____________________________________________________________
United States
Securities and Exchange Commission
Washington, D. C. 20549
This document is being submitted
pursuant to rule 901(d) of regulation S-T.
FORM 10-Q
X Quarterly report pursuant to section 13 or 15(d) of
the securities exchange act of 1934
For the Quarterly Period Ended February 28, 1995
Commission File No. 0-12867
or
Transition report pursuant to section 13 or 15(d) of
the securities exchange act of 1934
For the transition period from to
___________
3Com Corporation
(Exact name of registrant as specified in its charter)
California 94-2605794
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5400 Bayfront Plaza 95052
Santa Clara, California (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code
(408) 764-5000
Former name, former address and former fiscal year, if
changed since last report: N/A
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes ....XX.... No ........
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
As of February 28, 1995, 66,480,931 shares of the
Registrant's Common Stock were outstanding.
____________________________________________________________
3Com Corporation
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
February 28, 1995 and May 31, 1994
Consolidated Statements of Operations
Quarter and Nine Months Ended February 28,
1995 and 1994
Consolidated Statements of Cash Flows
Nine Months Ended February 28, 1995 and 1994
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
3Com Corporation
Consolidated Balance Sheets
(dollars in thousands)
February 28, May 31,
1995 1994
---- ----
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents 116,859 $ 66,284
Temporary cash investments 146,620 63,413
Trade receivables 187,628 118,653
Inventories 89,562 71,352
Deferred income taxes 31,608 31,236
Other 17,556 10,134
------- -------
Total current assets 589,833 361,072
Property and equipment-net 91,127 67,001
Other assets 33,291 16,270
------ ------
Total $714,251 $444,343
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 81,068 $ 51,827
Accrued and other liabilities 100,085 91,130
Income taxes payable 39,936 19,090
Current portion of long-term
obligations 219 482
------- -------
Total current liabilities 221,308 162,529
Long-term debt 110,000 -
Other long-term obligations 870 1,058
Shareholders' Equity:
Preferred stock, no par value,
3,000,000 shares authorized;
none outstanding - -
Common stock, no par value,
200,000,000 shares authorized;
shares outstanding:
February 28, 1995:
66,480,931; May 31, 1994:
65,052,900 263,728 219,937
Unamortized restricted stock grants (2,205) (202)
Retained earnings 120,813 61,326
Accumulated translation adjustments (263) (305)
------- -------
Total shareholders' equity 382,073 280,756
------- -------
Total $714,251 $444,343
======== ========
See notes to consolidated financial statements.
3Com Corporation
Consolidated Statements of Operations
(in thousands except per share data)
(unaudited)
Quarter Ended Nine Months Ended
February 28, February 28,
------------ ------------
1995 1994 1995 1994
---- ---- ---- ----
Sales $338,676 $218,166 $892,764 $585,532
Costs and expenses:
Cost of sales 155,627 104,983 415,427 289,069
Sales and marketing 64,901 44,002 174,809 121,958
Research and
development 33,132 19,369 88,779 53,410
General and
administrative 12,554 8,534 32,314 25,427
Purchased in-process
technology - 134,481 60,796 134,481
Non-recurring items - - (1,100) -
------- ------- ------- -------
Total 266,214 311,369 771,025 624,345
------- ------- ------- -------
Operating income (loss) 72,462 (93,203) 121,739 (38,813)
Other expense-net (1,684) (412) (2,359) (1,224)
Gain on sale of
investment - - - 17,746
------ ------ ------- ------
Income (loss) before
income taxes 70,778 (93,615) 119,380 (22,291)
Income tax provision 25,480 9,845 42,977 33,592
------ ------ ------- ------
Net income (loss) $ 45,298 $(103,460) $ 76,403 $(55,883)
======== ========= ======== ========
Net income (loss) per common and
equivalent share:
Primary $ .63 $ (1.64) $ 1.08 $ (.90)
Fully diluted $ .63 $ (1.64) $ 1.06 $ (.90)
Common and equivalent shares used
in computing per share amounts:
Primary 72,073 63,088 70,981 61,924
Fully diluted 72,288 63,088 71,758 61,924
See notes to consolidated financial statements.
