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FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended July 26,1997
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from ________ to ________
Commission file number 0-18225
CISCO SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
California 77-0059951
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
170 West Tasman Drive
San Jose, California 95134
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 526-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
None Nasdaq National Market
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
- --------------------------------------------------------------------------------
(Title of class)
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[ ]
As of September 15, 1997, the approximate aggregate market value of voting stock
held by non-affiliates of the registrant was $46,175,832,500 (based upon the
closing price for shares of the Registrant's Common Stock as reported by the
National Market System of the National Association of Securities Dealers
Automated Quotation System on that date). Shares of Common Stock held by each
officer, director, and holder of 5% or more of the outstanding Common Stock have
been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes. As of September 15, 1997, 672,119,249 shares of registrant's
common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of Annual Report to Shareholders for fiscal year ended July 26,
1997.
(2) Portions of the Registrant's Proxy Statement related to the 1997 Annual
Meeting of Shareholders, to be held on November 13, 1997, are
incorporated by reference into Part III of this Annual Report on 10-K
where indicated.
The table of exhibits filed appears at page 23.
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PART I
ITEM 1. BUSINESS
GENERAL
Certain Statements contained in this Annual Report on Form 10-K, including,
without limitation, statements containing the words "believes", "anticipates",
"estimates", "expects", and words of similar import, constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Readers are referred to the "Financial Risk Management" and "Future Growth
Subject to Risks" sections, of Cisco System Inc.'s 1997 Annual Report to
Shareholders, which is hereby incorporated by reference, as well as the
"Acquisition, Investment and Alliances", "Competition", "Research and
Development", "Manufacturing", "Patents, Intellectual Property and Licensing"
and "Other Risk Factors" sections contained herein, which identify important
risk factors that could cause actual results to differ from those contained in
the forward looking statements.
Cisco Systems, Inc. and its subsidiaries ("Cisco", or the "Company") operate in
one industry segment providing networking solutions that connect computing
devices and computer networks. These allow people to access or transfer
information without regard to differences in time, place or type of computer
system.
Networking is a multi-billion dollar global market whose growth is spurred by
the increasingly critical role that electronic information plays in almost every
facet of life today. While computer networking for many years has been a highly
complex science employed primarily by large enterprises, the growth in use of
the global Internet has proved beneficial to organizations of all sizes, as well
as individuals, worldwide.
The Company markets its products through its direct sales force, distributors,
value-added resellers and system integrators. This multiple-channel approach
allows customers to select the channel that addresses their specific needs and
provides the Company with broad coverage of worldwide markets.
Cisco was incorporated in California in December 1984. The Company's executive
offices are located at 170 West Tasman Drive, San Jose, California 95134, and
its telephone number at that location is (408)526-4000.
END-TO-END NETWORKING SOLUTIONS
Cisco's strategy is to provide end-to-end networking solutions that customers
can use to a) build a unified information infrastructure of their own, or b) to
connect to someone else's network. An end-to-end networking solution provides a
common technical architecture that allows network services to be consistently
provided to all users on the network.
Cisco's products are used individually or in combination to connect computing
devices to networks, or computer networks with each other - whether they are
within a building, across a campus or around the world. The Company's breadth of
product offerings enables it to configure
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hardware and software features to match customer needs. Many of the Company's
products are expandable, offering customers the option to upgrade their networks
as their needs grow.
Cisco's product offerings fall into several categories:
Routing
Routing is a foundation technology for computer communications. Routers move
information from one network to another, applying intelligence in the process to
ensure that the information reaches its destination securely and in the fastest
way possible. Cisco offers a broad range of routers, including the Cisco 7000,
4000, 2500 and 1000 families, as well as the recently introduced Cisco 12000, or
Gigabit Switch Router (GSR).
Switching
Switching is another important networking technology, used in both local-area
networks (LANs) and wide-area networks (WANs). Cisco's switching solutions
employ all widely used switching technologies -- Ethernet, Token Ring and
Asynchronous Transfer Mode (ATM). Cisco's LAN switching products are contained
in the Catalyst(TM) family. WAN switching products include the Cisco
StrataCom(R) IGX and BPX families, and the Cisco 3800 series.
