EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

CONTACTS:

 

Sandy O’Halloran, investor relations

Work today: 408.503.7405

Work starting July 5: 408.617.6739

sandy.ohalloran@palmOne.com

 

Marlene Somsak, media relations

Work today: 408.503.2592

Work starting July 5: 408.617.7451

Treo smartphone: 408.242.2425

marlene.somsak@palmOne.com

 

palmOne Reports Q4 and FY05 Results

 

Quarterly Revenue $335.8M, Up 26% Year-over-Year;

Annual Revenue $1.27B, Up 34%

 

MILPITAS, Calif., June 30, 2005 — palmOne, Inc. (Nasdaq: PLMO) today reported that revenue in its fourth quarter of fiscal year 2005, ended June 3, totaled $335.8 million, up 26 percent from the year-ago period and marking the eighth consecutive quarter of year-over-year growth. Quarterly revenue was up 18 percent sequentially.

 

Net income was $17.7 million, or $0.35 per diluted share. This compares to net income for the fourth quarter of fiscal year 2004 of $13.3 million, or $0.27 per diluted share, and net income for the third quarter of fiscal year 2005 of $4.4 million or $0.09 per diluted share.

 

Net income in the fourth fiscal quarter, measured on a non-GAAP(1) basis, totaled $19.2 million, or $0.37 per diluted share, excluding the effects of amortization of intangible assets and deferred stock-based compensation, employee separation costs and restructuring charges. This compares to non-GAAP net income in the fourth quarter of fiscal year 2004 of $15.9 million, or $0.32 per diluted share, which excluded the effects of amortization of intangible assets and deferred stock-based compensation and restructuring charges.

 

The company also generated positive cash flow of $36.5 million from operations in its fourth quarter of fiscal year 2005.

 

- 1 -

“We’re very pleased with the company’s performance during the quarter and the fiscal year,” said Ed Colligan, palmOne president and chief executive officer. “Our carrier and channel partners reported very strong sell-through on Treo smartphones for the quarter — a 250 percent increase over the comparable quarter last year and 57 percent more than in the third quarter of fiscal year 2005.”

 

Among the quarter’s other business highlights was the expansion of Treo(TM) 650 smartphone availability in the United States with Verizon Wireless and with EarthLink Wireless; in Canada on the Rogers Wireless high-speed EDGE(2) network; in Australia with Telstra Mobile; in France, the UK and Switzerland with Orange; in Holland with KPN; in Spain with movistar (Telefonica Moviles Espana); in Italy with Telecom Italia Mobile (TIM); in Argentina on Personal’s EDGE Network; in Mexico with Telcel’s EDGE network; and in Venezuela through Digitel TIM — most of which involved carrier customization prior to commercial availability.

 

In addition during the quarter, the company also:

 

  •   Introduced the Tungsten(TM) E2 handheld, featuring Bluetooth(R) wireless technology, to build on the popular Tungsten E, which had been the top-selling handheld in all U.S. channels for 18 months using data from The NPD Group. Combined sales of the Tungsten E and Tungsten E2 accounted for approximately 22 percent of the total U.S. retail market in April and May 2005;

 

  •   Created a new category of mobile-computing device for business productivity and entertainment applications with the introduction of the LifeDrive(TM) mobile manager. It features a hard drive and two wireless technologies, Wi-Fi and Bluetooth;

 

  •   Realized carrier- and channel-reported sell-through to end-user customers of 442,000 Treo smartphones vs. 126,000 in the comparable quarter last year and 282,000 in the third quarter of fiscal year 2005;

 

  •   Acquired full rights to the Palm(R) brand, ending co-ownership of the brand with PalmSource, Inc.; and

 

  •   Extended the license for Palm OS(R), ensuring the capability to develop Palm Powered(TM) products through 2009.

