United States
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the thirteen-week period ended: December 24, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
C-COR Incorporated
(Exact Name of Registrant as Specified in Charter)
| Pennsylvania | 0-10726 | 24-0811591 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
| 60 Decibel Road State College, PA | 16801 | |
| (Address of Principal Executive Offices) | (Zip Code) |
(814) 238-2461
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x No ¨
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock, $.05 Par Value - 47,697,390 shares as of January 21, 2005.
| Page | ||||
| Part I — FINANCIAL INFORMATION |
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| Item 1. |
Financial Statements | |||
| 2 | ||||
|
Condensed Consolidated Balance Sheets: |
3 | |||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| 7-16 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17-25 | ||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk | 26 | ||
| Item 4. |
Controls and Procedures | 26 | ||
| Part II — OTHER INFORMATION |
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| Item 4. |
Submission of Matters to a Vote of Shareholders | 27 | ||
| Item 6. |
Exhibits | 27-28 | ||
| 29 | ||||
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
C-COR Incorporated:
We have reviewed the condensed consolidated balance sheet of C-COR Incorporated and subsidiaries as of December 24, 2004, the related condensed consolidated statements of operations for the thirteen-week and twenty-six week periods ended December 24, 2004 and December 26, 2003, and the related condensed consolidated statements of cash flows for the twenty-six week periods ended December 24, 2004 and December 26, 2003. These condensed consolidated financial statements are the responsibility of the Company’s management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), 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 review, 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 U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of C-COR Incorporated and subsidiaries as of June 25, 2004, 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 13, 2004, except as to Note 24, which was as of September 3, 2004, 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 25, 2004, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
| /s/ KPMG LLP |
| Harrisburg, Pennsylvania February 1, 2005 |
2
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
| December 24, 2004 |
June 25, 2004 |
|||||||
| ASSETS | ||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 23,339 | $ | 63,791 | ||||
| Restricted cash |
3,074 | 1,637 | ||||||
| Marketable securities |
40,709 | 52,934 | ||||||
| Broker receivable for unsettled trades |
7,665 | — | ||||||
| Accounts receivable, net |
52,421 | 43,785 | ||||||
| Unbilled receivables |
9,676 | 3,494 | ||||||
| Inventories |
21,902 | 25,680 | ||||||
| Other current assets |
6,227 | 4,849 | ||||||
| Total current assets |
165,013 | 196,170 | ||||||
| Property, plant, and equipment, net |
19,789 | 17,697 | ||||||
| Goodwill |
58,080 | 38,312 | ||||||
| Other intangible assets, net |
12,265 | 10,752 | ||||||
| Deferred taxes |
338 | 754 | ||||||
| Other long-term assets |
3,932 | 3,200 | ||||||
| Total assets |
$ | 259,417 | $ | 266,885 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities |
||||||||
| Accounts payable |
$ | 17,880 | $ | 23,571 | ||||
| Accrued liabilities |
27,295 | 31,274 | ||||||
| Deferred taxes |
396 | 467 | ||||||
| Current portion of long-term debt |
154 | 158 | ||||||
| Total current liabilities |
45,725 | 55,470 | ||||||
| Long-term debt, less current portion |
696 | 772 | ||||||
| Other long-term liabilities |
2,880 | 2,381 | ||||||
| Total liabilities |
49,301 | 58,623 | ||||||
| Commitments and contingencies |
||||||||
| Shareholders’ equity |
||||||||
| Preferred stock, no par value; authorized shares of 2,000,000; none issued |
— | — | ||||||
| Common stock, $.05 par; authorized shares of 100,000,000; issued shares of 46,806,042 as of December 24, 2004 and 46,662,652 as of June 25, 2004 |
2,341 | 2,333 | ||||||
| Additional paid-in capital |
