3Com Reports Fiscal Q1 Results; Cash Balance of $1.39 Billion.Business Editors/High-Tech Writers SANTA CLARA Santa Clara, city, Cuba Santa Clara (sän`tä klä`rä), city (1994 est. pop. 217,000), capital of Villa Clara prov., central Cuba. , Calif.--(BUSINESS WIRE)--Sept. 19, 2002 3Com Corporation (Nasdaq:COMS COMS 3Com Corporation (stock symbol) COMS Certified Orientation and Mobility Specialist COMS Continuous Opacity Monitoring Systems COMS City of Manchester Stadium (UK) ) today reported financial results for its first quarter of fiscal year 2003 ended August 30, 2002. Revenues for the quarter were $305 million, down 10 percent from the prior fiscal quarter. Gross margins were $145 million, or 48 percent of revenues, up approximately four percentage points sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen . Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. were $172 million, a decrease of $15 million sequentially. The net loss was $32 million, or $0.09 per share, including restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. of $23 million, or $0.06 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. . This compares to a net loss of $19 million, or $0.05 per share, in the previous quarter and a net loss of $223 million, or $0.65 per share, in the first quarter of the prior fiscal year. 3Com announced on July July: see month. 22, 2002 that the company would discontinue dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: the use of pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma reporting. Beginning this fiscal quarter, operating results will be presented only on a U.S. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). (Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ) basis. These results are not comparable to First Call earnings estimates, which were prepared on a pro forma basis. The company ended the quarter with $1.39 billion in cash and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments, an increase of $5 million from the previous quarter, while reducing debt by $35 million. Strong working capital management continued, with a cash-to-cash cycle of eight days. Collection of accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying (DSO See CSO. ) was 41 days, average days payables Payables Related: Accounts payable outstanding (DPO DPO Direct Public Offering (finance/investment) DPO Direct Public Offering DPO District Police Officer (Pakistan) DPO Days Payables Outstanding DPO Document Process Outsourcing DPO Days Past Ovulation ) was 64 days, and average inventory turnover was 11.6 turns. NOTE: Attached is the full text of 3Com's fiscal first quarter 2003 formal earnings remarks. Additional comparative financial data is also attached. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. This press release and Mr. Claflin's and Mr. Slaven's remarks on the quarterly results contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the federal securities laws, including statements regarding the following: our gains in market segments; cost and expense management; the performance of the economy and the particular segments in which we and our customers operate; our ability to achieve revenue growth and profitability; revenue; gross margins; contribution margins; our existing and future product offerings; P&L performance; working capital management; our balance sheet; and trends in external markets in certain geographies. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially, including the following: possible fluctuations in the demand for our products and in economic conditions affecting the markets for our products; our ability to successfully manage costs and expenses; possible delays or inability to collect accounts receivable; guarantees or other credit arrangements with end customers; continued or increased reductions in capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. in the technology and networking sectors; possible development or marketing delays relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc our product offerings; our ability to plan and forecast channel and company inventory; possible defects in our product offerings; the introduction of new products by competitors or entry of new competitors into the markets for our products; and recovery in the capital equipment expenditures of carriers and service providers. A detailed discussion of other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in 3Com's most recent filings with the Securities and Exchange Commission, including 3Com's quarterly report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended May 31, 2002. 3Com undertakes no obligation to update forward-looking statements to reflect events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or occurring after the date of this press release. About 3Com Corporation 3Com is a tier-one provider of innovative, practical and high-value networking products for enterprise customers. 3Com is also a leader in Internet protocol See Internet and TCP/IP. (networking) Internet Protocol - (IP) The network layer for the TCP/IP protocol suite widely used on Ethernet networks, defined in STD 5, RFC 791. IP is a connectionless, best-effort packet switching protocol. (IP) service platforms and access infrastructure for the network service provider market. For further information, please visit www.3com.com, or the press site www.3com.com/pressbox.
