CalAmp Corp. - Quarter Report: 2011 August (Form 10-Q)

calamp_10q.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

(Mark One)

x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 27, 2011

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

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)

(805) 987-9000
(Registrant’s telephone number, including area code)
__________________________

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 o

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	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 o No x

The number of shares outstanding of the registrant’s common stock as of September 19, 2011 was 28,703,715.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CALAMP CORP.

CONSOLIDATED BALANCE SHEETS (Unaudited)
(IN THOUSANDS, EXCEPT PAR VALUE)

	August 31,			February 28,
Assets	2011			2011
Current assets:
Cash and cash equivalents	$	4,256		$	4,241
Accounts receivable, less allowance for doubtful accounts of
$258 and $290 at August 31, 2011 and February 28, 2011, respectively		14,523			16,814
Inventories		11,844			9,890
Costs and estimated earnings in excess of billings on
uncompleted contracts		2,203			1,331
Deferred income tax assets		2,073			1,961
Prepaid expenses and other current assets		3,752			3,866
Total current assets		38,651			38,103
Property, equipment and improvements, net of
accumulated depreciation and amortization		1,543			1,877
Deferred income tax assets, less current portion		9,758			9,887
Intangible assets, net		3,350			4,012
Other assets		1,078			1,606
	$	54,380		$	55,485

Liabilities and Stockholders' Equity
Current liabilities:
Bank working capital line of credit	$	5,274		$	7,489
Current portion of long-term debt		500			-
Accounts payable		13,618			14,103
Accrued payroll and employee benefits		3,382			3,341
Deferred revenue		5,667			5,796
Other current liabilities		2,515			2,140
Total current liabilities		30,956			32,869

Long-term debt		2,500			4,460
Other non-current liabilities		570			554

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;
28,702 and 28,147 shares issued and outstanding
at August 31, 2011 and February 28, 2011, respectively		287			281
Additional paid-in capital		153,204			153,135
Accumulated deficit		(133,072	)		(134,948	)
Accumulated other comprehensive loss		(65	)		(866	)
Total stockholders' equity		20,354			17,602
	$	54,380		$	55,485

See accompanying notes to consolidated financial statements.

CALAMP CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

	Three Months Ended						Six Months Ended
	August 31,						August 31,
	2011			2010			2011			2010
Revenues	$	33,801		$	29,490		$	68,355		$	55,836
Cost of revenues		21,976			22,122			47,098			42,345
Gross profit		11,825			7,368			21,257			13,491

Operating expenses:
Research and development		2,679			2,779			5,783			5,542
Selling		2,852			2,675			5,444			5,297
General and administrative		3,030			2,200			5,529			4,709
Intangible asset amortization		310			276			662			582
Total operating expenses		8,871			7,930			17,418			16,130

Operating income (loss)		2,954			(562	)		3,839			(2,639	)

Non-operating expense:
Interest expense, net		(771	)		(368	)		(1,145	)		(736	)
Other expense, net		(821	)		-			(803	)		(32	)
Total non-operating expense		(1,592	)		(368	)		(1,948	)		(768	)

Income (loss) before income taxes		1,362			(930	)		1,891			(3,407	)
Income tax provision		(6	)		-			(15	)		-
Net income (loss)	$	1,356		$	(930	)	$	1,876		$	(3,407	)
Basic and diluted earnings (loss) per share	$	0.05		$	(0.03	)	$	0.07		$	(0.13	)
Shares used in computing earnings (loss) per share:
Basic		27,524			27,094			27,441			27,038
Diluted		28,310			27,094			28,268			27,038

See accompanying notes to consolidated financial statements.

