<PAGE> 1
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 APRIL 28, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition to
period from
---------------- ----------------
Commission file number 0-18225
CISCO SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
California 77-0059951
(State or other jurisdiction of (I.R.S. Employer
incorporation or Identification Number)
organization)
170 West Tasman Drive
San Jose, California 95134
(Address of principal executive office and zip code)
(408) 526-4000
(Registrant's telephone number, including area code)
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 filing requirements for the past 90 days.
YES X NO
--- ---
As of June 3, 1996 571,274,426 shares of the Registrant's common stock were
outstanding.
<PAGE> 2
CISCO SYSTEMS, INC.
FORM 10-Q FOR THE QUARTER ENDED APRIL 28, 1996
INDEX
Page
Facing sheet 1
Index 2
Part I. Financial information
Item 1. a) Consolidated balance sheets at April 28, 1996
and July 30, 1995 3
b) Consolidated statements of operations for the
three and nine month periods ended April 28,
1996 and April 30, 1995 4
c) Consolidated statements of cash flows for the
nine month periods ended April 28, 1996 and
April 30, 1995 5
d) Notes to consolidated financial statements 6
Item 2. Management's discussion and analysis of financial
condition and results of operations 8
Part II. Other information 13
Signature 14
Exhibits Exhibit 11.01, Computation of net income per share 15
Exhibit 27, Financial Data Schedule
2
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CISCO SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
April 28, July 30,
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 188,583 $ 204,846
Short-term investments 479,503 234,681
Accounts receivable, net of allowance for doubtful
accounts of $17,997 at April 28, 1996 and
$13,305 at July 30, 1995 529,687 384,242
Inventories 313,855 71,160
Deferred income taxes 65,279 75,297
Prepaid expenses and other current assets 61,292 25,743
----------- -----------
Total current assets 1,638,199 995,969
Investments 758,753 403,855
Restricted investments 211,594 173,073
Property and equipment, net 229,604 136,635
Other assets 55,527 47,747
----------- -----------
Total assets $ 2,893,677 $ 1,757,279
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 164,368 $ 45,205
Income taxes payable 128,315 71,583
Accrued payroll and related expenses 160,167 84,695
Other accrued liabilities and deferred revenue 204,221 136,273
----------- -----------
Total current liabilities 657,071 337,756
Minority interest 41,253 40,792
Shareholders' equity:
Preferred stock, no par value, 5,000 shares authorized;
none issued or outstanding at April 28, 1996
and July 30, 1995
Common stock, no par value, 1,200,000 shares
authorized; 569,335 shares issued and outstanding at
April 28, 1996 and 544,492 at July 30, 1995 610,738 362,292
Retained earnings 1,420,311 959,657
Unrealized gains on marketable securities 168,337 50,933
Cumulative translation adjustments (4,033) 5,849
----------- -----------
Total shareholders' equity 2,195,353 1,378,731
------------ -----------
Total liabilities and shareholders' equity $ 2,893,677 $ 1,757,279
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per-share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------------------------
Apr. 28, Apr. 30, Apr. 28, Apr. 30,
1996 1995 1996 1995
--------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 985,147 $ 509,910 $2,521,820 $1,357,732
Cost of sales 338,782 165,522 850,782 441,695
---------- ---------- ---------- ----------
Gross margin 646,365 344,388 1,671,038 916,037
Operating expenses:
Research and development 89,277 43,992 225,404 112,158
Sales and marketing 169,817 88,868 445,723 235,644
General and administrative 34,886 20,652 89,448 51,612
Purchased research and development 95,760
---------- ---------- ---------- ----------
Total operating expenses 293,980 153,512 760,575 495,174
---------- ---------- ---------- ----------
Operating income 352,385 190,876 910,463 420,863
Interest and other income, net 15,103 10,785 41,180 26,371
---------- ---------- ---------- ----------
Income before provision for income taxes 367,488 201,661 951,643 447,234
Provision for income taxes 137,808 76,631 356,866 169,949
---------- ---------- ---------- ----------
Net income $ 229,680 $ 125,030 $ 594,777 $ 277,285
========== ========== ========== ==========
Net income per share $ .39 $ .22 $ 1.02 $ .50
========== ========== ========= ==========
Shares used in per-share calculation 588,616 557,744 583,575 551,437
========== ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------
April 28, April 30,
1996 1995
---------- ----------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 594,777 $ 277,285
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 65,330 42,132
Deferred income taxes (31,450) (54,094)
Change in operating assets and liabilities:
Accounts receivable (145,413) (115,157)
