United States
SECURITIES & EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[ X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the thirteen-week period ended: March 29, 1996
OR
[ ] 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: 0-10726
C-COR ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 24-0811591
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
60 Decibel Road, State College, PA 16801
(Address of principal executive offices) (Zip Code)
(814) 238-2461
(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
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
Common Stock, $.10 Par Value - 9,578,840 shares as of March 29, 1996.
<PAGE>
INDEX
C-COR ELECTRONICS, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited).
Consolidated condensed balance sheets -- June 30, 1995 and
March 29, 1996
Consolidated condensed statements of income -- thirteen-weeks
ended March 29, 1996 and March 24, 1995; thirty-nine weeks ended
March 29, 1996 and March 24, 1995
Consolidated condensed statements of cash flows -- thirteen-weeks
ended March 29, 1996 and March 24, 1995; thirty-nine weeks ended
March 29, 1996 and March 24, 1995
Notes to consolidated condensed financial statements --
March 29, 1996
Item 2. Management's Discussion and Analysis of Financial Conditions and Results
of Operations.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
<PAGE>
SIGNATURES
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.
C-COR ELECTRONICS, INC.
(Registrant)
Date: May 10, 1996 /s/ CHRIS A. MILLER
Chris A. Miller, C.P.A.,
Vice President-Finance,
Secretary & Treasurer
(Principal Financial Officer)
Date: May 10, 1996 /s/ JOSEPH E. ZAVACKY
Controller & Assistant
Secretary
(Principal Accounting Officer)
<PAGE>
<TABLE>
Item 1. Financial Statements
<CAPTION>
C-COR ELECTRONICS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
<S> <C> <C>
March 29, June 30,
1996 1995
---------------- ----------------
(Unaudited) (Note)
(000's omitted)
CURRENT ASSETS:
Cash and cash equivalents $2,435 $1,545
Marketable securities 367 393
Accounts receivable - net 19,118 33,142
---------------- ----------------
21,920 35,080
---------------- ----------------
Inventories:
Raw materials 17,085 16,406
Work-in-process 5,396 3,826
Finished goods 4,069 4,751
---------------- ----------------
Total inventories 26,550 24,983
---------------- ----------------
Deferred taxes 3,331 2,873
Other current assets 713 1,210
---------------- ----------------
TOTAL CURRENT ASSETS 52,514 64,146
---------------- ----------------
PROPERTY, PLANT AND EQUIPMENT - NET 25,283 22,129
INTANGIBLE ASSETS - NET AND
OTHER LONG-TERM ASSETS 1,300 1,386
---------------- ----------------
$79,097 $87,661
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $12,842 $18,245
Income taxes (recoverable) payable (1,354) 872
Line-of-credit 5,912 20,451
Current portion of long-term debt 832 136
---------------- ----------------
TOTAL CURRENT LIABILITIES 18,232 39,704
---------------- ----------------
LONG-TERM DEBT, less current portion 7,406 2,036
DEFERRED TAXES 793 828
OTHER LONG-TERM LIABILITIES 433 368
---------------- ----------------
26,864 42,936
---------------- ----------------
SHAREHOLDERS' EQUITY:
Common Stock, $.10 par; authorized shares
24,000,000; issued shares of 9,578,840 on
03/29/96 and 9,450,272 on 06/30/95 958 945
Additional paid-in capital 19,740 16,915
Retained earnings 31,580 26,891
Translation adjustment (23) (7)
Net unrealized loss on marketable securities (22) (19)
---------------- ----------------
52,233 44,725
---------------- ----------------
$79,097 $87,661
================ ================
<FN>
Note: The balance sheet at June 30, 1995 has been derived
from the audited financial statements at that date.
