<PAGE 1>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 29, 1996, OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period ended __________________ or __________________
Commission File Number 0-15323
NETWORK EQUIPMENT TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2904044
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
800 Saginaw Drive
Redwood City, CA 94063
(415) 366-4400
(Address, including zip code, and telephone number
including area code, of registrant's
principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of the registrant's Common Stock, $.01
par value, on December 29, 1996 was 20,926,680.
This document consists of 14 pages of which this is page 1.
<PAGE 2>
NETWORK EQUIPMENT TECHNOLOGIES, INC.
INDEX
Page
Number
------
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
December 29, 1996 and March 31, 1996 ......................... 3
Condensed Consolidated Statements of Income - Quarter and Nine
Months Ended December 29, 1996 and December 24, 1995 ......... 4
Condensed Consolidated Statements of Cash Flows - Nine Months
Ended December 29, 1996 and December 24, 1995 ................ 5
Notes to Condensed Consolidated Financial Statements ......... 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition .......... 7
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K ....................... 12
SIGNATURE ......................................................... 13
EXHIBIT 11 Computation of Primary and Fully Diluted
Earnings Per Share ..................................... 14
<PAGE 3>
NETWORK EQUIPMENT TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
December 29, March 31,
1996 1996
(unaudited)
--------- ---------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 34,280 $ 52,319
Temporary cash investments 86,092 59,892
Accounts receivable, net of allowances of $4,056 at
December 29 and $4,533 at March 31 87,381 76,966
Inventories 24,336 31,705
Deferred income taxes 11,936 11,830
Prepaid expenses and other assets 7,062 5,714
-------- --------
Total current assets 251,087 238,426
Property and equipment, net 29,113 31,040
Software production costs, net 4,370 4,146
Other assets 8,837 8,345
-------- --------
$293,407 $281,957
-------- --------
-------- --------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 20,539 $ 21,559
Accrued liabilities 39,198 42,442
-------- --------
Total current liabilities 59,737 64,001
7-1/4% convertible subordinated debentures 28,821 33,526
Stockholders' equity:
Preferred stock, $.01 par value
Authorized: 5,000,000 shares,
Outstanding: none - -
Common stock, $.01 par value
Authorized: 50,000,000 shares
Outstanding: 20,927,000 shares at December 29 and
20,839,000 shares at March 31 209 208
Additional paid-in capital 171,171 166,014
Treasury stock (2,935) (600)
Net unrealized gain (loss) on available-for-sale securities 73 (12)
Accumulated translation adjustment (107) (931)
Retained earnings 36,438 19,751
-------- --------
Total stockholders' equity 204,849 184,430
-------- --------
$ 293,407 $ 281,957
-------- --------
-------- --------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<Page 4>
NETWORK EQUIPMENT TECHNOLOGIES, INC.