3Com Corporation
Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
Nine Months Ended
February 28,
--------------------
1995 1994
---- ----
Cash flows from operating activities:
Net income (loss) $ 76,403 $(55,883)
Adjustments to reconcile
net income (loss) to cash
provided by operating activities:
Depreciation and amortization 34,374 21,654
Gain on sale of investment - (17,746)
Deferred income taxes (21,984) (3,894)
Purchased in-process technology 60,796 134,481
Non-cash restructuring costs (1,100) -
Changes in assets and liabilities,
net of effects of acquisitions:
Trade receivables (68,371) (32,893)
Inventories (19,215) 975
Other current assets (6,912) 6,894
Accounts payable 28,386 (777)
Accrued and other liabilities 2,927 2,287
Income taxes payable 40,716 16,837
------ ------
Net cash provided by operating
activities 126,020 71,935
------- ------
Cash flows from investing activities:
Proceeds from sale of investment - 18,066
Purchase of property and
equipment (48,790) (20,765)
Purchase of temporary cash
investments (120,554) (35,327)
Proceeds from temporary cash
investments 35,445 88,053
Acquisitions of businesses (48,689) (98,128)
Other-net 5,492 (4,213)
------ ------
Net cash used for investing
activities (177,096) (52,314)
-------- -------
Cash flows from financing activities:
Sale of stock 14,279 16,080
Repurchases of common stock (19,590) (16,645)
Net proceeds from issuance of
convertible debt 107,330 -
Repayments of notes payable and
capital lease obligations (410) (858)
Other-net 42 (831)
------- ------
Net cash provided by (used for)
financing activities 101,651 (2,254)
------- ------
Increase in cash and cash
equivalents 50,575 17,367
Cash and cash equivalents at
beginning of period 66,284 40,046
------ ------
Cash and cash equivalents at
end of period $116,859 $ 57,413
-------- --------
Non-cash financing and investing activities:
Tax benefit on stock option
transactions $19,870 $ 15,557
Stock issued and options assumed
in business acquisitions $10,188 $ 21,089
See notes to consolidated financial statements.
3Com Corporation
Notes to Consolidated Financial Statements
1. The consolidated financial statements include the
accounts of 3Com Corporation (the "Company") and its wholly-
owned subsidiaries. All significant intercompany balances
and transactions have been eliminated. In the opinion of
management, these unaudited consolidated financial
statements include all adjustments necessary for a fair
presentation of the Company's financial position as of
February 28, 1995, and the results of operations and cash
flows for the quarters and nine months ended February 28,
1995 and 1994.
The results of operations for the quarter and nine
months ended February 28, 1995 may not necessarily be
indicative of the results for the fiscal year ending May 31,
1995.
These financial statements should be read in
conjunction with the consolidated financial statements and
related notes thereto included in the Company's Annual
Report to Shareholders for the fiscal year ended May 31,
1994.
2. Investments
Effective June 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." This
statement requires the Company to classify debt and equity
securities into one of three categories: held-to-maturity,
trading or available-for-sale. At February 28, 1995, all
temporary cash investments of the Company were classified as
available-for-sale and the unrealized gains and losses
between the carrying value and fair value of those
securities was not significant.
3. Inventories consisted of (in thousands):
February 28, May 31,
1995 1994
---- ----
Finished goods $49,672 $44,770
Work-in-process 9,527 8,232
Raw materials 30,363 18,350
------ ------
Total $89,562 $71,352
======= =======
4. Long-Term Debt
In November 1994, the Company completed a private
placement under Rule 144A of the Securities Act of 1933 of
$110 million aggregate principle amount of convertible
subordinated notes. The notes bear interest at 10.25% per
annum, are payable semi-annually, and mature in 2001.
Beginning in November 1997, the notes are convertible into
the Company's common stock at an initial conversion price of
$69.125 per share. The Company has reserved 1,591,320
shares of common stock for the conversion of these notes.
5. Net Income (Loss) Per Share
Net income (loss) per common and equivalent share is
computed based on the weighted average number of common shares
and the dilutive effects of stock options outstanding during
the period using the treasury stock method. Weighted
average shares outstanding and per share amounts have been
restated to reflect the two-for-one stock split on September
1, 1994 for shareholders of record on August 16, 1994.
6. Business Acquisitions
On October 18, 1994, the Company acquired
substantially all the assets and assumed substantially all
the liabilities of NiceCom, Ltd. ("NiceCom"), and assumed
all outstanding NiceCom stock options. The purchase price
consisted of approximately $53.2 million which was paid using
funds from the Company's working capital and the issuance of
93,162 shares of common stock of the Company, with an
aggregate value of $3.7 million. In addition, the Company
assumed stock options with an associated value of $5.7
million. NiceCom is engaged in the development of ATM
("asynchronous transfer mode") switches and an Ethernet/ATM
solution to provide a migration path from existing Ethernet
LANs to ATM networking.
