U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K/A

Amendment No. 1 to

For the fiscal year ended: March 31, 2003

OR

For the transition period from                  to                 

Commission File Number: 0-15449

CALIFORNIA MICRO DEVICES CORPORATION

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code:

(408) 263-3214

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock

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 if disclosure of delinquent files pursuant to Item 405 of Regulation S-K (Section 209.405 of this chapter) is not contained herein, and will not be contained to the best of registrant’s knowledge, in any definitive proxy or information statement incorporated by reference in Part II of this Form 10-K or any amendment to this Form 10-K.    Yes  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes  ¨    No  x

The approximate aggregate market value of the registrant’s common stock held by non-affiliates as of September 30, 2002 (the last business day of the registrant’s most recently completed second fiscal quarter) was $38.0 million based on the closing price for the common stock on the Nasdaq National Market on such date.

For purposes of this disclosure, common stock held by persons who hold more than 5% of the outstanding voting shares and common stock held by executive officers and directors of the Registrant have been excluded in that such persons may be deemed to be “affiliates” as that term is defined under the rules and regulations promulgated under the Securities Act of 1933. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of May 30, 2003, the number of shares of the Registrant’s common stock outstanding was 15,887,606.

DOCUMENTS INCORPORATED BY REFERENCE

The Proxy Statement for the Registrant’s Annual Meeting of Shareholders held August 8, 2003.

EXPLANATORY NOTE

We are filing this Amendment No. 1 on Form 10-K/A (this “Amendment”) to our Annual Report on Form 10-K for the fiscal year ended March 31, 2003 (the “Original Report”) to correct clerical errors in unaudited Footnote 17 - “Quarterly Financial Data” of Item 8 – “Financial Statements and Supplementary Data” contained in the Original Report. These errors were in the balance sheet data for the quarters ended September 30, 2002, and December 31, 2002, in which the “Effect of Restatement” data were originally shown as ($625) and $29, respectively, instead of $1,117 and $1,146, respectively. These errors caused us to make corresponding changes to the corresponding “As restated” data as well. As a result of these corrections, Footnote 17 is now consistent with the amended quarterly reports on Form 10-Q/A for these periods filed with the Securities and Exchange Commission on September 18, 2003, and the Current Report on Form 8-K filed with the Securities and Exchange Commission on May 8, 2003. These corrections have no effect on any of the audited data contained in the Original Report. Thus, no changes in the financial statements or other items of the Original Report are necessary, except to include updated officer certifications as Exhibits 31 and 32 to this Amendment. This Amendment does not reflect events occurring after the filing of the Original Report, or modify or update the disclosures contained in the Original Report in any way other than as required to reflect the corrections described above.

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ITEM 8. Financial Statements and Supplementary Data.

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Shareholders

California Micro Devices Corporation

We have audited the accompanying balance sheets of California Micro Devices Corporation as of March 31, 2003 and 2002, and the related statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended March 31, 2003. Our audits also included the financial statement schedule listed in the Index at Item 8. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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 financial statements referred to above present fairly, in all material respects, the financial position of California Micro Devices Corporation at March 31, 2003 and 2002, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2003, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ ERNST & YOUNG LLP

San Jose, California

May 8, 2003

except for the third paragraph of Note 9, as to which the date is

June 26, 2003

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BALANCE SHEETS

(amounts in thousands, except share data)

The accompanying notes are an integral part of these financial statements.

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STATEMENTS OF OPERATIONS

(amounts in thousands, except per share data)

The accompanying notes are an integral part of these financial statements.

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STATEMENTS OF SHAREHOLDERS’ EQUITY

(amounts in thousands)

The accompanying notes are an integral part of these financial statements.

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STATEMENTS OF CASH FLOWS

(amounts in thousands)

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The accompanying notes are an integral part of these financial statements.

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1. THE COMPANY

California Micro Devices Corporation designs and markets application specific integrated passive devices and complementary analog semiconductors for the mobile, computing, lighting, medical and other markets. Our products provide signal integrity, electromagnetic interference filtering, electrostatic discharge protection, and power management solutions to original equipment manufacturers and contract manufacturers. Through proprietary manufacturing processes, we integrate multiple passive components onto single chips and enhance their functionality with discrete semiconductor functions.

