-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AV3+fAKiCa8yyJfdmT+e/UjH4YZx5buh/LltczkI7VUpJ2pizX7Mg3GIZdElQ274 dkZQ4FSVIh2oyhv95yUhvg== 0000350621-01-500005.txt : 20010213 0000350621-01-500005.hdr.sgml : 20010213 ACCESSION NUMBER: 0000350621-01-500005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001229 FILED AS OF DATE: 20010212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: C COR NET CORP CENTRAL INDEX KEY: 0000350621 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 240811591 STATE OF INCORPORATION: PA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-10726 FILM NUMBER: 1532421 BUSINESS ADDRESS: STREET 1: 60 DECIBEL RD CITY: STATE COLLEGE STATE: PA ZIP: 16801 BUSINESS PHONE: 8142382461 MAIL ADDRESS: STREET 1: 60 DECIBEL ROAD CITY: STATE COLLEGE STATE: PA ZIP: 16801 FORMER COMPANY: FORMER CONFORMED NAME: C COR ELECTRONICS INC DATE OF NAME CHANGE: 19920703 10-Q 1 test2ndqtr.txt 10Q 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 29, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 C-COR.net Corp. -------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Pennsylvania 0-10726 24-0811591 ------------------------------------------------------------------------------ (State or Other Juris- (Commission File (IRS Employer diction of Incorporation) Number) Identification No.) 60 Decibel Road State College, PA 16801 - -------------------------------------------------------------------------------- (Address of Principal (Zip Code) Executive Offices) (814) 238-2461 -------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.05 Par Value - 32,317,038 shares as of January 26, 2001. C-COR.net Corp. Page ---- Part I -- FINANCIAL INFORMATION Item 1. Financial Statements Independent Accountants' Review Report ..................... 2 Condensed Consolidated Balance Sheets ...................... 3 Condensed Consolidated Statements of Operations: Thirteen Weeks Ended December 29, 2000 ................... 4 Twenty-six Weeks Ended December 29, 2000 ................. 5 Condensed Consolidated Statements of Cash Flows Twenty-six Weeks Ended December 29, 2000 ................. 6 Notes to Condensed Consolidated Financial Statements ....... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .................................. 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk ... 17 Part II -- OTHER INFORMATION Item 4. Submission of Matters to a Vote of Shareholders .............. 17 Item 6. Exhibits and Reports on Form 8-K ............................. 17 Signature ............................................................ 18 1 Independent Accountants' Review Report The Board of Directors C-COR.net Corp. and Subsidiaries: We have reviewed the condensed consolidated balance sheet of C-COR.net Corp. and subsidiaries as of December 29, 2000 and the related condensed consolidated statements of operations and cash flows for the thirteen-week and twenty-six week periods ended December 29, 2000 and December 24, 1999. These condensed consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical review 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 generally accepted auditing standards, 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 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 30, 2000, 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 11, 2000, 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 30, 2000, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ KPMG LLP - --------------------------- State College, Pennsylvania January 15, 2001 2 PART I FINANCIAL INFORMATION Item 1. Financial Statements C-COR.net Corp. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data) December 29, June 30, 2000 2000 --------- --------- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents ............................ $ 88,132 $ 95,379 Marketable securities ................................ 34,349 42,154 Interest receivable .................................. 879 1,007 Accounts and notes receivables, net .................. 51,874 49,325 Inventories .......................................... 38,932 31,760 Deferred taxes ....................................... 6,702 7,470 Other current assets ................................. 2,812 3,826 --------- --------- TOTAL CURRENT ASSETS ................................. 223,680 230,921 Property, plant, and equipment, net .................. 25,568 28,322 Intangible assets, net ............................... 2,313 2,477 Deferred taxes ....................................... 3,799 4,909 Other long-term assets ............................... 6,738 6,410 --------- --------- TOTAL ASSETS.......................................... $ 262,098 $ 273,039 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable ..................................... $ 29,707 $ 21,341 Accrued liabilities .................................. 13,124 20,056 Current portion of long-term debt .................... 226 225 --------- --------- TOTAL CURRENT LIABILITIES ............................ 43,057 41,622 Long-term debt, less current portion ................. 1,428 1,527 Other long-term liabilities .......................... 1,847 2,232 --------- --------- TOTAL LIABILITIES .................................... 46,332 45,381 SHAREHOLDERS' EQUITY Common stock, $.05 par; authorized shares 100,000,000; issued shares of 35,406,624 on December 29, 2000 and 35,219,825 on June 30, 2000 . 1,770 1,761 Additional paid-in capital ........................... 198,995 197,240 Accumulated other comprehensive loss ................. (122) (30) Unearned compensation ................................ (4) (8) Retained earnings .................................... 46,046 35,952 Treasury stock at cost ............................... (30,919) (7,257) --------- --------- TOTAL SHAREHOLDERS' EQUITY ........................... 215,766 227,658 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ........... $ 262,098 $ 273,039 ========= ========= See independent accountants' review report and notes to condensed consolidated financial statements. 3 C-COR.net Corp. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data) Thirteen Weeks Ended --------------------------- December 29, December 24, 2000 1999 ----------- ----------- Net sales ........................................ $ 66,045 $ 68,954 Cost of sales .................................... 48,392 50,983 ----------- ----------- Gross margin 17,653 17,971 ----------- ----------- Operating expenses: Selling and administrative ..................... 7,387 8,278 Research and product development ............... 4,389 3,508 Merger and restructuring costs ................. 650 0 ----------- ----------- Total operating expenses ...................... 12,426 11,786 ----------- ----------- Income from operations 5,227 6,185 Interest expense ................................. (16) (140) Investment income ................................ 1,902 855 Other income, net ................................ 28 41 ----------- ----------- Income before income taxes ....................... 