See notes to consolidated condensed financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
C-COR ELECTRONICS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
March 29, March 24, March 29, March 24,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES $36,904 $29,985 $112,201 $87,268
--------- --------- --------- ---------
COSTS AND EXPENSES:
Cost of sales 27,940 22,459 84,069 62,192
Selling, general and administrative expense 4,390 4,595 13,708 12,595
Research and product development costs 2,612 1,625 6,682 4,538
Interest expense 167 220 868 346
Investment income (59) (21) (80) (53)
Foreign exchange gain (20) (66) (167) (97)
Other expenses 33 154 106 410
--------- --------- --------- ---------
35,063 28,966 105,186 79,931
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 1,841 1,019 7,015 7,337
INCOME TAXES 479 333 2,326 2,511
--------- --------- --------- ---------
NET INCOME $1,362 $686 $4,689 $4,826
========= ========= ========= =========
EARNINGS PER SHARE:
Primary $0.14 $0.07 $0.47 $0.49
========= ========= ========= =========
Fully diluted $0.14 $0.07 $0.47 $0.49
========= ========= ========= =========
<FN>
See notes to consolidated condensed financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
C-COR ELECTRONICS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW (UNAUDITED)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
March 29, March 24, March 29, March 24,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $1,362 $686 $4,689 $4,826
Adjustments to reconcile net income to net cash
and cash equivalents provided by (used in) operating
activities:
Depreciation and amortization 1,260 1,257 3,909 3,069
Provision for doubtful accounts 37 74 109 186
Provision for deferred income tax benefit (289) (593) (490) (1,238)
Provision for deferred retirement salary plan 26 26 65 72
Tax benefit of premature sales of stock
option shares - - 1,790 541
Issue common stock to employee stock purchase plan - 20 46 40
Loss on sale of marketable securities - 7 - 51
Loss (gain) on sale of property, plant and equipment - 22 (2) 21
Changes in operating assets and liabilities:
Accounts receivable 4,793 (3,200) 13,915 (5,667)
Inventories 666 (2,243) (1,567) (7,582)
Other assets 110 (274) 423 (455)
Accounts payable (2,956) 1,023 (3,652) 427
Accrued liabilities 201 401 (1,767) 834
Income taxes 293 537 (2,226) (691)
NET CASH AND CASH EQUIVALENTS PROVIDED BY --------- --------- --------- ---------
(USED IN) OPERATING ACTIVITIES 5,503 (2,257) 15,242 (5,566)
INVESTING ACTIVITIES
Purchase of property, plant and equipment (2,417) (4,397) (6,903) (12,706)
Proceeds from sale of property, plant and equipment - 2 2 4
Proceeds from sale of marketable securities - 405 - 2,287
Proceeds from maturity of marketable securities - 35 20 115
NET CASH AND CASH EQUIVALENTS --------- --------- --------- ---------
USED IN INVESTING ACTIVITIES (2,417) (3,955) (6,881) (10,300)
FINANCING ACTIVITIES
Payment of debt and capital lease obligations (220) (14) (376) (43)
Proceeds from long-term debt borrowing 390 - 6,442 -
Proceeds from line-of-credit 9,435 13,156 35,974 37,140
Payment of line-of-credit (13,523) (8,490) (50,513) (24,291)
Proceeds from exercise of stock options 49 256 1,002 858
NET CASH AND CASH EQUIVALENTS (USED IN) --------- --------- --------- ---------
PROVIDED BY FINANCING ACTIVITIES (3,869) 4,908 (7,471) 13,664
INCREASE (DECREASE) IN CASH AND --------- --------- --------- ---------
CASH EQUIVALENTS (783) (1,304) 890 (2,202)
Cash and equivalents at beginning of period 3,218 463 1,545 1,361
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,435 $ (841) $2,435 $(841)
========= ========= ========= =========
<FN>
See notes to consolidated condensed financial
statements.
</FN>
</TABLE>
<PAGE>
C-COR ELECTRONICS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The accompanying, unaudited, consolidated condensed financial statements
have been prepared in accordance with generally-accepted accounting
principles for interim financial information, and in the opinion of
management, contain all adjustments (consisting only of normal, recurring
adjustments) necessary to fairly present the Company's financial position as
of March 29, 1996 and the results of its operations for the thirty-nine week
period then ended. Operating results for the thirty-nine week period are not
necessarily indicative of the results that may be expected for the year
ending June 28, 1996. For further information, refer to financial statements
and footnotes thereto included in the Company's annual report on Form 10-K
for the year ended June 30, 1995.
