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 29, 2000
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.net Corp.
(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, $.05 Par Value - 33,455,876 shares as of October 25, 2000.
<PAGE>
INDEX
C-COR.net Corp.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed consolidated balance sheets -- September 29, 2000 and
June 30, 2000.
Condensed consolidated statements of operations (unaudited) --
thirteen weeks ended September 29, 2000 and September 24, 1999.
Condensed consolidated statements of cash flows (unaudited) --
thirteen weeks ended September 29, 2000 and September 24, 1999.
Notes to condensed consolidated financial statements --
September 29, 2000.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
<PAGE>
Item 1. Financial Statements
<TABLE>
<CAPTION>
C-COR.net Corp.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
September 29, June 30,
2000 2000
--------- ---------
(Unaudited)
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents ............................ $ 94,669 $ 95,379
Marketable securities ................................ 48,034 42,154
Interest receivable .................................. 866 1,007
Accounts and notes receivables, net .................. 54,314 49,325
Inventories .......................................... 29,385 31,760
Deferred taxes ....................................... 6,603 7,470
Other current assets ................................. 2,586 3,826
--------- ---------
TOTAL CURRENT ASSETS ................................. 236,457 230,921
Property, plant, and equipment, net .................. 26,529 28,322
Intangible assets, net ............................... 2,395 2,477
Deferred taxes ....................................... 3,857 4,909
Other long-term assets ............................... 6,442 6,410
--------- ---------
TOTAL ASSETS.......................................... $ 275,680 $ 273,039
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ..................................... $ 26,941 $ 21,341
Accrued liabilities .................................. 16,707 20,056
Current portion of long-term debt .................... 225 225
--------- ---------
TOTAL CURRENT LIABILITIES ............................ 43,873 41,622
Long-term debt, less current portion ................. 1,479 1,527
Other long-term liabilities .......................... 2,169 2,232
--------- ---------
TOTAL LIABILITIES .................................... 47,521 45,381
SHAREHOLDERS' EQUITY
Common stock, $.05 par; authorized shares
100,000,000; issued shares of 35,274,137 on
September 29, 2000 and 35,219,825 on June 30, 2000 . 1,763 1,761
Additional paid-in capital ........................... 197,898 197,240
Accumulated other comprehensive income (loss) ........ 57 (30)
Unearned compensation ................................ (6) (8)
Retained earnings .................................... 41,767 35,952
Treasury stock at cost ............................... (13,320) (7,257)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY ........................... 228,159 227,658
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ........... $ 275,680 $ 273,039
========= =========
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
C-COR.net Corp.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
Thirteen Weeks Ended
----------------------------
September 29, September 24,
2000 1999
-------- --------
<S> <C> <C>
Net sales ........................................ $ 78,335 $ 70,888
Cost of sales .................................... 57,063 52,247
-------- --------
Gross margin ..................................... 21,272 18,641
-------- --------
Operating expenses:
Selling and administrative ..................... 8,863 8,895
Research and product development ............... 4,424 3,175
Merger and restructuring costs ................. - 3,673
-------- --------
Total operating expenses ..................... 13,287 15,743
-------- --------
Income from operations ........................... 7,985 2,898
Interest expense ................................. (13) (621)
Investment income ................................ 2,015 63
Other expense, net ............................... (239) (340)
-------- --------
Income before income taxes ....................... 9,748 2,000
Income tax expense ............................... 3,934 1,659
-------- --------
Income from continuing operations ................ 5,814 341
Discontinued operations:
Gain on disposal of discontinued business
segment, net of tax .......................... 1 36
-------- --------
Net income ....................................... $ 5,815 $ 377
======== ========
Net income per share-basic:
Continuing operations .......................... $ 0.17 $ 0.01
Gain on disposal of discontinued operations .... - -
