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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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 25, 1999
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( ) 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
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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
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, $.10 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 September 21, 1999, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was $370,620,624.
As of September 21, 1999, the Registrant had 12,312,162 shares of Common Stock
outstanding.
Documents Incorporated by Reference:
1) 1999 Annual Report to Shareholders (Parts I, II and IV)
2) Proxy Statement dated September 21, 1999 (Part III)
PART I
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Item 1. Business
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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 Corporation's ability to provide complete
network solutions, the demand for network integrity, the trend toward more fiber
in the network, global demand for the Corporation's products and services,
statements relating to the Corporation's business strategy and the Corporation's
ability to integrate Convergence.com Corporation ("Convergence" or
"Convergence.com") and Silicon Valley Communications, Inc. ("SVCI" or "Silicon
Valley Communications"). Forward-looking statements represent the Corporation's
judgement regarding future events. Although the Corporation believes it has a
reasonable basis for these forward looking statements, the Corporation cannot
guarantee their accuracy and actual results may differ materially from those the
Corporation 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 Corporation's ability to develop new and enhanced products, if the AT&T
field trials with the Corporation's fiber optic products are not successful,
continued industry consolidation, the development of competing technology, the
Corporation's ability to achieve its strategic objectives and the Corporation's
ability to assimilate Convergence and SVCI. For additional information
concerning these and other important factors which may cause the Corporation's
actual results to differ materially from expectations and underlying
assumptions, please refer to the reports filed by the Corporation with the
Securities and Exchange Commission.
Introduction
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C-COR.net Corp. (the "Corporation) designs, manufactures and markets network
transmission products and provides services and support to information service
providers. The Corporation's principal customers are cable television system
operators who operate hybrid fiber coax ("HFC) networks for delivering video,
voice and data services. The Corporation's principal products are network
transmission equipment, including radio frequency ("RF") amplifiers and AM fiber
optic systems and nodes. The Corporation's services include network design,
activation, optimization, management and maintenance. The cable television
industry is undergoing both significant growth and change as a result of the
deregulation of the communications industry and demand by consumers for more and
better information services. The Corporation's strategy is to provide complete
network solutions to enable the Corporation's customers to meet the growing
demand for interactive broadband communication services, including high-speed
Internet access, telephony, and video on demand.
In fiscal years 1999 and 1998, the Corporation operated in one industry segment
broadly defined as the Electronics Distribution Products segment, which
represents the Corporation's continuing operations. In order to expand the
Corporation's product offering in the Electronics Distribution Products segment,
on September 17, 1999, the Corporation consummated a merger with SVCI, a
California corporation, whereby SVCI became a wholly-owned subsidiary of the
Corporation. This acquisition will enable the Corporation to broaden and
strengthen its network distribution product offering by adding advanced fiber
optic products to its existing RF and fiber optic equipment.
In addition, on July 9, 1999, the Corporation consummated a merger with
Convergence, whereby Convergence became a wholly-owned subsidiary of the
Corporation. The merger with Convergence will enable the Company to offer an
integrated package of network management and support services and products. As
a result of this merger with Convergence, in the next fiscal year, the
Corporation will operate in a business segment called Broadband Management
Services, which will provide Internet enabling technical services and support to
broadband operators in the United States.
In fiscal year 1997, the Corporation operated in two industry segments: the
Electronics Distribution Products segment and the Digital Fiber Optics
Transmission Products segment, which has been
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reported as a discontinued business segment. The Digital Fiber Optics
Transmission Products segment provided products for long-distance, point-to-
point video, voice and data signal transmission applications, primarily for
telephony, distance learning and other non-cable television markets. On July 10,
1997, the Corporation announced the discontinuance of its Digital Fiber Optics
Products segment in a nine-month wind-down process. See "Discontinued
Operations". In the remainder of this document, the discussions are based on the
Corporation's continuing operations, the Electronics Distribution Products
segment and Broadband Management Services segment, except where the context
indicates otherwise.
The Corporation's headquarters are in State College, Pennsylvania, and its
manufacturing facilities are in State College and Tipton, Pennsylvania, Santa
Clara, California, and Tijuana, Mexico. The Corporation operates a Network
Operations Center in Suwanee, Georgia, and administrative offices in Toronto,
Canada and Almere, The Netherlands. The Corporation also maintains 9 regional
sales offices throughout the United States and Asia.
Industry Overview
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Cable television system networks consist of a headend to receive television
signals, a transmission network to distribute the signal throughout the network
and connections from the transmission network to the subscribers. Historically,
these systems offered one-way only video service. Recently, the cable
television industry, like other parts of the communications industry, has been
undergoing substantial change as a result of:
. Deregulation that allows competition among communications companies,
including wireline and wireless telephone companies and 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
. Multiple technologies that attempt to address the need for high-speed local
loop connections, such as dense wave division multiplexing (DWDM), digital
subscriber lines (DSL) and local multipoint distribution service (LMDS).
For the cable television industry, these factors are resulting in:
. Upgrading existing cable networks to two-way, interactive broadband networks
to provide new services and to compete against other communications
technologies including DSL, LMD and direct broadcast satellite (DBS);
. Greater utilization of fiber optic technology, including DWDM into the
network;
. Consolidation among cable operators driven by the increased capital needs
of the system upgrades;
. Investments in cable operators by non-cable operators in an effort to compete
for both new and existing services and to provide a full range of
communication services; and
. Increased demand for more reliable cable networks resulting from the new
services being offered.
Strategy Overview
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The Corporation's comprehensive product line allows it to offer end-to-end
equipment for the three HFC network segments. The Corporation's Broadband
Management Services business segment provides its customers with a wide array of
services which work in conjunction with its equipment product line as well as
other product lines, such as network design, activation and performance
management.
The Corporation has been providing HFC distribution products and services and
customer support to cable operators for over 45 years. The Corporation's
customers include the largest cable multiple
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systems operators in the United States, many of the smaller domestic cable
operators, and several large cable operators internationally. As the
Corporation's customers upgrade their HFC networks to accommodate the Internet,
telephony and advanced digital services, its core business strategy is to
leverage its over 45 year legacy for quality and service, its strong customer
relationships and its extensive installed base of transmission equipment to
provide a full line of flexible, reliable and cost-effective network solutions.
The Corporation is seeking to implement this strategy through both internal
development of new products and services as well as acquisitions. Specific
aspects of the Corporation's strategy include:
Provide Comprehensive HFC Network Product Line. The Corporation's principal
product has been RF amplifiers which increase the power of an RF signal so that
it can be transmitted further in the network and used from "the headend to the
curb." The Corporation has undertaken initiatives to broaden its product line
to capture the additional investment being made by cable operators. First, in
December 1998, the Corporation introduced its NAVICOR family of optical node
products. Second, in July 1999, the Corporation acquired Convergence.com, which
allows the Corporation to resell headend and network equipment such as servers,
routers and cable modem termination systems that are required to transmit high-
speed data across cable networks. Third, in September, 1999, the Corporation
acquired Silicon Valley Communications which added advanced fiber optic headend
equipment and optical transmitters and receivers. The Corporation has delivered
these new products to enable next generation, fiber-rich, two-way HFC
architectures such as that being deployed in field trials by AT&T.
Leverage Extensive Installed Base of Equipment for Upgrade and Rebuild Sales.
