0000350621-01-500034.txt : 20011026
0000350621-01-500034.hdr.sgml : 20011026
ACCESSION NUMBER: 0000350621-01-500034
CONFORMED SUBMISSION TYPE: 8-K/A
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20010804
ITEM INFORMATION: Financial statements and exhibits
FILED AS OF DATE: 20011019
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: 8-K/A
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-10726
FILM NUMBER: 1762518
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
8-K/A
1
bcd8ka.txt
BCD ACQUISITION
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 4, 2001
C-COR.net Corp.
(Exact name of Registrant as specified in its charter)
Pennsylvania 0-10726 24-0811591
(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification No.)
60 Decibel Road, State College, Pennsylvania 16801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (814) 238-2461
(Former name or former address, if changed since last report.)
The purpose of this Form 8-K/A is to amend the Current Report on Form 8-K dated
August 4, 2001 and filed on August 20, 2001, to file the required financial
statements and pro forma information required in Item 7 - Financial Statements
and Exhibits.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements, pro forma financial information and
exhibits are filed as part of this report:
(a) Financial Statements of ADC Telecommunications, Inc. - Broadband
Communications Division and Subsidiaries (BCD) as of and for the year
ended October 31, 2000
Report of Public Accountants
Consolidated Balance Sheet - As of October 31, 2000
Consolidated Statement of Operations - For the year ended October 31,
2000
Consolidated Statement of Parent's Equity - For the year ended October
31, 2000
Consolidated Statement of Cash Flows - For the year ended October 31,
2000
Notes to Consolidated Financial Statements
Interim Period Financial Statements of BCD:
Consolidated Balance Sheet (unaudited) - As of May 5, 2001
Consolidated Statements of Operations (unaudited) - For the six month
periods ended May 5, 2001 and April 28, 2000
Consolidated Statements of Cash Flows (unaudited) - For the six month
periods ended May 5, 2001 and April 28, 2000
Note to Unaudited Interim Financial Statements
(b) Pro forma financial information:
Pro Forma Condensed Consolidated Balance Sheet (unaudited) as of June
29, 2001 with respect to the Registrant and May 5, 2001 with respect to
BCD
Pro Forma Condensed Consolidated Statement of Operations (unaudited)
for the year ended June 29, 2001 with respect to the Registrant and
the year ended May 5, 2001 with respect to BCD
Notes to Pro Forma Condensed Consolidated Financial Statements
2
(c) Exhibits
2.1 Acquisition Agreement dated as of July 9, 2001, by and among the
Registrant, C-COR Europe Holding, B.V., Broadband Capital Corp.,
Broadband Royalty Corp. and ADC Telecommunications, Inc., ADC
Broadband Communications, Inc., ADC International Holding Company,
ADC Phasor Electronics GMBH, and ADC Argentina, S.R.L.
(incorporated by reference to the Registrant's 8-K dated August 4,
2001, and filed on August 20, 2001, File No. 0-10726).
2.2 Amendment No. 1 to Acquisition Agreement dated as of August 4,
2001, by and among the Registrant, C-COR Europe Holding, B.V.,
Broadband Capital Corp., Broadband Royalty Corp. and ADC
Telecommunications, Inc., ADC Broadband Communications, Inc., ADC
International Holding Company, ADC Phasor Electronics GMBH, and ADC
Argentina, S.R.L. (incorporated by reference to the Registrant's
8-K dated August 4, 2001 and filed on August 20, 2001, File No.
0-10726).
23 Consent of Arthur Andersen LLP (Minneapolis, MN).
3
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 hereunto duly authorized.
C-COR.net Corp.
(Registrant)
Date: October 19, 2001 /s/ William T. Hanelly
---------------------------------------
William T. Hanelly
Chief Financial Officer, Secretary
and Treasurer
4
ADC Telecommunications, Inc. -
Broadband Communications
Division and Subsidiaries
Consolidated financial statements
as of October 31, 2000 together
with report of independent public
accountants
5
Report of independent public accountants
To ADC Telecommunications, Inc.:
We have audited the accompanying consolidated balance sheet of Broadband
Communications Division (a division of ADC Telecommunications, Inc., a Minnesota
corporation) and Subsidiaries as of October 31, 2000, and the related
consolidated statements of operations, parent's equity and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Broadband Communications
Division and Subsidiaries as of October 31, 2000, and the results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States.