CALAMP CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(IN THOUSANDS)

	Six Months Ended
	August 31,
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	1,876		$	(3,407	)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization		1,385			1,253
Stock-based compensation expense		1,099			1,004
Non-cash interest expense		724			268
Write-off of currency translation account of foreign subsidiary		801			-
Deferred tax assets, net		-			807
Other		-			9
Changes in operating assets and liabilities:
Accounts receivable		2,291			2,870
Inventories		(1,954	)		(1,379	)
Costs and estimated earnings in excess of billings
on uncompleted contracts		(872	)		(95	)
Prepaid expenses and other assets		223			376
Accounts payable		(485	)		(1,028	)
Accrued liabilities		432			(1,317	)
Deferred revenue		(129	)		677
NET CASH PROVIDED BY OPERATING ACTIVITIES		5,391			38

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(389	)		(712	)
Collections on note receivable		298			229
NET CASH USED IN INVESTING ACTIVITIES		(91	)		(483	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (repayments) of bank line of credit		(2,215	)		1,898
Proceeds from bank term loan		3,000			-
Repayment of subordinated notes payable		(5,000	)		-
Payment of debt issue costs		(63	)		-
Taxes paid related to net share settlement of vested equity awards		(1,016	)		(388	)
Proceeds from exercise of stock options		9			-
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(5,285	)		1,510

Net change in cash and cash equivalents		15			1,065
Cash and cash equivalents at beginning of period		4,241			2,986
Cash and cash equivalents at end of period	$	4,256		$	4,051

See accompanying notes to consolidated financial statements.

CALAMP CORP.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED AUGUST 31, 2011 AND 2010

NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

CalAmp Corp. ("CalAmp" or the "Company") develops and markets wireless communications solutions that deliver data, voice and video for critical networked applications. The Company's two business segments are Wireless DataCom, which serves utility, government and enterprise customers, and Satellite, which focuses on the North American Direct Broadcast Satellite market.

The Company uses a 52-53 week fiscal year ending on the Saturday closest to February 28, which for fiscal 2011 fell on February 26, 2011. The actual interim periods ended on August 27, 2011 and August 28, 2010. In the accompanying unaudited consolidated financial statements, the 2011 fiscal year end is shown as February 28 and the interim period end for both years is shown as August 31 for clarity of presentation.

Certain notes and other information are condensed or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Company's 2011 Annual Report on Form 10-K as filed with the Securities and Exchange Commission on April 28, 2011.

In the opinion of the Company's management, the accompanying unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary to present fairly the Company's financial position at August 31, 2011 and its results of operations for the three and six months ended August 31, 2011 and 2010. The results of operations for such periods are not necessarily indicative of results to be expected for the full fiscal year.

All significant intercompany transactions and accounts have been eliminated in consolidation.

Revenue Recognition

The Company recognizes revenue from product sales when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collection of the sales price is reasonably assured. Generally, these criteria are met at the time product is shipped, except for shipments made on the basis of "FOB Destination" terms, in which case title transfers to the customer and the revenue is recorded by the Company when the shipment reaches the customer. Customers do not have rights of return except for defective products returned during the warranty period.

The Company defers revenues from products sold with data communication services because the services are essential to the functionality of the products, and accordingly, the associated product costs are recorded as deferred costs. Such deferred revenue and cost amounts are recognized on a straight-line basis over the minimum contractual service period of one year. Revenues from renewals of airtime services after the initial one year term are recognized as the services are provided. When customers prepay airtime renewals, such amounts are recorded as deferred revenues and are recognized over the renewal term.

The Company also undertakes projects that include the design and development of communication systems used in the public safety and transportation sectors that are 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 on Uncompleted Contracts

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 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 on uncompleted contracts and related amounts billed were as follows (in thousands):

	August 31,		February 28,
	2011		2011
Costs incurred on uncompleted contracts	$	3,599	$	2,167
Estimated earnings		2,715		1,713
		6,314		3,880
Less: billings to date		4,165		2,594
Net costs and earnings in excess of billings	$	2,149	$	1,286

Such amounts were included in the accompanying consolidated balance sheets under the following captions (in thousands):

	August 31,			February 28,
	2011			2011
Costs and estimated earnings in excess
of billings on uncompleted contracts	$	2,203		$	1,331
Billings in excess of costs and estimated
earnings on uncompleted contracts
(included in other current liabilities)		(54	)		(45	)
Net costs and earnings in excess of billings	$	2,149		$	1,286

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.

