Dear Fellow Shareholders:
Fiscal 2012 was a remarkable transformation year for our company. We experienced
solid revenue growth across all of our businesses which resulted in a decisive return to
profitability for CalAmp and positive returns for shareholders. Revenue in our Wireless
Datacom segment increased by 26%, as we reported growth in nearly every vertical application
that we serve. We also had a very successful year in our Satellite segment where we experienced
revenue growth of 10%, and successfully completed the operational transition of this business
resulting in improved gross margins and positive cash flow. Our fiscal 2012 performance is
evidence that our strategy to invest our resources in those markets and applications that offer the
greatest long term prospects for revenue and profit growth is bearing fruit.
For fiscal 2012, consolidated revenue grew 21% year-over-year to $138.7 million, with
Wireless Datacom revenue increasing to a record $99.1 million and Satellite revenue growing to
$39.6 million. We generated operating cash flow of more than $12 million for the year which
enabled us to pay down our debt by $9.5 million. Driven by this strong cash flow, we ended
fiscal 2012 with a positive net cash balance of $2.6 million, which is the first time in five years
that we have had a positive net cash position. R&D investments across our businesses resulted
in 24 new product introductions during fiscal 2012, and we expect these new products to drive
continued growth and market expansion. We also expect that our focused and efficient R&D
organization will continue to drive new and innovative products to market at an accelerating pace
over the coming years.
Within Wireless Datacom, our technology and product leadership position in Mobile
Resource Management (MRM) applications fueled significant growth with strong demand for
our products and services. We experienced steady growth throughout the year with our core
customers in fleet management, trailer tracking, stolen vehicle recovery and vehicle finance
applications. In addition, we had greater international market penetration, particularly in Latin
America, and are poised for further customer wins in the Asia Pacific and EMEA regions.
The high-value CalAmp brand, combined with MRM bundled solutions, position us well
to serve larger enterprise customers looking to roll out new, secure turnkey machine-to-machine
solutions that enhance their business processes and improve the efficiency of their operations.
We are now seeing larger opportunities as we continue to nurture Tier 1 carrier partnerships with
worldwide reach and develop differentiated solutions tailored to diverse global enterprise
applications.
At the end of fiscal 2012 we had more than 1.3 million active MRM devices in service
with our customers around the world, of which 265,000 are devices served directly by CalAmp
bundled network solutions in the vehicle finance and remote car start markets. This expanding
subscriber base is generating a recurring revenue stream for CalAmp that should continue to
grow in the coming years. We look to leverage our device platforms, our cloud-based computing
infrastructure, and software application expertise to move up the value chain and offer a broad
range of turnkey solutions for new and emerging applications.
In our Wireless Networks unit, we experienced steady growth in our Energy and Rail
verticals, which are important long term growth markets for CalAmp. Although we experienced
ongoing softness in the Public Safety market where funding constraints and spectrum uncertainty
dampened demand, the future prospects for this market have improved. Recent actions by
Congress to set aside the D-Block spectrum for broadband LTE infrastructure to provide
interoperable communications for first responders could form the basis of an inflection point for
CalAmp in this vertical. As with other emerging opportunities in Rail and Energy, we plan to
bring to market in the coming years cutting-edge bundled hardware, software and network
solutions for Public Safety communications that support converged voice, video and mission-
critical data.
In our Satellite business segment we successfully completed an operational transition
resulting in improved gross margins and a substantially lower breakeven point. Near the end of
fiscal 2012 we launched two new products that increased our product line diversity and drove
revenue growth late in the year. The broadening of our satellite product portfolio should help
reduce the top line volatility we have experienced in this business segment over the last few
years. With this business now transitioned to a variable cost operating model, and with the
introduction of new product offerings, we expect our Satellite business will generate double digit
gross margins and positive cash flow in fiscal 2013 and beyond.
scal 2012 performance in which we achieved many
Overall, we are quite pleased with our fi
strategic milestones and saw significant improvements in both financial and operational
performance. We will continue to focus our resources on those markets and applications that we
believe have excellent long term growth prospects, addressing them with products and services
that have sustainable competitive advantages. The results of the last year are a clear expression
of the transformation of CalAmp to a growing and profitable enterprise, with a strong sales
pipeline and solid momentum. I am truly proud and privileged to have the opportunity to lead such
a dynamic company at one of the most exciting times in its history. I would like to thank the
dedicated and talented employees of our company as well as of all of you for the continued support
in our ongoing efforts to further enhance shareholder value.
Sincerely,
Michael Burdiek
President & Chief Executive Officer
June 14, 2012
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, 2012
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 [X] 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 [X] 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 27, 2011 was
approximately $79,039,000. As of April 6, 2012, there were 28,704,918 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 31, 2012 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 technology 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 commercial, industrial and government customers, and Satellite, which
focuses on the North American Direct Broadcast Satellite ("DBS") market.
WIRELESS DATACOM
The Wireless DataCom segment provides wireless technology, products and services for industrial Machine-to-
Machine (M2M) and Mobile Resource Management (MRM) market segments 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 emerging 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, narrowband and broadband 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 an MRM business, as described further below.
Wireless Networks
CalAmp's Wireless Networks business provides products, systems and services to industrial, utility, energy and
transportation enterprises and state and local governmental entities 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 also play a strategic role in support of North American Homeland Security initiatives and global electrical grid
modernization.
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.
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.
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
providers, 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 vehicle 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 and whole
home video networking devices for digital and high definition satellite TV reception. CalAmp's satellite products are
sold primarily to EchoStar, an affiliate of Dish Network, one of the two DBS system operators in the U.S., 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, during fiscal 2012, the
Company transitioned its principal satellite products to full turn-key production by off-shore contractors.
A substantial portion of the Company's products, components, and subassemblies are procured from foreign
suppliers and contract manufacturers located primarily in Hong Kong and 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 2012. 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 wireless communication systems for utilities, public safety
and industrial monitoring and controls for mobile and fixed location IP data communication applications, cellular
tracking products and services for MRM applications and satellite DBS products. 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 2012, 2011 and 2010 were $11,328,000, $11,125,000, and
$10,943,000, respectively. During this three-year period, the Company's research and development expenses have
ranged between 8% and 10% of annual consolidated revenues.
SALES AND MARKETING
The Company's revenues are derived mainly from customers in the United States, which represented 89%, 91%,
and 93% of consolidated revenues in fiscal 2012, 2011 and 2010, 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 Wireless DataCom segment’s sales and marketing activities are
supported internationally with sales personnel in Canada, Israel and the United Kingdom.
The Satellite segment sells its products primarily to Echostar, an affiliate of Dish Network, one of 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
Year Ended February 28,
2011
2010
2012
EchoStar
Satellite
28.3%
31.0%
48.6%
EchoStar, an affiliate of Dish Network, serves 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.
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 Solutions, GE-
MDS, Freewave, Sierra Wireless, GenX, Spireon, Novatel Wireless-Enfora and Xirgo.
Satellite
The Company believes that the principal competitors for its DBS products include Sharp, Wistron NeWeb
Corporation, Microelectronics Technology, Pro Brand and Global Invacom. Because the Company is typically not the
sole source supplier of its satellite products, it is exposed to ongoing price and margin pressures in this business.
BACKLOG
The Company's products are sold to customers that generally do not 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, 2012, the Company had 17 U.S. patents and 11 foreign patents in its Wireless DataCom business.
In addition to its awarded patents, the Company has 6 patent applications in process.
Trademarks
CalAmp and Dataradio are federally registered trademarks of the Company.
EMPLOYEES
At February 28, 2012, the Company had approximately 350 employees and approximately 20 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
AGE
POSITION
Michael Burdiek
Garo Sarkissian
Richard Vitelle
52
45
58
President and Chief Executive Officer
Vice President, Corporate Development
Vice President, Finance, Chief Financial Officer and Corporate Secretary
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. In June 2011, he was promoted to CEO
and was appointed to the Company’s Board of Directors. 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 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 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.