Our products are marketed primarily to customers in the mobile electronics, computing, LED lighting, medical and other industries.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

In the accompanying financial statements, fiscal 2003, 2002, and 2001 refer to the twelve months ended March 31, 2003, 2002, and 2001, respectively. Certain prior year amounts in the financial statements and notes thereto have been reclassified to conform to the fiscal 2003 presentation. The charges taken for discontinued inventories in the statement of cash flows are now stated at gross values rather than net in the prior year.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles 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. Our estimates are based on historical experience, input from sources outside of the company, and other relevant facts and circumstances. Actual results could differ from those estimates.

Cash and Cash Equivalents

We consider all highly liquid debt instruments with a maturity date of three months or less at the date of purchase to be cash equivalents. Cash equivalents generally consist of commercial paper and money market funds.

Short-term Investments

We invest our excess cash in high quality financial instruments. All of our marketable investments, except for investments related to our non-qualified deferred compensation program, are classified as available-for-sale and we view our available-for-sale portfolio as available for use in current operations. Accordingly, we have classified all investments, except for amounts related to our non-qualified deferred compensation program described in Note 14, as short-term, even though the stated maturity date may be one year or more past the current balance sheet date.

Available-for-sale securities are stated at fair market value, with unrealized gains and losses, net of tax, reported as a component of shareholders’ equity. The cost of securities sold is based upon the specific identification method. Realized gains and losses and declines in value judged to be other than temporary, if incurred, are included in interest income and other (net).

Inventories and Related Reserves

Inventories are stated at the lower of cost, determined on a first-in first-out basis, or market.

Reserves are provided for excess and obsolete inventory, which are estimated based on a comparison of the quantity and cost of inventory on hand to management’s forecast of customer demand. Customer demand is

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dependent on many factors and requires us to use significant judgment in our forecasting process. We must also make assumptions regarding the rate at which new products will be accepted in the marketplace and at which customers will transition from older products to newer products. Because a significant portion of our sales are through distributors and many parts may have small sales volume, the customer demand forecast process is not inclusive of all parts. Therefore, historical trends may also be used in estimating the excess and obsolete inventory reserves. Generally, inventories in excess of twelve months demand are reserved and the related charge is recorded to cost of sales. Once a reserve is established, it is maintained until the product to which it relates is sold or otherwise disposed of, even if in subsequent periods we forecast demand for this product.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method over the shorter of the estimated useful lives of the assets, or the remaining lease term. Estimated useful lives of assets are as follows:

Long-lived assets held and used by us are reviewed for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. An impairment loss is recognized if the sum of the expected future undiscounted cash flows from the use of the asset over its remaining useful economic life is less than the carrying value of the asset. The amount of impairment loss will be measured as the difference between the carrying value of the assets and their estimated fair values. No impairment was recorded during fiscal 2003. See footnote 7 for additional information regarding asset impairment in fiscal 2002.

Revenue Recognition

We recognize revenue when persuasive evidence of an arrangement exists, delivery or customer acceptance, where applicable, has occurred, the fee is fixed or determinable, and collection is reasonably assured.

Revenue from product sales to end user customers, or to distributors that do not receive price concessions and do not have return rights, is recognized upon shipment and title transfer, if we believe collection is reasonably assured and all other revenue recognition criteria are met. We assess the probability of collection based on a number of factors, including past transaction history and/or the creditworthiness of the customer. If we determine that collection of a receivable is not probable, we defer recognition of revenue until the collection becomes probable, which is generally upon receipt of cash. Reserves for sales returns and allowances from end user customers are estimated based on historical experience and are provided for at the time of shipment. At the end of each reporting period, the sufficiency of the reserve for sales returns and allowances is also assessed based on a comparison to authorized returns for which a credit memo has not been issued.

