Polycom (PLCM) 8-K Unaudited Pro Forma Condensed Consolidated Financial Statements

Exhibit 99.1

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On May 10, 2012, Polycom, Inc. (“Polycom” or “the Company”) entered into a Purchase and Sale Agreement (the “Purchase Agreement”) with Mobile Devices Holdings, LLC, a Delaware limited liability corporation (“Mobile Devices”), pursuant to which Polycom would divest its enterprise wireless solutions (“EWS”) business. On October 22, 2012, the Purchase Agreement was amended (the “Amended Purchase Agreement”). Per the terms of the Amended Purchase Agreement, Mobile Devices would acquire SpectraLink Corporation (“SpectraLink”), a wholly-owned subsidiary of Polycom, by purchasing all of the outstanding stock and an intercompany note of SpectraLink from Polycom (the “Transaction”).

Pursuant to the terms of the Amended Purchase Agreement, and upon the terms and conditions thereof, on December 4, 2012, Polycom completed the disposition of the assets of its EWS business to Mobile Devices and received cash consideration of approximately $50.7 million. Additional cash consideration of up to $57.0 million is payable over the next four years subject to certain conditions, including meeting certain agreed-upon EBITDA-based milestones.

The unaudited pro forma condensed consolidated balance sheet of Polycom as of September 30, 2012 is presented as if the disposition occurred on September 30, 2012. The unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2011 and 2012 and for each of the years ended December 31, 2009, 2010 and 2011 are presented as if the disposition occurred on January 1, 2009 and exclude results from discontinued operations.

The results of operations of the EWS business were classified as discontinued operations in the unaudited condensed consolidated financial statements and notes thereto included in our Quarterly Report on Form 10-Q as of and for the period ended September 30, 2012. As such, in the unaudited pro forma condensed consolidated statement of operations for the nine months ended September 30, 2011 and 2012, there are no pro forma adjustments to continuing operations necessary to reflect the disposition.

The unaudited pro forma condensed consolidated financial statements are not intended to represent or be indicative of our consolidated results of operations or financial position that would have been reported had the Transaction been completed as of the dates presented, and should not be taken as representation of our future consolidated results of operations or financial condition.

The unaudited pro forma condensed consolidated financial statements are based upon and should be read in conjunction with historical consolidated financial statements and related notes of Polycom included in our Annual Report on Form 10-K for the years ended December 31, 2009, 2010 and 2011 and our Quarterly Report on Form 10-Q for the period ended September 30, 2012.

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POLYCOM, INC.

Unaudited Pro Forma Condensed Consolidated Balance Sheet

(In thousands)

	September 30, 2012
	Historical		Pro Forma Adjustments			Pro Forma
ASSETS
Current assets
Cash and cash equivalents	$	415,558	$	49,747	(a)	$	465,305
Short-term investments		167,639		—			167,639
Trade receivables, net		189,778		—			189,778
Inventories		102,842		—			102,842
Deferred taxes		46,820		—			46,820
Prepaid expenses and other current assets		42,990		388	(c)		43,378
Assets held for sale		64,048		(64,048	)    (b)		—
Total current assets		1,029,675		(13,913	)		1,015,762
Property and equipment, net		138,156		—			138,156
Long-term investments		45,204		—			45,204
Goodwill		553,508		—			553,508
Purchased intangibles		59,424		—			59,424
Deferred taxes		25,981		—			25,981
Other assets		21,852		—			21,852
Total assets	$	1,873,800	$	(13,913	)	$	1,859,887
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	84,637	$	—		$	84,637
Accrued payroll and related liabilities		34,723		—			34,723
Deferred revenue		154,531		—			154,531
Other accrued liabilities		56,575		—			56,575
Liabilities held for sale		13,252		(13,252	)    (b)		—
Total current liabilities		343,718		(13,252	)		330,466
Non-current liabilities
Deferred revenue		89,028		—			89,028
Taxes payable		12,142		—			12,142
Deferred taxes		376		—			376
Other non-current liabilities		19,661		—			19,661
Total liabilities		464,925		(13,252	)		451,673
Stockholders’ equity		1,408,875		(661	)    (c)		1,407,214
Total liabilities and stockholders’ equity	$	1,873,800	$	(13,913	)	$	1,859,887

The accompanying notes are an integral part of these pro forma condensed consolidated financial statements.