Inventories (242,695) (24,884)
Prepaid expenses and other current assets (35,549) (5,605)
Income taxes payable 172,246 40,927
Accounts payable 119,065 33,379
Accrued payroll and related expenses 75,359 29,968
Other accrued liabilities 51,584 35,093
---------- ----------
Total adjustments 28,477 (18,241)
---------- ----------
Net cash provided by operating activities 623,254 259,044
---------- ----------
Cash flows from investing activities:
Purchases of short-term investments (429,840) (280,725)
Proceeds from sales of short-term investments 200,607 115,512
Maturities of short-term investments 200,110 85,505
Purchases of investments (574,335) (206,581)
Proceeds from sales of investments 187,433 155,740
Purchases of restricted investments (140,754)
Proceeds from sales of restricted investments 59,915
Maturities of restricted investments 45,515
Acquisition of property and equipment (151,589) (80,498)
Acquisition of business, net of cash acquired and
purchased research and development (17,920)
Other 21,726 13,136
--------- -----------
Net cash used by investing activities (581,212) (215,831)
--------- -----------
Cash flows from financing activities:
Issuance of common stock 67,187 28,891
Repurchase of common stock (115,610) (67,325)
Proceeds from sale of subsidiary stock 40,548
Other (9,882) 8,116
--------- -----------
Net cash (used in) provided by financing
activities (58,305) 10,230
--------- -----------
Net (decrease) increase in cash and equivalents (16,263) 53,443
Cash and equivalents, beginning of period 204,846 53,567
--------- -----------
Cash and equivalents, end of period $ 188,583 $ 107,010
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year
The Company's fiscal year is the 52 or 53 weeks ending on the last Sunday in
July. Fiscal years 1996 and 1995 are both 52 week years.
Basis of Presentation
The consolidated balance sheet as of April 28, 1996, and the consolidated
statements of operations and cash flows for the periods ended April 28, 1996 and
April 30, 1995 have been prepared by the Company, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. However, the
Company believes that the disclosures are adequate to make the information
presented not misleading. These consolidated financial statements should be read
in conjunction with the financial statements and the notes thereto included in
the Company's Annual Report on Form 10-K for the year ended July 30, 1995.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position at
April 28, 1996, and results of operations, and cash flows for the three and nine
month periods ended April 28, 1996 and April 30, 1995, have been made. The
results of operations for the period ended April 28, 1996 are not necessarily
indicative of the operating results for the full year.
The July 30, 1995 balance sheet was derived from audited financial statements,
but does not include all disclosures required by generally accepted accounting
principles.
Computation of Net Income Per Share
Net income per common share is computed using the weighted average number of
common and dilutive common equivalent shares outstanding during the period.
Dilutive common equivalent shares consist of stock options.
Recent Accounting Pronouncements
During October 1995, the Financial Accounting Standards Board issued Statement
No. 123 (SFAS No. 123), "Accounting for Stock-Based Compensation." This
standard, which establishes a fair value based method of accounting for
stock-based compensation plans, also permits an election to continue following
the requirements of APB Opinion No. 25, "Accounting for Stock Issued to
Employees" with disclosures of pro forma net income and earnings per share under
the new method. The Company is required to adopt SFAS No. 123 by fiscal 1997,
and upon adoption will elect to continue to measure compensation cost for its
employee stock compensation plans using the intrinsic value-based
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method of accounting prescribed by APB Opinion No. 25. Pro forma disclosure of
net income and earnings per share will reflect the difference between
compensation cost included in net income and the related cost measured by the
fair-value based method defined in SFAS No. 123, including tax effects, that
would have been recognized in the consolidated statement of operations if the
fair value-based method had been used.
2. BUSINESS COMBINATIONS
In September 1995, the Company acquired Combinet Inc. ("Combinet"), a privately
held manufacturer of remote access networking products. The Company issued
approximately 3,500,000 shares of common stock for all the outstanding stock of
Combinet in a transaction accounted for as a pooling of interests. In addition,
the Company assumed options and warrants to purchase Combinet stock that remain
outstanding as options to purchase approximately 327,000 shares of the Company's
common stock.
Additionally, in September 1995, the Company acquired Internet Junction, Inc.
