UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 November 28, 2003
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No. 000-29597
palmOne, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 94-3150688 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 400 N. McCarthy Blvd. Milpitas, California |
95035 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (408) 503-7000
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 x No ¨
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).
Yes x No ¨
As of December 26, 2003, 46,123,614 shares of the Registrant’s Common Stock were outstanding.
This report contains a total of 63 pages of which this page is number 1.
palmOne, Inc.
| Page | ||||
| PART I. |
FINANCIAL INFORMATION | |||
| Item 1. |
Financial Statements | |||
| Condensed Consolidated Statements of Operations Three and Six months ended November 30, 2003 and 2002 |
3 | |||
| Condensed Consolidated Balance Sheets November 30, 2003 and May 31, 2003 |
4 | |||
| Condensed Consolidated Statements of Cash Flows Six months ended November 30, 2003 and 2002 |
5 | |||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24 | ||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk | 53 | ||
| Item 4. |
Controls and Procedures | 54 | ||
| PART II. |
OTHER INFORMATION | |||
| Item 1. |
Legal Proceedings | 54 | ||
| Item 4. |
Submission of Matters to a Vote of Security Holders | 58 | ||
| Item 6. |
Exhibits and Reports on Form 8-K | 59 | ||
| 63 | ||||
The page numbers in this Table of Contents reflect actual page numbers, not EDGAR page tag numbers.
References to “palmOne,” “Company,” “we,” “us,” and “our” in this Form 10-Q refer to palmOne, Inc. and its subsidiaries unless the context requires otherwise.
palmOne, the palmOne logo, Zire, the Zire logo, Tungsten, the Tungsten logo, Handspring, the Handspring logo, Treo, Palm, the Palm logo, Palm OS, Graffiti, HotSync, the HotSync logo, and stylizations and design marks associated with all the preceding, and trade dress associated with palmOne, Inc.’s products, are among the trademarks or registered trademarks owned by or licensed to palmOne, Inc. or its subsidiaries. All other brand and product names are or may be trademarks of, and are used to identify products or services of, their respective owners. palmOne, Inc. uses the Bluetooth wireless technology trademark under express license from Bluetooth SIG, Inc. All other brand and product names are or may be trademarks of, and are used to identify products or services of, their respective owners.
2
PART I. FINANCIAL INFORMATION
| Item 1. | Financial Statements |
palmOne, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended November 30, |
Six Months Ended November 30, |
|||||||||||||||
| 2003 |
2002 |
2003 |
2002 |
|||||||||||||
| Revenues |
$ | 271,215 | $ | 257,902 | $ | 439,823 | $ | 422,627 | ||||||||
| Costs and operating expenses: |
||||||||||||||||
| Cost of revenues (**) |
197,739 | 187,632 | 318,963 | 314,638 | ||||||||||||
| Sales and marketing |
43,709 | 40,805 | 78,287 | 81,329 | ||||||||||||
| Research and development |
14,948 | 16,518 | 31,776 | 35,476 | ||||||||||||
| General and administrative |
9,355 | 8,631 | 18,049 | 17,579 | ||||||||||||
| Amortization of intangible assets and stock-based compensation (*) |
1,938 | 992 | 2,059 | 2,499 | ||||||||||||
| Restructuring charges |
918 | (2,023 | ) | 3,588 | (2,604 | ) | ||||||||||
| Total costs and operating expenses |
268,607 | 252,555 | 452,722 | 448,917 | ||||||||||||
| Operating income (loss) |
2,608 | 5,347 | (12,899 | ) | (26,290 | ) | ||||||||||
| Interest and other income (expense), net |
1,608 | 4,775 | 1,451 | 4,983 | ||||||||||||
| Income (loss) before income taxes |
4,216 | 10,122 | (11,448 | ) | (21,307 | ) | ||||||||||
| Income tax provision |
1,584 | 601 | 2,782 | 220,445 | ||||||||||||
| Income (loss) from continuing operations |
