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 September 28, 1997, 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
(650) 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 September 28, 1997 was 21,288,020.
==============================================================================
This document consists of 15 pages of which this is page 1.
<PAGE 2>
NETWORK EQUIPMENT TECHNOLOGIES, INC.
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Condensed Consolidated Balance Sheets -
September 28, 1997 and March 31, 1997 ..................... 3
Condensed Consolidated Statements of Income - Quarter and
Six Months ended September 28, 1997 and September 29, 1996. 4
Condensed Consolidated Statements of Cash Flows - Six
Months Ended September 28, 1997 and September 29, 1996 .... 5
Notes to Condensed Consolidated Financial Statements ...... 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition ............. 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders ....... 13
Item 5. Other Information ......................................... 13
Item 6. Exhibits and Reports on Form 8-K .......................... 13
SIGNATURE ........................................................... 14
EXHIBIT 11.1 Computation of Primary and Fully Diluted
Earnings Per Share ........................................ 15
<Page 3>
NETWORK EQUIPMENT TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
September 28, March 31,
1997 1997
-------- --------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 51,310 $ 39,141
Temporary cash investments 96,571 99,581
Accounts receivable, net of allowances of $3,485 at
September 28 and $3,910 at March 31 79,005 82,986
Inventories 21,847 22,662
Deferred income taxes 7,418 7,418
Prepaid expenses and other assets 7,754 6,679
-------- --------
Total current assets 263,905 258,467
Property and equipment, net 33,053 30,009
Software production costs, net 5,704 4,616
Other assets 10,728 8,561
-------- --------
$313,390 $301,653
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 18,945 $ 23,758
Accrued liabilities 40,661 39,174
-------- --------
Total current liabilities 59,606 62,932
7-1/4% convertible subordinated debentures 25,821 25,821
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: 21,288,000 shares at September 28 and
21,049,000 shares at March 31 213 210
Additional paid-in capital 174,916 172,038
Treasury stock (1,851) (2,545)
Net unrealized gain (loss) on available-for-sale securities 190 (56)
Accumulated translation adjustment (662) (490)
Retained earnings 55,157 43,743
-------- --------
Total stockholders' equity 227,963 212,900
-------- --------
$313,390 $301,653
======== ========
</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 Six Months Ended
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue:
Product revenue $ 50,049 $ 51,012 $103,566 $101,735
Service and other revenue 27,798 27,386 54,254 53,132
-------- -------- -------- --------
Total revenue 77,847 78,398 157,820 154,867
-------- -------- -------- --------
Cost of sales:
Cost of product revenue 19,363 22,324 39,791 43,099
Cost of service and other revenue 16,466 18,249 33,536 34,570
-------- -------- -------- --------
Total cost of sales 35,829 40,573 73,327 77,669
-------- -------- -------- --------
Gross margin 42,018 37,825 84,493 77,198
Operating expenses:
Sales and marketing 20,704 17,917 42,910 37,217
Research and development 10,760 9,931 20,911 20,378
General and administrative 2,959 2,586 5,743 5,659
-------- -------- -------- --------
Total operating expenses 34,423 30,434 69,564 63,254
-------- -------- -------- --------
Income from operations 7,595 7,391 14,929 13,944
Other income (expense):
Interest income 1,522 1,559 3,145 2,998
Interest expense (449) (609) (925) (1,242)
Other (198) (42) (363) (179)
-------- -------- -------- --------
Income before income taxes 8,470 8,299 16,786 15,521
Income tax provision 2,711 3,154 5,372 5,898
-------- -------- -------- --------
Income before extraordinary gain 5,759 5,145 11,414 9,623
Extraordinary gain on repurchase of debentures - 444 - 444
-------- -------- -------- --------
Net income $ 5,759 $ 5,589 $ 11,414 $ 10,067
======== ======== ======== ========
Primary and fully diluted earnings per share:
Income before extraordinary gain $ .26 $ .24 $ .52 $ .45
======== ======== ======== ========
Net income $ .26 $ .26 $ .52 $ .47
======== ======== ======== ========
Shares used in per share computation:
Primary 22,208 21,295 21,980 21,451
======== ======== ======== ========
Fully diluted 22,208 21,295 22,144 21,579
======== ======== ======== ========