("Internet Junction"), a developer of Internet gateway software that connects
desktop users with the Internet. The Company issued 162,000 shares of stock for
the net assets of Internet Junction in a transaction accounted for as a
purchase. Accordingly, the results of operations of the acquired business and
the fair market values of the acquired assets and liabilities were included in
the Company's financial statements as of the acquisition date. Amounts allocated
to goodwill are being amortized on a straight-line basis over a four year
period.
In November 1995, the Company acquired Grand Junction Networks, Inc. ("Grand
Junction") a privately held manufacturer of Fast Ethernet (100BaseT) and
Ethernet desktop switching products. Under the terms of the agreement, the
Company issued approximately 9,180,000 shares of common stock for all the
outstanding stock of Grand Junction in a transaction accounted for as a pooling
of interests. The Company also assumed options to purchase Grand Junction stock
that remain outstanding as options to purchase approximately 615,000 shares of
the Company's common stock.
In December 1995, the Company acquired Network Translation, Inc. ("NTI") in a
transaction accounted for as a pooling of interests. NTI develops and sells
address translation and firewall products for use in accessing the Internet.
Financial terms of the transaction are not material to the Company's
consolidated operations and financial position.
In March 1996, the Company acquired TGV Software Inc. ("TGV"). Under the terms
of the agreement, two shares of the Company's common stock were exchanged for
every five outstanding shares of TGV common stock in a transaction accounted for
as a pooling of interests. Approximately 2,400,000 shares of common stock were
issued to acquire TGV. The Company also assumed options to purchase TGV stock
that remain outstanding as options to purchase approximately 508,000 shares of
the Company's common stock.
The historical operations of the above pooling transactions are not material to
the Company's consolidated operations and financial position individually and
when aggregated. Therefore, the Company's
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financial statements have not been restated. A pro forma summary is not
presented for Internet Junction, a purchase acquisition, as the historical
operations are not material to the Company's consolidated operations and
financial position.
On April 22, 1996, the Company announced the signing of an agreement to acquire
StrataCom, Inc.("StrataCom"). Under the terms of the agreement, between 1 and
1.22 shares of the Company's stock will be exchanged for each outstanding share
of StrataCom common stock in a transaction to be accounted for as a pooling of
interests. The exact number of shares of Cisco common stock to be exchanged will
depend on the market price of Cisco shares during a specified period preceding
the merger. The transaction had an approximate value of $4 billion at the date
of signing. The agreement is subject to receipt of certain government approvals
and approval by StrataCom shareholders and is expected to be consummated in July
1996.
3. SHAREHOLDERS' EQUITY
A two-for-one stock split of the Company's common stock was approved by the
Board of Directors on January 23, 1996 payable to shareholders of record on
February 2, 1996 and was effective February 16, 1996. Share and per-share data
for all periods presented have been adjusted to give effect to the two-for-one
stock split.
4. BALANCE SHEET DETAIL
(In thousands)
<TABLE>
<CAPTION>
Inventories: April 28, July 30,
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
Raw materials $ 160,905 $ 33,555
Work in process 77,817 16,913
Finished goods 56,835 9,373
Demonstration systems 18,298 11,319
----------- -----------
$ 313,855 $ 71,160
=========== ===========
</TABLE>
5. INCOME TAXES
The Company paid income taxes of $225.1 million for the nine months ended April
28, 1996 and $180.3 million for the nine months ended April 30, 1995. The
Company's income taxes currently payable for both federal and state purposes
have been reduced by the tax benefit from employee related stock option
transactions. This benefit totaled $115.5 million in the first nine months of
1996, and was credited directly to shareholders' equity.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net sales grew from $509.9 million in the third quarter of 1995 to $985.1
million in the third quarter of 1996. Net sales for the first nine months of
1995 were $1,357.7 million, compared to $2,521.8 million in the first nine
months of 1996. The 93.2% increase in net sales between the two three month
periods and the 85.7% increase in net sales between the two nine month periods
was primarily the result of increasing unit sales of the Cisco 2500 product
family, the Cisco 4500, and also reflects the market acceptance of new LAN
switching products such as the Catalyst 5000 and also high end routers,
8
<PAGE> 9
primarily the Cisco 7500 product family. These increases were partially offset
by decreasing unit sales of the Company's older product lines, consisting of the
AGS+, Cisco 4000, and the Cisco 7000. Sales to international customers increased
from 44.5% of net sales in the third quarter of 1995, to 51.0% for the third
quarter of 1996. International sales in the first nine months of 1995 were 42.3%
of net sales compared with 50.3% of net sales for the same period in 1996. These
increases reflect the Company's continued expansion into new geographic markets
and growth in existing European and Asian markets. Sales growth between the
second and third quarters of fiscal 1996 in Asia exceeded the growth in other
international areas.
