United States
SECURITIES AND 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: December 27, 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 practicable date.
Common Stock, $.10 Par Value - 9,619,382 shares as of February 7, 1997.
<PAGE>
INDEX
C-COR ELECTRONICS, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited).
Condensed consolidated balance sheets -- June 28, 1996 and
December 27, 1996.
Condensed consolidated statements of income -- thirteen weeks
ended December 27, 1996 and December 29, 1995; twenty-six weeks
ended December 27, 1996 and December 29, 1995.
Condensed consolidated statements of cash flows -- thirteen weeks
ended December 27, 1996 and December 29, 1995; twenty-six weeks
ended December 27, 1996 and December 29, 1995.
Notes to condensed consolidated financial statements --
December 27, 1996.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
PART II. OTHER INFORMATION
Item 4. Submission of matters to a vote of Shareholders.
Item 6. Exhibits and Reports on Form 8-K.
<PAGE>
<TABLE>
Item 1. Financial Statements
<CAPTION>
C-COR ELECTRONICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 27, June 28,
ASSETS 1996 1996
----------- ----------
(Unaudited) (Note)
(000's omitted)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,917 $ 1,474
Marketable securities 564 364
Accounts receivable 18,094 21,465
----------- ----------
20,575 23,303
----------- ----------
Inventories:
Raw materials 17,466 14,508
Work-in-process 3,211 4,349
Finished goods 5,148 4,049
----------- ----------
Total inventories 25,825 22,906
----------- ----------
Deferred taxes 2,853 3,304
Other current assets 1,585 1,964
----------- ----------
TOTAL CURRENT ASSETS 50,838 51,477
----------- ----------
PROPERTY, PLANT, AND EQUIPMENT, NET 25,781 25,617
INTANGIBLE ASSETS AND OTHER LONG-TERM ASSETS, NET 1,328 1,313
----------- ----------
TOTAL ASSETS $ 77,947 $ 78,407
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 14,386 $ 13,918
Income taxes (recoverable) payable (727) 131
Line-of-credit 0 1,147
Current portion of long-term debt 825 829
----------- ----------
TOTAL CURRENT LIABILITIES 14,484 16,025
----------- ----------
LONG-TERM DEBT, less current portion 6,786 7,201
DEFERRED TAXES 1,427 1,367
OTHER LONG-TERM LIABILITIES 643 497
----------- ----------
TOTAL LIABILITIES 23,340 25,090
----------- ----------
SHAREHOLDERS' EQUITY
Common Stock, $.10 par; authorized shares
24,000,000; issued shares of 9,615,386 on 12/27/96
and 9,602,528 on 06/28/96 962 960
Additional paid-in capital 19,811 19,602
Retained earnings 33,904 32,810
Translation adjustment (52) (34)
Net unrealized loss on marketable securities (18) (21)
----------- ----------
TOTAL SHAREHOLDERS' EQUITY 54,607 53,317
----------- ----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 77,947 $ 78,407
=========== ==========
<FN>
Note: The balance sheet at June 28, 1996 has been derived from the audited
financial statements at that date.
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<TABLE>
C-COR ELECTRONICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
December 27, December 29, December 27, December 29,
1996 1995 1996 1995
----------- ----------- ----------- -----------
(000's omitted, except per share data)
<S> <C> <C> <C> <C>
NET SALES $ 34,913 $ 35,657 $ 68,927 $ 75,297
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales 27,394 27,320 53,606 56,129
Selling, general and administrative
expenses 4,318 4,639 8,434 9,319
Research and product development costs 2,664 2,120 5,113 4,070
Interest expense 54 325 116 701
Investment income (38) (8) (65) (21)
Foreign exchange (gain) loss (29) 77 (27) (147)
Other expenses 88 48 129 72
----------- ----------- ----------- -----------
34,451 34,521 67,306 70,123
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 462 1,136 1,621 5,174
INCOME TAXES 127 440 527 1,847
----------- ----------- ----------- -----------
NET INCOME $ 335 $ 696 $ 1,094 $ 3,327
=========== =========== =========== ===========
NET INCOME PER SHARE:
Primary $ 0.03 $ 0.07 $ 0.11 $ 0.34
=========== =========== =========== ===========
Fully diluted $ 0.03 $ 0.07 $ 0.11 $ 0.34
=========== =========== =========== ===========
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
C-COR ELECTRONICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Thirteen Weeks Ended Twenty-Six Weeks Ended
December 27, December 29, December 27, December 29,
1996 1995 1996 1995
----------- ----------- ----------- -----------
(000's omitted)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $ 335 $ 696 $ 1,094 $ 3,327
Adjustments to reconcile net income to net cash
and cash equivalents provided by (used in)
operating activities:
Depreciation and amortization 1,521 1,331 3,039 2,649
Provision for deferred retirement salary plan 109 19 146 39
Loss (gain) on sale of property, plant and equipment 46 - 46 (2)
Changes in operating assets and liabilities:
Accounts receivable 2,771 5,610 3,371 9,194
Inventories (542) (1,069) (2,919) (2,233)
Other assets 12 25 256 313
Accounts payable (22) 953 1,269 (696)
