-
- Cisco Systems 1997 AnnualReport
SAN JOSE, California -- November 4, 1997 -- Cisco Systems, Inc., the worldwide leader innetworking for the Internet, today reported its first quarter results for the period endingOctober 25, 1997.
Net sales for the first quarter were $1,869 million, compared with $1,435 million for thesame period last year, an increase of 30%. Pro forma net income, which excludes the write-offof purchased in-process R&D discussed below, was $416 million or $0.59 per share, compared withpro forma net income of $321 million or $0.47 per share for the first quarter of 1997,increases of 30% and 26% respectively.
On August 29, 1997, Cisco completed its purchase of DAGAZ Technologies, Inc. and its xDSLtechnology and took a one-time pretax charge of $127 million or $0.12 per share on an after-taxbasis as a write-off of in-process R&D. DAGAZ Technologies was a wholly owned subsidiary ofIntegrated Network Corporation.
Actual net income for the first quarter, including the above-mentioned write-off ofpurchased in-process R&D, was $337 million or $0.48 per share, compared with $181 million or$0.26 per share for the first quarter of 1997.
In other related news, on November 3, 1997, Ciscos board of directors authorized athree-for-two stock split to be effective on December 16, 1997.
'We are pleased to report the 31st consecutive quarter of revenue and earnings growth. Webelieve our growth rate indicates that Cisco continues to gain market share against ourtraditional competitors in most product sectors,' said John Chambers, president and CEO ofCisco Systems.
Cisco continues to make strides in providing end-to-end solutions for each of its keymarkets<Enterprise, Service Provider and Small/Medium Businessthrough internal development,strategic alliances, minority investments and acquisitions.
Cisco expanded its investment in long-term strategic alliances by announcing a uniqueproduct and services alliance with EDS, investing in a venture with KPMG, and broadening itsMicrosoft and Intel relationships.
The Cisco/EDS alliance provides companies with mainframe-to-Internet/intranet integrationand networking services. KPMG announced that its network integration practice will standardizeon Cisco products and technologies. To enable a powerful new class of networked applications,Cisco and Microsoft expanded the scope of their joint development efforts on MicrosoftsWindows NT 5.0 Server Active Directory technology. This initiative is supported by more than 20companies. Cisco and Intel will join several leading consumer electronics companies in aneffort to stimulate the worldwide market for affordable, standards-based cable modems.
In the Enterprise market, Cisco continues to maintain its LAN switching leadership. Keyannouncements include four new high-density, high-performance 10/100 Fast Ethernet modules forthe Catalyst. 5000 series and the launch of a new generation of Token Ring switchingsolutionsa Token Ring switching module for the Catalyst 5000 and the Catalyst 3900 stackableproduct.
Cisco continues to strengthen its position in the dial market with the introduction ofthree carrier-class dial solutions that give service providers high performance and the abilityto offer differentiated services. These new offerings include the Cisco AS5300 universal accessserver and two integrated AccessPath dial access systems. Cisco established its leadershipin the gigabit router space by shipping the Cisco 12000 series gigabit switch router, theindustrys first carrier-class router and only OC-12 capable solution.
In expanding its solution portfolio for the small- to medium-sized business market, Ciscoadded software-based firewall solutions for Cisco IOS access platforms and Windows NTenvironments. Cisco also added hubs to its existing switching and routing products. During thefirst quarter, Cisco shipped its millionth Cisco 2500 router and set new price/performancestandards with its Catalyst 1900 and 2820 Ethernet switches, which allow customers totransition from basic hub connectivity to intelligent switching technology.
In addition, Cisco announced the first phase of a data/voice/video integration strategythat will ultimately encompass all of its markets. Adding to Ciscos current voice-over-ATMand voice-over-Frame Relay offerings, new products include voice-over-IP modules for the Cisco3600 series and Asynchronous Transfer Mode (ATM) circuit emulation capabilities for theCatalyst 5500. Circuit emulation allows voice traffic from legacy systems, such as PBXs, to betransported over packet or cell infrastructures.
'Ciscos leadership in almost all productsegments, together with the continued acceptance of end-to-end networking solutions in all ofour markets, positions us well as the preferred provider of end-to-end network solutions.Increasingly, our customers realize that aligning with a single networking vendor and itspartners allows them to focus on their business objectives and start using networking to gain asustainable competitive advantage,' concluded Chambers.
Cisco Systems, Inc. (NASDAQ: CSCO) is the worldwide leader in networking for the Internet. at http://www.cisco.com.
This release may contain forward-looking statements that involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers arereferred to the documents filed by Cisco with the SEC, specifically the most recent reports onForm 10-K and 10-Q, which identify important risk factors that could cause actual results todiffer from those contained in the forward-looking statements, including potential fluctuationsin quarterly results, dependence on new product development, rapid technological and marketchange, acquisition strategy, manufacturing risks, risks associated with the Internetinfrastructure, volatility of stock price, financial risk management and future growth subjectto risks.
