CABLETRON SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended February 28, 1997, February 29, 1996 and
February 28, 1995
(in thousands)
1997 1996 1995
---- ---- ----
Cash flows from operating activities:
Net income $222,125 $144,485 $156,574
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 49,704 32,739 31,144
Provision for losses on accounts
receivable 9,140 435 187
Loss on disposal of property, plant and
equipment 87 93 174
Deferred income taxes (22,933) (38,766) (4,434)
Changes in assets and liabilities:
Accounts receivable (74,925) (55,795) (29,623)
Inventories (37,669) (55,597) (23,168)
Prepaid expenses and other assets (1,709) (18,947) (3,427)
Accounts payable and accrued expenses 52,661 68,766 11,873
Income taxes payable (7,653) 3,705 10,476
-------- -------- --------
Net cash provided by operating
activities 188,828 81,118 149,776
-------- -------- ---------
Cash flows from investing activities:
Capital expenditures (94,368) (67,760) (66,116)
Purchase of available-for-sale securities (203,667) (124,968) (71,598)
Purchase of held-to-maturity securities (247,855) (205,852) (282,712)
Sales/maturities of marketable securities 424,308 236,393 323,682
-------- -------- --------
Net cash used in investing
activities (121,582) (162,187) (96,744)
-------- -------- --------
Cash flows from financing activities:
Repayment of notes receivable from
stockholders 151 218 131
Repurchase of common stock --- (1,173) (13,070)
Tax benefit of options exercised 8,302 7,215 5,712
Proceeds from sale of common stock 8,577 41,774 8,408
Common stock issued to employee stock
purchase plan 6,208 3,323 2,287
Proceeds from exercise of stock options 18,022 17,222 4,887
-------- -------- --------
Net cash provided by financing
activities 41,260 68,579 8,355
-------- -------- --------
Effect of exchange rate changes on cash 220 159 712
-------- -------- --------
Net (decrease) increase in cash and cash
equivalents 108,726 (12,331) 62,099
Cash and cash equivalents, beginning of
year 106,102 118,433 56,334
-------- -------- --------
Cash and cash equivalents, end of year $214,828 $106,102 $118,433
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Cash paid during year for:
Income taxes $132,291 $142,733 $ 68,420
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See accompanying notes to consolidated financial statements.
<PAGE>
Note (9) Income Taxes
Income before income taxes is summarized as follows:
(in thousands) 1997 1996 1995
---- ---- ----
Total US domestic income $313,017 $173,515 $202,620
Total foreign subsidiaries income 26,683 51,311 39,968
-------- -------- --------
Total income before income taxes $339,700 $224,826 $242,588
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Currently payable:
Federal $117,546 $92,109 $63,944
State 21,962 20,807 19,286
Foreign 1,000 11,519 7,218
Deferred tax benefit (22,933) (44,094) (4,434)
-------- -------- -------
Total tax expense $117,575 $80,341 $86,014
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The following is a reconciliation of the effective tax rates to the statutory
federal tax rate:
1997 1996 1995
---- ---- ----
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income tax (net of federal
tax benefit) 3.6 3.8 4.7
Exempt income of foreign sales
corporation, net of tax (0.7) (1.1) (0.7)
Research and experimentation credit (0.7) --- (1.1)
Foreign operations (2.7) (1.6) (2.7)
Other 0.1 (0.4) 0.3
---- ----- ----
34.6% 35.7% 35.5%
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The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at February 28, 1997 and
February 29, 1996 are presented below:
(in thousands) 1997 1996
---- ----
Deferred tax assets:
Accounts receivable $ 4,996 $ 2,019
Inventories 33,859 28,225
Other reserves and accruals 24,149 9,416
Acquired research and
development 29,262 26,322
Domestic net operating loss
carryforwards 27,213 26,219
Foreign net operating loss
carryforwards 5,636 3,268
------- -------
Total gross deferred tax assets 125,115 95,550
Less valuation allowance (38,381) (33,762)
------- ------
Net deferred tax assets 86,734 61,788
------- ------
Deferred tax liabilities:
Property, plant and equipment (11,033) (9,088)
------- -------
Total gross deferred
liabilities (11,033) (9,088)
------- -------
Net deferred tax assets $75,631 $52,700
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