Reclassifications

Certain amounts in the financial statements of the prior year have been reclassified to conform to the fiscal 2012 presentation with no effect on net earnings. Specifically, in the February 28, 2011 consolidated balance sheet, $1,331,000 previously included in prepaid expenses and other current assets has been reclassified to costs and estimated earnings in excess of billings on uncompleted contracts.

NOTE 2 - INVENTORIES

Inventories consist of the following (in thousands):

	August 31,		February 28,
	2011		2011
Raw materials	$	9,458	$	8,663
Work in process		134		85
Finished goods		2,252		1,142
	$	11,844	$	9,890

NOTE 3 - INTANGIBLE ASSETS

Intangible assets are comprised as follows (in thousands):

		August 31, 2011						February 28, 2011
		Gross						Gross
	Amortization	Carrying		Accumulated				Carrying		Accumulated
	Period	Amount		Amortization		Net		Amount		Amortization		Net
Developed/core technology	5-7 years	$	2,853	$	1,861	$	992	$	3,101	$	1,783	$	1,318
Tradename	7 years		2,130		152		1,978		2,130		-		2,130
Customer lists	5-7 years		1,268		924		344		1,339		831		508
Covenants not to compete	4-5 years		115		99		16		138		106		32
Patents	4-5 years		39		19		20		39		15		24
		$	6,405	$	3,055	$	3,350	$	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 the current fiscal year, the Company commenced the amortization of this asset over a period of seven years.

Amortization expense of intangible assets was $310,000 and $276,000 for the three months ended August 31, 2011 and 2010, respectively, and was $662,000 and $582,000 for the six-month periods then ended. All intangible asset amortization expense was attributable to the Wireless DataCom segment.

Estimated future amortization expense for the fiscal years ending February 28 is as follows (in thousands):

2012 (remainder)	$	615
2013		1,060
2014		464
2015		304
2016		304
Thereafter		603
	$	3,350

NOTE 4 - FINANCING ARRANGEMENTS

On August 15, 2011, the Company and Square 1 Bank entered into a 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 facility is now comprised of a $3 million term loan facility, which was fully funded on the date of the Fourth Amendment, and a revolver of up to $12 million, and the maturity date 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 entering into the Fourth Amendment.

At August 31, 2011, the Company had outstanding borrowings under the revolver of $5,274,000, and the amount available to borrow at that date amounted to $3,726,000. At August 31, 2011, 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.

Long-term debt is comprised of the following (in thousands):

	August 31,			February 28,
	2011			2011
Bank term loan	$	3,000		$	-
Subordinated promissory notes		-			5,000
Less unamortized discount on subordinated notes		-			(540	)
		3,000			4,460
Less portion due within one year		(500	)		-
Long-term debt	$	2,500		$	4,460

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, the Company paid in full the $5,000,000 outstanding principal balance of the Subordinated Notes plus accrued interest of approximately $76,000. 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.

Other Non-Current Liabilities

Other non-current liabilities consist of the following (in thousands):

	August 31,		February 28,
	2011		2011
Deferred rent	$	12	$	4
Deferred revenue		558		550
	$	570	$	554

NOTE 5 - INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and for income tax purposes. A deferred income tax asset is recognized if realization of such asset is more likely than not, based upon the weight of available evidence which includes historical operating performance and the Company's forecast of future operating performance. The Company evaluates the realizability of its deferred income tax assets and a valuation allowance is provided, as necessary. During this evaluation, the Company reviews its forecasts of income in conjunction with the positive and negative evidence surrounding the realizability of its deferred income tax assets to determine if a valuation allowance is needed.

The Company files income tax returns in the U.S. federal jurisdiction, various U.S. states, Canada and France. Income tax returns filed for fiscal years 2006 and earlier are not subject to examination by U.S. federal and state tax authorities. Certain income tax returns for fiscal years 2007 through 2011 remain open to examination by U.S federal and state tax authorities. Income tax returns for fiscal years 2008 through 2011 remain open to examination by tax authorities in Canada and France. The Company believes that it has made adequate provision for all income tax uncertainties pertaining to these open tax years.