On October 14, 1994, the Company acquired all of the
outstanding shares and assumed all outstanding stock options
of a company engaged in the development of network adapter
technology. The purchase price consisted of approximately
$2.3 million in cash plus the assumption of stock options
with an associated value of $400,000. The purchase
price was paid using funds from the Company's working
capital.
The acquisitions were accounted for as purchases and,
accordingly, the acquired assets and liabilities were
recorded at their estimated fair market values at the dates
of acquisitions. The aggregate purchase price of $61.6
million plus $2.0 million of costs directly attributable to
the completion of the acquisitions has been allocated to the
assets and liabilities acquired. Approximately $60.8
million of the total purchase price represented the value of
in-process technology that had not yet reached technological
feasibility and was charged to the Company's operations.
On February 28, 1995, the Company acquired AccessWorks
Communications of Holmdel, New Jersey. AccessWorks
develops, manufactures and markets Integrated Services
Digital Network (ISDN) transmission products. The
acquisition was accounted for as a purchase. The purchase
price and costs directly attributable to the completion of
the acquisition were not significant.
The Company's consolidated results of operations
include the operating results of the acquired companies from
their acquisition dates. Pro forma results of operations of
3Com and the aforementioned acquired companies are not
presented as the amounts would not significantly differ from
the Company's historical results.
3Com Corporation
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Quarter ended February 28, 1995
The Company achieved record sales in the third quarter of
fiscal 1995 totaling $338.7 million, an increase of $120.5
million or 55 percent from the corresponding quarter a year
ago. Compared with the second quarter of fiscal 1995, sales
for the third quarter of fiscal 1995 increased $33.9 million
or 11 percent.
The Company believes that the year-over-year increase in
third quarter sales is due to several factors, including
strong market acceptance of the Company's new products,
continued market strength in the data networking market,
rapid growth in sales outside the U.S., the breadth of the
Company's product offerings and its ability to deliver
complete data networking solutions for different
connectivity environments. Sales from products introduced
in the last 12 months represented 68 percent of sales in the
third quarter of fiscal 1995, an increase from 26 percent of
sales in the third quarter of the prior year and from 43
percent of sales in the second quarter of fiscal 1995.
Sales of network adapters in the third quarter of fiscal
1995 represented 55 percent of total sales and increased 54
percent from the corresponding period in fiscal 1994. The
increase in network adapter sales represented the continued
increase in unit volume partially offset by continuation of
the industry-wide trend toward decreasing average selling
prices, particularly in the token ring market. The increase
in unit volume was attributed largely to sales of the most
recent version of the EtherLink(registered trademark) III
network adapter, but was also favorably impacted by sales
of the PC Card adapter (formerly PCMCIA).
Sales of systems products (internetworking, remote access
server, hub and switching products) in the third quarter of
fiscal 1995 represented 41 percent of total sales and
increased 65 percent from the year-ago quarter. The
increase was led primarily by the LinkBuilder(registered
trademark) FMS(trademark) II stackable hub, a component of
3Com's SuperStack((trademark) family of network system
products, the LANplex(registered trademark) 6000 backbone
switch, and the NETBuilder(registered trademark) Remote
Office internetworking system. Also contributing to fiscal
1995 third quarter sales was the recently introduced
LANplex(registered trademark) 2000 family of switches.
Similar to network adapters, the increase in systems
products sales represented an increase in unit volume which
was partially offset by a decrease in average selling
prices. The Company believes there is an industry-wide
trend towards demand for fully-functional, fault-tolerant,
lower-priced network systems in a stackable format. 3Com is
currently delivering many components of its SuperStack
network system including stackable hubs, remote office
routers, LAN switching products and a redundant power
system.
Sales of other products (terminal servers, customer service,
protocols and other products) represented four percent of
third quarter sales. These sales increased seven percent
from the third quarter of fiscal 1994, although they
continued to represent a decreasing percentage of the
Company's total sales, as expected.
Sales outside the United States provided 59 percent of third
quarter sales, compared to 56 percent for the same period
last year. Growth in international sales was strong in all
geographic regions, especially in the Asia Pacific and Latin
American regions. The Company believes that this increase
reflected the Company's continued expansion globally through
the opening of new sales offices in Latin America, Asia and
Europe, and the expansion of worldwide service and support
programs. The Company's exposure to foreign currency
fluctuations was not significant in the third quarter of
fiscal 1995 and 1994.
Cost of sales as a percentage of sales was 46.0 percent for
the third quarter of fiscal 1995, compared to 48.1 percent
for the third quarter of fiscal 1994. The 2.1 percentage
points improvement in gross margin from the year-ago period
resulted primarily from a favorable shipment mix towards
higher margin switching products and the lower-cost
EtherLink III and TokenLink(registered trademark) III
network adapters.
