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 24, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________________
C-COR.net Corp.
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(Exact Name of Registrant as Specified in Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Pennsylvania 0-10726 24-0811591
- ------------------------------------------------------------------------------
(State or Other Juris- (Commission File (IRS Employer
diction of Incorporation) Number) Identification No.)
</TABLE>
60 Decibel Road
State College, PA 16801
- --------------------------------------------------------------------------------
(Address of Principal (Zip Code)
Executive Offices)
(814) 238-2461
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(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 - 12,361,039 shares as of October 19, 1999.
<PAGE>
INDEX
C-COR.net Corp.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited).
Condensed consolidated balance sheets -- June 25, 1999, and
September 24, 1999.
Condensed consolidated statements of operations -- thirteen weeks
ended September 24, 1999, and September 25, 1998.
Condensed consolidated statements of cash flows -- thirteen weeks
ended September 24, 1999, and September 25, 1998.
Notes to condensed consolidated financial statements --
September 24, 1999.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Item 6. Exhibits and Reports on Form 8-K.
<PAGE>
<TABLE>
Item 1. Financial Statements
<CAPTION>
C-COR.net Corp.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 24, June 25,
ASSETS 1999 1999
----------- ----------
(Unaudited)
(000's omitted)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 500 $ 4,695
Marketable securities 438 445
Accounts receivable 34,269 31,314
----------- ----------
35,207 36,454
----------- ----------
Inventories:
Raw materials 17,665 17,240
Work-in-process 5,338 3,038
Finished goods 4,928 3,287
----------- ----------
Total inventories 27,931 23,565
----------- ----------
Deferred taxes 6,974 6,335
Property held for sale, net 1,100 1,281
Other current assets 4,805 2,176
Net current assets of discontinued operations 305 433
----------- ----------
TOTAL CURRENT ASSETS 76,322 70,244
----------- ----------
PROPERTY, PLANT, AND EQUIPMENT, NET 28,664 27,792
INTANGIBLE ASSETS AND OTHER LONG-TERM ASSETS, NET 3,914 4,913
----------- ----------
TOTAL ASSETS $ 108,900 $ 102,949
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 15,145 $ 16,286
Accrued liabilities 19,220 16,242
Line-of-credit and short-term credit obligations 6,622 4,638
Current portion of long-term debt 813 832
----------- ----------
TOTAL CURRENT LIABILITIES 41,800 37,998
----------- ----------
LONG-TERM DEBT, less current portion 3,513 3,708
OTHER LONG-TERM LIABILITIES 1,479 1,329
----------- ----------
TOTAL LIABILITIES 46,792 43,035
----------- ----------
SHAREHOLDERS' EQUITY
Common Stock, $.10 par; authorized shares
24,000,000; issued shares of 12,919,160 on 09/24/99,
and 12,761,485 on 06/25/99 1,292 1,276
Additional paid-in capital 46,790 44,649
Retained earnings 21,120 21,065
Accumulated other comprehensive loss (100) (96)
Unearned compensation (14) 0
Treasury stock (6,980) (6,980)
----------- ----------
TOTAL SHAREHOLDERS' EQUITY 62,108 59,914
----------- ----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 108,900 $ 102,949
=========== ==========
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
C-COR.net Corp.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<CAPTION>
Thirteen Weeks Ended
September 24, September 25,
1999 1998
----------- -----------
(000's omitted, except per share data)
<S> <C> <C>
NET SALES $ 64,503 $ 34,654
----------- -----------
COSTS AND EXPENSES:
Cost of sales 48,278 27,128
Selling, general and administrative
expenses 7,109 5,355
Research and product development costs 3,175 2,789
Merger-related costs 3,673 0
Interest expense 621 57
Investment income (48) (48)
Other expense 355 18
----------- -----------
63,163 35,299
----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 1,340 (645)
INCOME TAX EXPENSE 1,321 471
----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS 19 (1,116)
DISCONTINUED OPERATIONS:
Gain on disposal of discontinued
business segment, less applicable
income tax expense 36 288
----------- -----------
NET INCOME (LOSS) $ 55 $ (828)
=========== ===========
NET INCOME (LOSS) PER SHARE - (BASIC):
Continuing operations $ 0.00 $ (0.09)
Discontinued operations 0.00 0.02
----------- -----------
NET INCOME (LOSS) PER SHARE $ 0.00 $ (0.07)
=========== ===========
NET INCOME (LOSS) PER SHARE - (DILUTED):
Continuing operations $ 0.00 $ (0.09)
Discontinued operations 0.00 0.02
----------- -----------
NET INCOME (LOSS) PER SHARE $ 0.00 $ (0.07)
=========== ===========
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
C-COR.net Corp.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Thirteen Weeks Ended
September 24, September 25,
1999 1998
----------- -----------
(000's omitted)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 55 $ (828)
Adjustments to reconcile net income to net cash
and cash equivalents provided by operating
activities:
Depreciation and amortization 2,164 2,086
Amortization of debt discount 381 0
Amortization of unearned compensation 7 0
Gain on disposal of discontinued operations,
net of tax benefit (36) (288)
Provision for deferred retirement salary plan 150 125
Loss on sale and write-down of property, plant, and equipment 333 0
Changes in operating assets and liabilities:
Accounts receivable (2,955) 970
Inventories (4,366) (242)
Other assets (1,603) 1,598
Accounts payable (1,141) 1,643
Accrued liabilities 2,978 (2,129)
Deferred income taxes (663) (136)
Discontinued operations - working capital changes
and noncash charges 164 (209)
NET CASH AND CASH EQUIVALENTS (USED IN) PROVIDED BY ----------- -----------
OPERATING ACTIVITIES (4,532) 2,590
----------- -----------
INVESTING ACTIVITIES
Purchase of property, plant and equipment (3,190) (1,074)
Proceeds from sale of property, plant, and equipment 2 0
Change in other assets 0 45
NET CASH AND CASH EQUIVALENTS ----------- -----------
USED IN INVESTING ACTIVITIES (3,188) (1,029)
----------- -----------
FINANCING ACTIVITIES
Payment of debt and capital lease obligations (214) (4,481)
Proceeds from (payment on) short-term credit facilities, net 1,603 980
Proceeds from issuance of convertible preferred stock 0 5
Issue common stock to employee stock purchase plan 25 15
Proceeds from exercise of stock options 2,111 213
Purchase of treasury stock 0 (364)
NET CASH AND CASH EQUIVALENTS PROVIDED BY (USED IN) ----------- -----------
FINANCING ACTIVITIES 3,525 (3,632)
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (4,195) (2,071)
Cash and cash equivalents at beginning of period 4,695 3,030
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 500 $ 959
=========== ===========
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
C-COR.net Corp.
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 24, 1999, 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 30, 2000. 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 25, 1999.
2. Description of Business
The Company designs and manufactures network distribution products and provides
technical services in support of two-way hybrid fiber coax (HFC) networks. The
Company has predominately operated in the Electronic Distribution Products
segment, which provides HFC equipment for signal distribution applications
primarily to the cable television (CATV) market. In order to expand the
Company's product offering in the Electronics Distribution Products segment, on
September 17, 1999, the Company completed a merger with Silicon Valley
Communications, Inc. ("SVCI"), whereby SVCI became a wholly owned subsidiary of
the Company. In addition, on July 9, 1999, the Company completed a merger with
Convergence.com Corporation ("Convergence.com"), whereby Convergence.com became
a wholly owned subsidiary of the Company. These transactions were accounted for
under the pooling-of-interest method of accounting and, accordingly, the
accompanying financial statements have been retroactively restated to give
effect to the Convergence.com and SVCI mergers as if they had occurred on June
26, 1998. As a result of the merger with Convergence.com, the Company now
operates a separate business unit called Broadband Management Services, which
provides design, activation, network management and optimizations, as well as
ongoing support, repair and maintenance to broadband operators in the United
States.