</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>
Six Months Ended
Sept. 28, Sept. 29,
1997 1996
-------- --------
<S> <C> <C>
Cash and Cash Equivalents at Beginning of Period $ 39,141 $ 52,319
Net Cash Flows from Operating Activities:
Net income 11,414 10,067
Adjustments to reconcile net income to cash
provided by operations:
Extraordinary credit--gain on repurchase of debentures - (444)
Depreciation and amortization 9,149 8,397
Restricted stock compensation 180 198
Changes in assets and liabilities:
Accounts receivable 3,665 (4,395)
Inventories 784 5,198
Prepaid expenses and other assets (1,104) (953)
Accounts payable (4,766) (1,527)
Accrued liabilities 2,264 (3,773)
-------- --------
Net cash provided by operations 21,586 12,768
-------- --------
Cash Flows from Investing Activities:
Purchases of temporary cash investments (47,277) (71,639)
Proceeds from maturities of temporary cash investments 50,533 60,243
Purchases of property and equipment (11,139) (6,418)
Additions to software production costs (2,216) (1,376)
Other (2,194) (323)
-------- --------
Net cash used for investing activities (12,293) (19,513)
-------- --------
Cash Flows from Financing Activities:
Sale of Common Stock 2,759 2,564
Purchase of Common Stock - (2,722)
Repurchase of convertible subordinated debentures - (3,869)
-------- --------
Net cash provided by (used for) financing activities 2,759 (4,027)
-------- --------
Effect of exchange rate changes on cash 117 (84)
-------- --------
Net increase (decrease) in cash and cash equivalents 12,169 (10,856)
-------- --------
Cash and Cash Equivalents at End of Period $ 51,310 $ 41,463
======== ========
Other Cash Flow Information:
Cash paid during the period for:
Interest $ 943 $ 1,347
Income taxes $ 12,487 $ 3,557
Non-cash investing and financing activities:
Income tax benefit arising from employee stock option plans $ 636 $ 1,634
</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 September 28, 1997, and the results
of operations and cash flows for the quarter and six months ended
September 28, 1997 and September 29, 1996. These financial statements
should be read in conjunction with the March 31, 1997 audited
consolidated financial statements and notes thereto. The results of
operations for the six months ended September 28, 1997 are not
necessarily indicative of the results to be expected for the fiscal year
ending March 31, 1998.
2. Inventories
Inventories consist of (in thousands):
<TABLE>
<CAPTION>
September 28, March 31,
1997 1997
-------- --------
(unaudited)
<S> <C> <C>
Purchased components $ 5,019 $ 6,710
Work-in-process 13,795 13,675
Finished goods 3,033 2,277
-------- --------
$ 21,847 $ 22,662
======== ========
</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 during the
periods. 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 Standards
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
(SFAS 128). This standard replaces current earnings per share (EPS)
reporting requirements and requires a dual presentation of basic and
diluted EPS. Basic EPS excludes dilution by dividing net income by the
weighted average of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into
common stock.
<Page 7>
This standard will be effective for the Company beginning in the third
quarter of fiscal 1998 and will require restatement of prior periods. If
SFAS 128 had been in effect during the current and prior year periods,
basic EPS would have been $.27 for both quarters ended September 28, 1997
and September 29, 1996, and would have been $.54 and $.48 for the
respective year-to-date periods. Diluted EPS under SFAS 128 would have
remained the same as currently reported.
In June 1997, the FASB adopted SFAS No. 130, "Reporting Comprehensive
Income", which requires that an enterprise report, by major components
and as a single total, the change in its net assets during the period
from nonowner sources; and SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", which establishes annual and
interim reporting standards for an enterprise's business segments and
related disclosures about its products, services, geographic areas, and
major customers. Adoption of these statements will not impact the
Company's consolidated financial position, results of operations or cash
flows. Both statements are effective for the Company beginning April 1,
1998, with earlier application permitted.
<Page 8)
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 1997 Annual Report to Shareholders
and Part I of the Company's Form 10-K for the fiscal year ended March 31,
1997.
