UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x]QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED: August 31, 1995
COMMISSION FILE NUMBER: 1-10228
CABLETRON SYSTEMS, INC.
Exact name of registrant as specified in its charter
DELAWARE 04-2797263
(State of incorporation) (I.R.S. Employer
I.D.)
35 Industrial Way, Rochester, New Hampshire 03867
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (603) 332-9400
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
as of September 27, 1995 71,964,464 shares of the Registrant's
Common Stock were outstanding.
This document contains 18 pages
Exhibit index on page 12
INDEX
Page
Facing Page 1
Index 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets -- August 31, 1995 and
February 28, 1995 3
Consolidated Statements of Income -- Three and six
months ended August 31, 1995 and 1994 4
Consolidated Statements of Cash Flows -- Six months
ended August 31, 1995 and 1994 5
Notes to Consolidated Financial Statements -- August 31,
1995 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
Index to the Exhibits 12
Exhibit 10 - The Company's 1995 Employee Stock Purchase Plan 13-17
Exhibit 11 - Statement re: Computation of Per Share
Earnings 18
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CABLETRON SYSTEMS, INC.
Consolidated Balance Sheets
(in thousands of dollars)
(unaudited)
August 31, February 28,
Assets 1995 1995
Current Assets:
Cash and cash equivalents $155,710 $114,032
Short-term investments 104,409 130,563
Accounts receivable, net 115,340 91,411
Inventories 114,693 103,030
Deferred taxes 20,088 20,062
Prepaid expenses and other assets 23,470 11,998
Total current assets 533,710 471,096
Long-term investments 152,303 101,333
Property, plant and equipment, net 134,191 116,761
Capitalized software costs, net 493 730
Total assets $820,697 $689,920
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 31,237 $28,923
Accrued expenses 68,557 52,366
Income taxes payable 19,904 14,982
Total current liabilities 119,698 96,271
Deferred taxes 6,117 6,128
Total liabilities 125,815 102,399
Stockholders' equity
Preferred stock, $1.00 par value. Authorized
2,000 shares; none issued - -
Common stock $0.01 par value. Authorized
240,000 shares; issued and outstanding
71,801 and 71,469 respectively 718 715
Additional paid-in capital 116,702 110,564
Retained earnings 578,846 477,780
696,266 589,059
Cumulative translation adjustment (1,360) (1,364)
Notes receivable, stockholders (24) (174)
Total stockholders' equity 694,882 587,521
Total liabilities and stockholders' equity $820,697 $689,920
See accompanying notes to the consolidated financial statements.
CABLETRON SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands of dollars, except earnings per share)
(unaudited)
Three Months Ended Six Months Ended
August 31, August 31,
1995 1994 1995 1994
Net sales $257,299 $194,044 $498,053 $374,699
Cost of sales 104,120 78,929 201,553 152,527
Gross profit 153,179 115,115 296,500 222,172
Operating expenses:
Research and development 27,861 20,210 53,880 38,347
Selling, general and
administrative 48,930 38,078 96,228 73,583
Total operating expenses 76,791 58,288 150,108 111,930
Income from operations 76,388 56,827 146,392 110,242
Interest income 4,041 2,168 7,666 4,210
Income before income taxes 80,429 58,995 154,058 114,452
Income taxes 27,663 20,530 52,992 39,827
Net income $52,766 $38,465 $101,066 $74,625
Net income per common share $0.74 $0.54 $1.41 $1.04
Weighted average number of
shares outstanding 71,692 71,443 71,596 71,425
See accompanying notes to the consolidated financial statements.
CABLETRON SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
(unaudited)
Six Months Ended
August 31, August 31,
1995 1994
Cash flows from operating activities:
Net income $101,066 $74,625
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 16,467 11,875
Recovery of losses on accounts
receivable (331) (1,363)
Forgiveness of notes receivables
from shareholders 151 119
(Gain) loss on disposal of property plant
and equipment (71) 116
Deferred taxes (38) -
Changes in assets and liabilities:
Accounts receivables (22,680) 3,194
Inventories (11,650) (28,154)
Prepaid expenses and other assets (11,619) (2,272)
Accounts payable and accrued expenses 16,474 9,741
Income taxes payable 5,523 (4,483)
Common stock issued to employee
stock purchase plan 1,376 1,029
Net cash provided by operating
activities 94,668 64,427
Cash flows from investing activities:
Capital expenditures (33,661) (30,440)
Purchases of marketable securities (24,838) 7,277
Net cash used in investing
activities (58,499) (23,163)
Cash flows from financing activities:
Proceeds from exercise of stock options 4,764 (2,979)
Net cash provided by (used in) financing
activities 4,764 (2,979)
Effect of exchange rate changes on cash 745 302
Net increase in cash and cash equivalents 41,678 38,587
Cash and cash equivalents, beginning of
period 114,032 54,563
Cash and cash equivalents, end of period $155,710 $93,150
Cash paid during the year for:
Income taxes $44,928 $44,427
See accompanying notes to the consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting Policy
The information included in the foregoing interim financial
statements is unaudited. In the opinion of management, all
adjustments consisting of normal accruals necessary for a fair
presentation of the results of operations for the interim periods
presented have been reflected herein. The results of operations for
the interim periods are not necessarily indicative of the results to
be expected for the entire year.
