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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended June 29, 2001
[_]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
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C-COR.net Corp.
(Exact name of Registrant as specified in its charter)
Pennsylvania 24-0811591
(I.R.S. Employer
(State or other jurisdiction of Identification No.)
incorporation or organization)
60 Decibel Road
State College, Pennsylvania 16801
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (814) 238-2461
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.05 par value
Series A Junior Participating Preferred Stock Purchase Rights
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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 [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S)229.405 of this chapter) is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [_]
As of August 31, 2001, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was $272,468,127.
As of August 31, 2001, the Registrant had 32,538,980 shares of Common Stock
outstanding.
Documents Incorporated by Reference:
1)Proxy Statement dated September 14, 2001 (Part III)
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PART I
Item 1. Business
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 C-COR.net Corp. (C-
COR, the Company, or we) to provide complete network solutions, the demand for
network integrity, 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, the Company's ability to successfully
implement three new business divisions, to integrate acquisitions and to
achieve its strategic objectives. For additional information concerning these
and other important factors that 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.
Introduction
C-COR, headquartered in State College, Pennsylvania, provides technology and
services to the global market for the full network life cycle of two-way HFC
(hybrid fiber coax) broadband networks. Our core strategy is to leverage our
48-year reputation for quality and service, our strong customer relationships
and our extensive installed base of transmission equipment to provide a broad
line of flexible, reliable and cost-effective network products and service
solutions. To meet the strategic objective of delivering both a comprehensive
line of telecommunications equipment and broadband management services that our
customers require across the HFC network, we have made eight acquisitions since
1999, two of which were completed in the first quarter of our fiscal year 2002.
On April 27, 2001, we acquired MobileForce Technologies, Inc. (MobileForce).
This acquisition has enabled us to expand our suite of broadband management
services to include workforce management and wireless mobile computing
solutions for the cable and other large field service industries.
On July 3, 2001, we acquired Aerotec Communications, Inc. (Aerotec). This
acquisition has enabled us to strengthen our position as a nationwide provider
of comprehensive technical services by expanding our presence in the Western
United States and enhancing our network construction capabilities.
On August 4, 2001, we acquired certain assets and liabilities of the Broadband
Communications Division of ADC Telecommunications, Inc. (ADC). This acquisition
has expanded our product capabilities, particularly in digital video transport;
our customer and geographic reach, especially overseas; our installed equipment
base and our employee resources.
Following the acquisition from ADC in August 2001, we realigned our business
into three divisions to reflect our growing market position in delivering a
broad complement of advanced network products and services to the broadband
market. Each of these divisions focuses on a market segment that is key to
network integrity.
The Broadband Communications Division, headquartered in Meriden, Connecticut,
with supporting facilities in the U.S., Mexico, Austria and Argentina, is
responsible for development, management, production, support and sale of our
advanced fiber optic, digital video transport and RF (radio frequency)
equipment.
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The Broadband Management Solutions Division, headquartered in Pleasanton,
California, with an engineering facility in State College, Pennsylvania, is
responsible for development, integration, management, implementation, support
and sale of our solutions to operate and manage reliable, high-quality multi-
service networks. The division's flagship products include COR-Convergence(TM),
an integrated service management platform that takes the best in standards-
based network management technology and integrates it with customer care and
billing data sources to provide a real-time view of network, customer and
service status, and Nvision(TM), a suite of field service management tools that
combines browser-based business applications with real-time connectivity to the
mobile workforce through wireless data connections and mobile computing
devices.
The Technical Services Division, headquartered in Lakewood, Colorado, with
satellite offices in the Northeast, Midwest, Southeast and Western regions of
the U.S., provides outsourced technical field services, including broadband
network engineering and design, construction, activation, optimization,
certification, maintenance and operations.
Our principal customers are the largest cable operators in the United States,
such as Adelphia Communications, Cox Communications, AOL Time Warner, Charter
Communications, AT&T Broadband and Comcast; many smaller domestic cable
operators and several international cable operators. These customers primarily
operate HFC networks for delivering video, voice and data services to homes and
businesses. With the acquisition of cable assets from ADC, our customer base
has expanded in the U.S. and abroad, not only among cable operators, but also
among telephone companies and broadcasters who purchase digital video transport
equipment such as the DV6000 series that we acquired.
Industry Overview
HFC networks consist of a headend where information is received from a
satellite, Internet gateway or telephony network, a transmission infrastructure
that distributes the signal throughout the network, and connections from the
transmission network to the subscribers. Historically, these systems offered
one-way only video service. Over the last several years, the cable industry,
like other segments of the communications industry, has been undergoing
substantial change as a result of:
. deregulation that allows competition among communications companies,
including both wireline and wireless telephone companies as well as
cable operators, for communications services;
. demand by consumers for two-way, high-speed broadband communications to
accommodate Internet, telephony and other new information services; and
. the need to customize services for specific customers, thereby requiring
flexible and easy-to-configure networks.
For the cable television industry, these factors are resulting in:
. upgrades to existing cable networks to provide two-way, interactive
broadband services that will allow cable operators to compete against
other broadband communications technologies, including digital
subscriber line (DSL), local multichannel distribution service (LMDS)
and direct broadcast satellite (DBS);
. greater utilization of fiber optic technology, such as dense wave
division multiplexing (DWDM), in the cable network;
. consolidation among cable operators driven by the increased capital
requirements to implement system upgrades;
. investments in cable operations by non-cable operators in an effort to
compete for both new and existing services and to provide a full range
of communication services;
. increased demand for more flexible and reliable cable networks to
support the new services being offered;
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. demand for more sophisticated network management products to address
quality of service requirements and to support access by multiple
information service providers; and
. demand for more sophisticated technical field services to support the
increased complexity of broadband networks.
In addition to changes relating to regulation, technology and market demand,
the broadband communications industry has also been significantly impacted by
the general economic downturn of 2001. During this period, cable operators have
reduced spending, resulting in a decrease in demand for products and services
offered by us and other broadband market providers. We responded to this
economic environment by implementing a reduction in force and consolidation of
facilities beginning in January 2001.
Strategy Overview
Our strategic goal is to balance our business base across three distinct market
segments: advanced telecommunications products, operations management solutions
and technical field services. We are seeking to implement this strategy through
both internal development of new products and services as well as acquisitions.
Specific aspects of our strategy include:
Providing a Comprehensive HFC Network Product Line. We offer a full range of RF
and fiber optic transmission products to transmit signals in both directions
over HFC networks from "the headend to the curb." As part of our purchase of
certain cable assets from ADC, we acquired the DV6000 line of high-quality,
uncompressed digital video products with a primary customer base among
telephone and broadcast companies.
In addition, over the past year we have incorporated new technologies within
our product lines, including TL (Transfer Linearization) Technology(TM), our
proprietary circuit technique that enhances product performance using standard
silicon-based technology, and two unique digital return solutions for home and
business applications.
Leveraging an Extensive Installed Base of Equipment for Upgrade and Rebuild
Sales. We are leveraging our large installed base of transmission equipment in
our customers' networks through upgrades, rebuilds and node size reductions. We
provide a cost-effective path for our customers to upgrade existing components
of installed products rather than purchasing all new equipment.
Providing Broadband Management Services to Enhance Network Integrity. The
requirement for HFC network integrity and reliability has become much greater
as network traffic and complexity have grown and as networks have become
increasingly used by multiple service providers. Current approaches to managing
HFC networks, however, focus on monitoring limited, individual elements of the
network, such as cable modems or power supplies. In contrast, our COR-
Convergence system is a network, rather than element, management platform that
provides a comprehensive, real-time view of customer, service and network
status from set-top box and/or modem to the headend. With the acquisition of
MobileForce, we have expanded our broadband management services to the cable
operators' mobile workforce with wireless and handheld automation solutions
particularly for routing and dispatching functions.
Delivering Total Network Solutions to Meet the Emerging Broadband Needs of HFC
Network Operators. We are able to offer a broad network solution to HFC network
operators by delivering both a comprehensive line of equipment and the network
services that they require across the HFC network. We design the network to
enhance reliability, deliver the infrastructure equipment and management
software, furnish installation and activation services, and provide ongoing
network management and support services.
Increasing International Sales. We are currently supplying products and
services to a number of international customers, including cable operators in
Canada, Europe and Asia. In addition, our recent acquisition of certain cable
assets of ADC has expanded our customer base, particularly in Europe and Latin
America. With our
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broad product and services offerings, we are supplying comprehensive network
solutions to network operators in various international markets who generally
prefer to purchase products and services from suppliers offering a more
complete product line.
Products and Services
We provide telecommunications equipment and broadband management services to
support primarily cable operators as they plan, design, build and maintain
complex broadband communications networks. As of August 2001, these two major
market areas of equipment and services were formally realigned into three
business divisions.
The Broadband Communications Division provides our advanced fiber optic,
digital video transport and RF telecommunications equipment.
The Broadband Management Solutions Division provides our array of solutions to
operate and manage reliable, high-quality, multi-service networks.
The Technical Services Division provides technical field services, covering
broadband network engineering and design, construction, installation,
optimization, certification, maintenance and operations.
See Note T to the consolidated financial statements for financial information
relating to each of the segments for fiscal years 2001, 2000 and 1999.
