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: March 28, 1997
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 - 9,344,737 shares as of May 06, 1997.
<PAGE>
INDEX
C-COR ELECTRONICS, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited).
Condensed consolidated balance sheets -- June 28, 1996, and
March 28, 1997.
Condensed consolidated statements of income -- thirteen weeks
ended March 28, 1997, and March 29, 1996; thirty-nine weeks
ended March 28, 1997, and March 29, 1996.
Condensed consolidated statements of cash flows -- thirteen weeks
ended March 28, 1997, and March 29, 1996; thirty-nine weeks
ended March 28, 1997, and March 29, 1996.
Notes to condensed consolidated financial statements --
March 28, 1997.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
<PAGE>
<TABLE>
Item 1. Financial Statements
<CAPTION>
C-COR ELECTRONICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 28, June 28,
ASSETS 1997 1996
----------- ----------
(Unaudited) (Note)
(000's omitted)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,194 $ 1,474
Marketable securities 367 364
Accounts receivable 18,718 21,465
----------- ----------
20,279 23,303
----------- ----------
Inventories:
Raw materials 17,620 14,508
Work-in-process 4,411 4,349
Finished goods 3,312 4,049
----------- ----------
Total inventories 25,343 22,906
----------- ----------
Deferred taxes 3,279 3,304
Other current assets 1,955 1,964
----------- ----------
TOTAL CURRENT ASSETS 50,856 51,477
----------- ----------
PROPERTY, PLANT, AND EQUIPMENT, NET 26,207 25,617
INTANGIBLE ASSETS AND OTHER LONG-TERM ASSETS, NET 1,380 1,313
----------- ----------
TOTAL ASSETS $ 78,443 $ 78,407
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 15,155 $ 13,918
Income taxes (recoverable) payable (974) 131
Line-of-credit 2,808 1,147
Current portion of long-term debt 829 829
----------- ----------
TOTAL CURRENT LIABILITIES 17,818 16,025
----------- ----------
LONG-TERM DEBT, less current portion 6,577 7,201
DEFERRED TAXES 1,540 1,367
OTHER LONG-TERM LIABILITIES 746 497
----------- ----------
TOTAL LIABILITIES 26,681 25,090
----------- ----------
SHAREHOLDERS' EQUITY
Common Stock, $.10 par; authorized shares
24,000,000; issued shares of 9,626,589 on 03/28/97,
and 9,602,528 on 06/28/96 963 960
Additional paid-in capital 19,896 19,602
Retained earnings 34,069 32,810
Translation adjustment (88) (34)
Net unrealized loss on marketable securities (16) (21)
Treasury Stock (3,062) 0
----------- ----------
TOTAL SHAREHOLDERS' EQUITY 51,762 53,317
----------- ----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 78,443 $ 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>
<PAGE>
<TABLE>
C-COR ELECTRONICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
March 28, March 29, March 28, March 29,
1997 1996 1997 1996
----------- ----------- ----------- -----------
(000's omitted, except per share data)
<S> <C> <C> <C> <C>
NET SALES $ 33,718 $ 36,904 $ 102,646 $ 112,201
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales 27,561 27,940 81,168 84,069
Selling, general and administrative
expenses 4,481 4,390 12,916 13,708
Research and product development costs 2,438 2,612 7,551 6,682
Interest expense 59 167 175 868
Investment income (31) (59) (96) (80)
Foreign exchange gain (10) (20) (37) (167)
Other (income) expenses (63) 33 65 106
----------- ----------- ----------- -----------
34,435 35,063 101,742 105,186
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (717) 1,841 904 7,015
INCOME TAX (BENEFIT) EXPENSE (881) 479 (355) 2,326
----------- ----------- ----------- -----------
NET INCOME $ 164 $ 1,362 $ 1,259 $ 4,689
=========== =========== =========== ===========
NET INCOME PER SHARE:
Primary $ 0.02 $ 0.14 $ 0.13 $ 0.47
=========== =========== =========== ===========
Fully diluted $ 0.02 $ 0.14 $ 0.13 $ 0.47
=========== =========== =========== ===========