3. BUSINESS COMBINATIONS
On July 9, 1999, the Company consummated a merger with Convergence.com a Georgia
corporation, whereby Convergence.com became a wholly owned subsidiary of the
Company. The merger will enable the Company to offer an integrated package of
network management and support services and products. The expertise of
Convergence.com in enabling high-speed digital data transmission and Internet
delivery over HFC networks by providing network design, activation and support
services will augment the Company's existing technical service capabilities. As
consideration in the merger, each outstanding share of common stock of
Convergence.com was converted into one share of the Company's common stock for
an aggregate of 1,433,323 shares of the Company's common stock. Each outstanding
warrant to acquire Convergence.com common stock was converted into a warrant to
acquire the Company's common stock for an aggregate of warrants to acquire
366,930 shares of the Company's common stock. The merger was accounted for under
the pooling-of-interests method of accounting.
On September 17, 1999, the Company consummated a merger with SVCI a California
corporation, whereby SVCI became a wholly owned subsidiary of the Company. This
acquisition will enable the Company to broaden and strengthen its network
transmission product offering by adding advanced fiber optic products to the
Company's existing radio frequency (RF) and fiber optic products. In particular,
the Company's product offering will be strengthened with respect to headend
fiber optic equipment. As consideration in the merger, each outstanding share of
common stock of SVCI was converted into 0.094534 shares of the Company's common
stock, resulting in the issuance of 1,545,081 shares of the Company's common
stock (subject to reduction pursuant to certain escrow arrangements).
Outstanding stock options and warrants to acquire SVCI common stock were
converted into stock options and warrants to acquire the Company's common stock
using the same conversion ratio (with appropriate adjustment to the exercise
price) for an aggregate of stock options and warrants to acquire 383,844 shares
of the Company's common stock. The merger was accounted for under the
pooling-of-interests method of accounting.
The Company recorded a one-time charge of $3,673,000, ($3,113,000, net of tax)
related to the business combinations in the thirteen-week period ended September
24, 1999. The one-time charge includes the merger transaction costs, as well as
restructuring costs which included severance payments for approximately 40
employees affected by consolidation of positions and administrative functions
resulting from the mergers, and write-off of assets related to existing fiber
optic products that became redundant as a result of the acquisition of SVCI.
Both of these mergers were accounted for using the pooling-of-interests method
of accounting. This method requires that historical financial results of the
merged companies be combined and presented as if the Companies had always
operated as one entity. Accordingly, the Company's financial statements are
presented on a restated combined basis as if the mergers had occurred as of the
beginning of the thirteen-week periods ended September 24, 1999 and September
25, 1998, The restated combined financial statements are not necessarily
indicative of the results that would have occurred if the three companies had
actually been one entity during the entire thirteen-week periods ended September
24, 1999 and September 25, 1998.
4. ACCRUED LIABILITIES
<TABLE>
Accrued liabilities consisted of:
<CAPTION>
September 24, June 25,
1999 1999
---------------- ----------------
(000's omitted)
<S> <C> <C>
Accrued incentive plan expense $ 987 $ 2,285
Accrued vacation expense 1,814 2,000
Accrued salary expense 4,759 1,297
Accrued salary and sales tax expense 1,024 1,519
Accrued warranty expense 1,918 1,742
Accrued workers compensation
self-insurance expense 1,904 1,724
Accrued merger-related costs 1,365 0
Accrued sales commissions and rebates payable 547 951
Accrued income taxes 3,119 3,304
Accrued other 1,783 1,420
---------------- ----------------
$19,220 $16,242
================ ================
</TABLE>
5. COMPREHENSIVE INCOME (LOSS):
The components of accumulated other comprehensive income (loss), net of tax, of
the Company are as follows:
<TABLE>
<CAPTION>
September 24, June 25,
1999 1999
----------- ----------
(000's omitted)
<S> <C> <C>
Foreign currency translation loss $ (92) $ (92)
Unrealized holding loss on marketable securities (8) (4)
---------- ----------
Accumulated other comprehensive loss $ (100) $ (96)
========== ==========
</TABLE>
The components of comprehensive income (loss) of the Company for the
thirteen-week periods ended September 24, 1999, and September 25, 1998, are as
follows:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
September 24, September 25,
1999 1998
------------- ------------
(000's omitted)
<S> <C> <C>
Net income (loss) $ 55 $ (828)
Other comprehensive income (loss), net of tax:
Foreign currency translation gain 0 24
Unrealized loss on equity securities (4) 0
-------- --------
Other comprehensive income (loss) (4) 24
(net of tax expense (benefit) of ($2) and $16)
-------- --------
Comprehensive income (loss) $ 51 $ (804)
======== ========
</TABLE>
6. NET INCOME (LOSS) PER SHARE:
Basic earnings per share are computed based on the weighted average number of
common shares outstanding, excluding any dilutive options, warrants and awards.
Dilutive earnings per share are computed based on the weighted average number of
common shares outstanding plus the dilutive effect of options and warrants. The
dilutive effect of options and warrants is calculated under the treasury stock
method using the average market price for the period. Net income (loss) per
share is calculated for the periods presented as follows:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
September 24, September 25,
1999 1998
------------ -------------
(000's omitted, except per share data)
<S> <C> <C>
Basic:
Weighted average shares outstanding 12,224 12,124
------------ ------------
Total 12,224 12,124
Income (loss) from continuing operations $ 19 $ (1,116)
Gain from discontinued operations 36 288
------------ ------------
Net income (loss) $ 55 $ (828)
------------ ------------
Net income (loss) per share:
Continuing operations $ 0.00 $ (0.09)
Discontinued operations 0.00 0.02
------------ ------------
Net income (loss) per share $ 0.00 $ (0.07)
============ ============
Diluted:
Weighted average shares outstanding 12,224 12,124
Weighted average common stock
equivalents 1,042 0
------------ ------------
Total 13,266 12,124
Income (loss) from continuing operations $ 19 $ (1,116)
Gain from discontinued operations 36 288
------------ ------------
Net income (loss) $ 55 $ (828)
------------ ------------
Net income (loss) per share:
Continuing operations $ 0.00 $ (0.09)
Discontinued operations 0.00 0.02
------------ ------------
Net income (loss) per share $ 0.00 $ (0.07)
============ ============
</TABLE>
<PAGE>
7. SEGMENT INFORMATION
The Company adopted the Statement of Financial Accounting Standards No. 131,
"Disclosures About Segments of an Enterprise and Related Information" (Statement
131), in fiscal year 1999. For the thirteen-week period ended September 24,
1999, the Company operated in two industry segments; the Electronic Distribution
Products segment, which provides HFC equipment for signal distribution
applications, primarily to the CATV market, and the Broadband Management
Services segment, which provides HFC technical services and Internet enabling
technical services and support to broadband operators in the United States. For
the thirteen-week period ended September 25, 1998, the Company also operated in
two industry segments; the Electronic Distribution Product segment, which at
that time included HFC technical services and the Broadband Management Services
segment. For the thirteen-week period ended September 24, 1999, the Company
elected to change the reporting of its Broadband Management Services segment, to
include HFC technical services which were previously reported as part of the
Electronic Distribution Product segment during the thirteen-week period ended
September 25, 1998. The Company believes it is impracticable to disclose the
impact of this change on a restated segment basis for prior periods presented
and does not believe the change to be significant.