 

Fiscal Year 2005 Results

 

Revenue for the full fiscal year 2005 was $1.27 billion, up 34 percent from the $949.7 million reported in fiscal year 2004. Net income for fiscal year 2005 was $66.4 million, or $1.29 per diluted share, compared with net loss of $21.8 million, or $0.55 per diluted share, for fiscal year 2004. Non-GAAP net income for fiscal year 2005 — excluding the effects of amortization of intangible assets and deferred stock-based compensation, employee separation costs and restructuring charges — was $78.9 million, or $1.54 per diluted share. That compares with a fiscal year 2004 non-GAAP net income — excluding the effects of amortization of intangible assets and deferred stock-based compensation, restructuring charges and loss from discontinued operations — of $8.0 million, or $0.19 per diluted share.

 

- 2 -

“We concluded 2005 with very good results across virtually every key financial metric,” said Colligan. “We introduced several innovative products, and we enter fiscal year 2006 with an optimistic outlook for continued growth and profitability.”

 

palmOne shipped approximately 4.5 million Zire(TM), Tungsten, Treo and LifeDrive family devices during its fiscal year 2005, and more than 1 million devices during the fourth quarter of fiscal year 2005. To date, palmOne has shipped more than 30 million units.

 

Q1 Fiscal 2006 Guidance

 

In its pending conference call to investors today, the company will provide forward guidance for the first quarter of fiscal year 2006. The quarter’s guidance includes the following:

 

  •   Revenue is expected to be between $330 million and $335 million;

 

  •   Gross margin is expected to be in the range of 30 percent to 31 percent;

 

  •   Operating expenses on a GAAP basis are expected to be in the range of $87 million to $89 million, and non-GAAP operating expenses are expected to be in the range of $84 million to $86 million. This includes approximately $2 million in costs associated with moving to a new headquarters and changing the company name to Palm, Inc.; and

 

  •   Earnings per diluted share on a GAAP basis in the range of $0.24 to $0.29 and on a non-GAAP basis of $0.30 to $0.35.

 

Campus Move and Temporary Shutdown

 

palmOne is preparing its move to new corporate headquarters. On Tuesday, July 5, we can be reached at our new corporate address: 950 W. Maude Ave., Sunnyvale, Calif., 94085-2801.

 

The main telephone number at the new facility will be 408.617.7000. All individual telephone numbers will change. Email addresses will continue unchanged until July 14, when they will transition to first.last@palm.com. Email with a palmOne.com address will continue to be forwarded for several months.

 

New Company Name and Ticker

 

The company will adopt a new name — Palm, Inc. — on July 14, 2005, and begin trading on the Nasdaq exchange with a new ticker symbol — PALM.

 

- 3 -

INVESTOR’S NOTE: The company today will hold a conference call for the public at 6 a.m. Pacific/9 a.m. Eastern to discuss matters covered in this news release. The dial-in number is 800.510.0178 with a passcode of 34525667 in the United States and 617.614.3450 for international callers, with the same passcode of 34525667. A telephone call replay of the conference call will be available through July 8, 2005, beginning today at approximately 5 p.m. Pacific. The domestic dial-in number for the replay is 888.286.8010 and for international callers, it is 617.801.6888, with a passcode of 96750224 for both. The live conference call also will be available over the Internet by logging onto the investor relations section of palmOne’s website at http://ir.palmOne.com. An audio replay and text transcript of the conference call also can be accessed at the same URL beginning today at approximately 6 p.m. Pacific.