2,632 | 9,521 | (14,230 | ) | (241,752 | ) | ||||||||||
| Loss from discontinued operations (net of taxes of $4, $623, $252 and $905, respectively) |
(6,750 | ) | (6,001 | ) | (11,634 | ) | (13,473 | ) | ||||||||
| Net income (loss) |
$ | (4,118 | ) | $ | 3,520 | $ | (25,864 | ) | $ | (255,225 | ) | |||||
| Net income (loss) per share: |
||||||||||||||||
| Basic: |
||||||||||||||||
| Continuing operations |
$ | 0.07 | $ | 0.33 | $ | (0.43 | ) | $ | (8.33 | ) | ||||||
| Discontinued operations |
(0.18 | ) | (0.21 | ) | (0.35 | ) | (0.47 | ) | ||||||||
| $ | (0.11 | ) | $ | 0.12 | $ | (0.78 | ) | $ | (8.80 | ) | ||||||
| Diluted: |
||||||||||||||||
| Continuing operations |
$ | 0.07 | $ | 0.33 | $ | (0.43 | ) | $ | (8.33 | ) | ||||||
| Discontinued operations |
(0.18 | ) | (0.21 | ) | (0.35 | ) | (0.47 | ) | ||||||||
| $ | (0.11 | ) | $ | 0.12 | $ | (0.78 | ) | $ | (8.80 | ) | ||||||
| Shares used in computing per share amounts: |
||||||||||||||||
| Basic |
36,696 | 29,046 | 33,022 | 29,007 | ||||||||||||
| Diluted |
38,743 | 29,086 | 33,022 | 29,007 | ||||||||||||
| (*) Amortization of intangible assets and stock-based compensation: | ||||||||||||||||
| Cost of revenues |
$ | 84 | $ | 389 | $ | 88 | $ | 775 | ||||||||
| Sales and marketing |
1,599 | 190 | 1,657 | 393 | ||||||||||||
| Research and development |
37 | 286 | 64 | 1,062 | ||||||||||||
| General and administrative |
218 | 127 | 250 | 269 | ||||||||||||
| Total amortization of intangible assets and stock-based compensation |
$ | 1,938 | $ | 992 | $ | 2,059 | $ | 2,499 | ||||||||
| (**) Cost of revenues excludes the applicable portion of amortization of intangible assets and stock-based compensation. | ||||||||||||||||
See notes to condensed consolidated financial statements.
3
palmOne, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except par value amounts)
| November 30, 2003 |
May 31, 2003 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 218,195 | $ | 204,967 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $8,473 and $4,635, respectively |
152,987 | 96,784 | ||||||
| Inventories |
36,336 | 22,748 | ||||||
| Investment for committed tenant improvements |
7,297 | — | ||||||
| Prepaids and other |
10,318 | 9,039 | ||||||
| Net assets of discontinued operations |
— | 39,702 | ||||||
| Total current assets |
425,133 | 373,240 | ||||||
| Restricted investments |
1,816 | 948 | ||||||
| Land not in use |
60,000 | 60,000 | ||||||
| Property and equipment, net |
27,190 | 31,204 | ||||||
| Goodwill |
255,327 | 13,815 | ||||||
| Intangible assets, net |
18,004 | — | ||||||
| Deferred income taxes |
34,800 | 34,800 | ||||||
| Other assets |
1,420 | 1,720 | ||||||
| Total assets |
$ | 823,690 | $ | 515,727 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 131,010 | $ | 89,371 | ||||
| Accrued restructuring |
36,285 | 34,886 | ||||||
| Provision for committed tenant improvements |
7,297 | — | ||||||
| Other accrued liabilities |
134,049 | 100,519 | ||||||
| Total current liabilities |
308,641 | 224,776 | ||||||
| Non-current liabilities: |
||||||||
| Long-term convertible debt |
35,000 | 35,000 | ||||||
| Other non-current liabilities |
1,900 | 165 | ||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $.001 par value, 125,000 shares authorized; outstanding: none |
— | — | ||||||
| Common stock, $.001 par value, 2,000,000 shares authorized; outstanding: 46,115 shares and 29,230 shares, respectively |
46 | 29 | ||||||
| Additional paid-in capital |
1,374,782 | 1,123,819 | ||||||
| Unamortized deferred stock-based compensation |
(3,430 | ) | (508 | ) | ||||
| Accumulated deficit |
(894,653 | ) | (868,789 | ) | ||||
| Accumulated other comprehensive income |
1,404 | 1,235 | ||||||
| Total stockholders’ equity |
478,149 | 255,786 | ||||||
| Total liabilities and stockholders’ equity |
$ | 823,690 | $ | 515,727 | ||||