Telecommunications Equipment
An HFC network connects a central information source, typically referred to as
the headend, to individual residential users through a physical plant of fiber
optic and coaxial cables and a variety of electrical and fiber optic devices
that transmit, receive, modulate and amplify the signals as they move through
the network. A typical HFC network consists of three major segments: the
headend and hubs, nodes and the RF plant. We offer a comprehensive range of
products for each of these segments.
lumaCOR(TM) Line of Headend and Hub Products
The headend receives information from a satellite transmission, Internet
gateway, telephony network or other source and converts this information to
laser modulated optical signals for transmission across the network. Larger
networks feature both primary headends and a series of secondary headends or
hubs. We offer a broad range of headend and hub equipment under our lumaCOR
family of products that feature advanced technology, such as DWDM allowing
multiple signal wavelengths to be transmitted on one fiber across the network.
This increases the volume of information that can be conveyed over the network.
It also allows network operators flexibility in tailoring content for
individual subscribers by dedicating certain wavelengths to that content, such
as video-on-demand. In addition, our lumaCOR products support node-to-headend
digital return technology that enhances the return path capacity of a network
for multiple two-way service applications used by homes and businesses.
naviCOR(TM) Line of Nodes
The general function of the node in the HFC network is to convert information
from optical signals to RF signals for distribution to the home. We offer the
naviCOR family of node products that are upgradeable, scalable, modular and
fully integrated with our RF amplifiers. These features allow RF amplifiers to
be upgraded to nodes and simple nodes to be upgraded to telecommunication nodes
with narrowcasting and redundant configurations. Narrowcasting refers to
customizing content for certain subscribers by dedicating fibers or wavelengths
to that content. We have designed the optical components of the nodes to fit
into the lid, or cover, of the amplifier housing so that upgrades from
amplifiers to nodes are easily accomplished by replacing the lid.
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FlexNet(R) Line of RF Plant Equipment
The RF plant comprises products that transmit information between the nodes and
subscribers. These products are essentially RF amplifiers that come in various
configurations such as trunks, bridgers and line extenders. A trunk amplifier
handles a large amount of information in a network when the node size is
greater than 500 homes. A bridger splits the signal to send it to a greater
number of destinations. Line extenders move the information to the home.
I-Flex(R) Line of Node and RF Plant Equipment
The I-Flex line is an 862 MHz global product family for fiber intensive
architectures that require cabinet and pedestal mount housings. It includes
nodes, bridgers and line extenders that have been developed, designed and
produced to meet the distinct specifications of the international market.
The following table summarizes our major products and their primary functions
and features:
Network
Segment Products Functions and Features
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lumaCOR Universal Chassis . Houses components of the headend
equipment.
Headend and . Features modular one and three RU
design.
Hubs . Compact design maximizes limited
headend rack space.
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Optical Forward . Converts RF signals to laser modulated
Path Transmitters optical signals.
. Includes both 1310 nm and 1550 nm
wavelength versions.
. Used for standard and DWDM
applications.
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Optical Return . Conveys digital and video return path
signals.
Path Transmitters . Used for data monitoring and other
interactive applications.
. Includes both 1310 nm and 1550 nm
wavelength versions.
. Used for standard and DWDM
applications.
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Erbium Doped Fiber . Amplifies optical signals.
Amplifiers (EDFAs) . Used for both analog and digital
applications.
. Superior noise figure and gain flatness
response over a wide range of optical
wavelengths and optical input power.
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Optical Forward . Converts optical signals to RF signals.
Path Receivers . Provides high gain output and
redundancy capabilities to maximize
network performance and reliability.
. Supports both 1310 nm and 1550 nm
wavelengths.
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Optical Dual Return . Receives digital and video return path
signals.
Path Receivers . Supports both 1310 nm and 1550 nm
wavelengths.
. Has two return path receivers for a
maximum density of 20 receivers in one
chassis.
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Network
Segment Products Functions and Features
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Passive Equipment . Coarse Wavelength Division Multiplexer
(CWDM) allows more than one optical
signal (up to two frequencies), each
having different wavelengths, to be
transferred simultaneously over one
fiber; thereby increasing bandwidth
while decreasing the amount of fiber
needed.
. Optical Coupler is a compact, low-loss
fused component that is bi-directional
and provides a means of splitting or
combining optical signals.
. DWDM Optical Multiplexer/Demultiplexer
combines many wavelengths of light at a
variety of bit rates onto a single
optical fiber, offering more targeted
services to more subscribers.
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naviCOR Nodes Quadrant II Nodes . Scalable, strandmount optical node with
four active outputs and forward and
reverse segmentation.
. Offers an RF bridger amplifier option
that can be upgraded to the optical
node simply by adding a modular optical
lid package.
. Features optional TL Technology.
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FlexNet Nodes . Offered as complete nodes or as optical
upgrades to existing FlexNet
amplifiers, thereby providing a cost-
effective means of increasing fiber
optic penetration in networks by
converting existing RF equipment to
nodes.
. Available in 750 and 862 MHz
bandwidths.
. Features optional TL Technology.
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miniFiber Nodes . Exhibits high RF output levels, and
thus ideally suited for passive optical
network architectures.
. Available in 862 MHz bandwidth.
. Offers Digital Return Technology for
advanced HFC architectures as they
evolve to serve 50-to-100 homes per
node.
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FlexNet Trunks and Bridgers . Available in 750 and 862 MHz
bandwidths.
RF Plant . Supports delivery of both analog and
digital channels.
. Features optional TL Technology.
. Can be converted to optical nodes with
naviCOR Fiber-in-the-lid upgrade.
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Line Extenders . Available in 750 and 862 MHz
bandwidths.
. Used with FlexNet Trunks and Bridgers.
. Features the latest in Power Hybrid
Doubling (PHD) technology for increased
output levels.
. Supports delivery of both analog and
digital channels.
. Features optional TL Technology.
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Network
Segment Products Functions and Features
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I-Flex Nodes I-Flex II Nodes . Fully modular fiber optic node with two
and RF Plant or three active outputs.
. Housing can be used in non-strandmount
applications for easy cabinet or
pedestal mounting.
. Supports PAL and CENELEC channel plans.
. Features single or dual forward path
receivers and flexible reverse path
transmitters.
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I-Flex II Bridgers . Modular RF bridgers that can be
upgraded to nodes.
. Cabinet or pedestal mounting.
. Two or three active outputs.
. Flexible reverse path capability.
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I-Flex Line Extenders . Cabinet mount, end-of-line amplifier
used with I-Flex II nodes and bridgers.
. Available in 862 MHz bandwidth.
. Features Power Hybrid Doubling (PHD)
technology for increased performance.
. Carries up to 60 PAL channels as well
as digitally compressed video signals.
New Product and/or Developments
New products and/or developments for our telecommunications equipment
introduced during fiscal year 2001 include:
Introduction of Two Digital Return Solutions for Home and Business
Applications. The first of the two digital return solutions we introduced
during fiscal year 2001 uses digital summing with our unique Digital Return
Transceiver (a receiver and transmitter combined in one module) to provide
digital daisy-chain summing of 5-45 MHz RF return paths and local full duplex
"Fast Ethernet" functionality. The Ethernet feature adds local node area, high-
speed data capacity to HFC networks and is particularly attractive to business
broadband networks, a growing market segment for broadband network operators.
The second digital return solution applies Time Division Multiplexing
technology to combine two independent digitized 5-42 MHz analog return path
links onto one 1310 nm or 1550 nm ITU grid using our cooled Digital Return
Transmit Laser Module. This doubles the return capacity per wavelength of each
transmitter by multiplexing the return path on a single fiber. At the return
end of the transmission is a Time Division Demultiplexing headend or hub
receiver decoder that demultiplexes the combined data and converts it back to
two independent analog streams. Our node and headend/hub equipment, upgraded to
support both solutions, are expected to be available in fiscal year 2002.
Introduction of New naviCOR Quadrant II NQ4 Series Node. In May 2001, we
introduced the naviCOR Quadrant II NQ4 Series Node with immediate shipment
availability. The key features of the node include full 4 X 4 forward and
reverse segmentation, modular optics for ease of upgrade, forward and reverse
redundancy capability, dual power supplies and redundant network powering. The
NQ4 Series Node offers the cable operator a high degree of flexibility by
accommodating a range of new services and providing the capability to handle
service penetration changes quickly and cost effectively.
Incorporation of TL (Transfer Linearization) Technology(TM) Into Node and
Amplifier Products. During fiscal year 2001, we made available to the
marketplace TL Technology in the naviCOR miniFiber, Quadrant and FlexNet Nodes,
as well as FlexNet Trunks, Bridgers and Line Extenders. TL Technology, our
proprietary circuit technique that enhances product performance capabilities,
offers several advantages to the broadband operator. It improves the linear
characteristics of standard silicon technology hybrids, resulting in higher
operating level capabilities and/or improved distortion performance and higher
channel capabilities. In addition,
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TL Technology also translates into fewer active devices required for the HFC
architecture, thus reducing maintenance, installation and powering costs.