7,141 6,941 Income tax expense ............................... 2,857 2,647 ----------- ----------- Income from continuing operations ................ 4,284 4,294 Discontinued operations: Gain (loss) on disposal of discontinued business segment, net of tax ................... (5) 6 ----------- ----------- Net income ....................................... $ 4,279 $ 4,300 =========== =========== Net income per share - basic: Continuing operations .......................... $ 0.13 $ 0.15 Gain (loss) on disposal of discontinued operations ................................... 0.00 0.00 ----------- ----------- Net income ....................................... $ 0.13 $ 0.15 =========== =========== Net income per share - diluted: Continuing operations .......................... $ 0.13 $ 0.13 Gain (loss) on disposal of discontinued operations ................................... 0.00 0.00 ----------- ----------- Net income ....................................... $ 0.13 $ 0.13 =========== =========== See independent accountants' review report and notes to condensed consolidated financial statements. 4 C-COR.net Corp. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data) Twenty-six Weeks Ended --------------------------- December 29, December 24, 2000 1999 ----------- ----------- Net sales ....................................... $ 144,380 $ 139,842 Cost of sales ................................... 105,455 103,230 ----------- ----------- Gross margin 38,925 36,612 ----------- ----------- Operating expenses: Selling and administrative ..................... 16,250 17,173 Research and product development ............... 8,813 6,683 Merger and restructuring costs ................. 650 3,673 ----------- ----------- Total operating expenses ...................... 25,713 27,529 ----------- ----------- Income from operations 13,212 9,083 Interest expense ................................. (29) (761) Investment income ................................ 3,917 918 Other expense, net ............................... (211) (299) ----------- ----------- Income before income taxes ....................... 16,889 8,941 Income tax expense ............................... 6,791 4,306 ----------- ----------- Income from continuing operations ................ 10,098 4,635 Discontinued operations: Gain (loss) on disposal of discontinued business segment, net of tax ................... (4) 42 ----------- ----------- Net income ....................................... $ 10,094 $ 4,677 =========== =========== Net income per share - basic: Continuing operations ......................... $ 0.30 $ 0.18 Gain (loss) on disposal of discontinued operations ................................... 0.00 0.00 ----------- ----------- Net income ....................................... $ 0.30 $ 0.18 =========== =========== Net income per share - diluted: Continuing operations ......................... $ 0.29 $ 0.15 Gain (loss) on disposal of discontinued operations ................................... 0.00 0.00 ----------- ----------- Net income ....................................... $ 0.29 $ 0.15 =========== =========== See independent accountants' review report and notes to condensed consolidated financial statements. 5 C-COR.net Corp. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands of dollars) Twenty-six Weeks Ended -------------------- December 29, December 24, 2000 1999 -------- -------- OPERATING ACTIVITIES Net income ........................................... $ 10,094 $ 4,677 Adjustments to reconcile net income to net cash and cash equivalents provided by (used in) operating activities: Depreciation and amortization ...................... 4,812 4,853 Amortization of debt discount ...................... - 381 Amortization of unearned compensation .............. 4 5 Loss (gain) on disposal of discontinued operations, net of tax........................................ 4 (42) Loss on sales and write-down of property, plant and equipment......................................... 250 333 Tax benefit deriving from exercise and sales of stock option shares ..................... 207 2,775 Changes in operating assets and liabilities: Interest receivable ............................. 128 - Accounts and notes receivable ................... (2,549) (9,951) Inventories ..................................... (7,172) (7,275) Other assets .................................... 123 117 Accounts payable ................................ 8,366 1,873 Accrued liabilities ............................. (7,300) (3,692) Deferred retirement salary plan ................. (7) 49 Deferred income taxes ........................... 1,868 605 Discontinued operations - working capital changes and noncash charges ........................... 69 96 -------- -------- NET CASH AND CASH EQUIVALENTS PROVIDED BY (USED IN) OPERATING ACTIVITIES ......... 8,897 (5,196) -------- -------- INVESTING ACTIVITIES Purchase of property, plant, and equipment ........... (1,746) (5,181) Proceeds from sale (purchase) of marketable securities and other short term investments .................... 7,805 (14,772) Investment in equity securities....................... - (501) Proceeds from sale of property, plant, and equipment.. - 6 -------- -------- NET CASH AND CASH EQUIVALENTS PROVIDED BY (USED IN) INVESTING ACTIVITIES ......... 6,059 (20,448) -------- -------- FINANCING ACTIVITIES Payment of debt and capital lease obligations ........ (98) (2,733) Payment on short-term credit facilities, net ......... - (5,019) Issue common stock to employee stock purchase plan ... 75 45 Proceeds from exercise of stock options .............. 923 4,072 Proceeds from exercise of warrants ................... 559 2,259 Proceeds from issuance of common stock, net .......... - 133,370 Purchase of treasury stock ........................... (23,662) - -------- -------- NET CASH AND CASH EQUIVALENTS (USED IN) PROVIDED BY FINANCING ACTIVITIES ......... (22,203) 131,994 -------- -------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ..... (7,247) 106,350 Cash and cash equivalents at beginning of year ....... 95,379 5,805 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ........... $ 88,132 $112,155 ======== ======== Supplemental cash flow information: Non-cash investing activities Fair value adjustment of available-for-sale securities ........................................ $ 63 $ (2) See independent accountants' review report and notes to condensed consolidated financial statements. 6 C-COR.net Corp. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands except per share data) 1. The accompanying, unaudited, condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information, and in the opinion of management, contain all adjustments (consisting only of normal, recurring adjustments) necessary to fairly present the Company's financial position as of December 29, 2000, and the results of its operations for the thirteen-week and twenty-six week periods then ended. Operating results for the thirteen-week and twenty-six week periods are not necessarily indicative of the results that may be expected for the year ending June 29, 2001. For further information, refer to the financial statements and footnotes thereto included in the Company's Form 10-K for the year ended June 30, 2000. 