Information about industry segments for the thirteen-week periods ended
September 24, 1999, and September 25, 1998, is as follows:
<TABLE>
<CAPTION>
Discontinued
Continuing Operations Operations
------------------------ -------------
Digital
Electronic Broadband Fiber Optics
Distribution Management Transmission
Products Services Products Total
------------ --------- ------------ ---------
Thirteen-week period ended September 24, 1999
<S> <C> <C> <C> <C>
Total revenue ....................................... $60,461 $4,042 $ -- $64,503
Operating income (loss) ............................. 7,172 (1,231) -- 5,941 (A)
Interest income ..................................... 48
Interest expense .................................... 621
Income tax expense .................................. 1,321
Identifiable assets at September 24, 1999 ........... 100,674 8,226 1,154 110,054
Capital expenditures ................................ 2,683 507 -- 3,190
Depreciation and amortization ....................... 1,976 188 -- 2,164
Thirteen-week period ended September 25, 1998
Total revenue ....................................... $33,758 $896 -- $34,654
Operating (loss) .................................... (112) (506) -- (618)
Interest income ..................................... 48
Interest expense .................................... 57
Income tax expense .................................. 471
Identifiable assets at September 25, 1998 ........... 100,458 2,491 2,885 105,834
Capital expenditures ................................ 1,054 20 -- 1,074
Depreciation and amortization ....................... 2,011 75 -- 2,086
<FN>
(A) Operating income excludes one time merger-related cost related to the Convergence.com Corporation and Silicon Valley
Communications, Inc. mergers.(See Note 3 - Notes to Condensed Consolidated Financial Statements.)
</FN>
</TABLE>
The Company and subsidiaries operate in various geographic areas as indicated by
the following:
<TABLE>
<CAPTION>
U.S. Canada Europe Eliminations Total
----------- ------------ ------------- ------------- -------------
Thirteen-week period ended September 24, 1999
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers:
Domestic .................................................. $57,874 $42 $43 -- $57,959
Export .................................................... 6,544 -- -- -- 6,544
Transfers between geographic areas ........................ 12 -- -- (12) --
Total revenue ............................................. 64,430 42 43 (12) 64,503
Operating income (loss) ................................... 6,198 (66) (191) -- 5,941(A)
Interest income ........................................... 48
Interest expense .......................................... 621
Income tax expense ........................................ 1,321
Identifiable assets at September 24, 1999 ................. 108,281 455 164 -- 108,900
Capital expenditures ...................................... 3,189 -- 1 -- 3,190
Depreciation and amortization ............................. 2,159 -- 5 -- 2,164
Thirteen-week period ended September 25, 1998
Sales to unaffiliated customers:
Domestic .................................................. $31,417 $200 $40 -- $31,657
Export .................................................... 2,997 -- -- -- 2,997
Transfers between geographic areas ........................ 52 -- -- (52) --
Total revenue ............................................. 34,466 200 40 (52) 34,654
Operating income (loss) ................................... (624) (23) 29 -- (618)
Interest income ........................................... 48
Interest expense .......................................... 57
Income tax expense ........................................ 471
Identifiable assets at September 25, 1998 ................. 101,556 954 439 -- 102,949
Capital expenditures ...................................... 1,074 -- -- -- 1,074
Depreciation and amortization ............................. 2,078 3 5 -- 2,086
<FN>
(A) Operating income excludes one time merger-related cost related to the Convergence.com Corporation and Silicon Valley
Communications, Inc. mergers.(See Note 3 - Notes to Condensed Consolidated Financial Statements.)
</FN>
</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
September 24, 1999, and the results of operations for the thirteen-week period
ended September 24, 1999, compared with the same period of the prior year. This
discussion should be read in conjunction with the Management's Discussion and
Analysis section for the fiscal year ended June 25, 1999, included in the
Company's Annual Report on Form 10-K.
Disclosure Regarding Forward-Looking Statements
Some of the information presented in this report, including, but not limited to
continuation of increased domestic spending for network upgrades, expectations
regarding international sales volume, anticipated increased spending on product
development, the continued availability of capital resources, the Company's
expectations in connection with the mergers with Convergence.com Corporation
("Convergence.com") and Silicon Valley Communications, Inc. ("SVCI"), continued
delivery of fiber optic equipment to AT&T Broadband and Internet Services and
the Company's ability to assess the risks of the Year 2000 issue, with respect
to its operations, and resolve them in a timely manner, constitute
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, among others, the
ability to integrate both Convergence.com's and SVCI's businesses, the timing of
orders received from customers, the gain or loss of significant customers,
changes in the mix of products sold, the unsuccessful deployment of the
Company's fiber optic products in the AT&T field trial, or failure of the field
trial more generally, continued industry consolidation, the development of
competing technology, changes in the cost and availability of parts and
supplies, fluctuations in warranty costs, new product development activities,
the Company's ability to implement its strategies of product, service and global
market expansion, economic conditions affecting domestic and international
markets, 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 and materials filed with the Securities and Exchange Commission.
Business Combinations
On July 9, 1999, the Company consummated a merger with Convergence.com a Georgia
corporation, whereby Convergence.com became a wholly owned subsidiary of the
Company. The merger enables the Company to offer an integrated package of
network management and support services and products. The expertise of
Convergence.com in enabling high-speed digital data transmission and Internet
delivery over HFC networks by providing network design, activation and support
services will augment the Company's existing technical service capabilities. As
consideration in the merger, each outstanding share of common stock of
Convergence.com was converted into one share of the Company's common stock for
an aggregate of 1,433,323 shares of the Company's common stock. Each outstanding
warrant to acquire Convergence.com common stock was converted into a warrant to
acquire the Company's common stock for an aggregate of warrants to acquire
366,930 shares of the Company's common stock. The merger was accounted for under
the pooling-of-interests method of accounting.
On September 17, 1999, the Company consummated a merger with SVCI a California
corporation, whereby SVCI became a wholly owned subsidiary of the Company. This
acquisition enables the Company to broaden and strengthen its network
transmission product offering by adding advanced fiber optic products to the
Company's existing radio frequency (RF) and fiber optic products. In particular,
the Company's product offering will be strengthened with respect to headend
fiber optic equipment. As consideration in the merger, each outstanding share of
common stock of SVCI was converted into 0.094534 shares of the Company's common
stock, resulting in the issuance of 1,545,081 shares of the Company's common
stock (subject to reduction pursuant to certain escrow arrangements).
Outstanding stock options and warrants to acquire SVCI common stock were
converted into stock options and warrants to acquire the Company's common stock
using the same conversion ratio (with appropriate adjustment to the exercise
price) for an aggregate of stock options and warrants to acquire 383,844 shares
of the Company's common stock. The merger was accounted for under the
pooling-of-interests method of accounting.
The Company recorded a one-time charge of $3,673,000, ($3,113,000, net of tax)
related to the business combinations in the thirteen-week period ended September
24, 1999. The one-time charge includes the merger transaction costs, as well as
restructuring costs which included severance payments for approximately 40
employees affected by consolidation of positions and administrative functions
resulting from the mergers, and write-off of assets related to existing fiber
optic products that became redundant as a result of the acquisition of SVCI.
Both of these mergers were accounted for using the pooling-of-interests method
of accounting. This method requires that historical financial results of the
merged companies be combined and presented as if the Companies had always
operated as one entity. Accordingly, the Company's financial statements are
presented on a restated combined basis as if the mergers had occurred as of the
beginning of the thirteen-week periods ended September 24, 1999 and September
25, 1998, The restated combined financial statements are not necessarily
indicative of the results that would have occurred if the three companies had
actually been one entity during the entire thirteen-week periods ended September
24, 1999 and September 25, 1998.
Results of Operations
Net sales for the thirteen-week period ended September 24, 1999, were
$64,503,000, an increase of 86% from the prior year's sales of $34,654,000 for
the same period. The increase in sales was primarily attributable to increased
capital spending for cable network transmission equipment by domestic cable
operators and from increased sales of technical services related to design,
activation and support of cable networks.
