3Com Reports Fourth Quarter and Annual Fiscal Year 2006 Results; Delivers Continued Year-over-Year Improvements in Bottom-Line Performance; Announces Focused Business Restructuring.MALBOROUGH, Mass. -- 3Com Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : COMS COMS 3Com Corporation (stock symbol) COMS Certified Orientation and Mobility Specialist COMS Continuous Opacity Monitoring Systems COMS City of Manchester Stadium (UK) ): Fourth Quarter Highlights --GAAP loss per share was $0.04 in the fourth quarter, improved from a $0.15 loss per share in the prior-year quarter; and --GAAP revenue for the fourth quarter was $255 million, a 44 percent increase over the prior-year quarter; 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 consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: revenue for the fourth quarter of fiscal 2006 (assuming consolidation of the Huawei-3Com joint venture from the beginning of the period) was $304 million, a 22 percent increase over the prior-year quarter. 3Com Corporation (NASDAQ: COMS) today reported financial results for its fourth quarter and fiscal year-ended Fiscal Year-End The completion of a one-year, or 12-month, accounting period. Notes: The reason that a company's fiscal year often differs from the calendar year and does not close on Dec 31, is due to the nature of company's needs. June June: see month. 2, 2006. Starting with this reporting period 3Com is consolidating the results of its Huawei-3Com joint venture (H-3C) effective from the date that it became a majority-owned subsidiary majority-owned subsidiary A firm in which more than 50% of outstanding voting stock is owned by the parent company. . Specifically, 3Com's results for the fourth quarter consolidate Consolidate To combine the assets, liabilities, and other financial items of two or more entities into one. Notes: This term is generally used in the context of consolidated financial statements. H-3C's performance for the period of February February: see month. 1, 2006 through March 31, 2006; the January January: see month. 2006 results of H-3C were reported on the equity method consistent with prior period reporting(1). This period 3Com is also beginning to report segment results for two operating segments, Secure, Converged Networking The integration of the telephone system with IP-based data networks. See softswitch. (networking) converged network - A single network that can carry voice, video and data. (SCN SCN Scan SCN Sustainable Communities Network SCN System Change Number (Oracle) SCN Scientology SCN Suprachiasmatic Nucleus SCN Switched Circuit Network SCN Standing Committee on Nutrition (UN) ) and H-3C. Overall 3Com Results Revenue - 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 (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) basis Revenue for the fourth quarter of fiscal 2006 was $255 million, a 44 percent increase compared to same period in fiscal 2005. The growth is comprised of the consolidation of two months of H-3C revenue offset, in part, by a 6 percent decline in revenues from the SCN segment. Full year fiscal 2006 revenue was $795 million, a 22 percent increase compared to fiscal 2005. The growth is comprised of the consolidation of two months of H-3C revenue and growth in the SCN segment, primarily in security products. Revenue - Pro forma Basis(2) Pro forma revenue for the fourth quarter of fiscal 2006 was $304 million, an increase of 22 percent from the fourth quarter of fiscal 2005. The growth was comprised of a 90 percent growth in the H-3C operating segment offset in part by a 6 percent decline in the SCN segment. Gross Profit, Operating Expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. and 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. - GAAP Basis 3Com's gross profit for the fourth quarter of fiscal 2006 was $111 million, or 44 percent of revenue, which is a 9 percentage point improvement compared to the prior-year quarter. Fourth quarter fiscal 2006 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 $132 million, resulting in an operating loss of $21 million. This compares to a $62 million operating loss in the fourth quarter of fiscal 2005. The $41 million improvement comprises $15 million of operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. from H-3C's results and $26 million due to reduced operating loss in the SCN segment. Non-GAAP Operating Loss(3) The fourth quarter fiscal 2006 non-GAAP operating loss was $8 million, a $43 million improvement compared to the prior-year quarter's non-GAAP operating loss of $51 million. Net Loss 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. - GAAP basis The fourth quarter fiscal 2006 net loss was $15 million, or $0.04 per share, including 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). and amortization charges of $13 million, or $0.03 per share. In the same period of the prior year, the net loss was $58 million or $0.15 per share. Restructuring and amortization charges also represented $0.03 per share in the prior-year quarter. For the full fiscal year of 2006, the net loss was $101 million, or $0.26 per share. This compares to a net loss of $196 million or $0.51 per share for fiscal year 2005. Included in the fiscal 2006 net loss are restructuring and amortization charges of $35 million, or $0.09 per share. In fiscal 2005, restructuring and amortization charges were $33 million, or $0.09 per share. 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. Securities 3Com ended the quarter with $864 million in cash, cash equivalents and short-term investments, including the consolidated cash, cash equivalents and short-term investments of H-3C which totaled $169 million. Business Realignment re·a·lign tr.v. re·a·ligned, re·a·lign·ing, re·a·ligns 1. To put back into proper order or alignment. 