Comments on the First Quarter of Fiscal 2003
To be delivered during the analyst conference call by
Mark Slaven, 3Com senior vice president and chief financial officer
I'd I'd 1. Contraction of I had. 2. Contraction of I would. I'd I had or I would I'd have ~would like to begin by telling you about some changes we are implementing to make it easier for you to understand our results. First, we have included a copy of these notes with the press release to make it easier for you to follow along. Second, we have made the decision to stop publishing pro forma income statements. We will continue to provide sufficient detail relative to restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). , amortization of intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. and other special items in order for you to get a better sense of what the underlying run rate performance of the business is from a margin and expense standpoint The Standpoint is a newspaper published in the British Virgin Islands. It was originally published under the name Pennysaver, largely as a shopping-coupon promotional newspaper, but since emerged as one of the most influential sources of journalism in the . Third, we are including additional information on stock options in the attachments to the press release, and providing continued visibility into our Connectivity segment. I will now take you through our financial results for Q1, starting with a brief overview. We are reporting revenues of approximately $305 million, down 10 percent from the prior quarter, and at the low end of our guidance given last quarter. Included is approximately $5 million of revenue from discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: businesses, which was also included in the guidance provided for this quarter. Despite the revenue decline, gross margins improved almost 4 points to approximately 48 percent. Several factors contributed to this improvement and will be covered later. Total operating expenses were approximately $172 million, including approximately $27 million in restructuring charges, amortization of intangibles and write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of real estate held for sale. The operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. was $26 million. The net loss was approximately $32 million and EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. was a negative 9 cents per share. This includes a combined negative impact of approximately 11 cents per share from restructuring charges, amortization of intangibles, write-down of real estate held for sale, and loss on equity investments. It also includes a positive impact of approximately 2 cents per share from interest income on a tax refund Tax refund Money back from the government when too much tax has been paid or withheld from a salary. . Cash and short-term investment balances increased slightly to $1.39 billion. Net of debt, cash and short-term investment balances increased approximately $40 million. Before turning to each business segment I want to explain some changes. -- A mark to market write-down on equity investments; and -- A loss on the sale of our interest in several venture funds. This sale also reduces future cash obligations by approximately $16 million. Enterprise Networking The networking infrastructure in a large enterprise with multiple computer systems and networks of different types is extraordinarily complex. Due to the myriad of interfaces that are required, much of what goes on has little to do with the real data processing of the payroll and orders. Segment -- Revenues for our Enterprise Networking segment were approximately $196 million, a decline of approximately 2 percent sequentially; within expectations given a seasonally weak quarter. -- Revenue performance varied by geography. In the Americas A·mer·i·cas , the See America. sales increased 9 percent sequentially, our third straight quarter of sequential One after the other in some consecutive order such as by name or number. growth. Sales for our other two geographic regions declined 10 percent sequentially, with particular weakness in EMEA (Europe, Middle East, Africa) Refers to that region of the world. For example, one might see products packaged differently for the UK, EMEA and Asia Pacific markets. . -- While overall revenues were down due to the weakness in EMEA, revenue in our LAN telephony An IP telephony system that is contained within a local area network (LAN). See IP telephony and voice capable Ethernet switch. , wireless and modular products combined, increased by approximately 9 percent sequentially. -- Contribution margin declined by approximately $3 million, reflecting additional investment in marketing and sales which were made to drive future growth. Connectivity Segment -- Revenues for the Connectivity segment were approximately $68 million, down 27 percent from $93 million in the prior quarter. The sequential decline is largely attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to decline in our OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and business. -- This segment delivered a positive contribution margin of $19 million. This is down from a contribution margin of $25 million in Q4'02, due to the decline in revenues. As a percent of revenue contribution margin remains strong at 28 percent. -- This business has been, and will continue to be, run for