Arthur Andersen LLP
Minneapolis, Minnesota
August 3, 2001
6
ADC TELECOMMUNICATIONS, INC. -
BROADBAND COMMUNICATIONS DIVISION
AND SUBSIDIARIES
Consolidated balance sheet
As of October 31, 2000
(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,787
Accounts receivable, net of reserves of $3,836 29,960
Inventories 41,372
Deferred taxes 2,760
Prepaid and other current assets 2,014
---------
Total current assets 78,893
PROPERTY AND EQUIPMENT, net 9,805
GOODWILL, net 19,711
DEFERRED TAXES 686
---------
$ 109,095
=========
LIABILITIES AND PARENT'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 10,892
Accrued compensation and benefits 5,388
Other accrued liabilities, primarily warranty 6,363
Current maturities of long-term debt 2,740
Income taxes payable 823
Payable to Parent 48,910
---------
Total current liabilities 75,116
LONG-TERM DEBT, less current maturities 1,487
---------
Total liabilities 76,603
---------
COMMITMENTS AND CONTINGENCIES (Notes 6 and 9)
PARENT'S EQUITY:
Parent's equity in division 33,867
Accumulated other comprehensive loss (1,375)
---------
Total parent's equity 32,492
---------
$ 109,095
=========
The accompanying notes are an integral part of this consolidated financial
statement.
7
ADC TELECOMMUNICATIONS, INC. -
BROADBAND COMMUNICATIONS DIVISION
AND SUBSIDIARIES
Consolidated statement of operations
For the year ended October 31, 2000
(In thousands)
NET SALES $ 168,612
COST OF PRODUCTS SOLD 110,155
---------
Gross profit 58,457
EXPENSES:
Selling and administration 36,239
Research and development 21,574
Goodwill amortization 1,882
Nonrecurring charges 667
---------
Total expenses 60,362
---------
OPERATING LOSS (1,905)
INTEREST EXPENSE (1,418)
OTHER EXPENSE, net (1,661)
---------
LOSS BEFORE INCOME TAXES (4,984)
INCOME TAX BENEFIT (1,695)
---------
NET LOSS $ (3,289)
=========
The accompanying notes are an integral part of this consolidated financial
statement.
8
ADC TELECOMMUNICATIONS, INC. -
BROADBAND COMMUNICATIONS DIVISION
AND SUBSIDIARIES
Consolidated statement of parent's equity
For the year ended October 31, 2000
(In thousands)
Accumulated
other
comprehensive Comprehensive
Parent's equity loss loss
--------------- ------------- -------------
BALANCE, at October 31, 1999 $37,156 $ (351) $ -
Net loss (3,289) - (3,289)
Translation adjustment - (1,024) (1,024)
-------- ------ -----
BALANCE, at October 31, 2000 $33,867 $(1,375) $(4,313)
The accompanying notes are an integral part of this consolidated financial
statement.
9
ADC TELECOMMUNICATIONS, INC. -
BROADBAND COMMUNICATIONS DIVISION
AND SUBSIDIARIES
Consolidated statement of cash flows
For the year ended October 31, 2000
(In thousands)
OPERATING ACTIVITIES:
Net loss $(3,289)
Adjustments to reconcile net loss to net cash
provided by operating activities-
Depreciation and amortization 5,161
Net change in accounts receivable and inventory reserves 71
Change in assets and liabilities, net of effects from acquisitions:
Accounts receivable 5,109
Inventories 1,692
Prepaid and other assets (1,496)
Accounts payable (1,912)
Accrued liabilities and other (1,334)
Borrowings from Parent, net 3,876
-------
Net cash provided by operating activities 7,878
-------
INVESTING ACTIVITIES:
Property and equipment additions, net (5,752)
Acquisitions, net of cash acquired (2,657)
Sale of investment 1,604
-------
Net cash used for investing activities (6,805)
-------
FINANCING ACTIVITIES:
Decrease in debt (1,098)
-------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (43)
-------
DECREASE IN CASH AND CASH EQUIVALENTS (68)
CASH AND CASH EQUIVALENTS, beginning of year 2,855
-------
CASH AND CASH EQUIVALENTS, end of year $ 2,787
=======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 238
The accompanying notes are an integral part of this consolidated financial
statement.
10
ADC TELECOMMUNICATIONS, INC. -
BROADBAND COMMUNICATIONS DIVISlON
AND SUBSIDIARIES
Notes to consolidated financial statements
October 31, 2000
1 Summary of significant accounting policies
--------------------------------------------
Organization
Broadband Communications Division (BCD or the Company), a wholly owned operation
of ADC Telecommunications, Inc. (ADC or the Parent), manufactures and sells
products primarily to cable companies and other entities that want to transmit
and receive video.