Total operating expenses in the third quarter of fiscal 1995
were $110.6 million, or 32.7 percent of sales, compared to
$206.4 million in the third quarter of fiscal 1994.
Excluding the charge of $134.5 million for purchased in-
process technology resulting from the acquisitions of
Synernetics, Inc. and Centrum Communications, Inc., and the
technology licensing agreement with Pacific Monolithics,
Inc., total operating expenses in the third quarter of
fiscal 1994 would have been $71.9 million, or 33.0 percent
of sales. The Company has been successful in its efforts to
grow operating expenses at a rate slower than sales growth.
The increase in continuing operating expenses of $38.7
million, or 54 percent, reflected increased selling costs
related to higher sales volume, the cost of promoting new
products, increased investment in research and development
activities and growth in the number of employees in all
parts of the Company. The Company's average headcount
increased 26 percent in the third quarter of fiscal 1995
over the same period one year ago. Revenue per full-time
employee on an average annualized basis was $510,000 in the
third quarter of fiscal 1995, compared to $412,000 in the
third quarter of fiscal 1994, an increase of 24 percent.
Other expense (net) was $1.7 million for the third quarter
of fiscal 1995, compared with expense of $412,000 for the
same quarter one year ago. The increase from the prior year
is the result of the interest expense associated with the
$110.0 million in convertible subordinated notes issued in
the second quarter of fiscal 1995, partially offset by
higher interest income due to larger cash and investment
balances and rising interest rates.
The Company's effective income tax rate was 36 percent in
the third quarter of fiscal 1995. Despite the net loss
reported, the Company provided $9.8 million for income
taxes in the third quarter of fiscal 1994 because a
significant portion of the charge taken for purchased
in-process technology was not tax deductible. The tax
rate associated with continuing operations was 35 percent
in the third quarter of fiscal 1994.
Net income for the third quarter of fiscal 1995 was $45.3
million, or $.63 per share, compared to a net loss of $103.5
million, or $1.64 per share, reported a year ago. Excluding
the charge for purchased in-process technology, the Company
would have realized net income of $24.9 million, or $.36 per
share, in the third quarter of fiscal 1994. Net loss per
share for the third quarter of fiscal 1994 has been restated
to reflect the two-for-one stock split on September 1, 1994.
Nine Months Ended February 28, 1995
The Company achieved record sales for the first nine months
of fiscal 1995 totaling $892.8 million, an increase of
$307.2 million or 52 percent from the corresponding period a
year ago.
Cost of sales as a percentage of sales was 46.5 percent for
the first nine months of fiscal 1995, compared to 49.4
percent for the same period of fiscal 1994. The 2.9
percentage points improvement in gross margin from the prior
year period resulted primarily from a favorable shipment mix
towards the lower-cost EtherLink III network adapter and the
higher-margin switching products and lower inventory
obsolescence costs.
Total operating expenses in the first nine months of fiscal
1995 were $355.6 million compared to $335.3 million in the
first nine months of fiscal 1994. Excluding the charge of
$60.8 million for purchased in-process technology and the
non-recurring credit of $1.1 million for the reduction in
accrued costs relating to the fiscal 1991 restructuring,
total operating expenses in the first nine months of fiscal
1995 would have been $295.9 million, or 33.1 percent of
sales. Excluding the charge of $134.5 million for purchased
in-process technology, total operating expenses in the first
nine months of fiscal 1994 would have been $200.8 million,
or 34.3 percent of sales. The increase in continuing
operating expenses of $95.1 million, or 47 percent,
reflected increased selling costs related to higher sales
volume, the cost of developing and promoting the Company's
products and an average headcount increase of 22 percent
over the first nine months of fiscal 1994.
Other expense (net) was $2.4 million for the first nine
months of fiscal 1995, compared with expense of $1.2 million
for the same period one year ago. The increase from the
prior year is the result of the interest expense associated
with the issuance of $110.0 million in convertible
subordinated notes and higher provisions for doubtful
accounts associated with increased sales, partially offset
by higher interest income due to larger cash and investment
balances and rising interest rates.
Nonoperating income was favorably impacted during the first
nine months of fiscal 1994, as the Company realized a gain
of $17.7 million from the sale of the Company's investment
in Madge N.V.