Accrued liabilities 16 (497) (801) (1,968)
Income taxes (963) (2,037) (858) (2,519)
Deferred income taxes 382 10 509 (201)
NET CASH AND CASH EQUIVALENTS PROVIDED BY ----------- ----------- ----------- -----------
OPERATING ACTIVITIES 3,665 5,041 5,152 7,903
----------- ----------- ----------- -----------
INVESTING ACTIVITIES
Purchase of property, plant and equipment (2,041) (1,988) (3,171) (4,486)
Proceeds from sale of property, plant and equipment 12 - 12 2
Purchase of marketable securities - - (200) -
Proceeds from sale of marketable securities 5 - 5 -
Proceeds from maturity of marketable securities - - - 20
NET CASH AND CASH EQUIVALENTS ----------- ----------- ----------- -----------
(USED IN) INVESTING ACTIVITIES (2,024) (1,988) (3,354) (4,464)
----------- ----------- ----------- -----------
FINANCING ACTIVITIES
Payment of debt and capital lease obligations (211) (128) (419) (156)
Proceeds from long-term debt borrowing - 6,052 - 6,052
Proceeds from line-of-credit - 10,609 555 26,539
Payment of line-of-credit - (17,741) (1,702) (36,990)
Tax benefit deriving from exercise and
sale of stock option shares 11 197 71 1,790
Issue common stock to retirement plan - - - -
Issue common stock to employee stock purchase plan 18 22 45 46
Proceeds from exercise of stock options 31 148 95 953
NET CASH AND CASH EQUIVALENTS (USED IN) ----------- ----------- ----------- -----------
FINANCING ACTIVITIES (151) (841) (1,355) (1,766)
----------- ----------- ----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 1,490 2,212 443 1,673
Cash and cash equivalents at beginning of period 427 1,006 1,474 1,545
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,917 $ 3,218 $ 1,917 $ 3,218
=========== =========== =========== ===========
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
C-COR ELECTRONICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited condensed consolidated 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 December 27, 1996, and the
results of its operations for the thirteen-week period then ended. Operating
results for the twenty-six week period are not necessarily indicative of the
results that may be expected for the year ending June 27, 1997. For further
information refer to financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ending June 28, 1996.
2. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
Accounts payable and accrued liabilities consist of:
<CAPTION>
December 27, June 28,
1996 1996
---------------- ----------------
(000's omitted)
<S> <C> <C>
Accounts payable $ 7,996 $ 6,727
Accrued incentive plan expense 120 318
Accrued vacation expense 1,494 1,532
Accrued salary expense 642 752
Accrued salary and sales tax expense 553 942
Accrued warranty expense 1,985 1,772
Accrued workers compensation
self-insurance expense 754 704
Accrued other 842 1,171
---------------- ----------------
$14,386 $13,918
================ ================
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
The following discussion addresses the financial condition of the Company as of
December 27, 1996, and the results of operations for the thirteen-week and
twenty-six week periods ended December 27, 1996, compared with the same periods
the prior year. This discussion should be read in conjunction with the
Management's Discussion and Analysis section for the fiscal year ended June 28,
1996, 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, including, without limitation, the possibility of greater sales
opportunities, the timing and amount of resumed capital spending by some CATV
customers, the continuation of competitive pricing pressures and the continued
availability of capital resources. 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 December 27, 1996, were
$34,913,000, a decrease of 2% from the prior year's sales of $35,657,000 for the
same period. Net sales for the twenty-six week period ended December 27, 1996,
were $68,927,000, a decrease of 8% from the prior year's sales of $75,297,000
for the same period. The decreased sales for the second quarter and six months
versus the same period the prior year were primarily attributable to reduced
demand for RF distribution products by international customers in the cable
television (CATV) industry.
Domestic sales as a percentage of total consolidated sales were 71% for the
quarter ended December 27, 1996, and 76% for the period year-to-date. This
compares to 57% for the quarter and 54% year-to-date for the same periods the
prior year. Sales to domestic customers increased 24% during the quarter ending
December 27, 1996, and 32% for the period year-to-date compared to the same
periods the prior year. The increases are the result of expanded bandwidth
requirements by new and existing customers. The Company believes that its
continued development and introduction of new products for hybrid fiber coax
(HFC) networks will enhance its product offerings and provide greater sales
opportunities to both domestic and international customers throughout the
remainder of fiscal year 1997.