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, Phasor Electronics GmbH (Phasor) and
Comtec Electronica S.R.L. (Comtec). All significant intercompany amounts have
been eliminated in consolidation.
Fair value disclosure of financial instruments
The Company's financial instruments consist of cash and cash equivalents,
short-term trade receivables and payables for which current carrying amounts are
equal to or approximate fair market values. The fair values of debt approximate
the current rates at which the Company could borrow funds with similar remaining
maturities and risks.
Cash and cash equivalents
Cash equivalents represent short-term investments in commercial paper with
original maturities of three months or less. The carrying amounts of these
investments approximate their fair value due to their short maturities.
Inventories
Inventories include material, labor and overhead and are stated at the lower of
first-in, first-out cost or market.
Income taxes
BCD utilizes the liability method of accounting for income taxes. Deferred tax
liabilities or assets are recognized for the expected future tax consequences of
temporary differences between the book and tax bases of assets and liabilities.
11
Property and equipment
Property and equipment are recorded at cost. Additions, improvements or major
renewals are capitalized, while expenditures, which do not enhance or extend the
asset's useful life, are charged to operating expenses as incurred. Depreciation
is computed using the straight-line method based on the estimated useful life of
the asset. The components of property and equipment and the useful lives of the
assets are as follows as of October 31, 2000 (dollars in thousands):
Useful lives
------------
Buildings $ 2,128 25 years
Equipment 24,335 3-10 years
Furniture and fixtures 1,727 3-l0 years
Assets under construction 952
Less- Accumulated depreciation (19,337)
---------
Property and equipment, net $ 9,805
=========
Goodwill
The excess of the cost of acquired businesses over the fair value of the net
assets acquired is amortized on a straight-line basis ranging from 7 to 25
years. Management periodically assesses the amortization period and
recoverability of the carrying amount of goodwill based upon an estimate of
undiscounted future cash flows from related operations.
Revenue recognition
BCD recognizes revenues from equipment sales upon shipment, when risk of loss
for the equipment has transferred to the customer and collectibility of amounts
receivable from customers are reasonably assured.
Significant customers
The Company's two largest customers accounted for 27 percent of net sales in the
12 months ended October 31, 2000. No other customers accounted for more than 10
percent of net sales. At October 31, 2000, the Company had 27 percent, or
approximately $9.1 million, of receivables due from two customers.
New accounting pronouncements
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101 "Revenue Recognition in Financial Statements."
SAB No. 101, as amended, summarizes some of the SEC's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. At this time, management does not expect the adoption of SAB No. 101
to have a material effect on the Company's operations or financial position. The
Company is required to adopt SAB No. 101 in the fourth quarter of fiscal year
2001.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No.141, "Business Combinations" and SFAS
No. 142, "Goodwill and Other Intangible Assets." Under these new standards, all
acquisitions subsequent to June 30, 2001 must be accounted for under the
purchase method of accounting and purchased goodwill is no longer amortized over
its useful life. Rather, goodwill will be subject to a periodic impairment test
based on its fair value. SFAS No. 142 is effective in fiscal year 2003, although
earlier adoption is permitted. The Company is currently evaluating the potential
effect of the implementation of these two standards on the financial condition
and results of operations.
12
Use of estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Ultimate results could differ from those estimates.
Foreign currency translation
BCD converts assets and liabilities of foreign operations to their U.S. dollar
equivalents at rates in effect at the balance sheet date and records translation
adjustments in parent's equity. Income statements of foreign operations are
translated from the operations' functional currency to the U.S. dollar
equivalents at the exchange rate on the transaction dates. Foreign-exchange
transaction gains and losses are reported in other expense, net.
2 Acquisitions
--------------
In January 2000, the Company acquired Comtec, a provider of telecommunication
equipment to cable companies in South America, for approximately $3.7 million in
cash, plus direct expenses. The acquisition has been accounted for under the
purchase method of accounting and Comtec's results have been included in the
Company's results since acquisition. Had Comtec been acquired on November 1,
1999, results of BCD's operations would not have been materially different than
those reported in the accompanying consolidated financial statements.
Approximately $3.1 million of the purchase price was allocated to tangible net
assets acquired and the remainder was assigned to goodwill. Tangible net assets
acquired include cash, accounts receivable, inventories and fixed assets.
