UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

 Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

May 23, 2003

 

3COM CORPORATION


(Exact name of registrant as specified in its charter)

 

Delaware

 

0-12867

 

94-2605794

(State or other jurisdiction of incorporation)

 

(Commission File Number)

 

(IRS Employer Identification No.)

5500 Great America Parkway

Santa Clara, CA

95052

(Address of Principal Executive Offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (408) 326-5000

 

 

(Former name or former address, if changed since last report)

 



 

Item 2.    Acquisition or Disposition of Assets

On March 4, 2003, 3Com Corporation (“3Com”) entered into an agreement to sell selected assets and liabilities of its CommWorks division to UTStarcom, Inc. (“UTStarcom”) (“Asset Purchase Agreement”) in exchange for $100 million in cash, subject to certain closing adjustments.

On May 23, 2003, 3Com completed the sale of its CommWorks division and transferred certain assets and liabilities to UTStarcom pursuant to the terms of the Asset Purchase Agreement. Prior to its sale, CommWorks was engaged in developing and deploying carrier-class, Internet Protocol-based multi-service access and service creation platforms for telecommunications service providers.  CommWorks’ product portfolio includes the three key components of next generation networks:  wireline access systems; wireless access systems; and a media independent softswitch, that are critical to providing complete next generation data and voice services to both fixed and mobile subscribers.  CommWorks is headquartered in Rolling Meadows, Illinois.

The above description of 3Com’s sale of its CommWorks division is not intended to be complete. It is subject to, and qualified by reference to, the ­­­­­­­­­­­­­­Asset Purchase Agreement, a copy of which is attached hereto as Exhibit 10.1. The press release announcing the execution of the Asset Purchase Agreement with UTStarcom and the press release announcing the closing of the transaction are attached hereto as Exhibits 99.1 and 99.2, respectively.

Item 7.    Financial Statements, Pro Forma Information and Exhibits

 

(a)          Financial Statements of Businesses Acquired.

 

Not Applicable

 

(b)         Pro Forma Financial Information

 

On May 23, 2003, 3Com completed the sale of its CommWorks division and transferred certain assets and liabilities to UTStarcom pursuant to the terms of the Asset Purchase Agreement. Based on the carrying value of the assets and liabilities attributed to the CommWorks division on May 23, 2003, and the estimated costs and expenses incurred in connection with the sale, 3Com anticipates that it will record a gain of approximately $88.9 million, less any applicable tax expense. The anticipated gain will be adjusted to reflect final net assets attributed to the CommWorks division on the date of the sale, less any applicable tax expense.

 

The following unaudited pro forma financial statements and notes thereto are being filed herewith:

                  Unaudited Pro Forma Condensed Balance Sheet as of February 28, 2003

                  Unaudited Pro Forma Condensed Statement of Operations for the nine months ended February 28, 2003

                  Unaudited Pro Forma Condensed Statement of Operations for the years ended May 31, 2002, June 1, 2001 and June 2, 2000

 

The pro forma financial information represents, in the opinion of management, all adjustments necessary to present 3Com's pro forma results of operations and financial position in accordance with Article 11 of the United States Securities and Exchange Commission (“SEC”) Regulation S-X and are based upon available information and certain assumptions considered reasonable under the circumstances. The pro forma financial information also excludes the gain on sale noted above, and any other non-recurring charges or credits attributable to the transaction.

 

The pro forma condensed financial statements should be read in conjunction with 3Com’s unaudited consolidated financial statements and notes thereto included in 3Com’s Quarterly Report on Form 10-Q for the

 

1



 

 period ended February 28, 2003 and audited consolidated financial statements and notes thereto included in 3Com’s Annual Report on Form 10-K for the year ended May 31, 2002, filed on April 10, 2003 and August 2, 2002, respectively. The pro forma information may not necessarily be indicative of what 3Com’s financial position or results of operations would have been had the transaction been in effect as of and for the periods presented, nor is such information necessarily indicative of 3Com’s results of operations or financial position for any future period or date.

 

2



 

 

3Com Corporation

Pro Forma Consolidated Condensed Balance Sheets (Unaudited)

(in thousands)

 

The following table shows the unaudited pro forma condensed consolidated balance sheets at February 28, 2003 as if the transaction had taken place on February 28, 2003:

 

 

 

Historical (2)

 

Business to be disposed

 

Pro forma adjustments

 

 

 

Pro forma

 

ASSETS:

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and equivalents

 

$

503,459

 

$

 

 

$

100,000

 

(1

)

$

603,459

 

Short-term investments

 

937,592

 

 

 

 

 

 

 

937,592

 

Accounts receivable, net

 

120,152

 

 

 

 

 

 

 

120,152

 

Inventories

 

41,328

 