At August 31, 2011, the Company had a net deferred income tax asset balance of $11.8 million, comprised of a gross deferred tax asset of $52.1 million and a valuation allowance of $40.3 million. The current portion of the net deferred tax assets is $2,073,000 and the noncurrent portion is $9,758,000.

No income tax provision, other than minimum state and federal income taxes, was recorded during the quarter ended August 31, 2011 because of the existence of net operating loss carryforwards that offset the pre-tax income. No tax benefit was recorded during the three and six-month periods ended August 31, 2010, when the Company had a pretax loss, because the future realizability of such benefit was not considered to be more likely than not.

NOTE 6 - EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution, using the treasury stock method, that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. In computing diluted earnings per share, the treasury stock method assumes that outstanding options are exercised and the proceeds are used to purchase common stock at the average market price during the period. Options will have a dilutive effect under the treasury stock method only when the Company reports net income and the average market price of the common stock during the period exceeds the exercise price of the options.

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):

	Three Months Ended		Six Months Ended
	August 31,		August 31,
	2011	2010	2011	2010
Basic weighted average number of common
shares outstanding	27,524	27,094	27,441	27,038
Effect of stock options, restricted stock,
restricted stock units and warrants
computed on treasury stock method	786	-	827	-
Diluted weighted average number of common
shares outstanding	28,310	27,094	28,268	27,038

Shares underlying stock awards and warrants amounting to 2,216,000 at August 31, 2011 were excluded from the calculations of diluted earnings per share for the three and six months then ended because their inclusion would have been anti-dilutive under the treasury stock method.

Shares underlying stock awards and warrants amounting to 5,107,000 at August 31, 2010 were excluded from the computation of diluted earnings per share because the Company reported a net loss during the three- and six-month periods then ended and the effect of inclusion would be anti-dilutive (i.e., including such securities would result in a lower loss per share).

NOTE 7 - COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) is defined as the total of net income (loss) and all non-owner changes in equity. The following table details the components of comprehensive income (loss) for the three and six months ended August 31, 2011 and 2010 (in thousands):

	Three Months Ended					Six Months Ended
	August 31,					August 31,
	2011		2010			2011		2010
Net income (loss)	$	1,356	$	(930	)	$	1,876	$	(3,407	)
Reclassification adjustment for foreign
currency loss included in net income		801		-			801		-
Comprehensive income (loss)	$	2,157	$	(930	)	$	2,677	$	(3,407	)

During the second quarter of 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 shut down this subsidiary.

NOTE 8 - STOCK-BASED COMPENSATION

Stock-based compensation expense is included in the following captions of the unaudited consolidated statements of operations (in thousands):

	Three Months Ended					Six Months Ended
	August 31,					August 31,
	2011			2010		2011		2010
Cost of revenues	$	(3	)	$	34	$	40	$	73
Research and development		94			74		176		153
Selling		48			60		93		100
General and administrative		428			313		790		678
	$	567		$	481	$	1,099	$	1,004

Changes in the Company's outstanding stock options during the six months ended August 31, 2011 were as follows (options in thousands):

			Weighted
	Number of		Average
	Options		Option Price
Outstanding at February 28, 2011	2,108		$	4.87
Granted	164			3.42
Exercised	(6	)		1.63
Forfeited or expired	(92	)		4.98
Outstanding at August 31, 2011	2,174		$	4.77
Exercisable at August 31, 2011	1,588		$	5.63

Changes in the Company's unvested restricted stock shares and RSUs during the six months ended August 31, 2011 were as follows (shares and RSUs in thousands):

	Number of		Weighted
	Restricted		Average Grant
	Shares and		Date Fair
	RSUs		Value
Outstanding at February 28, 2011	2,045		$	2.16
Granted	752			3.59
Vested	(804	)		2.22
Forfeited	(53	)		1.91
Outstanding at August 31, 2011	1,940		$	2.70

During the six months ended August 31, 2011, the Company retained 274,000 of the 804,000 vested restricted stock shares and RSUs to cover the minimum statutory required amount of employee withholding taxes.