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
5
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 applicable 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 28% of the Company’s consolidated revenues for fiscal 2012. The loss of EchoStar as a
customer, a 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:
•
•
•
•
•
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;
6
•
•
•
•
•
•
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 products are
manufactured by a single subcontractor, and an alternative supply source may not be 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.
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.
7
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 11%, 9% and 7% of CalAmp’s total sales for the fiscal years
ended February 28, 2012, 2011 and 2010, 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 products, 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.
Disruptions in global credit and financial markets could materially and adversely affect our business and results of
operations.
There is significant uncertainty about the stability of global credit and financial markets. Credit market
dislocations, including as a result of the Eurozone concerns, could cause interest rates and the cost of borrowing to rise or
reduce the availability of credit, which could negatively affect customer demand for our products if they responded to
such credit market dislocations by suspending, delaying or reducing their capital expenditures. Moreover, since we
generate more than 10% of our revenues outside the United States, fluctuations in foreign currencies can have an impact
on our results of operations which are expressed in U.S. dollars. In addition, currency variations can adversely affect
margins on sales of our products in countries outside of the United States and margins on sales of products that include
components obtained from suppliers located outside of the United States.
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 28 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
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.
8
We rely on access to third-party patents and intellectual property, and our future results could be materially adversely
affected if we are unable to secure such access in the future.
Many of our hardware solutions and services are designed to include third-party intellectual property, and in the
future we may need to seek or renew licenses relating to such intellectual property. Although we believe that, based on
past experience and industry practice, such licenses generally can be obtained on reasonable terms, there is no assurance
that the necessary licenses would be available on acceptable terms or at all. Some licenses we obtain may be
nonexclusive and, therefore, our competitors may have access to the same technology licensed to us. If we fail to obtain
a required license or are unable to design around a patent where we do not hold a license, we may be unable to sell some
of our hardware solutions and services, and there can be no assurance that we would be able to design and incorporate
alternative technologies, without a material adverse effect on our business, financial condition, and results of operations.
Our competitors have or may obtain patents that could restrict our ability to offer our hardware solutions and
services, or subject us to additional costs, which could impede our ability to offer our hardware solutions and services
and otherwise adversely affect us. We may, from time to time, also be subject to litigation over intellectual property
rights or other commercial issues.
Several of our competitors have obtained and can be expected to obtain patents that cover hardware solutions and
services directly or indirectly related to those offered by us. There can be no assurance that we are aware of all existing
patents held by our competitors or other third parties containing claims that may pose a risk of our infringement on such
claims by our hardware solutions and services. In addition, patent applications in the United States may be confidential
until a patent is issued and, accordingly, we cannot evaluate the extent to which our hardware solutions and services may
infringe on future patent rights held by others.
Even with technology that we develop independently, a third party may claim that we are using inventions
claimed by their patents and may initiate litigation to stop us from engaging in our normal operations and activities, such
as engineering and development and the sale of any of our hardware solutions and services. Furthermore, because of
technological changes in the machine-to-machine (M2M) industry, current extensive patent coverage, and the rapid
issuance of new patents, it is possible that certain components of our hardware solutions, services, and business methods
may unknowingly infringe the patents or other intellectual property rights of third parties. From time to time, we have
been notified that we may be infringing such rights.
In the highly competitive and technology-dependent telecommunications field in particular, litigation over
intellectual property rights is a significant business risk, and some third parties are pursuing a litigation strategy the goal
of which is to monetize otherwise unutilized intellectual property portfolios via licensing arrangements entered into
under threat of continued litigation. Regardless of merit, responding to such litigation can consume significant time and
expense. In certain cases, we may consider the desirability of entering into such licensing agreements or arrangements,
although no assurance can be given that these licenses can be obtained on acceptable terms or that litigation will not
occur. If we are found to be infringing any intellectual property rights, we may be required to pay substantial damages. If
there is a temporary or permanent injunction prohibiting us from marketing or selling certain hardware solutions and
services or a successful claim of infringement against us requires us to pay royalties to a third party, our financial
condition and operating results could be materially adversely affected, regardless of whether we can develop non-
infringing technology. While in management’s opinion we do not have a potential liability for damages or royalties from
any known current legal proceedings or claims related to the infringement of patent or other intellectual property rights
that would individually or in the aggregate have a material adverse effect on our financial condition and operating
results, the results of such potential claims cannot be predicted with certainty. In any potential matters related to
infringement of patent or other intellectual property rights of others or should several of these matters be resolved against
us in the same reporting period, our financial condition and operating results could be materially adversely affected.
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. Industry growth has been and may continue to be
affected by the availability of licenses required to use frequencies and related costs. 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.
9
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 to three-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 MRM business depends upon several Internet-based systems that are proprietary to our Company. These
applications, which are hosted by an independent 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.
We may be subject to breaches of our information technology systems, which could damage our reputation, vendor,
and customer relationships, and our customers’ access to our services.
Our business requires it to use and store personally identifiable information of our employees and customers. We
require user names and passwords in order to access our information technology systems. We also use encryption and
authentication technologies to secure the transmission and storage of data.
These security measures may be compromised as a result of third-party security breaches, employee error,
malfeasance, faulty password management, or other irregularity, and may result in persons obtaining unauthorized access
to our data or accounts. If a computer security breach affects our systems, it could damage our reputation and also
expose us to litigation and possible liability, which could have a material adverse effect on our business, results of
operations and financial condition.
CalAmp’s products are subject to mandatory regulatory approvals in the United States and other countries that are
subject to change, which could make 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 Federal Communications Commission (“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.
We may be subject to product liability, warranty and recall claims, which may increase the costs of doing business
and adversely affect our business, financial condition and results of operations.
We are subject to a risk of product liability or warranty claims if our products or services actually or allegedly fail
to perform as expected or the use of our products results, or are alleged to result, in bodily injury and/or property
damage. While we maintain what we believe to be reasonable limits of insurance coverage to appropriately respond to
such liability exposures, large product liability claims, if made, could exceed our insurance coverage limits and insurance
may not continue to be available on commercially acceptable terms, if at all. We cannot assure you that we will not incur
10
significant costs to defend these claims or that we will not experience any product liability losses in the future. In
addition, if any of our designed products are, or are alleged to be, defective, we may be required to participate in recalls
and exchanges of such products. In the past five years, our warranty expense has fluctuated between approximately 0.3%
and 9.5% of sales on an annual basis. Individual quarters were above or below the annual averages. The future cost
associated with providing product warranties and/or bearing the cost of repair or replacement of our products could
exceed our historical experience and have a material adverse effect on our business, financial condition and results of
operations.
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.
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 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 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.
11
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.
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, 2012, the price of CalAmp common stock as reported on The
Nasdaq Stock Market ranged from a high of $5.14 to a low of $1.96. 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.