Domestic sales, as a percentage of total consolidated sales, were 90% for the
quarter ended September 24, 1999. This compares to 91% for same period of the
prior year. Domestic sales increased 83% during the quarter ended September 24,
1999, compared to the same period of the prior year. The increase was the result
of increased domestic sales of hybrid/fiber coax (HFC) transmission equipment
and related services during the quarter caused by domestic cable operators
continuing to upgrade and rebuild their systems, principally to offer new
services including two-way internet access.
International sales, as a percentage of total consolidated sales, were 10% for
the quarter ended September 24, 1999. This compares to 9% for the same period of
the prior year. Sales to international customers increased 105% during the
quarter ended September 24, 1999, compared to the same period of the prior year.
The increase for the quarter, resulted primarily from increased demand primarily
from a customer in Canada. The Company expects international markets will
represent a substantial portion of its sales base, but believes demand will
continue to be highly variable.
The Company's backlog of sales orders at September 24, 1999, was approximately
$43.4 million, consisting of backlog from domestic and international customers
of 86% and 14%, respectively. The Company's backlog was approximately $57.6
million at the end of the previous fiscal quarter ended June 25, 1999, which
consisted of backlog from domestic and international customers of 90% and 10%,
respectively. The Company booked approximately $50.4 million of new sales orders
during the quarter ended September 24, 1999, resulting in a book-to-bill ratio
for the quarter of .78. As a result of consolidation of ownership of domestic
cable systems, the Company's bookings and sales levels are dependent upon the
timing of orders from a limited number of large customer accounts. The Company
believes bookings from these customers can be influenced by a variety of
factors, including overall demand for cable services and the acceptance of new
broadband services, competitive pressures, cable operators' access to financing
and cable operators' annual budget cycles. Variations in the timing of bookings
and sales can cause significant fluctuations in quarterly operating results.
Gross profit percentage for the thirteen-week period ended September 24, 1999
was 25.2% versus 21.7% for the same period of the prior year. Reductions in
material costs, changes in customer and product mix, lower manufacturing costs
resulting from the Company's operation in Mexico and efficiencies resulting from
higher production volume and manufacturing automation initiatives contributed to
the increase in the gross profit percentage during the quarter compared to the
same period of the prior year.
Selling, general and administrative expenses for the thirteen-week period ended
September 24, 1999, were $7,109,000, an increase of 33% over the prior year's
total of $5,355,000 for the same period. The increase was due to various selling
and administrative costs, including personnel costs associated with higher sales
volumes and expansion of the Company's technical customer services business unit
and domestic sales force during the prior year, resulting in increased
expenditures during the quarter compared to the same period of the prior year.
Research and product development costs for the thirteen-week period ended
September 24, 1999, were $3,175,000, an increase of 14% over the prior year's
total of $2,789,000 for the same period. The increased expenditures resulted
from higher personnel costs and additional expenses primarily for development of
fiber optic transmission products, including transmitters, receivers and
Erbium-Doped Fiber Amplifiers (EDFAs), for advanced HFC networks and network
management products, including continued development of the Company's CNM System
2 software. These products include the Company's new mini-fiber nodes and
multiplexing nodes, for which initial delivery has been made to AT&T Broadband &
Internet Services (AT&T BIS) for deployment in the Salt Lake City trial of
AT&T's LightWire(TM) Neighborhood Broadband System. Both node products form part
of the foundation for the experimental LightWire(TM) architecture developed by
AT&T BIS and AT&T Labs. The trial deployment in Salt Lake City will be used for
concept testing of this architecture. The Company anticipates research and
product development expenses to increase in future periods, related to ongoing
initiatives, although these expenses may vary as a percentage of sales.
Interest expense for the thirteen-week period ended September 24, 1999, was
$621,000, compared to $57,000, for the same period of the prior year. Included
in interest expense for the thirteen-week period ended September 24, 1999, was
$381,000 of additional amortization related to the fair market value of warrants
issued in fiscal year 1999 in connection with certain debt financing
arrangements. In addition, interest expense increased for the quarter as a
result of an increase in short-term borrowings on the Company's revolving
line-of-credit agreement and other short-term credit facilities during the
period.
Other expense for the thirteen-week period ended September 24, 1999 was
$355,000, compared to $18,000 for the same period of the prior year. The
increase in other expense for the quarter resulted primarily from adjustment of
the carrying value of property held-for-sale, and losses on disposal of
property, plant, and equipment during the quarter.
The effective income tax rate for the thirteen-week period ended September 24,
1999, was 98.6%, compared to 73.0% for the same period of the prior year. The
Company's effective tax rate for the quarter ended September 24, 1999, excluding
non-recurring business combination costs, was approximately 37.5%. The higher
effective tax rate for the quarter ended September 24, 1999, is a result of
permanent differences for non-deductible business combination costs incurred in
relation to the mergers with Convergence.com and SVCI. The higher effective tax
rate for the quarter ended September 25, 1998, resulted from limited tax benefit
related to operating losses at both SVCI and Convergence.com.
Net income for the thirteen-week period ended September 24, 1999, was $55,000,
which includes income from continuing operations of $19,000 and a gain on
disposal of a discontinued business segment of $36,000, net of tax. This
compares to a net loss of $828,000 for the same period of the prior year, which
included a loss from continuing operations of $1,116,000, and a gain on disposal
of a discontinued business segment of $288,000, net of tax.
Liquidity and Capital Resources
As of September 24, 1999, cash and cash equivalents totaled $ 500,000, down from
$4,695,000 at June 25, 1999. Net cash and cash equivalents used in operating
activities was $4,532,000 for the thirteen-week period ended September 24, 1999.
This compares to cash and cash equivalents provided by operating activities of
$2,590,000, for the same period of the prior year. The increase in cash and cash
equivalents used in operating activities for the thirteen-week period ended
September 24, 1999 compared to the same period of the prior year, was primarily
due to business combination costs associated with the mergers of Convergence.com
and SVCI, and increased inventory purchases and accounts receivables resulting
from a higher level of production and sales volume during the quarter.
Net cash and cash equivalents used in investing activities was $3,188,000 for
the thirteen-week period ended September 24, 1999, compared to $1,029,000 for
the same period of the prior year. The increase in cash and cash equivalents
used in investing activities was primarily due to increased purchases of
property, plant and equipment to expand and automate the Company's manufacturing
operations.
Net cash and cash equivalents provided by financing activities totaled
$3,525,000 for the thirteen-week period ended September 24, 1999. This compares
to net cash and cash equivalents used in financing activities of $3,632,000 for
the same period of the prior year. The Company's financing activities consist
primarily of borrowings and payments on short-term and long-term debt. During
the thirteen-week period ended September 24, 1999, the Company increased it's
net borrowing on short-term credit facilities by $1,603,000 for working capital
purposes. In addition, the Company generated $2,111,000 in cash as a result of
employee stock option exercises during the quarter.
On August 9, 1999, the Company replaced its $25,000,000 revolving line-of-credit
agreement with a new credit agreement established with three banks under which
it may borrow up to $70,000,000. The agreement has two parts. First, $20,000,000
is available as a revolving line-of-credit, subject to an aggregate sub-limit
of $2,000,000 for issuance of letters of credit, which is committed through
December 31, 1999. The second part is a 364-day standby acquisition facility,
which enables the Company to borrow up to $50,000,000, for strategic
acquisitions and/or investments. Each draw on the facility may be extended for
up to 84 months. A pricing matrix has been established for credit pricing on
these facilities which is a function of the Company's total funded indebtedness
to earnings before interest, taxes, depreciation and amortization (EBITDA)
ratio. Borrowings under this credit agreement bear interest at various rates, at
the Company's option.
In addition, the Company amended its existing $3,000,000 term loan to eliminate
terms and conditions that govern that facility and replaced them with terms and
conditions that have been entered into for the revolving line-of-credit and the
standby facility. The outstanding balance on the term loan will be split among
the three participating banks based on their pro-rated share of the total
balance of combined credit facilities.