Liabilities assumed principally include accounts payable, accrued compensation
and accrued expenses. Goodwill resulting from the acquisition is being amortized
on a straight-line basis over seven years.
3 Long-term debt
----------------
Long-term debt consisted of the following as of October 31, 2000 (in thousands):
Unsecured note payable due in semiannual installments of $500,
interest at three month LIBOR rate (6.76% as of October 31, 2000) $ 2,200
Unsecured note payable due on December 31, 2000, interest at 5% 1,600
Unsecured bank note payable, payments due on June 30, 2001 and
March 31, 2003, interest rates ranging from 2% to 3% 427
-------
4,227
Less-Current maturities 2,740
-------
$ 1,487
=======
13
Aggregate annual maturities of long-term debt are as follows for the years
ending October 31 (in thousands):
2001 $ 2,740
2002 1,000
2003 287
2004 200
----------
Total $ 4,227
==========
4 Nonrecurring charges
----------------------
During the fourth quarter of fiscal year 2000, ADC's management approved a
restructuring plan to consolidate unproductive and duplicative facilities. The
total estimated charges recorded related to this restructuring plan were
$667,000 and are reported as nonrecurring charges in the accompanying
consolidated statement of operations. The charges included approximately
$394,000 for employee termination costs and approximately $273,000 in facility
closing costs. As of October 31, 2000, approximately $152,000 of costs related
to the restructuring are included in other accrued liabilities in the
accompanying consolidated balance sheet.
5 Related-party transactions
----------------------------
For the year ended October 31, 2000, ADC charged the Company approximately $24.4
million for certain administrative costs primarily related to marketing and
sales, customer service, information systems and human resources. In addition,
medical and workers' compensation insurance claims are paid by ADC on behalf of
the Company. The charges for these payments include both expenses that are
directly attributable to BCD and allocations of corporate costs and are included
in payable to Parent on the accompanying balance sheet.
6 Commitments
-------------
Capital expenditure commitments
As of October 31, 2000, the Company had entered into capital expenditure
purchase commitments of approximately $2.7 million, which will be funded from
borrowings from ADC.
14
Leases
The Company leases office space and real estate under noncancelable operating
leases.
Future minimum payments under these leases as of October 31, 2000 are as follows
(in thousands):
2001 $ 1,566
2002 1,490
2003 375
2004 312
----------
Total $ 3,743
==========
Under the terms of the lease agreements, the Company also is responsible for
certain operating expenses and taxes. Total rent expense of approximately $1.4
million was charged to operations for the year ended October 31, 2000.
7 Employee benefit plans
------------------------
Retirement savings plan
Substantially all employees are eligible to participate in ADC's retirement
savings plan (the Plan). ADC matches employee contributions to the Plan up to 6
percent of wages and, depending on ADC performance, may voluntarily make an
additional contribution up to 70 percent on 6 percent of wages. Employees are
fully vested in all contributions. BCD's contributions to the Plan were
approximately $624,000 during fiscal year 2000. The Plan's trustee invests a
portion of BCD's cash contributions in ADC's common stock.
Global employee stock purchase plan
ADC has a global employee stock purchase plan available to substantially all
employees. Eligible employees may purchase ADC common stock through payroll
deductions. Until April 2000, the discounted purchase price given to ADC
employees on ADC stock was 85 percent of the market closing price of ADC stock
at the end of each stock purchase period. Under the new stock purchase plan,
employees can purchase ADC common stock at a price equal to the lower of 85
percent of the market closing price of ADC's stock at the beginning or end of
each stock purchase period.
Stock award plan
ADC maintains a Global Stock Incentive Plan to grant various stock awards,
including stock options at fair market value and restricted shares, to key
employees of ADC. The following schedule summarizes activity restated for
management and employees of the Company (shares in thousands):
Weighted
average
Shares exercise price
------ --------------
Outstanding at October 31, 1999 20,619 $ 8.91
Granted 10,251 46.02
Exercised (3,444) 7.04
Canceled (3,063) 11.91
-------- --------
Outstanding at October 31, 2000 24,363 $ 14.92
======== ========
Exercisable at October 31, 2000 8,548 $ 8.29
======== ========
15
SFAS No. 123, "Accounting for Stock-Based Compensation," encourages, but does
not require, a fair-value-based method of accounting for employee stock options
or similar equity instruments. As permitted under the standard, the Company has
continued to account for employee stock options using the intrinsic value method
outlined in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees." Accordingly, the Company has recognized no compensation
expense for the Global Stock Incentive Plan.