Access
Computing and communications today are conducted in many locations, not just at
a company's head office. Cisco's access solutions give groups and individuals
who are remotely located the same level of connectivity and information access
they would have if they were located at the company's head office. Asynchronous
and ISDN remote-access routers and dial-up access servers are used for
supporting telecommuters and mobile workers, for Internet access and
branch-office connectivity. The Company's access products include the AS5000
family of access servers; access routers such as the Cisco 4000, 2500, and 1000
families, as well as network security and management software.
SNA/LAN
Most large organizations have existing IBM computing systems that use the System
Network Architecture (SNA) networking method, as well as LANs based on open
network architectures (such as the TCP/IP protocol). Network managers with both
types of networks increasingly want to combine them into a single network that
leverages existing investments. The Company's CiscoBlue strategy provides a
roadmap for consolidating and managing SNA and non-SNA networks. It also enables
an IBM data center to be used in Internet/intranet applications.
Internet Appliances and Software
Cisco offers products that improve a network manager's ability to cope with a
number of challenges posed by the growing popularity of the Internet, such as
security, network traffic volume, and network address shortage. These products
include: the PIX Firewall, which prevents unauthorized access to a network; the
Micro Webserver, which facilitates the set up of Web sites; IP/TV software,
which transmits audio and video to desktop PCs; IPeXchange Internet Gateways,
which are designed to provide Novell NetWare customers in small and medium-sized
businesses with easy and secure connectivity to the Internet; and LocalDirector
and
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Distributed Director, which balance the load between multiple servers to enable
timely access and response to requests.
Cisco IOS Software
Cisco Internetwork Operating System (Cisco IOS(TM)) is the common platform that
transforms a network into a strategic asset and competitive advantage. Cisco IOS
technologies include a wide variety of features that provide the intelligence of
the Internet and of private networks. They are the unifying thread that connects
otherwise disparate hardware to build a seamless, efficient infrastructure which
facilitates network growth and the deployment of new applications, which in turn
enhances reliability, and interoperability, and lowers the cost of ownership.
The Cisco IOS software platform provides important network services and enables
networked applications. Cisco IOS network services fall into two categories.
Foundation Network Services are the building blocks of a robust network. They
include connectivity, security, scalability, reliability and management.
Enabling Network Services support the deployment of applications that take
advantage of the underlying network. Enabling Network services include such
areas as multimedia, quality of service(a network management and optimization
service) and voice.
Network Management
Cisco provides applications that centralize management, automate routine tasks,
and can be integrated into customers' existing network management environments.
The CiscoWorks software is a suite of standards-based applications that allow
users to manage their Cisco devices from a single integrated console. Cisco
Enterprise Accounting is a new family of powerful and easy-to-use enterprise
network management accounting and billing applications that help manage and
control the cost of owning corporate networks and Internet access. The NETSYS
Enterprise/Solver family of network intelligent management tools aids in
troubleshooting, managing, and network planning.
CUSTOMERS AND MARKETS
Networking needs are influenced by a number of factors, including the size of
the organization, number and types of computer systems, geographic locations,
and the applications requiring data communications. Cisco's customer base is not
concentrated in any particular industry and in each of the past five fiscal
years no single customer has accounted for ten percent or more of the Company's
net sales. For additional information regarding the Company's customers and
markets see Note 11, "Geographic Information and Major Customers," on page 49 of
the Company's 1997 Annual Report to Shareholders, which is incorporated by
reference herein.
Cisco's market strategy addresses three customer profiles:
Enterprise
Enterprise customers generally are large organizations with complex networking
needs, usually spanning multiple locations and types of computer systems.
Enterprise customers include corporations, government agencies, utilities and
educational institutions.
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Service Providers
These customers provide data communication services, including telecommunication
carriers, Internet Service Providers, cable companies, and wireless
communication providers.