Net income for the first nine months of fiscal 1995 was
$76.4 million, or $1.06 per share, compared to a net loss of
$55.9 million, or $.90 per share, for the first nine months
of fiscal 1994. Excluding the charge for purchased in-
process technology and the non-recurring credit, the Company
would have realized net income of $113.1 million, or $1.58
per share, for the first nine months of fiscal 1995.
Excluding the charge for purchased in-process technology,
the gain from the sale of an investment and a $1.2 million
tax benefit, which resulted from retroactive changes to the
Revenue Reconciliation Act of 1993, net income for the first
nine months of fiscal 1994 would have been $59.7 million, or
$.87 per share. Net loss per share for the first nine
months of fiscal 1994 has been restated to reflect the two-
for-one stock split on September 1, 1994.
Business Environment and Risk Factors
The Company's future operating results may be affected by
various trends and factors which the Company must
successfully manage in order to achieve favorable operating
results. In addition, there are trends and factors beyond
the Company's control which affect its operations. Such
trends and factors include adverse changes in general
economic conditions, governmental regulation or intervention
affecting communications or data networking, fluctuations in
foreign exchange rates, and other factors listed below. The
data networking industry has become increasingly
competitive, and the Company's results may be adversely
affected by the actions of existing or future competitors.
Such actions may include the development or acquisition of
new technologies, the introduction of new products, the
assertion by third parties of patent or similar intellectual
property rights, and the reduction of prices by competitors
to gain or retain market share. Industry consolidation or
alliances may also affect the competitive environment.
The market for the Company's products is characterized by
rapidly changing technology. The Company's success depends
in substantial part on the timely and successful
introduction of new products. An unexpected change in one
or more of the technologies affecting data networking or in
market demand for products based on a particular technology
could have a material adverse effect on the Company's
operating results. The Company's operating results could be
adversely affected if there is an unexpected change in
demand for products based on such technology or if the
Company does not respond timely and effectively to
expected changes. The Company is engaged in research
and development activities in certain emerging LAN and WAN
high-speed technologies, such as 100 Mbps Ethernet, ATM and
ISDN. As the industry standardizes on high-speed
technologies, there can be no assurance that the Company
will be able to respond timely to compete in the
marketplace.
Some key components of the Company's products are currently
available only from single sources. There can be no
assurance that in the future the Company's suppliers will be
able to meet the Company's demand for components in a timely
and cost effective manner. The Company's operating results
and customer relationships could be adversely affected by
either an increase in prices for, or an interruption or
reduction in supply of, any key components.
The Company is currently increasing its manufacturing
facility capabilities in two locations. While the Company
has significant experience in expanding its manufacturing
operations, such expansion may be subject to delay due to
labor issues, adverse weather and construction or other
unforeseeable delays.
Acquisitions of complementary businesses and technologies
under development are an active part of the Company's
overall business strategy. The Company has recently
consummated acquisitions of several companies, including
NiceCom and AccessWorks Communications, and announced the
acquisitions of Primary Access Corporation and Sonix
Communications, Ltd. There can be no assurance that
products, technologies and businesses of acquired companies
will be effectively assimilated into the Company's business
or product offerings. There can be no assurance that any
acquired products, technologies or businesses will
contribute to the Company's revenues or earnings to any
material extent. Further, the challenge of managing the
integration of several companies and new technologies into
the Company's product offerings simultaneously is
significant, and there can be no assurance that the Company
will be able to successfully manage such integration.
The market price of the Company's common stock has been, and
may continue to be, extremely volatile. Factors such as new
product announcements by the Company or its competitors,
quarterly fluctuations in the Company's operating results
and general conditions in the data networking market may
have a significant impact on the market price of the
Company's common stock. These conditions, as well as
factors which generally affect the market for stocks of high
technology companies, could cause the price of the Company's
stock to fluctuate substantially, even over short periods.
The Company's corporate headquarters and a large portion of
its research and development activities and other critical
business operations are located near major earthquake
faults. Operating results could be materially adversely
affected in the event of a major earthquake. Because of the
foregoing factors, as well as other factors affecting the
Company's operating results, past trends should not be used
by investors to anticipate future results or trends.
Further, the Company's prior performance should not be
presumed to be an accurate indicator of future performance.
Liquidity and Capital Resources
Cash, cash equivalents and temporary cash investments at
February 28, 1995 were $263.5 million, increasing $133.8
million from May 31, 1994. During the nine months ended
February 28, 1995, the Company received net proceeds of
$107.3 million from the issuance of convertible subordinated
notes and spent approximately $48.7 million in net cash for
acquisitions (see Note 6 of Notes to Consolidated Financial
Statements).