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 Six Months Ended
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
Percent of Revenue 1997 1996 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Product revenue 64.3 65.1 65.6 65.7
Service and other revenue 35.7 34.9 34.4 34.3
----- ----- ----- -----
Total revenue 100.0 100.0 100.0 100.0
----- ----- ----- -----
Product gross margin 61.3 56.2 61.6 57.6
Service and other revenue gross margin 40.8 33.4 38.2 34.9
----- ----- ----- -----
Total gross margin 54.0 48.2 53.5 49.8
----- ----- ----- -----
Sales and marketing 26.6 22.8 27.2 24.0
Research and development 13.8 12.7 13.2 13.1
General and administrative 3.8 3.3 3.6 3.7
----- ----- ----- -----
Total operating expenses 44.2 38.8 44.0 40.8
----- ----- ----- -----
Income from operations 9.8 9.4 9.5 9.0
----- ----- ----- -----
Net income 7.4 7.1 7.2 6.5
===== ===== ===== =====
</TABLE>
Revenue
Total revenue for the second quarter of fiscal 1998 decreased less than one
percent from the second quarter of fiscal 1997, and increased 1.9% on a year-
to-date basis. Similarly, product revenue for the second quarter of fiscal
1998 decreased 1.9%, or $1.0 million, but increased on a year-to-date basis
1.8%, or $1.8 million, from the comparable periods of the prior year. A
decrease in sales through the North American channel from the prior year
negatively impacted both the quarter and year-to-date periods. Partially
offsetting this decline was an increase in product sales through the U.S.
federal channel for both periods and a year-to-date increase in international
product sales, which grew 16.4% from fiscal 1997 to 49.3% of product revenue
for the first six months of fiscal 1998. During the quarter, the Company
announced and shipped a number of new products. While sales of these new
products added incrementally to revenue, the lower-than-expected volume
coupled with issues related to a major product transition, have contributed to
the overall flatness of product revenue from the prior quarter and prior year
periods.
Service and other revenue for the second quarter and first six months of
fiscal 1998 increased $.4 million and $1.1 million, respectively, from the
comparable periods of fiscal 1997. This increase was attributable to an
increase in service revenue, partially offset by a decrease in revenue from
systems integration services in support of product sales to the U.S.
government.
<Page 9>
Gross Margin
Total gross margin as a percentage of total revenue increased to 54.0% and
53.5% for the second quarter and first six months of fiscal 1998 from 48.2%
and 49.8%, respectively, for the comparable periods of fiscal 1997. Increases
for both periods resulted from improvements in both the product and service
and other gross margins. Product margins increased to 61.3% and 61.6% for the
second quarter and first six months of fiscal 1998, respectively, from 56.2%
and 57.6% in the comparable periods of the prior year. The quarter-over-
quarter increase primarily resulted from a favorable channel mix, as an
increased percentage of the quarter's revenue represented sales through the
U.S. federal channel and a decreased percentage through the Asia Pacific/Latin
American channel. Additionally, both the quarter and year-to-date product
margins were positively impacted by a favorable product mix.
Service and other gross margin increased to 40.8% and 38.2% in the second
quarter and first six months of fiscal 1998 from 33.4% and 34.9%,
respectively, in the comparable periods of fiscal 1997. Contributing to the
increase in these margins were improvements in both the service margin and the
margin on systems integration services in support of product sales to the U.S.
government, which increased to 21.7% for the first six months of fiscal 1998
from 16.7% for the comparable period of fiscal 1997.
Due to planned shifts in product and channel mix, management expects total
gross margin as a percentage of total revenue to decrease slightly during the
remainder of fiscal 1998.
Operating Expenses
Operating expenses in the second quarter and first six months of fiscal 1998
increased $4.0 million and $6.3 million from the comparable periods of the
prior year, and increased as a percentage of total revenue to 44.2% from 38.8%
quarter-over-quarter and 44.0% from 40.8% year-over-year. Management expects
operating expenses to increase slightly during the remainder of fiscal 1998.
Sales and marketing expense increased $2.8 million and $5.7 million in the
second quarter and first six months of fiscal 1998, respectively, from the
comparable periods of fiscal 1997. The increase in spending quarter-over-
quarter is primarily a result of increased compensation expense in support of
the marketing infrastructure. On a year-to-date basis, the increase in
spending was primarily the result of increased trade show, advertising, travel
and compensation expenses in conjunction with new product launches.
Management expects sales and marketing spending to increase during the
remainder of fiscal 1998, while decreasing as a percentage of revenue.
Research and development expense increased $.8 million and $.5 million in the
second quarter and first six months of fiscal 1998, respectively, from the
comparable periods of fiscal 1997, and increased as a percentage of total
revenue to 13.8% from 12.7% quarter-over-quarter, remaining flat at
approximately 13.2% of revenue year-over-year. Management plans to continue
funding research and development efforts at levels necessary to advance
product programs and expects research and development spending to increase
during the remainder of fiscal 1998, while decreasing as a percentage of
revenue.