Gross margins decreased from 67.5% in both the third quarter and the first nine
months of 1995 to 65.6% and 66.3% for the third quarter and the first nine
months of 1996, respectively. Gross margins were affected by several factors,
including higher material costs as a result of certain component shortages and
the continued shift in revenue mix to the Company's lower margin products
consisting primarily of products in the Company's Access and Workgroup business
units. The Company expects this trend of decreasing gross margins to continue in
the future, although quarterly fluctuations may occur due to certain factors
such as component availability, mix of products sold, manufacturing
efficiencies, software content, and warranty costs.
Research and development expenses increased $45.3 million from the third quarter
of 1995 to the third quarter of 1996, and increased $113.2 million between the
first nine months of 1995 and the first nine months of 1996. This represents an
increase from 8.6% to 9.1% of net sales in the quarter to quarter period and
from 8.3% to 8.9% of net sales for the first nine months of each fiscal year.
The increase reflects the Company's continued commitment to develop new
technologies internally, including the further development of its CiscoFusion
architecture; as well as the acquisition of technologies to bring a broad range
of innovative products to market in a timely fashion. A significant portion of
the increase was due to the addition of new personnel, primarily from hiring and
to a lesser extent through acquisitions, as well as higher material costs for
prototypes and depreciation on new equipment. All of the Company's research and
development costs have been expensed as incurred.
Sales and marketing expenses increased $80.9 million from the third quarter of
1995 to the third quarter of 1996, and $210.1 million from the first nine months
of 1995 to the same period of 1996. This represents a slight decrease from 17.4%
to 17.2% of net sales in the quarter to quarter period and an increase from
17.4% to 17.7% of net sales for the first nine months of each fiscal year. The
quarter to quarter and year to date dollar increases in these expenses resulted
from an increase in the size of the Company's direct sales force and related
commissions, additional marketing programs to support the launch of new products
such as the CiscoPro product line, the entry into new markets, both domestic and
international, and expanding distribution channels.
General and administrative expenses rose $14.2 million from the third quarter of
1995 to the third quarter of 1996. This represents a decrease from 4.1% to 3.5%
of net sales in the quarter to quarter period. These expenses increased $37.8
million for the first nine months of 1995 to
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the first nine months of 1996, representing a decrease from 3.8% to 3.5% of net
sales, respectively. The dollar increase in these expenses was due primarily to
increased personnel costs, costs associated with the structuring and integration
of the Company's various acquisitions (see note 2), as well as to the
amortization of goodwill associated with the acquisition of LightStream
Corporation in fiscal year 1995. The percentage decline reflects continued net
sales growth and management controls over discretionary spending.
During October 1995, the Financial Accounting Standards Board issued Statement
No. 123 (SFAS No. 123), "Accounting for Stock-Based Compensation." This
standard, which establishes a fair value based method of accounting for
stock-based compensation plans, also permits an election to continue following
the requirements of APB Opinion No. 25, "Accounting for Stock Issued to
Employees" with disclosures of pro forma net income and earnings per share under
the new method. The Company is required to adopt SFAS No. 123 by fiscal 1997,
and upon adoption will elect to continue to measure compensation cost for its
employee stock compensation plans using the intrinsic value-based method of
accounting prescribed by APB Opinion No. 25. Pro forma disclosure of net income
and earnings per share will reflect the difference between compensation cost
included in net income and the related cost measured by the fair-value based
method defined in SFAS No. 123, including tax effects, that would have been
recognized in the consolidated statement of operations if the fair value-based
method had been used.
Future Growth Subject to Risks
The Company's operating performance each quarter is subject to various risks and
uncertainties as discussed in the Company's Annual Report on Form 10-K for 1995,
and the Company's Registration Statement on Form S-4 filed on June 7, 1996. This
report on Form 10-Q should be read in conjunction with such Annual Report and
Form S-4, particularly "Other Risk Factors" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in the
Annual Report on Form 10-K and "Risk Factors" contained in Form S-4. The
Company's growth is dependent upon market growth and its ability to enhance its
existing products and introduce new products on a timely basis. The Company must
also maintain its ability to manage any such growth effectively. In particular,
this would include potential growth associated with the announced StrataCom
acquisition. The Company has not completed an acquisition and integration of
this size to date. This process could divert management's attention from normal
day to day operations of the business. Failure to manage growth effectively and
successfully integrate StrataCom could adversely affect the Company's business
and operating results. The Company's growth and ability to meet customer demand
also depend, in part, on its ability to obtain timely supplies of parts from its
vendors. While lead times for commodity components have improved recently, some
components, particularly proprietary ASIC's and other networking specific
components, continue to be in short supply. An inability to obtain these items
at reasonable prices could have a materially adverse effect on the Company's
growth and operating results.