2. DESCRIPTION OF BUSINESS C-COR.net Corp. (the Company) designs, manufactures and markets network transmission products and provides services and support to hybrid fiber coax (HFC) network operators. The Company operates in two industry segments: the Telecommunications Equipment segment which provides a comprehensive range of products, including radio frequency (RF) amplifiers and fiber optic equipment for the network headend, node and RF plant; and the Broadband Management Services segment which focuses on enabling reliable, high speed, broadband communications over HFC networks and includes network management and enabling services, high-speed data certification, system integration services, data security solutions, network engineering and design, system activation, network optimization, and system maintenance. 3. INVENTORIES Inventories as of December 29, 2000 and June 30, 2000 consisted of the following: December 29, June 30, 2000 2000 ------- ------- Finished goods .............................. $ 8,939 $ 5,288 Work-in-process ............................. 7,032 6,841 Raw materials ............................... 22,961 19,631 ------- ------- Total inventories ........................ $38,932 $31,760 ======= ======= 4. ACCRUED LIABILITIES Accrued liabilities consisted of: December 29, June 30, 2000 2000 ------------- ------------- Accrued incentive plan expense .............. $ 1,187 $ 3,510 Accrued vacation expense .................... 1,610 1,880 Accrued salary expense ...................... 2,392 2,678 Accrued payroll and sales tax ............... 519 972 Accrued sales commissions and rebates payable ............................ 753 419 Accrued warranty expense .................... 2,412 2,232 Accrued workers compensation self-insurance expense .................... 1,927 1,577 Accrued restructuring and merger-related costs ..................................... 1,112 489 Accrued other ............................... 1,212 6,299 ------------- ------------- $ 13,124 $ 20,056 ============= ============= 7 5. COMPREHENSIVE INCOME The components of accumulated other comprehensive loss, net of tax, of the Company are as follows: December 29, June 30, 2000 2000 ------------- ------------- Unrealized gain on marketable securities ...... $ 9 $ 72 Foreign currency translation loss ............. (131) (102) ------------- ------------- Accumulated other comprehensive loss .......... $ (122) $ (30) ============= ============= The components of comprehensive income of the Company for the thirteen-week and twenty-six week periods ended December 29, 2000, and December 24, 1999, are as follows: Thirteen Weeks Ended -------------------------- December 29, December 24, 2000 1999 --------- --------- Net income ......................................... $ 4,279 $ 4,300 Other comprehensive loss, net of tax: Unrealized gain (loss) on marketable securities. (45) 2 Foreign currency translation loss .............. (134) (9) --------- --------- Other comprehensive loss ........................... (179) (7) --------- --------- Comprehensive income ............................... $ 4,100 $ 4,293 ========= ========= Twenty-six Weeks Ended --------------------------- December 29, December 24, 2000 1999 --------- --------- Net income ......................................... $ 10,094 $ 4,677 Other comprehensive loss, net of tax: Unrealized loss on marketable securities ....... (63) (2) Foreign currency translation loss .............. (29) (9) --------- --------- Other comprehensive loss ........................... (92) (11) --------- --------- Comprehensive income ............................... $ 10,002 $ 4,666 ========= ========= 8 6. NET INCOME PER SHARE Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding. Dilutive net income per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding plus the dilutive effect of options, warrants and convertible preferred stock. The dilutive effect of options and warrants is calculated under the treasury stock method using the average market price for the period. The dilutive effect of the convertible preferred stock is calculated under the if-converted method. Net income per share is calculated as follows: Thirteen Weeks Ended ----------------------------- December 29, December 24, 2000 1999 ------------ ------------ Income from continuing operations ............ $ 4,284 $ 4,294 Gain (loss) from discontinued operations ..... (5) 6 ------------ ------------ Net income ................................... $ 4,279 $ 4,300 ============ ============ Weighted average common shares outstanding ... 32,955 29,146 Common share equivalents ..................... 1,077 3,986 ------------ ------------ Weighted average common shares and common share equivalents .......................... 34,032 33,132 ============ ============ Net income per share - basic: Continuing operations ...................... $ 0.13 $ 0.15 Discontinued operations .................... 0.00 0.00 ------------ ------------ Net income per share ......................... $ 0.13 $ 0.15 ============ ============ Net income per share - diluted: Continuing operations ...................... $ 0.13 $ 0.13 Discontinued operations .................... 0.00 0.00 ------------ ------------ Net income per share ......................... $ 0.13 $ 0.13 ============ ============ Twenty-six Weeks Ended ----------------------------- December 29, December 24, 2000 1999 ------------ ------------ Income from continuing operations ............ $ 10,098 $ 4,635 Gain (loss) from discontinued operations ..... (4) 42 ------------ ------------ Net income ................................... $ 10,094 $ 4,677 ============ ============ Weighted average common shares outstanding ... 33,498 26,277 Common share equivalents ..................... 1,728 4,425 ------------ ------------ Total ........................................ 35,226 30,702 ============ ============ Net income per share - basic: Continuing operations ...................... $ 0.30 $ 0.18 Discontinued operations .................... 0.00 0.00 ------------ ------------ Net income per share ......................... $ 0.30 $ 0.18 ============ ============ Net income per share - diluted: Continuing operations ...................... $ 0.29 $ 0.15 Discontinued operations .................... 