 

NON-GAAP FINANCIAL MEASURES — To supplement the company’s consolidated financial statements presented in accordance with GAAP, palmOne uses non-GAAP measures of certain components of financial performance, including operating income (loss), net income (loss) and per share data, which are adjusted from results based on GAAP to exclude certain expenses, gains and losses. These non-GAAP measures are provided to enhance investors’ overall understanding of the company’s current financial performance and the company’s prospects for the future. Specifically, the company believes the non-GAAP results provide useful information to both management and investors by excluding certain expenses, gains and losses that may not be indicative of its core operating results. These non-GAAP results are among the primary indicators management uses as a basis for planning and forecasting of future periods and facilitating management’s internal comparisons to the company’s historical operating results and comparisons to competitors’ operating results. In addition, because palmOne has historically reported certain non-GAAP results to investors, the company believes the inclusion of non-GAAP measures provides consistency in the company’s financial reporting. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. These non-GAAP financial measures may also be different from non-GAAP financial measures used by other companies. Consistent with the company’s practice, the non-GAAP measures included in this press release have been reconciled to the nearest GAAP measure.

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements within the meaning of the federal securities laws, including, without limitation, statements regarding palmOne’s expected first quarter of fiscal year 2006 revenue, gross margin, operating expenses and earnings per share, our ability to grow our business and our ability to be profitable. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially, including, without limitation, the following: fluctuations in the demand for palmOne’s existing and future products and services and growth in palmOne’s industries and markets; palmOne’s ability to forecast demand for its products; possible defects in products and technologies developed; palmOne’s ability to introduce new products and services successfully and in a cost-effective and timely manner; palmOne’s ability

 

- 4 -

to timely and cost-effectively obtain components and elements of its technology from suppliers; palmOne’s ability to compete with existing and new competitors; palmOne’s dependence on wireless carriers and ability to meet wireless-carrier certification requirements; palmOne’s ability to utilize its net operating losses. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in palmOne’s most recent filings with the Securities and Exchange Commission, including its Quarterly Report on Form 10-Q for the fiscal quarter ended February 25, 2005 and its Annual Report on Form 10-K for the fiscal year ended May 28, 2004. palmOne undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this press release.

 

About palmOne, Inc.

 

palmOne, Inc. — a leader in mobile computing — strives to put the power of computing in people’s hands so they can access and share their most important information. The company’s products include Treo(TM) smartphones, the LifeDrive(TM) mobile manager, Tungsten(TM) and Zire(TM) handhelds, and software and accessories.

 

palmOne products are sold through select Internet, retail, reseller and wireless operator channels throughout the world, and at palmOne Retail Stores and palmOne online stores (http://www.palmOne.com/stores).

 

More information about palmOne, Inc. is available at http://www.palmOne.com.

 

# # #

(1) GAAP stands for Generally Accepted Accounting Principles.
(2) EDGE service not available in all areas. Please see service coverage map for details.

 

palmOne, Palm, Palm OS, Palm Powered, Zire, Tungsten, Treo and LifeDrive are among the trademarks or registered trademarks owned by or licensed to palmOne, Inc. or its subsidiaries. The Bluetooth word mark and logos are owned by the Bluetooth SIG, Inc. and any use of such marks by palmOne, Inc. is under license. All other brand and product names are or may be trademarks of, and are used to identify products or services of, their respective owners.

 

- 5 -

palmOne, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

 

     Three Months Ended
     Years Ended
  
     May 31,
2005
     May 31,
2004
     May 31,
2005
     May 31,
2004
  

Revenues

    $ 335,820     $ 267,346     $ 1,270,410     $ 949,654  

Costs and operating expenses:

                                 

Cost of revenues (*)

      234,381       185,659       879,435       676,791  

Sales and marketing

      43,899       35,201       170,893       152,070  

Research and development

      27,419       17,760       89,804       69,367  

General and administrative

      9,684       10,104       40,211       37,323  

Amortization of intangible assets and deferred stock-based compensation (**)

      2,781       2,278       9,833       9,751  

Employee separation costs

      (934 )     —         3,066       —    

Restructuring charges

      (360 )     322       (360 )     8,432  
    
 
 
 

Total costs and operating expenses

      316,870       251,324       1,192,882       953,734  
    
 
 
 

Operating income (loss)

      18,950       16,022       77,528       (4,080 )

Interest and other income (expense), net

      1,221       (1,009 )     3,003       (44 )
    