<PAGE>
International sales as a percentage of total consolidated sales were 29% for the
quarter ended December 27, 1996, and 24% for the period year-to-date. This
compares to 43% for the quarter and 46% year-to-date for the same periods of the
prior year. Sales to international customers decreased 36% during the quarter
ending December 27, 1996, and 54% for the period year-to-date compared to the
same periods of the prior year. The decrease for the quarter and year-to-date
periods resulted primarily from reduced demand by a significant customer in
Canada, and customers in Asia, and Latin America. Countries in the
aforementioned areas represent distinct markets for CATV equipment, and in
general, demand can be highly variable.
The Company's backlog of sales orders at December 27, 1996, was approximately
$29.9 million, up slightly from $28.3 million at the end of the previous
quarter. The Company's book-to-bill ratio for the past two quarters has been
above 1.
Several major Multiple System Operators (MSOs) in the industry are placing
tighter controls on capital expenditures. Although the Company believes that any
moratoriums on capital spending by MSOs are temporary, it cannot predict when
or if capital spending will return to prior levels.
Gross profit percentage for the thirteen-week period ending December 27, 1996,
was 21.5% versus 23.4% for the same period the prior year. Gross profit
percentage for the twenty-six week period ending December 27, 1996, was 22.2 %
versus 25.5% for the same period the prior year. The reduction in gross profit
margin for the quarter and year-to-date period is primarily a result of changes
in product sales mix and reduced manufacturing capacity utilization compared to
the same periods the prior year. In addition, excess capacity among suppliers
continues to drive competitive pricing pressures, particularly on RF coaxial
cable amplifiers. The Company expects pricing pressures to continue, but is
actively working on process improvements and other programs to increase
productivity and reduce costs throughout the Company, with the objective of
mitigating the effect of these pressures. The Company has recently implemented
several cost-reduction initiatives, including work force adjustments and
cutbacks in various operating budgets, with the goal of improving profit
margins.
Selling, general and administrative expense for the quarter ending December 27,
1996, was $4,318,000, a decrease of 7% from the prior year's total of
$4,639,000. Selling, general and administrative expense for the twenty-six week
period ending December 27, 1996, was $8,434,000, a decrease of 9% from the prior
year's expense of $9,319,000 for the same period. The reduction for the quarter
and year-to-date period is primarily the result of various ongoing cost
reduction initiatives.
Research and product development costs for the quarter ending December 27, 1996,
were $2,664,000, an increase of 26% over the prior year's total of $2,120,000
for the same period. Research and product development costs for the twenty-six
week period ending December 27, 1996, were $5,113,000, an increase of 26% over
the prior year's total of $4,070,000 for the same period. The increases are due
primarily to the continued expanded funding of AM and Digital fiber optics
product development, as well as expenditures for improvement of product
development processes.
Interest expense for the quarter ending December 27, 1996, was $54,000, a
decrease of 83% from the prior year's total of $325,000 for the same period.
Interest expense for the twenty-six week period ending December 27, 1996, was
$116,000, a decrease of 83% from the prior year's total of $701,000 for the same
period. This decrease for the quarter and year-to-date period is due to a
reduced level of outstanding borrowings on the Company's line-of-credit during
the periods.
<PAGE>
The effective income tax rate for the quarter ending December 27, 1996, was
27.5%, compared to 38.7% for the same period the prior year. The effective
income tax rate for the year-to-date period ending December 27, 1996, was 32.5%,
compared to 35.7% for the same period the prior year. The provision for income
taxes relates to both U.S. and non-U.S. operations. The reduction for the
quarter and year-to-date period reflects adjustments in the tax rate arising out
of changes in the relative level of profitability of U.S. and non-U.S.
operations.
Liquidity and Sources of Capital
Cash and cash equivalents totaled $1,917,000 as of December 27, 1996, compared
to $1,474,000 at June 28, 1996. Cash and cash equivalents provided by operations
totaled $5,152,000, for the twenty-six week period ended December 27, 1996. The
Company continues to maintain sufficient liquidity to fund its operations under
current business conditions.
On December 27, 1996, the Company announced a stock repurchase program. The
program allows the Company to repurchase up to 500,000 shares of C-COR common
stock. The shares may be purchased from time to time in the open market through
block or privately negotiated transactions, or otherwise. The Company intends to
use its currently available capital resources to fund the purchases. The
repurchased stock is expected to be held by the Company as treasury stock to be
used to meet the Company's obligations under its present and future stock option
plans and for other corporate purposes.
The Company maintains a line-of-credit with a bank pursuant to which it may
borrow the lesser of $23,000,000 or percentages of eligible accounts receivable
and inventory. The borrowings are collateralized by accounts receivable and
inventory. The line-of-credit is committed through October 31, 1997, and the
Company anticipates renewing this line-of-credit agreement. The Company had no
borrowings on this line-of-credit as of December 27, 1996. This compares to a
balance of $1,147,000 at the end of the Company's fiscal year ended June 28,
1996. Based upon the Company's analysis of eligible accounts receivable and
inventory, approximately $18,945,000 was available to borrow at December 27,
1996.