12
ITEM 2. PROPERTIES
The Company's principal facilities, all leased, are as follows:
Square
Footage
Location
Use
Oxnard, California 98,000
Corporate office and principal 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
ITEM 3. LEGAL PROCEEDINGS
The Company is 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, 2012
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Fiscal Year Ended February 28, 2011
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
LOW HIGH
$ 2.90
2.70
2.60
4.00
$ 1.96
2.00
2.34
2.46
$ 3.38
3.98
4.49
5.14
$ 3.60
2.68
3.00
3.39
At March 31, 2012 the Company had approximately 1,700 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 5,500. 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,
2012
2011
2010
2009
2008
(In thousands except per share amounts)
$
138,728
$
114,333
$
112,113
$
98,370
$
140,907
Cost of revenues
96,709
84,775
89,723
60,244
122,412
Gross profit
Operating expenses:
Research and development
Selling
General and administrative
Intangible asset amortization
Write-off of acquired in-process
research and development
Impairment loss
42,019
29,558
22,390
38,126
18,495
11,328
11,060
10,984
1,277
-
-
11,125
10,503
8,858
1,132
-
-
10,943
9,542
10,523
1,367
-
-
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
Total operating expenses
34,649
31,618
32,375
Operating income (loss)
7,370
(2,060)
(9,985)
(44,984)
(100,818)
Non-operating expense, net
(2,091)
(1,395)
(2,240)
(911)
(2,472)
Income (loss) from continuing operations
before income taxes
5,279
(3,455)
(12,225)
(45,895)
(103,290)
Income tax benefit (provision)
(61)
172
1,374
(3,770)
20,940
Income (loss) from continuing operations
5,218
(3,283)
(10,851)
(49,665)
(82,350)
Loss from discontinued operations,
net of tax
Loss on sale of discontinued operations,
net of tax
-
-
-
-
-
-
-
-
(597)
(1,202)
Net income (loss)
$
5,218
$
(3,283)
$
(10,851)
$
(49,665)
$
(84,149)
Basic earnings (loss) per share from:
Continuing operations
$
0.19
$
(0.12)
$
(0.43)
$
(2.01)
$
(3.45)
Discontinued operations
-
-
-
-
(0.08)
Total basic earnings (loss) per share
$
0.19
$
(0.12)
$
(0.43)
$
(2.01)
$
(3.53)
Diluted earnings (loss) per share from:
Continuing operations
$
0.18
$
(0.12)
$
(0.43)
$
(2.01)
$
(3.45)
Discontinued operations
-
-
-
-
(0.08)
Total diluted earnings (loss) per share
$
0.18
$
(0.12)
$
(0.43)
$
(2.01)
$
(3.53)
14
BALANCE SHEET DATA
Current assets
Current liabilities
February 28,
2012
2011
2010
2009
2008
(In thousands)
$
39,789
$
38,103
$
37,490
$
44,175
$
66,767
$
23,601
$
32,869
$
33,095
$
45,458
$
40,059
Working capital (deficit)
$
16,188
$
5,234
$
4,395
$
(1,283)
$
26,708
Current ratio
Total assets
Long-term debt
1.7
1.2
1.1
1.0
1.7
$
51,481
$
55,485
$
56,953
$
69,647
$
143,041
$
1,900
$
4,460
$
4,170
$
-
$
27,187
Stockholders' equity
$
24,977
$
17,602
$
19,199
$
23,199
$
73,420
Factors affecting the year-to-year comparability of the Selected Financial Data include business acquisitions, asset
impairment charges and other significant operating charges, 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.
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.
Basis of Presentation
The Company uses a 52-53 week fiscal year ending on the Saturday closest to February 28, which for fiscal years
2012, 2011 and 2010 fell on February 25, 2012, February 26, 2011, and February 27, 2010, respectively. In these
15
consolidated financial statements, the fiscal year end for all years is shown as February 28 for clarity of presentation.
Fiscal years 2012, 2011 and 2010 each consisted of 52 weeks.
Overview
CalAmp Corp. ("CalAmp" or the "Company") develops and markets wireless technology 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 commercial, industrial and government customers, and Satellite, which
focuses on the North American Direct Broadcast Satellite market.
WIRELESS DATACOM
The Wireless DataCom segment provides wireless communications technology, products and services for
industrial Machine-to-Machine (M2M) and Mobile Resource Management (MRM) market segments 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 an MRM business.
SATELLITE
The Company's satellite products are sold primarily to Echostar, an affiliate of Dish Network, for incorporation
into complete subscription satellite television systems. Revenue of the Company’s Satellite segment amounted to $39.6
million, $35.9 million and $54.7 million in fiscal years 2012, 2011 and 2010, respectively
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 approximately 28% of the
Company's fiscal 2012 consolidated revenues. 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
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.
16
Warranty
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 ("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”. 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, 2012,
the Company had unrecognized tax benefits for uncertain tax positions of $1,091,000.
Impairment Assessments of Purchased Intangible Assets and Other Long-Lived Assets
At February 28, 2012, the Company had $2.7 million in net intangible assets and $1.8 million in net property and
equipment and improvements on its consolidated balance sheet. The Company believes the valuation of its long-lived
assets is a "critical accounting estimate" because if circumstances arose that led to a decrease in the valuation of such
assets, it could have a material impact on the Company's results of operations.
The Company makes judgments about the recoverability of 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.
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-
17
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 that are 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.
Results of Operations, Fiscal Years 2010 Through 2012
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,
2011
2010
2012
Revenues
Cost of revenues
Gross profit
Operating expenses:
Research and development
Selling
General and administrative
Intangible asset amortization
Operating income (loss)
Other expense, net
Income (loss) before income taxes
Income tax benefit
Net income (loss)
100.0%
69.7
30.3
100.0%
74.1
25.9
100.0%
80.0
20.0
8.2
8.0
7.9
0.9
5.3
(1.5)
3.8
-
3.8%
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%)
The Company's revenue, gross profit and operating income (loss) by business segment for the last three years are
as follows:
18
REVENUE BY SEGMENT
Year ended February 28,
2012
2011
2010
$000s
$
99,121
39,607
138,728
$
% of
Total
71.4%
28.6%
100.0%
$000s
$
78,434
35,899
114,333
$
% of
Total
68.6%
31.4%
100.0%
$000s
$
57,398
54,715
112,113
$
GROSS PROFIT BY SEGMENT
Year ended February 28,
2012
2011
2010
$000s
$
$
38,632
3,387
42,019
% of
Total
91.9%
8.1%
100.0%
$000s
$
$
27,922
1,636
29,558
% of
Total
94.5%
5.5%
100.0%
$000s
$
$
18,132
4,258
22,390
OPERATING INCOME (LOSS) BY SEGMENT
Year ended February 28,
2012
2011
2010
% of
Total
Revenue
8.3%
(0.2%)
(2.8%)
5.3%
% of
Total
Revenue
3.7%
(2.5%)
(3.0%)
(1.8%)
$000s
$
4,218
(2,903)
(3,375)
(2,060)
$000s
$
11,564
(292)
(3,902)
7,370
$
$
$
$000s
$
(6,007)
(371)
(3,607)
(9,985)
% of
Total
51.2%
48.8%
100.0%
% of
Total
81.0%
19.0%
100.0%
% of
Total
Revenue
(5.4%)
(0.3%)
(3.2%)
(8.9%)
Segment
Wireless DataCom
Satellite
Total
Segment
Wireless DataCom
Satellite
Total
Segment
Wireless DataCom
Satellite
Corporate expenses
Total
Fiscal Year 2012 compared to Fiscal Year 2011
Revenue
Wireless DataCom revenue increased by $20.7 million, or 26%, to $99.1 million in fiscal 2012 compared to fiscal
2011. The MRM business contributed significantly to the increased revenue through the addition of new customers and
growth in orders from existing customers. The remaining Wireless DataCom revenue increase was attributable to higher
sales of the Wireless Networks business with significant contribution from a Positive Train Control project, which
accounted for $3.3 million of the year-over year revenue increase, and revenue of $3.0 million from the sale of patents in
the second quarter of fiscal 2012.
Satellite revenue increased by $3.7 million, or 10%, to $39.6 million in fiscal 2012 compared to fiscal 2011. This
increase was attributable in part to the launch of a new home video and data networking product that the Company began
shipping to its key satellite customer in the fourth quarter of fiscal 2012. The Company expects meaningful revenue
contributions from this new product in fiscal 2013.
19
Gross Profit and Gross Margins
Wireless DataCom gross profit increased by $10.7 million to $38.6 million in fiscal 2012 compared to $27.9
million in the previous year, and gross margin improved to 39.0% in fiscal 2012 from 35.6% in fiscal 2011 due primarily
to increased absorption of fixed manufacturing costs on higher revenue and revenue of $3.0 million from the sale of
patents in fiscal 2012 for which there was no corresponding cost of revenues.
Satellite gross profit increased by $1.8 million to $3.4 million in fiscal 2012 compared to $1.6 million in the
previous year. Gross margin of the Satellite business increased to 8.6% in fiscal 2012 from 4.6% in fiscal 2011 as a
result of the Company’s transition in fiscal 2012 to a variable cost operating model in which substantially all of the
satellite products are manufactured by off-shore subcontractors.
See also Note 12 to the accompanying consolidated financial statements for additional operating data by business
segment.
