WSJ Spin on 3Com FY97 Restatement Adds 2 Months
From U.S. Robotics
By JOELLE TESSLER
Dow Jones Newswires
NEW YORK -- In calculating earnings for 3Com Corp.
(COMS) and U.S. Robotics as a combined company for
fiscal 1997, 3Com has restated the figures to reflect two
months from U.S. Robotics that weren't previously
accounted for in the fiscal year report.
3Com acquired U.S. Robotics in June of 1997, which fell
during 3Com's fiscal 1998 first quarter.
3Com Corp.'s Chief Financial Officer, Christopher Paisley,
said the company restated the combined historical results
because "some in the financial community" and the
Securities and Exchange Commission expressed concern
about the way 3Com had accounted for U.S. Robotics' fiscal
1997 results.
U.S. Robotics' last reported quarter as an independent
company ended in March of 1997, while 3Com's 1997 fiscal
year ended two months later in May. 3Com therefore
initially calculated the combined historical results for fiscal
1997 by using the earnings for the 12 months ended in May
from 3Com - its regular fiscal year - and the numbers for
the 12 months ended in March from U.S. Robotics.
This left a "stub period" of results from U.S. Robotics - for
April and May of 1997 - that did not show up in the
combined operating results for fiscal 1997, Paisley said in a
conference call late Thursday.
3Com previously reported the U.S. Robotics results for April
and May of 1997 as an adjustment to its retained earnings in
the first quarter of fiscal 1998.
Paisley said 3Com has therefore restated its combined fiscal
1997 results using the 12 months ended in May 1997 for
3Com, just as it had before, but adjusting the months used
for U.S. Robotics. The restated results include the numbers
from July 1996 through May 1997 for U.S. Robotics. 3Com
then added in U.S. Robotics' results from March 1997 a
second time in order to have a complete 12-month year for
U.S. Robotics.
The restated fiscal 1997 results now include the numbers for
April and May of 1997 from U.S. Robotics.
Paisley also said 3Com reduced the merger restructuring
charge recorded in the fiscal 1998 first quarter to $270
million from $426 million. He said the company
overestimated the expenses associated with the acquisition
and has chosen to recognize these expenses as they occur
rather than account for them entirely in the quarter in
which the deal was closed.
3Com Chairman and Chief Executive Eric Benhamou told
Dow Jones that in upcoming quarters, the company could
record merger-related line-item charges that would reflect
any adjustments in business assumptions or any new charges
associated with the merger.
In addition, the company expects merger-related operating
expenses of $1 million to $2 million a quarter in coming
periods. Benhamou stressed, however, that these operating
expenses will be nominal - amounting to less than one third
of a penny per share.
He added that the restatements announced Thursday will
have no impact on 3Com's operating model going forward.
Stressing that 3Com is in a quiet period for fiscal third
quarter, ended in February, Paisley said he would not discuss
the third quarter outlook. The company's third quarter
numbers are due out later this month. |
