SAN JOSE, Calif., February 8, 2000 - Cisco Systems, Inc., the worldwide leader in networking for the Internet, today reported its second quarter results for the period ending January 29, 2000.
Net sales for the second quarter of fiscal 2000 were $4.35 billion, compared with $2.85 billion for the same period last year, an increase of 53%. Pro forma net income, which excludes the write-off of purchased in-process R&D, acquisition-related costs, the amortization of goodwill and purchased intangible assets, and the net gain on the sale of certain minority investments, was $906 million or $0.25 per share, compared with pro forma net income of $609 million or $0.17 per share for the second quarter of fiscal 1999, increases of 49% and 47%, respectively.
During the second quarter of fiscal 2000, Cisco completed the acquisitions of Calista, Inc., Internet Engineering Group, LLC, Tasmania Network Systems, Inc., and Worldwide Data Systems, Inc. for a combined purchase price, including assumed liabilities, of approximately $135 million and took a one-time charge of $43 million, or approximately $0.01 per share on an after-tax basis, as a write-off of purchased in-process R&D. Additionally, Cisco completed the acquisitions of Cerent Corporation, V-Bits, Inc., and WebLine Communications Corporation, which were accounted for as poolings of interests. All historical financial information contained herein has been restated to reflect the acquisitions of Cerent Corporation and WebLine Communications Corporation.
Actual net income for the second quarter of fiscal 2000 was $825 million or $0.23 per share, compared with $282 million or $0.08 per share in the same period last year.
Net sales for the first six months of fiscal 2000 were $8.26 billion, compared with $5.44 billion for the same period last year, an increase of 52%. Pro forma net income was $1.73 billion or $0.48 per share, compared with pro forma net income of $1.17 billion or $0.34 per share for the first six months of fiscal 1999, increases of 48% and 41%, respectively.
Actual net income for the first six months of fiscal 2000 was $1.25 billion or $0.34 per share, compared with $791 million or $0.23 per share in fiscal 1999.
Cisco's board of directors authorized the splitting of the company's common stock on a two-for-one basis for shareholders of record on February 22, 2000. Shares resulting from the split are expected to be distributed by the transfer agent on March 22, 2000. This action will be the ninth time that Cisco's stock has been split since the company's initial public offering in February 1990.
"The momentum of the Internet revolution continues to accelerate across both business and government sectors on a worldwide basis," said John Chambers, president and CEO of Cisco Systems. "A University of Texas study found that in the U.S. alone the Internet Economy would account for more than $500 billion in revenues in 1999, an increase of more than 68% over 1998. This continued economic growth together with Cisco's recognized expertise in the Internet, positions us to lead in the Internet Economy."
Cisco continues to advance its end-to-end Internet solutions for each of its key markets.
In the service provider marketplace, Cisco continued to advance its strategy for New World integrated data, voice, and video networks and made progress in all key areas. In the optical networking space, Cisco announced it would acquire Pirelli Optical Systems, a leader in optical transport, marking Cisco's first entry into the dense wave division multiplexing (DWDM) market. Strengthening its optical internetworking portfolio, Cisco introduced two additions to the Cisco 12000 gigabit switch router (GSR) product family that allow service providers to deploy terabit-capacity networks.
The new Cisco 12016 GSR and 12000 Terabit System provide a logical evolution of the GSR family. The Cisco 12016 GSR is a 320-Gbps, OC-192-capable platform that supports all existing line cards. The new Cisco 12000 Terabit System scales the GSR family to a five-terabit system. Cisco also announced the acquisition of Internet Engineering Group to help service providers build next-generation high-speed networks.
In the small and medium-sized business market, Cisco expanded its ecosystem of partners by joining with more than a dozen companies to accelerate the delivery of Internet business applications and services to help small and medium-sized businesses participate in the Internet Economy. In support of its ecosystem of partners, Cisco introduced the Catalyst. mid-market LAN switching solution. This solution enables small and medium-sized businesses experiencing high-growth and new office sites to support strategic applications such as supply-chain management, business-to-business e-commerce, and customer relationship management.