positive contribution margin and cash flow in the face of still declining revenues. CommWorks Segment -- Revenues for CommWorks were approximately $36 million, down approximately $8 million from Q4, and reflecting continued softness in spending by telecommunications service providers A Telecommunications Service Provider or TSP is a type of Communications Service Provider that has traditionally provided telephone and similar services. This category includes ILECs, CLECs, and mobile wireless companies. . -- Contribution margin was negative $11 million versus a negative $25 million in the prior quarter. However, excluding a $16 million write-down of acquired intangibles in Q4'02, division contribution margin declined from negative $9 million last quarter to negative $11 million this quarter. Improvement in operating expenses was more than offset by the loss in gross margin due to the decline in revenues. -- CommWorks continues to take additional steps to streamline streamline, path of a fluid flowing steadily and without appreciable turbulence. A body is said to be streamlined if its shape offers the least possible resistance to a current of air, water, or other fluid. its cost and expense structure in order to improve its contribution margin performance in the current depressed market, with a goal to achieve break-even contribution margin by the end of this fiscal year. -- As we have said before, CommWorks has staked out strong positions in some important technologies and, we believe, still presents a good long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. value proposition. Gross Margins Overall gross margins improved almost 4 points sequentially. The improvement was primarily driven by cost reductions. Standard related margins improved approximately 2 points due largely to component cost reductions, lower cost designs and favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. mix. Margins also improved due to a decline in other costs, including a duty refund TO REFUND. To pay back by the party who has received it, to the party who has paid it, money which ought not to have been paid. 2. On a deficiency of assets, executors and administrators cum testamento annexo, are entitled to have refunded to them legacies of approximately $4 million. Additionally, there was approximately $3 million in benefit from the sale or disposition of inventory that had previously been written-off.
Operating Expenses
Included in operating expenses of $172 million, were the following
items:
-- $23 million in restructuring charges consisting of:
1) $14 million in severance related expenses;
2) $6 million in facilities related expenses;
3) $2 million fixed asset impairment; and
4) $1 million in exit charges.
Also,
-- $2.5 million amortization of intangibles; and
-- $1 million write-down of real estate held for sale.
The number of employees, including alternative work force, at the end of Q1 was approximately 4,600, as compared to approximately 4,900 at the end of the prior quarter. Gains (Losses) on Investments Net loss on equity investments was approximately $12 million, consisting of two items of approximately $6 million each: -- A mark to market write-down on equity investments; and -- A loss on the sale of our interest in several venture funds. This sale also reduces future cash obligations by approximately $16 million. Interest and Other Income Interest and other income, net, was approximately $10 million including approximately $5 million of net interest income relating primarily to a tax refund received last year. Income Tax Provision The income tax provision is $4 million primarily representing tax on foreign earnings. Net Loss per Share, Shares Outstanding The net loss per share is 9 cents including the impacts previously mentioned. Basic shares outstanding for Q1 were approximately 357 million, up approximately two million shares from the prior quarter due to option exercises. Cash Cash and short-term investment balances increased approximately $5 million in the quarter, including a net reduction of $35 million in debt. Cash used in financing activities was approximately $33 million due to debt reduction of $35 million, against the receipt of $2 million from stock option exercises. Cash provided by investing activities was approximately $17 million driven by the following factors: -- $19 million from the sale of our facility in Mount Prospect, Illinois Illinois, river, United States Illinois, river, 273 mi (439 km) long, formed by the confluence of the Des Plaines and Kankakee rivers, NE Ill., and flowing SW to the Mississippi at Grafton, Ill. It is an important commercial and recreational waterway. and miscellaneous equipment; and -- $6 million in proceeds from the sale of equity investments. -- These proceeds were offset by the use of $8 million for capital expenditures and new equity investments. Cash generated from operating activities was approximately $21 million. This result includes cash receipts of approximately $14 million from tax and duty related refunds and interest on a tax refund. It also includes cash disbursements of $18 million related to previously announced restructuring activities; specifically, $10 million related to severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when and $8 million as the final installment related to excess manufacturing capacity. Excluding these items, cash generated from operating activities was approximately $25 million. Our cash cycle was 8 days. DSO increased slightly to 41 days, average inventory turns improved from 11.3 to 11.6 and average days payable was 64 days. Forward Looking Guidance I will now end with some guidance on the second quarter of our fiscal '03. This will include forward-looking statements about various matters pertaining per·tain intr.v. per·tained, per·tain·ing, per·tains 1. To have reference; relate: evidence that pertains to the accident. 