Borrowings on these facilities are unsecured, subject to a negative pledge on
all business assets, and the Company is required to maintain certain financial
ratios and indebtedness tests.
On September 28, 1999, the Company announced the filing of a registration
statement for a proposed public offering of 2,500,000 shares of its common stock
plus an over-allotment option of a maximum of 375,000 shares. Net proceeds from
the offering are to be used for the repayment of debt and for capital
expenditures. The balance of the net proceeds will be used for general corporate
purposes, including working capital.
Management believes that operating cash flow, proposed public offering, as well
as the aforementioned credit agreement, will be adequate to provide for all cash
requirements for the foreseeable future, subject to requirements that additional
growth or strategic development might dictate.
Year 2000 Readiness Disclosure
The Company is aware of the issues associated with the limitations of the
programming code in many existing computer systems, whereby the computer systems
may not properly recognize or process date-sensitive information as the Year
2000 approaches. The Company's date-sensitive systems include test equipment,
computer systems embedded in production equipment, products containing computer
systems, business data processing systems, production management and planning
systems, and personal computers. Systems that do not properly recognize such
information could generate erroneous data or cause a system to fail.
During fiscal 1999, the Company's Year 2000 project team (consisting of
representatives from the Company's information technology, finance,
manufacturing, product development, quality assurance, and sales and marketing
departments) completed its assessment of the Company's internal date-sensitive
equipment to determine Year 2000 compliance. As of June 25, 1999, prior to the
acquisitions of Convergence.com and Silicon Valley Communications, the Company
concluded that approximately 7% of the Company's date-sensitive equipment were
non-compliant. Most of these non-compliant items can and will be upgraded to be
compliant before January 1, 2000 at minimal cost. The non-compliant hardware and
software were determined not to be in critical systems.
At this time, all critical systems have been designated compliant by their
manufacturers. To verify manufacturers' assertions, the Company has developed a
testing plan for its critical systems and began compliance testing during the
third quarter of fiscal 1999. The Company has completed compliance testing,
other than the Company's payroll system, which the Company anticipates
completing early in the second quarter of fiscal 2000. At this time, there are
no exceptions identified with these manufacturers' assertions.
Throughout fiscal 1999, the Company corresponded with its principal customers,
suppliers, vendors and subcontractors to ascertain their readiness for the Year
2000 and requested assurances that they are addressing the Year 2000 issue.
These actions were intended to help mitigate the possible external impact of
Year 2000 issues. However, the Company is unable to fully assess the potential
consequences in the event of unforeseen compliance issues with the systems
operated by its customers, suppliers, vendors or subcontractors.
The Company has assessed its products presently being sold and those installed
in customers' networks. Only the Company's network management system has
inherent software embedded in it and the Company has assessed its network
management software and firmware, both present and previously sold versions, and
found them to be Year 2000 compliant.
As a result of the mergers consummated with Convergence.com on July 9, 1999 and
SVCI on September 17, 1999, the Company is in the process of assessing each of
Convergence.com's and SVCI's Year 2000 initiatives. The Company will focus on
the compliance attainment efforts of their customers and suppliers and
Convergence.com and SVCI's internal date-sensitive equipment. This activity is
expected to last into the second quarter of fiscal 2000. The Company's
preliminary assessment is that the Year 2000 costs associated with these mergers
will be minimal.
Based on the Company's assessment to date, the Company believes it will not
experience any material disruption as a result of Year 2000 problems with the
Company's internal financial, manufacturing and other computer systems. The
Company's most reasonably likely worst case scenario would be disruption of its
operations and lost revenues as a result of non-compliance of its systems and
those operated by its customers, suppliers, vendors and subcontractors. The
Company has established a contingency plan detailing how it will operate under
this scenario. This plan will be refined during the first and second quarters of
fiscal 2000, but includes provisions for increasing production and inventory
levels, altering third-party business relationships, if necessary, ensuring
adequate financial and personnel resources exist to adequately remedy problems
as soon as detected, and other contingency efforts.
While the total estimated cost of assessing Year 2000 issues is difficult to
predict with accuracy, based on the Company's evaluation and assessment thus
far, the Company estimates that its total costs will not exceed $500,000 and
should not have a material adverse impact on its operating results or financial
condition. However, Year 2000 issues could have a significant impact on the
Company's operations and its financial results if modifications cannot be
completed on a timely basis, if unforeseen needs or problems arise, or if there
are unforeseen compliance problems with the systems operated by its customers,
suppliers, vendors or subcontractors. Moreover, the change to the Year 2000 may
negatively impact the Company's customers or the cable television industry as a
whole, causing reduced demand and market disruption in anticipation of, or
following, the start of the Year 2000.
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On July 9, 1999, the Company consummated a merger with Convergence.com
Corporation ("Convergence.com") a Georgia corporation, whereby Convergence.com
became a wholly owned subsidiary of the Company. As consideration in the merger,
each outstanding share of common stock of Convergence.com was converted into one
share of the Company's common stock for an aggregate of 1,433,323 shares of the
Company's common stock. Each outstanding warrant to acquire Convergence.com
common stock was converted into a warrant to acquire the Company's common stock
for an aggregate of warrants to acquire 366,930 shares of the Company's common
stock. Warrants to purchase 340,158 shares are exercisable at a price of $10.00
per share, and warrants to purchase 26,772 shares are exercisable at a price of
$0.75 per share. The merger was accounted for under the pooling-of-interests
method of accounting. These securities were issued in a private placement
pursuant to Section 4(2) of the Securities Act of 1933, as amended. As required
by the merger agreement, a Registration Statement covering the resale of the
shares issued, or issuable upon exercise of the warrants, to the former
Convergence.com shareholders, has been declared effective by the Securities and
Exchange Commission.
On September 17, 1999, the Company consummated a merger with Silicon Valley
Communications, Inc. ("SVCI") a California corporation, whereby SVCI became a
wholly owned subsidiary of the Company. As consideration in the merger, each
outstanding share of common stock of SVCI was converted into 0.094534 shares of
the Company's common stock, resulting in the issuance of an aggregate of
1,545,081 shares of the Company's common stock (subject to reduction pursuant to
certain escrow arrangements). Outstanding stock options and warrants to acquire
SVCI common stock were converted into stock options and warrants to acquire the
Company's common stock using the same conversion ratio (with appropriate
adjustment to the exercise price) for an aggregate of stock options and warrants
to acquire 383,844 shares of the Company's common stock. The share and exercise
prices for these warrants and stock options, as adjusted for the conversion
ratio, are as follows:
<TABLE>
<CAPTION>
Exercise
Shares Price
----------- ----------
Warrants:
<S> <C> <C>
8,697 $ 13.12
132,349 $ 21.16
103,514 $ 31.73
5,199 $ 74.05
-----------
249,759
===========
Stock options:
5,045 $ 0.11
129,040 $ 2.12
-----------
134,085
===========
</TABLE>
The merger was accounted for under the pooling-of-interests method of
accounting. These securities were issued in a private placement pursuant to
Section 4(2) of the Securities Act of 1933, as amended and Regulation S
promulgated thereunder. As required by the merger agreement, a Registration
Statement covering the resale of the shares issued, or issuable upon exercise of
the warrants, to the former SVCI shareholders, has been filed with the
Securities and Exchange Commission.
On August 17, 1999, the Board of Directors of the Company declared a dividend of
one preferred share purchase right (a "Right") for each outstanding share of
common stock, par value $.10 per share, of the Company. The dividend was payable
on September 9, 1999 to the shareholders of record on August 30, 1999 (the
"Record Date"). Each Right entitles the registered holder to purchase from the
Company one one-hundredth of a share of Series A Junior Participating Preferred
Stock, no par value per share, of the Company (the "Preferred Stock") at a price
of $150.00 per one one-hundredth of a share of Preferred Stock, subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement dated as of August 17, 1999, between the Company and American Stock
Transfer & Trust Co., as Rights Agent (the "Rights Agreement"). A copy of the
Rights Agreement is included as an exhibit to the Company's registration
statement on Form 8-A filed on August 30, 1999.