General and administrative expense increased $.4 million and $.1 million in
the second quarter and first six months of fiscal 1998, respectively, from the
comparable periods of fiscal 1997, and remained fairly flat as a percentage of
total revenue. Management expects general and administrative expense to
increase slightly for the remainder of fiscal 1998, remaining fairly flat as a
percentage of revenue.
<Page 10>
Non-Operating Items
Net interest income for the second quarter of fiscal 1998 remained fairly flat
at $1.1 million and increased on a year-to-date basis by $.5 million from the
comparable period of fiscal 1997.
The second quarter and first six months of fiscal 1998 included a provision
for income tax expense of $2.7 million and $5.4 million, respectively, at an
effective rate of 32% as compared to $3.2 million and $5.9 million at an
effective rate of 38% in the second quarter and first six months of fiscal
1997. The lower effective tax rate in fiscal 1998 is primarily due to the
utilization of foreign net operating loss carryforwards as well as expected
U.S. tax benefits on increased export revenue.
The results for the second quarter and first six months of fiscal 1997 also
incuded an extraordinary gain of $.4 million, or two cents per share, arising
from the repurchase of $4.7 million of convertible subordinated debentures.
BUSINESS ENVIRONMENT AND RISK FACTORS
All statements in this 10-Q that are not historical are forward-looking
statements that involve risks and uncertainties including, but not limited to,
the risks and uncertainties detailed in the Company's filings with the
Securities and Exchange Commission. Actual results may differ materially from
those projected.
Historically, the majority of the Company's revenue in each quarter results
from orders received and shipped in that quarter. Because of these ordering
patterns and potential delivery schedule changes, the Company does not believe
that backlog is indicative of future revenue levels. In addition, because a
large portion of the Company's orders historically have been received and
filled in the last month of the quarter, forecasting sales during a quarter is
difficult, and there is a significant risk of excessive or inadequate
inventory if orders do not match forecast. Furthermore, if large orders do
not close when forecasted or if near-term demand weakens for the products the
Company has available to ship, the Company's operating results for that or
subsequent quarters would be adversely affected.
Expense levels are relatively fixed and are set based on expectations
regarding future revenue and margin levels. These expectations derive from
making judgments on issues such as planned revenue, 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 regulations and political
conditions. The Company has limited visibility into factors that could
influence its revenue, mix of product orders 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. The Company's
success also depends on its ability to attract and retain employees necessary
to support planned development and growth.
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 of products designed by N.E.T. are
performed at the Company's Redwood City, California, facility. Pursuant to
several types of agreements, the Company also resells products designed or
manufactured by third parties for order fulfillment, quality control and
support of their products. Such products are generally available to end users
from sources other than the Company, and are generally sold or licensed by the
Company at gross margins that are lower than products designed and
manufactured by the Company. There can be no assurance that these third-party
manufacturers will be able to meet the Company's future requirements for these
products, that the quality control and support provided by these manufacturers
will be adequate, or that the Company's gross margins on these products will
not be lowered further. Product availability limitations, price increases or
business interruptions could adversely impact revenue, margins and earnings.
<Page 11>
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, litigation
or other claims based on securities, intellectual property, patent, product,
regulatory or other issues or factors 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 September 28, 1997, the Company had cash, cash equivalents and temporary
cash investments of $147.9 million, as compared to $138.7 million as of March
31, 1997. Cash provided by operations was $21.6 million during the first six
months of fiscal 1998, which was an $8.8 million increase from the cash
provided by operations from the comparable period of the prior year. This
additional cash was principally generated by a decrease in accounts receivable
during the first six months of fiscal 1998 as compared to an increase in the
comparable period of fiscal 1997.
Net cash used for investing activities of $12.3 million for the first six
months of fiscal 1998 consisted primarily of purchases of property and
equipment of $11.1 million and an increase in software production costs of
$2.2 million, offset partially by net proceeds of temporary cash investments
of $3.3 million.
Net cash provided by financing activities of $2.8 million for the first six
months of fiscal 1998 pertains to the issuance of Common Stock relating to the
employee stock benefit plans.
