C-COR Loses Big in Q3

STATE COLLEGE, Pa. -- C-COR.net Corp. (Nasdaq:CCBL), a global provider of broadband communications products, software systems, and services, today reported its financial results for the third quarter of fiscal year 2003, ended March 28, 2003. Management will discuss C-COR's financial results on a conference call today at 11:00 AM (ET). For information on how to access the conference call, refer to C-COR's news release dated April 2, 2003 (posted on the C-COR web site at www.c-cor.net), or contact Investor Relations at 814-231-4438. Net sales for the third quarter of fiscal year 2003 were $50.1 million, compared to $77.2 million for the same period last year. Bookings in the third quarter were $56.4 million for a book-to-bill ratio of 1.13. The Company recorded a net loss of $115.3 million for the third quarter of fiscal year 2003 compared to net income of $109,000 for the same period last year. The net loss on a per share basis for the third quarter of fiscal year 2003 was $3.17, compared to net income per share of $.00 for the same period last year. The third quarter loss includes the following special items:

The $46.9 million charge to recognize a valuation allowance represents a full reserve of net deferred tax assets, consisting mainly of deferred tax assets related to U.S. and foreign net operating loss carryforwards and financial statement reserves. Given the large operating loss recorded this quarter, in conjunction with previous quarterly operating losses, the Company recorded the tax valuation allowance as the realization of the net deferred tax assets in future periods is uncertain. The $40.9 million charge for impairment of goodwill results from an impairment analysis that reflects current levels of customer demand and market valuations of equipment suppliers. After the impairment charge, the Company has $32.6 million of goodwill and $4.5 million of other intangible assets on its balance sheet. The goodwill impairment analysis was conducted internally by the Company in parallel with a third party appraisal being performed. The impairment charge will be adjusted for any changes resulting from the third party appraisal. It is expected that the third party appraisal of the fair value of the reporting units will be completed prior to the May 12, 2003 filing date for the Company's third quarter Quarterly Report on Form 10-Q. The $18.1 million increase in reserves for obsolete and slow-moving inventory reflects reduced levels of customer demand, product line rationalization including the designation of certain products in an end-of-life status, and application of criteria to slow-moving inventory items that reflect current economic conditions in the industry. On a pro forma basis, the Company recorded a loss of $9.6 million for the third quarter of fiscal year 2003, compared to net income of $2.1 million for the same period last year. The net loss per share on a pro forma basis for the third quarter of fiscal year 2003 was $.26, compared to a pro forma profit of $.06 per share for the same period last year. The pro forma results exclude the aforementioned special items. A complete reconciliation of the net loss reported on a GAAP (generally accepted accounting principle) basis with the net loss reported on a pro forma basis is provided in the attached table. The pro forma results for the third quarter of fiscal year 2003 are not directly comparable to the Company's previous guidance of a pro forma loss of between $.13 and $.17 or to the First Call consensus estimate of a pro forma loss of $.15 since these numbers include an income tax benefit and the Company's pro forma third quarter results do not. Taking into account the difference in income tax benefit, the third quarter pro forma loss was at the low end of the guidance range. C-COR anticipates that net sales for the fourth quarter of fiscal year 2003, ending June 27, 2003, will be between $48 million and $53 million with a loss per share of between $.14 and $.17 on a GAAP basis. On a pro forma basis, the Company anticipates a net loss per share of between $.12 and $.15. The difference between the GAAP and the pro forma projections is the exclusion of $550,000 of amortization of intangible assets relating to acquisitions from the pro forma results. Both the GAAP and pro forma loss per share projections exclude any tax benefit. Next quarter's results will be the final time the Company includes pro forma results in its earnings release. The Company will continue to identify the effect of significant accounting transactions so that investors can better evaluate the Company's financial results. C-COR.net