Condensed Consolidated Statements of Income
(in thousands, except per share amounts - unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
Dec. 29, Dec. 24, Dec. 29, Dec. 24,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue:
Product revenue $ 56,096 $ 58,602 $157,831 $161,583
Service and other revenue 27,206 25,959 80,338 85,545
-------- -------- -------- --------
Total revenue 83,302 84,561 238,169 247,128
-------- -------- -------- --------
Cost of sales:
Cost of product revenue 23,586 23,361 66,685 64,671
Cost of service and other revenue 17,988 17,529 52,558 58,498
-------- -------- -------- --------
Total cost of sales 41,574 40,890 119,243 123,169
-------- -------- -------- --------
Gross margin 41,728 43,671 118,926 123,959
Operating expenses:
Sales and marketing 20,061 18,612 57,278 54,720
Research and development 10,015 9,456 30,393 26,323
General and administrative 2,914 2,805 8,573 8,845
-------- -------- -------- --------
Total operating expenses 32,990 30,873 96,244 89,888
-------- -------- -------- --------
Income from operations 8,738 12,798 22,682 34,071
Other income (expense):
Interest income 1,365 1,410 4,363 4,230
Interest expense (537) (1,494) (1,779) (4,151)
Other (130) (75) (309) (173)
-------- -------- -------- --------
Income before income taxes 9,436 12,639 24,957 33,977
Income tax provision (2,816) (4,424) (8,714) (11,892)
-------- -------- -------- --------
Income before extraordinary gain 6,620 8,215 16,243 22,085
Extraordinary gain on repurchase of debentures - - 444 -
-------- -------- -------- --------
Net income $ 6,620 $ 8,215 $ 16,687 $ 22,085
-------- -------- -------- --------
-------- -------- -------- --------
Primary earnings per share:
Income before extraordinary gain $ .31 $ .39 $ .76 $ 1.07
-------- -------- -------- --------
-------- -------- -------- --------
Net income $ .31 $ .39 $ .78 $ 1.07
-------- -------- -------- --------
-------- -------- -------- --------
Fully diluted earnings per share:
Income before extraordinary gain $ .31 $ .39 $ .75 $ 1.07
-------- -------- -------- --------
-------- -------- -------- --------
Net income $ .31 $ .39 $ .77 $ 1.07
-------- -------- -------- --------
-------- -------- -------- --------
Shares used in computation:
Primary 21,408 21,199 21,437 20,587
-------- -------- -------- --------
-------- -------- -------- --------
Fully diluted 21,534 21,199 21,614 20,643
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<Page 5>
NETWORK EQUIPMENT TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands - unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
Dec. 29, Dec. 24,
1996 1995
-------- --------
<S> <C> <C>
Cash and Cash Equivalents at Beginning of Period $ 52,319 $ 33,886
-------- --------
Net Cash Flows from Operating Activities:
Net income 16,687 22,085
Adjustments to reconcile net income to cash
provided by operations:
Extraordinary credit--gain on repurchase of debentures (444) -
Depreciation and amortization 12,830 11,594
Restricted stock compensation 297 269
Changes in assets and liabilities:
Accounts receivable (9,477) (16,444)
Inventories 7,571 (2,559)
Prepaid expenses and other assets (1,482) (1,901)
Accounts payable (1,113) 3,236
Accrued liabilities (2,212) 7,578
-------- --------
Net cash provided by operations 22,657 23,858
-------- --------
Cash Flows from Investing Activities:
Purchases of temporary cash investments (117,929) (63,560)
Proceeds from maturities of temporary cash investments 91,814 58,163
Purchases of property and equipment (8,863) (10,823)
Additions to software production costs (1,957) (1,056)
Other (357) 961
-------- --------
Net cash used for investing activities (37,292) (16,315)
-------- --------
Cash Flows from Financing Activities:
Sale of common stock 3,614 10,268
Repurchase of common stock (2,722) (10,117)
Repayments of borrowings (3,869) -
-------- --------
Net cash provided by (used for) financing activities (2,977) 151
-------- --------
Effect of exchange rate changes on cash (427) 452
-------- --------
Net increase (decrease) in cash and cash equivalents (18,039) 8,146
-------- --------
Cash and Cash Equivalents at End of Period $ 34,280 $ 42,032
-------- --------
-------- --------
Other Cash Flow Information:
Cash paid for:
Interest $ 2,396 $ 4,162
Income taxes $ 4,252 $ 5,215
Non-cash investing and financing activities:
Conversion of convertible subordinated debentures to common stock
(including accrued interest and debenture offering costs) $ - $ 25,533
Income tax benefit arising from employee stock option plans $ 1,634 $ 10,996
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<Page 6>
NETWORK EQUIPMENT TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
1. Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. Intercompany accounts and transactions have been
eliminated. In the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all adjustments
(consisting only of normal recurring adjustments) considered necessary to
present fairly the financial position as of December 29, 1996, and the
results of operations and cash flows for the quarter and nine months
ended December 29, 1996 and December 24, 1995. These financial
statements should be read in conjunction with the March 31, 1996 audited
consolidated financial statements and notes thereto. The results of
operations for the nine months ended December 29, 1996 are not
necessarily indicative of the results to be expected for the fiscal year
ending March 31, 1997.