(7,528

)

 

 

 

 

33,800

 

Investments and other

 

49,662

 

(1,810

)

 

 

 

 

47,852

 

Total current assets

 

1,652,193

 

(9,338

)

100,000

 

 

 

1,742,855

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

426,162

 

(14,047

)

 

 

 

 

412,115

 

Deposits and other assets

 

46,284

 

 

 

 

 

 

 

46,284

 

Deferred income taxes

 

6,055

 

 

 

 

 

 

 

6,055

 

Intangible assets, net

 

13,518

 

 

 

 

 

 

 

13,518

 

Goodwill

 

899

 

 

 

 

 

 

 

899

 

Total assets

 

$

2,145,111

 

$

(23,385

)

$

100,000

 

 

 

$

2,221,726

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

118,767

 

$

 

$

 

 

 

$

118,767

 

Accrued liabilities and other

 

222,819

 

(19,790

)

10,663

 

(1

)

213,692

 

Current portion of debt

 

31,102

 

 

 

 

 

 

 

31,102

 

Total current liabilities

 

372,688

 

(19,790

)

10,663

 

 

 

363,561

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

37,550

 

 

 

 

 

 

 

37,550

 

Other long-term obligations

 

4,660

 

 

 

 

 

 

 

4,660

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

2,129,697

 

 

 

 

 

 

 

2,129,697

 

Treasury stock

 

(96,092

)

 

 

 

 

 

 

(96,092

)

Note receivable from sale of warrants

 

(12,631

)

 

 

 

 

 

 

(12,631

)

Unamortized stock-based compensation

 

(2,264

)

 

 

 

 

 

 

(2,264

)

Retained deficit

 

(284,924

)

 

 

85,742

 

(1

)

(199,182

Accumulated other comprehensive loss

 

(3,573

)

 

 

 

 

 

 

(3,573

)

Total stockhlders’ equity

 

1,730,213

 

 

 

85,742

 

 

 

1,815,955

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

2,145,111

 

$

(19,790

)

$

96,405

 

 

 

$

2,221,726

 

 

 

3



 

 

3Com Corporation

Pro Forma Consolidated Condensed Statements of Operations (Unaudited)

(in thousands, except per share data)

 

The following table shows the unaudited pro forma condensed consolidated results of operations for the nine months ended February 28, 2003 as if the transaction had taken place on May 29, 1999:

 

 

 

Historical (2)

 

Business to be disposed

 

Pro forma adjustments

 

Pro forma

 

Sales

 

$

852,842

 

$

(94,438

)

$

 

$

758,404

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

439,109

 

(39,569

)

 

 

399,540

 

Gross margin

 

413,733

 

(54,869

)

 

 

358,864

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Sales and marketing

 

203,503

 

(25,005

)

 

 

178,498

 

Research and development

 

134,561

 

(48,430

)

 

 

86,131

 

General and administrative

 

78,082

 

(5,716

)

 

 

72,366

 

Amortization and write down of intangibles

 

14,205

 

(5,401

)

 

 

8,804

 

Restructuring charges

 

146,686

 

(17,775

)

 

 

128,911

 

Loss on land and facilities, net

 

887

 

 

 

 

 

887

 

Total operating expenses

 

577,924

 

(102,327

)

 

 

475,597

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

(164,191

)

(47,458

)

 

 

(116,733

)

Loss on investments, net

 

(33,122

)

 

 

 

 

(33,122

)

Interest and other income, net

 

18,683

 

 

 

 

 

18,683

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes and cumulative effect of change in accounting principle

 

(178,630

)

(47,458

)

 

 

(131,172

)

Income tax provision

 

1,105

 

926

 

 

 

179

 

 

 

 

 

 

 

 

 

 

 

Loss before cumulative effect of change in accounting principle

 

(179,735

)

(48,384

)

 

 

(131,351

)

Cumulative effect of change in accounting principle

 

(65,601

)

(20,154

)

 

 

(45,447

)

Net loss

 

$

(245,336

)

$

(68,538

)

$

 

$

(176,798

)

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before cumulative effect of change in accounting principle

 

$

(0.50

)

 

 

 

 

$

(0.36

)

Cumulative effect of change in accounting principle

 

 

(0.18

)

 

 

 

 

 

(0.13

)

Net loss

 

$

(0.68

)

 

 

 

 

$

(0.49

)

 

 

 

 

 

 

 

 

 

 

Shares used in computing per share amounts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

359,266

 

 

 

 

 

359,266

 

 

4



 

3Com Corporation

Pro Forma Consolidated Condensed Statements of Operations (Unaudited)

(in thousands, except per share data)

 

The following table shows the unaudited pro forma condensed consolidated results of operations for the year ended May 31, 2002 as if the transaction had taken place on May 29, 1999:

 

 

 

Historical (2)

 

Business to be disposed

 

Pro forma adjustments

 

Pro forma

 

Sales

 

$

1,477,932

 

$

(218,963

)

$

 

$

1,258,969

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

999,731

 

(108,018

)

 

 

891,713

 

Gross margin

 

478,201

 

(110,945

)

 

 

367,256

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Sales and marketing

 

336,495

 

(62,943

)

 

 

273,552

 

Research and development

 

285,584

 

(87,626

)

 

 

197,958

 

General and administrative

 

124,740

 

(12,795

)

 

 

111,945

 

Amortization and write down of intangibles

 

116,679

 

(30,073

)

 

 

86,606

 

Restructuring charges

 

167,462

 

(58,426

)

 

 

109,036

 

Loss on land and facilities, net

 

1,375

 

 

 

 

 

1,375

 

Total operating expenses

 

1,032,335

 

(251,863

)

 

 

780,472

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

(554,134

)

(140,918

)

 

 

(413,216

)

Loss on investments, net

 

(17,888

)

 

 

 

 

(17,888

)

Interest and other income, net

 

67,371

 

 

 

 

 

67,371

 

Loss before income taxes

 

(504,651

)

(140,918

)

 

 

(363,733

)

Income tax provision

 

91,299

 

1,380

 

 

 

89,919

 

Net loss

 

$

(595,950

)

$

(142,298

)

$

 

$

(453,652

)

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(1.71

)

 

 

 

 

$

(1.30

)

 

 

 

 

 

 

 

 

 

 

Shares used in computing per share amounts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

349,489

 

 

 

 

 

349,489

 

 

 

5



 

3Com Corporation

Pro Forma Consolidated Condensed Statements of Operations (Unaudited)

(in thousands, except per share data)

 

The following table shows the unaudited pro forma condensed consolidated results of operations for the year ended June 1, 2001 as if the transaction had taken place on May 29, 1999:

 

 

 

Historical (2)

 

Business to be disposed

 

Pro forma adjustments

 

Pro forma

 

Sales

 

$

2,820,881

 

$

(399,716

)

$

 

$

2,421,165

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

2,287,250

 

(285,161

)

 

 

2,002,089

 

Gross margin

 

533,631

 

(114,555

)

 

 

419,076

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Sales and marketing

 

803,994

 

(97,755

)

 

 

706,239

 

Research and development

 

535,718

 

(128,821

)

 

 

406,897

 

General and administrative

 

182,090

 

(15,633

)

 

 

166,457

 

Amortization and write down of intangibles

 

69,707

 

(35,198

)

 

 

34,509

 

Restructuring charges

 

163,657

 

(8,732

)

 

 

154,925

 

Gain on land and facilities, net

 

(178,844

)

 

 

 

 

(178,844

)

Purchased in-process technology

 

60,221

 

 

 

 

 

60,221

 

Merger-related credits, net

 

(728

)

 

 

 

 

(728

)

Total operating expenses

 

1,635,815

 

(286,139

)

 

 

1,349,676

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

(1,102,184

)

(171,584

)

 

 

(930,600

)

Loss on investments, net

 

(18,614

)

 

 

 

 

(18,614

)

Litigation settlement

 

(250,000

)

 

 

 

 

(250,000

)

Interest and other income, net

 

144,596

 

 

 

 

 

144,596

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations before income taxes and equity interest

 

(1,226,202

)

(171,584

)

 

 

(1,054,618

)

Income tax provision (benefit)

 

(257,641

)

8,163

 

 

 

(265,804

)

Equity interest in loss on unconsolidated investee

 

1,352

 

 

 

 

 

1,352

 

 

 

 

 

 

 

 

 

 

 

Loss before discontinued operations

 

(969,913

)

(179,747

)

 

 

(790,166

)

Income from discontinued operations

 

4,537

 

 

 

 

 

4,537

 

Net loss

 

$

(965,376

)

$

(179,747

)

$

 

$

(785,629

)

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(2.81

)

 

 

 

 

$

(2.29

)

Discontinued operations

 

 

0.01

 

 

 

 

 

 

0.01

 

Net loss

 

$

(2.80

)

 

 

 

 

$

(2.28

)

 

 

 

 

 

 

 

 

 

 

Shares used in computing per share amounts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

345,027

 

 

 

 

 

345,027

 

 

 

6



 

 

3Com Corporation

Pro Forma Consolidated Condensed Statements of Operations (Unaudited)

(in thousands, except per share data)

 

The following table shows the unaudited pro forma condensed consolidated results of operations for the year ended June 2, 2000 as if the transaction had taken place on May 29, 1999:

 

 

 

Historical (2)

 

Business to be disposed

 