Introduction of New lumaCOR Headend Product. In November 2000, we introduced
the T5QEA, a new line of forward path opto-electronic transmitters, designed to
transport digital information on multiple Quadrature Amplitude Modulated (QAM)
carriers. The new line of transmitters are designed to facilitate the addition
of digital video, Internet data, telephony, video-on-demand and pay-per-view
services over the broadband networks. Using our application of the Electro-
Absorption (EA) modulator, the T5QEA delivers the high performance level of
traditional external modulation at a cost comparable to that of direct
modulation, providing a cost-effective solution for forward path narrowcasting,
digital injection and transmission of ITU-grid wavelengths.
Introduction of New High-Split Capability. To meet the increased reverse
bandwidth demands of today's market, we introduced in May 2001 a 186/222 MHz
high-split capability into several product lines, including those grouped under
the naviCOR Quadrant Node, FlexNet Bridger and FlexNet Line Extender brands.
Although a high-split has traditionally been used for local area network
applications, our high-split capability is also well suited for HFC
architectures exclusively delivering digital signals, such as Internet
services, telephony and video-on-demand.
Acquisition of Certain Cable Product Lines from ADC. On August 4, 2001, we
acquired certain assets and liabilities of the Broadband Communications
Division of ADC. Among these assets are four primary product lines, as
summarized in the table below. We will review and rationalize these products as
part of their integration into the Company's telecommunications equipment
offering.
Product Line Description
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DV6000(TM) Universal A universal 2.4 Gbps, sixteen channel uncompressed digital
Digital fiber optic transmission system supporting symmetrical and
Transport System asymmetrical signals. It is the most widely installed
uncompressed digital transport system in the world. It is
used for a number of applications including digital
supertrunking, studio quality broadcast, distance learning
and centralized commercial insertion.
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Optiworx HFC Transport An 870 MHz product portfolio that includes 1310 nm DFB
Systems: Headend Transmitters for broadcast and targeted service delivery
Equipment applications; 1550 nm External Modulation Transmitters for
supertrunk, distribution and DWDM applications; 1550 nm
EDFAs; Forward Path Receivers; single, dual and quad
Return Path Receivers for high density applications; and
rack mount 1 RU 1310 and 1550 nm Transmitters and
Receivers for forward and return applications.
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Optiworx HFC Transport 870 MHz node family of products, supporting expanding
Systems: Outside Plant bandwidth and deep fiber applications. Includes status
(Nodes) monitoring options.
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Optiworx HFC Transport Amplifiers and line extenders, developed for specific
Systems: Outside Plant markets (Europe and Latin America).
(RF Plant)
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Broadband Management Services
We offer the broadband network operator an array of products and services to
support the installation, operations management and maintenance of reliable,
multi-application networks with high integrity.
Specific products and services included under the Broadband Management Services
segment are:
Product/Service Description
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COR-Convergence(TM) Robust network management platform that takes the best in
standards-based network management technology and
integrates it with customer care and billing data sources
to provide a real-time view of network, customer and
services status. Through browser-based displays, the
system provides an integrated view of the entire broadband
network, including HFC plant and high-speed digital
network components. By correlating network status
information, COR-Convergence enables isolation of network
faults to specific root cause to determine services
affected by the outage. It then uses back-office
information to determine the customers affected. It also
enables identification of degrading elements before they
cause a failure.
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COR-Connect(TM) A gateway unit that provides software translation for
converting between network protocols, thereby allowing
standards-based or proprietary host systems to communicate
with various standards-based or proprietary network
elements. The use of modular software components allows
the COR-Connect to handle a variety of devices without
changing the base hardware.
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Nvision(TM) A suite of field service management tools to maximize the
potential of each customer contact, improve operational
efficiencies and improve customer service. This mobile
field service management solution utilizes the simplicity
and sophistication of browser-based business applications.
Combined with wireless data connectivity and mobile
computing devices, Nvision empowers field representatives
to more efficiently provision, maintain and sell
convergent broadband communications services.
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Outside Plant Technical Hands-on technical services performed in the customer's
Services plant. These are highly complex tasks largely centered on
the conversion of the cable operator's plant from a one-
way analog video medium to a two-way, fully interactive
broadband pipe, and the continuing operation of it as
such. Among the services provided are system sweep,
reverse path activation, ingress mitigation, node
certification, plant hardening, cable testing, cable
repair, system maintenance, contract service calls,
process design, personnel development and training,
project management, installation, coaxial and fiber
splicing, and aerial and underground construction.
- -------------------------------------------------------------------------------------
Network Integration Systems integration and installation services for data,
Technical Services telephony and digital video platforms for both network
operators and network equipment manufacturers. Consulting
services that include process design advisory services,
SPC (Statistical Process Control) system design, network
design and specification consulting are also provided.
Network Systems Integration technicians perform hands-on
services covering "rack and stack" final assembly and
deployment of Cable Modem Termination Systems, DWDM lasers
and HFC telephony systems, among others.
9
Product/Service Description
- -------------------------------------------------------------------------------------
Outsourced Operational Full outsourcing services in handling field operations,
Services including technical management, system maintenance,
customer service calls and installation activity. All
field operations are managed and performed to
predetermined standards and technical metrics.
- -------------------------------------------------------------------------------------
Network Design and Field Cost effective and efficient network design services that
Engineering Services include walkout, strand digitizing, RF design, electronics
network drafting, design QC, fiber design, fiber drafting
and documentation, engineering consultation, system data
archiving and project management.
Significant Customers
During the past fiscal year, our customers have included almost all of the
largest cable system operators in the United States. Our largest customers
during fiscal year 2001 were Adelphia Communications, Cox Communications, AOL
Time Warner and Charter Communications, accounting for 17%, 15%, 15% and 12%,
respectively, of net sales. Our largest customers during fiscal year 2000 were
AT&T Broadband, Time Warner Cable (now AOL Time Warner) and Adelphia
Communications, which accounted for 19%, 18% and 13%, respectively, of net
sales. Our largest customers during fiscal year 1999 were Time Warner Cable and
AT&T Broadband, which accounted for 27% and 15%, respectively, of net sales.
All of these principal customers purchase both products and services. With the
purchase of certain cable assets from ADC Telecommunications, we expect our
customer base to broaden both in the U.S. and abroad not only among cable
operators, but also to include telephone companies and broadcasters interested
in the digital video transport product line that was a part of our acquisition.
Sales and Distribution
Our sales and distribution function is organized into two major global regions:
the first covering the Americas, the second covering the EuroPacific area.
National account representatives focused on an overall business strategy for
specific large customers or groups of customers support our regional sales and
distribution efforts. As part of the realignment of the Company into three
business divisions, each division has been given responsibility for the sale of
their specific products or services on a regional level.
Sales efforts are conducted from our headquarters; from offices in the
Netherlands, Canada and Latin America; from regional sales offices located
throughout the United States; and through numerous distributors around the
world.
We sell our products and services in the United States and Canada through our
direct regional sales force, which is organized geographically and approaches
the customer at the system level, and by National Account Representatives,
working out of our headquarters and approaching the customer at the corporate
level. A highly qualified technical staff supports our sales force. They work
closely with customers to design systems, develop technical proposals and
assist with installation and post-sale support.
International sales in Europe, Asia and Latin America are made through our
direct sales force and through distributors. Overall sales management for the
EuroPacific area is located in the Netherlands office. Overall sales management
for Latin America is located at our headquarters in State College,
Pennsylvania. For fiscal year 2001, our international sales represented 13% of
net sales. In fiscal years 2000 and 1999, international sales were 11% and 9%,
respectively, of net sales.
Additionally, we provide 24x7 technical support, both directly and through
distributors, as well as training for customers and distributors, as required,
both in our facilities and at our customer's site.
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Our marketing function develops strategies for product lines and, in
conjunction with the sales force, identifies evolving technical and application
needs of customers. The marketing function is also responsible for demand
forecasting and general support of the sales force.
During fiscal year 2001, we began the implementation of a corporate wide ERP
(Enterprise Resource Planning) system, accessible by Company personnel
worldwide. The phased implementation, scheduled for completion in June 2002,
will automate and standardize key corporate functions in finance,
manufacturing, purchasing and customer service management.
Backlog
We schedule production of our telecommunications equipment based on our
backlog, informal commitments from customers and sales projections. Our backlog
consists of firm orders by customers for delivery within the next 12 months.
The majority of equipment backlog typically is shipped within one to two
quarters. In contrast, backlog in the services segment typically reflects
longer-term systems development and field service projects that convert into
revenue over a 12-month period.
At June 29, 2001, our backlog of orders was $52.3 million, including $15.4
million for the telecommunications equipment segment and $36.9 million for the
broadband management services segment. At June 30, 2000, our backlog of orders
was $89.3 million, including $61.3 million for the telecommunications equipment
segment and $28.0 million for the broadband management services segment. At
June 25, 1999, our backlog of orders was $73.0 million, including $57.2 million
for the telecommunications equipment segment and $15.8 million for the
broadband management services segment.
Anticipated orders from customers may fail to materialize and delivery
schedules may be deferred or canceled for a number of reasons, including
reductions in capital spending by network operators and construction delays. In
addition, due to weather-related seasonal factors and annual capital spending
budget cycles of many customers, our backlog may not necessarily be indicative
of actual sales for any succeeding period.