The Corporation intends to leverage its large installed base of transmission
equipment in its customers' networks through upgrades, rebuilds and node size
reductions. Over the past four years the Corporation has shipped approximately
1 million RF amplifiers. The Corporation provides a more cost effective upgrade
path for its customers due to its ability to upgrade existing components for its
installed products base rather than requiring all new equipment. As the
Corporation's customers continue to upgrade their networks, the Corporation
believes that this path will provide it with a competitive advantage in
providing this equipment.
Provide Next Generation Network Management Services to Enhance Network
Integrity. The requirement for HFC network integrity and reliability has become
much greater as traffic and complexity increased and as networks become
increasingly used for critical communications such as telephony and electronic
commerce. However, current approaches to managing HFC networks focus on
monitoring limited, individual elements of the network such as the cable modem
or power supplies. Through the Corporation's network management software and
Network Operations Center, the Corporation can provide a comprehensive,
proactive view of the network from the set top box and/or modem to the headend.
The Corporation intends to continue developing its network management services
to address the various types of equipment and the unique characteristics of the
different information types that will be delivered over future HFC networks.
Deliver Total Network Solutions to Meet Cable Operator's Emerging Broadband
Needs. The Corporation believes that it is able to offer a broad network
solution to cable operators by delivering a comprehensive line of equipment and
the network services that these cable operators need to offer additional and
improved services to their subscribers. The Corporation is able to design the
network to enhance reliability, deliver the equipment and software, furnish
installation and activation services, and provide ongoing network management and
support services.
Increase International Sales. The Corporation is currently supplying products
and services to a number of large international customers, including cable
operators in Canada, Europe, Asia and Latin America. The Corporation intends to
invest in further developing its international distribution channels and in
providing localized versions of our products. With its broadened product and
service offering, the Corporation intends to supply comprehensive network
solutions to these and other operators in various international markets who
generally prefer to purchase products and services from suppliers offering a
more complete product line.
Products and Services
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HFC Products
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, the node and the RF plant. The Corporation offers a full range of
products for each of these segments.
Headend Equipment
The headend receives information from a satellite transmission, gateway to the
Internet or 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. The Corporation offers a broad range of headend equipment that features
advanced technology.
Nodes
The general function of the node in the HFC network architecture is to convert
information from optical signals to RF signals to prepare the information for
distribution to the home. The Corporation offers a family of node products
under the NAVICOR brand name that are upgradeable, scalable, modular and fully
integrated with our RF amplifiers. This allows RF amplifiers to be upgraded to
become nodes and simple nodes to be upgraded to become telecommunication nodes
with narrowcasting and redundant configurations. Narrowcasting refers to
tailoring content for certain subscribers by dedicating wavelengths to that
content. The optical components of the nodes are designed to fit into the lid
or cover of the housing so that upgrades from amplifiers to nodes are easily
accomplished by replacing the lid.
Recently, the Corporation introduced a new family of fiber optic nodes, the
MuxNode and the MiniNode, that are used in architecture designed for node sizes
of 50 to 100 homes
RF Plant
The RF plant is comprised of the products that transmit information between the
nodes and the residential users. These products are essentially RF amplifiers
that come in various configurations such as trunks, bridgers, and line
extenders. A trunk is used to handle a large amount of information in a network
in which the node is further from the home. A bridger splits the signal to send
it to a greater number of destinations. Line extenders move the information to
the home.
The following table summarizes our major products and their primary functions
and features:
Product
Segment Our Products Function and Features
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Headend Universal Chassis . Houses components of the headend equipment
. Features modular one and three rack design
. Compact design maximizes limited headend rack space
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1310nm and 1550nm Transmitters . Convert RF signals to laser modulated optical signals
. Incorporate predistortion and linearization technology
. Satisfy primary channel requirements for North America,
Latin America and parts of Asia and Europe
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Erbium Doped Fiber . Used to amplify optical signals
Amplifiers (EDFA) . Suitable for wave division multiplexing (WDM) and dense
wave division multiplexing (DWDM)
. Used for both analog and digital applications
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Forward Path Receiver . Converts optical signals to RF signals
. Features low noise contribution for clear signal conversion
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Return Path Transmitter . Conveys digital and video return path signals
. Used for data monitoring and other interactive applications
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Dual Return Path Receiver . Plug in module that includes two independent return path receivers
. Receives digital and video return path signals
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Nodes NAVICOR Quadrant Node/Bridger . Provides four optical transmitters and four optical receivers
. Includes a variety of reverse path transmitters for data,
telephony and video services
. Modular design increases operating flexibility
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NAVICOR Flexnet Nodes . Can be configured with single or dual optical receivers and
transmitters
. Available in cost effective version for less complex networks
Node Reverse Path . Available in Fabry-Perot and distributed feedback versions
Transmitters For analog and digital applications.
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RF Plant FlexNet Trunk . High performance, high capacity amplifier splitter
with three outputs
. Configurable for a variety of applications in the network
. Available in 750 and 862 MHz bandwidth versions
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FlexNet Terminating . Amplifier/splitter with two distribution outputs
Bridger . Configurable for a variety of applications in the network
. Available in 750 and 862 MHz bandwidth versions
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NAVICOR and FlexNet . Used to transmit information at the end of the line to
Line Extenders residential users
. Available in 750 and 862 MHz bandwidth versions
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I-Flex Amplifiers . European version of the FlexNet product line
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New HFC Products
MuxNode and MiniNode. The Corporation has introduced two new fiber optic
products, which have recently begun field trials with AT&T's LightWire(TM)
Neighborhood Broadband System in Salt Lake City, Utah. The Corporation believes
these two products, the MuxNode and the MiniNode, are key components of the next
generation of HFC architecture. This architecture provides for the broader
deployment of fiber into the network, thereby providing increased bandwidth and
greater network reliability. The MuxNode is an advanced, scalable, bi-
directional fiber optic network device. The MuxNode is used to transmit and
receive fiber optic signals to up to twelve MiniNodes. The MiniNode is a high
output receiver, which replaces many of the amplifiers in the network and is
designed to serve approximately 50 to 100 homes. The MiniNodes feature multiple
forward and reverse paths that support analog video, digital video, high-speed
data and telephone applications. This new architecture is designed to
facilitate high-speed, interactive broadband communications, that allow
operators to provide new and enhanced services to customers with greater network
reliability.
The MuxNode and MiniNode feature DWDM technology which allows multiple signal
wavelengths to be transmitted at the same item across the network. This
increases the volume of information that can be conveyed over the network. It
also allows cable operators flexibility in tailoring content for individual
subscribers by dedicating certain wavelengths to that content, for example,
video on demand.
Broadband Management Services
The Corporation also offers a broad array of services to assist our customers in
operating reliable networks with high integrity. These services include design,
activation, network management and optimization, and ongoing support, repair and
maintenance.
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Network Design. Network design involves providing a customized plan for high-
reliability and cost-effective HFC network upgrades and rebuilds. The
customized plan takes into account the current state of the network and the
target applications including such factors as channel capacity, two-way
requirements, performance specifications, powering needs, high-speed data
transmission, Internet access and network management options. The plan details
the quantity, type and configuration of equipment required in the headend as
well as throughout the remainder of the network. Deliverables include design
services, highly accurate maps, bill-of-materials and custom drafting.
Activation Services. Activation services are required for a newly installed or
upgraded network to become operational. They include activation/energizing,
sweep and balance and proof of performance testing. The purpose of these
services is to identify and correct any problems that may exist within the newly
configured system and to validate that the construction is sound and the system
is operating optimally.