If compensation expense for the Company's stock-based compensation plan had been
determined based on the fair value at the grant dates consistent with the method
of SFAS No. 123, the Company's net loss would have increased to the pro forma
amount indicated below for the year ended October 31, 2000 (in thousands):
Net loss:
As reported $ (3,289)
Pro forma (6,631)
The weighted average fair value per option at the date of grant for options
granted in 2000 was $13.84. The fair value was estimated using the Black-Scholes
option pricing model with the following weighted average assumptions:
Risk-free interest rate 5.91%
Expected dividend -
Expected volatility factor 82.90
Expected option term 4.5 years
8 Income taxes
--------------
The Company's operations are included in the consolidated federal income tax
return of ADC. Federal income taxes are paid to or refunded by ADC pursuant to
the terms of a tax-sharing agreement under which taxes approximate the amount
that would have been computed on a separate company basis. The provision for
foreign income taxes is based upon foreign pretax earnings of approximately $2.9
million during fiscal year 2000.
The components of the benefit for income taxes for 2000 are (in thousands):
Current taxes receivable (payable):
Federal $ 1,390
Foreign (874)
State 138
-----------
654
Deferred 1,041
-----------
Total benefit $ 1,695
===========
The effective income tax rate differs from the federal statutory rate as
follows:
Federal statutory rate 35%
Goodwill amortization (14)
State income taxes, net 5
Foreign income taxes 3
Other 5
---------
Effective income tax rate 34%
=========
16
Deferred tax assets (liabilities) as of October 31, 2000 are composed of the
following (in thousands):
Current deferred tax assets (liabilities):
Asset valuation reserves $1,659
Accrued liabilities 1,330
Other (229)
----------
Total $2,760
==========
Noncurrent deferred tax assets:
Investment $ 391
Depreciation 295
----------
$ 686
==========
9 Litigation
------------
From time to time, the Company is involved in legal actions which arise in the
ordinary course of its business. Although the outcome of any such legal actions
cannot be predicted, in the opinion of the Company's management, the resolution
of any currently pending or threatened actions will not have a material adverse
effect upon the financial position of BCD.
10 Subsequent events
--------------------
During fiscal year 2001, ADC's management approved restructuring plans, which
included initiatives to consolidate unproductive and duplicative facilities and
dispose of product lines that no longer fit ADC's current focus and growth
strategy. During January 2001, a charge of approximately $2.0 million was
recorded for employee terminations and inventory write-offs. Additional charges
of approximately $1.2 million and $928,000 were recorded in April and July 2001,
respectively, for employee termination and facility consolidation costs.
During April 2001, an impairment charge of approximately $31.8 million was
recorded by ADC because the estimated fair value using a discounted cash flow
model was less than the carrying value of BCD's assets.
During August 2001, the Company was sold by ADC to C-COR.net Corp., a global
provider of broadband technology and services, for approximately $32 million
inclusive of certain liabilities assumed by C-COR.net Corp. In accordance with
the terms of the purchase agreement, the initial purchase price was reduced for
ADC's estimate of the remaining liability related to warranty claims for a
specific product. In addition, certain assets and liabilities were retained by
ADC, consisting primarily of accounts receivable and accounts payable.