2. Inventories
The components of inventory are as follows:
8/31/95 2/28/95
Raw materials and supplies $23,430 $22,420
Work in process 34,018 22,869
Finished goods 57,245 57,741
Total inventories $114,693 $103,030
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of the Second Quarter ended August 31, 1995 vs Second
Quarter ended August 31, 1994
Cabletron Systems' worldwide net sales of $257.3 million for the
fiscal quarter ended August 31, 1995 represented a 32.6 percent
increase over net sales of $194.0 million reported in the second
quarter of the preceding year. The increase was primarily the result
of higher sales of Multi Media Access Centers (MMAC (TM)) and
related items, inclusive of MMAC Plus, the next generation
intelligent switching hubs and small stackable hubs. International
sales as a percentage of total net sales decreased slightly to 27.0
percent in the quarter ended August 31, 1995 from 27.6 percent for
the same quarter of the preceding year.
Gross profit as a percentage of net sales for the three months ended
August 31, 1995 increased slightly to 59.5 compared to 59.3 percent
for the quarter ended August 31, 1994 predominantly due to
decreasing material costs.
Research and development costs increased to $27.9 million compared
to $20.2 million for the same quarter of the preceding fiscal year.
As a percentage of net sales, spending for research and development
increased to 10.8 percent from 10.4 percent. The higher spending
for research and development reflected increased numbers of software
and hardware engineers hired and associated costs related to the
development of new products, inclusive of MMAC Plus, the next
generation intelligent switching hub.
Spending for selling, general and administrative expenses for the
three months ended August 31, 1995 increased to $48.9 million
compared to $38.1 million for the same period of the preceding year.
As a percentage of net sales, spending for selling, general and
administration was 19.0 percent compared to 19.6 percent for the
same period of the preceding year. The absolute increase in
spending was the result of increases in both the inside and outside
sales forces in the United States and overseas and other
administrative expenses which were primarily volume related. As a
percentage of sales, selling and general administrative expenses
decreased due to a net gain on the sale of securities.
Net interest income in the current period was $4.0 million, compared
to $2.2 million in the same period last year. The increase in
interest income resulted from higher interest rates and increased
cash reserves.
Income before income taxes increased to $80.4 million compared to
$59.0 million for the same period of the prior fiscal year. As a
percentage of net sales, income before income taxes increased to
31.2 percent from 30.4 percent from the same period of the prior
fiscal year, primarily due the net gain on sale of securities.
For the three month period ending August 31, 1995 net income of
$52.8 million represented an increase of 37.1 percent from $38.5
million for the same quarter a year ago.
Results of the Six Months ended August 31, 1995 vs Six Months ended
August 31, 1994
Cabletron Systems' worldwide net sales of $498.0 million for the six
months ended August 31, 1995 represented a 32.9 percent increase
over net sales of $374.7 million reported for the same period of the
preceding year. The increase was primarily the result of higher
sales of Multi Media Access Centers (MMAC (TM)) and related items,
inclusive of MMAC Plus, the next generation intelligent switching
hubs and small stackable hubs. International sales as a percentage
of total net sales increased to 28.5 percent from 27.2 percent for
the same period of the preceding year.
Gross profit as a percentage of net sales for the six months ended
August 31, 1995 was 59.5 percent compared to 59.3 percent for the
six months ended August 31, 1994.
Research and development costs increased to $53.9 million compared
to $38.3 million for the same period of the preceding fiscal year.
As a percentage of net sales, spending for research and development
increased to 10.8 percent from 10.2 percent. The higher spending
for research and development reflected increased numbers of software
and hardware engineers hired and associated costs related to
development of new products.