Network Management Software. The Corporation's network management software
offering, CNM System 2, is a third generation product that automatically
identifies new units in the network and receives signals from intelligent agents
that provide early notice of equipment and other network related problems. CNM
System 2 is based on industry standards, which facilitate use with numerous
network elements and maximize interoperability with other software applications.
The Corporation's NAVICOR and I-Flex product lines are fully integrated with CNM
System 2.
The Corporation has implemented additional network management software in its
Network Operations Center in Suwanee, Georgia. This software facilitates
proactive monitoring and management of networks by identifying usage trends,
pinpointing customers that consume large amounts of bandwidth for special
billing, and providing real-time fault detection and provisioning advice. The
Center's software collects data and other information from cable modems
installed in the home thereby increasing the amount and reliability of data
available to proactively manage the network. The Corporation is currently
working to integrate its CNM System 2 software with the Network Operations
Center software to provide a more comprehensive network management product both
for use in its Network Operations Center and for licensing to customers.
Network Management Services. Through its Network Operations Center, the
Corporation is currently providing a number of network management services to
smaller cable operators. These services include server management, RF
technician help-desk support and end-user help-desk support as well as the basic
monitoring the overall network integrity. Server management monitors the
servers and routers installed in the customer headend that control the flow of
high-speed data traffic. This service includes remote backups, problem
diagnosis and secondary service. RF technician help-desk support uses the cable
modems as telemetry devices and aids the operator in troubleshooting, problem
diagnosis and maintenance of the RF cable plant. End-user help-desk services
take inbound calls from cable company subscribers with problems and questions on
Internet service and browser network applications.
Network Operations Center Consulting and System Integration Services. The
Corporation provides program management, engineering and technical resources to
cable operators to assist them in the design, development, implementation and
operation of their own network operations centers. Typical deliverables during
the planning and design phase include the site survey, business process
assessment, services architecture planning, customer capability assessment,
concept of operations document, systems architecture document and detailed bill-
of-materials. The Corporation will also procure and install all equipment and
software, including third party as well as the Corporation's equipment and
software. The Corporation offers customized software development to integrate
the network management software with other customer applications such as
billing, dispatching and geographic information systems.
Equipment Services Center. The Corporation's Equipment Service Center provides
repair and maintenance services on transmission equipment from all
manufacturers. Repair services include documentation of parts, labor and
problem identification. Upgrade services include such activities as bandwidth
increases and frequency changes.
Customers
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During the past fiscal year, the Corporation's cable television customers have
included almost all of the largest system operators in the United States. The
Corporation's largest customers during the fiscal year ended June 25, 1999, were
Time Warner and AT&T accounting for 28% and 17%, respectively, of net sales. The
Corporation's largest customer during the fiscal year ended June 26, 1998, was
Time Warner Cable, which accounted for 31% of net sales. The Corporation's
largest customer during the fiscal year ended June 27, 1997, was Time Warner
Cable, which accounted for 36% of net sales. No other customers accounted for
10% or more of net sales during fiscal years 1997, 1998, and 1999, respectively.
Sales and Distribution
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Sales efforts are conducted from the Corporation's headquarters; from offices in
Europe; from 10 regional sales offices located throughout the United States,
Canada and Asia; and through numerous distributors around the world.
The Corporation sells its products and services in the United States through its
direct sales force, which is geographically organized. The Corporation
approaches its customers at both the corporate level and in their individual
cable systems. A highly qualified technical staff supports the Corporation's
sales force. They work closely with customers to design systems, develop
technical proposals and assist with installation and post-sale support.
International sales in Canada, Europe, Asia and Latin America are made through
the Corporation's direct sales force and through distributors.
Additionally, the Corporation provides 24 hours per day, 7 days per week,
technical support, both directly and through distributors, as well as training
for customers and distributors, as required, both in the Corporation's
facilities and on-site.
The Corporation's marketing organization develops strategies for product lines
and, in conjunction with the sales force, identifies evolving technical and
application needs of customers so that product development resources can be most
effectively and efficiently deployed to meet anticipated product requirements.
The marketing organization is also responsible for demand forecasting and
general support of the sales force, particularly at major accounts. The
Corporation has many programs in place to heighten industry awareness of the
Corporation and its products, including participation in technical conferences,
publication of articles in industry journals and exhibiting at trade shows.
For the fiscal year ended June 25, 1999, the Corporation's international sales
represented 11% of net sales. In the fiscal years ended June 26, 1998, and June
27, 1997, international sales were 21% and 19%, respectively, of net sales. See
the discussion of segment information in the Corporation's 1999 Annual Report to
Shareholders, Note R, incorporated herein by reference.
At June 25, 1999, the Corporation's backlog of orders was $52.8 million. At June
26, 1998, the Corporation's backlog of orders was $24.0 million, and at June 27,
1997, it was $34.9 million. For additional information regarding backlog, refer
to Management's Discussion and Analysis of Financial Condition and Results of
Operation incorporated herein by reference to page 17 of the Registrant's 1999
Annual Report to Shareholders.
Research and Product Development
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The Corporation operates in an industry that is subject to rapid changes in
technology. The Corporation's ability to compete successfully depends in large
part upon its ability to anticipate such changes. Accordingly, the Corporation
is engaged 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. Research and development
activities for the three major product groups are conducted at the Corporation's
headquarters. The Corporation has an interdepartmental team, which assigns
product development priorities. During the past fiscal year, research and
product development expenditures were primarily directed at expanding the
Corporation's AM fiber optic technology, network management systems and RF
amplifier line. The
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Corporation 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 the fiscal years ended June 25, 1999, June 26, 1998, and June 27, 1997,
the Corporation spent approximately $9,038,000, $7,459,000, and $5,681,000,
respectively, on research and development related to AM fiber optic systems, RF
distribution equipment and network management. Anticipated product development
initiatives focused on AM fiber optics, network management and other technology
areas are expected to result in increased research and development expense in
future years. No research and product development expenditures mentioned above
have been capitalized.
Competition
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The broadband communications markets are dynamic and highly competitive,
requiring of those companies that compete in these markets substantial
resources, skilled and experienced personnel and a capability to anticipate and
capitalize on change. The Corporation competes with other companies in each of
the markets in which it operates including, General Instrument, Scientific-
Atlanta, ADC Telecommunications, Antec International and Harmonics, some of
which are large publicly traded companies that may have greater financial,
technical and marketing resources than we do.
The Corporation's products are marketed with emphasis on their quality and are
generally priced competitively with other manufacturers' product lines. Product
reliability and performance, superior and responsive customer service, breadth
of product offering and an enhanced warranty program are several of the key
criteria for competition. Other bases for competition include pricing and
technological innovation.
There are several competing equipment vendors selling network products in the
United States, a few of which have greater sales of similar equipment than the
Corporation. The Corporation, however, believes it offers a broader product line
in the RF distribution amplifier segment of the market, along with a growing
number of AM fiber optic and network management products.
Industry sources estimate that U.S. cable systems pass 97% of TV households in
the United States and in excess of 65% of those households are subscribers. In
face of this high consumer market penetration, there are alternative methods of
distributing entertainment video or information services to subscribers. All of
the methods compete, to a limited extent, with conventional Cable TV services.
The alternative distribution technologies include off-air broadcast service,
Multipoint Multichannel Distribution Service (MMDS), LMDS, Satellite Master
Antenna Television (SMATV), DSL and DBS.