0.00 0.00 ------------ ------------ Net income per share ......................... $ 0.29 $ 0.15 ============ ============ 9 7. SEGMENT INFORMATION The Company operates in two industry segments: the Telecommunications Equipment segment which provides a comprehensive range of products, including RF amplifiers and fiber optic equipment for the network headend, node and RF plant; and the Broadband Management Services segment which focuses on enabling reliable, high speed, broadband communications over HFC networks and includes network management and enabling services, high-speed data certification, system integration services, data security solutions, network engineering and design, system activation, network optimization, and system maintenance. Information about industry segments for the thirteen-week and the twenty-six week periods ended December 29, 2000, and December 24, 1999, are as follows: Continuing Operations ---------------------------- Telecom- Broadband munications Management Equipment Services Total --------------------------------- 13 week period ended December 29, 2000 Total revenue .............................. $ 53,910 $ 12,135 $ 66,045 Operating income(loss)(A) .................. 5,939 (62) 5,877 Investment income .......................... 1,902 Interest expense ........................... 16 Income tax expense(A) ...................... 3,117 Cash equivalents and marketable securities . 106,668 Identifiable assets at December 29, 2000 (B) 132,661 22,462 155,123 Capital expenditures ....................... 843 410 1,253 Depreciation and amortization .............. 1,623 649 2,272 13 week period ended December 24, 1999 Total revenue .............................. $ 59,999 $ 8,955 $ 68,954 Operating income ........................... 5,766 419 6,185 Investment income .......................... 855 Interest expense ........................... 140 Income tax expense ......................... 2,647 Cash equivalents and marketable securities . 116,122 Identifiable assets at December 24, 1999 (B) 119,553 12,330 131,883 Capital expenditures ....................... 1,358 548 1,906 Depreciation and amortization .............. 2,084 446 2,530 26 week period ended December 29, 2000 Total revenue .............................. $119,143 $ 25,237 $144,380 Operating income(A) ........................ 13,710 152 13,862 Investment income .......................... 3,917 Interest expense ........................... 29 Income tax expense(A) ...................... 7,051 Cash equivalents and marketable securities . 106,668 Identifiable assets at December 29, 2000 (B) 132,661 22,462 155,123 Capital expenditures ....................... 1,202 544 1,746 Depreciation and amortization .............. 3,533 1,279 4,812 26 week period ended December 24, 1999 Total revenue .............................. $121,985 $ 17,857 $139,842 Operating income (loss)(A) ................. 13,253 (497) 12,756 Investment income .......................... 918 Interest expense ........................... 761 Income tax expense (A) ..................... 4,866 Cash equivalents and marketable securities . 116,122 Identifiable assets at December 24, 1999 (B) 119,553 12,330 131,883 Capital expenditures ....................... 4,010 1,171 5,181 Depreciation and amortization .............. 4,152 701 4,853 (A) Operating income and income tax expense exclude the impact of non-recurring merger-related and restructuring costs. (B) Identifiable assets at December 29, 2000 and December 24, 1999, exclude cash equivalents and marketable securities related to the Company's follow-on public offering. 10 The Company and subsidiaries operate in various geographic areas as indicated by the following:
U.S Europe Elimination Total -------------------------------------------- 13 week period ended December 29, 2000 Sales to unaffiliated customers: Domestic .................................... $ 55,277 $ 1,017 $ -- $ 56,294 Export ...................................... 9,751 -- -- 9,751 Transfers between geographic areas .......... 197 -- (197) 0 Total revenue ............................... 65,225 1,017 (197) 66,045 Operating income (loss)(A) .................. 5,937 (60) -- 5,877 Investment income ........................... 1,902 Interest expense ............................ 16 Income tax expense(A) ....................... 3,117 Identifiable assets at December 29, 2000 .... 260,592 1,506 -- 262,098 Capital expenditures ........................ 1,253 -- -- 1,253 Depreciation and amortization ............... 2,272 -- -- 2,272 13 week period ended December 24, 1999 Sales to unaffiliated customers: Domestic .................................... $ 60,802 $ 134 $ -- $ 60,936 Export ...................................... 8,018 -- -- 8,018 Transfers between geographic areas .......... 20 -- (20) 0 Total revenue ............................... 68,840 134 (20) 68,954 Operating income (loss) ..................... 6,664 (479) -- 6,185 Investment income ........................... 855 Interest expense ............................ 140 Income tax expense .......................... 2,647 Identifiable assets at December 24, 1999 .... 247,884 500 -- 248,384 Capital expenditures ........................ 1,906 -- -- 1,906 Depreciation and amortization ............... 2,525 5 -- 2,530 26 week period ended December 29, 2000 Sales to unaffiliated customers: Domestic .................................... $ 124,146 $ 2,415 $ -- $ 126,561 Export ...................................... 17,819 -- -- 17,819 Transfers between geographic areas .......... 215 -- (215) 0 Total revenue ............................... 142,180 2,415 (215) 144,380 Operating income(A) ......................... 13,800 62 -- 13,862 Investment income ........................... 3,917 Interest expense ............................ 29 Income tax expense(A) ....................... 7,051 Identifiable assets at December 29, 2000 .... 260,592 1,506 -- 262,098 Capital expenditures ........................ 1,746 -- -- 1,746 Depreciation and amortization ............... 4,784 28 -- 4,812 26 week period ended December 24, 1999 Sales to unaffiliated customers: Domestic .................................... $ 125,103 $ 177 $ -- $ 125,280 Export ...................................... 14,562 -- -- 14,562 Transfers between geographic areas .......... 32 -- (32) 0 Total revenue ............................... 139,697 177 (32) 139,842 Operating income (loss) (A).................. 13,426 (670) -- 12,756 Investment income ........................... 918 Interest expense ............................ 761 Income tax expense (A)....................... 4,866 Identifiable assets at December 24, 1999 .... 247,884 500 -- 248,384 Capital expenditures ........................ 5,180 1 -- 5,181 Depreciation and amortization ............... 4,843 10 -- 4,853 (A) Operating income and income tax expense exclude the impact of non-recurring merger-related and restructuring costs.