As of August 31, 2011, the total unrecognized stock-based compensation cost related to nonvested stock options, restricted stock and RSUs amounted to $5.7 million. This cost is expected to be recognized as an expense over a weighted-average remaining vesting period of 3.0 years.

NOTE 9 - CONCENTRATION OF RISK

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. One customer of the Company's Satellite business unit accounted for 24% and 38% of consolidated revenues for the quarters ended August 31, 2011 and 2010, respectively, and accounted for 30% and 39% of consolidated revenues for the respective six-month periods then ended. This customer accounted for 21% and 28% of consolidated net accounts receivable at August 31, 2011 and February 28, 2011, respectively. One other customer accounted for 11% of consolidated revenue for the three months ended August 31, 2011.

Some of the Company’s components, assemblies and electronic manufacturing services are purchased from sole source suppliers. One supplier, which functions as an independent foreign procurement agent, accounted for approximately 50% of the Company's total inventory purchases in the six months ended August 31, 2011 and 2010. At August 31, 2011, this supplier accounted for 47% of the Company's total accounts payable balance.

NOTE 10 - PRODUCT WARRANTIES

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. Activity in the accrued warranty costs liability for the six months ended August 31, 2011 and 2010 is as follows (in thousands):

	Six Months Ended
	August 31,
	2011			2010
Balance at beginning of period	$	700		$	1,231
Charged to costs and expenses		467			360
Deductions		(305	)		(853	)
Balance at end of period	$	862		$	738

Accrued warranty costs are included in Other Current Liabilities in the consolidated balance sheets at August 31, 2011 and February 28, 2011.

NOTE 11 - OTHER FINANCIAL INFORMATION

"Net cash provided by operating activities" in the unaudited consolidated statements of cash flows includes cash payments for interest and income taxes as follows (in thousands):

	Six Months Ended
	August 31,
	2011		2010
Interest expense paid	$	625	$	537
Income taxes paid (refunds received)	$	8	$	(806	)

NOTE 12 - SEGMENT INFORMATION

Segment information for the three and six months ended August 31, 2011 and 2010 is as follows (dollars in thousands):

	Three Months Ended August 31, 2011												Three Months Ended August 31, 2010
	Operating Segments												Operating Segments
	Wireless												Wireless
	DataCom			Satellite			Corporate			Total			DataCom			Satellite			Corporate			Total
Revenues	$	25,523		$	8,278					$	33,801		$	18,074		$	11,416					$	29,490
Gross profit	$	11,380		$	445					$	11,825		$	6,223		$	1,145					$	7,368
Gross margin		44.6	%		5.4	%					35.0	%		34.4	%		10.0	%					25.0	%
Operating income (loss)	$	4,399		$	(447	)	$	(998	)	$	2,954		$	497		$	(129	)	$	(930	)	$	(562	)

	Six Months Ended August 31, 2011												Six Months Ended August 31, 2010
	Operating Segments												Operating Segments
	Wireless												Wireless
	DataCom			Satellite			Corporate			Total			DataCom			Satellite			Corporate			Total
Revenues	$	47,560		$	20,795					$	68,355		$	33,893		$	21,943					$	55,836
Gross profit	$	19,984		$	1,273					$	21,257		$	11,553		$	1,938					$	13,491
Gross margin		42.0	%		6.1	%					31.1	%		34.1	%		8.8	%					24.2	%
Operating income (loss)	$	6,529		$	(735	)	$	(1,955	)	$	3,839		$	(136	)	$	(567)		$	(1,936	)	$	(2,639	)

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. Corporate expenses include stock-based compensation expense of $218,000 and $160,000 in the three-month periods ended August 31, 2011 and 2010, respectively, and $429,000 and $330,000, respectively, in the six-month periods then ended.

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 three- and six-month periods ended August 31, 2010 have been reclassified to conform with the fiscal 2012 presentation. These changes had no effect on consolidated general and administrative expenses.