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are included herein:
(3) (a) Amended and Restated Articles of Incorporation of Registrant (the
"Articles of Incorporation") filed with the Secretary of State of
the Commonwealth of Pennsylvania on February 19, 1981.
(3) (b) Amendment to the Articles of Incorporation of Registrant filed with
the Secretary of State of the Commonwealth of Pennsylvania on
November 14, 1986.
(3) (c) Amendment to the Articles of Incorporation filed with the Secretary
of State of the Commonwealth of Pennsylvania on September 21, 1995.
(3) (d) Amendment to the Articles of Incorporation filed with the Secretary
of State of the Commonwealth of Pennsylvania on July 9, 1999.
(3) (e) Statement with Respect to Shares of Series A Junior Participating
Preferred Stock filed with the Secretary of State of the
Commonwealth of Pennsylvania on August 30, 1999.
(3) (f) Amendment to the Articles of Incorporation filed with the Secretary
of State of the Commonwealth of Pennsylvania on October 20, 1999.
(27) Financial Data Schedule
Reports on Form 8-K
On July 15, 1999, the Registrant, filed a Form 8-K dated July 12, 1999, which
included press releases reporting the consummation of the merger with
Convegence.com Corporation, name change to C-COR.net Corp. and a letter of
intent to acquire Silicon Valley Communications, Inc.
On July 26, 1999, the Registrant, filed a Form 8-K dated July 9, 1999, to report
the consummation of the merger with Convegence.com.
On August 2, 1999, the Registrant, filed a Form 8-K/A to amemd the Current
Report filed on July 26, 1999, reporting Pro-forma financial statements
associated with the acquisition of Convergence.com.
On August 30, 1999, the Registrant, filed a Form 8-K reporting the adoption of a
Shareholders' Right Plan.
On September 24, 1999, the Registrant, filed a Form 8-K dated September 17,
1999, to report the consummation of the merger between C-COR.net Corp. and
Silicon Valley Communications, Inc. and filed pro-forma financial statements for
the periods ended June 25, 1999, June 26, 1998 and June 27, 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.net Corp.
(Registrant)
Date: November 1, 1999 /s/ William T. Hanelly
----------------------------------
Vice President-Finance,
Secretary & Treasurer
(Principal Financial Officer)
Date: November 1, 1999 /s/ Joseph E. Zavacky
----------------------------------
Controller & Assistant
Secretary
(Principal Accounting Officer)
<PAGE>
Exhibit 3 (a)
-------------
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
C-COR ELECTRONICS, INC.
The Articles of Incorporation of C-COR Electronics, Inc., as
heretofore amended or supplemented, are hereby amended and restated in their
entirety as follows:
1. The name of the corporation is:
C-COR Electronics, Inc.
2. The location and post office address of the registered office
of the corporation is:
60 Decibel Road
State College, Pa. 16801
3. The corporation has been incorporated for the following
purposes:
To have unlimited power to engage in and to do any
lawful act concerning any and all lawful business for
which corporations may be incorporated under the
Business Corporation Law, including, but not limited
to, design, manufacture, repair and provision of
service with respect to electronics components used
with cable television and other broadband
communications systems.
4. The term for which the corporation is to exist is:
Perpetual.
5.(a). The aggregate number of shares which the corporation should
have authority to issue is:
Eight Million (8,000,000) shares of Common Stock having
a par value of $.10 (ten cents) per share and Two
Million (2,000,000) shares of Preferred Stock, no par
value per share.
5.(b) The Board of directors may issue in one or more series, up to
2,000,000 shares of Preferred Stock, no par value, with full, limited, multiple,
fractional or no voting rights, and with such designations, preferences,
qualifications, privileges, limitations, restrictions, options, conversion
rights, and other special or relative rights as shall be fixed from time to time
by resolution of the Board of Directors.
Manner and Basis of Reclassifying Outstanding
Shares of Common Stock of the Corporation
-----------------------------------------
Upon the effectiveness of these Amended and Restated Articles of
Incorporation, each outstanding share of Common Stock, no par value, shall be
reclassified into 28 shares of Common Stock, $.10 par value.
<PAGE>
Exhibit 3 (b)
-------------
ARTICLES OF AMENDMENT - DOMESTIC BUSINESS CORPORATION
COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF STATE
CORPORATION BUREAU
____________________________________________________________________
In compliance with the requirements of section 806 of the Business
Corporation Law, act of May 5, 1933 (P.L. 364) (13 P.S. (S)1806), the
undersigned corporation, desiring to amend this Articles, does hereby certify
that:
1. The name of the corporation is:
C-COR ELECTRONICS, INC.
-------------------------------------------------------------
2. The location of its registered office in this Commonwealth is (the
Department of State is hereby authorized to correct the following statement
to conform to the records of the Department):
60 Decibel Road
-------------------------------------------------------------
(Address) (Street)
STATE COLLEGE 16801
-------------------------------------------------------------
(City) (Zip Code)
3. The statute by or under which it was incorporated is:
ACT OF MAY 5, 1993, P.L. 364, AS AMENDED 16801
-------------------------------------------------------------
4. The date of its incorporation is JUNE 30, 1953
----------------------------
5. (Check, and if appropriate, complete one of the following):
x The meeting of the shareholders of the corporation at which the
-
amendment was adopted was held at the time and place and pursuant to the kind
and period of notice herein stated.
Time: The 22nd day of OCTOBER, 1986
---- ------- ----
Place: Nittany Lion Inn, State College, PA 16802
--------------------------------------------
Kind and period of notice: WRITTEN NOTICE MAILED SEPTEMBER 23, 1986
----------------------------------------
____________________________________________________________________
[_] The amendment was adopted by a consent in writing, setting
forth the action so taken, signed by all of the shareholders entitled to vote
thereon and filed with the Secretary of the corporation.
6. At the time of the action of shareholders:
<PAGE>
(a) The total number of shares outstanding was:
3,017,470 SHARES OF COMMON STOCK
-----------------------------------------------------------------
(b) The number of shares entitled to vote was:
3,017,470 SHARES OF COMMON STOCK
-----------------------------------------------------------------
7. In the action taken by the shareholders:
(a) The total number of shares voted in favor of the amendment was:
1,814,622
---------------------------------------------------------
(b) The number of shares voted against the amendment was:
456,892
---------------------------------------------------------
8. The amendment adopted by the shareholders set forth in full, is as follows:
RESOLVED that the Amended and Restated Articles of Incorporation, of
C-COR Electronics, Inc. shall be amended by adding new Articles 6 and 7 to read
as set forth in Appendix A to the proxy statement for this meeting, such
amendment to become effective upon the filing thereof.
See Appendix A attached hereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles
of Amendment to be signed by a duly authorized officer and it corporate seal,
duly attested by another such officer, to be hereunto affixed this 5/th/ day of
November, 1986.
C-COR ELECTRONICS, INC.
<PAGE>
APPENDIX A
6.A. The provisions of this Article 6 shall apply notwithstanding any
provisions of these Articles of Incorporation or of the By-Laws of the
Corporation to the contrary.