 
 
 

Income (loss) before income taxes

      20,171       15,013       80,531       (4,124 )

Income tax provision

      2,442       1,676       14,144       6,091  
    
 
 
 

Income (loss) from continuing operations

      17,729       13,337       66,387       (10,215 )

Loss from discontinued operations (net of taxes of $0, $0, $0 and $252, respectively)

      —         —         —         (11,634 )
    
 
 
 

Net income (loss)

    $ 17,729     $ 13,337     $ 66,387     $ (21,849 )
    
 
 
 

Net income (loss) per share:

                                 

Basic:

                                 

Continuing operations

    $ 0.36     $ 0.29     $ 1.37     $ (0.26 )

Discontinued operations

      —         —         —         (0.29 )
    
 
 
 
     $ 0.36     $ 0.29     $ 1.37     $ (0.55 )
    
 
 
 

Diluted:

                                 

Continuing operations

    $ 0.35     $ 0.27     $ 1.29     $ (0.26 )

Discontinued operations

      —         —         —         (0.29 )
    
 
 
 
     $ 0.35     $ 0.27     $ 1.29     $ (0.55 )
    
 
 
 

Shares used in computing per share amounts:

                                 

Basic

      49,182       46,628       48,486       39,686  

Diluted

      51,271       49,358       51,290       39,686  

(*)    Cost of revenues does not include that portion of amortization of intangible assets and deferred stock-based compensation related to cost of revenues.

(**)  Amortization of intangible assets and deferred stock-based compensation:

       

    

        

Cost of revenues

    $ 230     $ 243     $ 923     $ 574  

Sales and marketing

      1,763       1,540       6,760       7,906  

Research and development

      64       102       256       234  

General and administrative

      390       393       1,560       1,037  

Employee separation costs

      334       —         334       —    
    
 
 
 
     $ 2,781     $ 2,278     $ 9,833     $ 9,751  
    
 
 
 

 

palmOne’s fiscal periods are generally 13 weeks in length and end on a Friday. For presentation purposes, the periods are presented as ending on May 31.

 

- 6 -

palmOne, Inc.

Reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

 

     Three Months Ended May 31, 2005
    Three Months Ended May 31, 2004
  
     GAAP
     Adjustments
     Non-GAAP
    GAAP
     Adjustments
     Non-GAAP
  

Revenues

    $ 335,820     $ —       $ 335,820    $ 267,346     $ —       $ 267,346  

Costs and operating expenses:

                                                

Cost of revenues (*)

      234,381       —         234,381      185,659       —         185,659  

Sales and marketing

      43,899       —         43,899      35,201       —         35,201  

Research and development

      27,419       —         27,419      17,760       —         17,760  

General and administrative

      9,684       —         9,684      10,104       —         10,104  

Amortization of intangible assets and deferred stock-based compensation (**)

      2,781       (2,781 )     —        2,278       (2,278 )     —    

Employee separation costs

      (934 )     934       —        —         —         —    

Restructuring charges

      (360 )     360       —        322       (322 )     —    
    
 
 
  
 
 

Total costs and operating expenses

      316,870       (1,487 )     315,383      251,324       (2,600 )     248,724  
    
 
 
  
 
 

Operating income (loss)

      18,950       1,487       20,437      16,022       2,600       18,622  

Interest and other income (expense), net

      1,221       —         1,221      (1,009 )     —         (1,009 )
    
 
 
  
 
 

Income (loss) before income taxes

      20,171       1,487       21,658      15,013       2,600       17,613  

Income tax provision

      2,442       —         2,442      1,676       —         1,676  
    
 
 
  
 
 

Income (loss) from continuing operations

      17,729       1,487       19,216      13,337       2,600       15,937  

Loss from discontinued operations

      —         —         —        —         —         —    
    
 
 
  
 
 

Net income (loss)

