ITEM 7.01 Regulation FD Disclosure
Supplemental H3C Financial Information Delivered to Bank Lenders
As required by its senior secured credit facility the Company made available
to its senior secured bank lenders certain summary financial information
concerning its H3C Holdings Limited subsidiary. This financial data is attached
hereto as Exhibit 99.1 and is hereby incorporated by reference into this
Item 7.01.
The information in Item 7.01 of this Form 8-K and the exhibit attached hereto
as Exhibit 99.1 shall not be deemed "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
incorporated by reference in any filing under the Securities Act of 1933, as
amended, or the Exchange Act, except as shall be expressly set forth by specific
reference in such a filing.
Non-GAAP Financial Measures.
The attached Exhibit 99.1 contains non-GAAP financial measures which are defined
by our H3C credit agreement and used as measures for calculating compliance with
certain covenants set forth in the credit agreement. In evaluating the Company's
compliance under the credit agreement, management uses these non-GAAP financial
measures to supplement consolidated financial statements prepared under
generally accepted accounting principles in the United States ("GAAP").
Management believes these non-GAAP measures help the Company determine its
compliance with these covenants, although it generally does not use these
measures in evaluating business performance. Because these measures are used in
calculating our bank covenants, it may be useful to our investors as well.
Consolidated Adjusted EBITDA
We adjust our H3C GAAP net income by adjusting for net interest expense, tax
provision, EARP bonus and the following non-cash items: minority interest
(Huawei's 49% portion of H3C's net income), amortization of stepped-up inventory
from purchase accounting for H3C acquisition transaction, purchase accounting
for H3C acquisition transaction, depreciation and amortization. These items are
required adjustments under the credit agreement.
Consolidated Working Capital
We adjust our H3C GAAP working capital by adjusting for cash and cash
equivalents and the liability representing the current portion of long-term
debt, as required by the credit agreement. Excluding these items creates a
non-standard definition of working capital.
General. These non-GAAP measures have limitations, however, because they do
not include all items of income and expense that impact the Company's
operations. Management compensates for these limitations by also considering the
Company's GAAP results. The non-GAAP financial measures the Company uses are not
prepared in accordance with, and should not be considered an alternative to,
measurements required by GAAP, such as net income (loss) and net income (loss)
per share and should not be considered measures of the Company's liquidity. The
presentation of this additional information is not meant to be considered in
isolation or as a substitute for the most directly comparable GAAP measures. In
addition, these non-GAAP financial measures may not be comparable to similar
measures reported by other companies.
ITEM 9.01 Financial Statements and Exhibits
Exhibit Number Description
99.1 H3C - Summary Financial Information Provided to Bank Lenders
