3Com Reports Fiscal Q2 Results.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)--Dec. 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 second quarter of fiscal year 2003 ended November November: see month. 29, 2002. Revenues for the quarter were $303 million, including $15 million in royalties Not to be confused with Royal family. Royalties (sometimes, running royalties) are usage-based payments made by one party (the "licensee") to another (the "licensor") for ongoing use of an asset, most typically an intellectual property (IP) right. from a paid-up Paid-Up The state of a settlement when all payment obligations for a security have been completed in a customer account. When an individual has paid up, he or she has paid for the security in full. license. Gross margins were $156 million, or 51 percent of revenues, up approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 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 $217 million, an increase of $46 million sequentially. The net loss was approximately $69 million, or $0.19 per share. This compares to a net loss of $98 million, or $0.27 per share, in the previous quarter and a net loss of $95 million, or $0.27 per share, in the second quarter of the prior fiscal year. The net loss in the previous quarter includes an adjustment of $66 million for the write off of goodwill relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the adoption of SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 142. These results have been presented 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 and are not comparable to First Call earnings estimates. The company ended the quarter with $1.43 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 $46 million from the previous quarter, while reducing debt by $58 million. Strong working capital management continued, with a cash-to-cash cycle of five days. Days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). (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 12.8 turns. NOTE: Attached is the full text of 3Com's fiscal second quarter 2003 formal earnings remarks. Additional 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 performance in market segments; costs and expenses; cash and short-term investments balances; 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; trends in external markets in certain geographies; and our plans with regard to our real estate, employees, and R&D efforts. 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 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 ; 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 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 COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. 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-Q Form 10-Q See 10-Q. for the quarter ended August 30, 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 Second Quarter of Fiscal 2003
To be delivered during the analyst conference call by
Mark Slaven, 3Com senior vice president and chief financial officer
I will now take you through our financial results for Q2 of fiscal '03, starting with a brief overview. Revenues for the quarter were $303 million, including $15 million of royalties from a paid-up license with Xircom Xircom, Inc. was based in Thousand Oaks, California, with manufacturing facilities located in Penang & Malaysia and international offices throughout Europe and Asia Pacific. They were one of the first companies to develop network computing products for notebook computers. . Excluding the royalties, revenues were approximately $288 million, down approximately 6 percent from the prior quarter, and within our guidance of a 5 to 8 percent sequential One after the other in some consecutive order such as by name or number. decline. Gross margins improved almost 4 points to over 51 percent, driven largely by the benefit from the paid-up license. Total operating expenses were approximately $217 million, including approximately $70 million in 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. and $10 million in amortization and write downs 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. . 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 $61 million. The net loss was approximately $69 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 19 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 includes a combined negative impact of approximately 24 cents per share from restructuring charges, amortization and write downs of intangibles, gains on land and facilities, and losses on equity investments. It also includes a positive impact of approximately 5 cents per share from the paid-up license revenue and 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. Cash and short-term investment balances increased by $46 million to $1.43 billion, while overall debt balances were reduced by $58 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 -- $57 million from the sale of our facility in Marlborough, Massachusetts and $4 million from the sale of a facility in Salt Lake City; -- Net proceeds of approximately $1 million from equity investments; -- Offset by the use of $6 million for capital expenditures. Connectivity A generic term for connecting devices to each other in order to transfer data back and forth. It often refers to network connections, which embraces bridges, routers, switches and gateways as well as backbone networks. Segment -- Revenues for the Connectivity segment were much stronger than anticipated. Revenues including the $15 million paid-up license were $81 million. Excluding this $15 million, revenues were approximately $66 million, a decline of $2 million sequentially. While 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 sales declined sequentially, channel sales increased, nearly offsetting the OEM decline. -- This segment delivered a positive contribution margin of approximately $39 million including the $15 million benefit from the paid-up license. Excluding this benefit, contribution margin was approximately $24 million compared to $19 million in Q1. The increase was driven mainly by improved gross margins. CommWorks Segment -- Revenues for CommWorks were approximately $31 million, down approximately $5 million from Q1, 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 approximately negative $12 million and includes $4.5 million of write offs from impairments of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. . Without the write offs, the contribution margin improved by approximately $4 million over Q1, representing significant progress in the drive to achieve break even contribution margin by the end of the fiscal year. The improvement was largely the result of the substantial steps taken throughout the quarter to restructure the business. Gross Margins Overall gross margins improved almost 4 points sequentially, primarily the result of the $15 million in paid-up license revenue mentioned earlier. The remaining improvement was primarily the result of lower costs and favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. mix. As was the case last quarter, we received another duty refund of approximately $4 million, which benefited margins, and also received approximately $2 million in benefit from the sale or disposition Act of disposing; transferring to the care or possession of another. The parting with, alienation of, or giving up of property. The final settlement of a matter and, with reference to decisions announced by a court, a judge's ruling is commonly referred to as disposition, regardless of of inventory that had previously been written off. Operating Expenses Included in operating expenses of $217 million, were the following items:
-- $70 million in restructuring charges consisting of:
1) $11 million in severance related expenses;
2) a $31 million loss on the sale of property;
3) $17 million of write downs of assets held for sale and asset
retirements;
4) $9 million of accelerated depreciation on facilities in Santa
Clara;
5) and approximately $2 million of other miscellaneous items.