Employees
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The Corporation had approximately 1,947 employees as of September 20, 1999, of
which approximately 68% were engaged in manufacturing, inspection and quality
control activities. The remainder were engaged in executive, administrative,
sales, product development, research and technical customer services activities.
The technical staff includes 160 engineers with baccalaureate or more advanced
degrees and an additional 315 persons with at least two years of technical
college or military education equivalent to a two-year degree.
Suppliers
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The Corporation closely monitors supplier delivery performance and quality and
employs 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 the
Corporation as partners in the supply function. Typical items purchased are die
cast aluminum housings, RF hybrids, printed circuit boards, fiber optic laser
transmitter assemblies and standard electronic components. Some components,
subassemblies and modules necessary for the manufacture and integration of our
product are obtained from a sole supplier or a limited group of suppliers. The
reliance on sole or limited suppliers, particularly foreign suppliers, involves
several risks, including a potential inability to obtain an adequate supply of
required components or subassemblies and reduced control over pricing, quality
and timely delivery of components. The Corporation has experienced no
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significant difficulties to date in obtaining adequate quantities of raw
materials and component parts.
The Corporation uses in-house vendor supply relationships to gain access to key
parts needed in the manufacturing process on a "just-in-time" basis. The
Corporation has implemented a number of in-house vendor supply relationships to
date and will continue to establish such relationships in the future in order to
decrease vendor lead times and reduce on-hand inventory.
Business Combinations
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On July 9, 1999, the Corporation consummated a merger with Convergence, a
Georgia corporation, whereby Convergence became a wholly-owned subsidiary of the
Corporation. The merger will enable the Corporation to offer an integrated
package of network management and support services and products. The expertise
of Convergence in enabling high-speed digital data transmission and Internet
access over HFC networks by providing network design, activation and support
services will augment the Corporation's existing technical service capabilities.
In the merger, each outstanding share of common stock of Convergence was
converted into one share of the Corporation's common stock for an aggregate of
1,433,323 shares of the Corporation's common stock. Each outstanding warrant to
acquire Convergence common stock was converted into a warrant to acquire the
Corporation's common stock for an aggregate of warrants to acquire 366,930
shares of the Corporation's common stock. The merger was accounted for under the
pooling-of-interests method of accounting.
On September 17, 1999, the Corporation consummated a merger with SVCI, a
California corporation, whereby SVCI became a wholly-owned subsidiary of the
Corporation. This acquisition will enable the Corporation to broaden and
strengthen its network distribution product offering by adding advanced fiber
optic products to its existing radio frequency (RF) and fiber optic products.
In particular, the product offering will be strengthened with respect to head-
end fiber optic equipment. As consideration in the merger, each outstanding
share of common stock of SVCI was converted into the right to receive .094534
shares of the Corporation's common stock for an aggregate of 1,542,215 shares of
the Corporation's common stock (subject to reduction pursuant to certain escrow
arrangements). Outstanding stock options and warrants to acquire SVCI common
stock were converted into stock options and warrants to acquire the
Corporation's common stock, using the same conversion ratio (with appropriate
adjustment to the exercise price) for an aggregate of stock options and warrants
to acquire 387,227 shares of the Corporation's common stock. The merger was
accounted for under the pooling-of-interests method of accounting.
For additional information on Business Combinations, see the subsequent event
discussion in the Corporation's 1999 Annual Report to Shareholders, Note S,
incorporated herein by reference.
DISCONTINUED OPERATIONS
Digital Fiber Optics Transmission Products Segment
- --------------------------------------------------
On July 10, 1997, the Corporation announced the discontinuance of its Digital
Fiber Optics Transmission Products segment in a nine-month, wind-down process.
The Corporation completed the wind-down of this operation as of March 1998. The
Digital Fiber Optics Transmission Products segment provided products for long-
distance, point-to-point video, voice and data signal transmission applications,
primarily for telephony, distance-learning and other non-CATV markets.
Customers were primarily telephone companies, major broadcast companies and
educational institutions. The decision to discontinue this segment was based on
an assessment of the potential return on continued funding of product
development for the Corporation's proprietary digital technology versus other
opportunities for investments in the Corporation's core business, especially AM
fiber optics technology.
Research and development expenditures for this segment were $4,005,000 in fiscal
year 1997.
This business segment has been accounted for as a discontinued business segment,
and its results have been excluded from continuing operations for all periods
presented in the Corporation's consolidated financial statements, incorporated
herein by reference to pages 22 through 25 of the Registrant's 1999 Annual
Report to Shareholders.
10
Additional information regarding discontinued operations and segment performance
is incorporated by reference to Notes B (Discontinued Operations) and R (Segment
Information) on pages 28, 29, and 37 of the Registrant's 1999 Annual Report to
Shareholders.
Item 2. Properties
- -------------------
The Corporation operates the following principal facilities:
Approximate (O)Owned
Location Principal Use Square Feet (L)Leased
- ----------------------------- ------------------------- ----------- ---------
State College, Pennsylvania Administrative Offices
and Manufacturing 133,000 O
Tipton, Pennsylvania Manufacturing 45,000 O
Reedsville, Pennsylvania(1) Manufacturing 60,000 O
Tijuana, Mexico Manufacturing 61,900 L
Santa Clara, California(2) Development Engineering
and Manufacturing 24,500 L
Suwanee, Georgia(3) Network Operations Center 13,650 L
Almere, The Netherlands Administrative Offices 5,100 L
(1) On June 25, 1998, the Corporation announced its decision to close its
manufacturing plant located in Reedsville, Pennsylvania, in order to reduce
costs and improve productivity and asset utilization. The Corporation had a
Lease/Option to Purchase Agreement with the Mifflin County Industrial
Development Corporation for the building and improvements located in Reedsville,
Pennsylvania. On August 10, 1998, the Corporation purchased the facility, which
is being held for sale.
(2) On September 17, 1999, the Corporation consummated its merger with SVCI. As
a result of the merger, the Corporation operates a leased facility in Santa
Clara, California.
(3) On July 9, 1999, the Corporation consummated its merger with Convergence.
As a result of the merger, the Corporation operates a leased facility in
Suwanee, Georgia.
The Corporation has been approved for ISO 9001 registration at its 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 the Corporation's
reputation as a high-quality, global provider of transmission electronics.
Item 3. Legal Proceedings
- --------------------------
On August 28, 1998, the Corporation filed a complaint against Rockwell
International Corp. ("Rockwell") in the United States District Court for the
Middle District of Pennsylvania. The complaint was served on Rockwell on
September 11, 1998. The complaint alleges breach of contract, breach of implied
warranty and breach of the implied covenant of good faith and fair dealing by
Rockwell in connection with the development by Rockwell and sale to the
Corporation of an application-specific integrated circuit ("ASIC") to be used by
the Corporation in the manufacture of high-speed digital fiber optic receivers
and transmitters. The ASIC was a component used in products sold by the
Corporation as part of its Digital Fiber Optics
11
Draft
Transmission Products segment, which has been discontinued. The lawsuit seeks
damages of not less than $10,000,000.
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 25, 1999.
Executive Officers of the Registrant
- ------------------------------------
All executive officers of the Corporation are elected annually at the Annual
Meeting of the Board of Directors (which is normally held on the date of the
Annual Meeting of Shareholders of the Corporation) 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 the Corporation's executive officers, including the age,
present position, and business experience during the past five years.