Operating Expenses
Consolidated research and development (“R&D”) expense increased 2% to $11.3 million in fiscal 2012 from
$11.1 million in fiscal 2011 due to severance costs arising from personnel reductions in the Satellite business ($116,000)
and higher 401(k) plan employer contribution expense ($91,000) due to reinstatement of 401(k) employer matching
contributions in January 2011.
Consolidated selling expenses increased from $10.5 million in fiscal 2011 to $11.1 million in fiscal 2012 due
primarily to higher payroll expense as a result of additional sales personnel.
Consolidated general and administrative expenses ("G&A") increased by $2.1 million to $11.0 million in fiscal
2012 due to higher payroll and legal expenses. Higher G&A payroll expense is primarily due to incentive expenses
recorded in the current year as a result of the Company’s improving profitability and hiring additional personnel. Legal
expense was higher because last year’s legal expense was reduced by $230,000 due to an indemnification settlement
entered into with another company involving defense costs plus legal expense incurred this year in connection with the
shut-down of the Company’s French subsidiary.
Amortization of intangibles increased from $1.1 million in fiscal 2011 to $1.3 million in fiscal 2012. The
increase is attributable to the amortization of the Dataradio tradename asset over a period of seven years commencing in
the first quarter of fiscal 2012. Previously this tradename asset was classified as an indefinite-lived asset and accordingly
it was not being amortized prior to fiscal 2012.
Non-operating Expense, Net
Non-operating expense increased from $1.4 million in fiscal 2011 to $2.1 million in fiscal 2012 due to cumulative
foreign currency translation account losses of $801,000 related to the Company’s investment in its French subsidiary that
were written off in the second quarter of fiscal 2012 as a result of the decision to wind down this subsidiary.
Income Tax Provision
No income tax provision was recorded during fiscal 2012, other than minimum state and federal income taxes,
because of the existence of net operating loss carryforwards that offset pretax income. The tax benefit of $172,000 in
fiscal 2011 was related to the carryback of net operating losses of the Company’s French subsidiary.
At February 28, 2012, the Company had a net deferred income tax asset balance of $11.8 million. The net
deferred income tax asset balance is comprised of a gross deferred tax asset of $50.9 million and a valuation allowance
of $39.1 million. The valuation allowance was established in prior years during periods when the Company had
cumulative losses and was not able to demonstrate that it could generate sufficient future taxable income to utilize all of
the tax benefits. As a result of the Company’s return to profitable operations in fiscal 2012 and based on its latest
financial projections, the Company expects to reverse a substantial portion of the deferred tax asset valuation allowance
in the fourth quarter of fiscal 2013, which would result in recognizing an income tax benefit in a corresponding amount.
20
Fiscal Year 2011 compared to Fiscal Year 2010
Revenue
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.
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 older generation DBS products.
Gross Profit and Gross Margins
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.
Satellite gross profit was $1.6 million in fiscal 2011 compared to $4.3 million in the previous year. The decrease
in gross profit was primarily attributable to the decrease in revenue. Satellite gross margin declined 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; (ii) 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.
See also Note 12 to the accompanying consolidated financial statements for additional operating data by business
segment.
Operating Expenses
Consolidated R&D expense increased 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 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 in fiscal 2011 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 was attributable to some intangible assets becoming fully amortized during fiscal 2011.
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
rate on 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.
21
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 in that year. 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 was not
considered to be more likely than not.
Liquidity and Capital Resources
On August 15, 2011, the Company and Square 1 Bank entered into the Fourth Amendment (the “Fourth
Amendment”) to the Loan and Security Agreement dated as of December 22, 2009 (as amended, the "Amended Loan
Agreement"), which provides for borrowings of up to $12 million. Effective with the Fourth Amendment, the credit
facility is now comprised of a $3 million term loan, which was fully funded on the date of the Fourth Amendment, and a
revolver of up to $12 million. The maturity date of the Amended Loan Agreement is August 15, 2014. The revolver
borrowing limit is equal to the lesser of (a) $12 million minus the term loan principal outstanding at any point in time, or
(b) 85% of eligible accounts receivable. At February 28, 2012, $9.0 million was available for borrowing under the
revolver. The term loan principal is repayable at the rate of $100,000 per month beginning April 2012. All borrowings
under the Amended Loan Agreement bear interest at Square 1 Bank's prime rate plus 1.0% per annum. Interest is
payable on the last day of each calendar month. The Company paid a loan fee of $60,000 to Square 1 Bank in
connection with the Fourth Amendment. In conjunction with entering into the Fourth Amendment, the Company repaid
in full its 12% subordinated notes in the aggregate principal amount of $5 million.
The Amended 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 and a minimum debt coverage ratio. The Amended 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 Amended Loan Agreement 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
Amended Loan Agreement are secured by substantially all of the assets of the Company and its domestic subsidiaries.
At February 28, 2012, the Company was in compliance with its debt covenants under the Amended Loan Agreement.
The Company's primary sources of liquidity are its cash and cash equivalents, which amounted to $5,601,000 at
February 28, 2012, and the revolving line of credit with Square 1 Bank. During fiscal 2012, cash and cash equivalents
increased by $1,360,000. During this period, cash was provided by operations in the amount of $12,432,000, proceeds
from the bank term loan of $3,000,000 and collections on a note receivable of $566,000, partially offset by repayment of
the 12% subordinated notes payable of $5,000,000, net repayments on the bank working capital line of credit of
$7,489,000, capital expenditures of $1,076,000 and payment of employee withholding taxes on the net share settlement
of vested equity awards of $1,035,000.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of the Securities and
Exchange Commission Regulation S-K.
Contractual Obligations
Following is a summary of the Company's contractual cash obligations as of February 28, 2012 (in thousands):
22
Contractual Obligations
Long-term debt
Operating leases
Purchase obligations
Payments Due by Period
Less than
1 year
1-3 years
3-5 years
More
than 5
years
Total
$
1,100
$
1,900
$
-
$
-
$
3,000
1,209
33,570
1,788
-
1,077
-
4,074
33,570
-
Total contractual obligations
$
35,879
$
3,688
$
1,077
$
-
$
40,644
Purchase obligations consist primarily of inventory purchase commitments.
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 $65,000 related to the Company's Canadian subsidiary
is included in accumulated other comprehensive loss in the stockholders' equity section of the consolidated balance sheet
at February 28, 2012. Foreign currency gains (losses) included in the consolidated statements of operations were
$(45,000), $40,000 and $(288,000) in fiscal 2012, 2011 and 2010, respectively. In addition, during fiscal 2012 the
Company wrote off $801,000 of cumulative foreign currency translation losses related to its French subsidiary as a result
of the decision to wind down this subsidiary.
Interest Rate Risk
The Company has variable-rate bank debt. A fluctuation of one percent in the interest rate on the $12 million
credit facility with Square 1 Bank would have an annual impact of approximately $120,000 on the Company's
consolidated statement of operations assuming that the full amount of the facility was borrowed.
23
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 (collectively,
the “Company”) as of February 28, 2012 and 2011, and the related consolidated statements of operations, stockholders'
equity and comprehensive income (loss), and cash flows for each of the three years in the period ended February 28,
2012. 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 consolidated financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 the Company as of February 28, 2012 and 2011, and the results of its operations and its cash flows
for each of the three years in the period ended February 28, 2012, in conformity with U.S. generally accepted accounting
principles.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the Company’s internal control over financial reporting as of February 28, 2012, based on criteria
established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission, and our report dated April 26, 2012 expressed an unqualified opinion on the effectiveness of the
Company’s internal control over financial reporting.
SingerLewak LLP
Los Angeles, California
April 26, 2012
24
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
CalAmp Corp. and Subsidiaries
We have audited CalAmp Corp. and subsidiaries' (collectively, the “Company”) internal control over financial
reporting as of February 28, 2012, based on criteria established in Internal Control — Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible
for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based
on our audit.