2. To make new groupings of or working arrangements between. To help create a business model that 3Com believes supports 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. profitability and long-term growth, the company today outlined a multi-faceted restructuring plan. The plan focuses on reducing components of the SCN operating segment cost structure in order to achieve future profitability. The plan includes: the closure of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 21 facilities around the world; a reduction in workforce of approximately 250 full-time full-time adj. Employed for or involving a standard number of hours of working time: a full-time administrative assistant. full employees, equaling approximately 15 percent of its SCN headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. ; and focusing its sales, marketing and services efforts. As a result of this realignment, 3Com currently estimates it will record 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 approximately $10-$13 million. These charges are expected to be recorded principally during 3Com's first and second quarters of fiscal 2007. These actions are expected to be substantially completed by December December: see month. 31, 2006. "I am pleased with the progress that we have made in the past quarter in moving 3Com toward a profitable business model. H-3C delivered strong results, and we have continued to reduce the operating loss of our SCN business through solid cost control," commented Scott Murray
Conference Call Management will host a conference call and webcast at 5 p.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT today to discuss quarterly highlights, historical financial results and expectations of future performance. To participate on the call, U.S. and international parties may dial (913) 981-4903. Alternatively, interested parties may listen to the live broadcast of the call over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at 3Com's Investor Relations Investor relations The process by which the corporation communicates with its investors. Web site (www.3com.com/IR) in the Earnings webcast section. 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 contains 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. made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, including forward-looking statements regarding our goal to reach profitability and reduce costs and our restructuring plan (including, without limitation, facilities closures, workforce reduction, estimated charges and timing for each of the foregoing). These statements are neither promises nor guarantees, but involve risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements, including, without limitation, risks relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc : our ability to return to profitability in light of significant historical net losses; our focus on 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. and fluctuating fluc·tu·ate v. fluc·tu·at·ed, fluc·tu·at·ing, fluc·tu·ates v.intr. 1. To vary irregularly. See Synonyms at swing. 2. To rise and fall in or as if in waves; undulate. v. results based on conditions in that market; our ability to respond effectively to increased competition; our ability to compensate for lower sales or cash outlays Outlays Payments on obligations in the form of cash, checks, the issuance of bonds or notes, or the maturing of interest coupons. with cost reductions sufficient to generate positive net income or cash flow; the consequences of expense reduction; our dependence on our joint venture in China (H-3C); H-3C's success; economic, political and social events in China; the market acceptance of our products and the inclusion of our technology in industry standards; our ability to successfully develop relationships with system integrators See systems integrator. , service providers and enterprise VARs; H-3C's dependence on Huawei Huawei Technologies Co. Ltd. (Chinese: 华为技术有限公司; Pinyin: Huáwei Jíshu Yǒuxiàn Gōngsī ; our ability to hire and retain qualified personnel; the ability of our manufacturing 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. strategy to meet cost, quality and performance standards; China's reforms and changing economic environment; our ability to maintain effective internal controls that include H-3C; and other risks detailed in the Company's filings with the SEC, including those discussed in the Company's annual report filed with the SEC 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 June 3, 2005. 3Com Corporation assumes no obligation to update any forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. information contained in this press release or with respect to the announcements described herein. References to the financial information included in this press release and the related conference call reflect rounded numbers and should be considered approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. values. About 3Com Corporation 3Com Corporation is a leading provider of secure, converged voice and data networking solutions for enterprises of all sizes. 3Com offers a broad line of innovative products backed by world class sales, service and support, which 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" delivering business value for its customers. Through its TippingPoint Acquired by 3Com in 2005, TippingPoint sells Intrustion Prevention Systems (IPS). History Early 1999: Founded as Shbang! TippingPoint was originally founded in 1999, selling internet appliances under the name Shbang!. division, 3Com is the leading provider of network-based intrusion prevention See IPS and IDS. systems that deliver in-depth in-depth adj. Detailed; thorough: an in-depth study. in-depth Adjective detailed or thorough: an in-depth analysis application protection, infrastructure protection, and performance protection. 