17
ADC TELECOMMUNICATIONS, INC. -
BROADBAND COMMUNICATIONS DIVISION
CONSOLIDATED BALANCE SHEET - UNAUDITED
As of May 5, 2001
(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 789
Accounts receivable, net 15,770
Inventories 39,670
Prepaid income taxes and other assets 2,560
------------
Total current assets 58,789
PROPERTY AND EQUIPMENT, net 8,562
OTHER ASSETS 1,275
------------
$ 68,626
============
LIABILITIES AND PARENT'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 6,700
Accrued liabilities 11,566
Notes payable and current
maturities of long-term debt 1,154
Payable to Parent 54,162
------------
Total current liabilities 73,582
LONG-TERM DEBT, less current maturities 973
------------
Total liabilities 74,555
PARENT'S EQUITY (5,929)
------------
$ 68,626
============
18
ADC TELECOMMUNICATIONS, INC. -
BROADBAND COMMUNICATIONS DIVISION
CONSOLIDATED STATEMENTS OF OPERATIONS-UNAUDITED
(In thousands)
Six Months Ended
--------------------------------
May 5, April 28,
2001 2000
-------------- ---------------
NET SALES $ 60,135 $ 85,245
COST OF PRODUCTS SOLD 56,820 54,802
-------------- ---------------
GROSS PROFIT 3,315 30,443
-------------- ---------------
EXPENSES:
Research and development 8,226 10,844
Selling and administration 23,497 17,334
Impairment charges 18,453 -
Goodwill amortization 625 1,170
Nonrecurring charges 3,139 -
-------------- ---------------
Total expenses 53,940 29,348
-------------- ---------------
OPERATING INCOME (LOSS) (50,625) 1,095
OTHER INCOME (EXPENSE), NET:
Interest (902) (652)
Other (67) (1,303)
-------------- ---------------
LOSS BEFORE INCOME TAXES (51,594) (860)
BENEFIT FOR INCOME TAXES 11,412 334
-------------- ---------------
NET LOSS $ (40,182) $ (526)
============== ===============
19
ADC TELECOMMUNICATIONS, INC. -
BROADBAND COMMUNICATIONS DIVISION
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(In thousands)
Six Months Ended
------------------------
May 5, April 28,
2001 2000
---------- --------
OPERATING ACTIVITIES:
Net loss $(40,182) $ (526)
Adjustments to reconcile net income to net cash from
Operating activities -
Inventory and fixed asset write-offs (recovery) 124 (842)
Depreciation and amortization 2,473 2,810
Accounts receivable reserves 1,346 13
Impairment charges 18,453 -
Changes in operating assets and liabilities, net
of acquisitions
Accounts receivable 16,333 8,637
Inventories 4,967 (1,588)
Prepaid income taxes and other assets 2,642 (4,144)
Accounts payable (4,648) (5,713)
Accrued liabilities (2,537) (2,476)
---------- --------
Total cash used for operating activities (1,029) (3,829)
---------- --------
INVESTMENT ACTIVITIES:
Acquisitions, net of cash acquired (2,657) (4,752)
Property and equipment additions (218) (1,479)
Long-term investments - 1,604
---------- --------
Total cash used for investment activities (2,875) (4,627)
---------- --------
FINANCING ACTIVITIES:
Increase in debt and due to parent 1,985 9,017
---------- --------
Total cash from financing activities 1,985 9,017
---------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (79) 61
---------- --------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,998) 622
CASH AND CASH EQUIVALENTS, beginning of period 2,787 2,855
---------- --------
CASH AND CASH EQUIVALENTS, end of period $ 789 $ 3,477
========== ========
20
Note to Unaudited Interim Financial Statements
The unaudited interim financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information, and
in the opinion of management, contain all the adjustments (consisting of normal,
recurring adjustments), necessary to fairly present BCD's financial position as
of May 5, 2001, and the results of its operations for the six-month periods
ended May 5, 2001 and April 28, 2000.
21
PRO FORMA FINANCIAL INFORMATION
The accompanying unaudited pro forma condensed consolidated balance sheet of the
Registrant as of June 29, 2001, and the related unaudited pro forma condensed
consolidated statement of operations for the year ended June 29, 2001, give
effect to the acquisition of certain assets and liabilities of ADC
Telecommunications, Inc.'s, Broadband Communications Division (BCD), as
described in Note 1 of the Notes to the Pro Forma Condensed Consolidated
Financial Statements, as if the transaction had occurred as of June 29, 2001, in
the case of the unaudited pro forma condensed consolidated balance sheet, and as
of July 1, 2000, in the case of the unaudited pro forma condensed consolidated
statement of operations.
The unaudited pro forma condensed consolidated statement of operations for the
year ended June 29, 2001, also gives effect to the Registrant's acquisition of
MobileForce Technologies, Inc. (MobileForce) completed on April 27, 2001, as
described in Note 2 of the Notes to the Pro Forma Condensed Consolidated
Financial Statements, as if the transaction had occurred as of July 1, 2000.
The unaudited pro forma condensed consolidated financial statements have been
prepared by the Registrant and should be read in conjunction with the
Registrant's historical consolidated financial statements, which have been
previously filed in the Company's Annual Report on Form 10-K for the year ended
June 29, 2001, the historical consolidated financial statements of BCD, which
are included elsewhere in this Form 8-K/A, and the historical financial
statements of MobileForce, which have been previously filed by the Registrant on
Form 8-K/A, dated April 27, 2001, as amended on July 10, 2001.
