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: September 26, 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 - 9,147,494 shares as of November 3, 1997.
<PAGE>
INDEX
C-COR ELECTRONICS, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited).
Condensed consolidated balance sheets -- June 27, 1997, and
September 26, 1997.
Condensed consolidated statements of operations -- thirteen weeks
ended September 26, 1997, and September 27, 1996.
Condensed consolidated statements of cash flows -- thirteen weeks
ended September 26, 1997, and September 27, 1996.
Notes to condensed consolidated financial statements --
September 26, 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
September 26, June 27,
ASSETS 1997 1997
----------- ----------
(Unaudited) (Note)
(000's omitted)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 471 $ 452
Marketable securities 363 359
Accounts receivable 20,358 19,299
----------- ----------
21,192 20,110
----------- ----------
Inventories:
Raw materials 14,476 14,358
Work-in-process 2,559 3,346
Finished goods 2,337 1,436
----------- ----------
Total inventories 19,372 19,140
----------- ----------
Deferred taxes 2,839 2,616
Other current assets 1,666 1,893
Net current assets of discontinued operations 280 0
----------- ----------
TOTAL CURRENT ASSETS 45,349 43,759
----------- ----------
PROPERTY, PLANT, AND EQUIPMENT, NET 24,959 25,060
INTANGIBLE ASSETS AND OTHER LONG-TERM ASSETS, NET 866 785
Net noncurrent assets of discontinued operations 505 1,515
----------- ----------
TOTAL ASSETS $ 71,679 $ 71,119
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 18,832 $ 15,461
Line-of-credit 0 3,466
Current portion of long-term debt 839 834
Noncurrent liabilities of discontinued operations 0 1,253
----------- ----------
TOTAL CURRENT LIABILITIES 19,671 21,014
----------- ----------
LONG-TERM DEBT, less current portion 6,155 6,367
DEFERRED TAXES 1,370 1,311
OTHER LONG-TERM LIABILITIES 836 749
----------- ----------
TOTAL LIABILITIES 28,032 29,441
----------- ----------
SHAREHOLDERS' EQUITY
Common Stock, $.10 par; authorized shares
24,000,000; issued shares of 9,642,851 on 09/26/97,
and 9,633,435 on 06/27/97. 964 963
Additional paid-in capital 20,031 19,963
Retained earnings 28,513 26,632
Translation adjustment (84) (101)
Net unrealized loss on marketable securities (12) (14)
Treasury Stock (5,765) (5,765)
----------- ----------
TOTAL SHAREHOLDERS' EQUITY 43,647 41,678
----------- ----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 71,679 $ 71,119
=========== ==========
<FN>
Note: The balance sheet at June 27, 1997, has been derived from 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 OPERATIONS (UNAUDITED)
<CAPTION>
Thirteen Weeks Ended
September 26, September 27,
1997 1996
----------- -----------
(000's omitted, except per share data)
<S> <C> <C>
NET SALES $ 37,065 $ 31,844
----------- -----------
COSTS AND EXPENSES:
Cost of sales 28,473 24,647
Selling, general and administrative
expenses 3,555 3,472
Research and product development costs 1,773 1,379
Interest expense 77 59
Investment income (6) (31)
Foreign exchange gain (21) (10)
Other expenses 322 18
----------- -----------
34,173 29,534
----------- -----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 2,892 2,310
INCOME TAXES 1,011 777
----------- -----------
INCOME FROM CONTINUING OPERATIONS 1,881 1,533
DISCONTINUED OPERATIONS:
Loss from operations of discontinued
business segment, less applicable
income tax benefit of $377 0 (774)
----------- -----------
NET INCOME $ 1,881 $ 759
=========== ===========
NET INCOME (LOSS) PER SHARE:
Continuing operations $ 0.20 $ 0.16
Discontinued operations 0.00 (0.08)
----------- -----------
Total $ 0.20 $ 0.08
=========== ===========
<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
September 26, September 27,
1997 1996
----------- -----------
(000's omitted)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 1,881 $ 759
Adjustments to reconcile net income to net cash
and cash equivalents provided by operating
activities:
Depreciation and amortization 1,623 1,318
Provision for deferred retirement salary plan 87 37
Changes in operating assets and liabilities:
Accounts receivable (1,059) 1,921
Inventories (232) (1,705)