We conducted our audit 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 effective internal control over financial reporting was maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audit also included performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's internal control over financial reporting
includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (b) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (c) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of February 28, 2012, based on criteria established in Internal Control — Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets as of February 28, 2012 and 2011, and the related consolidated
statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows for each of the three
years in the period ended February 28, 2012 of the Company and our report dated April 26, 2012 expressed an
unqualified opinion.
SingerLewak LLP
Los Angeles, California
April 26, 2012
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
$254 and $290 at February 28, 2012 and 2011, 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
Current portion of long-term debt
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;
28,722 and 28,147 shares issued and outstanding
at February 28, 2012 and 2011, respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Total stockholders' equity
February 28,
2012
2011
$
5,601
$
4,241
14,383
10,057
5,425
4,323
39,789
1,761
6,412
2,738
781
16,814
9,890
1,961
5,197
38,103
1,877
9,887
4,012
1,606
$
51,481
$
55,485
$
-
1,100
9,523
4,405
6,305
2,268
23,601
$
7,489
-
14,103
3,341
5,796
2,140
32,869
1,900
1,003
4,460
554
-
-
287
154,485
(129,730)
(65)
24,977
51,481
$
281
153,135
(134,948)
(866)
17,602
55,485
$
See accompanying notes to consolidated financial statements.
26
CALAMP CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Year Ended February 28,
2011
2010
2012
Revenues
Cost of revenues
Gross profit
Operating expenses:
Research and development
Selling
General and administrative
Intangible asset amortization
Total operating expenses
Operating income (loss)
Non-operating income (expense):
Interest expense, net
Foreign currency translation account write-off
Loss on sale of investment
Other income (expense), net
Total non-operating expense
Income (loss) before income taxes
Income tax benefit (provision)
$
138,728
$
114,333
$
112,113
96,709
42,019
11,328
11,060
10,984
1,277
34,649
7,370
(1,261)
(801)
-
(29)
(2,091)
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
(2,060)
(9,985)
(1,445)
-
-
50
(1,395)
(940)
-
(1,008)
(292)
(2,240)
5,279
(3,455)
(12,225)
(61)
172
1,374
Net income (loss)
$
5,218
$
(3,283)
$
(10,851)
Earnings (loss) per share:
Basic
Diluted
Shares used in computing basic and
diluted earnings (loss) per share:
Basic
Diluted
$
$
0.19
0.18
$
$
(0.12)
(0.12)
$
$
(0.43)
(0.43)
27,658
28,458
27,181
27,181
25,309
25,309
See accompanying notes to consolidated financial statements.
27
CALAMP CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME (LOSS)
(In thousands)
C ommon Stock
Share s
Amount
Additional
Paid-in
Capital
Re taine d
Earnings
(Accumulat
e d De ficit)
Accumulate d
O the r
C ompre he n-
sive Loss
Total
Stockholde rs'
Equity
Balances at February 28, 2009
25,217
$
252
$
144,881
$
(120,814)
$
(1,120)
$
23,199
(10,851)
254
Comprehensive loss:
Net loss
Foreign currency translation adjustments
Total comprehensive loss
Stock-based compensation expense
Issuance of shares for restricted
stock awards
Shares retained on net share settlement
of equity awards
Exercise of stock options
Sale of stock
Issuance 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 compensation expense
Issuance of shares for restricted
stock awards
Shares retained on net share settlement
of equity awards
Other
655
(170)
6
(2)
(3,283)
2,109
(6)
(403)
(18)
(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
Comprehensive income:
Net income
Write-off of currency translation account
Total comprehensive income
Stock-based compensation expense
Issuance of shares for restricted
stock awards
Shares issued on net share settlement
of equity awards
Exercise of stock options
Other
354
205
16
4
2
-
2,375
(4)
(1,037)
27
(11)
5,218
801
5,218
801
6,019
2,375
-
(1,035)
27
(11)
Balances at February 28, 2012
28,722
$
287
$
154,485
$
(129,730)
$
(65)
$
24,977
See accompanying notes to consolidated financial statements.
28
CALAMP CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended February 28,
2011
2010
2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
Stock-based compensation expense
Amortization of debt issue costs and discount
Write-off of currency translation account of foreign subsidiary
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
Collections on note receivable
Proceeds from sale of investment
Other
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from borrowings on bank line of credit
Proceeds from bank term loan
Proceeds from issuance of subordinated debt and warrants
Debt repayments
Net proceeds from sale of common stock
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
$
5,218
$
(3,283)
$
(10,851)
2,447
2,375
747
801
-
-
19
2,431
(167)
991
(4,580)
1,641
509
12,432
(1,076)
566
-
-
(510)
(7,489)
3,000
-
(5,000)
-
(65)
(1,035)
27
(10,562)
2,543
2,109
536
-
-
807
(20)
(294)
718
(510)
(2,083)
(722)
1,056
857
(1,245)
428
-
32
(785)
1,588
-
-
-
-
-
(405)
-
1,183
2,522
1,981
-
-
1,008
39
104
(2,780)
4,626
42
10,764
(5,991)
1,131
2,595
(1,066)
325
992
(36)
215
7,551
-
5,000
(22,728)
3,967
(544)
(123)
1
(6,876)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
-
-
139
Net change in cash and cash equivalents
1,360
1,255
(3,927)
Cash and cash equivalents at beginning of year
4,241
2,986
6,913
Cash and cash equivalents at end of year
$
5,601
$
4,241
$
2,986
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 technology solutions that deliver
data, voice and video for critical networked communication and other applications. The Company's two business
segments are Wireless DataCom, which serves commercial, industrial and government 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
2012, 2011 and 2010 fell on February 25, 2012, February 26, 2011, and February 27, 2010, respectively. In these
consolidated financial statements, the fiscal year end for all years is shown as February 28 for clarity of presentation.
Fiscal years 2012, 2011 and 2010 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 the recognition of revenues for products that are 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. The deferred product revenue and deferred product cost amounts are recognized on a
straight-line basis over the minimum contractual service period of one year. Revenues from renewals of data
communication services after the initial one year term are recognized as the services are provided. When customers
prepay data communication service 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 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. Costs and estimated earnings in excess of billings on uncompleted contracts
arise when contract revenues have been recognized on the percentage-of-completion method in advance of when the
30
amounts can be invoiced to the customers under the terms of the contracts. Such amounts are billable to the customers
upon various measures of performance, including achievement of certain milestones, completion of specified units, or
completion of a contract. Costs and estimated earnings in excess of billings on uncompleted contracts are included in
prepaid expenses and other current assets in the accompanying consolidated balance sheets.
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
At February 28, 2012, the Company’s cash and cash equivalents were maintained in financial institutions that
are insured up to the limit determined by the appropriate governmental agency. The amounts held in the United States
are fully insured; however, cash and cash equivalents held in Canadian bank accounts at February 28, 2012 exceeded the
insured limits by approximately US$560,000.
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
Year ended February 28,
2011
31.0%
2010
48.6%
2012
28.3%
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
B
C
February 28,
2011
2012
27.6%
33.4%
11.1%
4.8%
1.7% 12.4%
Customer A is a customer of the Company's Satellite segment. Customer B and C are customers 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 contract manufacturer. This supplier accounted for 50% and 49% of
Company's total inventory purchases in fiscal 2012 and 2011, respectively. As of February 28, 2012, this supplier
accounted for 57% 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 having known or 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.
31
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. The Company has capitalized certain internal use software
which is included in property and equipment.
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,
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.
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 one to two years and also considers the impact
of the known operational issues that may have a greater impact than historical trends. The 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. The Company evaluates the realizability of
its deferred income tax assets and a valuation allowance is provided, as necessary. In assessing this valuation allowance,
32
the Company reviews historical and future expected operating results and other factors, including its recent cumulative
earnings experience, expectations of future taxable income by taxing jurisdiction and the carryforward periods available
for tax reporting purposes, to determine whether it is more likely than not that deferred tax assets are realizable.
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 was included in accumulated other comprehensive loss in the stockholders’ equity
section of the balance sheet. During fiscal 2012, the Company wrote off the $801,000 foreign currency translation loss
as a result of the decision to shut down this French subsidiary.