11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General The following discussion addresses the financial condition of C-COR.net Corp. (the Company, or we) as of December 29, 2000, and the results of operations for the thirteen-week and twenty-six week periods ended December 29, 2000, compared with the same periods of the prior fiscal year. This discussion should be read in conjunction with the Management's Discussion and Analysis section for the fiscal year ended June 30, 2000, included in the Company's Annual Report on Form 10-K. Disclosure Regarding Forward-Looking Statements Some of the information presented in this report contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, statements regarding the ability of the Company to expand its product offering, statements regarding near-term softening in demand for telecommunications equipment, the continuation of network upgrade activity, the trend toward more fiber in the network, the Company's ability to develop new and enhanced products, global demand for the Company's products and services, the ability of the Company to expand its operations internationally and statements relating to the Company's business strategy. Forward-looking statements represent the Company's judgment regarding future events. Although the Company believes it has a reasonable basis for these forward-looking statements, the Company cannot guarantee their accuracy and actual results may differ materially from those the Company anticipated due to a number of uncertainties, many of which we are not aware. Factors which could cause actual results to differ from expectations include, among others, capital spending patterns of the communications industry, the Company's ability to develop new and enhanced products, continued industry consolidation, the development of competing technology, and the Company's ability to achieve its strategic objectives. For additional information concerning these and other important factors which may cause the Company's actual results to differ materially from expectations and underlying assumptions, please refer to the reports filed by the Company with the Securities and Exchange Commission. Results of Operations Net sales for the thirteen-week period ended December 29, 2000 were $66.0 million, a decrease of 4% from the prior year's sales of $69.0 million for the same period. Net sales for the twenty-six week period ended December 29, 2000 were $144.4 million, an increase of 3% from the prior year's sales of $139.8 million for the same period. Telecommunications Equipment segment sales decreased by 10% to $53.9 million during the thirteen-week period, compared to $60.0 million for the same period of the prior year. Telecommunications Equipment segment sales decreased by 2% to $119.1 million during the twenty-six-week period, compared to $122.0 million for the same period of the prior year. The decreases for the quarter and year-to-date periods were attributable primarily to reduced sales of radio frequency (RF) equipment products (down 16% in the second quarter compared to the same quarter of the previous year), which were partially offset by increased sales of fiber optics products during the periods (up 17% in the second quarter compared to the same quarter of the previous year). We believe the decline in demand during the periods resulted from temporary delays in capital spending by several multiple system operators (MSO's), as they evaluate their capital spending plans for hybrid fiber coax (HFC) network transmission products and review on-hand inventory levels. We expect network system upgrade activity to continue by the MSO's, especially for current build-outs, but believe that continued spending for HFC network products could be delayed, as customers review their capital spending and upgrade plans for new build-outs. As a result, we anticipate a lower demand for telecommunications products in the near-term. 12 Broadband Management Services (BMS) segment sales increased by 36% to $12.1 million during the thirteen-week period, compared to $9.0 million for the same period of the prior year. BMS segment sales increased by 41% to $25.2 million during the twenty-six-week period, compared to $17.9 million for the same period of the prior year. The increases for the quarter and year-to-date periods were primarily attributable to demand for technical services performed in our customers' plants, including system sweep, reverse path activation, ingress mitigation, node certification and system maintenance. Domestic sales as a percentage of total consolidated sales were 84% and 86% for the thirteen-week and twenty-six-week periods ended December 29, 2000, respectively. This compares to 88% and 89% for the same respective periods of the prior year. Sales to domestic customers declined 9% and 1% during the thirteen-week and twenty-six week periods, respectively, as Telecommunications Equipment segment sales declined for the periods, and were partially offset by growth in BMS segment sales, primarily for technical services. International sales as a percentage of total consolidated sales were 16% and 14% for the thirteen-week and twenty-six-week periods ended December 29, 2000, respectively. This compares to 12% and 11% for the same respective periods of the prior year. Sales to international customers increased 32% and 37% during the thirteen-week and twenty-six week periods, respectively. This growth was principally in sales of telecommunications equipment and reflected sales to a major customer in Canada and increased demand from customers in the EuroPacific region. We expect international markets will continue to represent a substantial portion of our sales base, but believe demand will continue to be highly variable. The international markets represent distinct markets in which capital spending decisions for HFC network distribution equipment can be impacted by a variety of factors, including access to financing and general economic conditions. Gross margins were 26.7% and 27.0% for the thirteen-week and twenty-six-week periods ended December 29, 2000, respectively. This compares to 26.1% and 26.2% for the same respective periods of the prior year. For the Telecommunications Equipment segment, gross margins were 26.8% for both the thirteen-week and twenty-six-week periods ended December 29, 2000, respectively. This compares to 27.3% and 27.7% for the same respective periods of the prior year. The decrease in gross margins resulted primarily from changes in product mix and reduced efficiencies resulting from lower production volumes. For the BMS segment, gross margins were 26.3% and 27.6% for the thirteen-week and twenty-six-week periods ended December 29, 2000, respectively. This compares to 17.6% and 15.9% for the same respective periods of the prior year. The increase in gross margin is due primarily to improvements in productivity and changes in various costs associated with our technical services group, as we have integrated our legacy service organization with the service organizations of Worldbridge Broadband Services, Inc. and Advanced Communications Services, Inc., both of which were acquired in the third quarter of fiscal year 2000. Selling and administrative expenses were $7.4 million (11.2% of net sales) for the thirteen-week period ended December 29, 2000, compared to $8.3 million (12.0% of net sales) for the same period of the prior year. Selling and administrative expenses were $16.3 million (11.3% of net sales) for the twenty-six-week period ended December 29, 2000, compared to $17.2 million (12.3% of net sales) for the same period of the prior year. The decline in the Company's selling and administrative expenses resulted from reductions in various operating costs, including personnel costs as we consolidated certain functions after the mergers completed in the prior fiscal year. We anticipate increased selling and administrative expense in future periods, related to international expansion, although these expenses may vary as a percentage of net sales. 