Other assets 146 292
Accounts payable 1,001 798
Accrued liabilities 2,370 (983)
Deferred income taxes (166) 158
Discontinued operations - working capital changes
and noncash charges (545) (1,108)
NET CASH AND CASH EQUIVALENTS PROVIDED BY ----------- -----------
OPERATING ACTIVITIES 5,106 1,487
----------- -----------
INVESTING ACTIVITIES
Purchase of property, plant and equipment (1,505) (1,060)
Purchase of marketable securities 0 (200)
Investing activities of discontinued operations 22 (70)
NET CASH AND CASH EQUIVALENTS ----------- -----------
USED IN INVESTING ACTIVITIES (1,483) (1,330)
----------- -----------
FINANCING ACTIVITIES
Payment of debt and capital lease obligations (207) (208)
Proceeds from line-of-credit 12,792 555
Payment of line-of-credit (16,258) (1,702)
Tax benefit deriving from exercise and
sale of stock option shares 0 60
Issue common stock to employee stock purchase plan 12 27
Proceeds from exercise of stock options 57 64
NET CASH AND CASH EQUIVALENTS USED IN ----------- -----------
FINANCING ACTIVITIES (3,604) (1,204)
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 19 (1,047)
Cash and cash equivalents at beginning of period 452 1,474
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 471 $ 427
=========== ===========
<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 September 26, 1997, and
the results of its operations for the thirteen-week period then ended. Operating
results for the thirteen-week period are not necessarily indicative of the
results that may be expected for the year ending June 26, 1998. 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 27, 1997.
2. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
Accounts payable and accrued liabilities consist of:
<CAPTION>
September 26, June 27,
1997 1997
---------------- ----------------
(000's omitted)
<S> <C> <C>
Accounts payable $ 9,637 $ 8,636
Accrued incentive plan expense 796 0
Accrued vacation expense 1,350 1,358
Accrued salary expense 1,204 569
Accrued payroll and sales tax expense 345 555
Accrued warranty expense 2,366 2,185
Accrued workers compensation
self-insurance expense 1,342 1,162
Income taxes payable 940 137
Accrued other 852 859
---------------- ----------------
$18,832 $15,461
================ ================
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
The following discussion addresses the financial condition of the Company as of
September 26, 1997, and the results of operations for the thirteen-week period
ended September 26, 1997, compared with the same period the prior year. This
discussion should be read in conjunction with the Management's Discussion and
Analysis section for the fiscal year ended June 27, 1997, included in the
Company's Annual Report on Form 10-K.
Disclosure Regarding Forward-Looking Statement:
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,
anticipated new product development initiatives, and the continued availability
of capital resources. Although the Company believes 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,
new product development activities, changes in the cost and availability of
parts and supplies, fluctuations in warranty costs, 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 September 26, 1997, were
$37,065,000, an increase of 16% from the prior year's sales of $31,844,000 for
the same period. The increase in sales was primarily attributable to increased
demand for RF distribution products by international customers in the cable
television (CATV) industry, compared to the same period of the prior year.
Domestic sales, as a percentage of total consolidated sales, were 72% for the
quarter ended September 26, 1997. This compares to 81% for the same period the
prior year. Sales to domestic customers increased 2% during the quarter ended
September 26, 1997, compared to the same period of the prior year. In recent
periods, the Company has seen a steady demand from domestic CATV operators for
hybrid/fiber coax (HFC) distribution equipment. The Company believes the
increased demand continues to be driven by network upgrade activity resulting
from demands for improved services, affecting not only voice and video
requirements, but also demands for high-speed data.