Research and Product Development
We operate in an industry that is subject to rapid changes in technology. Our
ability to compete successfully depends in large part upon anticipating such
changes. Accordingly, we engage in ongoing research and development activities
that are intended to advance existing product lines, provide custom-designed
variations of existing product lines and develop or evaluate new products. In
October 2000, we appointed Kenneth Wright as the Company's Chief Technology
Officer (CTO), reporting to Chairman and CEO, David Woodle. The CTO's primary
responsibility is to implement our technology strategy, with initial focus on
the new and expanding arenas of fiber optics and operational management
systems. As such, the CTO is actively involved in providing direction to and
prioritizing our research and development effort.
Our product planning teams, which take input from sales representatives and
research engineers, assign product development priorities and develop an
overall product plan. Cross-functional project teams, coordinated by a project
manager, then implement the product plan. With the realignment of the Company
into three business divisions, product development is now a divisional
responsibility.
During the past fiscal year, research and product development expenditures were
primarily directed at expanding our fiber optic technology and operational
management systems. We also continued with product development process
improvements to reduce cycle time to design, develop and deliver new products,
reduce manufacturing costs and improve design quality.
During fiscal years 2001, 2000 and 1999, we spent approximately $17.4 million,
$16.0 million and $11.8 million, respectively, on research and development.
Anticipated product development initiatives focused on fiber optics, network
management and other technology areas are expected to result in increased
research and
11
development expense in future years. No research and product development
expenditures mentioned above have been capitalized.
Competition
The broadband communications markets are dynamic and highly competitive,
requiring substantial resources of those companies that compete in these
markets, skilled and experienced personnel and a capability to anticipate and
capitalize on change. Our telecommunications equipment segment competes with
other companies including Motorola's Broadband Communications Sector (formerly
General Instrument Corporation), Scientific Atlanta, Inc., Arris Group, Inc.
(formerly known as Antec) and Harmonic, Inc., some of which are large publicly
traded companies that may have greater financial, technical and marketing
resources than we do.
Our telecommunications equipment is marketed with emphasis on quality and is
generally priced competitively with other manufacturers' product lines. Product
reliability and performance, technological innovation, responsive customer
service, breadth of product offering and pricing are several of the key
criteria for competition.
In the services segment, there are several competing vendors offering network
management and mobile workforce management systems as well as technical
services in the United States, some of which may currently have greater sales
in these areas than we do. However, we believe that we offer a more integrated
solution that is tailored to the requirements of HFC network operators.
Employees
We had approximately 1,890 employees as of August 2001.
Suppliers
We closely monitor supplier delivery performance and quality. We employ a
strategy of limiting the total number of global suppliers to those who are
quality leaders in their respective specialties and who will work with us as
partners in the supply chain. Typical items purchased are die cast aluminum
housings, RF hybrids, printed circuit boards, fiber optic lasers and standard
electronic components. Although a few of the components we use are single-
sourced, we have experienced no significant difficulties to date in obtaining
adequate quantities of raw materials and component parts.
We outsource the manufacture of certain assemblies and modules where it is
cost-effective to do so or where there are advantages with respect to delivery
times. Current outsourcing arrangements include power supplies, accessories,
optical modules and digital return modules.
Strategic Partnerships
We have entered into strategic agreements with various technology partners to
enhance our fiber optic capabilities and to further development of our network
management systems.
In the area of fiber optics, we have an agreement with Finisar Corporation, a
leading provider of optical and digital integration technology, to co-develop a
set of fiber optics-based products for two-way HFC networks that provide
digital return functionality to improve network performance, economics and
capacity. In addition, JDS Uniphase is working with us through an OEM agreement
to incorporate JDS fiber-optic lasers into our headend product line.
In the area of network management, our alliances with Micromuse and Interactive
Enterprise Ltd. have significantly enhanced our COR-Convergence product
offering. We use Micromuse software to collect
12
information from various management systems and network devices, and process
fault data to build service availability views in real time. Interactive
Enterprise provides a software-based mediation platform that enables, among
other network management functions, the auto-provisioning of cable modems. Both
address key network management concerns of our customer base of network
operators.
Intellectual Property
We hold 14 United States patents for various inventions relating to fiber optic
and RF transmission equipment and technology, and network management techniques
and services. As a result of the purchase of certain cable assets from ADC, we
also have exclusive licenses for use in our field on 30 ADC patents. Ownership
of one additional ADC patent was also transferred to us as part of the
purchase. We attempt to protect our intellectual property through patents,
trademarks, copyrights and a program of maintaining certain technology as trade
secrets.
Item 2. Properties
We operate the following principal facilities:
Segment
--------------------------------
(1) Telecommunications Equipment Approximate (O)Owned
Location Principal Use (2) BMS Square Feet (L)Leased
- -------- ------------- -------------------------------- ----------- ---------
State College,
Pennsylvania........... Administrative Offices and Engineering (1) and (2) 133,000 O
Tipton, Pennsylvania.... Manufacturing (1) 45,000 O
Tijuana, Mexico......... Manufacturing (1) 89,400 L
Santa Clara,
California............. Development Engineering and Assembly (1) 24,500 L
Pleasanton, California.. Development and Administrative Offices (2) 18,729 L
Lakewood, Colorado...... Administrative Offices (2) 4,510 L
Almere, The
Netherlands............ Administrative Offices (1) 5,100 L
On March 30, 2001, we announced the planned closing of our manufacturing plant
located in Tipton, Pennsylvania, in response to a downturn in demand for our
products. We anticipate that the planned shutdown of the facility will be
completed by the end of calendar year 2001. The facility is currently being
marketed for sale.
As a result of our purchase of certain assets and liabilities of the Broadband
Communications Division of ADC, we assumed the following leased administrative,
engineering and manufacturing space: 83,600 square feet in Meriden,
Connecticut, 21,670 square feet in Klagenfurt, Austria, and 29,000 square feet
in Buenos Aires, Argentina.
We are approved for ISO 9001 registration at our Pennsylvania and Tijuana
manufacturing facilities. ISO 9001 is the most comprehensive of all ISO 9000
series requirements and includes quality assurance in design, development,
production, installation and servicing. Criteria for registration are set by
the International Organization for Standardization, whose function is to
develop global standards in an effort to improve the exchange of goods and
services internationally. This designation builds on our reputation as a high-
quality, global provider of transmission electronics.
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Securities Holders
There were no matters submitted to a vote of security holders during the fourth
quarter of the fiscal year ended June 29, 2001.
13
Executive Officers of the Registrant
All executive officers of the company are elected annually by the Board of
Directors to serve in their offices for the next succeeding year and until
their successors are duly elected and qualified. The listing immediately
following this paragraph gives certain information about our executive
officers, including the age, present position and business experience during
the past five years.
Name Age Position/Experience
---- --- -------------------
David A. Woodle...... 45 Chairman since October 2000; Chief Executive Officer
since July 1998; Vice President and General Manager-
Strategic Systems of Raytheon Systems Company, a
company providing computer systems integration
services to government and commercial customers,
from January 1998 to July 1998; Vice President and
General Manager, Raytheon E-Systems, HRB Systems
from June 1996 to January 1998.
Mary G. Beahm........ 41 Corporate Vice President, Human Resources since
August 2001; Vice President, Human Resources from
November 1998 to August 2001; Human Resources
Consultant, Westinghouse Electric Corporation, a
company providing products and services to
government and commercial industries, from August
1987 to November 1998. Trustee, Board of Trustees,
The Pennsylvania State University since 1990.
John O. Caezza....... 43 President, Broadband Communications Division since
August 2001; Vice President and General Manager,
Broadband Communications Division of ADC
Telecommunications, Inc. a major manufacturer of
uncompressed digital transport, opto-electronic and
radio frequency products for the broadband
communications market from May 2000 to August 2001;
Vice President, Engineering, Philips Broadband
Networks, Inc., a major international manufacturer
of opto-electronic and radio frequency products for
the broadband communications market, from June 1996
to May 2000.
David J. Eng......... 48 Corporate Vice President, Americas Business since
August 2001; Sr. Vice President, Sales, Americas
Business, from February 2000 to August 2001; Sr.
Vice President--Worldwide Sales from March 1997 to
February 2000; Vice President--Sales, North, Central
and South America from August 1996 to March 1997.
Douglas W. Engerman.. 45 President, Broadband Management Solutions Division
since August 2001; Vice President and General
Manager, Broadband Management Services from June
2001 to August 2001; Senior Vice President for
Project Implementation and Customer Support at
Mobile Data Solutions, Inc., (MDSI), a provider of
wireless software application solutions to the
energy, utility, telecommunications, cable and
insurance industries worldwide, from November 1999
to June 2001; Senior Vice President, Utilities
Business Unit at MDSI from November 1998 to November
1999; Vice President of Sales, Utilities Business
Unit at MDSI from July 1997 to November 1998;
Executive Vice President, Alliance Systems, Inc., a
provider of wireless software solutions for mobile
workforce automation, from August 1993 to July 1997.
William T. Hanelly... 45 Chief Financial Officer, Secretary and Treasurer
since August 2001; Vice President, Finance,
Secretary and Treasurer from October 1998 to August
2001; Regional Controller, Raytheon, a company
providing computer systems integration services to
government and commercial customers, from May 1998
to October 1998; Vice President--Finance, HRB
Systems from June 1994 to May 1998.