-------- --------
Net income ................................... $ 0.17 $ 0.01
======== ========
Net income per share-diluted:
Continuing operations .......................... $ 0.16 $ 0.01
Gain on disposal of discontinued operations .... - -
-------- --------
Net income ................................... $ 0.16 $ 0.01
======== ========
Weighted average common shares and common share
equivalents
Basic .......................................... 34,040 23,410
Diluted ........................................ 36,419 28,274
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
C-COR.net Corp.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands of dollars)
Thirteen Weeks Ended
--------------------
September 29, September 24,
2000 1999
-------- --------
OPERATING ACTIVITIES
<S> <C> <C>
Net income ........................................... $ 5,815 $ 377
Adjustments to reconcile net income to net cash
and cash equivalents provided by (used in)
operating activities:
Depreciation and amortization ...................... 2,540 2,323
Amortization of debt discount ...................... - 381
Amortization of unearned compensation .............. 2 (14)
Gain on disposal of discontinued operations, net of
tax............................................... (1) (36)
Provision for deferred retirement salary plan ...... 21 148
Loss on sales and write-down of property, plant and
equipment......................................... 250 332
Tax benefit deriving from exercise and
sales of stock option shares ..................... 207 -
Changes in operating assets and liabilities:
Interest receivable ............................. 141 (3)
Accounts and notes receivable ................... (4,989) (3,936)
Inventories ..................................... 2,375 (4,366)
Other assets .................................... 873 (1,402)
Accounts payable ................................ 5,600 (939)
Accrued liabilities ............................. (3,433) 3,084
Deferred income taxes ........................... 1,919 (638)
Discontinued operations - working capital changes
and noncash charges ........................... 1 174
-------- --------
NET CASH AND CASH EQUIVALENTS
PROVIDED BY (USED IN) OPERATING ACTIVITIES ......... 11,321 (4,515)
-------- --------
INVESTING ACTIVITIES
Purchase of property, plant, and equipment ........... (493) (3,275)
Purchase of marketable securities and other short
term investments .................................... (5,880) -
Proceeds from sale of property, plant and equipment... - 3
-------- --------
NET CASH AND CASH EQUIVALENTS
USED IN INVESTING ACTIVITIES ....................... (6,373) (3,272)
-------- --------
FINANCING ACTIVITIES
Payment of debt and capital lease obligations ........ (48) (220)
Proceeds from short-term credit facilities, net ...... - 1,603
Issue common stock to employee stock purchase plan ... 39 25
Proceeds from exercise of stock options .............. 321 2,131
Proceeds from exercise of warrants ................... 93 -
Purchase of treasury stock ........................... (6,063) -
-------- --------
NET CASH AND CASH EQUIVALENTS
(USED IN) PROVIDED BY FINANCING ACTIVITIES ......... (5,658) 3,539
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS ................ (710) (4,248)
Cash and cash equivalents at beginning of year ....... 95,379 5,805
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ........... $ 94,669 $ 1,557
======== ========
Supplemental cash flow information:
Non-cash investing activities
Fair value adjustment of available-for-sale securities $ 18 $ 6
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
C-COR.net Corp.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands except per share data)
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 29, 2000, 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 29, 2001. For further
information, refer to the financial statements and footnotes thereto included in
the Company's Form 10-K for the year ended June 30, 2000.
2. DESCRIPTION OF BUSINESS
C-COR.net Corp. (the Company) designs, manufactures and markets network
transmission products and provides services and support to hybrid fiber coax
(HFC) network operators. The Company operates in two industry segments: the
Telecommunications Equipment segment which provides a comprehensive range of
products, including radio frequency (RF) amplifiers and fiber optic equipment
for the network headend, node and RF plant; and the Broadband Management
Services segment which focuses on enabling reliable, high speed, broadband
communications over HFC networks and includes network management and enabling
services, high-speed data certification, system integration services, data
security solutions, network engineering and design, system activation, network
optimization, and system maintenance.