13 Research and product development expenses were $4.4 million (6.6% of net sales) for the thirteen-week period ended December 29, 2000, compared to $3.5 million (5.1% of net sales) for the same period of the prior year. Research and product development expenses were $8.8 million (6.1% of net sales) for the twenty-six-week period ended December 29, 2000, compared to $6.7 million (4.8% of net sales) for the same period of the prior year. The increase in research and product development expenditures resulted from higher personnel costs and additional expenses primarily for development of fiber optic transmission products and the continued development of network management products and capabilities. We anticipate continuing increases in research and product development expenses in future periods, related to ongoing initiatives in the development of fiber optic products and network management products and capabilities, although these expenses may vary as a percentage of net sales. The following discussion of operating income (loss) by segment for the thirteen-week and twenty-six-week periods compared to the same periods of the prior year, exclude non-recurring merger related and restructuring costs. Operating income for the Telecommunications Equipment segment for the thirteen-week period ended December 29, 2000, was $5.9 million, compared to $5.8 million for the same period of the prior year. Operating income for the Telecommunications Equipment segment for the twenty-six-week period ended December 29, 2000, was $13.7 million, compared to $13.3 million for the same period of the prior year. Lower revenue volume was offset by reduced operating costs for the periods, compared to the prior year. Operating loss for the BMS segment for the thirteen-week period ended December 29, 2000, was $62,000, compared to operating income of $419,000 for the same period of the prior year. The higher revenue volume for the period was more than offset by increased investment and development costs associated with our network management products. On a year to date basis, for the twenty-six-week period ended December 29, 2000, operating income for the BMS segment was $152,000, compared to an operating loss of $497,000 for the same period of the prior year. Interest expense was $16,000 for the thirteen-week period ended December 29, 2000, compared to $140,000 for the same period of the prior year. Interest expense was $29,000 for the twenty-six-week period ended December 29, 2000, compared to $761,000 for the same period of the prior year. The decrease in interest expense resulted from reductions of long-term debt and borrowings on various short-term credit facilities, and a decrease in the amortization related to the fair market value of warrants issued in fiscal year 1999 in connection with certain debt financing arrangements by Silicon Valley Communications, Inc. (SVCI), a wholly-owned subsidiary of the Company. Investment income was $1.9 million for the thirteen-week period ended December 29, 2000, compared to $855,000 for the same period of the prior year. Investment income for the twenty-six-week period ended December 29, 2000 was $3.9 million, compared to $918,000 for the same period of the prior year. The increase in investment income resulted from short-term investments of the net proceeds received in our follow-on public offering completed on November 12, 1999. Our overall effective income tax rate was 40% for the both the thirteen-week and twenty-six-week periods ended December 29, 2000. This compared to an overall effective income tax rate of 38% and 48% for the same periods of the prior year, respectively. The higher effective income tax rate for the twenty-six-week period of the prior year resulted primarily from permanent differences for non-deductible business combination costs incurred in relation to the acquisitions of Convergence.com Corporation (Convergence) and SVCI. 14 Merger and Restructuring Costs During the thirteen-week period ended December 29, 2000, we recorded a restructuring charge of $650,000, related to our decision to discontinue providing high-speed data Helpdesk services. The restructuring charge represents salaries and benefits for those employees affected, costs to terminate contractual obligations of the operation, as well as a write-off of fixed assets. The Company reached a cooperative arrangement with High Speed Access Corp. (HSA), whereby, HSA will assume responsibility for helpdesk activities formerly provided by us to certain customers, allowing us to increase our focus on providing Network Operation Center services, as well as a variety of technical support and maintenance services. For the twenty-six-week period of the prior year, we recorded merger and restructuring charges of $3.7 million, in connection with the acquisitions of Convergence and SVCI. In January 2001, we announced that we were restructuring our manufacturing operations, as a result of reduced near-term demand for our telecommunications products and anticipated continuing shifts of product mix in response to evolving network architectures. We anticipate recording a non-recurring charge of approximately $3.0 to $4.0 million in the third quarter of fiscal year 2001, associated with this restructuring. The non-recurring charge represents employee termination benefits and other costs to consolidate manufacturing operations. Liquidity and Capital Resources In November 1999, we completed a follow-on public offering of our common stock, resulting in net proceeds (after deducting issuance costs) of $133.3 million. As of December 29, 2000, cash and cash equivalents and marketable securities totaled $122.5 million, down from $137.5 million at June 30, 2000. Net cash and cash equivalents provided by operating activities were $8.9 million for the twenty-six-week period ended December 29, 2000, compared to net cash and cash equivalents used in operating activities of $5.2 million for the same period of the prior year. The increase in net cash and cash equivalents provided by operating activities was primarily due to the increase in net income for the period, as well as higher accounts payable which were partially offset by increases in inventories, accounts and notes receivable, and reductions of accrued liabilities. Net cash and cash equivalents provided by investing activities were $6.1 million for the twenty-six-week period ended December 29, 2000, compared to net cash and cash equivalents used in investing activities of $20.4 million for the same period of the prior year. The increase in cash and cash equivalents provided by investing