NOTE 13 - COMMITMENTS AND CONTINGENCIES

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 that are pending at the present time would have a material adverse effect on the Company's consolidated financial position or results of operations.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 may affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reporting periods. Actual results could differ materially from these estimates. The critical accounting policies listed below involve the Company’s more significant accounting judgments and estimates that are used in the preparation of the consolidated financial statements. These policies are described in greater detail in Management’s Discussion and Analysis (“MD&A”) under Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended February 28, 2011, as filed with the Securities and Exchange Commission on April 28, 2011, and include the following areas:

Allowance for doubtful accounts;
Inventory write-downs;
Product warranties;
Deferred income tax assets and uncertain tax positions;
Impairment assessments of purchased intangible assets and other long-lived assets;
Stock-based compensation expense; and
Revenue recognition.

RESULTS OF OPERATIONS

Overview

CalAmp Corp. ("CalAmp" or the "Company") develops and markets wireless communications solutions that deliver data, voice and video for critical networked applications and other purposes. The Company's two business segments are Wireless DataCom, which serves utility, government and enterprise customers, and Satellite, which focuses on the North American Direct Broadcast Satellite market.

Wireless DataCom

The Wireless DataCom segment provides wireless communications technologies, products and services for a wide range of commercial and industrial applications. CalAmp has expertise in designing and providing applications involving various combinations of private and public (cellular infrastructure) networks, narrow-band and broad-band frequencies, licensed and unlicensed radio spectrum, and mobile and fixed-remote communications. The Company's Wireless DataCom segment is comprised of a Wireless Networks business and a Mobile Resource Management (“MRM”) business.

Satellite

The Company's DBS reception products are primarily sold to EchoStar, an affiliate of Dish Network, for incorporation into complete subscription satellite television systems.

Operating Results by Business Segment

The Company's revenue, gross profit and operating income (loss) by business segment are as follows:

REVENUE BY SEGMENT
	Three Months Ended August 31,								Six Months Ended August 31,
	2011				2010				2011				2010
			% of				% of				% of				% of
	$000s		Total		$000s		Total		$000s		Total		$000s		Total
Segment
Wireless DataCom	$	25,523	75.5	%		18,074	61.3	%	$	47,560	69.6	%	$	33,893	60.7	%
Satellite		8,278	24.5	%		11,416	38.7	%		20,795	30.4	%		21,943	39.3	%
Total	$	33,801	100.0	%	$	29,490	100.0	%	$	68,355	100.0	%	$	55,836	100.0	%


GROSS PROFIT BY SEGMENT
	Three Months Ended August 31,								Six Months Ended August 31,
	2011				2010				2011				2010
			% of				% of				% of				% of
	$000s		Total		$000s		Total			$000s	Total		$000s		Total
Segment
Wireless DataCom	$	11,380	96.2	%	$	6,223	84.5	%	$	19,984	94.0	%	$	11,553	85.6	%
Satellite		445	3.8	%		1,145	15.5	%		1,273	6.0	%		1,938	14.4	%
Total	$	11,825	100.0	%	$	7,368	100.0	%	$	21,257	100.0	%	$	13,491	100.0	%

OPERATING INCOME (LOSS) BY SEGMENT
	Three Months Ended August 31,										Six Months Ended August 31,
	2011					2010					2011					2010
				% of					% of					% of					% of
				Total					Total					Total					Total
	$000s			Revenue		$000s			Revenue		$000s			Revenue		$000s			Revenue
Segment
Wireless DataCom	$	4,399		13.0	%	$	497		1.7	%	$	6,529		9.6	%	$	(136	)	(0.2	%)
Satellite		(447	)	(1.3	%)		(129	)	(0.4	%)		(735	)	(1.1	%)		(567	)	(1.0	%)
Corporate expenses		(998	)	(3.0	%)		(930	)	(3.2	%)		(1,955	)	(2.9	%)		(1,936	)	(3.5	%)
Total	$	2,954		8.7	%	$	(562	)	(1.9	%)	$	3,839		5.6	%	$	(2,639	)	(4.7	%)

Revenue

Wireless DataCom revenue increased by $7.4 million, or 41%, to $25.5 million in the second quarter of fiscal 2012 compared to the fiscal 2011 second quarter. For the six months ended August 31, 2011, Wireless DataCom revenue increased by $13.7 million, or 40%, to $47.6 million compared to the same period of the prior year. The MRM business contributed significantly to the increased revenue through the addition of new customers, growth in orders from existing customers, license fee revenue of $400,000 in the first quarter of fiscal 2012, and revenue of $3.0 million from the sale of patents in the second quarter of fiscal 2012. The remaining Wireless DataCom revenue increase was attributable to higher sales of the Wireless Networks business, with significant contribution from an important project in the railroad sector.