2. Inventories
Inventories consist of (in thousands):
<TABLE>
<CAPTION>
December 29, March 31,
1996 1996
(unaudited)
-------- --------
<S> <C> <C>
Purchased components $ 7,276 $ 14,381
Work-in-process 14,231 15,533
Finished goods 2,829 1,791
-------- --------
$ 24,336 $ 31,705
-------- --------
-------- --------
</TABLE>
3. Earnings Per Share
Net income per share has been computed based upon the weighted average
number of common and common equivalent shares outstanding. For primary
earnings per share, common equivalent shares consist of the incremental
shares issuable upon the assumed exercise of dilutive stock options. For
fully diluted earnings per share, common equivalent shares also include,
if dilutive, the effect of incremental shares issuable upon the
conversion of the 7-1/4% convertible subordinated debentures, and net
income is adjusted for the interest expense (net of income taxes) related
to the debentures.
4. Recently Issued Accounting Standard
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"). This standard defines a fair
value method of accounting for stock-based employee compensation plans.
Under this method, compensation cost is measured based on the fair value
of the stock award when granted and is recognized as an expense over the
service period. This standard became effective for the Company on April
1, 1996 and will require measurement of awards made beginning April 1,
1995. The Company has adopted the disclosure-only alternative, and,
accordingly, SFAS 123 will have no impact on the Company's results of
operations or financial position.
5. Reclassification
Certain fiscal 1996 amounts have been reclassified to conform with fiscal
1997 presentation.
<Page 7>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
This discussion and analysis should be read in conjunction with Management's
Discussion and Analysis in the Company's 1996 Annual Report to Shareholders
and Part I of the Company's Form 10-K for the fiscal year ended March 31,
1996.
This Form 10-Q generally, and the following discussion and analysis by
management in particular, contains forward-looking statements. These forward-
looking statements are subject to risks and uncertainties. Actual results may
differ materially from such forward-looking statements as a result of risks
and uncertainties, including those described below and others as set forth in
the Company's fiscal 1996 Form 10-K and other reports filed with the
Securities and Exchange Commission.
RESULTS OF OPERATIONS
The following table depicts selected data derived from the Company's
Consolidated Statements of Income expressed as a percentage of revenue for the
periods presented:
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
------------------ ------------------
Dec. 29, Dec. 24, Dec. 29, Dec. 24,
Percent of Revenue 1996 1995 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Product revenue 67.3 69.3 66.3 65.4
Service and other revenue 32.7 30.7 33.7 34.6
----- ----- ----- -----
Total revenue 100.0 100.0 100.0 100.0
----- ----- ----- -----
Product revenue gross margin 58.0 60.1 57.7 60.0
Service and other revenue gross margin 33.9 32.5 34.6 31.6
----- ----- ----- -----
Total gross margin 50.1 51.6 49.9 50.2
----- ----- ----- -----
Sales and marketing 24.1 22.0 24.0 22.1
Research and development 12.0 11.2 12.8 10.7
General and administrative 3.5 3.3 3.6 3.6
----- ----- ----- -----
Total operating expenses 39.6 36.5 40.4 36.4
----- ----- ----- -----
Income from operations 10.5 15.1 9.5 13.8
----- ----- ----- -----
Net income 7.9 9.7 7.0 8.9
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
Revenue
Total revenue for the third quarter and first nine months of fiscal 1997
decreased 1.5% and 3.6%, respectively, from the comparable periods of fiscal
1996. Product revenue for the third quarter and first nine months of fiscal
1997 decreased $2.5 million, or 4.3%, and $3.8 million, or 2.3%, respectively,
from the comparable periods of the prior year. These decreases in product
revenue were a result of a 20.6% decrease in domestic product sales, which
includes sales through our U.S. Federal channel, offset partially by increased
product sales in both the Asia Pacific/Latin American (APLA) and European
regions. On a year-to-date basis, product sales in the APLA region have
increased 73.3%. Overall international product sales increased 62.4% for the
quarter and 34.8% year-to-date.