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POLYCOM, INC.

Unaudited Pro Forma Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

	For the nine months ended September 30, 2011								For the nine months ended September 30, 2012
	Historical			Pro Forma Adjustments (d)		Pro Forma			Historical			Pro Forma Adjustments (d)		Pro Forma
Revenues:
Product revenues	$	834,589		$	—	$	834,589		$	780,611		$	—	$	780,611
Service revenues		181,370			—		181,370			258,991			—		258,991
Total revenues		1,015,959			—		1,015,959			1,039,602			—		1,039,602
Cost of revenues:
Cost of product revenues		319,089			—		319,089			316,863			—		316,863
Cost of service revenues		72,566			—		72,566			106,123			—		106,123
Total cost of revenues		391,655			—		391,655			422,986			—		422,986
Gross profit		624,304			—		624,304			616,616			—		616,616
Operating expenses:
Sales and marketing		315,428			—		315,428			348,041			—		348,041
Research and development		138,896			—		138,896			153,425			—		153,425
General and administrative		61,031			—		61,031			72,375			—		72,375
Acquisition-related costs		7,924			—		7,924			11,793			—		11,793
Amortization of purchased intangibles		2,869			—		2,869			7,318			—		7,318
Restructuring costs		4,739			—		4,739			21,829			—		21,829
Total operating expenses		530,887			—		530,887			614,781			—		614,781
Operating income		93,417			—		93,417			1,835			—		1,835
Other expense, net		(3,449	)		—		(3,449	)		(3,010	)		—		(3,010	)
Income (loss) from continuing operations before provision for income taxes		89,968			—		89,968			(1,175	)		—		(1,175	)
Provision for (benefit from) income taxes		9,790			—		9,790			(1,025	)		—		(1,025	)
Net income (loss) from continuing operations	$	80,178		$	—	$	80,178		$	(150	)	$	—	$	(150	)
Net income (loss) per share from continuing operations:
Basic	$	0.45				$	0.45		$	(0.00	)			$	(0.00	)
Diluted	$	0.44				$	0.44		$	(0.00	)			$	(0.00	)
Number of shares used in computation of net income (loss) per share from continuing operations:
Basic		176,325					176,325			177,331					177,331
Diluted		181,816					181,816			177,331					177,331

Note that as a result of the net loss from continuing operations for the nine month period ended September 30, 2012, all potentially issuable common shares have been excluded from the diluted shares used in the computation of earnings per share for that period as their effect was anti-dilutive.

The accompanying notes are an integral part of these pro forma condensed consolidated financial statements.

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POLYCOM, INC.

Unaudited Pro Forma Condensed Consolidated Statements of Operations

For the year ended December 31, 2009

(In thousands, except per share amounts)

	Historical			Pro Forma Adjustments			Pro Forma
Revenues:
Product revenues	$	791,508		$	(67,051	)    (d)	$	724,457
Service revenues		175,476			(27,016	)    (d)		148,460
Total revenues		966,984			(94,067	)		872,917
Cost of revenues:
Cost of product revenues		335,696			(44,355	)    (d)		291,341
Cost of service revenues		82,312			(15,873	)    (d)		66,439
Total cost of revenues		418,008			(60,228	)		357,780
Gross profit		548,976			(33,839	)		515,137
Operating expenses:
Sales and marketing		285,312			(15,440	)    (d)		269,872
Research and development		117,575			(11,124	)    (d)		106,451
General and administrative		54,011			(1,518	)    (d)		52,493
Acquisition-related costs		—			—			—
Amortization of purchased intangibles		5,800			(4,326	)    (d)		1,474
Restructuring costs		15,935			—			15,935
Litigation reserves and payments		700			—			700
Total operating expenses		479,333			(32,408	)		446,925
Operating income		69,643			(1,431	)		68,212
Other expense, net		(2,087	)		77	(d)		(2,010	)
Income from continuing operations before provision for income taxes		67,556			(1,354	)		66,202
Provision for income taxes		17,677			(2,998	)    (d)		14,679
Net income from continuing operations	$	49,879		$	1,644		$	51,523
Net income per share from continuing operations:
Basic	$	0.30					$	0.31
Diluted	$	0.29					$	0.30
Number of shares used in computation of net income per share from continuing operations:
Basic		167,999						167,999
Diluted		171,118						171,118