3. INVENTORIES
Inventories as of September 29, 2000 and June 30, 2000 consisted of the
following:
<TABLE>
<CAPTION>
September 29, June 30,
2000 2000
------- -------
<S> <C> <C>
Finished goods .............................. $ 4,327 $ 5,288
Work-in-process ............................. 5,733 6,841
Raw materials ............................... 19,325 19,631
------- -------
Total inventories ........................ $29,385 $31,760
======= =======
</TABLE>
4. ACCRUED LIABILITIES
Accrued liabilities as of September 29, 2000 and June 30, 2000 consisted of the
following:
<TABLE>
<CAPTION>
September 29, June 30,
2000 2000
------------- -------------
<S> <C> <C>
Accrued incentive plan expense .............. $ 1,259 $ 3,510
Accrued vacation expense .................... 1,665 1,880
Accrued salary expense ...................... 1,374 2,678
Accrued payroll and sales tax ............... 1,206 972
Accrued sales commissions and
rebates payable ............................ 499 419
Accrued warranty expense .................... 2,322 2,232
Accrued workers compensation
self-insurance expense .................... 1,753 1,577
Accrued merger-related costs ................ 484 489
Accrued income tax payable .................. 3,565 4,199
Accrued other ............................... 2,580 2,100
------------- -------------
$ 16,707 $ 20,056
============= =============
</TABLE>
5. COMPREHENSIVE INCOME
The components of accumulated other comprehensive income (loss), net of tax, of
the Company are as follows:
<TABLE>
<CAPTION>
September 29, June 30,
2000 2000
------------- -------------
<S> <C> <C>
Unrealized gain on marketable securities ...... $ 54 $ 72
Foreign currency translation gain (loss) ...... 3 (102)
------------- -------------
Accumulated other comprehensive income (loss) . $ 57 $ (30)
============= =============
</TABLE>
The components of comprehensive income (loss) of the Company for the
thirteen-week periods ended September 29, 2000 and September 24, 1999, are as
follows:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
---------------------------
September 29, September 24,
2000 1999
------------- ------------
<S> <C> <C>
Net income ....................................... $ 5,815 $ 377
Other comprehensive income (loss), net of tax:
Unrealized loss on equity securities ........... (18) (4)
Foreign currency translation gain .............. 105 -
------------- ------------
Other comprehensive income (loss) ................ 87 (4)
------------- ------------
Comprehensive income ............................. $ 5,902 $ 373
============= ============
</TABLE>
6. NET INCOME PER SHARE
Basic earnings per share is computed by dividing net income available to common
shareholders by the weighted average number of common shares outstanding.
Dilutive net income per share is computed by dividing net income available to
common shareholders by the weighted average number of common shares outstanding
plus the dilutive effect of options, warrants and convertible preferred stock.
The dilutive effect of options and warrants is calculated under the treasury
stock method using the average market price for the period. The dilutive effect
of the convertible preferred stock is calculated under the if-converted method.
Net income per share is calculated as follows:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
---------------------------
September 29, September 24,
2000 1999
------------- -------------
<S> <C> <C>
Income from continuing operations ................ $ 5,814 $ 341
Gain from discontinued operations ................ 1 36
------------- -------------
Net income ....................................... $ 5,815 $ 377
============= =============
Weighted average common shares outstanding ....... 34,040 23,410
Common share equivalents ......................... 2,379 4,864
------------- -------------
Weighted average common share and common
share equivalents .............................. 36,419 28,274
============= =============
Net income per share-basic:
Continuing operations .......................... $ 0.17 $ 0.01
Discontinued operations ........................ - -
------------- -------------
Net income ....................................... $ 0.17 $ 0.01
============= =============
Net income per share - diluted:
Continuing operations .......................... $ 0.16 $ 0.01
Discontinued operations ........................ - -
------------- -------------
Net income ....................................... $ 0.16 $ 0.01
============= =============
</TABLE>
7. SEGMENT INFORMATION
The Company operates in two industry segments: the Telecommunications Equipment
segment which provides a comprehensive range of products, including RF
amplifiers and fiber optic equipment for the network headend, node and RF plant;
and the Broadband Management Services segment which focuses on enabling
reliable, high- speed, broadband communications over HFC networks and includes
network management and enabling services, high-speed data certification, system
integration services, data security solutions, network engineering and design,
system activation, network optimization, and system maintenance.