<Page 8>
Service and other revenue increased $1.2 million for the third quarter and
decreased $5.2 million for the first nine months of fiscal 1997 from the
comparable periods of fiscal 1996. The quarter-over-quarter increase was
primarily a result of increased service revenues. The year-over-year decrease
as due to a decrease in revenue from systems integration services in support
of product sales to the U.S. government. On a year-to-date basis, systems
integration revenue decreased by $9.1 million over the prior year.
As a result of continued softness in revenue from our domestic channels and
other uncertainties discussed in this Management's Discussion and Analysis,
management expects overall revenue levels for the fourth quarter and twelve
months of fiscal year 1997 to be lower than the comparable periods of fiscal
1996.
Gross Margin
Total gross margin as a percentage of total revenue decreased to 50.1% from
51.6% in the third quarter and decreased to 49.9% from 50.2% in the first nine
months of fiscal 1997 from the comparable periods of fiscal 1996. The
decrease for both periods was a result of a decrease in product gross margin
partially offset by increased service and other gross margin. Product gross
margin decreased to 58.0% and 57.7% for the third quarter and first nine
months of fiscal 1997 from 60.1% and 60.0%, respectively, for the comparable
periods of fiscal 1996. The quarter-over-quarter decrease resulted primarily
from a charge to cost of goods sold to increase inventory reserves for certain
end-of-life access products. Product margins for the quarter and year-to-date
periods also decreased as a result of a higher mix of lower gross margin
products. On a year-to-date basis, this decrease was largely attributable to
increased sales in the Asia Pacific/Latin American region, which typically
have lower margins as they are sold predominantly through distributors.
Service and other gross margin increased to 33.9% and 34.6% for the third
quarter and first nine months of fiscal 1997 from 32.5% and 31.6%,
respectively, in the comparable periods of the prior year. The
quarter-over-quarter fluctuation was a result of increased margins on lower
margin systems integration services provided under a U.S. government contract.
The year-over-year increase resulted from a lower mix of these integration
services, as the revenue for these services has decreased 25.6% for the first
nine months of fiscal 1997 from the comparable period of fiscal 1996. The
gross margin on these services increased to 23.1% from 17.9%
quarter-over-quarter and increased to 19.0% from 14.9% year-over-year.
Management expects service and other gross margin to continue to fluctuate as
a result of the changes in mix between systems integration services and other
service revenue.
Operating Expenses
Operating expenses in the third quarter and first nine months of fiscal 1997
increased $2.1 million and $6.4 million from the comparable periods of fiscal
1996, and increased as a percentage of total revenue to 39.6% from 36.5%
quarter-over-quarter and 40.4% from 36.4% year-over-year as a result of higher
expenses and lower revenues. Management expects operating expenses to
continue to increase during the remainder of fiscal 1997.
Sales and marketing expense increased $1.4 million and $2.6 million in the
third quarter and first nine months of fiscal 1997, respectively, from the
comparable periods of fiscal 1996. As a percentage of total revenue, sales
and marketing expense increased to 24.1% and 24.0% for the third quarter and
first nine months of fiscal 1997 from 22.0% and 22.1%, respectively, for the
comparable periods of fiscal 1996. The increased spending is primarily the
result of the addition of personnel to support expansion of the sales and
marketing infrastructure, increased travel expenses and increased advertising
and promotional expenses, offset partially by decreased sales commissions.
Management expects sales and marketing expenses to increase during the
remainder of fiscal 1997.