Satellite revenue decreased $3.1 million, or 27%, to $8.3 million in the three months ended August 31, 2011 from $11.4 million for the same period in the previous fiscal year. For the six months ended August 31, 2011, Satellite revenue decreased $1.1 million, or 5%, to $20.8 million from $21.9 million for the same period of the prior year. The year-over-year revenue decreases were due to changes in product mix and product transitions.

Gross Profit and Gross Margins

Wireless DataCom gross profit increased by $5.2 million to $11.4 million in the fiscal 2012 second quarter compared to $6.2 million in the second quarter of last year, and gross margin improved to 44.6% in the second quarter of fiscal 2012 from 34.4% in the second quarter of fiscal 2011 due primarily to higher revenue, including the $3 million patents sale, for which there was no associated cost of revenue.

Wireless DataCom gross profit increased 73% to $20.0 million in the six months ended August 31, 2011, compared to $11.6 million for the same period of the prior year. Wireless DataCom gross margin increased from 34% in the first half of fiscal 2011 to 42% in the first half of fiscal 2012 due primarily to higher revenue and the sale of patents.

Satellite gross profit decreased by $700,000 to $445,000 in the fiscal 2012 second quarter compared to the second quarter of last year. Satellite's gross margin decreased to 5.4% in the fiscal 2012 second quarter from 10% in the second quarter of last year due to lower revenue, severance of approximately $200,000 for production jobs that were eliminated in conjunction with the transition to off-shore manufacturing, and approximately $150,000 in other costs associated with the restructuring of the Satellite business. Gross profit and gross margin in the second quarter of last year also benefited from royalty income of $200,000 that had no corresponding cost of revenue.

The Satellite segment had gross profit of $1.3 million for the six months ended August 31, 2011, compared with gross profit of $1.9 million for the same period last year. Satellite gross margin was 6.1% for the six months ended August 31, 2011, compared to 8.8% for the same period last year. The decrease in gross profit and gross margin in the latest six-month period is primarily attributable to the factors cited above for the lower gross profit and gross margin in the latest quarter.

See also Note 12 to the accompanying unaudited consolidated financial statements for additional operating data by business segment.

Operating Expenses

Consolidated research and development (“R&D”) expense decreased by $100,000 to $2,679,000 in the second quarter of fiscal 2012 from $2,779,000 in the second quarter of last year. For the six-month year-to-date periods, R&D expenses increased by $241,000 from $5,542,000 last year to $5,783,000 this year due to severance costs arising from personnel reductions in the Satellite business during the first quarter of fiscal 2012 ($116k), 401K employer contribution ($58k) and higher consulting and outside services ($47k).

Consolidated selling expenses increased by $177,000 to $2,852,000 in the second quarter of this year from $2,675,000 last year. For the six-month year-to-date periods, selling expenses increased by $147,000 from $5,297,000 last year to $5,444,000 this year. These year-over-year increases are due primarily to expenses incurred in connection with the shut-down of the Company’s French subsidiary.

Consolidated general and administrative expenses ("G&A") increased by $830,000 to $3,030,000 in the second quarter of this year compared to the prior year. For the six-month periods, consolidated G&A increased by $820,000 to $5,529,000 for fiscal 2012 from $4,709,000 last year. These year-over-year increases are due primarily to higher incentive expense, increased salaries expense, and expenses incurred in connection with the shut-down of the Company’s French subsidiary.