Spending for selling, general and administrative expenses increased
to $96.2 million compared to $73.6 million for the same period of
the preceding year. As a percentage of net sales, spending for
selling, general and administration decreased to 19.3 percent from
19.6 for the same period of the preceding year. The absolute
increase in spending was the result of increases in both the inside
and outside sales forces in the United States and overseas and other
administrative expenses which were primarily volume related. As a
percentage of sales, selling and general administrative expenses
decreased due to a net gain on sale of securities.
Net interest income was $7.7 million compared to $4.2 million in the
same period last year. The increase in interest income resulted from
higher interest rates and increased cash reserves.
Income before income taxes increased to $154.1 million compared to
$114.5 million for the same period of the prior fiscal year. As a
percentage of net sales, income before income taxes increased to
30.9 percent from 30.5 percent from the same period of the prior
fiscal year, primarily due to a net gain on sale of securities.
Net income of $101.1 million represented an increase of 35.4 percent
from $74.6 million for the same period a year ago.
Liquidity and Capital Resources
Cash and cash equivalents and long term investments increased $66.5
million from $345.9 million at February 28, 1995 to $412.4 million
at August 31, 1995, primarily due to favorable operating results.
Accounts receivable at August 31, 1995 were $115.3 million compared
to $91.4 million at February 28, 1995. Days sales outstanding
increased to 40 days compared to 33 days on February 28, 1995. The
increase was predominantly due to the increase in sales and the
timing of collections.
The Company has historically maintained higher levels of inventory
than its competitors in the LAN industry in order to implement its
policy of shipping most orders requiring immediate delivery within
24 to 48 hours. Worldwide inventory at August 31, 1995 was $114.7
million, or 97 days of inventory, compared to $103.0 million, or 104
days of inventory at the end of the prior fiscal year. The decrease
in days of inventory was due to the the increase in sales and
improved inventory controls. The increase in absolute inventory
dollars was predominantly due to inventory build up associated with
the development of new products.
Capital expenditures for the first six months ended August 31, 1995
were $33.7 million compared to $30.4 million for the same period of
the preceding year. Capital expenditures the first six months of
fiscal 1996 included approximately $6.1 million for building costs
of which $5.6 million was for the purchase and remodeling of a
114,000-square-foot engineering building. Additionally, another $9.4
million was spent on computer and computer related equipment, $1.9
million for manufacturing and related equipment and $1.8 million was
spent on expanding global sales operations.
Current liabilities at August 31, 1995 were $119.7 million compared
to $96.3 million at the end of the prior fiscal year. This increase
was mainly due to the growth in operations and the timing of
disbursements.
In the opinion of management, internally generated funds from
operations and existing cash, cash equivalents and short-term
investments will prove adequate to support the Company's working
capital and capital expenditure requirements for the next twelve
months.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of Stockholders of the Company was held on
July 6, 1995. Proxies for the annual meeting were solicited
pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended.
(b) Craig R. Benson and Paul R. Duncan were elected to serve as
directors with terms expiring in 1998. S. Robert Levine, Donald F.
McGuinness and Michael D. Myerow continue to serve as directors.
The tabulation of votes regarding the election of Mr. Benson was
51,860,242 for, 64,582 votes against, with 19,643,729 votes
abstaining. The tabulation of votes regarding the election of Mr.
Duncan was 51,855,974 for, 68,848 votes against, with 19,643,731
votes abstaining.
(c) An amendment to increase the number of authorized shares of
Common Stock from 80,000,000 to 240,000,000 was approved. The
tabulation of votes was 41,615,242 for, 10,150,419 against and
19,802,892 votes abstaining.
(d) An amendment to increase the number of shares available for
grant under the Company's 1989 Equity Incentive Plan from 7,500,000
to 12,500,000 shares was approved. The tabulation of votes was
31,732,666 for, 12,908,152 against and 26,928,735 votes abstaining.
(e) The Company's 1995 Employee Stock Purchase Plan was approved.
The tabulation of votes was 42,111,758 for, 2,463,203 against and
26,993,592 votes abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 10 - The Company's 1995 Employee Stock Purchase Plan
(page 13-17).
Exhibit 11 - Statement re: Computation of Per Share Earnings
(page 18 of this report).
(b) There were no reports on Form 8-K filed during the quarter
ended August 31, 1995
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.