<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 Thirty-Nine Weeks Ended
March 28, March 29, March 28, March 29,
1997 1996 1997 1996
----------- ----------- ----------- -----------
(000's omitted)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $ 164 $ 1,362 $ 1,259 $ 4,689
Adjustments to reconcile net income to net cash
and cash equivalents provided by
operating activities:
Depreciation and amortization 1,498 1,260 4,536 3,909
Provision for deferred retirement salary plan 103 26 249 65
Loss (gain) on sale of property, plant and equipment (21) - 25 (2)
Changes in operating assets and liabilities:
Accounts receivable (624) 4,830 2,747 14,024
Inventories 482 666 (2,437) (1,567)
Other assets (474) 110 (218) 423
Accounts payable 228 (2,956) 1,497 (3,652)
Accrued liabilities 541 201 (260) (1,767)
Income taxes (248) 293 (1,106) (2,226)
Deferred income taxes (314) (289) 195 (490)
NET CASH AND CASH EQUIVALENTS PROVIDED BY ----------- ----------- ----------- -----------
OPERATING ACTIVITIES 1,335 5,503 6,487 13,406
----------- ----------- ----------- -----------
INVESTING ACTIVITIES
Purchase of property, plant and equipment (1,885) (2,417) (5,056) (6,903)
Proceeds from sale of property, plant and equipment - - 12 2
Purchase of marketable securities - - (200) -
Proceeds from sale of marketable securities 200 - 205 -
Proceeds from maturity of marketable securities - - - 20
NET CASH AND CASH EQUIVALENTS ----------- ----------- ----------- -----------
(USED IN) INVESTING ACTIVITIES (1,685) (2,417) (5,039) (6,881)
----------- ----------- ----------- -----------
FINANCING ACTIVITIES
Payment of debt and capital lease obligations (205) (220) (624) (376)
Proceeds from long-term debt borrowing - 390 - 6,442
Proceeds from line-of-credit 3,685 9,435 4,240 35,974
Payment of line-of-credit (877) (13,523) (2,579) (50,513)
Tax benefit deriving from exercise and
sale of stock option shares - - 71 1,790
Issue common stock to employee stock purchase plan 33 - 78 46
Proceeds from exercise of stock options 53 49 148 1,002
Purchase of treasury stock (3,062) - (3,062) -
NET CASH AND CASH EQUIVALENTS (USED IN) ----------- ----------- ----------- -----------
FINANCING ACTIVITIES (373) (3,869) (1,728) (5,635)
----------- ----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (723) (783) (280) 890
Cash and cash equivalents at beginning of period 1,917 3,218 1,474 1,545
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,194 $ 2,435 $ 1,194 $ 2,435
=========== =========== =========== ===========
<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 March 28, 1997, and the
results of its operations for the thirteen-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 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>
March 28, June 28,
1997 1996
---------------- ----------------
(000's omitted)
<S> <C> <C>
Accounts payable $ 8,224 $ 6,727
Accrued incentive plan expense - 318
Accrued vacation expense 1,496 1,532
Accrued salary expense 1,316 752
Accrued salary and sales tax expense 718 942
Accrued warranty expense 1,898 1,772
Accrued workers compensation
self-insurance expense 829 704
Accrued other 674 1,171
---------------- ----------------
$15,155 $13,918
================ ================
</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 28, 1997, and the results of operations for the thirteen-week and
thirty-nine-week periods ended March 28, 1997, 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, continuation of increased domestic spending
for network upgrades, the continuation of competitive pricing pressures,
financial impact that restructuring plans will have on cost reductions and
improvements in operating efficiencies, 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 March 28, 1997, were $33,718,000, a
decrease of 9% from the prior year's sales of $36,904,000 for the same period.