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) before income
taxes were $(45,000), $40,000 and $(288,000) in fiscal 2012, 2011 and 2010, 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 stock options and stock purchase warrants were
exercised. In computing diluted earnings per share, the treasury stock method assumes that outstanding options and
warrants are exercised and the proceeds are used to purchase common stock at the average market price during the
period. Options and warrants 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
derivative securities.
Stock-Based Compensation
The Company measures stock-based compensation expense at the grant date, based on the fair value of the equity
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 type
of equity award, 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.
Recent Accounting Pronouncements
In June 2011, the FASB issued Accounting Standards Update No. 2011-05, Comprehensive Income (Topic
220): Presentation of Comprehensive Income. This guidance is effective for interim and annual periods beginning
December 15, 2011 and will require companies to present the components of net income and other comprehensive
income either as one continuous statement or as two consecutive statements. It eliminates the option to present
components of other comprehensive income as part of the statement of changes in stockholders' equity. The standard
does not change the items which must be reported in other comprehensive income, how such items are measured or when
they must be reclassified to net income. In addition, in December 2011, the FASB issued an amendment which defers
the requirement to present components of reclassifications of other comprehensive income on the face of the income
statement. The Company plans to adopt this pronouncement in the first quarter of fiscal 2013.
33
NOTE 2 – INVENTORIES
Inventories consist of the following (in thousands):
February 28,
2012
2011
Raw materials
Work in process
Finished goods
$
$
8,648
77
1,332
10,057
8,663
85
1,142
9,890
$
$
NOTE 3 – PROPERTY, EQUIPMENT AND IMPROVEMENTS
Property, equipment and improvements consist of the following (in thousands):
February 28,
2012
2011
Leasehold improvements
Plant equipment and tooling
Office equipment, computers and furniture
Less accumulated depreciation and amortization
$
$
1,725
11,179
4,319
17,223
(15,462)
1,761
1,487
12,941
2,706
17,134
(15,257)
1,877
$
$
NOTE 4 – INTANGIBLE ASSETS
Intangible assets are comprised as follows (in thousands):
Fe bruary 28, 2012
Fe bruary 28, 2011
Gross
Carrying
Amount
Accum-
ulate d
Amortiz -
ation
Amortiz ation
Pe riod
Gross
Carrying
Amount
Accum-
ulate d
Amortiz -
ation
Ne t
Ne t
Developed/core technology 5-7 years
$
2,853
$
2,154
$
699
$
3,101
$
1,783
$
1,318
T radename
Customer lists
7 years
5-7 years
Covenants not to compete
4-5 years
Patents
4-5 years
2,130
1,268
115
41
304
1,826
1,075
114
22
193
1
19
2,130
1,339
138
39
-
831
106
15
2,130
508
32
24
$
6,407
$
3,669
$
2,738
$
6,747
$
2,735
$
4,012
The Dataradio tradename, which was originally classified as an indefinite-lived asset at the time of its acquisition
in 2006, was recently determined to have a finite useful life as a result of management’s decision to phase out the use of
this tradename in the future. Effective at the beginning of fiscal 2012, the Company commenced the amortization of this
asset over a period of seven years.
Amortization expense of intangible assets was $1,277,000, $1,132,000, and $1,367,000 for the years ended
February 28, 2012, 2011 and 2010, 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):
34
2013
2014
2015
2016
T hereafter
1,054
465
305
305
609
$
2,738
NOTE 5 – FINANCING ARRANGEMENTS AND CONTRACTUAL CASH OBLIGATIONS
Bank Credit Facility
On August 15, 2011, the Company and Square 1 Bank entered into the Fourth Amendment (the “Fourth
Amendment”) to the Loan and Security Agreement dated as of December 22, 2009 (as amended, the "Amended Loan
Agreement"), which provides for borrowings of up to $12 million. Effective with the Fourth Amendment, the credit
facility is now comprised of a $3 million term loan, which was fully funded on the date of the Fourth Amendment, and a
revolver of up to $12 million. The maturity date of the Amended Loan Agreement is August 15, 2014. The revolver
borrowing limit is equal to the lesser of (a) $12 million minus the term loan principal outstanding at any point in time, or
(b) 85% of eligible accounts receivable. The term loan principal is repayable at the rate of $100,000 per month
beginning April 2012. All borrowings under the Amended Loan Agreement bear interest at Square 1 Bank's prime rate
plus 1.0% per annum. Interest is payable on the last day of each calendar month. The Company paid a loan fee of
$60,000 to Square 1 Bank in connection with the Fourth Amendment.
At February 28, 2011, the Company had no outstanding borrowings under the revolver, and the amount available
to borrow at that date amounted to $9,000,000. At February 28, 2012, the effective interest rate on the revolver and bank
term loan was 4.25%. At February 28, 2011, the effective interest rate on the revolver was 6.0%.
The Amended 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 and a minimum debt coverage ratio. The Amended 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 Amended Loan Agreement 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
Amended Loan Agreement are secured by substantially all of the assets of the Company and its domestic subsidiaries.
Subordinated Promissory Notes
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") that bore interest at 12% per annum and had a
maturity date of December 22, 2012. On August 15, 2011, in conjunction with entering into the Fourth Amendment
with Square 1 Bank, the Company paid in full the $5,000,000 outstanding principal balance of the Subordinated Notes
plus accrued interest of approximately $76,000, which included Subordinated Notes totaling $325,000 that were held by
two officers and one director of the Company. The 500,000 common stock purchase warrants that were issued to the
subordinated note holders at the time the notes were issued have an expiration date of December 22, 2012, and are
exercisable at $4.02 per share.
Long-Term Debt
Long-term debt is comprised of the following (in thousands):
35
Bank term loan
Subordinated promissory notes
Less unamortized discount on subordinated notes
Less portion due within one year
Long-term debt
Other Non-Current Liabilities
February 28,
2012
$
3,000
-
-
3,000
(1,100)
1,900
$
2011
-
$
5,000
(540)
4,460
-
4,460
$
Other non-current liabilities consist of the following (in thousands):
February 28,
Deferred rent
Deferred revenue
Contractual Cash Obligations
2012
$
$
279
724
1,003
2011
4
$
550
554
$
Following is a summary of the Company's contractual cash obligations as of February 28, 2012 (in thousands):
Future Cash Payments Due by Fiscal Year
Contractual Obligations
2013
2014
2015
2016
2017
There-
after
Total
Bank line of credit principal
$
1,100
$
1,200
$
700
$
-
$
-
$
-
$
3,000
Operating leases
Purchase obligations
1,209
33,570
986
-
802
-
789
-
288
-
-
4,074
33,570
Total contractual obligations
$
35,879
$
2,186
$
1,502
$
789
$
288
$
-
$
40,644
Purchase obligations consist primarily of inventory purchase commitments. Rent expense under operating leases
was $1,566,000, $1,918,000 and $1,962,000 in fiscal years 2012, 2011 and 2010, respectively.
NOTE 6 – INCOME TAXES
The Company's income (loss) before income taxes consists of the following (in thousands):
Year Ended February 28,
2011
2010
2012
$
$
$
6,047
(768)
5,279
(3,314)
(141)
(3,455)
$
$
$
(9,587)
(2,638)
(12,225)
Domestic
Foreign
Income (loss) before income taxes
36
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,
2011
2010
2012
$
(52)
(9)
-
(61)
-
-
-
-
$
-
172
172
-
$
-
-
-
-
-
-
1,098
276
1,374
Income tax benefit (provision)
$
(61)
$
172
$
1,374
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,
2011
2010
2012
Income tax benefit (provision) at U.S. statutory federal rate of 35%
State income tax benefit, net of federal income tax effect
Foreign taxes
Valuation allowance
Tax deduction for stock basis in dissolved subsidiaries
Other, net
Income tax benefit (provision)
(1,848)
(245)
(268)
1,816
-
484
(61)
1,209
108
123
(1,652)
-
384
172
$
$
$
$
$
$
4,278
760
84
(24,074)
18,089
2,237
1,374
The components of net deferred income tax assets are as follows (in thousands):
February 28,
2012
2011
$
$
Net operating loss carryforwards
Depreciation, amortization and impairments
Research and development credits
Stock-based compensation
Other tax credits
Capital loss carryforward
Inventory reserve
Payroll and employee benefit accruals
Warranty reserve
Allowance for doubtful accounts
Other, net
Gross deferred tax assets
Valuation allowance
Net deferred tax assets
Less current portion
Non-current portion
30,250
12,180
4,804
1,929
1,064
848
700
477
277
113
388
53,030
(41,182)
11,848
1,961
9,887
28,214
11,123
5,344
2,122
1,028
848
761
408
393
101
549
50,891
(39,054)
11,837
5,425
6,412
37
$
$
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, 2012, the Company had net operating loss carryforwards ("NOLs") of approximately $70.9
million and $87.2 million for federal and state purposes, respectively, expiring at various dates through fiscal 2032. If
certain substantial changes in the Company’s ownership were to occur, there could be an annual limitation on the amount
of the NOL carryforwards that can be utilized.