<Page 9>
Research and development expense increased $.6 million and $4.1 million in the
third quarter and first nine months of fiscal 1997, respectively, from the
comparable periods of fiscal 1996, and increased as a percentage of total
revenue to 12.0% and 12.8%, respectively, from 11.2% and 10.7% in the
comparable periods of fiscal 1996. The increase in spending is primarily due
to an increase in direct project funding, primarily salary-related expenses
and purchases of direct materials and capital equipment to support product
development. Management plans to continue funding research and development
efforts at levels necessary to advance product programs and therefore expects
research and development spending to continue to increase during the remainder
of fiscal 1997.
General and administrative expense increased $.1 million and decreased $.3
million, respectively, in the third quarter and first nine months of fiscal
1997 as compared to the prior year, and remained comparable as a percentage of
total revenue. Management expects general and administrative expense to
remain fairly flat for the remainder of fiscal 1997.
Income from Operations
Income from operations for the third quarter and first nine months of fiscal
1997 decreased to $8.7 million and $22.7 million from $12.8 million and $34.1
million, respectively, for the comparable periods of fiscal 1996. The Company
expects income from operations for the remainder of fiscal 1997 to be below
operating income for the comparable period of fiscal 1996.
Non-Operating Items
Interest income for the third quarter and first nine months of fiscal 1997
remained fairly flat from the comparable periods of fiscal 1996. Interest
expense decreased by $1.0 million quarter-over-quarter and $2.4 million
year-over-year as a result of the partial call of the Company's convertible
subordinated debentures in the third quarter of fiscal 1996.
The third quarter and first nine months of fiscal 1997 included a provision
for income tax expense of $2.8 million and $8.7 million, respectively, at
effective rates of 30% and 35%, as compared to $4.4 million and $11.9 million
at an effective rate of 35%, in the comparable periods of fiscal 1996. In the
third quarter of fiscal 1997, the Company decreased the year-to-date tax rate
from 38% to 35% primarily as a result of expected U.S. tax benefits on
increased export revenue.
The results for the first nine months of fiscal 1997 also included an
extraordinary gain of $444 thousand, or two cents per share, arising from the
repurchase of $4.7 million of convertible subordinated debentures.
BUSINESS ENVIRONMENT AND RISK FACTORS
As mentioned above, the Company's business is subject to various risk factors
and aspects of the business environment that could lead actual future results
to differ materially from management's current projections and expectations.
Among these risks are those that are described below. This section should be
read in conjunction with the Company's fiscal 1996 Form 10-K and other filings
with the Securities and Exchange Commission.
Historically, the majority of the Company's revenue each quarter results from
orders received and shipped in that quarter, with a substantial percentage of
orders and shipments concentrated in the final weeks of the quarter. In
addition, because of the lead times necessary to manufacture certain of the
Company's products, and the Company's reliance on outside suppliers for
product components, receipt of an order in a given quarter does not
necessarily mean the Company will be in a position to ship the ordered product
prior to the end of that quarter.
<Page 10>
Expense levels are relatively fixed and are set, in part, based on
expectations regarding future revenue and margin levels. These expectations
derive from making judgments on issues such as future technology trends,
competitive products and services, pricing and customer requirements, a
process that involves evaluation of information that is often unclear and in
conflict. All markets for the Company's products are very competitive and
dynamic and many are susceptible to changing economic conditions, regulations
and political conditions. The Company has limited visibility into factors
that could influence its revenue, product mix and other revenue sources and
margins, particularly in international markets that are served primarily by
non-exclusive resellers.
The Company's products incorporate intellectual property and technology owned
by the Company or licensed from third parties. The Company's ability to
maintain and enhance the value of its intellectual property and technology and
third party licenses will affect future product and service offerings.