Net sales for the thirty-nine-week period ended March 28, 1997, were
$102,646,000, a decrease of 9% from the prior year's sales of $112,201,000 for
the same period. The decrease in sales was 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 82% for the
quarter ended March 28, 1997, and 78% 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 31% during the quarter ended March 28,
1997, and 32% for the period year-to-date, compared to the same periods the
prior year. Domestic spending on network upgrades has continued to remain
strong. The increased demand is the result of expanded bandwidth requirements by
new and existing customers. During the quarter, shipments increased for the
Company's new 800 Series and 900 Series FlexNet products.
International sales, as a percentage of total consolidated sales, were 18% for
the quarter ended March 28, 1997, and 22% 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 61% during the quarter
ended March 28, 1997, and 56% 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
continue to represent distinct markets for CATV equipment, and, in general,
demand can be highly variable.
<PAGE>
The Company's backlog of sales orders at March 28, 1997, was approximately $36.4
million, up from $29.9 million at the end of the previous quarter. Sales order
bookings were $40.2 million during the third quarter, the second highest
quarterly bookings in the Company's history. It is uncertain whether the Company
will sustain this level of order activity for future periods. The Company's
book-to-bill ratio for the past three quarters has been above 1.
Gross profit percentage for the thirteen-week period ended March 28, 1997, was
18.3% versus 24.3% for the same period the prior year. Gross profit percentage
for the thirty-nine-week period ended March 28, 1997, was 20.9% versus 25.1% for
the same period the prior year. The reduction in gross profit margin for the
quarter and year-to-date periods is primarily a result of changes in product and
customer sales mix, 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 several initiatives
with the objective of mitigating the effect of these pressures. The Company is
implementing an aggressive corporate restructuring plan designed to increase
gross margins and improve operating efficiencies. As part of this plan, the
Company anticipates transferring the manufacturing of the power supply assembly
component of its RF amplifiers to Mexico in the summer of 1997. Several other
initiatives are currently underway that are focused on reducing costs and
increasing plant utilization.
Selling, general and administrative expense for the quarter ended March 28,
1997, was $4,481,000, an increase of 2% from the prior year's total of
$4,390,000. The increase is a result of higher outside service expenses and
marketing costs incurred in the quarter compared to the previous year. Selling,
general and administrative expense for the thirty-nine-week period ended March
28, 1997, was $12,916,000, a decrease of 6% from the prior year's expense of
$13,708,000 for the same period. The reduction, year-to-date, is primarily the
result of various ongoing cost reduction initiatives. Going forward, as part of
the Company's restructuring plan, a reconfiguration of the Company's worldwide
sales territories and consolidation of the Company's sales forces will be
implemented. These changes are designed to improve operational efficiencies and
will allow the Company to continue to provide high-quality products and services
to the global communications marketplace.
Research and product development costs for the quarter ended March 28, 1997,
were $2,438,000, a decrease of 7% from the prior year's total of $2,612,000 for
the same period. The decrease was primarily due to reductions in digital fiber
optic product development expense for the quarter, compared to the prior year.
Research and product development costs for the thirty-nine-week period ended
March 28, 1997, were $7,551,000, an increase of 13% over the prior year's total
of $6,682,000 for the same period. The increase is due primarily to the
continued expanded funding of AM fiber optics and Network Management product
development.
The restructuring plan the Company is implementing will impact various areas of
the organization. Costs related to the restructuring plan will be reflected in
the fourth quarter results for fiscal year 1997, but the amount is uncertain at
this time.
Interest expense for the quarter ended March 28, 1997, was $59,000, a decrease
of 65% from the prior year's total of $167,000 for the same period. Interest
expense for the thirty-nine-week period ended March 28, 1997, was $175,000, a
decrease of 80% from the prior year's total of $868,000 for the same period.
These decreases for the quarter and year-to-date periods are due to a reduced
level of outstanding borrowings on the Company's line-of-credit during the
periods.