In 2008, the State of California adopted legislation that suspended the use of NOLs for tax years beginning on
or after January 1, 2008 and 2009. In 2010, the suspension was extended two years through the end of 2011. Current
California law reinstates use of NOLs in tax years beginning on or after January 1, 2012 absent extension of the
suspension.
As of February 28, 2012, the Company had foreign tax credit carryforwards of $546,000 expiring at various dates
through 2013 and research and development (“R&D”) tax credit carryforwards of $4.2 million and $3.4 million for
federal and state income tax purposes, respectively. The federal R&D credits expire at various dates through 2032. A
substantial portion of the state R&D credits have no expiration date.
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 $1.1
million and $1.3 million at February 28, 2012 and February 28, 2011, respectively, 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, 2012, such benefit would have been fully negated by a corresponding increase in the deferred income tax
valuation allowance because the Company has recorded a full valuation allowance against its recognized federal R&D
tax credits of $3.1 million due to uncertainty as to future realization.
A reconciliation of the beginning and ending amount of unrecognized tax benefits for uncertain tax positions 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
Decrease in fiscal 2012
Balance at February 28, 2012
$
6,449
(5,184)
1,265
-
1,265
(174)
1,091
$
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 fiscal 2011, 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 2007 and earlier are not subject to examination by U.S. federal and state tax
authorities. Certain income tax returns for fiscal years 2008 through 2012 remain open to examination by U.S federal
and state tax authorities. Income tax returns for fiscal years 2009 through 2012 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.
38
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. To date, stock
options, restricted stock, RSUs and bonus stock have been granted under the 2004 Plan. Options are generally granted
with exercise prices equal to market value on the date of grant. Substantially all 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.
The following table summarizes stock option activity for fiscal years 2012, 2011 and 2010 (options in thousands):
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
Granted
Exercised
Forfeited or expired
Outstanding at February 28, 2012
Number of
Options
1,869
320
(1)
(165)
2,023
186
-
(101)
2,108
163
(16)
(92)
2,163
Weighted
Average
Exercise Price
8.20
1.48
1.32
24.39
5.82
2.34
-
19.23
4.87
3.42
1.68
4.98
4.78
$
Exercisable at February 28, 2012
1,578
$
5.65
Changes in the Company's outstanding restricted stock shares and RSUs during fiscal years 2012, 2011 and 2010
were as follows (shares and RSUs in thousands):
39
Outstanding at February 28, 2009
Granted
Vested
Forfeited
Outstanding at February 28, 2010
Granted
Vested
Forfeited
Outstanding at February 28, 2011
Granted
Vested
Forfeited
Outstanding at February 28, 2012
Number of
Shares
and RSUs
907
1,147
(231)
(39)
1,784
863
(544)
(58)
2,045
762
(819)
(59)
1,929
Weighted
Average Grant
Date Fair
Value
2.50
1.81
2.49
2.26
2.06
2.34
2.15
1.78
2.16
3.59
2.21
1.99
2.71
$
The Company retained 279,764, 169,854 and 71,293 of the vested restricted stock shares and RSUs to cover the
required amount of employee withholding taxes in fiscal 2012, 2011 and 2010, respectively.
As of February 28, 2012, there were 717,041 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.
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,
2011
2010
6
74%
2.1%
0%
6
74%-79%
2.0%-3.0%
0%
2012
6
73%
1.9%
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 2012, 2011 and 2010 was $2.22, $1.54,
and $1.02, respectively.
The weighted average remaining contractual term and the aggregate intrinsic value of outstanding options as of
February 28, 2012 was 5.4 years and $2,312,000, respectively. The weighted average remaining contractual term and
the aggregate intrinsic value of exercisable options as of February 28, 2012 was 4.5 years and $1,297,000, respectively.
Stock-based compensation expense for the years ended February 28, 2012, 2011 and 2010 is included in the
following captions of the consolidated statements of operations (in thousands):
40
Year Ended February 28,
2012
2011
2010
Cost of revenues
$
100
$
151
$
164
Research and development
Selling
General and administrative
388
204
1,683
339
209
1,410
298
133
1,386
$
2,375
$
2,109
$
1,981
As of February 28, 2012, there was $4.4 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
2.7 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.
NOTE 8 – EARNINGS PER SHARE
The following is a summary of the calculation of weighted average shares used in the computation of basic and
diluted earnings (loss) per share (in thousands):
Basic weighted average number of common
shares outstanding
Effect of stock options, restricted stock,
restricted stock units and warrants
computed on treasury stock method
Diluted weighted average number of common
shares outstanding
Year Ended
February 28,
2011
2010
2012
27,658
27,181
25,309
800
-
-
28,458
27,181
25,309
Shares underlying stock options and warrants amounting to 907,000 at February 28, 2012 were excluded from the
calculations of diluted earnings per share for fiscal 2012 because based on the exercise prices of these derivative
securities their inclusion would have been anti-dilutive under the treasury stock method.
Shares underlying stock awards and warrants amounting to 4,673,000 and 4,677,000 at February 28, 2011 and
2010, respectively, were excluded from the computation of diluted earnings per share for the fiscal years then ended
because the Company reported a net loss during these years and the effect of inclusion would be anti-dilutive (i.e.,
including such securities would result in a lower loss per share).
NOTE 9 – OTHER FINANCIAL INFORMATION
Prepaid expenses and other current assets consist of the following (in thousands):
41
Deferred product costs
Costs and estimated earnings in excess of billings
on uncompleted contracts
Other
Supplemental Cash Flow Information
February 28,
2012
2011
$
2,091
$
1,994
556
1,676
4,323
$
1,331
1,872
5,197
$
"Net cash provided (used) by operating activities" in the consolidated statements of cash flows includes cash
payments for interest expense and income taxes as follows (in thousands):
Year Ended February 28,
2011
2010
2012
Interest expense paid
$
756
$
1,076
$
942
Income tax paid (net refunds received)
$
(64)
$
(803)
$
(6)
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
Allowance for doubtful accounts:
Fiscal 2010
Fiscal 2011
Fiscal 2012
Warranty reserve:
Fiscal 2010
Fiscal 2011
Fiscal 2012
552
413
290
3,286
1,231
700
486
386
114
305
647
635
Deferred Tax Assets Valuation Allowance
Fiscal 2010
Fiscal 2011
Fiscal 2012
18,230
41,297
41,182
24,074
1,652
1,816
(625)
(509)
(150)
(2,360)
(1,178)
(341)
(1,007)
(1,767)
(3,944)
413
290
254
1,231
700
994
41,297
41,182
39,054
NOTE 10 – COMMITMENTS AND CONTINGENCIES
Operating Lease Commitments
The Company leases a building in Oxnard, California that houses its corporate office and principal manufacturing
facilities 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. In addition, the Company leases
other facilities in California, Minnesota, Georgia and Canada. The Company also leases certain manufacturing
42
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
concerning contract performance, or claims that its products or services infringe the intellectual property of third parties.