Pro forma adjustments

 

Pro forma

 

Sales

 

$

4,333,942

 

$

(577,767

)

$

 

$

3,756,175

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

2,475,934

 

(249,991

)

 

 

2,225,943

 

Gross margin

 

1,858,008

 

(327,776

)

 

 

1,530,232

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Sales and marketing

 

949,228

 

(96,365

)

 

 

852,863

 

Research and development

 

597,816

 

(99,094

)

 

 

498,722

 

General and administrative

 

213,085

 

(10,200

)

 

 

202,885

 

Amortization and write down of intangibles

 

24,535

 

(3,959

)

 

 

20,576

 

Restructuring charges

 

68,867

 

(347

)

 

 

68,520

 

Gain on land and facilities, net

 

(25,483

)

 

 

 

 

(25,483

)

Purchased in-process technology

 

13,456

 

(13,456

)

 

 

 

 

Merger-related credits, net

 

(2,297

)

 

 

 

 

(2,297

)

Total operating expenses

 

1,839,207

 

(223,421

)

 

 

1,615,786

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

18,801

 

104,355

 

 

 

(85,554

)

Gains on investments, net

 

838,795

 

 

 

 

 

838,795

 

Interest and other income, net

 

104,258

 

 

 

 

 

104,258

 

Income from continuing operations before income taxes and equity interest

 

961,854

 

104,355

 

 

 

857,499

 

Income tax provision

 

341,672

 

48,250

 

 

 

293,422

 

Other interest in gain on unconsolidated joint venture

 

(1,028

)

 

 

 

 

(1,028

)

Equity interest in loss on unconsolidated investee

 

5,647

 

 

 

 

 

5,647

 

 

 

 

 

 

 

 

 

 

 

Income before discontinued operations

 

615,563

 

56,105

 

 

 

559,458

 

Income from discontinued operations

 

58,740

 

 

 

 

 

58,740

 

Net income

 

$

674,303

 

$

56,105

 

$

 

$

618,198

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

1.77

 

 

 

 

 

$

1.60

 

Discontinued operations

 

 

0.17

 

 

 

 

 

 

0.17

 

 

 

$

1.94

 

 

 

 

 

$

1.77

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

1.72

 

 

 

 

 

$

1.56

 

Discontinued operations

 

 

0.16

 

 

 

 

 

 

0.17

 

 

 

$

1.88

 

 

 

 

 

$

1.73

 

Shares used in computing per share amounts:

 

 

 

 

 

 

 

 

 

Basic

 

348,314

 

 

 

 

 

348,314

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

357,883

 

 

 

 

 

357,883

 

 

 

7



 

 

NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL INORMATION

 

Basis of Presentation

 

The above unaudited pro forma condensed consolidated financial statements present financial information for 3Com giving effect to the sale of its CommWorks division, which was effective as of May 23, 2003.  The unaudited pro forma condensed balance sheet as of February 28, 2003 is presented as if the transaction occurred on that date. The unaudited proforma condensed statements of operations for the nine months ended February 28, 2003 and for the years ended May 31, 2002, June 1, 2001 and June 2, 2000 are presented as if the transaction had occurred on May 29, 1999 and exclude the anticipated gain to be realized.

 

Unaudited Pro Forma Financial Information

 

(1)          Reflects the sale of certain net assets of CommWorks for a total cash payment of $100 million on May 23, 2003. The pro forma adjustment to other current liabilities reflects the estimated costs and expenses incurred in connection with the sale, as if the sale ocurred on February 28, 2003.

 

(2)          The historical amounts were derived from unaudited and audited financial statements included in 3Com’s quarterly report on Form 10-Q for the period ended February 28, 2003 and annual report on Form 10-K for the year ended May 31, 2002. Certain amounts in fiscal 2002 have been reclassified to conform to the presentation for the nine-month period ended February 28, 2003.

 

(c) Exhibits

 

Exhibit No.

 

10.1                       Asset Purchase Agreement by and between 3Com Corporation and UTStarcom, Inc. dated March 4, 2003

99.1                       Text of Press Release dated March 4, 2003, titled “UTStarcom Agrees to Acquire Selected Assets of 3Com’s CommWorks Business for $100 Million”

99.2                       Text of Press Release dated May 23, 2003, titled “3Com Announces Completion of the Sale of CommWorks Assets”

 

8



 

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

 

 

 

3Com Corporation

 

 

 

 

 

 

(Registrant)

 

 

 

 

 

 

 

Date:

 

June 9, 2003

 

By:

 

/s/ Mark Slaven

 

 

 

 

 

 

Mark Slaven

 

 

 

 

 

 

Executive Vice President, Finance, and Chief Financial Officer (Principal Financial and Accounting Officer)

 

 

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