As of September 28, 1997, the Company had available an unsecured $10.0 million
line of credit. Borrowings under this committed facility are available
through May 1998 and would bear interest at the bank's base rate (which
approximates prime). At September 28, 1997, there were no outstanding
borrowings under this facility.
In April 1997, the Company entered into a 12-year operating lease agreement
pursuant to which a new corporate headquarters facility will be built in
Fremont, California. In conjunction with the project management and design
and construction of the new facility, the Company expects to incur
expenditures during the remainder of fiscal 1998, the significant portion of
which it plans to capitalize. Management expects to fund the leasehold
improvements with available cash and investments. The Company plans to move
to its new headquarters when the buildings are completed, which is expected to
occur during the first half of fiscal 1999. The Company's current
headquarters' lease expires in October 1998.
<Page 12>
The Company believes that current cash and cash equivalents, temporary cash
investments and cash flows from operations will be sufficient to fund
operations, including costs associated with the new headquarters' facility,
purchases of capital equipment and research and development programs currently
planned at least through the next twelve months.
<Page 13>
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On August 12, 1997, the Company held its Annual Meeting of
Stockholders. At this meeting, the stockholders voted to (1) elect
Joseph J. Francesconi and Walter J. Gill as directors. Joseph J.
Francesconi received 18,391,917 votes in favor and 888,112 votes
against and Walter J. Gill received 18,385,816 votes in favor and
894,213 votes against. Continuing as directors are Dixon R. Doll,
James K. Dutton, and Hans A. Wolf; and (2) approve amendments to the
Company's 1993 Stock Option Plan to increase the number of shares
available for issuance thereunder by 2,000,000 and to reflect changes
to the stockholder approval requirements of Securities and Exchange
Commission Rule 16b-3 as follows: 8,488,875 votes in favor,
5,558,927 votes against, and 253,821 votes abstaining; and (3) ratify
the appointment of Deloitte and Touche LLP as independent public
accountants of the Company for the fiscal year ending March 31, 1998
as follows: 19,195,239 votes in favor, 29,669 votes against, and
55,121 votes abstaining.
Item 5. Other Information
On October 23, 1997, George M. Scalise was elected as a Class III
Director and was appointed to the Nominating Committee of the Board
of Directors.
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 September 28, 1997.
<Page 14>
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, Chief Financial
Officer and Corporate Secretary
(Principal Financial and Accounting
Officer)
EXHIBIT 11.1
NETWORK EQUIPMENT TECHNOLOGIES, INC.
Computation of Primary and Fully Diluted Earnings Per Share
(in thousands, except per share amounts - unaudited)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Primary
Earnings:
Income before extraordinary gain $ 5,759 $ 5,145 $ 11,414 $ 9,623
Extraordinary gain on repurchase of debentures - 444 - 444
-------- -------- -------- --------
Net income $ 5,759 $ 5,589 $ 11,414 $ 10,067
-------- -------- -------- --------
Shares:
Weighted average number of common shares
outstanding 21,196 20,828 21,130 20,861
Number of common equivalent shares assuming
exercise of dilutive stock options 1,012 467 850 590
-------- -------- -------- --------
22,208 21,295 21,980 21,451
-------- -------- -------- --------
Primary earnings per share:
Income before extraordinary gain $ .26 $ .24 $ .52 $ .45
======== ======== ======== ========
Net income $ .26 $ .26 $ .52 $ .47
======== ======== ======== ========
Fully Diluted
Earnings:
Income before extraordinary gain $ 5,759 $ 5,145 $ 11,414 $ 9,623
Extraordinary gain on repurchase of debentures - 444 - 444
-------- -------- -------- --------
Net income $ 5,759 $ 5,589 $ 11,414 $ 10,067
-------- -------- -------- --------
Shares:
Weighted average number of common shares
outstanding 21,196 20,828 21,130 20,861
Number of common equivalent shares assuming
exercise of dilutive stock options 1,012 467 1,014 718
Number of common equivalent shares assuming
conversion of convertible securities (1) - - - -
-------- -------- -------- --------
22,208 21,295 22,144 21,579
-------- -------- -------- --------
Fully diluted earnings per share:
Income before extraordinary gain $ .26 $ .24 $ .52 $ .45
======== ======== ======== ========
Net income $ .26 $ .26 $ .52 $ .47
======== ======== ======== ========
</TABLE>
_________________
(1) The assumed exercise of these common stock equivalents were excluded as
they were anti-dilutive.
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