Management believes that operating cash flow, as well as the aforementioned
financing source, will adequately provide for all cash requirements for the
foreseeable future, subject to requirements that additional growth or strategic
development might dictate.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of matters to a vote of Shareholders
The Company's Annual Meeting of Shareholders was held on October 15, 1996, at
which the holders of at least 7,977,157 shares of Common Stock of the Company
(out of a total of 9,609,496 shares outstanding and entitled to vote at such
Annual Meeting), were present in person or represented by proxy (representing a
quorum for the transaction of business). The following items were submitted to a
vote by shareholders:
1. The election of three directors
2. The approval of a proposed amendment to the C-COR Electronics, Inc. 1988
Stock Option Plan to expand the class of persons eligible to participate
in such plan.
3. The approval of a proposed amendment to the C-COR Electronics, Inc. 1992
Employee Stock Purchase Plan to provide for monthly (rather than
quarterly) purchases under such plan.
Details of the proposals noted above were provided to shareholders in the form
of a Notice of Annual Meeting of Shareholders, dated September 13, 1996, and
mailed on or about September 13, 1996.
Mr. Scott C. Chandler was elected as a director until 1999. Mr. I.N. Rendall
Harper, Jr. and Dr. Frank Rusinko, Jr. were re-elected as directors until 1999.
Furthermore, proposals 2 and 3 above were duly approved by the shareholders.
The voting results on the three matters noted above are set forth as follows:
<TABLE>
1. Election of Directors:
<S> <C> <C>
Name of Nominee Votes For Votes Withheld
- - ------------------- ------------- --------------
Scott C. Chandler 7,902,222 74,935
I.N. Rendall Harper, Jr. 7,903,447 73,710
Dr. Frank Rusinko, Jr. 7,903,447 73,710
</TABLE>
<TABLE>
2. Approval of the amendment to the C-COR Electronics, Inc. 1988 Stock Option
Plan to expand the class of persons eligible to participate in such plan:
<S> <C> <C> <C>
Votes For Votes Against Abstentions Non-Voting
6,506,525 987,334 26,428 456,870
</TABLE>
<TABLE>
3. Approval of the amendment to the C-COR Electronics, Inc. 1992 Employee Stock
Purchase Plan to provide for monthly (rather than quarterly) purchases under
such plan:
<S> <C> <C> <C>
Votes For Votes Against Abstentions Non-Voting
7,374,805 104,624 40,858 456,870
</TABLE>
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 December 27, 1996.
<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: February 10, 1997 /s/ CHRIS A. MILLER
Chris A. Miller, C.P.A.,
Vice President-Finance,
Secretary & Treasurer
(Principal Financial Officer)
Date: February 10, 1997 /s/ JOSEPH E. ZAVACKY
Controller & Assistant
Secretary
(Principal Accounting Officer)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
December 27, December 29, December 27, December 29,
1996 1995 1996 1995
(000's omitted, except per share data)
<S> <C> <C> <C> <C>
PRIMARY
Weighted Average Shares Outstanding 9,613 9,562 9,610 9,526
Net effect of dilutive stock
options-based on the
treasury stock method using
average market price 182 261 189 368
-------- ------- ------- -------
Total 9,795 9,823 9,799 9,894
Net income $ 335 $ 696 $ 1,094 $ 3,327
Net income per share $ 0.03 $ 0.07 $ 0.11 $ 0.34
FULLY DILUTED
Weighted Average Shares Outstanding 9,613 9,562 9,610 9,526
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 182 261 189 368
-------- ------- ------- -------
Total 9,795 9,823 9,799 9,894
Net income $ 335 $ 696 $ 1,094 $ 3,327
Net income per share $ 0.03 $ 0.07 $ 0.11 $ 0.34
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-27-1997
<PERIOD-START> SEP-28-1996
<PERIOD-END> DEC-27-1996
<CASH> 1,917
<SECURITIES> 564
<RECEIVABLES> 18,351
<ALLOWANCES> 257
<INVENTORY> 25,825
<CURRENT-ASSETS> 50,838
<PP&E> 47,045
<DEPRECIATION> 21,264
<TOTAL-ASSETS> 77,947
<CURRENT-LIABILITIES> 14,484
<BONDS> 0
0
0
<COMMON> 962
<OTHER-SE> 53,645
<TOTAL-LIABILITY-AND-EQUITY> 77,947
<SALES> 34,913
<TOTAL-REVENUES> 34,913
<CGS> 27,394
<TOTAL-COSTS> 6,982
<OTHER-EXPENSES> 21
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54
<INCOME-PRETAX> 462
<INCOME-TAX> 127
<INCOME-CONTINUING> 335
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 335
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