Since the unaudited pro forma condensed consolidated financial statements which
follow are based upon the financial condition of BCD and operating results of
BCD and MobileForce during the periods when they were not under the control or
management of the Registrant, the information presented may not be indicative of
the results which would have actually been obtained had the acquisitions been
completed on July 1, 2000 nor are they indicative of future operating results or
financial position.
Consideration for the acquisition was approximately $24,904,000 consisting of a
cash payment of $24,596,000 to ADC and direct transaction costs incurred of
approximately $308,000. The pro forma information including the allocation of
the purchase price is based on management's estimates. An independent valuation
of intangible assets has not yet been completed, and as such, the allocations
and related tax effects are preliminary and subject to change. For purposes of
the pro forma information included, the excess of the purchase price over the
allocation to tangible identifiable assets and liabilities has been presumed to
be goodwill, and therefore no amortization was reflected in the unaudited pro
forma condensed consolidated statement of operations.
22
C-COR.NET CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
June 29, 2001
Historical
------------------------ PRO FORMA PRO FORMA
C-COR BCD ADJUSTMENTS COMBINED
------------ ------- ----------- ---------
ASSETS
Current Assets:
Cash and cash equivalents $ 87,891 $ 789 $ (64) (A) $ 63,712
(24,904) (E)
Marketable securities 13,002 - - 13,002
Receivables, net 26,593 15,770 (7,523) (A) 33,246
(1,594) (C)
Inventories 34,809 39,670 (19,616) (C) 54,863
Prepaid and other assets 21,990 2,560 (88) (A) 26,101
1,639 (B)
------------------------------------- ------------
Total current assets 184,285 58,789 (52,150) 190,924
Property, plant and equipment, net 21,609 8,562 (35) (A) 29,266
(870) (C)
Intangible assets, net 22,994 1,275 (1,275) (C) 26,845
3,851 (B)
Other assets 9,817 - - 9,817
------------------------------------- ------------
$ 238,705 $ 68,626 $ (50,479) $ 256,852
===================================== ============
LIABILITIES
Current Liabilities:
Accounts payable $12,723 $ 6,700 $ (5,487) (A) $ 13,936
Accrued liabilities 18,297 11,566 (4,225) (A) 34,804
9,166 (C)
Current portion of long-term debt 264 1,154 (1,000) (A) 418
------------------------------------- ------------
Total current liabilities 31,284 19,420 (1,546) 49,158
Long-term debt, less current portion 1,501 973 (700) (A) 1,774
Other liabilities 2,011 - - 2,011
Shareholders' equity 203,909 48,233 3,702 (A) 203,909
(51,935) (D)
------------------------------------- ------------
$ 238,705 $ 68,626 $ (50,479) $ 256,852
===================================== ============
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
23
C-COR.NET CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
For the Year Ended June 29, 2001
Historical
--------------------------------- PRO FORMA PRO FORMA
C-COR MobileForce BCD ADJUSTMENTS COMBINED
-------- ------------- --------- ----------- ---------
Net sales $223,295 $ 501 $ 143,502 $ - $ 367,298
Cost of sales 177,668 1,876 112,173 - 291,717
---------------------------------------------- -----------
Gross margin 45,627 (1,375) 31,329 - 75,581
Operating expenses:
Selling and administrative 31,011 5,886 42,402 - 79,299
Research and product development 17,399 5,363 18,956 - 41,718
Amortization of goodwill and other intangibles 1,536 - 1,337 6,142 (A) 9,015
Acquired in-process technology charge 1,500 - - 1,500
Goodwill impairment - 18,453 - 18,453
Restructuring costs 11,031 - 3,806 - 14,837
---------------------------------------------- -----------
Total operating expenses 62,477 11,249 84,954 6,142 164,822
---------------------------------------------- -----------
Loss from operations (16,850) (12,624) (53,625) (6,142) (89,241)
Interest and other income, net 3,859 (1,886) (2,093) - (120)
---------------------------------------------- -----------
Loss before income taxes (12,991) (14,510) (55,718) (6,142) (89,361)
Income tax benefit (5,164) - (12,773) (7,228) (B) (31,893)
(6,728) (C)
---------------------------------------------- -----------
Loss from continuing operations $ (7,827) $ (14,510) $ (42,945) $ 7,814 $ (57,468)
============================================== ===========
Net loss per share:
Basic $ (0.24) $ (1.75)
Diluted $ (0.24) $ (1.75)
Weighted average common shares and
common share equivalents
Basic 32,905 32,905
Diluted 32,905 32,905
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
24
C-COR.NET CORP.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
NOTE 1 - ADJUSTMENTS TO THE BALANCE SHEET
(A) To reflect an adjustment for certain assets and liabilities of BCD that
were not acquired or assumed by the Registrant as part of the purchase
transaction.