    $ 17,729     $ 1,487     $ 19,216    $ 13,337     $ 2,600     $ 15,937  
    
 
 
  
 
 

Net income (loss) per share:

                                                

Basic:

                                                

Continuing operations

    $ 0.36     $ 0.03     $ 0.39    $ 0.29     $ 0.05     $ 0.34  

Discontinued operations

      —         —         —        —         —         —    
    
 
 
  
 
 
     $ 0.36     $ 0.03     $ 0.39    $ 0.29     $ 0.05     $ 0.34  
    
 
 
  
 
 

Diluted:

                                                

Continuing operations

    $ 0.35     $ 0.02     $ 0.37    $ 0.27     $ 0.05     $ 0.32  

Discontinued operations

      —         —         —        —         —         —    
    
 
 
  
 
 
     $ 0.35     $ 0.02     $ 0.37    $ 0.27     $ 0.05     $ 0.32  
    
 
 
  
 
 

Shares used in computing per share amounts:

                                                

Basic

      49,182       —         49,182      46,628       —         46,628  

Diluted

      51,271       —         51,271      49,358       —         49,358  

(*)    Cost of revenues does not include that portion of amortization of intangible assets and deferred stock-based compensation related to cost of revenues.

(**)  Amortization of intangible assets and deferred stock-based compensation:

       

    

        

Cost of revenues

    $ 230     $ (230 )   $ —      $ 243     $ (243 )   $ —    

Sales and marketing

      1,763       (1,763 )     —        1,540       (1,540 )     —    

Research and development

      64       (64 )     —        102       (102 )     —    

General and administrative

      390       (390 )     —        393       (393 )     —    

Employee separation costs

      334       (334 )     —        —         —         —    
    
 
 
  
 
 
     $ 2,781     $ (2,781 )   $ —      $ 2,278     $ (2,278 )   $ —    
    
 
 
  
 
 

 

The above non-GAAP amounts have been adjusted to eliminate amortization of intangible assets and deferred stock-based compensation, employee separation costs and restructuring charges.

 

palmOne’s fiscal periods are generally 13 weeks in length and end on a Friday. For presentation purposes, the periods are presented as ending on May 31.

 

- 7 -

palmOne, Inc.

Reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

 

     Year Ended May 31, 2005
    Year Ended May 31, 2004
  
     GAAP
     Adjustments
     Non-GAAP
    GAAP
     Adjustments
     Non-GAAP
  

Revenues

    $ 1,270,410     $ —       $ 1,270,410    $ 949,654     $ —       $ 949,654  

Costs and operating expenses:

                                                

Cost of revenues (*)

      879,435       —         879,435      676,791       —         676,791  

Sales and marketing

      170,893       —         170,893      152,070       —         152,070  

Research and development

      89,804       —         89,804      69,367       —         69,367  

General and administrative

      40,211       —         40,211      37,323       —         37,323  

Amortization of intangible assets and deferred stock-based compensation (**)

      9,833       (9,833 )     —        9,751       (9,751 )     —    

Employee separation costs

      3,066       (3,066 )     —        —         —         —    

Restructuring charges

      (360 )     360       —        8,432       (8,432 )     —    
    
 
 
  
 
 

Total costs and operating expenses

      1,192,882       (12,539 )     1,180,343      953,734       (18,183 )     935,551  
    
 
 
  
 
 

Operating income (loss)

      77,528       12,539       90,067      (4,080 )     18,183       14,103  

Interest and other income (expense), net

      3,003       —         3,003      (44 )     —         (44 )
    
 
 
  
 
 

Income (loss) before income taxes

      80,531       12,539       93,070      (4,124 )     18,183       14,059  

Income tax provision

      14,144       —         14,144      6,091       —         6,091  
    
 
 
  
 
 

Income (loss) from continuing operations

      66,387       12,539       78,926      (10,215 )     18,183       7,968  

Loss from discontinued operations (net of taxes of $0 and $252, respectively)