CABLETRON SYSTEMS, INC. (REGISTRANT)
September 28, 1995 /s/ Craig R. Benson
(Date) Craig R. Benson
Chairman of the Board, Treasurer
and Chief Operating Officer
September 28, 1995 /s/ David Kirkpatrick
(Date) David Kirkpatrick
Director of Finance and Chief
Financial Officer
Exhibit Index
Page
Exhibit 10 The Company's 1995 Employee Stock Purchase Plan 13-17
Exhibit 11 Statement re: Computation of Per Share Earnings 18
Exhibit 10
CABLETRON SYSTEMS, INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. PURPOSE OF PLAN
The Cabletron Systems, Inc. 1995 Employee Stock Purchase Plan (the
"Plan") is intended to provide a method by which eligible employees
of Cabletron Systems, Inc. ("Cabletron") and such of its
Subsidiaries as the Board of Directors of Cabletron (the "Board of
Directors") may from time to time designate (Cabletron and such
Subsidiaries being hereinafter referred to as the "Company") may use
voluntary, systematic payroll deductions to purchase shares of
Common Stock, $.01 par value of Cabletron (such Common Stock being
hereafter referred to as "Stock") and thereby acquire an interest in
the future of Cabletron. For purposes of the Plan, a "Subsidiary"
is any corporation in which Cabletron owns, directly or indirectly,
stock possessing 50% or more of the total combined voting power of
all classes of stock.
SECTION 2. OPTIONS TO PURCHASE STOCK
Under the Plan, there is available an aggregate of not more than
1,000,000 shares of Stock (subject to adjustment as provided in
Section 15) for sale pursuant to the exercise of options ("Options")
granted under the Plan to employees of the Company ("Employees") who
meet the eligibility requirements set forth in Section 3 hereof
("Eligible Employees"). The Stock to be delivered upon exercise of
Options under the Plan may be either shares of authorized but
unissued Stock or shares of reacuqired Stock , as the Board of
Directors may determine.
SECTION 3. ELIGIBLE EMPLOYEES
Except as otherwise provided below, each Employee who has completed
two years or more of continuous service in the employ of the Company
will be eligible to participate in the Plan.
(a) Any Employee who immediately after the grant of an Option to him
would (in accordance with the provisions of Sections 423 and 424 (d)
of the Internal Revenue Code of 1986 (as it may from time to time be
amended, the "Code")) own stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the
employer corporation or of its parent or Subsidiary corporations, as
defined in Section 424 of the Code, will not be eligible to receive
an Option to purchase Stock pursuant to the Plan.
(b) No Employee will be granted an Option under the Plan which
would permit his rights to purchase shares of stock under all
employee stock purchase plans of the Company and parent and
subsidiary corporations to accrue at a rate which exceeds $25,000 in
fair market value of such stock (determined at the time the Option
is granted) for each calendar year during which any such Option
granted to such Employee is outstanding at any time, as provided in
Sections 423 and 424(d) of the Code.
SECTION 4. METHOD OF PARTICIPATION
The periods December 1 to May 31 and June 1 to November 30 of each
year will be termed "Option Periods." The first Option period under
the Plan will be the period December 1, 1995 to May 31, 1996. Each
person who will be an Eligible Employee on the first day of any
Option Period may elect to participate in the Plan by executing and
delivering, at least 15 days prior to such day, a payroll deduction
authorization in accordance with Section 5. Such Employee will
thereby become a participant ("Participant") on the first day of
such Option Period and will remain a Participant until his
participation is terminated as provided in the Plan.
SECTION 5. PAYROLL DEDUCTION
The payroll deduction authorization will request withholding at a
rate (in whole percentages) of not less than 2% nor more than 10%
from the Participant's Compensation by means of substantially equal
payroll deductions over the Option Period from payroll periods
ending in the Option Period. For purposes of the Plan,
"Compensation" will mean all compensation paid to the Participant by
the Company and currently includible in his income, including
bonuses, commissions, and other amounts includible in the definition
of compensation provided in the Treasury Regulations promulgated
under Section 415 of the Code, plus any amount that would be so
included but for the fact that is was contributed to a qualified
plan pursuant to an elective deferral under Section 401 (k) of the
Code, but not including payments under stock option plans and other
employee benefit plans or any other amounts excluded from the
definition of compensation provided in the Treasury Regulations
under Section 415 of the Code. A Participant may change the
withholding rate of his payroll deduction authorization by written
notice delivered to Cabletron at least 15 days prior to the first
day of the Option Period as to which the change is to be effective.
All amounts withheld in accordance with a Participant's payroll
deduction authorization will be credited to a withholding account
for such Participant.