3Com also is the majority owner of Huawei-3Com Co., Ltd. (H-3C), a China-based joint venture formed by 3Com and Huawei in November November: see month. 2003. H-3C brings innovative and cost-effective cost-effective, n the minimal expenditure of dollars, time, and other elements necessary to achieve the health care result deemed necessary and appropriate. product development and manufacturing and a strong footprint The amount of geographic space covered by an object. A computer footprint is the desk or floor surface it occupies. A satellite's footprint is the earth area covered by its downlink. See form factor. 1. in one of the world's most dynamic markets. For further information, please visit www.3com.com, or the press site www.3com.com/pressbox. Copyright (C) 2006 3Com Corporation. 3Com and the 3Com logo are registered trademarks and TippingPoint is a trademark of 3Com Corporation. All other company and product names may be trademarks of their respective holders. (1)H-3C is on a calendar reporting schedule (a two month difference from 3Com's fiscal reporting schedule). The two month time lag will continue as 3Com consolidates future H-3C results. (2)Assumes consolidation of H-3C for the full fiscal fourth quarter and in comparison periods. See Table F. (3)Non-GAAP operating loss measures exclude restructuring, amortization, in-process research and development and certain unusual items such as executive transition and impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. . The required reconciliations and other disclosures are set forth later in this press release in Table D and in the Current Report on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. furnished fur·nish tr.v. fur·nished, fur·nish·ing, fur·nish·es 1. To equip with what is needed, especially to provide furniture for. 2. to the SEC on the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" .
3Com Corporation
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
TABLE A
Three Months Ended Year Ended
----------------------------- ---------------------
June 2, March 3, June 3, June 2, June 3,
2006 2006 2005 2006 2005
--------- --------- --------- ---------- ----------
Sales $255,276 $177,563 $176,642 $794,807 $651,244
Cost of sales 143,999 105,157 114,460 466,743 416,916
--------- --------- --------- ---------- ----------
Gross profit 111,277 72,406 62,182 328,064 234,328
Operating
expenses:
Sales and
marketing 69,860 67,073 69,849 274,745 243,700
Research and
development 32,373 25,075 27,215 101,870 94,584
General and
administrative 16,571 19,520 15,817 72,596 59,833
Amortization of
intangibles 9,317 3,862 4,084 20,903 8,989
In-process
research and
development 650 - - 650 6,775
Restructuring
charges 3,426 4,148 7,548 14,403 23,922
--------- --------- --------- ---------- ----------
Total
operating
expenses 132,197 119,678 124,513 485,167 437,803
--------- --------- --------- ---------- ----------
Operating loss (20,920) (47,272) (62,331) (157,103) (203,475)
Gain on
investments, net 1,063 173 (163) 4,333 1,580
Interest and other
income, net 17,621 6,593 5,954 37,320 16,621
--------- --------- --------- ---------- ----------
Loss from
operations before
income taxes and
equity interest
in
unconsolidated
Huawei - 3Com
joint venture (2,236) (40,506) (56,540) (115,450) (185,274)
Income tax
(provision)
benefit (5,115) (1,030) (1,988) 14,833 (3,490)
Equity interest of
3Com in the
income (loss) of
unconsolidated
Huawei - 3Com
joint venture (1) 3,251 8,776 203 11,016 (6,922)
Minority Interest
of Huawei in the
(income) of
consolidated
Huawei - 3Com
joint venture (2) (11,074) - - (11,074) -
--------- --------- --------- ---------- ----------
Net loss $(15,174) $(32,760) $(58,325) $(100,675) $(195,686)
========= ========= ========= ========== ==========
Basic and diluted
loss per share: $(0.04) $(0.08) $(0.15) $(0.26) $(0.51)
========= ========= ========= ========== ==========
Shares used in
computing basic
and diluted per
share amounts 390,245 387,754 383,009 386,801 382,309
(1) Represents 3Com's interest in the Huawei-3Com joint venture for
the period prior to February 1, 2006
(2) Represents Huawei's interest in the Huawei-3Com joint venture for
the period subsequent to February 1, 2006
3Com Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
TABLE B
June 2, June 3,
2006 2005
----------- -----------
ASSETS
Current assets:
Cash and short-term investments $864,347 $844,104
Notes receivable 63,224 -
Accounts receivable, net 115,120 61,664
Inventories, net 148,819 29,311
Other current assets 57,835 42,430
----------- -----------
Total current assets 1,249,345 977,509
Property & equipment, net 105,294 69,535
Investment in joint venture - 135,969
Other assets 40,618 33,705
Goodwill 354,259 310,367
Intangibles, net 111,845 65,882
----------- -----------
Total assets $1,861,361 $1,592,967
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $153,245 $99,632
Accrued liabilities and other 318,036 209,928
----------- -----------
Total current liabilities 471,281 309,560
Deferred revenue and long-term obligations 13,788 8,484
Minority Interest (a) 173,930 -
Stockholders' equity 1,202,362 1,274,923
----------- -----------
Total liabilities and stockholders' equity $1,861,361 $1,592,967
=========== ===========
(a) Represents Huawei's 49 percent ownership in the H-3C
joint-venture.