14
Name Age Position/Experience
---- --- -------------------
Paul Janson.......... 42 President, Technical Services Division since August
2001; President and Chief Executive Officer of
Worldbridge Broadband Services from October 2000 to
August 2001; Vice President, Technical Services of
Worldbridge Broadband Services, a business unit of
C-COR, from February 2000 to October 2000; Chief
Operating Officer, Worldbridge Broadband Services,
Inc., a provider of technical field services to
broadband network operators, from October 1998 to
February 2000; Regional Director of Operations and
Marketing for InterMedia Partners (Tennessee
Holdings), a multiple system, broadband network
services provider, from June 1996 to August 1998.
Gerhard B. Nederlof.. 53 Corporate Vice President, EuroPacific Business since
August 2001; Sr. Vice President--EuroPacific
Business from February 2000 to August 2001; Sr. Vice
President--Broadband Management Services from July
1999 to February 2000; Sr. Vice President--Marketing
from September 1998 to July 1999; Sr. Vice
President--Marketing, Business Development and
Services from March 1997 to September 1998; Vice
President--Sales, Europe and Pacific Rim from August
1996 to March 1997.
Ken Wright........... 45 Chief Technology Officer since October 2000; Chief
Technology Officer, 21e.net from October 1999 to
October 2000; Chief Technical Officer for InterMedia
Partners, a multiple cable system operator (MSO)
from February 1995 to September 1999.
15
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
The Company's common stock is traded on The Nasdaq Stock Market's. The Nasdaq
symbol is CCBL. The range of high and low price information as reported by
Nasdaq follows:
High Low
------ ------
2000
Quarter ended
September 30, 1999........................................... $18.13 $10.81
December 31, 1999............................................ $41.64 $14.13
March 31, 2000............................................... $51.63 $21.38
June 30, 2000................................................ $48.50 $19.50
2001
Quarter ended
September 30, 2000........................................... $33.00 $12.50
December 31, 2000............................................ $16.63 $ 9.00
March 31, 2001............................................... $13.38 $ 6.69
June 30, 2001................................................ $13.45 $ 5.00
We have never paid a dividend. As of June 29, 2001, there were 687 shareholders
of record of common stock.
16
Item 6. Selected Financial Data
Selected Financial Data
(in thousands except per share data)
June 29, June 30, June 25, June 26, June 27,
Fiscal Year Ended 2001 2000 1999 1998 1997
- ----------------- -------- -------- -------- -------- --------
Statement of operations data:
Net sales..................... $223,295 $283,262 $203,851 $171,522 $146,054
Income (loss) from continuing
operations--pro forma(/1/)... 2,758 18,101 (597) 434 1,298
Income (loss) from continuing
operations................... (7,827) 14,461 (704) 40 1,284
Loss from discontinued
operations................... -- -- -- -- (6,605)
Gain (loss) from disposal of
discontinued operations...... 177 1,063 397 928 (3,830)
Net income (loss)............. (7,650) 15,524 (307) 968 (9,151)
Net income (loss) per share--
basic(/2/)
Continuing operations--pro
forma...................... $ 0.08 $ 0.60 $ (0.05) $ 0.01 $ 0.05
Continuing operations....... (0.24) 0.48 (0.06) -- 0.05
Discontinued operations..... -- -- -- -- (0.28)
Disposal of discontinued
operations................. 0.01 0.04 0.02 0.04 (0.17)
Net income (loss) per share--
basic........................ (0.23) 0.52 (0.04) 0.04 (0.40)
Net income (loss) per share--
diluted(/2/)
Continuing operations--pro
forma...................... $ 0.08 $ 0.53 $ (0.05) $ 0.01 $ 0.05
Continuing operations....... (0.24) 0.43 (0.06) -- 0.05
Discontinued operations..... -- -- -- -- (0.25)
Disposal of discontinued
operations................. 0.01 0.03 0.02 0.04 (0.15)
Net income (loss) per share--
diluted...................... (0.23) 0.46 (0.04) 0.04 (0.35)
Weighted average common shares
and common share
equivalents(/2/)
Basic....................... 32,905 30,039 22,483 22,503 23,197
Diluted..................... 32,905 33,968 22,483 22,503 25,929
Balance sheet data (at period
end):
Working capital(/3/).......... $ 59,108 $ 69,451 $ 36,082 $ 31,696 $ 35,591
Total assets.................. 238,705 273,039 109,180 90,160 88,721
Total long-term debt
obligations.................. 1,765 1,752 7,992 9,348 8,532
Shareholders' equity.......... 203,909 227,658 61,265 60,933 55,976
- --------
(/1/)Income (loss) from continuing operations--pro forma excludes merger and
restructuring charges, amortization of goodwill and other intangibles
resulting from acquisitions for all periods presented, and for fiscal year
2001 excludes an acquired in-process technology charge of $1.5 million and
a write-off of a long-term investment in the amount of $3.5 million.
(/2/)Net income (loss) per share amounts and weighted average common shares and
common share equivalents have been adjusted to reflect a 2-for-1 stock
split effective December 22, 1999.
(/3/)Working capital for fiscal years 2001 and 2000 exclude cash equivalents
and marketable securities related to the Company's follow-on public
offering.
17
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
We design, manufacture and market network distribution and transmission
products and provide services and operational support systems to operators of
advanced hybrid fiber coax (HFC) broadband networks. We operate in two industry
segments; the Telecommunications Equipment segment, which includes our
Broadband Communications Division and the Broadband Management Services (BMS)
segment, which includes both our Broadband Management Solutions Division and
our Technical Services Division. Our Broadband Communications Division is
responsible for research, development, management, production, support and
sales of advanced fiber optic and RF (radio frequency) equipment. A digital
video transport product line was added to this division with the acquisition of
certain operations from ADC Telecommunications, Inc. (ADC), effective August 4,
2001. Our Broadband Management Solutions Division is responsible for the
development, integration, management, implementation, support and sales of
operational support systems that focus on network management and mobile
workforce management solutions. Our Technical Services Division provides
outsourced technical services, including network engineering and design,
construction, activation, optimization, certification, maintenance and
operations.
Business Combinations
On April 27, 2001, we acquired MobileForce Technologies Inc. (MobileForce). The
consideration for the acquisition was $9.1 million, consisting of a cash
payment of $5.0 million, direct transaction costs and expenses of $738,000, and
the assumption of MobileForce stock options to purchase 500,000 shares of the
Company's common stock having a fair market value of $3.4 million. As part of
the acquisition, we also assumed $15.2 million of MobileForce debt. We used our
available cash to fund the cash portion of the consideration. The resulting
goodwill of $7.0 million is being amortized on a straight-line method over the
estimated useful life of three years. The acquisition agreement provides for
additional consideration to be paid to MobileForce stockholders, in an amount
not to exceed $13.5 million, if MobileForce achieves certain performance
objectives through April 2002.
Subsequent Events
On July 3, 2001, a wholly owned subsidiary of the Company acquired Aerotec
Communications Inc. (Aerotec) for $2.25 million. Additional cash payments of up
to $3.75 million may be made to Aerotec shareholders if certain performance
targets are met. Any excess of the purchase price and related costs over the
fair value of the acquired net assets of the business will be recorded as
goodwill.
On August 4, 2001, the Company completed its purchase of certain assets and
liabilities of ADC's cable product portfolio. The assets purchased include the
Optiworx(TM) and DV6000 series product lines, as well as other related cable
infrastructure products from ADC's Broadband Communications Division, located
in Meriden, Connecticut; Buenos Aires, Argentina; and Klagenfurt, Austria.
These facilities and their assets will become part of the Broadband
Communications Division of our Telecommunications Equipment segment. We
acquired the assets for approximately $25.0 million in cash and the assumption
of approximately $400,000 of debt, together with certain other liabilities. The
acquisition is being accounted for as a purchase. Any excess of the purchase
price and related costs over the fair value of the acquired net assets of the
business will be recorded as goodwill.