While the outcome of any such claims or litigation cannot be predicted with certainty, management does not believe that
the outcome of any of such matters existing at the present time 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:
Ye ar e nde d Fe bruary 28, 2012
Ye ar e nde d Fe bruary 28, 2011
O pe rating Se gme nts
O pe rating Se gme nts
Wire le ss
DataC om
Sate llite
Corporate
Total
Wire le ss
DataCom
Sate llite
C orporate
Total
Revenues
Gross profit
Gross margin
$
99,121
$
39,607
$
138,728
$
78,434
$
35,899
$
38,632
$
3,387
$
42,019
$
27,922
$
1,636
39.0%
8.6%
30.3%
35.6%
4.6%
$
114,333
$
29,558
25.9%
Operating income (loss)
$
11,564
$
(292)
$
(3,902)
$
7,370
$
4,218
$
(2,903)
$
(3,375)
$
(2,060)
Year ended February 28, 2010
O pe rating Se gments
Wireless
DataCom
Satellite
C orporate
Total
Revenues
Gross profit
Gross margin
$
57,398
$
54,715
$
18,132
$
4,258
31.6%
7.8%
$
112,113
$
22,390
20.0%
Operating income (loss)
$
(6,007)
$
(371)
$
(3,607)
$
(9,985)
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 that are not allocated to the business segments. These non-allocated corporate expenses include
salaries and benefits of certain executive officers and expenses such as audit fees, investor relations, stock listing fees,
director and officer liability insurance, and director fees and expenses.
Effective with the fiscal 2012 first quarter, certain general and administrative expenses that were previously
treated as non-allocated Corporate expenses were allocated to the operating segments. In the above segment information
table, the operating income (loss) amounts for the year ended February 28, 2011 have been reclassified to conform with
the fiscal 2012 presentation. These changes had no effect on consolidated general and administrative 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.
43
The Company's revenues were derived mainly from customers in the United States, which represented 89%, 91%
and 93% of consolidated revenues in fiscal 2012, 2011 and 2010, respectively. No single foreign country accounted for
more than 5% of the Company's revenue in fiscal 2012, 2011 or 2010.
NOTE 13 – EMPLOYEE SAVINGS PLAN
The Company maintains a 401(k) Employee Savings Plan in the U.S. and a Registered Retirement Savings Plan
in Canada in which all employees are eligible to participate. The Company may make matching contributions to the
savings plans at the discretion of the Board of Directors. The Company reinstated the matching contributions to the
savings plans effective at the beginning of calendar 2011 equal to one-half of the first 4% of participants’ compensation
contributed to the plans. The Company recorded expense for the matching contributions of $312,000, $58,000 and
$34,000 in fiscal years 2012, 2011 and 2010, respectively.
NOTE 14 – QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following summarizes certain quarterly statement of operations data for each of the quarters in fiscal years
2012 and 2011 (in thousands, except percentages and per share data):
Revenues
Gross profit
Gross margin
Net income
Earnings per diluted share
First
Quarter
Second
Quarter
$
34,554
9,432
27.3%
520
0.02
$
33,801
11,825
35.0%
1,356
0.05
First
Quarter
Second
Quarter
Revenues
Gross profit
Gross margin
Net income (loss)
Earnings (loss) per diluted share
$
26,346
6,123
23.2%
(2,477)
(0.09)
$
29,490
7,368
25.0%
(930)
(0.03)
Fiscal 2012
Third
Quarter
$
32,752
10,169
31.0%
1,700
0.06
Fiscal 2011
Third
Quarter
$
29,553
7,699
26.1%
(179)
(0.01)
Fourth
Quarter
Total
$
37,621
10,593
28.2%
1,642
0.06
$
138,728
42,019
30.3%
5,218
0.18
Fourth
Quarter
Total
$
28,944
8,368
28.9%
303
0.01
$
114,333
29,558
25.9%
(3,283)
(0.12)
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, 2012, 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
44
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 Company’s management 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 Company’s management has assessed the effectiveness of the Company's internal control over financial
reporting as of February 28, 2012. 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 the Company has concluded that as of February 28, 2012 the Company's internal
control over financial reporting is effective based on those criteria.
The effectiveness of the Company’s internal control over financial reporting as of February 28, 2012 has been
audited by SingerLewak LLP, an independent registered public accounting firm, as stated in their report which is
included in Part II, Item 8 of 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 2012 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 April 24, 2012, 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 2013 executive officer
incentive compensation plan. The individuals covered by the fiscal 2013 executive officer incentive compensation plan
are:
• Michael Burdiek President and Chief Executive Officer
• Richard Vitelle Vice President Finance, Chief Financial Officer and Corporate Secretary
• Garo Sarkissian Vice President Corporate Development
Mr. Burdiek is eligible for target and maximum bonuses of up to 70% and 130%, respectively, of annual salary.
Mr. Vitelle is eligible for target and maximum bonuses of up to 50% and 90%, respectively, of his annual salary. Mr.
Sarkissian is eligible for target and maximum bonuses of up to 40% and 80%, 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
2013, and in the case of Mr. Sarkissian, attaining certain business goals.
45
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 31, 2012 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 31, 2012 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 31, 2012 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
31, 2012 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 31, 2012 is incorporated herein by reference
in response to this item.
46
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.
Reports of Independent Registered Public Accounting Firm
24-25
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
and Comprehensive Income (Loss)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2. Financial Statements Schedules:
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).
10. Material Contracts:
(i)
Other than Compensatory Plan or Arrangements:
10.1 Building lease dated June 10, 2003 between the Company and Sunbelt Enterprises for 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).
47
10.2 First Amendment to building lease dated December 20, 2010 between the Company and Sunbelt
Enterprises for 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 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).
10.5 Amendment dated March 24, 2010 to Loan and Security Agreement 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).
10.6
Amendment dated December 22, 2010 to Loan and Security Agreement 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).
10.7 Amendment dated August 15, 2011 to Loan and Security Agreement 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 8-K dated August 15, 2011).
(ii)
Compensatory Plans or Arrangements required to be filed as Exhibits to this Report pursuant to
Item 15 (b) of this Report:
10.8 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)
10.9 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).
10.10 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).
10.11 Employment Agreement between the Company and Michael Burdiek effective June 1, 2011 (incorporated
by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K dated May 27, 2011).
10.12 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).
10.13 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).
10.14 Form of Amendment to Executive Officer Employment Agreement dated December 19, 2008
(incorporated by reference to Exhibit 10.1 of the Company's Report on Form 10-Q for the period ended
November 29, 2008).
10.15 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).
10.16 Third Amendment to Employment Agreement effective June 1, 2011 between the Company and Richard
Gold (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K dated May
27, 2011).
10.17 Fourth Amendment to Employment Agreement between the Company and Richard Gold
effective March 1, 2012 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on
Form 8-K dated March 1, 2012).
48
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.
101
Interactive Data Files Pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of
February 28, 2012 and 2011, (ii) Consolidated Statements of Operations for the years ended February 28,
2012, 2011 and 2010, (iii) Consolidated Statement of Stockholders’ Equity for the years ended February
28, 2012, 2011 and 2010, (iv) Consolidated Statements of Cash Flows for the years ended February 28,
2012, 2011 and 2010, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text.
49
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, 2012.
SIGNATURES
CALAMP CORP.
By: /s/ Michael Burdiek
Michael Burdiek
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 24, 2012
Frank Perna, Jr.
/s/ Richard Gold Vice Chairman of the Board of Directors April 24, 2012
Richard Gold
/s/ Kimberly Alexy Director April 24, 2012
Kimberly Alexy
/s/ A.J. Moyer Director April 24, 2012
A.J. Moyer
/s/ Thomas Pardun Director April 24, 2012
Thomas Pardun
/s/ Larry Wolfe Director April 24, 2012
Larry Wolfe
/s/ Michael Burdiek President, Chief Executive Officer and
Michael Burdiek Director (principal executive officer) April 26, 2012
/s/ Richard Vitelle VP Finance, Chief Financial Officer and
Richard Vitelle Treasurer (principal accounting officer) April 26, 2012
50