Revenue from product sales to distributors with agreements allowing for either price concessions or for product returns is recognized at the time the distributor sells the product to original equipment manufacturers or other end users at which time the sales price becomes fixed. Revenue is not recognized upon initial shipment to the distributor since, due to various forms of price concessions, the sales price is not substantially fixed or determinable at that time. Additionally, these distributors have contractual rights to return products, up to a specified amount for a given period of time. Pursuant to our agreements with our distributors, custom, older or end-of-life products are sold with no right of return and are not eligible for price concessions. In these cases, revenue is recognized upon shipment to the distributor, assuming all other revenue recognition criteria are met.

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At the time of shipment to distributors, we defer our gross selling price of the product shipped and the related cost of the product shipped and reflect such net amounts on our balance sheet as a current liability entitled deferred margin on shipments to distributors. Thus, deferred margin on shipments to distributors represents the margin on the products we ship to distributors, or the difference between our revenue and cost of the product for inventory held by the distributors at the end of the accounting period.

Other

We expense all research and development and advertising costs as incurred. Advertising expense was immaterial for fiscal years 2003, 2002 and 2001.

We expense all shipping costs related to shipments to customers as incurred. Shipping costs are recognized in cost of goods sold.

Allowance for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company provides an allowance for specific customer accounts where collection is doubtful and also provides a general allowance for other accounts based on historical collection and write-off experience.

Net (Loss) Income Per Share

Basic earnings per common share are computed using the weighted-average number of common shares outstanding during the period. Diluted earnings per common share incorporate the incremental shares issuable upon the assumed exercise of stock options and other dilutive securities. The following table sets forth the computation of basic and diluted net income (loss) per share:

Options to purchase 2,942,000, 2,790,000 and 231,000 shares of common stock outstanding at March 31, 2003, 2002 and 2001, respectively, were not included in the diluted earnings per share computation, as the effect of including such shares would be antidilutive. Warrants to purchase 483,667 and 59,250 shares of common stock outstanding at March 31, 2003 and 2002, respectively, were not included in the diluted earnings per share computation, as the effect of including such shares would be antidilutive.

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Stock-Based Compensation

As allowed under Statement of Financial Accounting Standards No. 123 (“SFAS 123”), “Accounting for Stock Based Compensation,” we account for our employee stock plans in accordance with the provisions of Accounting Principles Board’s Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees” and have adopted the disclosure only provisions of SFAS 123. Stock-based awards to non-employees are accounted for in accordance with SFAS 123 and EITF 96-18 “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.” Fair value for these awards is calculated using the Black-Scholes option-pricing model, which requires that we estimate the volatility of our stock, an appropriate risk-free interest rate, estimated time until exercise of the option, and our dividend yield. The Black-Scholes model was developed for use in estimating the fair value of traded options that do not have specific vesting schedules and are ordinarily transferable. The calculation of fair value is highly sensitive to the expected life of the stock-based award and the volatility of our stock, both of which we estimate based primarily on historical experience. As a result, the pro forma disclosures are not necessarily indicative of pro forma effects on reported financial results for future years.

We generally recognize no compensation expense with respect to employee stock grants. Had we recognized compensation for the grant date fair value of employee stock grants in accordance with SFAS 123, our net (loss) income and net (loss) income loss per share would have been revised to the pro forma amounts below. For pro forma purposes, the estimated fair value of our stock-based grants is amortized over the options’ vesting period for stock options granted under our stock option plans, and the purchase period for stock purchases under our stock purchase plan.

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The pro forma net loss and basic and diluted pro forma loss per share information for the year ended March 31, 2002 in the table above have been restated to reflect the correction of a clerical error. The restatement decreased pro forma net loss by approximately $1.0 million, and decreased the pro forma basic and diluted net loss per share by $.07.

The fair value of our stock-based grants was estimated assuming no expected dividends and the following weighted-average assumptions:

The weighted-average fair value of stock options granted in fiscal 2003, 2002 and 2001 were $3.69, $4.57 and $17.05 per share, respectively. The weighted-average fair value of the option element of the 1995 Employee Stock Purchase Plan stock granted in fiscal 2003, 2002 and 2001 was $1.43, $2.27 and $9.91 per share, respectively. See Note 14.