SECTION 6. GRANT OPTIONS
Each person who is Participant on the first day of an Option Period
will as of such day be granted an Option for such Period. Such
Option will be for the number of whole shares of Stock to be
determined by dividing (i) the balance in the Participant's
withholding account on the last day of the Option Period, by (ii)
the purchase price per share of the Stock determined under Section
7. Cabletron will reduce, on a substantially proportionate basis,
the number of shares of Stock receivable by each Participant upon
exercise of his Option for an Option Period in the event that the
number of shares then available under the Plan is otherwise
insufficient.
SECTION 7. PURCHASE PRICE
The purchase price of Stock issued pursuant to the exercise of an
Option will be 85% of the fair market value of the Stock at (a) the
time of grant of the Option or (b) the time at which the Option is
deemed exercised, whichever is less. Fair market value will mean
the Closing Price of the Stock. The "Closing Price" of the Stock on
any business day will be the last sale price, regular way, with
respect to such Stock, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way,
with respect to such Stock, in either case as reported in the
principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock
Exchange; or, if such Stock is not listed or admitted to trading on
the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which such
Stock is listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal
national securities exchanged on which such Stock is listed or
admitted to trading; or if such Stock is not listed or admitted to
trading, the last quoted price with respect to such Stock, or, if
not so quoted, the average of the high bid and low asked prices in
the over-the-counter market with respect to such Stock, as reported
by the National Association of Securities Dealers, Inc. Automated
Quotation System or such other similar system then in use; or, if on
any such date such Stock is not quoted by any such organization, the
average of the closing bid and asking prices with respect to such
Stock, as furnished by a professional market maker making a market
in such Stock selected by the Board of Directors in good faith; or,
if no such market maker is available, the fair market value of such
Stock as of such day as determined in good faith by the Board of
Directors.
SECTION 8. EXERCISE OF OPTIONS
If any Employee is a Participant in the Plan on the last business
day of an Option Period, he will be deemed to have exercised the
Option granted to him for that period. Upon such exercise,
Cabletron will apply the balance of the Participant's withholding
account (but in no event more than the Adjusted Amount, as
hereinafter defined) to the purchase of the number of whole shares
of Stock determined under Section 6 and as soon as practicable
thereafter will issue and deliver certificates for said shares to
the Participant and will return to him the balance, if any, of his
withholding account in excess of the total purchase price of the
shares so issued; provided, that if the balance left in the account
consists solely of an amount equal to the value of a fractional
share it will be retained in the Account and carried over to the
next Period. No fractional shares will be issued hereunder. For
purposes of the Plan the term "Adjusted Amount" will mean, for any
Option Period, the Adjusted Amount for the immediately preceding
Option Period increased by a factor reflecting the increase in the
Consumer Price Index for All Urban Consumers, as determined by the
Board of Directors or its delegate; for the first Option Period
commencing December 1, 1995, the Adjusted Amount will be $1,904.
Notwithstanding anything herein to the contrary, Cabletron's
obligation to issue and deliver shares of Stock under the Plan will
be subject to the approval required or any governmental authority in
connection with the authorization, issuance, sale or transfer of
said shares, to any requirements of any national securities exchange
applicable thereto, and to compliance by Cabletron with other
applicable legal requirements in effect from time to time.
SECTION 9. INTEREST
No interest will be payable on withholding accounts.
SECTION 10. CANCELLATION AND WITHDRAWAL
A participant who holds an Option under the Plan may at any time
prior to exercise thereof under Section 8 cancel all (but not less
than all) of his Options by written notice delivered to the Company.
Upon such cancellation, the balance in his withholding account will
be returned to him.
A participant may terminate his payroll deduction authorization as
of any date by written notice delivered to the Company and will
thereby cease to be a Participant as of such date. Any participant
who voluntarily terminates his payroll deduction authorization prior
to the last business day of an option period will be deemed to have
cancelled his Option.
SECTION 11. TERMINATION OF EMPLOYMENT
Subject to section 12, upon the termination of the Participant's
service with the Company for any reason, he will cease to be a
Participant, and any Option held by him under the Plan will be
deemed cancelled, the balance of his withholding account will be
returned to him, and he will have no further rights under the Plan.