Amortization of intangibles increased from $276,000 in the second quarter of last year to $310,000 in the first quarter of this year. For the six-month periods, amortization of intangibles increased to $662,000 this year from $582,000 last year. 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. This tradename asset was classified as indefinite-lived asset in years prior to fiscal 2012 and accordingly it was not being amortized prior to the current year.

Non-operating Expense, Net

Non-operating expense increased $1,224,000 from the second quarter of last year to the second quarter of this year. This increase was primarily due to $801,000 cumulative foreign currency translation account losses related to the Company’s investment in its French subsidiary that were written off as a result of the decision to shut down this subsidiary. Also contributing to the increase in non-operating expense in the latest quarter was the $462,000 write-off of the remaining unamortized debt discount and issue costs on the 12% Subordinated Notes as a result of repaying this debt in August 2011, which was 16 months prior to the maturity date.

Non-operating expense was $1,948,000 in the six months ended August 31, 2011, compared to non-operating expense of $768,000 in the six months ended August 31, 2010 due to the reasons noted above.

Income Tax Provision

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of liquidity are its cash and cash equivalents, which amounted to $4,256,000 at August 31, 2011, and the revolving line of credit with Square 1 Bank. During the six months ended August 31, 2011, cash and cash equivalents increased by $15,000. During this period, cash was provided by operations in the amount of $5,391,000, proceeds from the bank term loan of $3,000,000 and collections on a note receivable of $298,000, partially offset by repayment of subordinated notes payable of $5,000,000, net repayments on the bank working capital line of credit of $2,215,000, capital expenditures of $389,000 and payment of employee withholding taxes on the net share settlement of vested equity awards of $1,016,000.

On August 15, 2011, the Company and Square 1 Bank entered into a Fourth Amendment (the “Fourth Amendment”) to the Loan and Security Agreement dated as of December 22, 2009 (as amended, the "Loan Agreement"), which provides for borrowings of up to $12 million. Effective with the Fourth Amendment, the facility is now comprised of a $3 million term loan facility, which was fully funded on the date of the Fourth Amendment, and a revolver of up to $12 million, and the maturity date 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 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 entering into the Fourth Amendment.

FORWARD LOOKING STATEMENTS

Forward looking statements in this Form 10-Q 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 the Annual Report on Form 10-K for the year ended February 28, 2011 as filed with the Securities and Exchange Commission on April 28, 2011. 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk

The Company has international operations that give 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 sheets at August 31, 2011. Foreign currency losses (gains) of $6,000 and $(2,000) were included in the consolidated statements of operations for the three months ended August 31, 2011 and 2010, respectively. Foreign currency losses of $13,000 and $41,000 were included in the consolidated statements of operations for the six months ended August 31, 2011 and 2010, respectively. In addition, during the second quarter of 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 shut 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 loan 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.

ITEM 4. CONTROLS AND PROCEDURES

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) under the Securities Exchange Act of 1934, (the "Exchange Act")) as of the end of the period covered by this Report, that the Company's disclosure controls and procedures are effective to ensure that the information required to be disclosed in reports that are filed or submitted under the Exchange Act is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and that such information is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission.

Internal Control Over Financial Reporting

There was no change in the Company's internal control over financial reporting during the Company's most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is not currently involved in any material pending legal proceedings.

ITEM 1A. RISK FACTORS

The reader is referred to Part I, "Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the year ended February 28, 2011, for a discussion of factors that could materially affect the Company's business, financial condition or future results.

ITEM 6. EXHIBITS

	Exhibit 10.1 -	Patent Purchase Agreement between the Company and ProconGPS Inc. effective June 27, 2011

	Exhibit 31.1 -	Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	Exhibit 31.2 -	Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	Exhibit 32 -	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	101.INS	XBRL Instance Document

	101.SCH	XBRL Taxonomy Extension Schema Document

	101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

	101.LAB	XBRLTaxonomy Extension Label Linkbase Document

	101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

	101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

SIGNATURE

Pursuant to the requirements 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.

September 29, 2011	/s/ Richard Vitelle
Date	Richard Vitelle
	Vice President Finance & CFO
	(Principal Financial Officer and
	Chief Accounting Officer)