Restructuring After Brush With Bankruptcy : Amplifier Firm Forced to Retune

Times Staff Writer

Home satellite dishes sounded like the coming thing, so California Amplifier was founded in a garage five years ago to make the amplifiers that are essential to dish systems.

But, with the onset of scrambling by major broadcasters, such as Home Box Office on Jan. 15, the home dish market collapsed, and Camarillo-based California Amplifier almost collapsed with it.

Now its future appears to rest in the hands of David R. Nichols, 27, a graduate of Cal State Northridge who became president July 4.

His job will not be easy. California Amplifier officials have acknowledged that they narrowly avoided filing for Chapter 11 protection recently by restructuring $1.9 million in debts and that the company will use the three-year breather it gained on $1.15 million of that to reorient its business toward the military market.

$3.5-Million Deficit

Selling mostly to the military isn't the hard part. California Amplifier, whose products permit microwave signals to be used for communication by amplifying them, has long sold to defense contractors.

But selling enough to the military to save the company is a different story. As of Feb. 28, the end of its fiscal year, the firm had a working capital deficit of $3.5 million. It lost $5.7 million on sales of $14.6 million for the same fiscal year.

Accordingly, the price of California Amplifier's stock has fallen from a high of about $18 in 1983 to a close Monday of 75 cents.

California Amplifier has also lost Donald W. Fuller, its chairman, president, and chief executive. Fuller, 55, a seasoned executive and turnaround specialist, became chairman in February, 1985. He announced his resignation last month.

"I'm used to running bigger and more powerful organizations," Fuller said in a telephone interview. "I feel that the turnaround situation has been accomplished."

Not everybody agrees, however. Analyst Seth Feinstein of Drake Capital Securities in Santa Monica said he expects the firm to fail. David Fealkoff, marketing director at Amplica, a Newbury Park competitor, said, "The talk in the industry is whether or not Cal Amp still exists any more."

Certainly California Amplifier will have its work cut out. The company does 90% of its military business as a subcontractor, meaning it sells to bigger firms that incorporate its products into items later sold to the government. Marketing in such an environment requires intense effort, Nichols said.

For example, the company must work harder to prove that its products are well-engineered and must provide more engineering data to military contractors.

Success Predicted

"It's a different kind of sell job," said Nichols.

But Nichols says it will succeed.

An electrical engineer specializing in microwave technology, Nichols used to work for Jacob Inbar at Micromega, a Westlake Village unit of Eaton Corp. that makes microwave components. When Inbar decided to form California Amplifier, Nichols went with him.

"He's a very bright young man, good technically," said a former older colleague at Micromega who asked not to be named. "I don't know how much experience he has as a manager. He was a designer here."

But Fuller said Nichols gained managerial experience as executive vice president at California Amplifier, his job before becoming president, and Inbar, still a major shareholder and himself a former president, said he has complete confidence in Nichols.

2 Positions Left Open

Nichols is president, but the posts of chairman and chief executive will remain vacant for now, the company said.

Whether or not Nichols has much management experience, he has experienced tremendous paper wealth--and paper losses--at a very young age. When the company went public in December of 1983 at $10 a share, Nichols received nearly 300,000 shares and was instantly worth close to $3 million.

But he has seen much of that wealth wiped out in the precipitous decline of his company's stock. Fortunately, he sold about 30,000 shares right after the first public offering and more shares in smaller amounts since then. However, he still has a 6.5% stake in the company.

In an interview, Nichols said the company is already back on track. He said it gets 70% of its revenue from military sales, contrasted with about 15% in the fiscal year ended Feb. 28.

Cyclical Nature Cited

"The consumer industry is very cyclical," Nichols said. "The military business will not be as profitable in good times, but it's more consistent."

Another analyst, who asked not to be named, predicted that California Amplifier is likely to survive now that it has gained a breather on its debt.

Jefferson Montgomery, chairman of ElectroniCast, a market research firm, said the available market for military microwave amplifiers this year is about $190 million, plus $335 million more in a "captive" market consisting of amplifiers made by companies for inclusion in larger systems manufactured by these same firms.

Montgomery said that the military amplifier business should grow at a rate of 8% to 10% a year over the next few years and that none of the firms in the business--there are perhaps two or three dozen--has an overwhelming market share.

Microwave systems (and thus, microwave amplifiers) have various uses in military communications. For example, microwaves can be used to control missiles, to send messages from mountaintop to mountaintop or via satellite, and in both radar and anti-radar devices.

Besides shooting for military business, California Amplifier has lowered costs. In February, it stopped making amplifiers for the consumer market, and will merely import those it sells for home dish systems. Employment at the firm is down to about 90, from 300 in January, because of layoffs and attrition, Nichols said.

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