Name Age Position/Experience
---- --- ------------------------------------------------
Richard E. Perry 69 Chairman since June 1986; Chief Executive
Officer from July 1985 to August 1996, and from
March 1998 to July 1998; President from July
1985 through December 1992.
David A. Woodle 43 President and Chief Executive Officer since July
20, 1998. 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; VP, Strategic
Programs and TMS, Raytheon E-Systems, HRB
Systems from October 1990 to June 1996.
David R. Ames 50 Sr. Vice President - Strategic Development and
Corporate Marketing since July 1999; Chairman,
President, and Chief Executive Officer and co-
founder, Convergence.com Corporation from May
1994 to July 1999.
Mary G. Beahm 39 Vice President - Human Resources since November
1998; Human Resources Consultant, Westinghouse
Electric Corporation from August 1987 to
November 1998.
David J. Eng 46 Sr. Vice President - Worldwide Sales since March
1997; Vice President-Sales, North, Central and
South America from August 1996 to March 1997;
Vice President-Sales & Marketing from August
1994 to August 1996. Director, Regional
Telephony Sales, Scientific Atlanta, Inc. from
March 1993 to July 1994; Regional Sales Manager,
Scientific Atlanta, Inc. from April 1985 to
February 1993.
Lawrence R. Fisher, Jr. 49 Vice President - Science and Technology since
July 1999. Vice President - Engineering from
August 1996 to July 1999; Director, RF
Engineering Product Development from June 1995
to July 1996; Manager, RF Engineering from June
1994 to May 1995. Director of Engineering,
Calan, Inc. from January 1993 to May 1994.
William T. Hanelly 43 Vice President - Finance, Secretary and
Treasurer since October 1998; Division
Controller, Raytheon E-Systems from May 1998 to
October 1998; Vice President-Finance, HRB
Systems from June 1994 to May 1998.
12
Draft
Chris A. Miller 46 Vice President - Services since October 1998;
Vice President -Finance, Secretary and Treasurer
from July 1995 to October 1998; Controller,
Planning Manager and Assistant Secretary from
February 1993 to July 1995; Controller and
Assistant Secretary from February 1987 to
February 1993.
Donald F. Miller 57 Vice President - Operations & Manufacturing since
August 1995; Plant Manager from September 1987 to
August 1995.
Gerhard B. Nederlof 51 Sr. Vice President - Broadband Management
Services since July 1999, 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; Vice President-
International from January 1992 to August 1996.
Managing Director of DataCable B.V. from November
1981 to January 1992.
Terry L. Wright 49 Sr. Vice President-Technology since July 1999;
Chief Technology Officer and co-founder,
Convergence.com Corporation from May 1994 to July
1999.
PART II
-------
Item 5. Market for the Registrant's Common Stock and Related Stockholder
- -------------------------------------------------------------------------
Matters
- -------
The information required by this item is incorporated herein by reference to
page 43 of the Registrant's 1999 Annual Report to Shareholders under the caption
"Stock Listing."
There were no sales of unregistered securities during fiscal year 1999.
Item 6. Selected Financial Data
- --------------------------------
The information required by this item is incorporated herein by reference to
page 3 of the Registrant's 1999 Annual Report to Shareholders.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- -------------
The information required by this item is incorporated herein by reference to
pages 16 through 21 of the Registrant's 1999 Annual Report to Shareholders.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
- --------------------------------------------------------------------
Not Applicable.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
The following consolidated financial statements are filed as part of this
report.
(1) The information with respect to Consolidated Financial Statements of C-
COR.net Corp.(without reflecting the pooling-of-interest combinations
with Convergence and SVCI), required by this item is incorporated
herein by reference to pages 22 through 41 of the Registrant's 1999
Annual Report to Shareholders.
Item 9. Changes and Disagreements on Accounting and Financial Disclosure
- -------------------------------------------------------------------------
13
Draft
None
PART III
--------
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
The information with respect to Directors required by this item is incorporated
herein by reference to pages 3 and 4 of the Registrant's Proxy Statement dated
September 21, 1999.
The information with respect to Executive Officers required by this item is set
forth in Part I of this report.
To the Corporation's knowledge, based solely on a review of the copies of such
reports furnished to the Corporation and written representations that no other
reports were required during the fiscal year ended June 25, 1999, its officers,
directors, and ten-percent shareholders complied with all applicable Section
16(a) filing requirements, with the exception of those filings listed on page 20
of the Registrant's Proxy Statement dated September 21, 1999, incorporated by
reference herein.
Item 11. Executive Compensation
- --------------------------------
The information required by this item is incorporated herein by reference to
pages 11 through 19 of the Registrant's Proxy Statement dated September 21,
1999.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
The information required by this item is incorporated herein by reference to
pages 8 and 10 of the Registrant's Proxy Statement dated September 21, 1999.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
The information related to transactions or relationships requiring disclosure
under Regulation S-K, Item 404, during the fiscal year is incorporated herein
by reference to page 20 of the Registrant'' Proxy Statement dated September 21,
1999.
PART IV
-------
Item 14. Exhibits, Financial Statements and Reports on Form 8-K
- ----------------------------------------------------------------
(a) The following documents are filed as part of this report:
14
Draft
(1) As indicated in Item 8 of Part II, the following financial statements
of the Registrant included in the Registrant's 1999 Annual Report to
Shareholders for the year ended June 25 1999, are incorporated by
reference to pages 22 through 41 of the Registrant's Annual Report to
Shareholders.
Consolidated Balance Sheets -- Years ended June 25, 1999, and June 26,
1998.
Consolidated Statements of Operations -- Years ended June 25, 1999,
June 26, 1998, and June 27, 1997.
Consolidated Statements of Cash Flows -- Years ended June 25, 1999,
June 26, 1998, and June 27, 1997.
Consolidated Statements of Shareholders' Equity -- Years ended June
25, 1999, June 26, 1998, and June 27, 1997.
Notes to Consolidated Financial Statements.
Report of KPMG LLP.
(2) The following financial statement schedule of the Registrant is filed
as a part of this report:
Schedule II -- Valuation and Qualifying Accounts
Report of KPMG LLP
Schedules, other than the one listed above, have been omitted because
they are not applicable or the required information is shown in the
consolidated financial statements or notes thereto.
(3) Exhibits
NUMBER DESCRIPTION OF DOCUMENTS
------ ------------------------
(2) (a) Agreement and Plan of Merger dated May 15, 1999 among C-COR
Electronics, Inc., C-COR Acquisition Corp. and Convergence.com
Corporation (incorporated by reference to the Registrant's 8-K
filed on July 26, 1999).
(2) (b) Agreement and Plan of Merger dated July 13, 1999 among C-COR.net
Corp., C-COR.net Acquisition Corp. and Silicon Valley
Communications, Inc.
(3) (a) Amended and Restated Articles of Incorporation of Registrant (the
"Articles of Incorporation") filed with the Secretary of State of
the Commonwealth of Pennsylvania on February 19, 1981.
(3) (b) Amendment to the Articles of Incorporation of Registrant filed with
the Secretary of State of the Commonwealth of Pennsylvania on
November 14, 1986.
(3) (c) Amendment to the Articles of Incorporation filed with the Secretary
of State of the Commonwealth of Pennsylvania on September 21, 1995.
(3) (d) Amendment to the Articles of Incorporation filed with the Secretary
of State of the Commonwealth of Pennsylvania on July 9, 1999.