Also,
-- $10 million of amortization and write down of intangibles.
Excluding the restructuring charges and the amortization and write down of intangibles, operating expenses were approximately $138 million. The number of employees, including alternative work force, at the end of Q2 was approximately 4,200, as compared to approximately 4,600 at the end of the prior quarter. Gains (Losses) on Investments Net loss on equity investments was approximately $7 million, the result of fair value adjustments and write downs of 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. equity investments. Interest and Other Income Interest and other income, net, was approximately $4 million. Income Tax Provision The income tax provision was $4 million primarily representing tax on foreign earnings. Net Loss per Share, Shares Outstanding The net loss per share was approximately 19 cents including the impacts previously mentioned. Basic shares outstanding for Q2 were approximately 359 million, up approximately two million shares from the prior quarter due to option exercises and issuance of shares under the employee stock purchase program. Cash Cash and short-term investment balances increased approximately $46 million in the quarter, including a net reduction of $58 million in debt. Cash used in financing activities was approximately $46 million due to debt reduction of $58 million, against the receipt of $9 million from stock option exercises and employee purchases of shares and the receipt of $4 million on a note receivable note receivable A debt due from borrowers and evidenced by a written promise of payment. Note receivable, an entry on the asset side of many corporate balance sheets, indicates the dollar amount of loans due to be repaid by borrowers. . Additionally, we repurchased four hundred thousand shares of 3Com stock at an average price of $3.89 under a share repurchase plan share repurchase plan A corporation's plan for buying back a predetermined number of its own shares in the open market. Institution of a share repurchase plan derives from management's view that the company has limited outside investment opportunities and authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: during the quarter. Cash provided by investing activities was approximately $56 million driven by the following factors: -- $57 million from the sale of our facility in Marlborough, Massachusetts and $4 million from the sale of a facility in Salt Lake City; -- Net proceeds of approximately $1 million from equity investments; -- Offset by the use of $6 million for capital expenditures. Cash generated from operating activities was approximately $35 million. This includes $15 million from the paid-up license, and $4 million in duty refunds. It also includes cash disbursements of approximately $15 million related to previously announced 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). activities, including $13 million related to separation. Excluding these items, cash generated from operating activities was approximately $31 million. Our cash cycle was 5 days, our second best performance ever. DSO remained flat at 41 days. Average inventory turns improved from 11.6 to a new record of 12.8, and average days payable was 64 days. Forward Looking Guidance I will now end with some guidance on the third 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. Historically the third quarter has been a seasonally weaker quarter for the company. Setting aside the $15 million in royalties received in Q2, we expect total revenues to decline sequentially by approximately 5 to 7 percent. We expect the Connectivity segment to decline approximately 20 percent as OEM sales continue to decline and we enter a seasonally slower quarter for channel sales. We expect the Enterprise Networking segment to decline modestly due to the seasonal weakness and we expect sales for CommWorks to be roughly flat. We expect gross margins to be in the range of 45 to 47 percent. We expect a modest decline in ongoing operating expenses. 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. Finally, we expect to maintain cash and short-term investment balances in excess of $1.4 billion.
