Cabletron Systems Announces Fourth Quarter and Fiscal Year Results in
Line With Previously Announced Estimates - Business Wire - March 23, 1998 16:29
ROCHESTER, N.H.--(BUSINESS WIRE)--March 23, 1998--Cabletron Systems, Inc. (NYSE:CS) today reported financial results
for the fourth quarter and fiscal year ended February 28, 1998.
Net sales for the fourth quarter were $311.5 million as compared with $380.6 million in the fourth quarter of fiscal 1997. Net loss for
the quarter was $6.3 million, or ($0.04) per share on a diluted basis, exclusive of one-time charges of $257.0 million (net of tax) or
$1.63 per share, compared to net income of $72.6 million or $0.45 per share on a diluted basis, exclusive of one-time charges of $12.2
million (net of tax) or $0.08 per share on a diluted basis, in the comparable period last year.
Fourth quarter 1998 charges are broken out as follows: a realignment charge of $35.5 million ($21.8 million or $0.14 per share on a
diluted basis, net of tax) and one-time charges related to the completion of the Digital Network Products Business acquisition during
the period for in process research and development of $325 million ($200.0 million, or $1.26 per share on a diluted basis, net of tax)
and also for one-time acquisition related expenses of $57.2 million ($35.2 million, or $0.22 per share on a diluted basis, net of tax).
Including these items, the Company reported a net loss for the fourth quarter of fiscal 1998 of $263.4 million, or $1.67 per share on a
diluted basis, compared with net income of $60.3 million, or $.38 per share on a diluted basis, in last year's fourth quarter.
For the full fiscal year, net sales were $1,377 million as compared with $1,407 million in fiscal 1997. Excluding one-time charges, net
income was $130 million, or $0.82 per share on a diluted basis. In fiscal 1997, Cabletron reported net income of $261 million, or $1.64
per share on a diluted basis before one-time charges. Fiscal 1998 net loss, including the one-time charges, was $127.1 million, or
$0.81 per share on a diluted basis versus net income of $222.1 million, or $1.40 per share on a diluted basis, last year.
As announced by the Company on March 2, 1998, fourth quarter results were primarily impacted by a domestic order shortfall,
softness in the federal government business and weakness in Asia Pacific and Latin America. Additionally, the Company
experienced operating and gross margin pressures due to lower overall sales levels, inventory related charges and product pricing and
product mix impacts.
During the quarter, the Company completed its acquisition of the Digital Network Products Business on February 7, 1998,
significantly increasing Cabletron's presence in the enterprise and service provider markets. Additionally, Cabletron signed a definitive
agreement during the fourth quarter to acquire Yago Systems, a leader in switch routers. The Company announced the completion of
the Yago acquisition on March 17, 1998.
"I am confident that we are currently building a foundation that will allow Cabletron to achieve its growth objectives, while
simultaneously adjusting for market driven challenges, although I am disappointed with our results for the year" commented Don
Reed, President and Chief Executive Officer. "Our strategy of providing complete solution packages, not just stand-alone products,
combined with our new channel initiatives and international focus, positions Cabletron for improved performance in fiscal 1999.
Additionally, we expect to further leverage both the Digital and Yago Systems acquisitions and to benefit from the resulting expansion
in our product lines and distribution capabilities."
About Cabletron Systems
Cabletron Systems is a recognized leader in providing high- performance Intranet and Internet solutions, including LAN and WAN
switches, remote access products and advanced network and systems management software. Under its Synthesis product
framework, Cabletron markets products to businesses and customers throughout the world for linking and managing enterprise-wide
networks. The Company employs 6,900 people worldwide.