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Comprehensive Income

Accumulated other comprehensive income presented in the accompanying balance sheets at March 31, 2002 consists of the accumulated net unrealized gains on available-for-sale securities. There is no accumulated other comprehensive income at March 31, 2003.

Income Taxes

Income taxes have been provided using the liability method in accordance with Financial Accounting Standards Board (“FASB”) Statement No. 109, “Accounting for Income Taxes” (“SFAS 109”). In accordance with SFAS 109, a deferred tax asset or liability is determined based on the difference between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. We provide a valuation allowance against net deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax assets will be realized.

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board, or FASB, issued SFAS No. 143, “Accounting for Asset Retirement Obligations,” which addresses accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. We do not expect that the adoption of SFAS No. 143 will have a material effect on our financial condition or results of operations.

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, rather than when the exit or disposal plan is approved. SFAS No. 146 nullifies EITF Issue No. 94-3, and had to be applied beginning January 1, 2003. The adoption of SFAS No. 146 has not had a material effect on our financial condition or results of operations.

In November 2002, the FASB issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” or FIN 45. FIN 45 will significantly change current practice in the accounting for and disclosure of guarantees. FIN 45 requires certain guarantees to be recorded at fair value, which is different from the current practice of recording a liability only when a loss is probable and reasonably estimable, as those terms are defined in SFAS No. 5, “Accounting for Contingencies.” FIN 45 also requires a guarantor to make significant new disclosures, even when the likelihood of making any payments under the guarantee is remote, which is another change from the current practice. FIN 45 disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002, while the initial recognition and initial measurement provisions are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of FIN 45 did not have a material impact on our results of operations and financial condition.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation, Transition and Disclosure.” SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. SFAS No. 148 also requires that disclosures of the pro forma effect of using the fair value method of accounting for stock-based employee compensation be displayed more prominently and in a tabular format. Additionally, SFAS No. 148 requires disclosure of the pro forma effect in interim financial statements. SFAS No. 148 is effective for financial statements for fiscal years ending after December 15, 2002. The adoption of SFAS No. 148 has not had a material effect on our financial condition or results of operations.

In January 2003, the FASB issued Interpretation No. 46, or FIN 46, “Consolidation of Variable Interest Entities.” FIN 46 requires an investor with a majority of the variable interests in a variable interest entity to consolidate the entity and also requires majority and significant variable interest investors to provide certain disclosures. The Company does not have any investments in variable interest entities and therefore the adoption of the provisions of FIN 46 did not have a material impact on its results of operations and financial position in 2003.

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3. CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES

The following is a summary of cash, cash equivalents and marketable securities at March 31, 2003 and March 31, 2002, respectively:

At March 31, 2003, the Company had no short-term investments. Gross realized gains and losses on the sales of securities are reported as other income and were not significant for all years presented. Gross unrealized gains and losses on available-for-sale securities at March 31, 2003 and 2002 were not material.

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4. CONCENTRATIONS OF CREDIT RISK

Our financial instruments that expose us to concentrations of credit risk consist primarily of cash, cash equivalents, short-term investments and trade accounts receivable.

We primarily use one financial institution for our banking activities and maintain available cash in our short term money markets funds.

A significant portion of our sales are to customers whose activities are related to computer and computer peripherals, wireless communications, medical, and LED lighting industries, including many who are located in foreign countries. We generally extend credit to these customers and, therefore, the aforementioned industries and economic influences of customers’ geographic locations affect collection of accounts receivable. However, we monitor extensions of credit and require collateral, such as letters of credit, whenever deemed necessary. We maintain a reserve for potentially uncollectable accounts receivable based on our assessment of collectibility and historical experience.

5. CONCENTRATION OF OTHER RISKS

Markets

We market our products into high-technology industries, such as mobile electronics, computing, LED lighting, medical and other markets that are characterized by rapid technological change, intense competitive pressure, and volatile demand patterns. Most of the systems into which the Company’s products are designed have short life cycles. As a result, we require a significant number of new design wins on an ongoing basis to maintain and grow revenue.