activities was primarily due to proceeds from the sales of marketable securities and other short-term investments. Other investing activities included our purchases of property, plant and equipment for $1.7 million, as compared to $5.2 million for the same period of the prior year. 15 Net cash and cash equivalents used in financing activities were $22.2 million for the twenty-six-week period ended December 29, 2000, resulting primarily from the purchase of treasury stock during the period. On September 25, 2000, we announced that we were beginning a stock repurchase program, effective September 22, 2000. The new program allows the Company to repurchase up to 2,000,000 shares of C-COR.net common stock. The shares may be purchased from time to time in the open market through block or privately negotiated transactions, or otherwise. The Company intends to use its currently available capital resources to fund the purchases. The repurchased stock is being held by the Company as treasury stock to be used to meet the Company's obligations under its present and future stock option plans and for other corporate purposes. As of December 29, 2000, 1,875,200 shares were repurchased under this stock repurchase program. Our other financing activities consisted primarily of payments on short-term and long-term debt and proceeds from the exercise of employee stock options and warrants. This compared to net cash and cash equivalents provided by financing activities of $132.0 million for the same period of the prior year. The increase in net cash and cash equivalents provided by financing activities for the prior year period resulted from the net proceeds from our follow-on public offering of our common stock, completed in November 1999. We have a credit agreement with three banks under which we may borrow up to $70.0 million. Under the credit agreement, $20.0 million is available as a revolving line-of-credit, subject to an aggregate sub-limit of $2.0 million for issuance of letters of credit, which is committed through November 29, 2001. The credit agreement also permits us to borrow up to $50.0 million, for strategic acquisitions and/or investments, which is also committed through November 29, 2001. Credit pricing on these facilities is a function of our total funded indebtedness to earnings before interest, taxes, depreciation and amortization (EBITDA) ratio. Borrowings under the credit agreement bear interest at various rates, at our option, and are limited to two and one quarter times EBITDA. Borrowings on these facilities are unsecured, subject to a negative pledge on all business assets, and we are required to maintain certain financial ratios and comply with indebtedness tests. As of December 29, 2000, we had no borrowings outstanding under the credit agreement and based upon our EBITDA, as measured on a rolling four-quarter basis, the full $70.0 million facility was available. Management believes that operating cash flow, proceeds received from the follow-on public offering, as well as the aforementioned credit agreement, will be adequate to provide for all cash requirements for the foreseeable future, subject to requirements that strategic developments might dictate. 16 Item 3. Quantitative and Qualitative Disclosures About Market Risk (Not Applicable) PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Shareholders The Company's annual meeting of shareholders was held on October 17, 2000. The record date was September 8, 2000, on which there were 34,042,388 shares outstanding and entitled to vote at such annual meeting. The following items were submitted to a vote by shareholders. 1. The election of three directors for a term of three years. 2. The approval of the Amended and Restated C-COR.net Corp. Incentive Plan. Mr. Donald M. Cook, Jr., and Mr. Michael J. Farrell were re-elected as directors, and Ms. Christine Jack Toretti was elected as a director of the Company until the year 2003. The voting results for the matters noted above are set forth as follows: 1. The election of three directors for a term of three years. Name of Nominee Votes For Votes Withheld ----------------------- --------- -------------- Donald M. Cook Jr. 29,663,581 440,180 Michael J. Farrell 29,669,545 434,216 Christine Jack Toretti 29,672,190 431,571 2. The approval of the Amended and Restated C-COR.net Corp. Incentive Plan. Votes For Votes Against Abstained -------------- ------------- --------- 11,780,202 11,438,836 141,771 Item 6. Exhibits and Reports on Form 8-K The following exhibits are included herein: (10) Amendment dated November 24, 2000, to the 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. Reports on Form 8-K None 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. C-COR.net Corp. (Registrant) Date: February 12, 2001 /s/ William T. Hanelly ---------------------------------- Vice President-Finance, Secretary & Treasurer (Principal Financial Officer) Date: February 12, 2001 /s/ Joseph E. Zavacky ---------------------------------- Controller & Assistant Secretary (Principal Accounting Officer) 18 EX-10 2 amd2.txt AMENDMENT 2 TO CREDIT AGREEMENT DATED 8-9-1999 SECOND AMENDMENT TO CREDIT AGREEMENT THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Agreement") is made as of this 24th day of November, 2000 between C-COR.NET CORP., a Pennsylvania corporation ("C-Cor"), BROADBAND CAPITAL CORPORATION, a Delaware corporation ("Broadband," and collectively with C-Cor, the "Borrowers"), THE UNDERSIGNED BANK PARTIES (individually a "Bank" and collectively, the "Banks") and MELLON BANK, N.A., a national banking association, as agent for the Banks (the "Agent"). W I T N E S S E T H : WHEREAS, the Borrowers, the Banks and the Agent are parties to a Credit Agreement dated as of August 9, 1999, as amended by that certain First Amendment to Credit Agreement dated as of December 29, 1999 (as so amended, the "Credit Agreement"), pursuant to which the Banks agreed to extend to the Borrowers a Twenty Million Dollar ($20,000,000.00) revolving credit facility, a Fifty Million Dollar ($50,000,000.00) standby acquisition facility and a Two Million Five Hundred Thousand Dollar ($2,500,000.00) term loan (Capitalized terms used herein but not defined in this Agreement shall have the meanings ascribed to them in the Credit Agreement.); WHEREAS, the Borrowers have repaid the Term Loan in full; WHEREAS, the Borrowers have requested that the Credit Agreement be amended in order to extend the Revolving Credit Expiration Date and the Standby Facility Expiration Date; and WHEREAS, the Agent and the Banks are willing to grant such request, subject to the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the mutual promises contained herein and intending to be legally bound, the Borrowers, the Agent and the Banks hereby covenant and agree as follows: 1. Amendments. Upon the execution and delivery by the Borrowers and the Banks of this Agreement, the Credit Agreement shall be amended as follows: (a) The definition of Revolving Credit Expiration Date set forth in Section 1.01 of the Credit Agreement is deleted in its entirety and replaced with the following: "Revolving Credit Expiration Date" shall mean November 29, 2001. (b) The definition of Standby Facility Expiration Date set forth in Section 1.01 of the Credit Agreement is deleted in its entirety and replaced with the following: "Standby Facility Expiration Date" shall mean November 29, 2001. (c) The pricing grid set forth subsection (a) of Section 2.05, Interest Rates, shall be deleted in its entirety and replaced with the following:
- ---------------------------------------------------------------------------------------------------------------------- Applicable Margin - ---------------------------------------------------------------------------------------------------------------------- Funded Revolving Revolving Standby Facility Standby Facility Swingline Loan Indebtedness Credit, Credit and Term Loan Term Loan Fed Funds Rate to EBITDA Ratio Swingline Loan, Standby Prime Rate Option LIBOR Rate Option Option and Standby Facility Loan Facility Loan LIBOR Rate Prime Rate Option Option - ---------------------------------------------------------------------------------------------------------------------- Less than 1.00 (0.50%) 0.60% (0.50%) 0.75% 1.00% - ---------------------------------------------------------------------------------------------------------------------- Greater than or (0.50%) 0.75% (0.50%) 0.90% 1.15% equal to 1.00 and less than 1.50 - ---------------------------------------------------------------------------------------------------------------------- Greater than or (0.25%) .90% (0.25%) 1.05% 1.30% equal to 1.50 and less than 2.25 - ------------------- ------------------ ---------------- ------------------ --------------------- ---------------------
(d) Subsection (a) of Section 7.01, Financial Covenants, shall be deleted in its entirety and replaced with the following: (a) Funded Indebtedness to EBITDA Ratio. As of the last day of each fiscal quarter, the Funded Indebtedness to EBITDA Ratio, as measured on a rolling four quarter basis of the four most recent quarters, shall not exceed 2.25:1.00. (e) Subsection (e) of Section 7.05, Loans and Investments, shall be deleted in its entirety and replaced with the following: (e) Borrowers may invest up to twenty-percent (20%) of cash and marketable securities in obligations backed by the full faith and credit of the United States of America maturing not in excess of one year from the date of acquisition, and commercial paper maturing not in excess of one year from the date of acquisition and rated at least P-2 by Moody's Investors Service, Inc. or A-2 by Standard & Poor's Corporation on the date of acquisition; (f) Subsection (a) of Section 7.08, Acquisitions; Mergers, Etc., shall be deleted in its entirety and replaced with the following: (a) The total legal consideration paid by the Borrowers does not exceed $10,000,000 in the aggregate per fiscal year for all such transactions (excluding transactions where the sole legal consideration is the Stock of a Borrower), except that the total legal consideration may be increased to $30,000,000 in the aggregate per fiscal year if Borrowers maintain cash and marketable securities in excess of $50,000,000 at the time of each transaction; (g) Subsection (b) of Section 7.08, Acquisitions; Mergers, Etc., shall be deleted in its entirety and replaced with the following: (b) The Person is historically profitable based on unadjusted GAAP during the most recent fiscal year, except where the transaction is an investment in cash to acquire less than 50% of the Person's capital stock ("Minority Investment" and "Minority Investments"), in which case the Person must have a positive EBITDA for the twelve months immediately prior to the transaction, based on unadjusted GAAP, except that the Borrowers shall be entitled to make such Minority Investments in an amount not to exceed $10,000,000 in the aggregate per fiscal year if Borrowers maintain cash and marketable securities in excess of $50,000,000 at the time of each transaction; 2. Representations and Warranties. (a) The Borrowers hereby represent and warrant to the Agent and the Banks that there is no default or Event of Default under the Credit Agreement, the Loan Documents, or any other document executed in connection therewith. (b) Each of the representations and warranties by the Borrowers in or pursuant to the Credit Agreement or any Loan Document are true and correct in all material respects on and as of the date of this Agreement as though made on and as of such date. 3. Other Terms Confirmed. All other terms and conditions of the Credit Agreement, including, without limitation, the right of the Agent and the Banks to CONFESS JUDGMENT, are hereby confirmed and shall remain in full force and effect without modification. From and after the effectiveness of the amendments set forth in Section 1 hereof, all references in any document or instrument to the Credit Agreement shall mean the Credit Agreement as amended by this Agreement. 4. No New Indebtedness. The Borrowers specifically acknowledge and agree that this Agreement shall not represent in any way the extension of any additional credit by the Banks to the Borrowers, or the satisfaction of any indebtedness evidenced by Loan Documents or the Credit Agreement as amended hereby. 5. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. 6. Headings. The descriptive headings which are used in this Agreement are for convenience only and shall not affect the meaning of any provision of this Agreement. 7. Governing Law. This Agreement shall be governed by and construed under the laws of the Commonwealth of Pennsylvania, without regard to conflict of laws principles. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the day and year first written above. ATTEST: C-COR.NET CORP. /s/ Joseph E. Zavacky By /s/ W. T. Hanelly - ------------------------------------ -------------------------------- By: Joseph E. Zavacky Name: W. T. Hanelly Title: Controller Title: Vice President, Finance [CORPORATE SEAL] ATTEST: BROADBAND CAPITAL CORPORATION /s/ Joseph E. Zavacky By /s/ George M. Savereno - ------------------------------------ -------------------------------- By: Joseph E. Zavacky Name: George M. Savereno Title: Director Title: President [CORPORATE SEAL] MELLON BANK, N.A., as Issuing Bank and as Agent for the Banks By /s/ Joseph N. Butto ----------------------------------------- Name: Joseph N. Butto Title: Vice President MELLON BANK, N.A., individually as a Bank By /s/ Joseph N. Butto ----------------------------------------- Name: Joseph N. Butto Title: Vice President FIRST UNION NATIONAL BANK, individually as a Bank By /s/ Robert A. Jenco ----------------------------------------- Name: Robert A. Jenco Title: Senior Vice President PNC BANK, NATIONAL ASSOCIATION, individually as a Bank By /s/ Thomas J. Fowlstom ----------------------------------------- Name: Thomas J. Fowlston Title: Vice President -----END PRIVACY-ENHANCED MESSAGE-----