In the enterprise market, Cisco continued to increase acceptance of its end-to-end Internet solutions and advanced its New World services portfolio through three acquisitions in the areas of virtual private networking (VPN) and consulting services. Cisco announced the acquisitions of Altiga Networks and Compatible Systems to provide both enterprise and service provider customers with industry-leading remote-access and extranet solutions. The services portfolio acquired from Worldwide Data Systems broadens Cisco's ecosystem of professional service and channel partners to enable the design, implementation, and delivery of Internet-based data, voice, and video networks. Cisco continued to enhance the Catalyst family of products by extending the functionality and intelligence of the Catalyst 6000 family to its new Catalyst 4000 and 5000 solutions.
"It is becoming increasingly evident that the adoption of Internet applications is key to success in the Internet economy. By providing Internet systems and expertise, Cisco is helping customers implement the right Internet architecture and application strategy for their businesses. The resulting increase in productivity, agility, and competitive advantage will define the winners in the Internet revolution," concluded Chambers.
About Cisco Systems
Cisco Systems, Inc., (NASDAQ: CSCO) is the worldwide leader in networking for the Internet. at www.cisco.com.
This release may contain projections or other forward-looking statements regarding future events or the future financial performance of the Company that involve risks and uncertainties. Readers are cautioned that these statements are only predictions and may differ materially from actual future events or results. Readers are referred to the documents filed by Cisco with the SEC, specifically the most recent reports on Form 10-K, 8-K, and 10-Q, including amendments thereto, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements, including risks associated with acquisition strategy, dependence on new product offerings, competition, patents, intellectual property and licensing, future growth, rapid technological and market change, manufacturing and sourcing risks, Internet infrastructure and regulation, international operations, volatility of stock price, financial risk management, and potential volatility in operating results, among others.
Catalyst, Cisco, Cisco Systems, and the Cisco Systems logo are registered trademarks of Cisco Systems, Inc. and/or its affiliates in the U.S. and certain other countries. All other trademarks mentioned in this document are the property of their respective owners. Copyright ) 2000 Cisco Systems, Inc. All rights reserved
| PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Excluding Purchased In-Process R&D, Acquisition-Related Costs, Amortization of Goodwill and Purchased Intangible Assets, and Net Gain on Sale of Certain Minority Investments |
| Quarters Ended | Six Months Ended | |||
| January 29, 2000 (Unaudited) |
January 23, 1999 (Unaudited) |
January 29, 2000 (Unaudited) |
January 23, 1999 (Unaudited) |
|
| Net sales | $ 4,350 | $ 2,845 | $ 8,264 | $ 5,443 |
| Cost of sales | 1,536 | 988 | 2,923 | 1,885 |
| Gross margin | 2,814 | 1,857 | 5,341 | 3,558 |
| Operating expenses: | ||||
| Research and development | 598 | 372 | 1,135 | 711 |
| Sales and marketing | 924 | 576 | 1,737 | 1,096 |
| General and administrative | 118 | 82 | 228 | 159 |
| Total operating expenses | 1,640 | 1,030 | 3,100 | 1,966 |
| Operating income | 1,174 | 827 | 2,241 | 1,592 |
| Interest and other income, net | 120 | 79 | 222 | 146 |
| Income before provision for income taxes | 1,294 | 906 | 2,463 | 1,738 |
| Provision for income taxes | 388 | 297 | 738 | 571 |
| Net income | $ 906 | $ 609 | $ 1,725 | $ 1,167 |
| Net income per share--basic | $ .27 | $ .19 | $ .51 | $ .36 |
| Net income per share--diluted | $ .25 | $ .17 | $ .48 | $ .34 |
| Shares used in per-share calculation--basic | 3,413 | 3,274 | 3,401 | 3,251 |
| Shares used in per-share calculation--diluted | 3,648 | 3,486 | 3,629 | 3,453 |
| PRO FORMA ONLY |
The above pro forma amounts for the quarter ended January 29, 2000 have been adjusted to eliminate the $43 million write-off of purchased in-process R&D, $47 million of amortization of goodwill and purchased intangible assets, $25 million of acquisition-related costs, and $31 million of net gain on the sale of certain minority investments, net of related tax benefits of $3 million.
The above pro forma amounts for the six months ended January 29, 2000 have been adjusted to eliminate the $424 million write-off of purchased in-process R&D, $71 million of amortization of goodwill and purchased intangible assets, $25 million of acquisition-related costs, and $31 million of net gain on the sale of certain minority investments, net of related tax benefits of $9 million.