15
Draft
(3) (e) Bylaws of Registrant, as amended through August 17, 1999.
(4) (a) Specimen of Common Stock Certificate (incorporated by reference to
Exhibit 4 to Amendment No. 1 of Form S-1 Registration Statement,
File No. 2-70661).
(4) (b) Rights Agreement, dated as of August 17, 1999, between C-COR.net
Corp. and American Stock Transfer and Trust Co, as Rights Agent,
including the Form of Statement with Respect to Shares as Exhibit
A, the Form of Right Certificate as Exhibit B, and the Summary of
Rights as Exhibit C (incorporated by Reference to Registrant's 8-K
filed on August 30, 1999.
(10) (a) Deferred Compensation Plan between the Registrant and Richard E.
Perry dated December 6, 1989, (incorporated by reference to Exhibit
(10) (y) to the Registrant's Form 10-K for the year ended June 30,
1990, Securities and Exchange Commission File No. 0-10726).
(10) (b) 1989 Non-Employee Directors' Non-Qualified Stock Option Plan
(incorporated by reference to Exhibit 28 to Form S-8 Registration
Statement, File No. 33-35208).
(10) (c) Indemnification Agreement dated February 3, 1992, between the
Registrant and Gerhard B. Nederlof (incorporated by reference to
Exhibit (10) (gg) to the Registrant's Form 10-K for the year ended
June 26, 1992, Securities and Exchange Commission File No. 0-
10726).
(10) (d) Supplemental Retirement Plan Participation Agreement dated April
20, 1993, between the Registrant and Gerhard B. Nederlof
(incorporated by reference to Exhibit (10) (bb) to the Registrant's
Form 10-K for the year ended June 25, 1993, Securities and Exchange
Commission File No. 0-10726).
(10) (e) Change of Control Agreement dated May 21, 1993, between the
Registrant and Gerhard B. Nederlof (incorporated by reference to
Exhibit (10) (gg) to the Registrant's Form 10-K for the year ended
June 25, 1993, Securities and Exchange Commission File No. 0-
10726).
(10) (f) Change of Control Agreement dated August 22, 1994, between the
Registrant and David J. Eng (incorporated by reference to Exhibit
(10) (oo) to the Registrant's Form 10-K for the year ended June 24,
1994, Securities and Exchange Commission File No. 0-10726).
(10) (g) Form of Indemnification Agreement dated August 22, 1994, between
the Registrant and David J. Eng (incorporated by reference to
Exhibit (10) (pp) to the Registrant's Form 10-K for the year ended
June 24, 1994, Securities and Exchange Commission File No.
0-10726).
(10) (h) Supplemental Retirement Plan Participation Agreement dated August
22, 1994, between the Registrant and David J. Eng (incorporated by
reference to Exhibit (10) (qq) to the Registrant's Form 10-K for
the year ended June 24, 1994, Securities and Exchange Commission
File No. 0-10726).
(10)(i) Change of Control Agreement dated May 23, 1995, between the
Registrant and Joseph E. Zavacky (incorporated by reference to
Exhibit (10) (gg) to the Registrant's Form 10-K for the year ended
June 30, 1995, Securities and Exchange Commission File No.
0-10726).
(10) (j) Form of Indemnification Agreement dated May 23, 1995, between the
Registrant and Joseph E. Zavacky (incorporated by reference to
Exhibit
16
Draft
(10) (hh) to the Registrant's Form 10-K for the year ended June 30,
1995, Securities and Exchange Commission File No. 0-10726).
(10) (k) Supplemental Retirement Plan Participation Agreement dated May 22,
1995, between the Registrant and Chris A. Miller (incorporated by
reference to Exhibit (10) (ii) to the Registrant's Form 10-K for
the year ended June 30, 1995, Securities and Exchange Commission
File No. 0-10726).
(10) (l) Change of Control Agreement dated May 22, 1995, between the
Registrant and Chris A. Miller (incorporated by reference to
Exhibit (10) (jj) to the Registrant's Form 10-K for the year ended
June 30, 1995, Securities and Exchange Commission File No. 0-
10726).
(10) (m) Form of Indemnification Agreement dated May 22, 1995, between the
Registrant and Chris A. Miller (incorporated by reference to
Exhibit (10) (kk) to the Registrant's Form 10-K for the year ended
June 30, 1995, Securities and Exchange Commission File No. 0-
10726).
(10) (n) Supplemental Retirement Plan Participation Agreement dated August
24, 1995, between the Registrant and Donald F. Miller (incorporated
by reference to Exhibit (10) (ll) to the Registrant's Form 10-K for
the year ended June 30, 1995, Securities and Exchange Commission
File No. 0-10726).
(10) (o) Change of Control Agreement dated August 24, 1995, between the
Registrant and Donald F. Miller (incorporated by reference to
Exhibit (10) (mm) to the Registrant's Form 10-K for the year ended
June 30, 1995, Securities and Exchange Commission File No.
0-10726).
(10) (p) Form of Indemnification Agreement dated August 24, 1995, between
the Registrant and Donald F. Miller (incorporated by reference to
Exhibit (10) (nn) to the Registrant's Form 10-K for the year ended
June 30, 1995, Securities and Exchange Commission File No. 0-
10726).
(10) (q) Registrant's Retirement Savings and Profit Sharing Plan as Amended
July 1, 1989, and including amendments through April 19, 1994
(incorporated by reference to Exhibit 99.B14 to Form S-8
Registration Statement, File No. 333-02505).
(10) (r) Supplemental Retirement Plan Participation Agreement dated August
13, 1996, between the Registrant and Lawrence R. Fisher, Jr.
(incorporated by reference to Exhibit (10) (aa) to the Registrant's
Form 10-K for the year ended June 28, 1996, Securities and Exchange
Commission File No.0-10726).
(10) (s) Change of Control Agreement dated August 13, 1996, between the
Registrant and Lawrence R. Fisher, Jr. (incorporated by reference
to Exhibit (10) (bb) to the Registrant's Form 10-K for the year
ended June 28, 1996, Securities and Exchange Commission File No.
0-10726).
(10) (t) Form of Indemnification Agreement dated August 13, 1996, between
the Registrant and Lawrence R. Fisher, Jr. (incorporated by
reference to Exhibit (10) (cc) to the Registrant's Form 10-K for
the year ended June 28, 1996, Securities and Exchange Commission
File No. 0-10726).
(10) (u) Amended and Restated Employment Agreement dated October 16, 1995,
between the Registrant and Richard E. Perry (incorporated by
reference to Exhibit
17
Draft
(10) (dd) to the Registrant's Form 10-K for the year ended June
28, 1996, Securities and Exchange Commission File No. 0-10726).
(10) (v) Registrant's Supplemental Executive Retirement Plan effective
May 1, 1996 (incorporated by reference to Exhibit (10) (ff) to
the Registrant's Form 10-K for the year ended June 28, 1996,
Securities and Exchange Commission File No. 0-10726).
(10) (w)(i) 1988 Stock Option Plan (incorporated by reference to Exhibit
(10) (kk) (i) to the Registrant's Form 10-K for the year ended
June 28, 1996, Securities and Exchange Commission File No. 0-
10726).
(10) (w)(ii) Amendment to 1988 Stock Option Plan (incorporated by reference
to Exhibit (10) (kk) (ii) to the Registrant's Form 10-K for the
year ended June 28, 1996, Securities and Exchange Commission
File No. 0-10726).