The statements in this press release regarding the anticipated benefits of Cabletron's Digital NPB and Yago acquisitions and the
intended benefits from the Company's recent management restructuring, as well as certain other statements, constitute forward
looking information, and actual results could differ materially. Among the factors that could cause actual results to differ include
competitive conditions, adverse margin impact of competition and lower margin reseller sales, difficulties in assimilating the
operations, technologies and products of the acquired companies, risks of entering new markets and distribution channels, and the
temporary disruption of the Company's business activities that may result from the dedication of management and other resources
required to accomplish the acquisitions and the management restructuring. For a detailed discussion of the risks and uncertainties
related to the Company's business, please refer to the Company's Annual Report on Form 10-K for fiscal 1997, the Company's
subsequent reports on Form 10-Q and the Company's registration statement on Form S-4 originally filed on February 11, 1998.
CABLETRON SYSTEMS, INC.
Consolidated Condensed Statements of Operations (three months and
twelve months ended February 28, 1998 and February 28, 1997)
(in thousands, except per share data)
Fourth Quarter Twelve Months
1998 1997 1998 1997
Net sales $ 311,522 $380,555 $1,377,330 $1,406,552
Cost of sales 168,943 155,800 645,790 575,107
Gross profit 142,579 224,755 731,540 831,445
Operating expenses:
R & D 47,194 42,230 181,777 161,674
S G & A 109,310 77,085 371,159 286,469
Nonrecurring items 417,685 20,000 417,685 63,024
Operating income (loss) (431,610) 85,440 (239,081) 320,278
Interest income 4,309 5,168 18,578 19,422
Income (loss) from
operations before
income taxes (427,301) 90,608 (220,503) 339,700
Income tax expense
(benefit) (163,930) 30,268 (93,441) 117,575
Net income (loss) ($ 263,371) $ 60,340 ($ 127,062) $ 221,125
Net income (loss) per
share ($ 1.67) $ 0.38 ($ 0.81) $ 1.40
Weighted average common
shares outstanding 158,172 159,852 157,686 158,931
Note: Included in the 1998 fourth quarter and year end results are
$382.2 million ($235.2 million net of tax) of nonrecurring items
related to the acquisition of Digital's Network Products Group in
February 1998 and a fourth quarter restructuring charge of $35.5
million ($21.8 million net of tax). Excluding these one-time expenses,
fourth quarter net loss would have been $6.3 million or $0.04 per
share. Excluding these one-time expenses fiscal 1998 net income would
have been $130.0 million or $0.82 per share.
Note: Included in the 1997 fourth quarter results are $20.0 million
($12.2 million net of tax) of nonrecurring items related to the
Netlink and OASys. Excluding these one-time charges, fourth quarter
net income would have been $72.6 million or $0.45 per share. Included
in the 1997 year end results are $63.0 million ($39.9 million net of
tax) of nonrecurring items related to the acquisitions of Netlink,
Zeitnet, Network Express and OASys. Excluding these one-time charges
net income would have been $261.0 million or $1.64 per share.
CABLETRON SYSTEMS, INC.
Consolidated Condensed Balance Sheets (February 28, 1998 and
February 28, 1997)
(in thousands)
2/28/98 2/28/97
Assets
Cash & short-term investments $ 324,057 $ 380,224
Accounts receivable (net) 241,181 219,896
Inventories 309,667 197,438
Deferred taxes 81,161 57,107
Other assets 78,084 34,691
Total current assets 1,034,150 889,356
Investments 123,272 188,081
Property, plant & equipment (net) 244,730 198,557
Intangible Assets 36,867 1,234
Deferred taxes 167,308 29,627
Total assets $1,606,327 $1,306,855
Liabilities & Stockholders' Equity
Accounts payable $ 79,969 $ 68,604
Accrued liabilities 389,732 135,208
Income taxes payable -- 10,442
Total current liabilities 469,701 214,254
Long-term obligations 135,549 --
Deferred taxes 12,057 11,103
Total liabilities 617,307 225,357
Stockholders' equity 989,020 1,081,498
Total liabilities & stockholders' equity $1,606,327 $1,306,855
CONTACT: Cabletron Systems
Jim Caldwell, 603/337-4225
jcaldwell@ctron.com
or
Darren Orzechowski, 603/337-1282
darreno@ctron.com
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