Each year, with the exception of fiscal year 1995 and the first three quarters
of fiscal year 1996, the Company generally has had one quarter of a fiscal year
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when backlog has been reduced. Traditionally, it has been the third quarter.
While such a reduction did not occur in the past two fiscal years, such
reductions are extremely difficult to predict and may occur in the future. In
addition, in response to customer demand, the Company has, from time to time,
reduced its product manufacturing lead times which resulted in corresponding
reductions in order backlog. To the extent that backlog levels decline during
any particular period, it would result in more variability and less
predictability in the Company's quarter-to-quarter net sales and operating
results. Recently, however, the Company's backlog has been increasing and lead
times for products most affected by the increases have seen a corresponding
increase. In particular, in the quarter ended April 28, 1996, backlog of orders
increased. If manufacturing lead times are not reduced, the Company's customers
may cancel orders or not place further orders if shorter lead times are
available from other manufacturers.
The Company expects that gross margins may be adversely affected by increases in
material or labor costs, heightened price competition, changes in channels of
distribution or in the mix of products sold. In particular, the Company
broadened its product line by introducing its first network access product in
August 1992. Since that time, sales of these products, which are generally
lower-priced and carry lower gross margins than the Company's core products,
have increased more rapidly than the sales of the core products. The
introduction of the CiscoPro product line during the first quarter of fiscal
year 1996, as well as the increasing growth rates experienced in the switching
markets, may accelerate this trend. In addition, the growth in inventory in
recent quarters may result in future writedowns due to obsolescence if the
Company does not correctly anticipate market demand for certain products.
The Company also expects that its operating margins may decrease as it continues
to hire additional personnel and increases other operating expenses to support
its business. The results of operations for the first nine months of 1996 are
not necessarily indicative of results to be expected in future periods, and the
Company's operating results may be subject to quarterly fluctuations as a result
of a number of factors. These factors include the integration of people,
operations, and products from acquired businesses and technologies, especially
StrataCom; increased competition, which the Company expects; the overall trend
toward industry consolidation; the introduction and market acceptance of new
products, including high-speed switching and ATM technologies; variations in
sales channels, product costs, or mix of products sold; the timing of orders and
manufacturing lead times; and changes in general economic conditions, any of
which could have an adverse impact on operations and financial results.
Volatility of Stock Price
The Company's Common Stock has experienced substantial price volatility,
particularly as a result of variations between the Company's actual or
anticipated financial results and the published expectations of analysts and as
a result of announcements by the Company and its competitors. In addition, the
stock market has experienced extreme price and volume fluctuations that have
affected the market price of many technology companies in particular and that
have often been unrelated to the operating performance of these companies. These
broad market fluctuations, as well as general
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economic and political conditions, may adversely affect the market price of the
Company's Common Stock.
LIQUIDITY AND CAPITAL RESOURCES
Cash, short-term investments, and investments increased by $583.5 million from
July 30, 1995 to April 28, 1996, primarily as a result of cash generated by
operations and, to a lesser extent, the exercise of employee stock options. This
increase was partially offset by capital expenditures of approximately $151.6
million and by the repurchase of $115.6 million of common stock during this
time.
Accounts receivable increased 37.9% from July 30, 1995 to April 28, 1996,
primarily as a result of higher sales levels. Days sales outstanding in
receivables improved from 56 days at July 30, 1995 to 49 days at April 28, 1996.
Inventories increased 341.1% between July 30, 1995 and April 28, 1996 which was
a planned investment necessary to support the higher sales volumes and desired
manufacturing lead times, particularly on new products. As a result, inventory
turnover on an annualized basis decreased from 13.4 turns at July 30, 1995 to
5.9 turns at April 28, 1996.
Accounts payable increased 263.6% from July 30, 1995 to April 28, 1996 because
of increases in capital expenditures, operating expenses, and material purchases
to support the planned growth in sales volume. The 89.1% increase in accrued
payroll and related expenses can be attributed to an increase in personnel
during the nine month period. Other accrued liabilities increased by 49.9%,
primarily due to increases in deferred service contract revenues.