International sales, as a percentage of total consolidated sales, were 28% for
the quarter ended September 26, 1997. This compares to 19% for the same period
the prior year. Sales to international customers increased 78% during the
quarter ended September 26, 1997, compared to the same period of the prior year.
The increase for the quarter resulted primarily from increased demand in Canada,
Asia, and Europe. These markets continue to represent distinct markets for CATV
equipment, and, in general, demand can be highly variable.
The Company's backlog of sales orders at September 26, 1997, was approximately
$37.9 million, up from approximately $34.9 million at the end of the Company's
fiscal year ended June 27, 1997. The Company booked approximately $40.1 million
of new sales orders during the quarter ended September 26, 1997.
Gross profit percentage for the thirteen-week period ended September 26, 1997,
was 23.2% versus 22.6% for the same period the prior year. The increase in the
gross profit margin for the quarter is primarily a result of changes in customer
and product sales mix, and efficiencies resulting from higher production
volumes, compared to the same period the prior year. Although pricing pressures
continue, the Company has implemented initiatives to mitigate these pressures.
The Company has taken steps to lower manufacturing costs and is continuing
efforts to improve manufacturing processes in order to enhance efficiency and
productivity, and efforts to redesign products to enhance manufacturability and
reduce material costs. As one of these initiatives, production began during the
quarter at the Company's new manufacturing facility in Tijuana, Mexico. The
Company will manufacture the power supply assembly component of it's RF
amplifier products at this new facility.
Selling, general and administrative expenses for the thirteen-week period ended
September 26, 1997, were $3,555,000, an increase of 2% over the prior year's
total of $3,472,000 for the same period. The increase is due primarily to an
increase in accrued profit incentive expense under the Company's profit sharing
plan, compared to the previous year.
Research and product development costs for the thirteen-week period ended
September 26, 1997, were $1,773,000, an increase of 29% over the prior year's
total of $1,379,000 for the same period. The increase is a result of higher
personnel costs and increased expenditures for AM fiber optics product
development. In addition, the aforementioned increase in accrued profit
incentive expense under the Company's profit sharing plan contributed to the
increased research and product development expenses, compared to the previous
year. Anticipated new product development initiatives are expected to increase
research and product development expenses in future periods.
Other expense for the thirteen-week period ended September 26, 1997, was $322.
This compares to $18 for same period the prior year. The increase is primarily a
result of expense accrued in relation to a tentative settlement reached in
relation to litigation dating back to March of 1995 that alleged violations of
securities and other laws.
The effective income tax rate for the thirteen-week period ended September 26,
1997, was 35.0%. This compares to an effective income tax rate of 33.6% for the
same period the prior year. The provision for income tax expense reflects
changes in the relative profitability related to both U.S. and non-U.S.
operations and differences in statuatory rates.
Net income for the thirteen-week period ended September 26, 1997, was $1,881,000
or $.20 per share versus $759,000 or $.08 per share for the same period the
prior year. Net income for the first quarter of the prior year reflects income
from continuing operations of $1,533,000 or $.16 per share, and a loss from
discontinued operations of ($774,000) or ($.08) per share (net of applicable tax
benefit).
Results of Discontinued Operations:
On July 10, 1997, the Company announced the discontinuation of its digital fiber
optic business segment located in Fremont, California, in a phase-down process
expected to span nine months. Anticipated wind-down costs were recorded as a
loss on disposal of the discontinued segment in the results of discontinued
operations for the Company's prior fiscal year ended June 27, 1997. Thus, no
wind-down costs from operations of the discontinued business segment were
recorded for the quarter ended September 26, 1997. This compares to a loss from
operations of the discontinued business segment for the same period of the prior
year of ($774,000), net of applicable tax benefit of ($377,000).
Liquidity and Capital Resources
The Company's current ratio at September 26, 1997, increased to 2.3 from 2.1 at
June 27, 1997. Net cash generated from operating activities increased to
$5,106,000 as of September 26, 1997, compared to $1,487,000 for the same period
the prior year. Working capital was $25,678,000 as of September 26, 1997,
compared to $22,745,000 for the same period of the prior year.