B. Except as otherwise expressly provided in Paragraph C of this
Article 6:
(i) any merger or consolidation of the Corporation with or into
any other corporation;
(ii) any sale, lease, exchange or other disposition of all or
substantial all of the assets of the Corporation to or with any other
corporation, person or other entity; or
(iii) any issuance or transfer by the Corporation to any other
corporation, person other entity, in a single transaction or group or
series of related transactions, of any shares of capital stock of the
Corporation entitled to vote generally in elections of directors (or
warrants or options or securities convertible into such capital stock), if
the holders of such shares would be entitled to cast 5% or more of the
votes which all holders of shares of all classes of capital stock of the
Corporation, outstanding immediately prior to such transaction and entitled
to vote generally in elections of directors, would be entitled to cast,
shall require the affirmative vote of shareholders entitled to cast at least 66
2/3% of the votes which all holders of shares of all classes of capital stock of
the Corporation entitled to vote generally in elections of directors, voting
together for this purpose as one class, would be entitled to cast at any annual
or special meeting duly convened after notice to the shareholders of that
purpose, if as of the date of any action taken by the Board of Directors of the
Corporation with respect to any transaction described in clause (i), (ii) or
(iii) of this Paragraph B or as of the record date for the determination of
shareholders entitled to notice thereof and to vote thereon, such other
corporation, person or other entity referred to above is the beneficial owner,
directly or indirectly, of 10% or more of the outstanding shares of any class of
capital stock of the Corporation. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that some lesser
percentage may be specified, by law, in any agreement with any national
securities exchange or otherwise.
C. The provisions of this Article 6 shall not apply to any transaction
described in clause (i), (ii) or (iii) of Paragraph B of this Article 6 (i) if
such transaction shall have been approved by the affirmative vote of a majority
of the whole Board of Directors of the Corporation prior to the time such other
corporation, person or other entity became the beneficial owner, directly or
indirectly, of 10% or more of the outstanding shares of any class of capital
stock of the Corporation or (ii) if such transaction shall have been approved by
the affirmative vote of at least 80% of the whole Board of Directors of the
Corporation, in each case at any regular or special meeting duly convened after
notice to the directors of that purpose.
D. For the purposes of this Article 6, a corporation, person or other
entity shall be deemed to be the beneficial owner of any shares of any class of
capital stock of the Corporation (i) which it has the right to acquire pursuant
to any agreement, or upon exercise of conversion rights, warrants or options, or
otherwise, or (ii) which are beneficially owned, directly or indirectly
(including shares deemed owned through application of clause (i) of this
Paragraph D), by any other corporation, person or other entity (a) with which it
or its affiliate or associate has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any securities of
the Corporation or (b) which is its affiliate or associate. For the purposes of
this Article 6 the outstanding shares of any class of capital stock of the
Corporation shall include shares deemed owned through the application of clauses
(i) and (ii) of this Paragraph D but shall not include any
<PAGE>
other shares which may be issuable pursuant to any agreement or upon exercise of
conversion rights, warrants or options, or otherwise.
E. For purposes of this Article 6, the terms "affiliate" and
"associate" are defined as those terms are defined in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934 as in effect on
June 30, 1986.
F. The Board of Directors of the Corporation, by the affirmative vote
of at least 80% of the whole Board of Directors, shall have the power to
determine for the purposes of this Article 6 on the basis of information then
known to it, (i) whether (a) any corporation, person or other entity
beneficially own, directly or indirectly, 10% or more of the outstanding shares
of any class of capital stock of the Corporation, (b) any corporation, person or
other entity is an affiliate or an associate of another, (c) any proposed sale,
lease, exchange or other disposition of part of the assets of the Corporation
involves substantially all of the assets of the Corporation, and (d) the Board
of Directors of the Corporation has approved any transaction and (ii) when any
of the facts set forth in clause (i) of this sentence has occurred. Any such
determination by the Board shall be conclusive and binding for all purpose of
this Article 6.
7. The Corporation reserves the right to amend, alter, add to or
repeal any provision contained in these Articles of Incorporation, in the manner
now or hereinafter prescribed by statute, and all rights conferred upon
shareholders are herein granted subject to this reservation; provided, however,
that no amendment to these Articles of Incorporation shall amend, alter, add to
or repeal any of the provisions of Article 6 unless the resolution effecting
such amendment, alteration, addition or repeal shall receive the affirmative
vote of shareholders entitled to cast at least 66 2/3% of the votes which all
holders of shares of all clauses of capital stock of the Corporation entitled to
vote generally in elections of directors, voting together for this purpose as
one class, would be entitled to cast at any annual or special meeting duly
convened after notice to the shareholders of that purpose.
<PAGE>
Exhibit 3 (c)
-------------
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DBCB:15-1915 (Rev 80)
In compliance with the requirements of 15 Pa. C. S. ss. 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby states that:
1. The name of the corporation is: C-COR Electronics, Inc.
-------------------------------------
- -------------------------------------------------------------------------
2. The (a) address of the corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
<TABLE>
<S> <C> <C> <C> <C>
(a) 60 Decibel Road State College PA 16801 Centre
----------------------------------------------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o: -------------------------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the county in (b) shall be deemed the county
in which the corporation is located for venue and official publication purposes.
3. The statute by or under which it was incorporated is: Pennsylvania Business Corporation Law of 1933
--------------------------------------------------------------
4. The date of its incorporation is: June 30, 1953
------------------------------------------------------------------------------------
5. (Check, and if appropriate complete, one of the following):
X The amendment shall be effective upon filing these Articles of Amendment in the Department of State
---
--- The amendment shall be effective on: ----------------------- at ------------------------------
Date Hour
6. (Check one of the following):
X The amendment was adopted by the shareholders (or members) pursuant to 15 Pa. C.S.(S).1914(a) and (b).
---
--- The amendment was adopted by the board of directors pursuant to 15 Pa. C.S. (S). 1914(c).
7. (Check, and if appropriate complete, one of the following):
--- The amendment adopted by the corporation, set forth in full, is as follows:
X The amendment adopted by the corporation as set forth in full in Exhibit A attached hereto and made a part hereof.
---
8. (Check if the amendment restates the Articles):
--- The restated Articles of Incorporation supersede the original Articles and all amendments thereto.
</TABLE>
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles
of Amendment to be signed by a duly authorized officer thereof this 21st day of
September, 1995.
C-COR ELECTRONICS, INC.
<PAGE>
EXHIBIT A
TO
ARTICLES OF AMENDMENT
OF
C-COR ELECTRONICS, INC.
7. The amendment adopted by the corporation, set forth in full is
as follows:
RESOLVED, that article 5(a) of C-COR Electronics, Inc.'s Amended and
Restated Articles of Incorporation which presently reads as follows:
5(a). The aggregate numbers of shares which the Corporation
should have authority to issue is:
Eight Million (8,000,000) shares of Common Stock having a par value of
$.10 (ten cents) per share and Two Million (2,000,000) shares of
Preferred Stock, no par value per share.be amended to read in full as
follows:
5(a). The aggregate number of shares which the corporation should have
authority to issue is:
Twenty Four Million (24,000,000) shares of Common Stock having a par
value of $.10 (ten cents) per share and Two Million (2,000,000) shares
of Preferred Stock, no par value per share.
<PAGE>
Exhibit 3 (d)
-------------
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DBCB:15-1915 (Rev 80)
In compliance with the requirements of 15 Pa. C. S. (S) 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby states that:
1. The name of the corporation is: C-COR Electronics, Inc.
-------------------------------------
--------------------------------------------------------------------
2. The (a) address of the corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and the
county of venue is (the Department is hereby authorized to correct the following
information to conform to the records of the Department):
<TABLE>
<S> <C>
(a) 60 Decibel Road State College PA 16801 Centre
------------------------------------------------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:------------------------------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the county in (b) shall be deemed the county in
which the corporation is located for venue and official publication purposes.
3. The statute by or under which it was incorporated is: PA Business Corporation Law, Act of May 5, 1933, P L 364
----------------------------------------------------------------
4. The date of its incorporation is: June 30, 1953
-------------------------------------------------------------------------------------
5. (Check, and if appropriate complete, one of the following):
X The amendment shall be effective upon filing these Articles of Amendment in the Department of State
---
--- The amendment shall be effective on:------------------------------ at -----------------------------
Date Hour
6. (Check one of the following):
--- The amendment was adopted by the shareholders (or members) pursuant to 15 Pa. C.S. (S) 1914(a) and (b).
