(4,243)
(0.17)
$
30,692
5,897
19.2%
(1,319)
(0.05)
$
34,481
6,982
20.2%
(1,332)
(0.05)
$
112,113
22,390
20.0%
(10,851)
(0.43)
43
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company's principal executive officer and principal financial officer have concluded, based on their
evaluation of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange
Act of 1934), as amended (the "Exchange Act") as of February 28, 2011, that the Company's disclosure controls and
procedures are effective, at the reasonable assurance level, to ensure that the information required to be disclosed in
reports that are filed or submitted under the Exchange Act is accumulated and communicated to management, including
the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required
disclosure and to allow such information to be recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the Securities Exchange Commission.
Management's Report on Internal Control over Financial Reporting
The management of CalAmp Corp. is responsible for establishing and maintaining adequate internal control over
financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.
The management of CalAmp Corp. has assessed the effectiveness of the Company's internal control over
financial reporting as of February 28, 2011. In making this assessment, management used criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in "Internal Control – Integrated
Framework". Based on its assessment, management of CalAmp Corp. has concluded that, as of February 28, 2011, the
Company's internal control over financial reporting is effective based on those criteria.
For fiscal 2011, the Company was not required to engage, and did not engage, its independent registered public
accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Securities and
Exchange Commission that permit the Company to provide only management’s report in this Annual Report.
Changes in Internal Control over Financial Reporting
There were no changes in the Company's internal control over financial reporting during the fourth quarter of
fiscal 2011 that have materially affected, or are reasonably likely to materially affect, the Company's internal control
over financial reporting.
ITEM 9B. OTHER INFORMATION
Compensatory Arrangements of Executive Officers
On February 17, 2011, the Board of Directors of the Company, upon the recommendation of the Compensation
Committee, established the target and maximum bonuses and performance goals under the fiscal 2012 executive officer
incentive compensation plan. The individuals covered by the fiscal 2012 executive officer incentive compensation plan
are:
• Richard Gold
Chief Executive Officer
• Michael Burdiek
President and Chief Operating Officer
• Richard Vitelle
Vice President Finance, Chief Financial
Officer and Corporate Secretary
• Garo Sarkissian
Vice President Corporate Development
44
Messrs. Gold and Burdiek are eligible for target and maximum bonuses of up to 50% and 100%, respectively, of
annual salary. Mr. Vitelle is eligible for target and maximum bonuses of up to 40% and 80%, respectively, of his annual
salary. Mr. Sarkissian is eligible for target and maximum bonuses of up to 35% and 70%, respectively, of his annual
salary.
The target and maximum bonus amounts for all executive officers are based on the Company attaining certain
levels of consolidated revenue and consolidated earnings before interest, taxes, depreciation and amortization (EBITDA)
for fiscal 2012.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
Information about executive officers is included in Part I, Item 1 of this Annual Report on Form 10-K.
The following information will be included in the Company's definitive statement for the Annual Meeting of
Stockholders to be held on July 28, 2011 and is incorporated herein by reference in response to this item:
•
•
•
Information regarding directors of the Company who are standing for reelection.
Information regarding the Company's Audit Committee and designated "audit committee financial experts".
Information on the Company's "Code of Business Conduct and Ethics" for directors, officers and employees.
ITEM 11. EXECUTIVE COMPENSATION
The information under the caption "Executive Compensation" in the Company's definitive proxy statement for the
Annual Meeting of Stockholders to be held on July 28, 2011 is incorporated herein by reference in response to this item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information under the caption "Stock Ownership" in the Company's definitive proxy statement for the
Annual Meeting of Stockholders to be held on July 28, 2011 is incorporated herein by reference in response to this item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE
The information contained under the captions "Certain Relationships and Related Transactions" and "Director
Independence" in the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on July
28, 2011 is incorporated herein by reference in response to this item.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information contained under the caption "Independent Public Accountants" in the Company's definitive
proxy statement for the Annual Meeting of Stockholders to be held on July 28, 2011 is incorporated herein by reference
in response to this item.
45
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)
The following documents are filed as part of this Report:
1. The following consolidated financial statements of CalAmp Corp. and subsidiaries are filed as part of this
report under Item 8 – Financial Statements and Supplementary Data:
Form 10-K
Page No.
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
and Comprehensive Loss
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2. Financial Statements Schedules:
25
26
27
28
29
30
Schedule II – Valuation and Qualifying Accounts is included in the consolidated financial statements which are
filed as part of this report under Item 8 – Financial Statements and Supplementary Data.
All other financial statement schedules for which provision is made in the applicable accounting regulations of
the Securities and Exchange Commission are not required under the related instructions or are inapplicable and,
therefore, have been omitted.
3. Exhibits
Exhibits required to be filed as part of this report are:
Exhibit
Number Description
3.1 Amended and Restated Certificate of Incorporation reflecting the change in the Company's name to
CalAmp Corp. and the increase in authorized common stock from 30 million to 40 million shares
(incorporated by reference to Exhibit 3.1 of the Company's Report on Form 10-Q for the period
ended August 31, 2004).
3.2
Bylaws of the Company (incorporated by reference to Exhibit 3.2 of the Company's Annual Report on
Form 10-K for the year ended February 28, 2005).
4.1 Amended and Restated Rights Agreement, amended and restated as of September 5, 2001, by and between
Registrant and Mellon Investor Services LLC, as Rights Agent (incorporated by reference to Exhibit 4.1
filed with Company's Annual Report on Form 10-K for the year ended February 28, 2007).