The accompanying notes are an integral part of these pro forma condensed consolidated financial statements.

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POLYCOM, INC.

Unaudited Pro Forma Condensed Consolidated Statements of Operations

For the year ended December 31, 2010

(In thousands, except per share amounts)

	Historical			Pro Forma Adjustments			Pro Forma
Revenues:
Product revenues	$	1,010,955		$	(73,771	)    (d)	$	937,184
Service revenues		207,534			(25,846	)    (d)		181,688
Total revenues		1,218,489			(99,617	)		1,118,872
Cost of revenues:
Cost of product revenues		401,319			(48,046	)    (d)		353,273
Cost of service revenues		101,220			(15,903	)    (d)		85,317
Total cost of revenues		502,539			(63,949	)		438,590
Gross profit		715,950			(35,668	)		680,282
Operating expenses:
Sales and marketing		387,208			(15,720	)    (d)		371,488
Research and development		148,991			(11,026	)    (d)		137,965
General and administrative		74,661			(1,282	)    (d)		73,379
Acquisition-related costs		—			—			—
Amortization of purchased intangibles		5,647			(4,247	)    (d)		1,400
Restructuring costs		8,139			—			8,139
Litigation reserves and payments		1,235			—			1,235
Total operating expenses		625,881			(32,275	)		593,606
Operating income		90,069			(3,393	)		86,676
Other expense, net		(7,772	)		(90	)    (d)		(7,862	)
Income from continuing operations before provision for income taxes		82,297			(3,483	)		78,814
Provision for income taxes		13,888			(1,729	)    (d)		12,159
Net income from continuing operations	$	68,409		$	(1,754	)	$	66,655
Net income per share from continuing operations:
Basic	$	0.40					$	0.39
Diluted	$	0.39					$	0.38
Number of shares used in computation of net income per share from continuing operations:
Basic		170,662						170,662
Diluted		176,370						176,370

The accompanying notes are an integral part of these pro forma condensed consolidated financial statements.

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POLYCOM, INC.

Unaudited Pro Forma Condensed Consolidated Statements of Operations

For the year ended December 31, 2011

(In thousands, except per share amounts)

	Historical			Pro Forma Adjustments			Pro Forma
Revenues:
Product revenues	$	1,207,787		$	(69,737	)    (d)	$	1,138,050
Service revenues		288,011			(23,872	)    (d)		264,139
Total revenues		1,495,798			(93,609	)		1,402,189
Cost of revenues:
Cost of product revenues		481,634			(41,639	)    (d)		439,995
Cost of service revenues		116,808			(12,878	)    (d)		103,930
Total cost of revenues		598,442			(54,517	)		543,925
Gross profit		897,356			(39,092	)		858,264
Operating expenses:
Sales and marketing		435,614			(6,785	)    (d)		428,829
Research and development		201,067			(10,745	)    (d)		190,322
General and administrative		82,901			(1,240	)    (d)		81,661
Acquisition-related costs		9,688			—			9,688
Amortization of purchased intangibles		9,831			(4,289	)    (d)		5,542
Restructuring costs		9,396			—			9,396
Total operating expenses		748,497			(23,059	)		725,438
Operating income		148,859			(16,033	)		132,826
Other expense, net		(1,639	)		(33	)    (d)		(1,672	)
Income from continuing operations before provision for income taxes		147,220			(16,066	)		131,154
Provision for income taxes		11,406			(6,160	)    (d)		5,246
Net income from continuing operations	$	135,814		$	(9,906	)	$	125,908
Net income per share from continuing operations:
Basic	$	0.77					$	0.71
Diluted	$	0.75					$	0.69
Number of shares used in computation of net income per share from continuing operations:
Basic		176,426						176,426
Diluted		181,195						181,195