Additional Financial Data
(in thousands)
(unaudited)
TABLE C
Sales by Geography (a)
Three Months Ended Year Ended
----------------------------- -------------------
June 2, March 3, June 3, June 2, June 3,
2006 2006 2005 2006 2005
North America $57,513 $60,875 $60,588 $248,532 $214,051
Latin and South
America 18,778 19,781 15,659 72,164 57,717
Europe, Middle East
and Africa 67,485 74,956 78,034 298,545 294,753
Asia Pacific Rim 111,500 21,951 22,361 175,566 84,723
--------- --------- --------- --------- ---------
Total Sales $255,276 $177,563 $176,642 $794,807 $651,244
========= ========= ========= ========= =========
(a) SCN segment sales are included in geographic categories based on
the location of the end customer. H-3C segment sales included in
the geographic categories are based upon the hub locations of OEM
partners in the case of OEM sales and the location of
end-customers in the case of direct customer sales.
Sales by Product Category
Three Months Ended Year Ended
----------------------------- -------------------
June 2, March 3, June 3, June 2, June 3,
2006 2006 2005 2006 2005
--------- --------- --------- --------- ---------
Networking $198,838 $119,473 $126,995 $577,038 $494,497
Security 24,681 25,542 14,881 88,012 25,781
Voice 14,532 12,503 14,102 56,632 45,002
Services 8,757 7,958 8,319 33,357 32,019
Connectivity
Products 8,468 12,087 12,345 39,768 53,945
--------- --------- --------- --------- ---------
Total Sales $255,276 $177,563 $176,642 $794,807 $651,244
========= ========= ========= ========= =========
3Com Corporation
Reconciliation of Non-GAAP Operating Loss
(in thousands)
(unaudited)
TABLE D
Three Months Ended Twelve Months Ended
------------------------------ ---------------------
June 2, March 3, June 3, June 2, June 3,
2006 2006 2005 2006 2005
---------- --------- --------- ---------- ----------
GAAP operating
loss $(20,920) $(47,272) $(62,331) $(157,103) $(203,475)
Asset
impairment
(a) - 4,200 - 4,200 -
Executive
transition
(b) - 4,612 - 4,612 -
Restructuring 3,426 4,148 7,548 14,403 23,922
Amortization
of intangible
assets 9,317 3,862 4,084 20,903 8,989
In-process
research and
development
(c) 650 - - 650 6,775
---------- --------- --------- ---------- ----------
Non-GAAP operating
loss $(7,527) $(30,450) $(50,699) $(112,335) $(163,789)
========== ========= ========= ========== ==========
(a) This charge is the result of the Company's decision to abandon
development plans utilizing licensed software for which the
Company had no alternative use.
(b) These charges represent expenses associated with transition of the
Company's Chief Executive Officer.
(c) This charge is the combination of: a write-down of in-process
R&D as part of the H-3C 2 percent majority ownership acquisition,
a write-down of in-process R&D as part of the TippingPoint
acquisition and certain technology assets acquired in Q1 of FY
2005.