10. Material Contracts:
(i)
Other than Compensatory Plan or Arrangements:
46
10.1 Building lease dated June 10, 2003 between the Company and Sunbelt Enterprises for a facility in Oxnard,
California (incorporated by reference to Exhibit 10-1 filed with the Company's Report on Form 10-Q for
the quarter ended May 31, 2003).
10.2 First Amendment to building lease dated December 20, 2010 between the Company and Sunbelt
Enterprises for a facility in Oxnard, California.
10.3 Form of Directors and Officers Indemnity Agreement (incorporated by reference to Exhibit 10.3 of the
Company's Annual Report on Form 10-K for the year ended February 28, 2005).
10.4 Settlement Agreement, dated December 14, 2007, by and between CalAmp Corp. and EchoStar
Technologies Corporation (incorporated by reference to Exhibit 10.1 filed with the Company's Current
Report on Form 8-K dated December 14, 2007).
10.5 Loan and Security Agreement dated December 22, 2009 between Square 1 Bank, CalAmp Corp. and
CalAmp's domestic subsidiaries (incorporated by reference to Exhibit 10.1 filed with the Company's
Current Report on Form 8-K dated December 22, 2009).
10.6 Subordinated Note and Warrant Purchase Agreement dated December 22, 2009 between CalAmp Corp.
and nine investors (incorporated by reference to Exhibit 10.2 filed with the Company's Current Report on
Form 8-K dated December 22, 2009).
10.7
Joinder Agreement dated January 15, 2010 between CalAmp Corp. and six investors (incorporated by
reference to Exhibit 10.1 filed with the Company's Current Report on Form 8-K dated January 15, 2010).
10.8 Amendment to Loan Documents dated March 24, 2010 between Square 1 Bank, CalAmp Corp. and
CalAmp's domestic subsidiaries (incorporated by reference to Exhibit 10.7 of the Company's Annual
Report on Form 10-K for the year ended February 28, 2010).
.
10.9
Amendment to Loan Documents dated December 22, 2010 between Square 1 Bank, CalAmp Corp. and
CalAmp’s domestic subsidiaries (incorporated by reference to Exhibit 10.1 of the Company's Report on
Form 10-Q for the period ended November 30, 2010).
(ii)
Compensatory Plans or Arrangements required to be filed as Exhibits to this Report pursuant to
Item 15 (b) of this Report:
10.10 The 1999 Stock Option Plan (incorporated by reference to Exhibit 4.1 of the Company's Registration
Statement No. 333-93097 on Form S-8)
10.11 CalAmp Corp. 2004 Stock Incentive Plan as amended and Restated (incorporated by reference to Exhibit
A of the Company's Definitive Proxy Statement filed on June 24, 2009).
10.12 Employment Agreement between the Company and Richard Vitelle dated May 31, 2002 (incorporated by
reference to Exhibit 10.9 of the Company's Annual Report on Form 10-K for the year ended February
28, 2004).
10.13 Employment Agreement between the Company and Michael Burdiek dated July 2, 2007 (incorporated by
reference to Exhibit 10.1 of the Company's Report on Form 10-Q for the period ended May 31, 2007).
10.14 Employment Agreement between the Company and Garo Sarkissian dated July 2, 2007 (incorporated by
reference to Exhibit 10.2 of the Company's Report on Form 10-Q for the period ended May 31, 2007).
10.15 Employment Agreement between the Company and Richard Gold, effective March 4, 2008 (incorporated
by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K dated March 4, 2008).
10.16 Form of Amendment to Employment Agreement dated December 19, 2008, for each of the executive
officers: Richard Gold, Michael Burdiek, Richard Vitelle and Garo Sarkissian (incorporated by reference
to Exhibit 10.1 of the Company's Report on Form 10-Q for the period ended November 29, 2008).
47
10.17 Second Amendment to Employment Agreement dated May 11, 2009 between the Company and Richard
Gold (incorporated by reference to Exhibit 10.24 of the Company's Annual Report on Form 10-K for
the year ended February 28, 2009)
21 Subsidiaries of the Registrant.
23.1 Consent of Independent Registered Public Accounting Firm.
31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification of Chief Executive Officer and Chief
Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b)
Each management contract or compensatory plan or arrangement required to be filed as an exhibit to this form is
filed as part of Item 15(a)(3)Exhibits and specifically identified as such.
(c)
Other Financial Statement Schedules. None
48
Pursuant to the requirements of Section 13 or 15(d) 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, on April 26, 2011.
SIGNATURES
CALAMP CORP.
By: /s/ Richard Gold
Richard Gold
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Frank Perna, Jr. Chairman of the Board of Directors April 26, 2011
Frank Perna, Jr.
/s/ Kimberly Alexy Director April 26, 2011
Kimberly Alexy
/s/ A.J. Moyer Director April 26, 2011
A.J. Moyer
/s/ Thomas Pardun Director April 26, 2011
Thomas Pardun
/s/ Larry Wolfe Director April 26, 2011
Larry Wolfe
/s/ Richard Gold Chief Executive Officer and
Richard Gold Director (principal executive officer) April 26, 2011
/s/ Richard Vitelle VP Finance, Chief Financial Officer and
Richard Vitelle Treasurer (principal accounting officer) April 26, 2011
49
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