Comments on the Second Quarter of Fiscal 2003
To be delivered during the analyst conference call by
Bruce Claflin, 3Com president and chief executive officer
We were all hopeful that as we ended calendar year 2002, it would be on a more upbeat note for the industry. Yet as we all know, that is not the case. However, despite the continuing challenges of the industry, I am confident in 3Com's future potential. We end the year with a strong balance sheet and superb cash position. We are enjoying growth in strategically important products like Layer 3 switching and LAN Telephony An IP telephony system that is contained within a local area network (LAN). See IP telephony and voice capable Ethernet switch. . For example, on December December: see month. 9, we released the XRN XRN - A newsreader program for Usenet news running under the X Window System. Interconnect (1) To attach one device to another. (2) A physical port (plug, socket) or wireless port (transmitter, receiver) used to attach one device to another. Kit, which demonstrates 3Com's commitment to delivering reliable, scalable networks to the enterprise market at lower prices and cost of ownership. Feedback from over 25 Beta See beta version, beta site, Betamax and Betacam. 1. BETA - Kristensen, Madsen <olmadsen@daimi.aau.dk>, Moller-Pedersen & Nygaard, 1983. Object-oriented language with block structure, coroutines, concurrency, strong typing, part objects, separate objects and customers has been very favorable, and we are actively selling and shipping kits. We are readying future phases of the technology to enable enterprises to have a long-term, flexible path of scalability How much a system can be expanded. See scalable. scalability - How well a solution to some problem will work when the size of the problem increases. For example, a central server of some kind with ten clients may perform adequately but with a thousand clients it and network optimization optimization Field of applied mathematics whose principles and methods are used to solve quantitative problems in disciplines including physics, biology, engineering, and economics. . Also, our previously announced products that use XRN technology showed healthy growth this quarter. As a result, our Layer 3 fixed-configuration Gigabit switches pulled ahead of Extreme Networks in revenue and ports shipped, and 3Com now holds the #2 position in both categories, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Dell'Oro. In LAN Telephony, we have now had four straight quarters of revenue growth. All this proves 3Com's ability to successfully introduce new products in growth areas. As you know, telecom related markets remain severely depressed Depressed A description of a market, security, or product that is experiencing weak demand and lowering prices. Notes: A depressed market, security, or product implies that prices and volume are low. There are many reasons for a depressed market, security, or product. . As a result we substantially reduced our cost structure in CommWorks. Despite lower revenues, this unit continued to make substantial progress in Q2 toward its goal of positive contribution margin in Q4 FY'03. Strategically, we've we've Contraction of we have. we've have set our sights on what it will take to be the tier one networking company of the future -- 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. While the economy and industry environment remain challenging, we remain confident in the long-term growth prospects of our industry and specifically, 3Com's ability to grow not just with, but also ahead of the industry.
3Com Corporation
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
------------------------------ ---------------------
Nov. 29, Aug. 30, Nov. 30, Nov. 29, Nov. 30,
2002 2002 2001 2002 2001
--------- --------- ---------- ---------- ----------
Sales $303,194 $304,722 $393,854 $607,916 $783,443
Cost of sales 147,316 159,257 260,857 306,573 581,641
Non-recurring
inventory
charges -- -- -- -- 6,037
--------- --------- ---------- ---------- ----------
Gross margin 155,878 145,465 132,997 301,343 195,765
--------- --------- ---------- ---------- ----------
Operating expenses:
Sales and
marketing 67,661 66,981 85,027 134,642 191,251
Research and
development 44,597 50,929 73,220 95,526 159,101
General and
administrative 25,633 26,906 28,786 52,539 69,785
Restructuring
charges 69,539 23,157 31,536 92,696 89,051
Amortization and
write down of
intangibles 10,048 2,452 12,884 12,500 29,368
Losses (gains) on
land and
facilities, net (265) 1,152 -- 887 --
--------- --------- ---------- ---------- ----------
Total operating
expenses 217,213 171,577 231,453 388,790 538,556
--------- --------- ---------- ---------- ----------
Operating loss (61,335) (26,112) (98,456) (87,447) (342,791)
Loss on
investments, net (7,087) (11,465) (4,620) (18,552) (7,270)
Interest and other
income, net 3,909 9,597 26,640 13,506 45,798
--------- --------- ---------- ---------- ----------
Loss before income
taxes and
cumulative effect
of change in
accounting
principle (64,513) (27,980) (76,436) (92,493) (304,263)
Income tax
provision 4,000 4,000 27,238 8,000 31,795
--------- --------- ---------- ---------- ----------
Loss before
cumulative effect
of change
in accounting
principle (68,513) (31,980) (103,674) (100,493) (336,058)
Cumulative effect
of change in
accounting
principle(1) -- (65,601) -- (65,601) --
--------- --------- ---------- ---------- ----------
Net loss $(68,513) $(97,581) $(103,674) $(166,094) $(336,058)
========= ========= ========== ========== ==========
Loss per basic and
diluted share
before cumulative
effect of change
in accounting
principle $(0.19) $(0.09) $(0.30) $(0.28) $(0.97)
Cumulative effect
of change in
accounting
principle -- (0.18) -- (0.18) --
--------- --------- ---------- ---------- ----------
Net loss per basic
and diluted share $(0.19) $(0.27) $(0.30) $(0.46) $(0.97)
========= ========= ========== ========== ==========
Shares used in
computing basic
and diluted per
share amounts 359,340 357,437 346,703 358,389 345,508
(1) During the quarter ended November 29, 2002, we completed the
transitional goodwill impairment evaluation prescribed by FAS 142
and recorded a charge totaling approximately $66 million as a
change in accounting principle effective June 1, 2002.