18
Results of Operations
The Company's consolidated statements of operations from continuing operations
for fiscal years 2001, 2000 and 1999 as a percentage of net sales, are as
follows:
Year Ended
---------------------------
June 29, June 30, June 25,
2001 2000 1999
-------- -------- --------
Net sales...................................... 100.0% 100.0% 100.0%
Cost of sales.................................. 79.6 73.6 74.6
----- ----- -----
Gross margin................................... 20.4 26.4 25.4
Operating expenses:
Selling and administrative................... 13.9 11.8 16.7
Research and product development............. 7.8 5.6 5.8
Amortization of goodwill and other
intangibles................................. .7 .1 .1
Acquired in-process technology charge........ .7 -- --
Merger and restructuring costs............... 4.9 3.2 --
----- ----- -----
Total operating expenses................... 28.0 20.7 22.6
----- ----- -----
Income (loss) from continuing operations....... (7.6) 5.7 2.8
Interest and other income (expense), net..... 1.8 1.4 (0.7)
----- ----- -----
Income (loss) from continuing operations before
income taxes.................................. (5.8) 7.1 2.1
Income tax expense (benefit)................... (2.3) 2.0 2.4
----- ----- -----
Income (loss) from continuing operations....... (3.5)% 5.1% (0.3)%
===== ===== =====
Net Sales. Net sales decreased by 21% to $223.3 million in fiscal year 2001
from $283.3 million in fiscal year 2000. Telecommunications Equipment segment
sales decreased by 25% to $181.9 million in fiscal year 2001 from $241.4
million in fiscal year 2000. The decline in telecommunications equipment sales
reflects the sharp slowdown of capital spending in the telecommunications
industry that began in the latter part of calendar year 2000. We believe the
sudden slowdown that has affected our telecommunications equipment sales has
resulted from several factors, including high customer on-hand inventory
levels, delays in construction schedules for HFC network system build-outs,
continued customer consolidation and lack of access to financing. We expect
network system upgrade activity for current build-outs to continue and believe
as network operators evaluate new build requirements, we will see a shift in
product requirements from RF amplifiers to more fiber optics products,
including digital technology, for transporting voice, video and data. In the
long-term, we believe the requirements for reliable, two-way capable networks
will compel network operators to increase spending for telecommunications
equipment from current levels, but we have no visibility into when such an
increase might occur. BMS segment sales remained relatively flat at $41.4
million in fiscal year 2001 compared to $41.9 million in fiscal year 2000. BMS
sales were primarily attributable to technical services performed in our
customers' plants, including system sweep, reverse path activation, ingress
mitigation, node certification and system maintenance. Net sales increased by
39% to $283.3 million in fiscal year 2000 from $203.9 million in fiscal year
1999. Telecommunications Equipment segment sales increased by 35% to $241.4
million in fiscal year 2000 from $178.5 million in fiscal year 1999. The
increase was attributable to sales growth in RF and fiber optics products as we
expanded our product offering through development of new products, acquisitions
and strategic partnerships to meet domestic and international customer demands.
BMS segment sales increased by 65% to $41.9 million in fiscal year 2000 from
$25.4 million in fiscal year 1999. The increase in fiscal year 2000 over 1999
was also primarily attributable to technical services activities.
Domestic sales decreased by 23% to $194.7 million in fiscal year 2001 from
$252.3 million in fiscal year 2000. This decline resulted primarily from a
decrease in Telecommunications Equipment segment sales, due to the slowdown in
capital spending by certain domestic multiple system operators (MSOs). Domestic
sales increased
19
by 37% to $252.3 million in fiscal year 2000 from $184.6 million in fiscal year
1999. This growth occurred in both Telecommunication Equipment and BMS segment
sales as consolidation and system swaps occurred among our domestic customer
base. Following that activity, several of the resulting large MSOs began
upgrading the properties they had acquired, translating into increased demand
for our products and services. Total domestic sales were 87% of net sales for
fiscal year 2001, as compared to 89% and 91% for fiscal years 2000 and 1999,
respectively.
International sales decreased by 8% to $28.6 million in fiscal year 2001 from
$31.0 million in fiscal year 2000. This decrease was principally caused by a
decline in Telecommunications Equipment segment sales to a major customer in
Canada. International sales increased by 61% to $31.0 million in fiscal year
2000 from $19.3 million in fiscal year 1999. This growth was principally in
sales in the Telecommunications Equipment segment and reflected the beginning
of a network upgrade program by 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 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 13% of consolidated net sales in fiscal year 2001, as compared to
11% and 9% for fiscal years 2000 and 1999, respectively.
We are subject to certain risks as a result of market and customer
concentration. For additional information regarding risks, reference Note Q of
the consolidated financial statements.
Gross Margin. Gross margin was 20.4% in fiscal year 2001, 26.4% in fiscal year
2000 and 25.4% in fiscal year 1999. For the Telecommunications Equipment
segment, gross margin was 19.8% in fiscal year 2001, 28.0% in fiscal year 2000
and 26.1% in fiscal year 1999. In fiscal year 2001, gross margins were
negatively impacted from under-absorbed manufacturing overhead resulting from
lower production volumes and increases to operating reserves for excess and
obsolete inventories and warranty costs for equipment upgrades and
replacements. Additions to the inventory reserve were $10.6 million in fiscal
year 2001, compared to $2.2 million in fiscal year 2000. The increase was
necessary due to the slowdown in spending in the telecommunications industry.
During the fiscal year we took steps to mitigate the impact of volume
reductions by beginning to consolidate our manufacturing operations in State
College and Tipton, Pennsylvania, to our Tijuana, Mexico, facility. This
consolidation is scheduled to be completed by the end of calendar year 2001. In
fiscal year 2000, efficiencies resulting from higher production volumes enabled
us to improve our absorption of fixed manufacturing overhead costs and realize
greater material cost reductions, as compared to fiscal year 1999. In addition,
changes in product mix and ongoing efforts to improve manufacturing automation
initiatives also contributed to the increase in gross margin percentage in
fiscal year 2000, relative to fiscal year 1999. For the BMS segment, gross
margin was 23.4% in fiscal year 2001, 17.6% in fiscal year 2000 and 19.9% in
fiscal year 1999. In fiscal year 2001, increased gross margin resulted from
service mix and volume changes. In fiscal year 2000, gross margin for the BMS
segment declined relative to fiscal year 1999 due to increased costs associated
with a ramp-up of personnel and other infrastructure costs as the Company
expanded its technical services group.
Selling and Administrative. Selling and administrative expenses were $31.0
million (13.9% of net sales) in fiscal year 2001, $33.5 million (11.8% of net
sales) in fiscal year 2000 and $34.1 million (16.7% of net sales) in fiscal
year 1999. The decrease in fiscal year 2001 was primarily due to steps taken to
reduce selling and administrative expenses, including personnel and other
operating costs, to obtain a more favorable cost structure. We do anticipate
increased selling and administrative expense in future periods, related to the
acquisition of MobileForce and certain assets and operations of ADC, although
selling and administrative expenses are expected to vary as a percentage of net
sales. The decrease in selling and administrative expenses in fiscal year 2000
was primarily due to the consolidation of certain positions and administrative
functions, as a result of the mergers with Convergence.com Corporation
(Convergence) and Silicon Valley Communications, Inc. (SVCI).
Research and Product Development. Research and product development expenses
were $17.4 million (7.8% of net sales) in fiscal year 2001, $16.0 million (5.6%
of net sales) in fiscal year 2000 and $11.8 million (5.8%
20
of net sales) in fiscal year 1999. The increase in fiscal year 2001 derives
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 in the development of fiber optic products and network management
products and capabilities, as well as the acquisitions of MobileForce and
certain assets and operations of ADC, although research and product development
expenses are expected to vary as a percentage of net sales. The increase in
research and product development expenditures in fiscal year 2000 resulted from
higher personnel costs and additional expenses primarily for development of
fiber optic transmission products, including transmitters, receivers, Erbium
Doped Fiber Amplifiers and development of network management products and
capabilities.
Operating Income (Loss) By Segment. Operating income (excluding non-recurring
merger and restructuring charges) for the Telecommunications Equipment segment
in fiscal years 2001, 2000 and 1999, was $595,000, $28.1 million and $8.2
million, respectively. The decrease in operating income for fiscal year 2001
was primarily attributable to decreased volume and reductions in gross margins.
Operating loss (excluding non-recurring merger and restructuring charges) for
the BMS segment in fiscal years 2001, 2000 and 1999, was $6.4 million, $2.9
million and $2.6 million, respectively. The loss for fiscal year 2001 derives
primarily from increased investment and development costs associated with our
network management products, as well as operating costs, including amortization
of acquired intangible assets and goodwill related to the MobileForce
acquisition.
Interest and Investment Income. Interest expense was $109,000 in fiscal year
2001, $814,000 in fiscal year 2000 and $1.4 million in fiscal year 1999. The
decrease in interest expense in fiscal years 2001 and 2000 resulted from
reductions of borrowings on 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 SVCI, acquired
by the Company in a pooling-of-interest transaction in September 1999.
Investment income was $7.4 million in fiscal year 2001, $4.9 million in fiscal
year 2000 and $318,000 in fiscal year 1999. The increase in investment income
in fiscal years 2001 and 2000 resulted from investing the net proceeds received
in our follow-on public offering completed on November 12, 1999, in short-term
investments.
Income Taxes. Our overall effective income tax rate was (39.7%) for fiscal year
2001, 27.6% for fiscal year 2000 and 117.0% for fiscal year 1999. The effective
income tax rate for fiscal year 2001 reflects the impact of federal and state
income taxes and changes in the valuation allowance for deferred taxes. The
lower effective income tax rate for fiscal year 2000 resulted primarily from an
adjustment to the valuation allowance on deferred tax assets related to certain
tax benefits from the acquisitions of Convergence and SVCI, and was offset
partially by permanent differences for non-deductible business combination
costs incurred with the mergers with Convergence, SVCI and Worldbridge
Broadband Services, Inc. (Worldbridge). The higher effective income tax rate in
fiscal year 1999 resulted primarily from limited tax benefit from the operating
losses at SVCI and Convergence, reduced tax benefits from our Foreign Sales
Corporation and higher state income taxes. In addition, fluctuations in the
effective income tax rate from period to period reflect other changes in
permanent, non-deductible amounts, the relative profitability related to both
U.S. and non-U.S. operations and differences in statutory rates. We expect to
have an effective annual tax rate that approximates statutory rates in the
future.
Liquidity and Capital Resources
As of June 29, 2001, cash and cash equivalents and short-term investments
totaled $100.9 million, down from $137.5 million at June 30, 2000. 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.