Access Path and Cisco IOS are trademarks, and Catalyst, Cisco, Cisco Systems and the CiscoSystems logo are registered trademarks of Cisco Systems, Inc. in the U.S. and certain othercountries. All other trademarks mentioned in this document are the property of theirrespective owners.
Pro Forma Condensed Consolidated Statements of Operations
Excluding PurchasedR&D and Realized Gain
(In thousands, except per-share amounts)
| Quarter Ended October 25, 1997 |
Quarter Ended October 26, 1996 |
|||
| (Unaudited) | ||||
| Net sales | $ 1,868,717 | $ 1,434,826 | ||
| Cost of sales | 652,181 | 501,480 | ||
| Gross margin | 1,216,536 | |||
| Operating expenses | ||||
| Research and development | 224,235 | 144,711 | ||
| Sales and marketing | 333,417 | 259,110 | ||
| General and adminstrative | 56,414 | 41,776 | ||
| Total operating expenses | 614,066 | |||
| Operating income | 602,470 | 487,749 | ||
| Interest and other income, net | 37,056 | 21,478 | ||
| Income before provision for income taxes | 639,526 | |||
| Provision for income taxes | 223,834 | 188,414 | ||
| Net income | $ 415,692 | |||
| Net income per share * | $ .59 | |||
| Shares used in per-share calculation * | 704,390 | |||
| PRO FORMA ONLY | ||||
The above pro forma amounts for the quarter ended October 25, 1997 have been adjusted toeliminate the $127.2 million write-off of purchased in-process R&D and the $5.4 million gainfrom sale of minority stock investment, net of the tax benefit of $42.6 million. The pro formaamounts for the quarter ended October 26, 1996 have been adjusted to eliminate the $174.6million write-off of purchased in-process R&D and the $55.1 million gain from the sale ofminority stock investment, net of tax expense of $20.4 million.
* Does not reflect the effect of the three-for-two stock split.
Condensed Consolidated Statements of Operations
(In thousandsexcept per-share amounts)
| Quarter Ended October 25, 1997 |
Quarter Ended October 26,1996 |
|||
| (Unaudited) | ||||
| Net sales | $ 1,868,717 | $ 1,434,826 | ||
| Cost of sales | 652,181 | 501,480 | ||
| Gross margin | 1,216,536 | |||
| Operating expenses | ||||
| Research and development | 224,235 | 144,711 | ||
| Sales and marketing | 333,417 | 259,110 | ||
| General and adminstrative | 56,414 | 41,776 | ||
| Purchased R and D | 127,191 | 174,589 | ||
| Total operating expenses | 741,257 | 620,186 | ||
| Operating income | 475,279 | 313,160 | ||
| Realized gain on sale of investment | 5,411 | 55,108 | ||
| Interest and other income, net | 37,056 | 21,478 | ||
| Income before provision for income taxes | 517,746 | |||
| Provision for income taxes | 181,211 | 208,804 | ||
| Net income | $ 336,535 | $ 180,942 | ||
| Net income per share * | $ .48 | |||
| Shares used in per-share calculation * | 704,390 | 682,918 | ||
* Does not reflect the effect of the three-for-two stock split.
Condensed Consolidated Balance Sheets
(In thousands)
| October25,1997 | July 26, 1997 | |||
| (Unaudited) | ||||
| Assets | ||||
|
|
|
|||
| Cash and equivalents | $ 378,196 | $ 269,608 | ||
| Short-term investments | 1,448,381 | 1,005,977 | ||
| Accounts receivable, net | 1,147,282 | 1,170,401 | ||
| Inventories, net | 241,122 | 254,677 | ||
| Deferred income taxes | 326,068 | 312,132 | ||
| Other current assets | 61,883 | 88,471 | ||
| Total current assets | 3,602,932 | |||
| Investments | 1,359,764 | 1,267,174 | ||
| Restricted investments | 404,474 | 363,216 | ||
| Property and equipment, net | 467,150 | 466,352 | ||
| Other assets | 340,910 | 253,976 | ||
| Total assets | $ 6,175,230 | |||
| Liabilities and Shareholder's Equity: | ||||
| Current Liabilities: | ||||
| Accounts payable and other accrued expenses | $ 920,094 | |||
| Income taxes payable | 409,443 | 256,224 | ||
| Total current liabilities | 1,329,537 | 1,120,109 | ||
| Minority interest | 42,262 | 42,253 | ||
| Shareholder's equity | 4,803,431 | 4,289,622 | ||
| Total liabilities and shareholder's equity | $ 6,175,230 | $ 5,451,984 | ||
Cisco IOS is a trademark, and Cisco, Cisco Systems, and the Cisco Systems logo areregistered trademarks of Cisco Systems, Inc. in the U.S. and certain other countries. All othertrademarks mentioned in this document are the property of their respective owners.