For the nine months ended February 28, 1995, net cash
generated from operating activities was $126.0 million. Net
cash generated from operating activities was offset by the
final payment of $14.3 million to Centrum shareholders in
the first quarter of fiscal 1995 for the acquisition of
Centrum Communications in February 1994. Inventory levels
increased $18.2 million from the prior fiscal year end, with
inventory turnover improving from 6.5 turns at May 31, 1994
to 7.6 turns at February 28, 1995. Trade receivables at
February 28, 1995 increased $69.0 million from May 31, 1994
due primarily to an increase in sales and the shortened
accounting period in February which has historically
increased days sales outstanding in receivables. Days sales
outstanding in receivables was 50 days at the end of the
third quarter, compared to 44 days at May 31, 1994 and 50
days at February 28, 1994. Other noncurrent assets
increased primarily due to an increase in noncurrent
deferred taxes of $20.1 million associated with the
acquisition of NiceCom and the related charge for purchased
in-process technology.
For the nine months ended February 28, 1995, the Company
made $48.8 million in capital expenditures. Major capital
expenditures included upgrades and additions to
manufacturing product lines, facility relocations,
development of a new worldwide accounting and information
system, and upgrades of desktop systems.
During the nine months ended February 28, 1995, the Company
repurchased 785,000 shares of common stock with a cash
outlay of $19.6 million. As of February 28, 1995, the
Company was authorized to repurchase up to an additional 2.7
million shares of its common stock in the open market.
During the first quarter of fiscal 1995, the Company signed
a five-year lease for 225,000 square feet of office and
manufacturing space to be built on land adjacent to its
existing headquarters in Santa Clara. Under such
arrangement, the Company has committed to fund up to a
maximum of $33.5 million for the construction of the
buildings. The Company is obligated to purchase the
property or cause a third party to purchase the property at
a future date. The Company estimates that it will commence
occupancy of portions of the facility in early fiscal 1996,
with payments on the lease to start no later than April
1996.
The Company believes that its existing cash balances, cash
generated from operations and the available revolving credit
agreement will be sufficient to satisfy operating cash
requirements through calendar 1995.
Subsequent Events
On March 22, 1995, the Company announced definitive
agreements to acquire Primary Access Corporation (Primary
Access), located in San Diego, California, and Sonix
Communications Limited (Sonix), located in Cirencester,
Gloucestershire in the United Kingdom. Primary Access
develops, manufactures and markets fully integrated remote
access products to network service providers. Sonix
develops, manufactures and markets a portfolio of network
access products specifically designed to optimize ISDN
technology.
The acquisitions of Primary Access for 3Com common stock
with a market value of approximately $170 million and
Sonix for 3Com common stock with a market value of
approximately $70 million will both be accounted for by
the pooling-of-interests method and are expected to be
completed effective in the fourth quarter of fiscal 1995.
Up to approximately 4.3 million shares of 3Com common stock
are expected to be issued for the two transactions. The
Primary Access acquisition is subject to a number of
conditions including the effectiveness of a registration
statement covering the shares to be issued, and approval
by the shareholders of Primary Access.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
On September 8, 1989, the Board of Directors
of the Company declared a dividend distribution
of one Common Stock Purchase Right (each a
"right" and collectively, the "Rights") for
each outstanding share of Common Stock, without
par value ("Common Stock"), of the Company
pursuant to that certain Rights Agreement
dated as of September 8, 1989 (the "Original
Rights Agreement"). The distribution was
paid as of September 20, 1989, to shareholders
of record on that date, and subsequently to
holders of all shares of Common Stock issued
after that date, pursuant to the terms of the
Original Rights Agreement.