Small/Medium Business
These customers have a need for data networks of their own, as well as
connection to the Internet and/or to business partners. However, these customers
generally have limited resources; therefore, the Company attempts to provide
products which are affordable as well as easy to install and use.
The Company's worldwide direct sales organization at September 20, 1997
consisted of approximately 3,500 individuals, including managers, sales
representatives, and technical support personnel. The Company has approximately
105 U.S. field sales offices providing coverage in the following metropolitan
areas: Atlanta, Boston, Chicago, Cincinnati, Cleveland, Dallas, Denver, Durham,
Honolulu, Houston, Indianapolis, Los Angeles, Miami, New Orleans, New York,
Orlando, Phoenix, Pittsburgh, Portland (Oregon), Princeton, Salt Lake City, San
Antonio, San Diego, San Francisco, San Jose, Seattle, St. Louis, and Washington,
D.C., among others.
The Company's international sales are currently being made through multiple
channels including approximately 90 international distributors and resellers
throughout the world. These international distributors provide system
installation, technical support, and follow-up services to end-customers.
Generally, the Company's international distributors have nonexclusive,
country-wide agreements. International sales through the various channels,
including the Company's subsidiaries, accounted for approximately 43.5% of total
sales in fiscal 1997, 48.2% in fiscal 1996, and 41.7% in fiscal 1995. Sales to
international customers and distributors generally have been made in United
States dollars. During fiscal 1997, the Company established its European
Operations Center (EOC). On an ongoing basis, substantially all European orders
will be fulfilled from the EOC.
The Company has sales support subsidiaries worldwide. New subsidiaries formed in
fiscal 1997 include Greece, India, Israel, Poland, Taiwan, and Turkey.
ACQUISITIONS, INVESTMENTS AND ALLIANCES
The end-to-end strategy pursued by Cisco requires a wide variety of
technologies, products and capabilities. Additionally, the pace of change in the
industry is very rapid. The combination of complexity and rapid change make it
difficult for one company, no matter how large, to develop all technological
solutions alone. Acquisitions, investments and alliances are tools used by the
Company to fill gaps in its offerings and enable it to deliver complete
solutions to its customers and prospects in target markets. Satisfying
customers' networking needs requires a constant monitoring of market and
technology trends, plus an ability to act quickly. Cisco has a four-part
approach to satisfy the need for new or enhanced networking products and
solutions. In order of preference, this approach is to: develop new technologies
and products internally; enter into joint-development efforts with other
companies; resell another company's product; and acquire all or part of another
company. Acquisitions involve numerous risks, including difficulties in
assimilation of the operations, technologies, and products of the acquired
companies; the risk of diverting management's attention from normal daily
operations of the business; risks of entering markets in which the company has
no or limited direct prior experience and where competitors in such markets have
stronger market positions; and the potential loss of key employees of the
acquired company. The company must also maintain its ability to manage any such
growth effectively. Failure to manage growth effectively and successfully
integrate acquisitions made by the company could adversely affect the Company's
business and operating results.
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Since 1993, the Company has acquired a number of companies. The Company expects
to make future acquisitions where it believes that it can acquire new products
and channels of distribution or otherwise rapidly enter new or emerging markets.
Mergers and acquisitions of high-technology companies are inherently risky, and
no assurance can be given that the Company's previous or future acquisitions
will be successful and will not adversely affect the Company's financial
condition or results of operations.
Each of the Company's acquisitions has furthered the Company's commitment to
providing an end-to-end solution. The Company now has a broad set of product
offerings and technologies, which include Ethernet, Token Ring, Asynchronous
Transfer Mode (ATM) switching, Synchronous Optical Network/Synchronous Digit
Hierarchy (SONET/SDH), xDSL, and also network management software solutions,
among others.
Minority Investments
The Company makes minority investments in companies whose technologies or
expertise appear strategic to Cisco's interests and merit monitoring, but where
there is not yet a compelling need to have those capabilities in house.
Strategic Alliances
The Company pursues strategic alliances with other industry leaders in areas
where collaboration can produce mutual benefits. The motivation for a strategic
alliance can include: technology exchange, product development, joint marketing
and sales, and new-market creation. Cisco has strategic alliances with
Microsoft, Intel, Hewlett-Packard, GTE, and Alcatel, among others.