(10) (x)(i) 1992 Stock Purchase Plan (incorporated by reference to Exhibit
(10) (ll) (i) to the Registrant's Form 10-K for the year ended
June 28, 1996, Securities and Exchange Commission File No. 0-
10726).
(10) (x)(ii) Amendment to 1992 Stock Purchase Plan (incorporated by reference
to Exhibit (10) (ll) (ii) to the Registrant's Form 10-K for the
year ended June 28, 1996, Securities and Exchange
Commission File No. 0-10726).
(10) (y) Amended and Restated Employment Agreement dated July 21, 1997,
between the Registrant and Richard E. Perry (incorporated by
reference to Exhibit (10) (nn) to the Registrant's Form 10-K for
the year ended June 27, 1997, Securities and Exchange Comission
File No. 0-10726).
(10) (z) Amended and Restated Employment Agreement dated July 30, 1997,
between the Registrant and Gerhard B. Nederlof (incorporated by
reference to Exhibit (10) (oo) to the Registrant's Form 10-K for
the year ended June 27, 1997, Securities and Exchange Comission
File No. 0-10726).
(10) (aa) Note and Security Agreement effective December 30, 1997, between
the Registrant and Mellon Bank, N.A. (incorporated by reference
to Exhibit (10) (a) to the Registrant's Form 10-Q for the
thirteen-week period ended December 26, 1997, Securities and
Exchange Commission File No.0-10726).
(10) (bb) Supplement to Note and Security Agreement effective December 30,
1997, between the Registrant and Mellon Bank, N.A. (incorporated
by reference to Exhibit (10) (b) to the Registrant's Form 10-Q
for the thirteen-week period ended December 26, 1997, Securities
and Exchange Commission File No. 0-10726).
(10) (cc) Revolving Line of Credit Agreement effective December 30, 1997,
between the Registrant and Mellon Bank, N.A. (incorporated by
reference to Exhibit (10) (c) to the Registrant's Form 10-Q for
the thirteen-week period ended December 26, 1997, Securities and
Exchange Commission File No. 0-10726).
(10) (dd) Supplement to Revolving Line of Credit Agreement effective
December 30, 1997, between the Registrant and Mellon Bank, N.A.
(incorporated by reference to Exhibit (10) (d) to the
Registrant's Form 10-Q for the thirteen-week period ended
December 26, 1997, Securities and Exchange Commission File No.
0-10726).
18
Draft
(10) (ee) Supplemental Retirement Plan Participation Agreement dated
February 23, 1998, between the Registrant and Lynn D. Hutcheson
(incorporated by reference to Exhibit (10) (oo) to the
Registrant's Form 10-K for the year ended June 26, 1998,
Securities and Exchange Comission File No. 0-10726).
(10) (ff) Employment Agreement dated June 22, 1998, between the Registrant
and David A. Woodle (incorporated by reference to Exhibit (10)
(rr) to the Registrant's Form 10-K for the year ended June 26,
1998, Securities and Exchange Comission File No. 0-10726).
(10) (gg) Fiscal Year 1999 Profit Incentive Plan (incorporated by
reference to Exhibit (10) (ss) to the Registrant's Form 10-K for
the year ended June 26, 1998, Securities and Exchange Comission
File No. 0-10726).
(10) (hh) C-COR Electronics, Inc. Incentive Plan (incorporated by
reference to Exhibit (10) (tt) to the Registrant's Form 10-K for
the year ended June 26, 1998, Securities and Exchange Comission
File No. 0-10726).
(10) (ii) Supplemental Retirement Plan Participation Agreement dated
November 9, 1998, between the Registrant and Mary G. Beahm.
(10) (jj) Change of Control Agreement dated November 9, 1998, between the
Registrant and Mary G. Beahm.
(10) (kk) Form of Indemnification Agreement dated November 9, 1998,
between the Registrant and Mary G. Beahm.
(10) (ll) Supplemental Retirement Plan Participation Agreement dated
October 19, 1998, between the Registrant and William T. Hanelly.
(10) (mm) Change of Control Agreement dated October 19, 1998, between the
Registrant and William T. Hanelly.
(10) (nn) Form of Indemnification Agreement dated October 19, 1998,
between the Registrant and William T. Hanelly.
(10) (oo) Credit Agreement dated August 9, 1999, between the Registrant
and Broadband Capital Corporation as borrowers, and The Banks
Parties Hereto From Time to Time and Mellon Bank, N.A. as Agent.
(10) (pp) Fiscal Year 2000 Profit Incentive Plan (PIP).
(10) (qq) Amended and Restated Employment Agreement dated September 14,
1999 between the Registrant and David A. Woodle.
(10) (rr) Employment Agreement dated July 9, 1999 between the Registrant
and David R. Ames.
(10) (ss) Employment Agreement dated July 9, 1999 between the Registrant
and Terry L. Wright.
(11) Statement re Computation of Earnings Per Share.
(13) Annual Report to Shareholders for the year ended June 25, 1999.
(21) Subsidiaries of the Registrant.
(23) (a) Consent of Independent Auditors of C-COR.net Corp.
19
Draft
(23) (b) Consent of Independent Auditors of Silicon Valley
Communications, Inc.
(27) Financial Data Schedule.
(b) Reports on Form 8-K filed in the fourth quarter of the fiscal year 1999:
On May 24, 1999, the Registrant filed a Form 8-K with the Securities and
Exchange Commission reporting that it had entered into an Agreement and
Plan of Merger with Convergence.com Corporation ("Convergence"), under
which Convergence will become a wholly-owned subsidiary of the
Corporation.
On May 26, 1999, the Registrant filed a Form 8-K with the Securities and
Exchange Commission reporting that it had executed a letter of intent to
acquire Silicon Valley Communication, Inc.
(c) Exhibits: See (a) (3) above.
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
C-COR.net Corp.
(Registrant)
September 23, 1999 /s/ DAVID A. WOODLE
---------------------------
David A. Woodle, President and
Chief Executive Officer
(principal executive officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on the 23rd day of September 1999.
/s/ RICHARD E. PERRY /s/ JOHN J. OMLOR
- ------------------------------------ -------------------------------
Richard E. Perry, Director, Chairman John J. Omlor, Director
/s/ DONALD M. COOK, JR. /s/ FRANK RUSINKO JR.