Net cash and cash equivalents provided by operating activities were $9.1
million in fiscal year 2001, compared to $10.8 million in fiscal year 2000 and
$4.6 million in fiscal year 1999. The decrease in cash and cash
21
equivalents provided by operating activities in fiscal year 2001 was primarily
due to the net loss recorded for fiscal year 2001, which includes the effect of
$4.0 million of cash paid associated with restructuring charges. Also
contributing to the decrease in cash provided by operations for the period were
higher inventories and lower accounts payable and accrued liabilities, which
was partially offset by lower accounts receivable. The $10.8 million of cash
provided by operations in fiscal year 2000 includes the effect of $9.0 million
of nonrecurring costs associated with the mergers completed during the year.
Excluding these costs, the operations generated $18.4 million in cash in fiscal
year 2000. The increase in cash and cash equivalents provided by operating
activities in fiscal year 2000 was primarily due to the increase in net income
for fiscal year 2000, compared to a net loss in fiscal year 1999, and higher
accounts payable and accrued liabilities, which was partially offset by
increases in accounts receivable and inventory.
Net cash and cash equivalents provided by investing activities were $19.8
million in fiscal year 2001, compared to cash and cash equivalents used in
investing activities of $56.3 million in fiscal year 2000 and $6.6 million in
fiscal year 1999. The increase in cash and cash equivalents provided by
investing activities in fiscal year 2001 was primarily due to proceeds from the
sale of marketable securities and other short-term investments. Other investing
activities included purchases of property, plant and equipment for $3.6
million, as well as cash consideration for the purchase of MobileForce of $5.8
million. The increase in cash and cash equivalents used in investing activities
in fiscal year 2000 was primarily due to purchases of marketable securities and
other short-term investments. Other investing activities included purchases of
property, plant and equipment for $7.9 million, as well as our purchase of
substantially all the assets of Advanced Communications Services, Inc. (ACSI)
for $3.6 million, of which $3.2 million was disbursed during the fiscal year,
with the remaining balance subject to certain escrow requirements. In addition,
we invested $3.5 million in Fortress Technologies.
Net cash and cash equivalents used in financing activities were $36.4 million
in fiscal year 2001, compared to cash and cash equivalents provided by
financing activities of $135.1 million in fiscal year 2000 and $3.4 million in
fiscal year 1999. The decrease in cash provided by financing activities for
fiscal year 2001 resulted primarily from the purchase of treasury stock during
the period. On September 25, 2000, we announced a stock repurchase program,
effective September 22, 2000. The program allowed us to repurchase up to
2,000,000 shares of our common stock. On April 6, 2001, we raised the ceiling
of this stock repurchase program to allow the buy back of an additional
2,000,000 shares, bringing the total to 4,000,000 shares authorized under this
program. The shares may be purchased from time to time in the open market
through block or privately negotiated transactions, or otherwise. We intend to
use our currently available capital resources to fund the purchases. The
repurchased stock is being held by us as treasury stock to be used to meet our
obligations under our present and future stock option plans and for other
corporate purposes. As of June 29, 2001, 1,934,590 shares have been repurchased
under this stock repurchase program. Our other financing activities consisted
primarily of payments on long-term debt, primarily resulting from retirement of
outstanding debt assumed in the MobileForce acquisition and proceeds from the
exercise of employee stock options and warrants. The increase in cash provided
by financing activities for fiscal year 2000 resulted primarily from net
proceeds received through a follow-on public offering of our common stock. 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.
In June 2001, we amended our existing 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, 2001. 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, 2001. Credit pricing on these facilities is a
function of our total funded indebtedness to earnings before interest, taxes,
depreciation and amortization (EBITDA) ratio, adjusted for certain non-
recurring charges. Borrowings under the credit agreement bear interest at
various rates, at our option, and are limited to two and a quarter (2.25) times
adjusted 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 June 29, 2001, we
had
22
no borrowings outstanding under the credit agreement and, based on fiscal year
2001 adjusted EBITDA, approximately $30.6 million of the facility was
available. Based upon the current slowdown in business, we anticipate a reduced
borrowing capacity under the current credit agreement. We are in the process of
soliciting proposals for renewal of the credit agreement at the end of the
current commitment period.
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.
Recent Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 141, "Business Combinations"
(Statement 141) which supersedes APB Opinion No. 16, "Business Combinations"
and SFAS No. 38, "Accounting for Preacquisition Contingencies of Purchased
Enterprises." Statement 141 addresses financial accounting and reporting for
business combinations and requires that all business combinations within the
scope of Statement 141 be accounted for using only the purchase method.
Statement 141 is required to be adopted for all business combinations initiated
after June 30, 2001.
Also in July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets" (Statement 142) which supercedes APB Opinion No. 17, "Intangible
Assets." Statement 142 addresses how intangible assets that are acquired
individually or with a group of other assets (but not those acquired in a
business combination) should be accounted for in financial statements upon
their acquisition. Statement 142 also addresses how goodwill and other
intangible assets should be accounted for after they have been initially
recognized in the financial statements. Statement 142 requires that goodwill
and intangible assets with indefinite useful lives no longer be amortized, but
instead be tested for impairment at least annually in accordance with the
provisions of Statement 142. Statement 142 also requires that intangible assets
with definite useful lives be amortized over their respective estimated useful
lives to their estimated residual values and reviewed for impairment in
accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." The provisions of
Statement 142 are required to be applied starting with fiscal years beginning
after December 15, 2001. Statement 142, which is required to be applied at the
beginning of an entity's fiscal year, is to be applied to all goodwill and
other intangible assets recognized in the financial statements at that date.
Because of the effort needed to comply with adopting Statements 141 and 142, it
is not currently practicable to reasonably estimate the impact of adopting
these Statements on the Company's consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risk represents the risk of loss that may impact the financial position,
results of operations or cash flow of the Company due to adverse changes in
market prices and rates. The Company is exposed to market risk because of
changes in interest rates and the fair market value of its marketable
securities portfolios. The Company does not use derivative instruments in its
marketable securities portfolios. The Company classifies its marketable
securities portfolios as either available-for-sale or trading, and records them
at fair value. For the Company's available-for-sale securities, unrealized
holding gains and losses are excluded from income and are recorded directly to
shareholders' equity in accumulated other comprehensive income (loss), net of
related deferred income taxes. For the Company's trading securities, unrealized
holding gains and losses are included in the statement of operations in the
period they arise.
23
Item 8. Financial Statements and Supplementary Data
Consolidated financial statements of C-COR.net Corp. meeting the requirements
of Regulation S-X are filed on the following pages of this Item 8 of this
Annual Report on Form 10-K, as listed below:
Page
-----
Independent Auditors' Report............................................ 25
Consolidated Balance Sheets as of June 29, 2001 and June 30, 2000....... 26
Consolidated Statements of Operations for the Years Ended June 29, 2001,
June 30, 2000 and June 25, 1999........................................ 27
Consolidated Statements of Cash Flows for the Years Ended June 29, 2001,
June 30, 2000 and June 25, 1999........................................ 28
Consolidated Statements of Shareholders' Equity for the Years Ended June
29, 2001, June 30, 2000 and June 25, 1999.............................. 29
Notes to Consolidated Financial Statements.............................. 30-56
24
Independent Auditors' Report
The Board of Directors
C-COR.net Corp. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of C-COR.net Corp.
and subsidiaries as of June 29, 2001 and June 30, 2000, and the related
consolidated statements of operations, cash flows, and shareholders' equity for
each of the years in the three-year period ended June 29, 2001. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of C-COR.net Corp. and
subsidiaries as of June 29, 2001 and June 30, 2000, and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 29, 2001, in conformity with accounting principles generally
accepted in the United States of America.
KPMG LLP
State College, Pennsylvania
August 10, 2001
25
C-COR.net Corp.
Consolidated Balance Sheets
(In thousands, except share and per share data)
June 29, June 30,
2001 2000
-------- --------
ASSETS
Current assets
Cash and cash equivalents.................................. $ 87,891 $ 95,379
Marketable securities...................................... 13,002 42,154
Interest receivable........................................ 426 1,007
Accounts and notes receivables, less allowance of $1,565 in
2001 and $1,148 in 2000................................... 26,167 49,325
Inventories................................................ 34,809 31,760
Deferred taxes............................................. 12,250 7,470
Other current assets....................................... 9,490 3,447
Net assets of discontinued operations...................... 250 379
-------- --------
Total current assets................................... 184,285 230,921
Property, plant and equipment, net......................... 21,609 28,322
Intangible assets, net..................................... 22,994 2,477
Deferred taxes............................................. 6,851 4,909
Other long-term assets..................................... 2,966 6,410
-------- --------
Total assets........................................... $238,705 $273,039
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable........................................... $ 12,723 $ 21,341
Accrued liabilities........................................ 18,297 20,056
Current portion of long-term debt.......................... 264 225
-------- --------
Total current liabilities.............................. 31,284 41,622
Long-term debt, less current portion....................... 1,501 1,527
Other long-term liabilities................................ 2,011 2,232
-------- --------
Total liabilities...................................... 34,796 45,381
-------- --------
Commitments and contingent liabilities
Shareholders' equity
Preferred stock, no par; authorized shares of 2,000,000;
none issued............................................... -- --
Common stock, $.05 par; authorized shares of 100,000,000;
issued shares of 35,629,737 in 2001 and 35,219,825 in
2000...................................................... 1,781 1,761
Additional paid-in capital................................. 205,154 197,240
Accumulated other comprehensive loss....................... (131) (30)
Unearned compensation...................................... -- (8)
Retained earnings.......................................... 28,302 35,952
Treasury stock at cost, 3,160,516 shares in 2001 and
1,224,941 shares in 2000.................................. (31,197) (7,257)
-------- --------
Net shareholders' equity............................... 203,909 227,658
-------- --------
Total liabilities and shareholders' equity............. $238,705 $273,039
======== ========
See accompanying notes to consolidated financial statements.