BACKLOG
The Company's backlog on September 20, 1997 was approximately $442.9 million
compared with an approximate backlog of $292.3 million at September 21, 1996.
The Company includes in its backlog only orders confirmed with a purchase order
for products to be shipped within six months to customers with approved credit
status. Because of the generally short cycle between order and shipment, and
occasional customer changes in delivery schedules or cancellation of orders
(which are made without significant penalty), the Company does not believe that
its backlog, as of any particular date, is necessarily indicative of actual net
sales for any future period.
COMPETITION
Cisco competes in the networking market, providing solutions for Internet,
intranet, and extranet connectivity. The networking market is characterized by
rapid growth, technological change, and a
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convergence of technologies. These market factors represent both an opportunity
and a competitive threat to Cisco. The Company competes with numerous vendors in
each product category. Cisco expects that the overall number of vendors will
increase in these markets due to its attractive growth opportunities.
Cisco's traditional competitors include 3Com, Ascend, Bay Networks, Cabletron,
Fore, and IBM. As the Company focuses on new market opportunities, such as
transporting voice, video, and data traffic across the same network, it will
increasingly compete with large telecommunications equipment suppliers such as
Lucent, Ericsson and Nortel. Some of the Company's competitors compete across
all of Cisco's product lines, while others do not offer as wide a breadth of
networking solutions. Several of the Company's current and potential competitors
have greater financial, marketing and technical resources than the Company.
The principal competitive factors in the markets in which the Company presently
competes and may compete in the future are: price; performance; the ability to
provide end-to-end solutions and support; conformance to standards; the ability
to provide added value features such as security, reliability, and investment
protection; and market presence.
The Company also faces competition from customers it licenses technology to and
suppliers from whom it transfers technology. Networking's inherent nature is
such that the Company must compete, and at the same time cooperate, with these
companies. The Company's inability to effectively manage these complicated
relationships with customers and suppliers could have a material adverse effect
on the Company's business, operating results, and financial condition.
RESEARCH AND DEVELOPMENT
The Company is engaged in research and development efforts to develop customer
solutions for each of its three primary lines of business: Enterprise, Service
Provider, and Small/Medium Business. The Company focuses its product development
activities on networking products that are responsive to customer requirements
and that provide end-to-end networking solutions. The Company's research and
development investments are made either internally or through acquisition, and
in addition, the Company makes minority equity investments in early stage
technology development entities.
The Company has recently announced several new products, including the Gigabit
Switch Router, known as the GSR12000, and the Company's next-generation
universal access server, the AS5300. However, the industry in which Cisco
competes is subject to rapid technological developments, evolving industry
standards, changes in customer requirements and frequent new product
introductions and enhancements. As a result, the Company's success, in part,
depends upon its ability, on a cost-effective and timely basis, to continue to
enhance its existing solutions and to develop and introduce new solutions that
improve performance and reduce total cost of ownership. In order to achieve
these objectives, the Company's management and engineering personnel work
closely with customers, to identify and respond to customer needs, as well as
with other innovators of internetworking products, including universities,
laboratories, and corporations. The Company will also continue to make strategic
acquisitions and equity investments where appropriate. The Company intends to
remain dedicated to industry standards and to continue to support important
protocol standards as
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they emerge. Still, there can be no assurance that Cisco will be able to
successfully develop new products to address new customer requirements and
technological changes, or that such products will achieve market acceptance.
In fiscal 1997, 1996, and 1995, the Company's research and development
expenditures were approximately $698.2 million, $399.3 million, and $210.8
million, respectively. All of the Company's expenditures for research and
development costs, and purchased research and development of approximately
$508.4 million in fiscal 1997 and $95.8 million in fiscal 1995, have been
expensed as incurred.