- ------------------------------------ -------------------------------
Donald M. Cook, Jr., Director Frank Rusinko, Jr., Director
/s/ I.N. RENDALL HARPER, JR. /s/ J.J TIETJEN
- ------------------------------------ -------------------------------
I. N. Rendall Harper, Jr., Director James J. Tietjen, Director
/s/ ANNE P. JONES /s/ WILLIAM T. HANELLY
- ------------------------------------ -------------------------------
Anne P. Jones, Director William T. Hanelly, Vice
President-Finance, Secretary and
Treasurer (principal financial
officer)
/s/ Joseph E. Zavacky
--------------------------------
Joseph E. Zavacky, Controller
(principal accounting officer0
21
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
COL. A COL. B COL. C
- ----------------------------------------------------------------------------------------------------------
ADDITIONS
-----------------------------
DESCRIPTION Balance at Charged Charged to
Beginning to Costs Costs Accounts-
of Period and Expenses Describe
- ----------------------------------------------------------------------------------------------------------
Year ended June 25, 1999
Reserves deducted from assets to which they apply:
Allowance for Doubtful Accounts $ 430,000 $ 253,000 $0
Inventory Reserve - Continuing Operations 1,987,000 1,549,000 0
Inventory Reserve - Discontinued Operations 845,000 0 0
--------------------------------------------
$ 3,262,000 $ 1,802,000 $0
============== ============= ==============
Reserves not deducted from assets:
Product Warranty Reserve - Continuing Operations $ 1,716,000 $ 1,083,000 $0
Product Warranty Reserve - Discontinued Operations 2,291,000 (301,000) 0
Workers' compensation self-insurance 1,319,000 837,000 0
Allowance for Discontinued Operations 600,000 (475,000) 0
--------------------------------------------
$ 5,926,000 $ 1,144,000 $0
============== ============= ==============
Year ended June 26, 1998
Reserves deducted from assets to which they apply:
Allowance for Doubtful Accounts $ 510,000 $ (79,000) $0
Inventory Reserve - Continuing Operations 1,233,000 1,674,000 0
Inventory Reserve - Discontinued Operations 3,630,000 (1,573,000) 0
--------------------------------------------
$ 5,373,000 $ 22,000 $0
============== ============= ==============
Reserves not deducted from assets:
Product Warranty Reserve - Continuing Operations $ 2,185,000 $ 966,000 $0
Product Warranty Reserve - Discontinued Operations 3,429,000 1,283,000 0
Workers' compensation self-insurance 1,162,000 921,000 0
Allowance for Discontinued Operations 3,375,000 0 0
--------------------------------------------
$ 10,151,000 $ 3,170,000 $0
============== ============= ==============
Year ended June 27, 1997
Reserves deducted from assets to which they apply:
Allowance for Doubtful Accounts $ 355,000 $ 157,000 $0
Inventory Reserve - Continuing Operations 1,112,000 1,323,000 0
Inventory Reserve - Discontinued Operations 305,000 3,418,000 0
--------------------------------------------
$ 1,772,000 $ 4,898,000 $0
============== ============= ==============
Reserves not deducted from assets:
Product Warranty Reserve - Continuing Operations $ 1,724,000 $ 2,310,000 $0
Product Warranty Reserve - Discontinued Operations 0 4,028,000 0
Workers' compensation self-insurance 704,000 1,068,000 0
Allowance for Discontinued Operations 0 3,375,000 0
--------------------------------------------
$ 2,428,000 $10,781,000 $0
============== ============= ==============
COL. A COL. D COL. E
- ------------------------------------------------------------------------------------------------
DESCRIPTION Deductions- Balance at
Describe End
of Period
- ------------------------------------------------------------------------------------------------
Year ended June 25, 1999
Reserves deducted from assets to which they apply:
Allowance for Doubtful Accounts $ 13,000 (1) $ 670,000
Inventory Reserve - Continuing Operations 1,513,000 (2) 2,023,000
Inventory Reserve - Discontinued Operations 845,000 (2) 0
-------------------------------------
$ 2,371,000 $ 2,693,000
============= ======= ==============
Reserves not deducted from assets:
Product Warranty Reserve - Continuing Operations $ 1,175,000 (3) $ 1,624,000
Product Warranty Reserve - Discontinued Operations 1,580,000 (3) 410,000
Workers' compensation self-insurance 432,000 (4) 1,724,000
Allowance for Discontinued Operations 0 (5) 125,000
------------------------------------
$ 3,187,000 $ 3,883,000
============= ======= ==============
Year ended June 26, 1998
Reserves deducted from assets to which they apply:
Allowance for Doubtful Accounts $ 1,000 (1) $ 430,000
Inventory Reserve - Continuing Operations 920,000 (2) 1,987,000
Inventory Reserve - Discontinued Operations 1,212,000 (2) 845,000
-------------------------------------
$ 2,133,000 $ 3,262,000
============= ======= ==============
Reserves not deducted from assets:
Product Warranty Reserve - Continuing Operations $ 1,435,000 (3) $ 1,716,000
Product Warranty Reserve - Discontinued Operations 2,421,000 (3) 2,291,000
Workers' compensation self-insurance 764,000 (4) 1,319,000
Allowance for Discontinued Operations 2,775,000 (5) 600,000
$ 7,395,000 $ 5,926,000
============= ======= ==============
Year ended June 27, 1997
Reserves deducted from assets to which they apply:
Allowance for Doubtful Accounts $ 2,000 (1) $ 510,000
Inventory Reserve - Continuing Operations 1,202,000 (2) 1,233,000
Inventory Reserve - Discontinued Operations 93,000 (2) 3,630,000
-------------------------------------
$ 1,297,000 $ 5,373,000
============= ======= ==============
Reserves not deducted from assets:
Product Warranty Reserve - Continuing Operations $ 1,849,000 (3) $ 2,185,000
Product Warranty Reserve - Discontinued Operations 599,000 (3) 3,429,000
Workers' compensation self-insurance 610,000 (4) 1,162,000
Allowance for Discontinued Operations 0 3,375,000
$ 3,058,000 $10,151,000
============= ======= ==============
(1)Uncollectible accounts written off, net of recoveries. (4)Workers compenstation claims paid.
(2)Inventory disposals. (5)Expenses for Discontinued Operations incurred from
(3)Warranty claims honored during year. measurement date to disposal date.
Note: Unless otherwise indicated, reserves relate to
continuing operations.
Year ended June 26, 1998
Reserves deducted from assets to which they apply
Allowance for Doubtful Accounts $ 1,000 (1) $ 430,000
Inventory Reserve - Continuing Operations 920,000 (2) 1,987,000
Inventory Reserve - Discontinued Operations 1,212,000 (2) 845,000
------------------------------------
2,133,000 $ 3,262,000
====================================
Reserves not deducted from assets
Product Warranty Reserve - Continuing Operations $ 1,435,000 (3) $ 1,716,000
Product Warranty Reserve - Discontinued Operations 2,421,000 (3) 2,291,000
Workers' compensation self-insurance 764,000 (4) 1,319,000
Allowance for Discontinued Operations 2,775,000 (5) 600,000
------------------------------------
$ 7,395,000 $ 5,926,000
====================================
Year ended June 27, 1997
Reserves deducted from assets to which they apply:
Allowance for Doubtful Accounts $ 2,000 (1) $ 510,000
Inventory Reserve - Continuing Operations 1,202,000 (2) 1,233,000
Inventory Reserve - Discontinued Operations 93,000 (2) 3,630,000
------------------------------------
$ 1,297,000 $ 5,373,000
====================================
Reserves not deducted from assets:
Product Warranty Reserve - Continuing Operations $ 1,849,000 (3) $ 2,185,000
Product Warranty Reserve - Discontinued Operations 599,000 (3) 3,429,000
Workers' compensation self-insurance 610,000 (4) 1,162,000
Allowance for Discontinued Operations 0 3,375,000
------------------------------------
$ 3,058,000 $ 10,151,000
====================================
Independent Auditors' Report
The Board of Directors and Stockholders
C-COR.net Corp:
Under date of August 16, 1999, we reported on the consolidated balance sheets of
C-COR.net Corp. as of June 25, 1999 and June 26, 1998, and the related
consolidated statements of operations, cash flows and shareholders' equity for
each of the years in the three-year period ended June 25, 1999, which are
incorporated by reference herein. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedule included herein. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG LLP
State College, Pennsylvania
August 16, 1999