      —         —         —        (11,634 )     11,634       —    
    
 
 
  
 
 

Net income (loss)

    $ 66,387     $ 12,539     $ 78,926    $ (21,849 )   $ 29,817     $ 7,968  
    
 
 
  
 
 

Net income (loss) per share:

                                                

Basic:

                                                

Continuing operations

    $ 1.37     $ 0.26     $ 1.63    $ (0.26 )   $ 0.46     $ 0.20  

Discontinued operations

      —         —         —        (0.29 )     0.29       —    
    
 
 
  
 
 
     $ 1.37     $ 0.26     $ 1.63    $ (0.55 )   $ 0.75     $ 0.20  
    
 
 
  
 
 

Diluted:

                                                

Continuing operations

    $ 1.29     $ 0.25     $ 1.54    $ (0.26 )   $ 0.45     $ 0.19  

Discontinued operations

      —         —         —        (0.29 )     0.29       —    
    
 
 
  
 
 
     $ 1.29     $ 0.25     $ 1.54    $ (0.55 )   $ 0.74     $ 0.19  
    
 
 
  
 
 

Shares used in computing per share amounts:

                                                

Basic

      48,486       —         48,486      39,686       —         39,686  

Diluted

      51,290       —         51,290      39,686       1,570       41,256  

(**)  Cost of revenues does not include that portion of amortization of intangible assets and deferred stock-based compensation related to cost of revenues.

(*)    Amortization of intangible assets and deferred stock-based compensation:

     

      

        

Cost of revenues

    $ 923     $ (923 )   $ —      $ 574     $ (574 )   $ —    

Sales and marketing

      6,760       (6,760 )     —        7,906       (7,906 )     —    

Research and development

      256       (256 )     —        234       (234 )     —    

General and administrative

      1,560       (1,560 )     —        1,037       (1,037 )     —    

Employee separation costs

      334       (334 )     —        —         —         —    
    
 
 
  
 
 
     $ 9,833     $ (9,833 )   $ —      $ 9,751     $ (9,751 )   $ —    
    
 
 
  
 
 

 

The above non-GAAP amounts have been adjusted to eliminate amortization of intangible assets and deferred stock-based compensation, employee separation costs, restructuring charges and loss from discontinued operations.

 

palmOne’s fiscal periods are generally 13 weeks in length and end on a Friday. For presentation purposes, the periods are presented as ending on May 31.

 

- 8 -

palmOne, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except par value amounts)

(Unaudited)

 

     May 31, 2005
     May 31, 2004
  

ASSETS

                 

Current assets:

                 

Cash and cash equivalents (1)

    $ 128,164     $ 98,569  

Short-term investments (1)

      234,535       153,882  

Accounts receivable, net of allowance for doubtful accounts of $7,673 and $8,317, respectively

      140,162       120,757  

Inventories

      35,544       14,030  

Investment for committed tenant improvements

      6,182       7,197  

Prepaids and other

      8,225       8,067  
    
 

Total current assets

      552,812       402,502  

Restricted investments

      775       1,175  

Land not in use

      60,000       60,000  

Property and equipment, net

      19,158       19,425  

Goodwill

      249,161       257,363  

Intangible assets, net

      30,373       10,979  

Deferred income taxes

      36,217       34,800  

Other assets

      1,536       1,694  
    
 

Total assets

    $ 950,032     $ 787,938  
    
 

LIABILITIES AND STOCKHOLDERS’ EQUITY

                 

Current liabilities:

                 

Accounts payable

    $ 135,720     $ 112,772  

Accrued restructuring

      15,400       27,156  

Provision for committed tenant improvements

      6,182       7,197  

Other accrued liabilities

      164,450       112,679  
    
 

Total current liabilities

      321,752       259,804  

Non-current liabilities:

                 

Long-term convertible debt

      35,000       35,000  

Other non-current liabilities

      12,257       1,600  

Stockholders’ equity:

                 

Preferred stock, $.001 par value, 125,000 shares authorized; none outstanding

      —         —    

Common stock, $.001 par value, 2,000,000 shares authorized; outstanding: 49,488 shares and 47,032 shares, respectively

      49       47  

Additional paid-in capital

      1,406,935       1,383,630  

Unamortized deferred stock-based compensation

      (2,422 )     (1,995 )

Accumulated deficit

      (824,251 )     (890,638 )

Accumulated other comprehensive income

      712       490  
    
 

Total stockholders’ equity

      581,023       491,534  
    
 

Total liabilities and stockholders’ equity

    $ 950,032     $ 787,938  
    
 
(1) In the third quarter of fiscal year 2005, the Company began to classify its investment in auction-rate securities as short-term investments. These investments were included in cash and cash equivalents in previous periods ($104.5 million at May 31, 2004), and such amounts have been reclassified in the accompanying financial statements to conform to the current period classification. This change in classification had no effect on the amounts of total current assets, total assets, net income or cash flow from operations of the Company.

 

palmOne’s fiscal periods are generally 13 weeks in length and end on a Friday. For presentation purposes, the periods are presented as ending on May 31.

 

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palmOne, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

     Three Months Ended
  
     May 31, 2005
     May 31, 2004
  

Cash flows from operating activities:

                 

Income from continuing operations

    $ 17,729     $ 13,337  

Adjustments to reconcile income from continuing operations to net cash provided by (used in) operating activities:

                 

Depreciation

      3,441       4,931  

Amortization

      2,781       2,400  

Deferred income taxes

      (817 )     —    

Changes in assets and liabilities, net of effect of business acquisition:

                 

Accounts receivable

      18,378       (19,080 )

Inventories

      10,076       13,012  

Prepaids and other

      1,219       1,959  

Accounts payable

      (14,847 )     1,739  

Accrued restructuring

      (3,695 )     (7,955 )

Other accrued liabilities

      2,227       (3,984 )
    
 

Net cash provided by (used in) operating activities

      36,492       6,359  
    
 

Cash flows from investing activities:

                 

Purchase of brand name intangible

      (7,500 )     —    

Purchase of property and equipment

      (5,967 )     (1,547 )

Purchase of short-term investments

      (56,421 )     (77,799 )

Sale of short-term investments

      51,829       41,762  
    
 

Net cash provided by (used in) investing activities

      (18,059 )     (37,584 )
    
 

Cash flows from financing activities:

                 

Proceeds from issuance of common stock; employee stock plans

      4,950       8,244  

Repayment of debt

      (1,600 )     —    
    
 

Net cash provided by financing activities

      3,350       8,244  
    
 

Change in cash and cash equivalents

      21,783       (22,981 )

Cash and cash equivalents, beginning of period (1)

      106,381       121,550  
    
 

Cash and cash equivalents, end of period (1)

    $ 128,164     $ 98,569  
    
 

Other cash flow information:

                 

Cash paid for income taxes

    $ 1,297     $ 2,052  
    
 

Cash paid for interest

    $ 145     $ 88  
    
 

Non-cash investing and financing activities:

                 

Debt for intangible asset

    $ 19,700     $ —    
    
 

Accrued liability for long-term investment

    $ 984     $ —    
    
 
(1) In the third quarter of fiscal year 2005, the Company began to classify its investment in auction-rate securities as short-term investments. These investments were included in cash and cash equivalents in previous periods ($69.0 million at February 28, 2004 and $104.5 million at May 31, 2004), and such amounts have been reclassified in the accompanying financial statements to conform to the current period classification. This change in classification had no effect on the amounts of total current assets, total assets, net income or cash flow from operations of the Company.

 

palmOne’s fiscal periods are generally 13 weeks in length and end on a Friday. For presentation purposes, the periods are presented as ending on May 31.

 

# # #

 

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