26
C-COR.net Corp.
Consolidated Statements of Operations
(In thousands, except per share data)
Year Ended
----------------------------
June 29, June 30, June 25,
2001 2000 1999
-------- -------- --------
Net sales........................................ $223,295 $283,262 $203,851
Cost of sales.................................... 177,668 208,376 152,143
-------- -------- --------
Gross margin..................................... 45,627 74,886 51,708
Operating expenses:
Selling and administrative..................... 31,011 33,477 34,113
Research and product development............... 17,399 16,003 11,833
Amortization of goodwill and other
intangibles................................... 1,536 273 172
Acquired in-process technology charge.......... 1,500 -- --
Merger and restructuring costs................. 11,031 9,045 --
-------- -------- --------
Total operating expenses..................... 62,477 58,798 46,118
Income (loss) from operations.................... (16,850) 16,088 5,590
Interest expense................................. (109) (814) (1,396)
Investment income................................ 7,374 4,901 318
Other expense, net............................... (3,406) (202) (377)
-------- -------- --------
Income (loss) before income taxes................ (12,991) 19,973 4,135
Income tax expense (benefit)..................... (5,164) 5,512 4,839
-------- -------- --------
Income (loss) from continuing operations......... (7,827) 14,461 (704)
-------- -------- --------
Discontinued operations:
Gain on disposal of discontinued business
segment, net of tax........................... 177 1,063 397
-------- -------- --------
Net income (loss)................................ (7,650) 15,524 (307)
Dividend requirements on preferred stocks........ -- -- (613)
-------- -------- --------
Net income (loss) available to common
shareholders.................................... $ (7,650) $ 15,524 $ (920)
======== ======== ========
Net income (loss) per share--basic:
Continuing operations.......................... $ (0.24) $ 0.48 $ (0.06)
Gain on disposal of discontinued operations.... 0.01 0.04 0.02
-------- -------- --------
Net income (loss)............................ $ (0.23) $ 0.52 $ (0.04)
======== ======== ========
Net income (loss) per share--diluted:
Continuing operations.......................... $ (0.24) $ 0.43 $ (0.06)
Gain on disposal of discontinued operations.... 0.01 0.03 0.02
-------- -------- --------
Net income (loss)............................ $ (0.23) $ 0.46 $ (0.04)
======== ======== ========
Weighted average common shares and common share
equivalents
Basic.......................................... 32,905 30,039 22,483
Diluted........................................ 32,905 33,968 22,483
See accompanying notes to consolidated financial statements.
27
C-COR.net Corp.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended
----------------------------
June 29, June 30, June 25,
2001 2000 1999
-------- -------- --------
Operating Activities:
Net income (loss)................................ $(7,650) $15,524 $ (307)
Adjustments to reconcile net income (loss) to net
cash and cash equivalents provided by operating
activities:
Depreciation and amortization.................... 10,116 8,891 9,199
Amortization of debt discount.................... -- 381 911
Amortization of unearned compensation............ 8 14 --
Write-off of long-term investment................ 3,501 -- --
Write-off of intangibles and long-lived assets... 6,023 -- --
Gain on disposal of discontinued operations, net
of tax.......................................... (177) (1,063) (397)
Provision for deferred retirement salary plan.... 4 309 204
Loss on sale of property, plant and equipment.... 244 331 235
Incentive plan compensation expense.............. -- 369 --
Tax benefit deriving from exercise and sale of
stock option shares............................. 2,207 3,859 94
Changes in operating assets and liabilities, net
of acquisitions:
Interest receivable............................. 581 (1,006) --
Accounts receivable............................. 23,294 (13,188) (12,294)
Inventories..................................... (3,049) (8,195) (5,756)
Other assets.................................... (6,199) 468 (58)
Accounts payable................................ (9,571) 4,920 9,540
Accrued liabilities............................. (4,035) 2,983 6,084
Deferred income taxes........................... (6,465) (4,917) (2,303)
Discontinued operations--working capital changes
and noncash charges............................ 306 1,117 (553)
------- ------- -------
Net cash and cash equivalents provided by
operating activities............................ 9,138 10,797 4,599
------- ------- -------
Investing Activities:
Purchase of property, plant and equipment........ (3,638) (7,891) (8,669)
Proceeds from (purchase of) marketable securities
and other short-term investments, net........... 29,152 (41,709) (84)
Investment in equity securities.................. -- (3,501) --
Payments received on notes receivable............ -- -- 1,972
Acquisitions of MobileForce and ACSI............. (5,767) (3,185) --
Other............................................ 54 8 142
------- ------- -------
Net cash and cash equivalents provided by (used
in) investing activities........................ 19,801 (56,278) (6,639)
------- ------- -------
Financing Activities:
Payment of debt and capital lease obligations.... (14,843) (2,847) (5,107)
Proceeds from long-term debt borrowing........... -- -- 3,097
Proceeds from (payments on) short-term credit
facilities, net................................. -- (5,019) 5,019
Proceeds from issuance of convertible preferred
stock........................................... -- -- 1,355
Proceeds from issuance of common stock to
employee stock purchase plan.................... 143 130 76
Proceeds from exercise of stock options and stock
warants......................................... 2,213 9,757 1,202
Proceeds from issuance of common stock, net...... -- 133,311 --
Purchase and retirement of convertible preferred
stock........................................... -- -- (1,000)
Purchase of treasury stock....................... (23,940) (277) (1,265)
------- ------- -------
Net cash and cash equivalents provided by (used
in) financing activities........................ (36,427) 135,055 3,377
------- ------- -------
Increase (decrease) in cash and cash
equivalents..................................... (7,488) 89,574 1,337
Elimination of duplicated activity............... -- -- 1,014
Cash and cash equivalents at beginning of year... 95,379 5,805 3,454
------- ------- -------
Cash and cash equivalents at end of year......... $87,891 $95,379 $ 5,805
======= ======= =======
Supplemental cash flow information:
Non-cash investing and financing activities
Fair value adjustment of available-for-sale
securities..................................... $ (73) $ 75 --
Conversion of convertible preferred stock....... -- 27,697 --
Exercise of warrants............................ -- 247 --
Retirement of treasury stock.................... -- 181 --
See accompanying notes to consolidated financial statements.
28
C-COR.net Corp.
Consolidated Statements of Shareholders' Equity
(In thousands)
Accumulated
Additional Other
Comprehensive Preferred Common Paid-in Comprehensive Unearned Retained Treasury
Income Stock Stock Capital Income (Loss) Compensation Earnings Stock
------------- --------- ------ ---------- ------------- ------------ -------- --------
Balance, June 26, 1998.. $24,010 $1,183 $ 21,103 $ (99) $ -- $20,813 $ (6,077)
Net loss................ $ (307) -- -- -- -- -- (307) --
Other comprehensive
income:
Net unrealized holding
gains on marketable
securities............. 4
Foreign currency
translation loss....... (1)
-------
Other comprehensive
income................. 3 -- -- -- 3 -- -- --
-------
Comprehensive loss...... $ (304)
=======
Adjustment related to
merger (Note B)........ -- -- -- -- -- 712 --
Shares adjustment....... -- -- (45) -- -- -- --
Issuance of stock
warrants............... 1,294 -- -- -- -- -- --
Accretion of discount on
convertible preferred
stock.................. -- -- -- -- -- (613) --
Exercise of stock
options................ -- 13 1,189 -- -- -- --
Tax benefit deriving
from exercise and sale
of stock option
shares................. -- -- 94 -- -- -- --
Issue shares to employee
stock purchase plan.... -- 1 75 -- -- -- --
Purchase and retirement
of preferred stock..... (1,000) -- -- -- -- -- --
Purchase of treasury
stock.................. -- -- -- -- -- -- (1,084)
------- ------ -------- ----- ----- ------- --------
Balance, June 25, 1999.. 24,304 1,197 22,416 (96) -- 20,605 (7,161)
Net income.............. $15,524 -- -- -- -- -- 15,524 --
Other comprehensive
income:
Net unrealized holding
gains on marketable
securities............. 75
Foreign currency
translation loss....... (9)
-------
Other comprehensive
income................. 66 -- -- -- 66 -- -- --
-------
Comprehensive income.... $15,590
=======
Shares issued for
secondary public
offering............... -- 322 132,989 -- -- -- --
Conversion of preferred
stock and retirement of
treasury shares........ (24,304) 161 27,532 -- -- (177) 181
Exercise of stock
options................ -- 45 6,227 -- -- -- --
Exercise of stock
warrants............... -- 35 3,697 -- -- -- --
Tax benefit d