2. The Company borrowed the remaining balance available of $390,000 on a
low interest loan during the quarter ended March 29, 1996. The loan, in the
principal amount of $1,952,000 from the Pennsylvania Industrial Development
Authority (PIDA), financed the expansion and renovation at the Company's
manufacturing facility in State College, Pennsylvania. The loan has an
interest rate of 2%, contingent upon meeting certain job creation
commitments. Monthly payments of principal and interest are required through
the year 2010 (fifteen years).
3. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
Accounts payable and accrued liabilities consist of:
<CAPTION>
March 29, June 30,
1996 1995
--------- --------
(000's omitted)
<S> <C> <C>
Accounts payable $ 5,634 $ 9,286
Accrued incentive plan expense 324 2,416
Accrued vacation expense 1,339 1,295
Accrued salary expense 1,346 819
Accrued warranty expense 1,961 1,754
Accrued workers compensation
self insurance expense 963 553
Accrued other 1,275 2,122
--------- --------
$12,842 $18,245
========= ========
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Conditions and Results
of Operations
General
The following discussion addresses the financial condition of the Company as of
March 29, 1996 and the results of operations for the thirteen-week and
thirty-nine week period ended March 29, 1996, compared with the same periods
last year. This discussion should be read in conjunction with the Management's
Discussion and Analysis section for the fiscal year ended June 30, 1995 included
in the Company's Annual Report on Form 10-K.
Some of the information presented in this report constitutes forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Although the Company believes that its expectations are based on
reasonable assumptions within the bounds of its knowledge of its business and
operations, there can be no assurance that actual results will not differ
materially from its expectations. Factors which could cause actual results to
differ from expectations include the timing of orders received from customers,
the gain or loss of significant customers, changes in the mix of products sold,
changes in the cost and availability of parts and supplies, regulatory changes
affecting the telecommunications industry, in general, and the Company's
operations, in particular, competition and changes in domestic and international
demand for the Company's products and other factors which may impact
operations and manufacturing. For additional information concerning
these and other important factors which may cause the Company's actual results
to differ materially from expectations and underlying assumptions, please
refer to the Company's reports filed on form 10-K and other reports filed with
the Securities and Exchange Commission.
Results of Operations
Net sales for the thirteen-week period ended March 29, 1996 were
$36,904,000, an increase of 23.1% from last year's sales of $29,985,000 for the
same period. Net sales for the thirty-nine week period ended March 29, 1996 were
$112,201,000, an increase of 28.6% over last year's sales of $87,268,000 for the
same period. The increased sales for the third quarter and year-to-date versus
the same periods last year are attributable to increased sales of RF and AM
Fiber Optic distribution products, primarily to customers in the cable
television (CATV) industry.
International sales as a percentage of total consolidated sales were 43% for the
quarter ended March 29, 1996 and 46% for the period year-to-date. This compares
to 41% for the quarter and 36% year-to-date for the same periods in the prior
year. The increase is the result of expanded sales and marketing efforts to
pursue additional international sales primarily in Canada, Asia, Europe, and
Latin America.
C-COR's backlog at March 29, 1996 was approximately $37 million compared with
$55 million at June 30, 1995. The long awaited passage of the telecommunications
reform legislation became a reality during the quarter. Although passage of this
legislation may enhance competition and reduce regulatory uncertainty, no
significant impact on new order bookings materialized during the quarter.
C-COR's primary customers are CATV multiple system operators (MSO's) and
telephone companies (telcos). Legislation, as well as other factors, has
prompted a recent series of consolidation and merger activities in the
telecommunications industry. MSO's continue to consolidate with each other.
More recently, two planned mergers were announced by Regional Bell Operating
Companies (RBOCs). Nynex announced a merger with Bell Atlantic. Similarly,
Pacific Telesis announced a merger with Southwest Bell. In a move that further
blurred the line between C-COR's MSO and telco markets, U.S. West
purchased Continental Cablevision, Inc. The Company believes that the
uncertainty caused by the new legislation and aforementioned business
combination activity has resulted in delays, as customers develop new
construction strategies and capital equipment budgets. The Company is
positioning itself to introduce new products to meet future anticipated demand
for hybrid-fiber-coax (HFC) networks in both the domestic and international
markets.