X The amendment was adopted by the board of directors pursuant to 15 Pa. C.S.(S) 1914(c).
---
7. (Check, and if appropriate complete, one of the following):
X The amendment adopted by the corporation, set forth in full, is as follows:
---
"1. The name of the Corporation is C-COR.net Corp."
-------------------------------------------------------------------------------------------------------
_______________________________________________________________________________________________
_______________________________________________________________________________________________
--- The amendment adopted by the corporation as set forth in full in Exhibit A attached hereto and made a part hereof.
8. (Check if the amendment restates the Articles):
--- The restated Articles of Incorporation supersede the original Articles and all amendments thereto.
</TABLE>
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles
of Amendment to be signed by a duly authorized officer thereof this 9th day of
July, 1999.
C-COR ELECTRONICS, INC.
<PAGE>
Exhibit 3 (e)
-------------
STATEMENT WITH RESPECT TO SHARES
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
C-COR.net Corp.
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of the Articles of
Incorporation, a series of Preferred Stock, no par value per share, of the
Corporation be and hereby is created, and that the designation and number of
shares thereof and the voting and other powers, preferences and relative,
participating, optional or other rights of the shares of such series and the
qualifications, limitations and restrictions thereof are as follows:
Series A Junior Participating Preferred Stock
1. Designation and Amount. There shall be a series of Preferred Stock that
shall be designated as "Series A Junior Participating Preferred Stock," and the
number of shares constituting such series shall be 200,000. Such number of
shares may be increased or decreased by resolution of the Board of Directors;
provided, however, that no decrease shall reduce the number of shares of Series
A Junior Participating Preferred Stock to less than the number of shares then
issued and outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Corporation.
2. Dividends and Distribution.
(A) Subject to the prior and superior rights of the holders of any shares
of any class or series of stock of the Corporation ranking prior and superior to
the shares of Series A Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Series A Junior Participating Preferred
Stock, in preference to the holders of shares of any class or series of stock of
the Corporation ranking junior to the Series A Junior Participating Preferred
Stock in respect thereof, shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the 15th day of February, May, August and
November, in each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Series A Junior
Participating Preferred Stock, in an amount per share (rounded to the nearest
cent) equal to the greater of (a) $1.00 or (b) the Adjustment Number (as defined
below) times the aggregate per share amount of all cash dividends, and the
Adjustment Number times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, par
value $.10 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred Stock. The
"Adjustment Number" shall initially be 100. In the event the Corporation shall
at any time after August 17, 1999 (the "Rights Declaration Date") (i) declare
and pay any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the Adjustment
Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series
A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Junior Participating Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A Junior
Participating Preferred Stock, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of Series
A Junior Participating Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Junior Participating Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 60 days prior to the
date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A Junior Participating
Preferred Stock shall have the following voting rights:
(A) Each share of Series A Junior Participating Preferred Stock shall
entitle the holder thereof to a number of votes equal to the Adjustment Number
on all matters submitted to a vote of the shareholders of the Corporation.
(B) Except as required by law and by Section 10 hereof, holders of Series A
Junior Participating Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or redeem
or purchase or otherwise acquire for consideration any shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Junior Participating Preferred
Stock, except dividends paid ratably on the Series A Junior Participating
Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled; or
(iii) purchase or otherwise acquire for consideration any shares of Series
A Junior Participating Preferred Stock, or any shares of stock ranking on a
parity with the Series A Junior Participating Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of Series A Junior
Participating Preferred Stock, or to such holders and holders of any such shares
ranking on a parity therewith, upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
5. Reacquired Shares. Any shares of Series A Junior Participating Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired promptly after the acquisition thereof. All such
shares shall upon their retirement become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
any conditions and restrictions on issuance set forth herein.
6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation, dissolution or winding up of the Corporation,
voluntary or otherwise, no distribution shall be made to the holders of shares
of stock ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series A Junior Participating Preferred Stock unless,
prior thereto, the holders of shares of Series A Junior Participating Preferred
Stock shall have received an amount per share (the "Series A Liquidation
Preference") equal to the greater of (i) $1.00 plus an amount equal to accrued
and unpaid dividends and distributions thereon, whether or not declared, to the
date of such payment, or (ii) the Adjustment Number times the per share amount
of all cash and other property to be distributed in respect of the Common Stock
upon such liquidation, dissolution or winding up of the Corporation.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other classes and series of stock of the
Corporation, if any, that rank on a parity with the Series A Junior
Participating Preferred Stock in respect thereof, then the assets available for
such distribution shall be distributed ratably to the holders of the Series A
Junior Participating Preferred Stock and the holders of such parity shares in
proportion to their respective liquidation preferences.
(C) Neither the merger or consolidation of the Corporation into or with
another corporation nor the merger or consolidation of any other corporation
into or with the Corporation shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of this Section 6.
7. Consolidation, Merger, Etc. In case the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the outstanding
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed into an amount per share equal to the Adjustment
Number times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged.
8. No Redemption. Shares of Series A Junior Participating Preferred Stock
shall not be subject to redemption by the Company.
9. Ranking. The Series A Junior Participating Preferred Stock shall rank
junior to all other series of the Preferred Stock as to the payment of dividends
and as to the distribution of assets upon liquidation, dissolution or winding
up, unless the terms of any such series shall provide otherwise, and shall rank
senior to the Common Stock as to such matters.
10. Amendment. At any time that any shares of Series A Junior Participating
Preferred Stock are outstanding, the Amended and Restated Certificate of
Incorporation of the Corporation shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series A Junior Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of two-thirds of the outstanding
shares of Series A Junior Participating Preferred Stock, voting separately as a
class.
11. Fractional Shares. Series A Junior Participating Preferred Stock may be
issued in fractions of a share that shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Junior Participating Preferred Stock.
IN WITNESS WHEREOF, this Statement is executed on behalf of the Corporation
this ___ day of August, 1999.
C-COR.net Corp.
By: /s/ David A. Woodle
---------------------------------------------
Name: David A. Woodle
Title: President and
Chief Executive Officer
<PAGE>
Exhibit 3 (f)
-------------
RESOLVED, that Article 5(a) of the Corporation's Amended and Restated
Articles of Incorporation, as amended, be amended and restated in its entirety
to read in full as follows:
5(a). The aggregate number of shares which the Corporation should have
authority to issue is Fifty Million (50,000,000) shares of Common Stock having a
par value of $.10 per share and Two Million (2,000,000) shares of Preferred
Stock, no par value per share.
RESOLVED, that the Corporation's Amended and Restated Articles of
Incorporation, as amended, be amended to add a new Article 8 thereto, which
shall read in full as follows:
8. The shareholders of the Corporation shall not have the right to cumulate
votes in the election of directors.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUN-26-1999
<PERIOD-END> SEP-24-1999
<CASH> 500
<SECURITIES> 438
<RECEIVABLES> 35,591
<ALLOWANCES> 1,322
<INVENTORY> 27,931
<CURRENT-ASSETS> 76,322
<PP&E> 66,615
<DEPRECIATION> 37,951
<TOTAL-ASSETS> 108,900
<CURRENT-LIABILITIES> 41,800
<BONDS> 0
0
0
<COMMON> 1,292
<OTHER-SE> 60,816
<TOTAL-LIABILITY-AND-EQUITY> 108,900
<SALES> 64,503
<TOTAL-REVENUES> 64,503
<CGS> 48,278
<TOTAL-COSTS> 13,957
<OTHER-EXPENSES> 307
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 621
<INCOME-PRETAX> 1,340
<INCOME-TAX> 1,321
<INCOME-CONTINUING> 19
<DISCONTINUED> 36
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55
<EPS-BASIC> .00
<EPS-DILUTED> .00
</TABLE>