At April 28, 1996, the Company had a line of credit totaling $100.0 million,
which expires April 1998. There have been no borrowings under this agreement.
The Company has entered into certain lease arrangements in San Jose, California,
and Research Triangle Park, North Carolina, where it has established its
headquarters operations and certain research and development and customer
support activities, respectively. In connection with these transactions, the
Company has pledged $211.6 million of its investments as collateral for certain
obligations of the leases. The restricted investments balance will continue to
increase as the Company phases in operations at these lease sites.
Under the Company's ongoing stock repurchase program, shares are purchased
periodically to meet employee stock plan requirements. During the nine months
ended April 28, 1996, the Company purchased and reissued in the form of stock
options approximately 3.1 million shares for an aggregate price of $115.6
million. As of April 28, 1996, the Company was authorized to repurchase up to an
additional 6.8 million shares of its common stock in the open market or through
privately negotiated transactions. The Company's ability to repurchase shares
has been restricted, and is expected to continue to be restricted from time to
time by virtue of business combinations and limitations imposed under
pooling-of-interests accounting.
The Company's management believes that its current cash and equivalents,
short-term investments, line of credit, and cash generated from operations will
satisfy its expected working capital and capital expenditure requirements
through 1996.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11.01 Computation of net income per share
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed two reports on Form 8-K during the
quarter ended April 28, 1996. The dates of the
filings were April 2, 1996 and April 26, 1996. The
items reported on were the acquisition of TGV
Software, Inc., and the agreement to acquire
StrataCom, Inc., respectively.
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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.
Cisco Systems, Inc.
Date: June 10, 1996
By /s/ Larry R. Carter
--------------------------
Larry R. Carter, Vice President
Finance, and Chief Financial
Officer (Principal Financial and
Accounting Officer)
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EXHIBIT 11.01
COMPUTATION OF NET INCOME PER SHARE
IN ACCORDANCE WITH INTERPRETIVE RELEASE NO. 34-9083
(In thousands, except per-share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
-------------------- --------------------
Apr. 28, Apr. 30, Apr. 28, Apr. 30,
1996 1995 1996 1995
-------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Actual weighted average common shares
outstanding for the period 566,634 539,180 561,235 532,848
Weighted average shares assuming exercise of
employee stock options using average
market price 21,982 18,564 22,340 18,589
-------- -------- -------- --------
Shares used in per-share calculations 588,616 557,744 583,575 551,437
======== ======== ======== ========
Net income applicable to primary income per
share $229,680 $125,030 $594,777 $277,285
======== ======== ======== ========
Net income per share $ .39 $ .22 $ 1.02 $ .50
======== ======== ======== ========
FULLY DILUTED EARNINGS PER SHARE
Actual weighted average common shares
outstanding for the period 566,634 539,180 561,235 532,848
Weighted average shares assuming exercise of
employee stock options using the greater of
ending or average market price 23,671 19,683 25,806 19,614
-------- -------- -------- --------
Shares used in per-share calculations 590,305 558,863 587,041 552,462
======== ======== ======== ========
Net income applicable to fully diluted income
per share $229,680 $125,030 $594,777 $277,285
======== ======== ======== ========
Net income per share $ .39 $ .22 $ 1.01 $ .50
======== ======== ======== ========
</TABLE>
These calculations are submitted in accordance with Securities Exchange Act of
1934 Release No. 34-9083
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet, consolidated statement of operations and
consolidated statement of cash flows included in the Company's Form 10-Q for the
period ending April 28, 1996, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-28-1996
<PERIOD-START> JUL-31-1995
<PERIOD-END> APR-28-1995
<CASH> 188,583
<SECURITIES> 1,449,850
<RECEIVABLES> 547,684
<ALLOWANCES> 17,997
<INVENTORY> 313,855
<CURRENT-ASSETS> 1,638,199
<PP&E> 394,519
<DEPRECIATION> 164,915
<TOTAL-ASSETS> 2,893,677
<CURRENT-LIABILITIES> 657,071
<BONDS> 0
0
0
<COMMON> 610,738
<OTHER-SE> 1,584,615
<TOTAL-LIABILITY-AND-EQUITY> 2,893,677
<SALES> 2,521,820
<TOTAL-REVENUES> 2,521,820
<CGS> 850,782
<TOTAL-COSTS> 1,611,357
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 951,643
<INCOME-TAX> 356,866
<INCOME-CONTINUING> 594,777
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 594,777
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 0
</TABLE>