Customers

Generally, our sales are not subject to long-term contracts but rather to short-term releases of customers’ purchase orders, most of which are cancelable on relatively short notice. The timing of these releases for production as well as custom design work is in the control of the customer. Because of the short life cycles involved with our customers’ products, the order pattern from individual customers can be erratic with significant accumulation and de-accumulation of inventory during phases of the life cycle.

Two manufacturers represented 29% and one distributor represented 12% of our fiscal 2003 revenue. Loss of any of these customers could have a substantial negative effect on our revenues and results of operations.

Manufacturing

Our manufacturing processes are complex, and require production in a highly controlled, clean environment suitable for fine tolerances. Normal manufacturing risks include errors in fabrication processes, defects in raw materials, process changes, as well as other factors that can affect yields.

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Subcontractors

Beginning in fiscal 2002, we implemented a strategy to outsource the wafer fabrication of a substantial portion of our products to ASMC, an outside foundry, located in China. As a result of this strategy, we are subject to certain risks including reduced control over delivery schedules, quality assurance, manufacturing yields and production costs, lack of guaranteed production capacity or product supply and lack of availability of, or delayed access to, key process technologies. We also use independent subcontractors, primarily in Thailand, for assembly, packaging and testing of most of our product. The common industry practice of using independent subcontractors to manufacture, test, package and assemble products is subject to risks resulting from unfavorable economic conditions, political strife, prolonged work stoppages, natural or man-made disasters, or power shortages in these countries, or other factors, and may adversely affect the ability of our independent subcontractors to manufacture, test, package and assemble our products.

Liquidity

Cash and cash equivalents at March 31, 2003 were $4.5 million. In fiscal 2002, we began to implement a restructuring program aimed at streamlining our manufacturing operations, bringing our costs more in line with the current revenue levels and restoring profitability. We believe these actions and other actions we may take will continue to reduce our operating costs during fiscal 2004 and that we will have sufficient financial resources to fund our operations for at least the next 12 months. However, there can be no assurance that such steps will be successful. If we are not successful, then we may have to cut expenses in order to conserve our cash or raise additional financing, of which there can be no assurance of success.

6. BALANCE SHEET COMPONENTS

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7. RESTRUCTURING AND ASSET IMPAIRMENT

During fiscal 2003, we completed the restructuring program approved by the Board of Directors in the second quarter of 2002, in which we streamlined our manufacturing operations and now focus our business on products and markets in which we have, or believe we can achieve, a leadership position while leveraging our core technology strengths. Key parts of this strategy include the plan to outsource a significant portion of our wafer manufacturing to an independent foundry and to discontinue certain older products.

In connection with outsourcing a significant portion of our wafer manufacturing, we have consolidated all of our internal wafer fabrication activities and chip scale packaging activities into our Tempe, Arizona facility with selected high-value backend manufacturing activities continuing at our Milpitas, California headquarters. In connection with these actions, we recorded restructuring and asset impairment charges of $4.2 million in the year ended March 31, 2002, which was reflected in operating expenses as “Special Charges”. The restructuring program included workforce reduction and lease termination costs. At the end of the third quarter of fiscal 2003, we determined that our original estimate of restructuring costs exceeded the actual amount required to complete the plan. Therefore, we reversed the remaining restructuring liability of approximately $193,000 as a benefit to operations. There is no restructuring liability remaining at March 31, 2003.

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A roll forward of the restructuring and asset impairment charges incurred during the year ended March 31, 2002 through March 31, 2003 is as follows:

Workforce reduction

In connection with the restructuring program, we reduced our headcount by approximately 65 employees, primarily in the manufacturing functions and primarily located at our Milpitas, California facility. The workforce reduction resulted in a $438,000 charge in fiscal year 2002 relating to severance and fringe benefits of which $106,000 was reversed in fiscal 2003. All employees affected by the workforce reduction were informed of the plan in enough detail so that they could determine their type and amount of benefit. Approximately 15 employees had been terminated as of March 31, 2002, with their severance and benefits paid in April 2002, and the majority of the remaining employees were terminated by the end of the second quarter of fiscal 2003.