2. to fiscal 2003. Please refer to the safe harbor language in the earnings release, which is available on our website, for factors that could cause actual results to vary. We expect total revenues to decline sequentially by approximately 5 to 8 percent, driven by another substantial decline in our Connectivity segment sales. However, sales for our Enterprise Networking segment are expected to increase modestly while sales for CommWorks are expected to be roughly flat. We expect gross margins to decline 3 to 4 points sequentially, principally due to the following: -- The anticipated absence of benefits from duty refunds and the sale or disposition of previously written off inventory; and -- Lower margins in the Connectivity segment due to much lower revenues. We expect normal operating expenses to decline slightly, as the decline from restructuring related actions is substantially offset by additional investment in sales and marketing and accelerated depreciation Accelerated Depreciation Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years of the life of an asset. Notes: The straight-line depreciation method spreads the cost evenly over the life of an asset. on IT applications. We expect non-operating income of approximately $3 to 5 million and the tax provision to be approximately $4 million. Additional charges due to restructuring, loss on sale of assets and investments, and asset impairments are likely, though not possible to predict in the aggregate at this time. Regarding cash balances: Given the strong balance sheet and cash position we plan to pay down most, if not all of the borrowings under the revolver revolver: see small arms. revolver Pistol with a revolving cylinder that provides multishot action. Some early versions, known as pepperboxes, had several barrels, but as early as the 17th century pistols were being made with a revolving chamber to . Net of debt reduction, we are forecasting a modest decline in balances of 1 to 2 percent driven by payments related to restructuring actions.
Comments on the First Quarter of Fiscal 2003
To be delivered during the analyst conference call by
Bruce Claflin, 3Com president and chief executive officer
Given that everyone is aware of the continuing softness in our overall market, my words today are going to focus more on our future potential. In the face of a negative industry environment, we are taking actions that will allow us to thrive as market conditions improve and the competitive landscape changes. In my letter to shareholders I reiterated our belief that the leading, tier-one networking company of the future will be the one that offers innovative, feature-rich products and solutions that excel at Verb 1. excel at - be good at; "She shines at math" shine at excel, surpass, stand out - distinguish oneself; "She excelled in math" low cost of acquisition and ownership. Further, if that company also maintains the lowest cost structure and best asset velocity, it can generate superior financial returns. We intend to be that company. Let me explain why. At the early stages of any new technology or product category, customers don't don't 1. Contraction of do not. 2. Nonstandard Contraction of does not. n. A statement of what should not be done: a list of the dos and don'ts. have experience buying, installing and managing the new technology. Standards aren't aren't Contraction of are not. See Usage Note at ain't. aren't are not aren't be set, interfaces aren't open, and management tools and experience are limited. At this early stage of a segment's evolution, customers have typically turned to the vendors who "de-mystify" the technology for them, paying a premium price along the way. But over time, standards become set, interfaces are understood, and management tools and experience become pervasive pervasive, adj indicates that a condition permeates the entire development of the individual. . When this happens, customers increasingly look to get the best value for their purchase dollar. That does not mean they want the "cheapest." They want to know that their technology is current and the vendor they select will keep it that way. They want to know that their vendor will provide "headroom head·room n. 1. Space above one's head, as in a motor vehicle, above a doorway, or in a tunnel; clearance. 