An income tax benefit of $881,000 was recorded for the quarter. Approximately
$593,000 of this tax benefit resulted from reassessment of the Company's foreign
sales transactions for the prior three years and optimizing the tax benefits
deriving from its Foreign Sales Corporation (FSC). FSC tax returns from the
previous three years were amended and the resultant tax benefit was reflected in
the third quarter results. The reduction in the effective tax rate for the
year-to-date period includes the adjustment discussed above and reflects changes
in the relative level of profitability of U.S. and non-U.S. operations.
<PAGE>
Liquidity and Sources of Capital
Cash and cash equivalents totaled $1,194,000 as of March 28, 1997, compared to
$1,474,000 at June 28, 1996. The Company's current ratio was 2.9 at March 28,
1997, compared to 3.2 at June 28, 1996. Cash and cash equivalents provided by
operations totaled $1,335,000 for the quarter ended March 28, 1997. Cash
generated from operations was used primarily to finance acquisitions of
property, plant and equipment and repurchase treasury stock. The Company's
principal sources of liquidity are borrowings under its line-of-credit facility
and from internally-generated funds. The Company continues to maintain
sufficient liquidity to fund its operations under current business conditions.
Accounts receivables decreased to $18,718,000 as of March 28, 1997, compared to
$21,465,000 at June 28, 1996, due to lower sales in March 1997 compared to June
1996. Inventory as of March 28, 1997, was $25,343,000, down $482,000 from the
previous quarter, but up $2,437,000 over the balance at June 28, 1996, primarily
due to higher levels of raw material inventories.
As of March 28, 1997, the Company had repurchased 239,900 shares of its common
stock for $3,062,000, under a stock repurchase program adopted in December 1996.
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
used 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 annually. The Company had
borrowings of $2,808,000 on this line-of-credit as of March 28, 1997. This
compares to an outstanding 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 $16,383,000 was available to
borrow at March 28, 1997.
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 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 28, 1997.
<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 12, 1997 /s/ CHRIS A. MILLER
Chris A. Miller, C.P.A.,
Vice President-Finance,
Secretary & Treasurer
(Principal Financial Officer)
Date: May 12, 1997 /s/ JOSEPH E. ZAVACKY
Controller & Assistant
Secretary
(Principal Accounting Officer)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
March 28, March 29, March 28, March 29,
1997 1996 1997 1996
(000's omitted, except per share data)
<S> <C> <C> <C> <C>
PRIMARY
Weighted Average Shares Outstanding 9,548 9,577 9,590 9,543
Net effect of dilutive stock
options-based on the
treasury stock method using
average market price 158 248 157 332
-------- ------- ------- -------
Total 9,706 9,825 9,747 9,875
Net income $ 164 $ 1,362 $ 1,259 $ 4,689
Net income per share $ 0.02 $ 0.14 $ 0.13 $ 0.47
FULLY DILUTED
Weighted Average Shares Outstanding 9,548 9,577 9,590 9,543
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 158 248 157 332
-------- ------- ------- -------
Total 9,706 9,825 9,747 9,875
Net income $ 164 $ 1,362 $ 1,259 $ 4,689
Net income per share $ 0.02 $ 0.14 $ 0.13 $ 0.47
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-27-1997
<PERIOD-START> DEC-28-1996
<PERIOD-END> MAR-28-1997
<CASH> 1,194
<SECURITIES> 367
<RECEIVABLES> 19,004
<ALLOWANCES> 286
<INVENTORY> 25,343
<CURRENT-ASSETS> 50,856
<PP&E> 48,913
<DEPRECIATION> 22,706
<TOTAL-ASSETS> 78,443
<CURRENT-LIABILITIES> 17,818
<BONDS> 0
0
0
<COMMON> 963
<OTHER-SE> 50,799
<TOTAL-LIABILITY-AND-EQUITY> 78,443
<SALES> 33,718
<TOTAL-REVENUES> 33,718
<CGS> 27,561
<TOTAL-COSTS> 6,919
<OTHER-EXPENSES> (104)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59
<INCOME-PRETAX> (717)
<INCOME-TAX> (881)
<INCOME-CONTINUING> 164
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 164
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