Information about industry segments for the thirteen-week periods ended
September 29, 2000 and September 24, 1999, are as follows:
<TABLE>
<CAPTION>
Continuing Operations
----------------------------
Broadband
Telecommunications Management
Equipment Services Total
---------------------------------------------------
13 week period ended September 29, 2000
<S> <C> <C> <C>
Total revenue ......................................... $ 65,233 $ 13,102 $ 78,335
Operating income ...................................... 7,753 232 7,985
Investment income ..................................... 2,015
Interest expense ...................................... 13
Income tax expense .................................... 3,934
Cash equivalents and marketable securities ............ 121,360
Identifiable assets at September 29, 2000 (B).......... 129,735 24,206 153,941
Capital expenditures .................................. 359 134 493
Depreciation and amortization ......................... 1,910 630 2,540
13 week period ended September 24, 1999
Total revenue ......................................... $ 61,986 $ 8,902 $ 70,888
Operating income (loss)(A) ............................ 7,487 (916) 6,571
Investment income ..................................... 63
Interest expense ...................................... 621
Income tax expense (A) ................................ 2,219
Identifiable assets at September 24, 1999 ............. 101,040 14,550 115,590
Capital expenditures .................................. 2,652 623 3,275
Depreciation and amortization ......................... 2,068 255 2,323
<FN>
(A) Operating income and income tax expense exclude the impact of the one-time
merger-related costs related to the Convergence and SVCI mergers.
(B) Identifiable assets at September 29, 2000, exclude cash equivalents and
marketable securities related to the Company's follow-on public offering.
</FN>
</TABLE>
<PAGE>
The Company and its subsidiaries operate in various geographic areas as
indicated by the following:
<TABLE>
<CAPTION>
U.S. Europe Eliminations Total
---------------------------------------------------------
13 week period ended September 29, 2000
<S> <C> <C> <C> <C>
Sales to unaffiliated customers:
Domestic $ 68,869 $1,398 $ - $ 70,267
Export 8,068 - - 8,068
Transfers between geographic areas 18 - (18) -
Total revenue 76,955 1,398 (18) 78,335
Operating income 7,863 122 - 7,985
Investment income 2,014 1 - 2,015
Interest expense 13 - - 13
Income tax expense 3,887 47 - 3,934
Identifiable assets at September 29, 2000 273,403 1,898 - 275,301
Capital expenditures 493 - - 493
Depreciation and amortization 2,428 112 - 2,540
13 week period ended September 24, 1999
Sales to unaffiliated customers:
Domestic $ 64,301 $ 43 $ - $ 64,344
Export 6,544 - - 6,544
Transfers between geographic areas 12 - (12) -
Total revenue 70,857 43 (12) 70,888
Operating income (loss) (A) 6,762 (191) - 6,571
Investment income 62 1 - 63
Interest expense 621 - - 621
Income tax expense (A) 2,215 4 - 2,219
Identifiable assets at September 24, 1999 115,426 164 - 115,590
Capital expenditures 3,274 1 - 3,275
Depreciation and amortization 2,318 5 - 2,323
<FN>
(A) Operating income (loss) and income tax expense exclude the impact of the
one-time merger-related costs related to the Convergence and SVCI mergers.
</FN>
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
The following discussion addresses the financial condition of C-COR.net Corp.
(the Company, or we) as of September 29, 2000, and the results of operations for
the thirteen-week period ended September 29, 2000, 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 30,
2000, included in the Company's Annual Report on Form 10-K.
Disclosure Regarding Forward-Looking Statements
Some of the information presented in this report contains forward-looking
statements made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements include, among
others, statements regarding the ability of the Company to expand its product
offering, the continuation of network upgrade activity, the trend toward more
fiber in the network, the Company's ability to develop new and enhanced
products, global demand for the Company's products and services, and statements
relating to the Company's business strategy. Forward-looking statements
represent the Company's judgment regarding future events. Although the Company
believes it has a reasonable basis for these forward-looking statements, the
Company cannot guarantee their accuracy and actual results may differ materially
from those the Company anticipated due to a number of uncertainties, many of
which we are not aware. Factors which could cause actual results to differ from
expectations include, among others, capital spending patterns of the
communications industry, the Company's ability to develop new and enhanced
products, continued industry consolidation, the development of competing
technology, and the Company's ability to achieve its strategic objectives. 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 reports filed by the Company with
the Securities and Exchange Commission.