C-COR's gross profit percentage for the third quarter of fiscal year 1996 was
24.3% versus 25.1% for the same period of the prior year. The gross profit
percentage for the thirty-nine week period ended March 29, 1996 was 25.1% versus
28.7% for the same period of the prior fiscal year. The reduction in gross
margin is a result of several factors. Pricing pressures and product mix
contributed to lower gross margin results for the quarter and year-to-date
compared to the previous year. In addition, production and fixed manufacturing
costs increased over the prior year as a result of capacity expansion to meet
anticipated higher production volumes. The Company expects pricing pressures to
continue, and is actively pursuing and implementing process improvements and
other programs to increase productivity and reduce costs throughout the Company
with the objective of mitigating the effect of these pressures.
Selling, general and administrative expense for the third quarter of fiscal year
1996 was $4,390,000, a decrease of 4.5% over last year's total of $4,595,000.
The reduction for the quarter is primarily the result of higher personnel
procurement costs incurred in the third quarter of the previous year as a result
of the Company adding personnel. In addition, in January 1995, start up costs
were incurred to establish a regional sales office in Denver, Colorado. Selling,
general and administrative expense for the first three quarters of fiscal year
1996 was $13,708,000, an increase of 8.8% over last year's expense of
$12,595,000 for the same period. This increase, as mentioned above, is primarily
attributable to the expansion of personnel and increased marketing activities in
the domestic and international markets. The regional sales office mentioned
above is reflected for a full three quarters of fiscal year 1996, where in the
previous fiscal year these costs were only included beginning in the third
quarter.
Research and product development costs for the third quarter of fiscal year 1996
were $2,612,000, an increase of 60.7% over last year's total of $1,625,000 for
the same period. Research and product development costs for the first three
quarters of fiscal year 1996 totaled $6,682,000, an increase of 47.2% over last
year's figure of $4,538,000 for the same period. The increases are due primarily
to new product development related to C-COR's line of digital fiber optic
products. Increased levels of spending for RF and AM fiber optic development
continued for the quarter and year-to-date compared to the previous year.
Interest expense for the first nine months of fiscal year 1996 was $868,000.
This represents an increase over last year's total for the same period of
$346,000. This increase is due primarily to an increase in the level of
outstanding borrowings during the three quarters of fiscal year 1996 on the
Company's line-of-credit for expansion of manufacturing capabilities and upgrade
to its facilities. Proceeds from long-term permanent financing, at a lower
interest rate, was used to pay down a portion of the outstanding balance on the
Company's line-of-credit.
The effective income tax rate for the thirty-nine weeks ended March 29, 1996
is 33.2% compared to 34.2% for the same period the previous year. The
provision for income taxes relates to both U.S. and non-U.S. operations. The
reduction is the result of tax benefits arising out of increased foreign sales
activity and changes in the relative level of profitability of U.S. and non-U.S.
operations.
Liquidity and Sources of Capital
Cash and cash equivalents as of March 29, 1996 totaled $2,435,000. The principal
source of cash in the third quarter of fiscal year 1996 was from operating
activities which generated $5,503,000, as a result of improved collections on
accounts receivable and a reduction in inventories. The Company's current ratio
increased to 2.9 at March 29, 1996, up from 1.6 at June 30, 1995.
<PAGE>
Accounts receivable-net decreased to $19,118,000 as of March 29, 1996, as
compared to $33,142,000 at June 30, 1995. The decrease is attributed primarily
to the fact that sales in the fourth quarter of fiscal year 1995 were
$50,172,000, compared to sales during the third quarter of fiscal year 1996 of
$36,904,000, and improved collections. Inventory levels decreased for the
quarter ended March 29, 1996 compared to the previous quarter, but were
higher compared to the balance at June 30, 1995.
As of March 29, 1996, C-COR had a balance of recoverable income taxes that
is derived primarily from prepayments of estimated taxes and a tax benefit
derived from the exercise and sale by employees of stock option shares.
Capital expenditures for purchases of property, plant, and equipment for the
thirteen-week period ended March 29, 1996 were $2,417,000, compared to last
year's purchases of $4,397,000 for the same period. For the thirty-nine week
period ended March 29, 1996, purchases were $6,903,000, a decrease over last
year's purchases of $12,706,000 for the same period. Lower capital
expenditures in the current year were the result of the completion of expansion
of facilities and equipment at C-COR's manufacturing facilities in State
College and Reedsville, Pennsylvania.