On December 13, 1994, the Board of Directors
of the Company approved the amendment and
restatement of the Original Rights Agreement
to provide, among other things, that (i) each
Right entitles the registered holder to
purchase from the Company one full share of
Common Stock at a price of $250 per share;
(ii) the term of the Rights be extended
through December 13, 2004; and (iii) pursuant
to Section 15.5 of that certain Indenture by
and between the Company and The First National
Bank of Boston, as trustee, dated as of
November 1, 1994 (the "Indenture"), upon
conversion of the notes issued pursuant to
the Indenture (the "Notes"), the holders of
the Notes will be issued the Rights in
addition to the Common Stock issuable upon
such conversion, whether or not the Rights
have separated from the Common Stock at the
time of the conversion. The description and
terms of the Rights, as amended, are set
forth in the Amended and Restated Rights
Agreement dated as of December 21, 1994 (the
"Amended Rights Agreement") between the
Company and the First National Bank of Boston,
as Rights Agent.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security
Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
------ -----------
3.1 Amended and Restated Articles of
Incorporation (Exhibit 19.1 to Form 10-Q) (8)
3.2 Certificate of Amendment of the
Amended and Restated Articles of Incorporation (Exhibit 3.2
to Form 10-K) (19)
3.3 Bylaws, as amended and restated
(Exhibit 3.2 to Form 10-K) (10)
4.1 Reference is made to Exhibit 3.1
(Exhibit 4.1 to Form 10-K) (19)
4.2 Indenture Agreement between 3Com
Corporation and The First National Bank of Boston for the
private placement of convertible subordinated notes dated as
of November 1, 1994 (Exhibit 5.2 to Form 8-K) (22)
4.3 Placement Agreement for the private
placement of convertible subordinated notes dated November
8, 1994 (Exhibit 5.1 to Form 8-K) (22)
4.4 Amended and Restated Rights Agreement
dated December 21, 1994 (Exhibit 10.27 to Form 10-Q) (23)
10.1 1983 Stock Option Plan, as amended
(Exhibit 10.1 to Form 10-K) (10)
10.2 Amended and Restated Incentive Stock
Option Plan (4)
10.3 License Agreement dated March 19, 1981
(1)
10.4 First Amended and Restated 1984
Employee Stock Purchase Plan, as amended (Exhibit 19.1 to
Form 10-Q) (11)
10.5 License Agreement dated as of June 1,
1986 (Exhibit 10.16 to Form 10-K) (3)
10.6 3Com Corporation Director Stock Option
Plan, as amended (Exhibit 19.3 to Form 10-Q) (11)
10.7 Bridge Communications, Inc. 1983 Stock
Option Plan, as amended (Exhibit 4.7 to Form S-8) (2)
10.8 3Com Headquarters Lease dated December
1, 1988, as amended (Exhibit 10.14 to Form 10-K) (10)
10.9 Ground Lease dated July 5, 1989
(Exhibit 10.19 to Form 10-K) (5)
10.10 Sublease Agreement dated February 9,
1989 (Exhibit 10.20 to Form 10-K) (5)
10.11 Credit Agreement dated April 21, 1993
(Exhibit 10.11 to Form 10-K) (16)
10.12 Asset Purchase Agreement dated as of
January 24, 1992 (Exhibit 2.1 to Form 8-K) (12)
10.13 3Com Corporation Restricted Stock Plan
dated July 9, 1991 (Exhibit 19.2 to Form 10-Q) (11)
10.14 Agreement and Plan of Merger dated
December 16, 1992 (Exhibit 3 to Form 8-K) (13)
10.15 Form of Indemnity Agreement for
Directors and Officers (Exhibit 10.15 to Form 10-Q) (18)
10.16 Agreement and Plan of Reorganization
dated December 16, 1993 among 3Com Corporation, 3Sub
Corporation and Synernetics, Inc. (Exhibit 7.1 to Form 8-K)
(14)
10.17 Side Agreement Regarding Agreement and
Plan of Reorganization dated January 14, 1993 among 3Com
Corporation, 3Sub Corporation and Synernetics, Inc. (Exhibit
7.2 to Form 8-K) (14)
10.18 Agreement and Plan of Reorganization
dated January 18, 1994 (Exhibit 7.2 to Form 8-K) (15)
10.19 Indemnity and Escrow Agreement dated
February 2, 1994 (Exhibit 7.3 to Form 8-K) (15)
10.20 Amendment to Credit Agreement (Exhibit
10.20 to Form 10-Q) (17)
10.21 Second Amendment to Credit Agreement
(Exhibit 10.21 to Form 10-Q) (17)
10.22 1994 Stock Option Plan (Exhibit 10.22
to Form 10-K) (19)
10.23 Lease Agreement between BNP Leasing
Corporation, as Landlord, and 3Com Corporation, as Tenant,
effective as of July 14, 1994 (Exhibit 10.23 to Form 10-Q)
(20)
10.24 Purchase Agreement between BNP Leasing
Corporation and 3Com Corporation, dated July 14, 1994
(Exhibit 10.24 to Form 10-Q) (20)
10.25 Asset Purchase Agreement dated
September 18, 1994 among 3Com Corporation, NiceCom, Ltd.,
and Nice Systems, Ltd. (Exhibit 7.1 to Form 8-K) (21)
10.26 First Amendment to Asset Purchase
