United States
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the thirteen-week period ended: March 28, 2003 | |
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| OR | |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| C-COR.net Corp. | |
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| (Exact Name of Registrant as Specified in Charter) | |
| Pennsylvania |
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0-10726 |
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24-0811591 |
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| (State or Other Jurisdiction of Incorporation) |
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(Commission File Number) |
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(IRS Employer Identification No.) |
| 60 Decibel Road |
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16801 |
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| (Address of Principal Executive Offices) |
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(Zip Code) |
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(814) 238-2461 |
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(Registrant’s Telephone Number, Including Area Code) |
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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 o |
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock, $.05 Par Value - 36,409,460 shares as of April 28, 2003.
C-COR.net Corp.
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Page |
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| Part I -- FINANCIAL INFORMATION |
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| Item 1. Financial Statements |
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2 | |
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3 | |
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4 | |
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5 | |
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6 | |
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7-18 | |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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19-27 |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
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28 |
| Item 4. Controls and Procedures |
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29 |
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| Part II -- OTHER INFORMATION |
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30 | |
| Item 6. Exhibits and Reports on Form 8-K |
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30 |
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31 | |
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32-33 |
Independent Accountants’ Review Report
The Board of Directors and Shareholders
C-COR.net Corp.:
We have reviewed the condensed consolidated balance sheet of C-COR.net Corp. and subsidiaries as of March 28, 2003, the related condensed consolidated statements of operations for the thirteen-week and thirty-nine week periods ended March 28, 2003 and March 29, 2002, and the related condensed consolidated statements of cash flows for the thirty-nine week periods ended March 28, 2003 and March 29, 2002. These condensed consolidated financial statements are the responsibility of the Company’s management.
We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of C-COR.net Corp. and subsidiaries as of June 28, 2002, and the related consolidated statements of operations, cash flows, and shareholders’ equity for the year then ended (not presented herein); and in our report dated August 9, 2002, except as to Note U, which is as of September 16, 2002, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of June 28, 2002, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
| /s/ KPMG LLP |
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| Harrisburg, Pennsylvania |
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| April 18, 2003 |
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2
C-COR.net Corp.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
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March 28, |
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June 28, |
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(Unaudited) |
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| ASSETS |
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| Current assets |
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| Cash and cash equivalents |
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$ |
25,660 |
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$ |
111,858 |
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| Restricted cash |
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2,602 |
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— |
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| Accounts and notes receivables, net |
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36,410 |
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27,582 |
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| Inventories |
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28,212 |
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39,084 |
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| Refundable income taxes |
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— |
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10,425 |
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| Deferred taxes |
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— |
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18,715 |
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| Other current assets |
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4,682 |
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6,020 |
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| Total current assets |
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97,566 |
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213,684 |
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| Property, plant and equipment, net |
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24,805 |
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24,701 |
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| Goodwill and other intangible assets, net |
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38,165 |
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8,843 |
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| Deferred taxes |
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— |
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20,549 |
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| Other long-term assets |
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3,301 |
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3,046 |
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| Total assets |
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$ |
163,837 |
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$ |
270,823 |
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| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| Current liabilities |
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| Accounts payable |
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$ |
21,674 |
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$ |
15,333 |
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| Accrued liabilities |
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45,980 |
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32,991 |
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| Current portion of long-term debt |
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643 |
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633 |
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| Total current liabilities |
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68,297 |
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48,957 |
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| Long-term debt, less current portion |
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1,061 |
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1,263 |
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| Other long-term liabilities |
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1,970 |
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2,005 |
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| Total liabilities |
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71,328 |
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52,225 |
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| Commitments and contingent liabilities |
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| Shareholders’ equity |
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| Preferred stock, no par value; authorized shares of 2,000,000; none issued |
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— |
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— |
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| Common stock, $.05 par; authorized shares of 100,000,000; issued shares of 40,017,986 on March 28, 2003 and 39,945,219 on June 28, 2002 |
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2,001 |
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1,997 |
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| Additional paid-in capital |
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264,115 |
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263,936 |
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| Accumulated other comprehensive income |
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971 |
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546 |
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| Accumulated deficit |
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(140,229 |
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(13,622 |
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| Treasury stock at cost, 3,645,339 shares as of March 28, 2003 and 3,629,506 shares as of June 28, 2002 |
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(34,349 |
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(34,259 |
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| Shareholders’ equity |
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92,509 |
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218,598 |
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| Total liabilities and shareholders’ equity |
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$ |
163,837 |
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$ |
270,823 |
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See independent accountants’ review report and notes to condensed consolidated financial statements.