2. Electronics Dynamic headroom. " to grow as their needs change. They want to know that their vendor has a commitment to quality and support. But having satisfied that, customers will then increasingly expect their vendor's offerings to be price competitive both to buy and to own. I believe the networking industry is entering this new phase and 3Com intends to exploit it, starting first in the enterprise segment. To enhance our status as a tier-one enterprise networking company, we will expand our higher end Coordinates: For other places with the same name, see Billinge. Higher End or Billinge Higher End is a district of the Metropolitan Borough of Wigan, in Greater Manchester, England. data and voice offerings, allowing us to compete more effectively for mid to large size customers and the channels that serve them. To support our expanded product line, we are currently adding field resources to work with our customers and partners on larger, more complex opportunities. In order to maintain differentiated products we will continue to invest in core technologies such as ASICs and software. We will innovate in·no·vate v. in·no·vat·ed, in·no·vat·ing, in·no·vates v.tr. To begin or introduce (something new) for or as if for the first time. v.intr. To begin or introduce something new. around architectures and systems design and will leverage emerging technologies around IP telephony The two-way transmission of voice over a packet-switched IP network, which is part of the TCP/IP protocol suite. The terms "IP telephony" and "voice over IP" (VoIP) are synonymous. , wireless, gigabit and 10 gigabit, as well as security and layer 3 plus capabilities. These investments will ensure we continue to offer innovative, feature rich products. But if we just stopped there, our strategy would be similar to others you may follow in the networking industry. What particularly sets us apart from all our major competitors is our commitment to also provide products that excel at low cost of acquisition and ownership. To that end we are wringing wring v. wrung , wring·ing, wrings v.tr. 1. To twist, squeeze, or compress, especially so as to extract liquid. Often used with out. 2. unnecessary cost out of our company in every area in which we do business. For example, we are increasing the percent of our R&D budget devoted to cost reduced products In model theory, a branch of mathematical logic, the reduced product is a construction that generalizes both direct product and ultraproduct. . And we are moving basic engineering activities to low cost locations such as greater China and India India, officially Republic of India, republic (2005 est pop. 1,080,264,000), 1,261,810 sq mi (3,268,090 sq km), S Asia. The second most populous country in the world, it is also sometimes called Bharat, its ancient name. India's land frontier (c. . We are increasingly outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. a number of cost and capital-intensive Capital-intensive Used to describe industries that require large investments in capital assets to produce their goods, such as the automobile industry. These firms require large profit margins and/or low costs of borrowing to survive. activities such as manufacturing and IT infrastructure. And we are taking down our overhead structure to ensure our spending is consistent with the most efficient companies in the IT industry. Last, we continue to drive the concept of "asset velocity" which is exemplified by our already best in class cash to cash cycle. By running our business at a lower cost than our competitors and having the most efficient use of capital we can offer a substantially better value proposition than our competitors on both price and functionality while still having strong financial returns. We know of no other major networking company that is pursuing this strategy and believe it will lead to market leadership and strong financial returns in the future. While this is a long-term vision for our company, its implementation is under way. And we expect to see results now, particularly in our enterprise segment, sequentially growing revenue starting in Q2 and again in Q4. And as we get further into the execution of this strategy we will see accelerating performance not only across our enterprise segment, but all of our businesses.
3Com Corporation
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended
August 30, May 31, August 31,
2002 2002 2001
Sales $ 304,722 $ 338,511 $ 389,589
Cost of sales 159,257 189,547 326,821
----------- ----------- -----------
Gross margin 145,465 148,964 62,768
----------- ----------- -----------
Operating expenses:
Sales and marketing 66,981 66,602 106,224
Research and development 50,929 54,208 85,881
General and administrative 26,906 27,538 40,999
Amortization and write down
of intangibles 2,452 23,794 16,484
Restructuring charges 23,157 14,372 57,515
Losses on land and
facilities, net 1,152 -- --
----------- ----------- -----------
Total operating expenses 171,577 186,514 307,103
----------- ----------- -----------
Operating loss (26,112) (37,550) (244,335)
Gains (losses) on
investments, net (11,465) 1,684 (2,650)
Interest and other
income, net 9,597 12,271 19,158
----------- ----------- -----------
Loss before income taxes (27,980) (23,595) (227,827)
Income tax provision 4,000 163 4,557
----------- ----------- -----------
Net loss $ (31,980) $ (23,758) $(232,384)
=========== =========== ===========
Net loss per basic and
diluted share $ (0.09) $ (0.07) $ (0.67)
=========== =========== ===========
Shares used in computing
basic and diluted per share
amounts: 357,437 355,345 344,313
Effective June 1, 2002, FAS 142 was adopted. The results above exclude
the impact, if any, from the transitional goodwill impairment
evaluation required under FAS 142. Any financial statement impact of
this evaluation will be completed in our second fiscal quarter, and
will be reflected as a retroactive adjustment to the results for the
three months ended August 30, 2002.