Agreement dated October 17, 1994 among 3Com Corporation,
NiceCom, Ltd., and Nice Systems, Ltd. (Exhibit 7.2 to
Form 8-K) (21)
(1) Incorporated by reference to the
corresponding Exhibit previously filed as an Exhibit to
Registrant's Registration Statement on Form S-1 filed
January 25, 1984 (File No. 2-89045)
(2) Incorporated by reference to the Exhibit
identified in parentheses previously filed as an Exhibit to
Registrant's Registration Statement on Form S-8 filed
October 13, 1987 (File No. 33-17848)
(3) Incorporated by reference to the
corresponding Exhibit or the Exhibit identified in
parentheses previously filed as an Exhibit to Registrant's
Form 10-K filed August 29, 1987 (File No. 0-12867)
(4) Incorporated by reference to Exhibit 10.2
to Registrant's Registration Statement on Form S-4 filed on
August 31, 1987 (File No. 33-16850)
(5) Incorporated by reference to the
corresponding Exhibit or the Exhibit identified in
parentheses previously filed as an Exhibit to Registrant's
Form 10-K filed on August 28, 1989 (File No. 0-12867)
(6) Incorporated by reference to Exhibit 19.1
to Registrant's Form 10-Q on April 14, 1990 (File No. 0-
12867)
(7) Incorporated by reference to the f
corresponding Exhibit or the Exhibit identified in
parentheses previously filed as an Exhibit to Registrant's
Form 10-K filed on August 28, 1990 (File No. 0-12867)
(8) Incorporated by reference to the Exhibit
identified in parentheses previously filed as an Exhibit to
Registrant's Form 10-Q filed on January 2, 1991 (File No. 0-
12867)
(9) Incorporated by reference to the Exhibit
identified in parentheses previously filed as an Exhibit to
Registrant's Form 10-Q filed on April 15, 1991 (File No. 0-
12867)
(10) Incorporated by reference to the Exhibit
identified in parentheses previously filed as an Exhibit to
Registrant's Form 10-K filed on August 27, 1991 (File No. 0-
12867)
(11) Incorporated by reference to the Exhibit
identified in parentheses previously filed as an Exhibit to
Registrant's Form 10-Q filed January 10, 1992 (File No. 0-
12867)
(12) Incorporated by reference to the Exhibit
identified in parentheses previously filed as an Exhibit to
Registrant's Form 8-K filed on February 18, 1992 (File No.
0-12867)
(13) Incorporated by reference to the Exhibit
identified in parentheses previously filed as an Exhibit to
Registrant's Form 8-K filed on February 12, 1993 (File No.
9-12867)
(14) Incorporated by reference to the Exhibit
identified in parentheses previously filed as an Exhibit to
Registrant's Form 8-K filed on January 31, 1994 (File No. 0-
12867)
(15) Incorporated by reference to the Exhibit
identified in parentheses previously filed as an Exhibit to
Registrant's Form 8-K filed on February 11, 1994 (File No.
0-12867)
(16) Incorporated by reference to the Exhibit
identified in parentheses previously filed as an Exhibit to
Registrant's Form 10-K filed on August 27, 1993 (File No. 0-
12867)
(17) Incorporated by reference to the Exhibit
identified in parentheses previously filed as an Exhibit to
Registrant's Form 10-Q filed on April 13, 1994 (File No. 0-
12867)
(18) Incorporated by reference to the Exhibit
identified in parentheses previously filed as an Exhibit to
Registrant's Form 10-Q filed on January 14, 1994 (File No.
0-12867)
(19) Incorporated by reference to the Exhibit
identified in parentheses previously filed as an Exhibit to
Registrant's Form 10-K filed on August 31, 1994 (File No. 0-
12867)
(20) Incorporated by reference to the Exhibit
identified in parentheses previously filed as an Exhibit to
Registrant's Form 10-Q filed on October 16, 1994 (File No.
0-12867)
(21) Incorporated by reference to the Exhibit
identified in parentheses previously filed as an Exhibit to
Registrant's Form 8-K filed on November 1, 1994 (File No. 0-
12867)
(22) Incorporated by reference to the Exhibit
identified in parentheses previously filed as an Exhibit to
Registrant's Form 8-K filed on November 16, 1994 (File No.
0-12867)
(23) Incorporated by reference to the Exhibit
identified in parentheses previously filed as an Exhibit to
Registrant's Form 10-Q filed on January 13, 1995 (File No.
0-12867)
(b) Reports on Form 8-K
None.
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 thereunto duly
authorized.
3Com Corporation
(Registrant)
Dated: April 13, 1995 By: /s/ Christopher B. Paisley
--------------------------
Christopher B. Paisley
Vice President Finance and
Chief Financial Officer
(Principal Financial Officer)
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