3
C-COR.net Corp.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
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Thirteen Weeks Ended |
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March 28, |
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March 29, |
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| Net sales |
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$ |
50,100 |
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$ |
77,230 |
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| Cost of sales |
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56,303 |
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54,535 |
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| Gross margin |
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(6,203 |
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22,695 |
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| Operating expenses: |
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| Selling and administrative |
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13,741 |
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15,301 |
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| Research and product development |
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7,640 |
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6,524 |
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| Amortization of goodwill and other intangibles |
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622 |
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1,913 |
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| Acquired in-process technology charge |
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(760 |
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— |
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| Goodwill impairment charge |
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40,022 |
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— |
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| Restructuring costs (credits) |
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200 |
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(431 |
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| Total operating expenses |
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61,465 |
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23,307 |
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| Loss from operations |
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(67,668 |
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(612 |
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| Interest expense |
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(14 |
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(20 |
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| Investment income |
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98 |
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321 |
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| Foreign exchange gain |
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49 |
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1,483 |
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| Other income (expense), net |
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(216 |
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178 |
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| Income (loss) before income taxes |
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(67,751 |
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1,350 |
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| Income tax expense |
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46,890 |
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1,241 |
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| Net income (loss) |
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$ |
(114,641 |
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$ |
109 |
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| Net income (loss) per share: |
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| Basic |
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$ |
(3.15 |
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$ |
0.00 |
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| Diluted |
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$ |
(3.15 |
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$ |
0.00 |
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| Weighted average common shares and common share equivalents: |
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| Basic |
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36,365 |
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33,983 |
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| Diluted |
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36,365 |
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36,833 |
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See independent accountants’ review report and notes to condensed consolidated financial statements.
4
C-COR.net Corp.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
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Thirty-nine Weeks Ended |
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March 28, |
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March 29, |
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| Net sales |
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$ |
148,709 |
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$ |
196,426 |
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| Cost of sales |
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132,119 |
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139,633 |
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| Gross margin |
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16,590 |
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56,793 |
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| Operating expenses: |
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| Selling and administrative |
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37,997 |
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37,151 |
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| Research and product development |
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21,446 |
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20,848 |
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| Amortization of goodwill and other intangibles |
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1,411 |
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5,721 |
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| Acquired in-process technology charge |
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800 |
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— |
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| Goodwill impairment charge |
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40,022 |
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— |
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| Restructuring costs |
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398 |
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671 |
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| Total operating expenses |
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102,074 |
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64,391 |
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| Loss from operations |
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(85,484 |
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(7,598 |
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| Interest expense |
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(250 |
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(109 |
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| Investment income |
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827 |
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1,321 |
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| Foreign exchange gain (loss) |
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(1,192 |
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1,918 |
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| Other income (expense), net |
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540 |
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(1,516 |
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| Loss before income taxes |
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(85,559 |
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(5,984 |
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| Income tax expense (benefit) |
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41,048 |
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(1,219 |
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| Net loss |
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$ |
(126,607 |
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$ |
(4,765 |
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| Net loss per share: |
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| Basic |
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$ |
(3.48 |
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$ |
(0.14 |
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| Diluted |
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$ |
(3.48 |
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$ |
(0.14 |
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| Weighted average common shares and common share equivalents: |
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| Basic |
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36,356 |
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32,863 |
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| Diluted |
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36,356 |
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32,863 |
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See independent accountants’ review report and notes to condensed consolidated financial statements.
5
C-COR.net Corp.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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Thirty-nine Weeks Ended |
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March 28, |
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March 29, |
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| Operating Activities: |
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