In accordance with FAS 142, which was adopted the first quarter of
fiscal 2003, 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 Six Months Ended
------------------------------ ---------------------
Nov. 29, Aug. 30, Nov. 30, Nov. 29, Nov. 30,
2002 2002 2001 2002 2001
--------- --------- ---------- ---------- ----------
Actual reported
net loss $(68,513) $(97,581) $(103,674) $(166,094) $(336,058)
Add back goodwill
amortization -- -- 8,306 -- 16,627
Add back acquired
workforce
amortization -- -- 669 -- 1,335
--------- --------- ---------- ---------- ----------
Adjusted net loss $(68,513) $(97,581) $(94,699) $(166,094) $(318,096)
Basic and diluted
loss per share:
Reported loss per
share: $(0.19) $(0.27) $(0.30) $(0.46) $(0.97)
Add back goodwill
amortization per
share -- -- 0.03 -- 0.05
Add back acquired
workforce
amortization per
share -- -- -- -- --
--------- --------- ---------- ---------- ----------
Adjusted basic and
diluted loss per
share $(0.19) $(0.27) $(0.27) $(0.46) $(0.92)
3Com Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
November 29, May 31,
2002 2002
-------------- -----------
ASSETS
Current assets:
Cash and short-term investments $1,433,602 $1,382,048
Accounts receivable, net 137,848 147,113
Inventories 44,010 61,777
Other current assets 58,349 72,106
-------------- -----------
Total current assets 1,673,809 1,663,044
Deferred income taxes 6,055 6,192
Property & equipment, net 487,152 676,154
Goodwill, intangibles, deposits,
and other assets 76,120 181,402
-------------- -----------
Total assets $2,243,136 $2,526,792
============== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $109,050 $125,903
Accrued liabilities and other 249,130 275,965
Current debt obligations 31,952 101,354
-------------- -----------
Total current liabilities 390,132 503,222
Long-term debt and other 49,777 73,365
Stockholders' equity 1,803,227 1,950,205
-------------- -----------
Total liabilities and stockholders'
equity $2,243,136 $2,526,792
============== ===========
Additional Financial Data
(in thousands)
(unaudited)
Sales by Geography
Three Months Ended
------------------------
November 29, August 30, $ %
2002 2002 Change Change
-------- -------- -------- ------
Americas(1) $139,005 $151,728 $(12,723) -8%
EMEA 116,109 101,930 14,179 +14%
Asia Pacific Rim 48,080 51,064 (2,984) -6%
-------- -------- --------
Total Sales $303,194 $304,722 $(1,528) -1%
======== ======== ======== ======
(1) Americas sales for the three months ended November 29, 2002
includes $15.0 million of royalty revenue from a paid-up license
Sales by Segment
Three Months Ended
------------------------
November 29, August 30, $ %
2002 2002 Change Change
-------- -------- -------- ------
Connectivity Segment(1) $81,291 $67,930 $13,361 +20%
Enterprise Networking
Segment 190,170 195,813 (5,643) -3%
CommWorks Segment 31,008 35,545 (4,537) -13%
-------- -------- --------
Subtotal 302,469 299,288 3,181 +1%
Exited Product Lines 725 5,434 (4,709) -87%
-------- -------- --------
Total Sales $303,194 $304,722 $(1,528) -1%
======== ======== ======== ======
(1) Connectivity segment sales for the three months ended
November 29, 2002 includes $15.0 million of royalty revenue
from a paid-up license
Contribution Margin by
Segment
Three Months Ended
------------------------
November 29, August 30, $ %
2002 2002 Change Change
-------- -------- -------- ------
Connectivity Segment(1) $38,566 $18,968 $19,598 103%
Enterprise Networking
Segment(2) 14,319 23,311 (8,992) -39%
CommWorks Segment(3) (11,549) (11,312) (237) -2%
-------- -------- --------
Subtotal 41,336 30,967 10,369 33%
Exited Product Lines 1,573 (613) 2,186 357%
-------- -------- --------
Total Contribution
Margin $42,909 $30,354 $12,555 41%
======== ======== ======== ======
(1) Connectivity segment contribution margin for the three months
ended November 29, 2002 includes $15.0 million of royalty
revenue from a paid-up license
(2) Enterprise Networking segment contribution margin for the
three months ended November 29, 2002 includes a write down
of intangibles of $3.2 million
(3) CommWorks segment contribution margin for the three months
ended November 29, 2002 includes write downs of intangibles
of $4.5 million
Additional Financial Data
(unaudited)
Stock Options Outstanding Options as of November 29, 2002
-------------------------------------------
Range of Number Weighted Average
Exercise prices of shares exercise price
--------------- --------------- ------------------
(in thousands)
$ 0.13 - 4.80 29,977 $ 4.23
4.81 - 5.54 20,721 5.38
5.55 - 6.68 22,043 5.96
6.71 - 11.73 20,241 8.80
11.76 - 21.57 13,476 13.94
--------- ----------
Total 106,458 $ 6.91
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