3Com Recombines 3Com/USR Fiscal 1997 Results and Adjusts Merger
Restructuring Charge
SANTA CLARA, Calif.--(BUSINESS WIRE)--March 5, 1998--3Com Corporation
(NASDAQ:COMS) today announced that it is revising previously reported financial results
relating to the accounting combination and merger restructuring charge for the June 1997
merger of 3Com and U.S. Robotics (USR).
The fiscal 1997 results of the combined company were accounted for as a pooling of interests.
Because the companies had different fiscal periods, the previously reported combined results
included heritage 3Com's May 1997 fiscal year with heritage USR's four fiscal quarters ended
March 1997, as permitted under General Accepted Accounting Principles (GAAP). April and
May 1997 results were previously reported as an adjustment to 3Com's retained earnings in the
first quarter of fiscal 1998, and not included in fiscal 1997 operating results.
Today, the company is recombining historical results, using the 12 months ended May 1997 for
heritage 3Com, added to the period July 1996 through May 1997 for heritage USR, and then
adding in March 1997 a second time in order to have a complete 12-month year for USR. This
methodology includes USR's April and May 1997 financial results in the recombined fiscal 1997
operating results.
Further, the company has reviewed its merger restructuring charge which, at the time the
merger closed in the first quarter of fiscal 1998, was an estimated $426 million. As a result of a
complete reassessment of this charge, the company is making adjustments primarily to reflect
three factors: a change in the timing and costs associated with product swap-outs; a more
accurate recording of costs associated with the elimination of duplicate facilities; and a revision
of goodwill write-offs related to acquisitions by USR prior to the 3Com merger. 3Com is
reducing the merger restructuring charge recorded in the first quarter to $270 million.
"We have made these revisions principally in response to the Securities and Exchange
Commission's review of our Form 10-Q filings since the time of the merger," said Chris Paisley,
3Com's senior vice president and chief financial officer. "The company will be revising its Form
10-Q filings for the first and second quarters of fiscal 1998 as soon as practicable."
The attached schedules highlight the original and revised results for fiscal 1997 and revised
statements of operations for the first and second quarters of fiscal 1998. About 3Com
3Com Corporation enables individuals and organizations worldwide to communicate and share
information and resources at anytime from anywhere. As one of the world's preeminent
suppliers of data, voice and video communications technology, 3Com has delivered networking
solutions to more than 100 million customers worldwide. The company provides enterprises,
network service providers and carriers, small businesses and consumers with comprehensive,
innovative information access products and system solutions for building intelligent, reliable and
high performance local and wide area networks. For further information, visit 3Com's World
Wide Web site at 3com.com, or the press site at 3com.com.
Note to Editors: 3Com is a registered trademark of 3Com Corporation and its subsidiaries.
3Com Corporation
Consolidated Statements of Operations for the Year Ended May 31, 1997
(In thousands, except per share data.)
Twelve Months Ended
May 31, 1997
-------------------------
Previously
Reported Revised
-------------------------
Sales $5,604,146 $5,606,077
Cost of sales 2,906,229 2,918,966
---------- ----------
Gross margin 2,697,917 2,687,111
Total operating expenses 1,770,229 1,894,890
Operating income 927,688 792,221
Income before income taxes 944,683 800,701
Income tax provision 347,060 300,168
---------- ----------
Net income $ 597,623 $ 500,533
========== ==========
Net income per common and
equivalent share:
Primary $1.69 $1.42
Fully diluted $1.69 $1.41
Quarter Ended
Aug. 31, 1996 Nov. 30, 1996
-------------------------------------------
Previously Previously
Reported Revised Reported Revised
--------------------- ---------------------
Sales $1,250,060 $1,311,504 $1,421,660 $1,459,939
Cost of sales 658,204 693,593 738,252 756,916
--------------------- ---------------------
Gross margin 591,856 617,911 683,408 703,023
Total operating expenses 354,615 424,266 467,137 429,505
Operating income 237,241 193,645 216,271 273,518
Income before income
taxes 240,214 195,923 220,404 277,050
Income tax provision 88,250 90,879 101,363 102,452
--------------------- ---------------------
Net income $ 151,964 $ 105,044 $ 119,041 $ 174,598
===================== =====================
Net income per common
and equivalent share:
Primary $0.43 $0.30 $0.34 $0.49
Fully diluted $0.43 $0.30 $0.34 $0.49
Quarter Ended
Feb. 28, 1997 May 31, 1997
-------------------------------------------
Previously Previously
Reported Revised Reported Revised
--------------------- ---------------------
Sales $1,426,421 $1,462,891 $1,506,005 $1,371,743
Cost of sales 743,926 725,116 762,881 743,341
--------------------- ---------------------
Gross margin 682,495 737,775 743,124 628,402
Total operating expenses 442,124 489,494 492,630 551,625
Operating income 240,371 248,281 250,494 76,777
Income before income
taxes 245,628 252,771 255,126 74,957
Income tax provision 88,954 73,667 74,503 33,170
--------------------- ---------------------
Net income $ 156,674 $ 179,104 $ 180,623 $ 41,787
===================== =====================
Net income per common
and equivalent share:
Primary $0.44 $0.50 $0.51 $0.12
Fully diluted $0.44 $0.50 $0.51 $0.12
Note: Quarter periods
combined: Q1'97 Q2'97 Q3'97(a) Q4'97(b)
3Com quarters ended August '96 November '96 February '97 May '97
USR quarters ended:
Original combination
(quarters ended) June '96 September '96 December '96 March '97
Recombination
(quarters ended) September '96 December '96 March '97 May '97(a)
(a) Three-month period; March, April, May
(b) Both quarters include heritage USR's March results
Consolidated Statements of Operations
For the Three Months Ended August 31 and November 30, 1997
(In thousands, except per share data.)
Quarter Ended
Aug. 31, 1997 Nov. 30, 1997
-------------------- --------------------
Previously Previously
Reported Revised Reported Revised
--------- --------- --------- ---------
Sales $1,600,862 $1,597,516 $1,220,253 $1,197,189
Cost of sales 832,808 831,429 651,094 645,344
--------- --------- --------- ---------
Gross margin 768,054 766,087 569,159 551,845
Operating expenses
Sales and marketing 301,307 302,378 337,594 338,334
Research and development 142,117 142,798 145,491 144,978
General and
administrative 62,589 62,865 70,507 71,265
Merger-related charges
and other 426,000 269,787 -- (1,229)
--------- --------- --------- ---------
Total operating expenses 932,013 777,828 553,592 553,348
--------- --------- --------- ---------
Operating income (loss) (163,959) (11,741) 15,567 (1,503)
Other income - net 2,961 2,961 7,637 7,637
--------- --------- --------- ---------
Income (loss) before
income taxes (160,998) (8,780) 23,204 6,134
Income tax provision
(benefit) (14,178) 42,453 8,121 2,113
--------- --------- --------- ---------
Net income (loss) $(146,820) $ (51,233) $ 15,083 $ 4,021
========= ========= ========= =========
Net income (loss) per
share
Primary $ (0.43) $ (0.15) $ 0.04 $ 0.01
Fully-diluted $ (0.43) $ (0.15) $ 0.04 $ 0.01
--------- --------- --------- ---------
CONTACT: 3Com
Shirley Stacy, 408/764-6301 (Investor Relations)
shirley_stacy@3com.com
Leslie Davis, 408/764-7187 (Public Relations)
leslie_davis@3com.com
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