Moreover, the Company believes that operating results will depend on
successful development and introduction of new products and enhancements to
existing products and service offerings. There can be no assurance that the
Company will succeed in such efforts or that customers will accept new,
enhanced and existing products and services in quantities and at prices and
margins that are consistent with the Company's expectations. Competition is
intense for qualified technical personnel in the Silicon Valley and for
qualified sales and marketing personnel throughout the world. The Company's
success depends on its ability to attract and retain employees necessary to
support planned product development and marketing and sales initiatives.
The Company's products include components, assemblies and subassemblies that
are currently available from single sources and, in some cases, are in short
supply. Testing and manufacturing is performed at the Company's Redwood City,
California, facility. Availability limitations, price increases or business
interruptions could adversely impact revenue, margins and earnings.
The Company has distribution, product and technology relationships with a
number of significant customers and entities that are considered by the
Company to be strategic. Most of the Company's competitors have similar
relationships with their respective customers and other parties. Changes in
the Company's relationships or changes in similar relationships among
competitors could have a material impact on competitive and other factors
described above, including the Company's operating results. Also, to the
extent that litigation or other claims are in the future asserted against the
Company based on securities, intellectual property, patent, product,
regulatory or other factors, they could materially adversely affect the
Company's business, operating results and finances.
A significant portion of the Company's revenue comes from contracts with the
U.S. government, most of which do not include purchase commitments. There can
be no assurance that orders from the U.S. government, or from other customers,
will continue at historical levels, or that the Company will be able to obtain
orders from new customers.
Because of the factors described above, as well as others that may affect the
Company's operating results, past financial results may not be an accurate
indicator of future performance.
LIQUIDITY AND CAPITAL RESOURCES
As of December 29, 1996, the Company had cash, cash equivalents and temporary
cash investments of $120.4 million, as compared to $112.2 million as of March
31, 1996. Cash provided by operations was $22.7 million during the first nine
months of fiscal 1997, which was a $1.2 million decrease from the cash
provided by operations from the comparable period of the prior year. This
decrease was principally due to decreases in accrued liabilities and accounts
payable on a year-to-date basis in fiscal 1997 as compared to increases in
those balances in the prior year, and lower net income, offset partially by a
decrease in inventory and lower increases in accounts receivable.
Net cash used for investing activities of $37.3 million for the first nine
months of fiscal 1997 primarily consisted of $26.1 million in net purchases of
temporary cash investments and $8.9 million in purchases of property and
equipment.
<Page 11>
Net cash used for financing activities of $3.0 million for the first nine
months of fiscal 1997 resulted from $3.9 million used to repurchase the
Company's convertible subordinated debentures and $2.7 million used to
repurchase the Company's Common Stock, partially offset by the issuance of
$3.6 million of Common Stock related to the employee stock benefit plans.
During the second quarter of fiscal 1997, the Board of Directors authorized
the Company to repurchase up to 10% of the outstanding shares of its Common
Stock and to repurchase its outstanding 7-1/4% convertible subordinated
debentures. These purchases may be made on the open market from time to time
at the discretion of the Company's management and at price levels the Company
deems appropriate. The Company may discountinue its purchases at any time it
determines additional purchases are not warranted. As of December 29, 1996,
the Company had repurchased 204,600 of its shares of Common Stock at a
weighted average price of $13.27 and repurchased debentures with a face value
of $4,705,000 at a weighted average cost of 82.2% of the face value.
As of December 29, 1996 the Company had available an unsecured $10.0 million
line of credit. Borrowings under this committed facility are available
through May 1997 and would bear interest at the bank's base rate (which
approximates prime). At December 29, 1996, there were no outstanding
borrowings under this facility.
The Company believes that current cash and cash equivalents, temporary cash
investments and cash flows from operations will be sufficient to fund
operations, purchases of capital equipment and research and development
programs currently planned at least through the next twelve months.
<Page 12>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11: Statement re: Computation of Primary and Fully
Diluted Earnings Per Share.