Results of Operations
Net Sales for the thirteen-week period ended September 29, 2000 were $78.3
million, an increase of 11% from the prior year's sales of $70.9 million for the
same period. Telecommunications Equipment segment sales increased by 5% to $65.2
million during the thirteen-week period, compared to $62.0 million for the same
period of the prior year. The increase was attributable primarily to increased
sales of fiber optics products as we continue to expand our product offering
through development of new products and strategic partnerships to meet domestic
and international customer demands. Broadband Management Services (BMS) segment
sales increased by 47% to $13.1 million during the thirteen-week period,
compared to $8.9 million for the same period of the prior year. The increase was
primarily attributable to technical services performed in our customers' plants,
including system sweep, reverse path activation, ingress mitigation, node
certification and system maintenance.
Domestic sales increased by 7% for the thirteen-week period ended September 29,
2000 to $68.9 million from $64.3 million for the same period of the prior year.
This growth occurred in our BMS segment sales, primarily for technical services.
We believe the continuation of network upgrade activities to enable two-way
interactive broadband services has translated into increased demand for our
products and services. Total domestic sales were 88% of net sales for the
thirteen-week period ended September 29, 2000, as compared to 91% for the same
period of the prior year.
International sales increased by 43% for the thirteen-week period ended
September 29, 2000 to $9.4 million from $6.6 million for the same period of the
prior year. This growth was principally in sales of telecommunications equipment
and reflected sales to a major customer in Canada and increased demand from
customers in the EuroPacific region. We expect international markets will
continue to represent a substantial portion of our sales base, but believe
demand will continue to be highly variable. The international markets represent
distinct markets in which capital spending decisions for hybrid fiber coax (HFC)
network distribution equipment can be impacted by a variety of factors including
access to financing and general economic conditions. Our total international
sales were 12% of consolidated net sales for the thirteen-week period ended
September 29, 2000, as compared to 9% for the same period of the prior year.
Gross margin was 27.2% for the thirteen-week period ended September 29, 2000,
compared to 26.3% for the same period of the prior year. For the
Telecommunications Equipment segment, gross margin was 26.7% for the
thirteen-week period ended September 29, 2000, compared to 28.0% for the same
period of the prior year. The decrease in gross margin resulted primarily from
changes in product mix. For the BMS segment, gross margin was 29.6% for the
thirteen-week period ended September 29, 2000, compared to 14.2% for the same
period of the prior year. The increase in gross margin is due primarily to
improvements in productivity and changes in various costs associated with our
technical services, as we have substantially completed the integration of our
legacy service organization with the acquisitions of Worldbridge Broadband
Services, Inc. and Advanced Communications Services, Inc., consummated in the
third quarter of fiscal year 2000.
Selling and administrative expenses were $8.9 million (11.3% of net sales) for
the thirteen-week period ended September 29, 2000, compared to $8.9 million
(12.5% of net sales) for the same period of the prior year. The Company's
selling and administrative expenses remained flat for the quarter, but we
anticipate increasing selling and administrative expense in future periods,
related to international expansion, although these expenses may vary as a
percentage of net sales.
Research and product development expenses were $4.4 million (5.6% of net sales)
for the thirteen-week period ended September 29, 2000, compared to $3.2 million
(4.5% of net sales) for the same period of the prior year. The increase in
research and product development expenditures resulted from higher personnel
costs and additional expenses primarily for development of fiber optic
transmission products and the continued development of network management
products and capabilities. We anticipate continuing increases in research and
product development expenses in future periods, related to ongoing initiatives,
although these expenses may vary as a percentage of net sales.
Operating income (excluding non-recurring business combination costs) for the
Telecommunications Equipment segment for the thirteen-week period ended
September 29, 2000, was $7.8 million, compared to $7.5 million for the same
period of the prior year. The increase in operating income was attributable
primarily to increased volume. Operating income (excluding non-recurring
business combination costs) for the BMS segment for the thirteen-week period
ended September 29, 2000, was $232,000, compared to an operating loss of
$916,000 for the same period of the prior year. The improvement in operating
income derives from higher volumes, which absorbed our fixed operating costs, as
well as improved gross margin deriving from our technical services. These
improved factors were offset partially by a continued increase in investment and
development costs associated with our network management products.
Interest expense was $13,000 for the thirteen-week period ended September 29,
2000, compared to $621,000 for the same period of the prior year. The decrease
in interest expense resulted from reductions of long-term debt and borrowings on
various short-term credit facilities, and a decrease in the amortization related
to the fair market value of warrants issued in fiscal year 1999 in connection
with certain debt financing arrangements by Silicon Valley Communications,
Inc.(SVCI), a wholly-owned subsidiary of the Company.