Reconciliation of Non-GAAP H-3C Segment Financial Measures
(in thousands)
(unaudited)
TABLE E
Non-GAAP
GAAP H-3C H-3C
Segment Adjustments Segment
--------- ----------- ---------
Two Months One Month Three
Ended Ended Months
Ended
March 31, January 31, March 31,
2006 2006 2006 (d)
--------- ----------- ---------
Sales $108,290 $47,690 $155,980
Gross profit 51,437 24,372 75,809
Total sales and marketing, research and
development, and general and
administrative expenses 30,203 15,895 46,098
Other operating expenses (e) 6,377 2,484 8,861
Operating income 14,857 5,993 20,850
Net income before minority or equity
interest (f) $21,568 $6,631 $28,199
========= =========== =========
(d) Without eliminations
(e) Includes amortization for all periods presented plus an in-process
research and development charge of $650 for the two months ended
March 31, 2006.
(f) Represents net income before equity interest of 3Com, and minority
interest of Huawei, in H-3C.
The "pro forma consolidated" columns in the tables below show
selected items from 3Com Corporation's GAAP statement of operations on
a pro forma basis as if H-3C was consolidated as of the beginning of
the relevant periods. For the sake of clarity, the non-GAAP
adjustments made to 3Com's operating loss measure on the prior page of
this release have not been made to these financials. Certain of these
pro forma measures, however, are considered "Non GAAP", as indicated
3Com Corporation
Non-GAAP Pro Forma Consolidated
Statements of Operations
(in thousands, except per share data)
(unaudited)
TABLE F
Twelve Three
Months Months
Three Months Ended Ended Ended
--------------------------------------- ----------- ----------
Sept 2, Dec 2, March 3, June 2, June 2, June 3,
2005 (a) 2005 (a) 2006 2006 2006 2005 (a)
Sales $259,615 $282,470 $304,938 $304,425 $1,151,448 $248,684
Net
loss $(42,649) $(11,348) $(33,010) $(15,237) $(102,244) $(58,623)
========= ========= ========= ========= =========== ==========
EPS $(0.11) $(0.03) $(0.09) $(0.04) $(0.26) $(0.15)
========= ========= ========= ========= =========== ==========
Shares
used in
com-
puting
EPS 383,760 385,442 387,754 390,245 386,801 383,009
(a) These columns contain non-GAAP financial measures. The most
directly comparable GAAP measure and required reconciliations are
set forth below.
Reconciliation of Non-GAAP Pro Forma Measures
(in thousands, except per share data)
(unaudited)
Three Months Ended
---------------------------------------------------------
Adjustments
GAAP -------------------------- Pro Forma
3Com H-3C Consolidated
June 3, 2005 March 31, 2005 Eliminations June 3, 2005
------------ ----------------------------- --------------
Sales $176,642 $82,281 $(10,239) $248,684
Net loss $(58,325) $(193)(b) $(105)(c) $(58,623)
=========== ============ ========== ==============
EPS $(0.15)
==============
Shares used
in
computing
EPS 383,009
Three Months Ended
---------------------------------------------------------
Adjustments
GAAP -------------------------- Pro Forma
3Com H-3C Consolidated
Sept 2, 2005 June 30, 2005 Eliminations Sept 2, 2005
------------ ----------------------------- --------------
Sales $177,636 $95,772 $(13,793) $259,615
Net loss $(42,041) $(1,224)(b) $616 (c) $(42,649)
=========== ============ ========== ==============
EPS $(0.11)
==============
Shares used
in
computing
EPS 383,760
Three Months Ended
---------------------------------------------------------
Adjustments
GAAP -------------------------- Pro Forma
3Com H-3C Consolidated
December 2, September 30, Eliminations December 2,
2005 2005 2005
----------- ------------------------------ --------------
Sales $184,332 $111,177 $(13,039) $282,470
Net loss $(10,700) $(3,221)(b) $2,573 (c) $(11,348)
=========== ============ ========== ==============
EPS $(0.03)
==============
Shares used
in
computing
EPS 385,442
Three Months Ended
---------------------------------------------------------
Adjustments
GAAP -------------------------- Pro Forma
3Com H-3C Consolidated
March 3, December 31, March 3,
2006 2005 Eliminations 2006
------------- ---------------------------- --------------
Sales $177,563 $144,973 $(17,598) $304,938
Net loss $(32,760) $16,719 (b) $(16,969)(c) $(33,010)
=========== ============ ========== ==============
EPS $(0.09)
==============
Shares used
in
computing
EPS 387,754
(b) For the purpose of calculating the pro forma consolidated net
loss, the net loss for stand-alone H-3C includes amortization
expense resulting from the estimated allocation of the Company's
purchase price for its incremental 2 percent of the equity of H-3C
in January 2006. Such estimated allocation was not available until
the current reporting period.