(b) Reports on Form 8-K
No report on Form 8-K was filed by the Company during its
fiscal quarter ended December 29, 1996.
<Page 13>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
(REGISTRANT) NETWORK EQUIPMENT TECHNOLOGIES, INC.
BY (SIGNATURE) /s/ Craig M. Gentner
(NAME AND TITLE) Craig M. Gentner
Senior Vice President and
Chief Financial Officer and Secretary
(Principal Financial and Accounting
Officer)
(DATE) February 10, 1997
<PAGE>
EXHIBIT 11
NETWORK EQUIPMENT TECHNOLOGIES, INC.
Computation of Primary and Fully Diluted Earnings Per Share
(in thousands, except per share amounts - unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
Dec. 29, Dec. 24, Dec. 29, Dec. 24,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Primary
Earnings:
Income before extraordinary gain $ 6,620 $ 8,215 $ 16,243 $ 22,085
Extraordinary gain on repurchase of debentures - - 444 -
-------- -------- -------- --------
Net income $ 6,620 $ 8,215 $ 16,687 $ 22,085
-------- -------- -------- --------
-------- -------- -------- --------
Shares:
Weighted average number of common shares
outstanding 20,861 20,136 20,861 19,492
Number of common equivalent shares assuming
exercise of dilutive stock options 547 1,063 576 1,095
-------- -------- -------- --------
21,408 21,199 21,437 20,587
-------- -------- -------- --------
-------- -------- -------- --------
Primary earnings per share:
Income before extraordinary gain $ .31 $ .39 $ .76 $ 1.07
-------- -------- -------- --------
-------- -------- -------- --------
Net income $ .31 $ .39 $ .78 $ 1.07
-------- -------- -------- --------
-------- -------- -------- --------
Fully Diluted
Earnings:
Income before extraordinary gain $ 6,620 $ 8,215 $ 16,243 $ 22,085
Extraordinary gain on repurchase of debentures - - 444 -
-------- -------- -------- --------
Net income $ 6,620 $ 8,215 $ 16,687 $ 22,085
-------- -------- -------- --------
-------- -------- -------- --------
Shares:
Weighted average number of common shares
outstanding 20,861 20,136 20,861 19,492
Number of common equivalent shares assuming
exercise of dilutive stock options 673 1,063 753 1,151
Number of common equivalent shares assuming
conversion of convertible securities (1) - - - -
-------- -------- -------- --------
21,534 21,199 21,614 20,643
-------- -------- -------- --------
-------- -------- -------- --------
Fully diluted earnings per share:
Income before extraordinary gain $ .31 $ .39 $ .75 $ 1.07
-------- -------- -------- --------
-------- -------- -------- --------
Net income $ .31 $ .39 $ .77 $ 1.07
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
(1) The assumed exercise of these common stock equivalents were excluded as
they were anti-dilutive.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-29-1996
<CASH> 34,280
<SECURITIES> 86,092
<RECEIVABLES> 87,381
<ALLOWANCES> 4,056
<INVENTORY> 24,336
<CURRENT-ASSETS> 251,087
<PP&E> 29,113
<DEPRECIATION> 86,161
<TOTAL-ASSETS> 293,407
<CURRENT-LIABILITIES> 59,737
<BONDS> 28,821
<COMMON> 209
0
0
<OTHER-SE> 204,640
<TOTAL-LIABILITY-AND-EQUITY> 293,407
<SALES> 157,831
<TOTAL-REVENUES> 238,169
<CGS> 66,685
<TOTAL-COSTS> 119,243
<OTHER-EXPENSES> 96,244
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,779
<INCOME-PRETAX> 24,957
<INCOME-TAX> 8,714
<INCOME-CONTINUING> 16,243
<DISCONTINUED> 0
<EXTRAORDINARY> 444
<CHANGES> 0
<NET-INCOME> 16,687
<EPS-PRIMARY> .78
<EPS-DILUTED> .77
</TABLE>