SECTION 12. DEATH OF PARTICIPANT
A Participant may file a written designation of beneficiary
specifying who is to receive any stock and/or cash credited to the
Participant under the Plan in the event of the Participant's death,
which designation will also provide for the election by the
Participant of either (i) cancellation of the Participant's Option
upon his death, as provided in Section 10 or (ii) application as of
the last day of the Option Period of the balance of the deceased
Participant's withholding account at the time of the death of the
exercise of his Option, pursuant to Section 8 of the Plan. In the
absence of a valid election otherwise, the death of a Participant
will be deemed to effect a cancellation of his Option. A
designation of beneficiary and election may be changed by the
Participant at any time, by written notice. In the event of the
death of a Participant and receipt by Cabletron of proof of the
identity and existence at the Participant's death of a beneficiary
validly designated by him under the Plan, Cabletron will deliver
such stock and/or cash to which the beneficiary is entitled under
the Plan to such beneficiary. In the event of the death of a
Participant and in the absence of a beneficiary validly designated
under the Plan who is living at the time of such Participant's
death, Cabletron will deliver such stock and/or cash to the executor
or administrator of the estate of the Participant, if Cabletron is
able to identify such executor or administrator. If Cabletron is
unable to identify such executor or administrator, Cabletron, in its
discretion, may deliver such stock and/or cash to the spouse or to
any one or more dependents of a Participant as Cabletron may
determine. No beneficialy will, prior to the death of the
Participant by whom he has been designated, acquire any interest in
the stock or cash credited to the Participant under the Plan.
SECTION 13. PARTICIPANT'S RIGHTS NOT TRANSFERABLE
All Participants granted Options under the Plan will have the same
rights and privileges, and each Participant's rights and privileges
under any Option granted under the Plan will be exercisable during
his lifetime only by him, and will not be sold, pledged, assigned,
or transferred in any manner. In the event any Participant violates
the terms of this Section, any Options held my him may be terminated
by the Company and upon return to the Participant of the balance of
his withholding account, all his rights under the Plan will
terminate.
SECTION 14. EMPLOYMENT RIGHTS
Nothing contained in the provisions of the Plan will be construed to
give to any Employee the right to be retained in the employ of the
Company or to interfere with the right of the Company to discharge
any Employee at any time.
SECTION 15. CHANGE IN CAPITALIZATION
In the event of any change in the outstanding Stock of Cabletron by
reason of a stock divided, split-up, recapitalization, merger,
consolidation, reorganization, or other capital change, the
aggregate number of shares available under the Plan, the number of
shares under Options granted but not exercised, and the Option price
will be appropriately adjusted.
SECTION 16. ADMINISTRATION OF PLAN
The Plan will be administered by the Board of Directors, which will
have the right to determine any questions which may arise regarding
the interpretation and application of the provisions of the Plan and
to make, administer, and interpret such rules and regulations as it
will deem necessary or advisable.
SECTION 17. AMENDMENT AND TERMINATION OF PLAN
Cabletron reserves the right at any time or times to amend the Plan
to any extent and in any manner it may deem advisable by vote of the
Board of Directors; provided, however, that any amendment relating
to the aggregate number of shares which may be issued under the Plan
(other than an adjustment provided for in Section 15) or to the
Employees (or class of Employees) eligible to receive Options under
the Plan will have no force or effect unless it will have been
approved by the shareholders within twelve months before or after
its adoption.
The Plan may be suspended or terminated at any time by the Board of
Directors, but no such suspension or termination will adversely
affect the rights and privileges of holders of the outstanding
Options. The Plan will terminate in any case when all or
substantially all of the Stock reserved for the purposes of the Plan
has been purchased.
SECTION 18. APPROVAL OF SHAREHOLDERS
The Plan will be subject to the approval of the shareholders of
Cabletron secured within twelve months before or after the date the
Plan is adopted by the Board of Directors.
EXHIBIT 11
CABLETRON SYSTEMS, INC. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
For the period ended August 31, 1995 and 1994
(in thousands, except per share amount)
(unaudited)
Three Months Six Months
Ended Ended
August 31, August 31,
1995 1994 1995 1994
Net Income Per Common Share(non-dilutive)
Net income $52,766 $38,465 $101,066 $74,625
Weighted average common shares
outstanding 71,692 71,443 71,596 71,425
Reported net income per common share $0.74 $0.54 $1.41 $1.04
Net Income Per Common Share(full dilution)
Net income $52,766 $38,465 $101,066 $74,625
Average common shares outstanding 71,692 71,443 71,596 71,425
Add: additional common shares upon
exercise of stock options, net of
purchase of treasury stock 1,220 1,138 1,178 1,138
Adjusted average common shares
outstanding 72,912 72,581 72,774 72,563
Net income per common share
(full dilution) $0.72 $0.53 $1.39 $1.03
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