The accompanying notes are an integral part of these pro forma condensed consolidated financial statements.

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Polycom, Inc.

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

1. DESCRIPTION OF THE TRANSACTION

On May 10, 2012, Polycom, Inc. (“Polycom” or “the Company”) entered into a Purchase and Sale Agreement (the “Purchase Agreement”) with Mobile Devices Holdings, LLC, a Delaware limited liability corporation (“Mobile Devices”), pursuant to which Polycom would divest its enterprise wireless solutions (“EWS”) business. On October 22, 2012, the Purchase Agreement was amended (the “Amended Purchase Agreement”). Per the terms of the Amended Purchase Agreement, Mobile Devices would acquire SpectraLink Corporation (“SpectraLink”), a wholly-owned subsidiary of Polycom, by purchasing all of the outstanding stock and an intercompany note of SpectraLink from Polycom (the “Transaction”).

Pursuant to the terms of the Amended Purchase Agreement, and upon the terms and conditions thereof, on December 4, 2012, Polycom completed the disposition of the assets of its EWS business to Mobile Devices and received cash consideration of approximately $50.7 million. Additional cash consideration of up to $57.0 million is payable over the next four years subject to certain conditions, including meeting certain agreed-upon EBITDA-based milestones. The $57.0 million in contingent consideration has been excluded from these unaudited pro forma condensed consolidated financial statements.

2. BASIS OF PRESENTATION

The unaudited pro forma condensed consolidated financial statements have been derived from the Company’s historical financial information included in our Quarterly Report on Form 10-Q as of and for the period ended September 30, 2012 and included in our Annual Report on Form 10-K for the years ended December 31, 2009, 2010 and 2011.

3. PRO FORMA ADJUSTMENTS

(a) Represents cash proceeds of approximately $50.7 million offset by approximately $0.9 million of costs incurred directly attributable to the Transaction.

(b) Adjustment reflects the decrease in assets held for sale of approximately $64.0 million and liabilities held for sale of approximately $13.3 million at September 30, 2012 as a result of the closing of the Transaction.

(c) Solely for purposes of the pro forma balance sheet, to record the preliminary loss on the sale of the EWS business as if the Transaction had been consummated on September 30, 2012 applying the actual purchase price to the net assets as of September 30, 2012. The loss calculation is preliminary and will change upon the finalization of the Company’s financial statements for the three months ended December 31, 2012, including the completion of the income tax accounting associated with the sale. For purposes of this pro forma balance sheet, the applicable enacted statutory rate of approximately 37% was used to calculate the tax effect of the Transaction. The adjustment to reflect the pro forma net loss from the Transaction of approximately $0.7 million, net of related tax benefit, was calculated as follows (in thousands):

Cash proceeds	$	50,659
Less:
Basis in net assets sold		50,796
Costs incurred directly attributable to the Transaction		912
Estimated pro forma loss before income taxes		(1,049	)
Benefit from provision for income taxes		388
Estimated pro forma loss, net of taxes	$	(661	)

(d) Adjustments to present the operations of the EWS business for the years ended December 31, 2009, 2010 and 2011 as a discontinued operation. The EWS business was included in discontinued operations in our Quarterly Report on Form 10-Q for the period ended September 30, 2012 and as such, there are no pro forma adjustments to continuing operations necessary to reflect the disposition.

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