(B) To reflect the excess of acquisition cost over the estimated fair value of
net assets acquired. The purchase price and purchase allocation are
summarized as follows:
Purchase price:
Cash paid to ADC Telecommunications, Inc. $24,596
Direct transaction costs and expenses 308
------
Total purchase price $24,904
======
Allocated to:
Historical book values of BCD
assets and liabilities $48,233
Adjustment in the basis of assets acquired and liabilities
not assumed as part of the purchase transaction (See A) 3,702
Fair value adjustments:
Accounts receivable (1,594)
Inventory (19,616)
Property, plant and equipment (870)
Intangible assets (1,275)
Accrued liabilities (9,166)
Deferred tax assets for differences in fair value and tax basis 1,639
------
Total allocations $21,053
======
Excess purchase price over allocation to
tangible identifiable assets and liabilities $ 3,851
======
The allocation of purchase price is based upon management's estimates and
reflect fair market value adjustments to the carrying value of assets
acquired and liabilities assumed in the acquisition. The fair market value
adjustments primarily include inventories related to certain product lines
that became redundant or are being discontinued, as well as certain
warranty liabilities assumed in the purchase.
(C) To reflect the fair value adjustments of assets and liabilities acquired
(see B).
(D) To reflect the elimination of shareholder's equity accounts of BCD.
(E) To reflect the consideration paid for the acquisition, which included a
cash payment to ADC Telecommunications, Inc. and direct transaction costs
and expenses.
25
NOTE 2 - ADJUSTMENTS TO THE STATEMENT OF OPERATIONS
(A) To reflect the amortization of the goodwill and acquired intangible assets
over the estimated useful life of three years for the Registrant's
acquisition of MobileForce Technologies, Inc. (MobileForce) from the period
of July 1, 2000 through the acquisition date of April 27, 2001.
(B) To reflect the tax effect of goodwill amortization and record tax benefits
related to the net loss of MobileForce on a consolidated basis, using the
federal statutory rate of 35%. State tax benefits, if any, have not been
provided since management believes it is not more likely than not that the
Registrant would have realized for state income tax purposes a tax benefit
for the net loss of MobileForce in the period presented.
(C) To reflect the additional tax benefit related to net losses of BCD on a
consolidated basis, using the federal statutory rate of 35%. State tax
benefits, if any, have not been provided since management believes it is
not more likely than not that the Registrant would have realized for state
income tax purposes a tax benefit for the net loss of BCD in the period
presented.
26
EXHIBIT INDEX
DESCRIPTION
EXHIBIT
NUMBER
2.1 Acquisition Agreement dated as of July 9, 2001, by and among the
Registrant, C-COR Europe Holding, B.V., Broadband Capital Corp.,
Broadband Royalty Corp. and ADC Telecommunications, Inc., ADC
Broadband Communications, Inc., ADC International Holding Company,
ADC Phasor Electronics GMBH, and ADC Argentina, S.R.L. (incorporated
by reference to the Registrant's 8-K dated August 4, 2001 and filed
on August 20, 2001, File No. 0-10726).
2.2 Amendment No. 1 to Acquisition Agreement dated as of August 4, 2001,
by and among the Registrant, C-COR Europe Holding, B.V., Broadband
Capital Corp., Broadband Royalty Corp. and ADC Telecommunications,
Inc., ADC Broadband Communications, Inc., ADC International Holding
Company, ADC Phasor Electronics GMBH, and ADC Argentina, S.R.L.
(incorporated by reference to the Registrant's 8-K dated August
4,2001 and filed on August 20, 2001, File No. 0-10726).
23 Consent of Arthur Andersen LLP (Minneapolis, MN).
EXHIBIT 23
Consent of independent public accountants
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 8-K, into the Company's previously filed
registration statements on Form S-8 (Nos. 2-95959, 33-27440, 33-35208, 33-66590,
333-02505, 333-30982, 333-43592, 333-49826, 333-61226, 333-64040, 333-65805 and
333-89067) and on Form S-3 (Nos. 333-82697, 333-90011, 333-90589 and 333-32676).
/s/ Arthur Andersen LLP
-----------------------
Arthur Andersen LLP
Minneapolis, Minnesota
October 19, 2001