The above pro forma amounts for the quarter and six months ended January 23, 1999 have been adjusted to eliminate the $349 and $390 million write-off of purchased in-process R&D, $12 and $23 million of amortization of goodwill and purchased intangible assets, net of related tax benefits of $34 and $37 million, respectively.
All historical financial information has been restated to reflect the acquisitions of StratumOne Communications, Inc. and TransMedia Communications, Inc. in the first quarter of fiscal 2000 and Cerent Corporation and WebLine Communications Corporation in the second quarter of fiscal 2000, which were accounted for as poolings of interests. In addition, the historical financial information has been restated to reflect the acquisition of Fibex Systems which was completed in the fourth quarter of fiscal 1999 and accounted for as a pooling of interests.
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
| Quarters Ended | Six Months Ended | |||
| January 29, 2000 (Unaudited) |
January 23, 1999 (Unaudited) |
January 29, 2000 (Unaudited) |
January 23, 1999 (Unaudited) |
|
| Net sales | $ 4,350 | $ 2,845 | $ 8,264 | $ 5,443 |
| Cost of sales | 1,536 | 988 | 2,923 | 1,885 |
| Gross margin | 2,814 | 1,857 | 5,341 | 3,558 |
| Operating expenses: | ||||
| Research and development | 598 | 372 | 1,135 | 711 |
| Sales and marketing | 924 | 576 | 1,737 | 1,096 |
| General and administrative | 143 | 82 | 253 | 159 |
| Amortization of goodwill and purchased intangible assets | 47 | 12 | 71 | 23 |
| Purchased in-process R&D | 43 | 349 | 424 | 390 |
| Total operating expenses | 1,755 | 1,391 | 3,620 | 2,379 |
| Operating income | 1,059 | 466 | 1,721 | 1,179 |
| Interest and other income, net | 151 | 79 | 253 | 146 |
| Income before provision for income taxes | 1,210 | 545 | 1,974 | 1,325 |
| Provision for income taxes | 385 | 263 | 729 | 534 |
| Net income | $ 825 | $ 282 | $ 1,245 | $ 791 |
| Net income per share--basic | $ .24 | $ .09 | $ .37 | $ .24 |
| Net income per share--diluted | $ .23 | $ .08 | $ .34 | $ .23 |
| Shares used in per-share calculation--basic | 3,413 | 3,274 | 3,401 | 3,251 |
| Shares used in per-share calculation--diluted | 3,648 | 3,486 | 3,629 | 3,453 |
All historical financial information has been restated to reflect the acquisitions of StratumOne Communications, Inc. and TransMedia Communications, Inc. in the first quarter of fiscal 2000 and Cerent Corporation and WebLine Communications Corporation in the second quarter of fiscal 2000, which were accounted for as poolings of interests. In addition, the historical financial information has been restated to reflect the acquisition of Fibex Systems, which was completed in the fourth quarter of fiscal 1999 and accounted for as a pooling of interests.
| CONDENSED CONSOLIDATED BALANCE SHEETS |
| January 29, 2000 (Unaudited) |
July 31, 1999 | |
| Assets | ||
| Current Assets: |
|
|
| Cash and short-term investments | $ 3,968 | $ 2,075 |
| Accounts receivable, net | 1,711 | 1,249 |
| Inventories, net | 695 | 656 |
| Deferred tax assets | 711 | 571 |
| Prepaid expenses and other current assets | 637 | 170 |
| Total current assets | 7,722 | 4,721 |
| Investments | 9,819 | 7,032 |
| Restricted investments | 1,107 | 1,080 |
| Property and equipment, net | 1,004 | 822 |
| Other assets | 1,739 | 1,191 |
| Total assets | $21,391 | |
| Liabilities and Shareholders' Equity: | ||
| Current Liabilities: | ||
| Accounts payable and other accrued expenses | $ 3,183 | $ 2,404 |
| Income taxes payable | 595 | 630 |
| Total current liabilities | 3,778 | 3,034 |
| Deferred tax liabilities | 1,045 | - |
| Minority interest | 45 | 44 |
| Shareholders' equity | 16,523 | 11,768 |
| Total liabilities and shareholders' equity | $ 21,391 | $ 14,846 |
All historical financial information has been restated to reflect the acquisitions of StratumOne Communications, Inc. and TransMedia Communications, Inc. in the first quarter of fiscal 2000 and Cerent Corporation and WebLine Communications Corporation in the second quarter of fiscal 2000 which were accounted for as poolings of interests.