Accounts payable and accrued liabilities decreased as of March 29, 1996 to
$12,842,000. This is a decrease of 29.6% from the balance as of June 30, 1995.
Accounts payable declined as a result of reduced inventory purchases during the
period. C-COR's accrued incentive plan expense also declined due to payments
under the plan since June 30, 1995. For a further breakdown in the changes, see
notes to consolidated condensed financial statements.
The Company borrowed the remaining balance available of $390,000 on a low
interest loan during the quarter ended March 29, 1996. The loan, in the
principal amount of $1,952,000 from the Pennsylvania Industrial Development
Authority (PIDA), financed the expansion and renovation at the Company's
manufacturing facility in State College, Pennsylvania. The loan has an interest
rate of 2%, contingent upon meeting certain job creation commitments. Monthly
payments of principal and interest are required through the year 2010 (fifteen
years).
The Company maintains a line-of-credit with a bank which can be drawn upon up to
a maximum of $23,000,000, contingent on sufficient collateral in accounts
receivable as outlined in a revolving credit agreement. The Company had a
balance of $5,912,000 drawn on this line-of-credit at the end of the third
quarter of fiscal year 1996, down $14,539,000 since the end of fiscal year 1995.
Proceeds from long-term permanent financing and operating cash flows were used
to pay down a portion of the short-term borrowings during fiscal year 1996. As
of April 26, 1996, the outstanding balance on the line-of-credit was
$4,500,000, and, based on management's analysis of eligible accounts
receivable, $12,752,000 was available.
Management believes that operating cash flow as well as the aforementioned
financing source, will adequately provide for all cash requirements for the
immediate future subject to requirements that additional growth or strategic
development might dictate.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
The following exhibit is included herein:
(11) Statement re: computation of earnings per share
The Company did not file any reports on Form 8-K during the thirteen-week
period ended March 29, 1996.
<TABLE>
<CAPTION>
C-COR ELECTRONICS, INC.
COMPUTATION OF EARNINGS PER SHARE
Thirteen Weeks Ended Thirty-Nine Weeks Ended
March 29, March 24, March 29, March 24,
1996 1995 1996 1995
--------------- --------------- -------------- ---------------
(000's omitted, except per share data)
<S> <C> <C> <C> <C>
PRIMARY
Weighted Average Shares 9,577 9,370 9,543 9,297
Outstanding
Net effect of dilutive stock
options-based on the
treasury stock method using
average market price 248 500 332 565
--------------- --------------- -------------- ---------------
Total 9,825 9,870 9,875 9,862
=============== =============== ============== ===============
Net income $1,362 $686 $4,689 $4,826
=============== =============== ============== ===============
Net income per share $0.14 $0.07 $0.47 $0.49
=============== =============== ============== ===============
FULLY DILUTED
Weighted Average Shares Outstanding 9,577 9,370 9,543 9,297
Net effect of dilutive stock
options-based on the treasury
stock method using the greater
of the average market price or
period end market price 248 500 332 565
--------------- --------------- -------------- ---------------
Total 9,825 9,870 9,875 9,862
=============== =============== ============== ===============
Net income $1,362 $686 $4,689 $4,826
=============== =============== ============== ===============
Net income per share $0.14 $0.07 $0.47 $0.49
=============== =============== ============== ===============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-28-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-29-1996
<CASH> 2,435
<SECURITIES> 367
<RECEIVABLES> 19,709
<ALLOWANCES> 591
<INVENTORY> 26,550
<CURRENT-ASSETS> 52,514
<PP&E> 42,839
<DEPRECIATION> 17,556
<TOTAL-ASSETS> 79,097
<CURRENT-LIABILITIES> 18,232
<BONDS> 0
<COMMON> 958
0
0
<OTHER-SE> 51,275
<TOTAL-LIABILITY-AND-EQUITY> 79,097
<SALES> 112,201
<TOTAL-REVENUES> 112,201
<CGS> 84,069
<TOTAL-COSTS> 20,390
<OTHER-EXPENSES> (141)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 868
<INCOME-PRETAX> 7,015
<INCOME-TAX> 2,326
<INCOME-CONTINUING> 4,689
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,689
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.47
</TABLE>