Investment income was $2.0 million for the thirteen-week period ended September
29, 2000, compared to $63,000 for the same period of the prior year. The
increase in investment income resulted from short-term investments of the net
proceeds received in our follow-on public offering completed on November 12,
1999.
Our overall effective income tax rate was 40.4% for the thirteen-week period
ended September 29, 2000, compared to 83.0% for the same period of the prior
year. The higher effective income tax rate in the prior year resulted primarily
from permanent differences for non-deductible business combination costs
incurred in relation with the mergers with Convergence.com Corporation
(Convergence) and SVCI.
Liquidity and Capital Resources
In November 1999, we completed a follow-on public offering of our common stock,
resulting in net proceeds (after deducting issuance costs) of $133.3 million.
As of September 29, 2000, cash and cash equivalents and marketable securities
totaled $142.7 million, up from $137.5 million at June 30, 2000.
Net cash and cash equivalents provided by operating activities were $11.3
million for the thirteen-week period ended September 29, 2000, compared to net
cash and cash equivalents used in operating activities of $4.5 million for the
same period of the prior year. The increase in net cash and cash equivalents
provided by operating activities was primarily due to the increase in net income
for the period, as well as higher accounts payable and reductions in
inventories, and were partially offset by increases in accounts receivable and
reductions of accrued liabilities.
Net cash and cash equivalents used in investing activities were $6.4 million for
the thirteen-week period ended September 29, 2000, compared to $3.3 million for
the same period of the prior year. The increase in cash and cash equivalents
used in investing activities was primarily due to purchases of marketable
securities and other short-term investments. Other investing activities included
our purchases of property, plant and equipment for $493,000, as compared to $3.3
million for the same period of the prior year.
Net cash and cash equivalents used in financing activities were $5.7 million for
the thirteen-week period ended September 29, 2000, compared to $3.5 million of
net cash and cash equivalents provided by financing activities for the same
period of the prior year. The increase in cash used in financing activities
resulted primarily from the purchase of treasury stock during the period.
On September 25, 2000, we announced that we were beginning a stock repurchase
program, effective September 22, 2000. The new program allows the Company to
repurchase up to 2,000,000 shares of C-COR.net 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. As of September 29, 2000, 449,900 shares were
repurchased under this stock repurchase program. Our other financing activities
consisted primarily of payments on short-term and long-term debt and proceeds
from the exercise of employee stock options and warrants.
We have a credit agreement with three banks under which we may borrow up to
$70.0 million. Under the credit agreement, $20.0 million is available as a
revolving line-of-credit, subject to an aggregate sub-limit of $2.0 million for
issuance of letters of credit which is committed through November 30, 2000. The
credit agreement also permits us to borrow up to $50.0 million, for strategic
acquisitions and/or investments, which is also committed through November 30,
2000. Credit pricing on these facilities is a function of our total funded
indebtedness to earnings before interest, taxes, depreciation and amortization
(EBITDA) ratio. Borrowings under the credit agreement bear interest at various
rates, at our option, and are limited to three times EBITDA. Borrowings on these
facilities are unsecured, subject to a negative pledge on all business assets,
and we are required to maintain certain financial ratios and comply with
indebtedness tests. As of September 29, 2000, we had no borrowings outstanding
under the credit agreement and based upon our EBITDA, as measured on a rolling
four quarter basis, the full $70.0 million facility was available. We anticipate
renewing this credit agreement on or before November 30, 2000.
Management believes that operating cash flow, proceeds received from the
follow-on 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 strategic developments might dictate.
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
(Not Applicable)
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
The following exhibit is included herein:
3.1 Bylaws of the Company, as amended as of September 22, 2000
27 Financial Data Schedule
Reports on Form 8-K
None
<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 6, 2000 /s/ William T. Hanelly
----------------------------------
Vice President-Finance,
Secretary & Treasurer
(Principal Financial Officer)
Date: November 6, 2000 /s/ Joseph E. Zavacky
----------------------------------
Controller & Assistant
Secretary
(Principal Accounting Officer)