In accordance with FAS 142, goodwill and workforce intangibles are no
longer amortized. The following table represents net loss and basic
and diluted loss per share as if FAS 142 was adopted in the first
quarter of fiscal 2002:
Three Months Ended
August 30, May 31, August 31,
2002 2002 2001
Actual reported net loss $ (31,980) $ (23,758) $(232,384)
Add back goodwill
amortization -- 4,710 8,321
Add back acquired workforce
amortization -- 166 666
----------- ----------- -----------
Adjusted net loss $ (31,980) $ (18,882) $(223,397)
Basic and diluted loss
per share:
Reported loss per share: $ (0.09) $ (0.07) $ (0.67)
Add back goodwill
amortization per share -- 0.02 0.02
Add back acquired workforce
amortization per share -- 0.00 0.00
----------- ----------- -----------
Adjusted basic and diluted
loss per share $ (0.09) $ (0.05) $ (0.65)
3Com Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
August 30, May 31,
2002 2002
ASSETS
Current assets:
Cash and short-term investments $ 1,387,294 $ 1,382,048
Accounts receivable, net 138,205 147,113
Inventories 48,176 61,777
Other current assets 55,883 72,106
------------- -------------
Total current assets 1,629,558 1,663,044
Deferred income taxes 6,055 6,192
Property and equipment, net 628,489 676,154
Goodwill, intangibles, deposits,
and other assets 160,623 181,402
------------- -------------
Total assets $ 2,424,725 $ 2,526,792
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 101,876 $ 125,903
Accrued liabilities and other 260,550 275,965
Current debt obligations 81,248 101,354
------------- -------------
Total current liabilities 443,674 503,222
Long-term debt and other 58,691 73,365
Stockholders' equity 1,922,360 1,950,205
------------- -------------
Total liabilities and
stockholders' equity $ 2,424,725 $ 2,526,792
============= =============
Additional Financial Data
(in thousands)
(unaudited)
Sales by Geography
Three Months Ended
August 30, May 31, $ %
2002 2002 Change Change
Americas $ 151,728 $ 158,046 $ (6,318) -4%
EMEA 101,930 111,869 (9,939) -9%
Asia Pacific Rim 51,064 68,596 (17,532) -26%
----------- ----------- -----------
Total Sales $ 304,722 $ 338,511 $ (33,789) -10%
=========== =========== =========== ======
Sales by Segment
Three Months Ended
August 30, May 31, $ %
2002 2002 Change Change
Connectivity
Segment $ 67,930 $ 93,428 $ (25,498) -27%
Enterprise
Networking
Segment 195,813 200,384 (4,571) -2%
CommWorks Segment 35,545 43,713 (8,168) -19%
----------- ----------- -----------
Subtotal 299,288 337,525 (38,237) -11%
Exited Product
Lines 5,434 986 4,448 451%
----------- ----------- -----------
Total Sales $ 304,722 $ 338,511 $ (33,789) -10%
=========== =========== =========== ======
Contribution Margin by Segment
Three Months Ended
August 30, May 31, $ %
2002 2002 Change Change
Connectivity
Segment $ 18,968 $ 24,876 $ (5,908) -24%
Enterprise
Networking
Segment 23,311 25,985 (2,674) -10%
CommWorks(1)
Segment (11,312) (25,435) 14,123 56%
----------- ----------- -----------
Subtotal 30,967 25,426 5,541 22%
Exited Product
Lines (613) (8,818) 8,205 93%
Total
Contribution
Margin $ 30,354 $ 16,608 $ 13,746 83%
(1) The contribution margin for CommWorks for the three months ended
May 31, 2002 includes a non-recurring charge of $16 million
related to the write-down of intangible assets.
Additional Financial Data
(unaudited)
Stock Options
Outstanding Options as of August 30, 2002
-----------------------------------------
Range of Number Weighted Average
Exercise prices of shares exercise price
------------ ------------------
(in thousands)
$ 0.13 - 4.80 31,703 $ 4.24
4.81 - 5.54 22,030 5.38
5.55 - 6.68 23,398 5.96
6.71 - 11.73 22,002 8.82
11.76 - 21.57 14,411 13.94
--------- ----------
Total 113,544 $ 6.93
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