345,678 | 344,821 | ||||||
| Accumulated other comprehensive income |
8,523 | 5,013 | ||||||
| Unearned compensation |
(424 | ) | (504 | ) | ||||
| Accumulated deficit |
(111,652 | ) | (109,051 | ) | ||||
| Treasury stock at cost, 3,645,850 shares as of December 24, 2004 and June 25, 2004 |
(34,350 | ) | (34,350 | ) | ||||
| Shareholders’ equity |
210,116 | 208,262 | ||||||
| Total liabilities and shareholders’ equity |
$ | 259,417 | $ | 266,885 | ||||
See notes to condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| Thirteen Weeks Ended |
||||||||
| December 24, 2004 |
December 26, 2003 |
|||||||
| Net sales: |
||||||||
| Products |
$ | 41,581 | $ | 44,709 | ||||
| Services |
16,906 | 16,821 | ||||||
| Total net sales |
58,487 | 61,530 | ||||||
| Cost of sales: |
||||||||
| Products |
23,847 | 28,040 | ||||||
| Services |
11,744 | 10,251 | ||||||
| Total cost of sales |
35,591 | 38,291 | ||||||
| Gross margin |
22,896 | 23,239 | ||||||
| Operating expenses: |
||||||||
| Selling and administrative |
14,199 | 9,415 | ||||||
| Research and product development |
8,600 | 5,227 | ||||||
| Amortization of intangibles |
1,200 | 550 | ||||||
| Restructuring charge (recovery) |
619 | (106 | ) | |||||
| Total operating expenses |
24,618 | 15,086 | ||||||
| Income (loss) from operations |
(1,722 | ) | 8,153 | |||||
| Other income (expense), net: |
||||||||
| Interest expense |
(25 | ) | (20 | ) | ||||
| Investment income |
488 | 216 | ||||||
| Foreign exchange gain |
265 | 624 | ||||||
| Gain on sale of bankruptcy trade claims |
— | 21,075 | ||||||
| Other income, net |
229 | 40 | ||||||
| Income (loss) before income taxes |
(765 | ) | 30,088 | |||||
| Income tax expense |
792 | 367 | ||||||
| Net income (loss) |
$ | (1,557 | ) | $ | 29,721 | |||
| Net income (loss) per share: |
||||||||
| Basic |
$ | (0.04 | ) | $ | 0.81 | |||
| Diluted |
$ | (0.04 | ) | $ | 0.78 | |||
| Weighted average common shares and common share equivalents: |
||||||||
| Basic |
43,128 | 36,737 | ||||||
| Diluted |
43,128 | 38,297 | ||||||
See notes to condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| Twenty-six Weeks Ended |
||||||||
| December 24, 2004 |
December 26, 2003 |
|||||||
| Net sales: |
||||||||
| Products |
$ | 86,392 | $ | 91,266 | ||||
| Services |
34,194 | 27,031 | ||||||
| Total net sales |
120,586 | 118,297 | ||||||
| Cost of sales: |
||||||||
| Products |
51,105 | 56,272 | ||||||
| Services |
24,906 | 18,765 | ||||||
| Total cost of sales |
76,011 | 75,037 | ||||||
| Gross margin |
44,575 | 43,260 | ||||||
| Operating expenses: |
||||||||
| Selling and administrative |
26,150 | 18,619 | ||||||
| Research and product development |
15,930 | 10,469 | ||||||
| Amortization of intangibles |
2,346 | 1,100 | ||||||
| Acquired in-process technology charge |
1,850 | — | ||||||
| Restructuring charge (recovery) |
619 | (106 | ) | |||||
| Total operating expenses |
46,895 | 30,082 | ||||||
| Income (loss) from operations |
(2,320 | ) | 13,178 | |||||
| Other income (expense), net: |
||||||||
| Interest expense |
(44 | ) | (41 | ) | ||||
| Investment income |
787 | 310 | ||||||
| Foreign exchange gain |
8 | 733 | ||||||
| Gain on sale of bankruptcy trade claims |
— | 21,075 | ||||||
| Other income, net |
278 | 72 | ||||||
| Income (loss) before income taxes |
(1,291 | ) | 35,327 | |||||
| Income tax expense |
1,310 | 778 | ||||||
| Net income (loss) |
$ | (2,601 | ) | $ | 34,549 | |||
| Net income (loss) per share: |
||||||||
| Basic |
$ | (0.06 | ) | $ | 0.94 | |||
| Diluted |
$ | (0.06 | ) | $ | 0.92 | |||
| Weighted average common shares and common share equivalents: |
||||||||
| Basic |
43,081 | 36,652 | ||||||
| Diluted |
43,081 | 37,651 | ||||||
See notes to condensed consolidated financial statements.
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Twenty-six Weeks Ended |
||||||||
| December 24, 2004 |
December 26, 2003 |
|||||||
| Operating Activities: |
||||||||
| Net income (loss) |
$ | (2,601 | ) | $ | 34,549 | |||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||
| Depreciation and amortization |
5,484 | 5,949 | ||||||
| Acquired in-process technology charge |
1,850 | — &n | ||||||