(c) Represents the adjustment necessary for the pro forma consolidated
net loss to include 3Com's 51 percent ownership position in H-3C.
Additional Financial Data
(in thousands, except per share amounts)
(unaudited)
TABLE G
Stock Options
Outstanding Options as of June 2, 2006
---------------------------------------------------------
Weighted
Range of Number average
exercise price of shares exercise price
------------------ --------------------- ---------------
$0.00 - 4.00 13,879 $2.82
4.01 - 5.00 17,869 4.63
5.01 - 6.00 16,222 5.66
6.01 - 7.00 2,228 6.24
7.01 - 8.00 1,433 7.71
8.01 - 22.00 9,790 11.44
---------------------
Total 61,421 $5.71
=====================
3Com Corporation
Segment Reporting
(in thousands)
(unaudited)
TABLE H
Operating Segments Corporate
-------------------------------------- ------------------------
Eliminations and
SCN H-3C (1) Adjustments
------------------- ------------------ ------------------------
For the For the
Three Twelve Period Period Twelve
Months Months Feb. 2, Feb. 2, Three Months Months
Ended Ended 2006 - 2006 - Ended Ended
June 2, June 2, Mar. 31, Mar. 31, June 2, June 2,
2006 2006 2006 2006 2006 2006
---------------------------------------------------------------
Sales $165,808 $705,339 $108,290 $108,290 $(18,822)(2)$(18,822)(2)
Gross
pro-
fit 59,840 276,627 51,437 51,437
Total
sales
and
mark-
eting,
research
and dev-
elopment,
and
general
and
admin-
istr-
ative
ex-
penses 88,601 419,008 30,203 30,203
Other
oper-
ating
ex-
penses
(4) 7,016 29,579 6,377 6,377
Oper-
ating
income
(loss) (35,777) (171,960) 14,857 14,857
Net
income
(loss)$(28,919)$(114,420) $21,568 $21,568 $(7,823)(3) $(7,823)(3)
(1) Consolidated foreign subsidiary
(2) Represents eliminations for inter-company revenue during the
respective periods
(3) Represents equity interest of Huawei in H-3C for February and
March of 2006, net of 3Com's minority interest in H-3C for the
month of January 2006
(4) Represents restructuring and amortization in all periods presented
plus in-process research and development included in the H-3C
operating segment of $650 in the two month periods presented
3Com Corporation
Additional Financial Data
Huawei-3Com Joint Venture (unconsolidated foreign subsidiary)
(in thousands)
(unaudited)
TABLE I
CY 2006
CY 2005 (a) (a)
------------------------------------------------- ---------
Three Months Ended Twelve One Month
Months Ended
Ended
--------------------------------------- ---------
03/31/05 06/30/05 09/30/05 12/31/05 12/31/05 01/31/06
--------- --------- --------- --------- --------- ---------
Sales $82,281 $95,772 $111,177 $144,973 $434,203 $47,690
Gross
profit 36,013 40,450 47,187 69,544 193,194 24,372
-- As a
% of
sales 43.8% 42.2% 42.4% 48.0% 44.5% 51.1%
Net profit
(loss)
(b) 415 (33) (2,030) 17,910 16,262 6,631
3Com
equity in
earnings
(loss) $203 $(16) $(995) $8,776 $7,968 $3,251
Notes:
(a) The Huawei-3Com Joint Venture (H-3C) reports on a calendar year
basis. H-3C was formed and commenced operations in November 2003.
(b) In determining 3Com's share of H-3C's net earnings or loss,
certain adjustments to H-3C's reported results are required. Such
adjustments are made primarily to defer H-3C's sales and gross
profit related to products sold to 3Com that remained in 3Com's
inventory at the end of the accounting period, and to recognize
amortization expense associated with Huawei's contributed
intangible assets.
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