Impairment of equipment

As part of our restructuring program, we are outsourcing a significant portion of our wafer fabrication activities and have consolidated our internal wafer fabrication activities and chip scale packaging activities into our Tempe, Arizona facility with selected high-value backend manufacturing activities continuing at our Milpitas, California headquarters. With the outsourcing of a significant portion of our wafer fabrication activities, the number and volume of products generated from the equipment located at our Tempe facility have been significantly reduced. As a result of these circumstances in fiscal 2002, we performed an analysis to determine if the manufacturing equipment at our Tempe, Arizona facility was impaired. Based on the analysis performed, which was based on our estimates of future undiscounted cash flows, we determined that these assets were impaired and wrote-down the recorded value of the assets to their estimated fair value, resulting in a charge of $3.4 million in fiscal 2002. Fair value was estimated as the amount for which the assets could be purchased in an arms-length transaction.

Facilities and other

The restructuring plan called for us to relocate from our Milpitas facility once all internal wafer fabrication activities had been consolidated into our Tempe, Arizona facility. As required by the lease for the Milpitas facility, we were obligated to restore the Milpitas facility to its pre-lease condition. Accordingly, we recorded $251,000 in estimated renovation costs related to the Milpitas facility in fiscal 2002. Of the total restructuring liability pertaining to facilities, $87,000 was reversed in fiscal 2003.

Cash expenditures relating to the workforce reduction were paid in fiscal 2003. The restructuring liability is included in accrued liabilities in the balance sheet as of March 31, 2002. The restructuring program is complete and no liability remains as of the end of March 31, 2003.

8. FAIR VALUE OF FINANCIAL INSTRUMENTS

We have evaluated the estimated fair value of our financial instruments. The amounts reported as cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value due to their short-term maturities. Historically, the fair values of short-term investments are estimated based on quoted market prices.

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The carrying and estimated fair values of our long-term debt are follows (in thousands):

The fair value of our long-term debt obligations is based on the estimated market rate of interest for similar debt instruments with the same remaining maturities.

9. LONG-TERM DEBT

Long-term debt consists of the following (amounts in thousands):

Our industrial revenue bonds are collateralized by a lien on all of our land and buildings in Tempe, Arizona, and certain equipment acquired with the proceeds of the bonds, and require certain minimum annual sinking fund payments ranging from $185,000 in fiscal 2003 to $780,000 in fiscal 2018. We have the right to prepay the 10.5% Industrial Revenue Bond by redeeming all or part of the outstanding principal amounts without penalty. At March 31, 2003 and 2002, restricted cash of $880,000 and $888,000, respectively, was held in sinking fund trust accounts. Of these amounts, $800,000 is to be used for principal and interest payments in the event of default by the Company, and the balance is used for semi-annual interest and principal payments. As of March 31, 2003, $6,535,000 was outstanding under this agreement. These bonds are subject to certain covenants, including a restriction on the payment of dividends. The financial covenants associated with these bonds are requirements to maintain minimum current and quick ratios, shareholders equity, and debt coverage, and not to exceed maximum ratios of total liabilities to equity and long-term debt to working capital. As of March 31, 2002 and continuing through March 31, 2003, we were not in compliance with the long-term debt to working capital ratio covenant, shareholders equity, and debt coverage. We have not been in compliance with these covenants since December 31, 2001. In accordance with the terms of the industrial revenue bond, the Company has retained a management consulting firm acceptable to the Trustee who has prepared a report to the Issuer and the Trustee making recommendations and establishing a progress schedule over a period not to exceed six successive quarters after the date of issuance of such report, to correct all deficiencies. The report of such management consulting firm was completed and filed with the Issuer and the Trustee in March 2003 (within 120 days of the end of the fourth quarter in which the Company was not in compliance with the requirements) as set forth in the loan agreement and has been accepted by the Trustee. In accordance with the terms of the bonds, our non-compliance would need to continue through September 30, 2004 in order for the industrial revenue bonds to become callable and accordingly, there is no impact on our short-term liquidity due to our current non-compliance. We have begun to implement the recommendations of the management consulting firm. We believe we will be in compliance with all financial covenants within the period allowed and therefore, we have not reclassified the long-term portion of this debt of $6.5 million to short-term on our balance sheet at March 31, 2003.