Cash used by investing activities was $1,483,000 as of September 26, 1997,
compared to $1,330,000 for the same period the prior year. The increase of cash
used in investing activities was primarily due to higher purchases of property,
plant, and equipment compared to the same period the prior year.
Cash totaling $3,604,000 was used in financing activities as of September 26,
1997, compared to $1,204,000 for the same period the prior year. The increase in
cash used in financing activities resulted from payments on borrowings related
to the Company's line-of-credit.
On September 4, 1997, the Company announced that it was beginning another stock
repurchase program. The new 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. To date,
no shares were repurchased under this new stock repurchase program adopted in
September 1997. In May 1997 the Company completed a stock repurchase program,
which it had begun in December 1996, for 500,000 shares.
The Company maintains a line-of-credit with a bank, pursuant to which it may
borrow the lesser of $23,000,000 or a percentage 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 no
borrowings on this line-of-credit as of September 26, 1997. Based upon the
Company's analysis of eligible accounts receivable and inventory, approximately
$20,442,000 was available to borrow as of September 26, 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
(27) Financial Data Schedule
Reports on Form 8-K
On July 14, 1997, the Registrant filed a Form 8-K to report that the Registrant
announced on July 10, 1997, that it will discontinue its digital fiber optic
business segment.
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: November 10, 1997 /s/ CHRIS A. MILLER
Chris A. Miller, C.P.A.,
Vice President-Finance,
Secretary & Treasurer
(Principal Financial Officer)
Date: November 10, 1997 /s/ JOSEPH E. ZAVACKY
Controller & Assistant
Secretary
(Principal Accounting Officer)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
September 26, September 27,
1997 1996
(000's omitted, except per share data)
<S> <C> <C>
Primary:
Weighted average shares outstanding 9,139 9,608
Net effect of dilutive stock
options-based on the
treasury stock method using
average market price 120 195
---------- ----------
Total 9,259 9,803
Income from continuing operations $ 1,881 $ 1,533
Loss from discontinued operations 0 (774)
---------- ----------
Net income $ 1,881 $ 759
---------- ----------
Net income (loss) per share
Continuing operations $ 0.20 $ 0.16
Discontinued operations 0.00 (0.08)
---------- ----------
Net income per share $ 0.20 $ 0.08
---------- ----------
Fully Diluted:
Weighted average shares outstanding 9,139 9,608
Net effect of dilutive stock
options-based on the
treasury stock method using
the greater of the average
market price or the period end
market price 160 204
---------- ----------
Total 9,299 9,812
Income from continuing operations $ 1,881 $ 1,533
Loss from discontinued operations 0 (774)
---------- ----------
Net income $ 1,881 $ 759
---------- ----------
Net income (loss) per share
Continuing operations $ 0.20 $ 0.16
Discontinued operations 0.00 (0.08)
---------- ----------
Net income per share $ 0.20 $ 0.08
---------- ----------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-26-1998
<PERIOD-START> JUN-28-1997
<PERIOD-END> SEP-26-1997
<CASH> 471
<SECURITIES> 363
<RECEIVABLES> 20,905
<ALLOWANCES> 547
<INVENTORY> 19,372
<CURRENT-ASSETS> 45,349
<PP&E> 48,239
<DEPRECIATION> 23,280
<TOTAL-ASSETS> 71,679
<CURRENT-LIABILITIES> 19,671
<BONDS> 0
0
0
<COMMON> 964
<OTHER-SE> 42,683
<TOTAL-LIABILITY-AND-EQUITY> 71,679
<SALES> 37,065
<TOTAL-REVENUES> 37,065
<CGS> 28,473
<TOTAL-COSTS> 5,328
<OTHER-EXPENSES> 295
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 77
<INCOME-PRETAX> 2,892
<INCOME-TAX> 1,011
<INCOME-CONTINUING> 1,881
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,881
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