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CALIFORNIA MICRO DEVICES CORPORATION

As of March 31, 2002, we had $1,786,000 outstanding under equipment financing facilities due through February 2004. These borrowings bore interest at 9.9% per year, respectively, and principal and interest payments were due in monthly installments through February 2004. During fiscal 2003, the Company used its facilities under the Loan and Security Agreement described below to repay this debt in full.

In June 2002, we entered into a Loan and Security Agreement (“Agreement”) that allows us to borrow up to a total of $5.0 million under an equipment line of credit and a revolving line of credit. The amount available under the Agreement is based on the amount of eligible equipment and accounts receivable. Under the Agreement, which includes a subjective acceleration clause, we are subject to certain financial covenants and restrictions and must maintain a compensating balance of $2.75 million with the bank in order to maintain our borrowing capability. The financial covenants relate to a required monthly minimum quick ratio and quarterly tangible net worth. Borrowings under the equipment line and the revolving line bear interest at an annual rate of prime plus 3.0% and prime plus 0.75%, respectively. As of March 31, 2003, the equipment line of credit rate was 7.25%. Principal, in equal installments, and interest are due monthly for the term of 36 months for all borrowings made under the equipment line. Borrowings under the revolving credit line have a term of 12 months, with principal due at maturity and interest due in monthly installments. Borrowings under both lines are collateralized by substantially all of our assets. During the twelve-months ending March 31, 2003, we had borrowed $3.5 million under the equipment line and $1.3 million under the revolving line of credit, of which $1.5 million was used to pay off other capital equipment financing facilities in full in the first quarter of fiscal 2003. As of March 31, 2003, $2.8 million remained outstanding on the equipment line of credit and the $1.3 million borrowed on the revolving line of credit had been paid in full. Therefore, $2.2 million was available under the equipment line of credit and the revolving line of credit as of March 31, 2003. We were in not compliance with the tangible net worth ratio under our Agreement as of March 31, 2003. It is highly possible that we will not be in compliance with certain of our covenants for the first two quarters of fiscal 2004. The Bank has subsequently provided a waiver to the March 31, 2003 covenants, has modified the future covenants and extended the term of the agreement to July 31, 2003. On June 26, 2003, the bank agreed to further modify the loan agreement such that if we fail in the future to comply with either of the financial covenants defined in the agreement, as amended, the credit facilities will convert to an asset based lending facility. The Borrowing Base, as defined within the agreement, must be adequate to support all outstanding obligations with any excess being immediately repaid. Presently, our Borrowing Base is sufficient to support all outstanding obligations therefore we have continued to classify as long term on our balance sheet, all obligations scheduled to be repaid beyond twelve months. However, there can be no assurance that the Borrowing Base will remain sufficient and we may be required to repay all or part of our outstanding indebtedness to the Bank earlier than scheduled.

In March 2001, we entered into a equipment Financing Agreement (“Agreement”) with Epic Funding Corporation which allows us to finance $975,000 of equipment over a term of 4 years with interest at 9.6% payable in 48 installments of approximately $25,000 per month. The total outstanding obligation as of March 31, 2003 was approximately $534,000.

During fiscal 2003, we entered into new capital leases to finance some equipment purchases. The total outstanding capital lease obligations were $67,000 at March 31, 2003, due in monthly installments with interest rates ranging from 10.4% to 12.6%. Fixed assets purchased under capital leases and the associated accumulated depreciation were not material as of March 31, 2003 and 2002.

Future maturities of long-term debt, including sinking fund requirements and capital lease obligations at March 31, 2003 are as follows (amounts in thousands):

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CALIFORNIA MICRO DEVICES CORPORATION

10. COMMITMENTS