MANUFACTURING
The Company's manufacturing operations consist primarily of quality assurance of
materials, components and subassemblies. Additionally, the Company performs
final assembly and test. The Company presently uses a variety of independent
third-party companies to perform printed circuit board assembly, in circuit
test, and product repair. The Company and single enterprise partners install
proprietary software on electronically programmable memory chips installed in
its systems in order to configure products to customer needs and to maintain
quality control and security. The manufacturing process enables the Company to
configure the hardware and software in unique combinations to meet a wide
variety of individual customer requirements. The Company and single enterprise
partners use automated testing equipment and "burn-in" procedures, as well as
comprehensive inspection, testing, and statistical process control to assure the
quality and reliability of its products. The Company's and its partners'
manufacturing processes and procedures are ISO 9001 certified. To date, the
Company has not experienced significant customer returns of its products.
PATENTS, INTELLECTUAL PROPERTY AND LICENSING
Cisco's success is dependent upon its proprietary technology. Cisco generally
relies upon patents, copyrights, trademarks and trade secret laws to establish
and maintain its proprietary rights in its technology and products. Cisco has a
program to file applications for and obtain patents in the United States and in
selected foreign countries where a potential market for Cisco's products exists.
Cisco has been issued a number of patents; other patent applications are
currently pending. There can be no assurance that any of these patents will not
be challenged, invalidated or circumvented, or that any rights granted
thereunder will provide competitive advantages to Cisco. In addition, there can
be no assurance that patents will be issued from pending applications, or that
claims allowed on any future patents will be sufficiently broad to protect
Cisco's technology. In addition, the laws of some foreign countries may not
permit the protection of Cisco's proprietary rights to the same extent as do the
laws of the United States. Although Cisco believes the protection afforded by
its patents, patent applications, copyrights and trademarks has value, the
rapidly changing technology in the networking industry makes Cisco's future
success dependent primarily on the innovative skills, technological expertise
and management abilities of its employees rather than on patent, copyright and
trademark protection.
Many of Cisco's products are designed to include software or other intellectual
property licensed from third parties. While it may be necessary in the future to
seek or renew licenses relating to various aspects of its products, Cisco
believes that based upon past experience
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and standard industry practice, such licenses generally could be obtained on
commercially reasonable terms. Because of the existence of a large number of
patents in the networking field and the rapid rate of issuance of new patents,
it is not economically practical to determine in advance whether a product or
any of its components infringe patent rights of others. From time to time, Cisco
receives notices from or is sued by third parties regarding patent claims. If
infringement is alleged, Cisco believes that, based upon industry practice, any
necessary license or rights under such patents may be obtained on terms that
would not have a material adverse effect on Cisco's business, operating results
and financial condition. Nevertheless, there can be no assurance that the
necessary licenses would be available on acceptable terms, if at all, or that
Cisco would prevail in any such challenge. The inability to obtain certain
licenses or other rights or to obtain such licenses or rights on favorable
terms, or the need to engage in litigation could have a material adverse effect
on Cisco's business, operating results and financial condition.
OTHER RISK FACTORS
The Company's business and stock is subject to a number of risks. Some of those
risks are described below. Other risks are presented in the "Financial Risk
Management," and "Future Growth Subject to Risks" sections on pages 25-29 of the
Company's Annual Report to Shareholders for the year ended July 26, 1997, which
is hereby incorporated by reference.
Potential Fluctuations in Quarterly Results
The Company's operating results have in the past been, and may continue to be,
subject to quarterly fluctuations as a result of a number of factors. These
factors include the introduction and market acceptance of new technologies,
including Gigabit Switch Routing and Tag Switching; the timing of orders and
manufacturing lead times; variations in sales channels, product costs or mix of
products sold; increased competition in the networking industry; the overall
trend toward industry consolidation; the integration of people, operations and
products from acquired businesses and technologies; and changes in general
economic conditions and specific economic conditions in the computer and
networking industries, any of which could have an adverse impact on operations
and financial results. For example, the Company from time to time has made
acquisitions that result in purchased research and development expenses being
charged in an individual quarter. These charges may occur in any particular
quarter resulting in variability in the Company's quarterly earnings.
Additionally, the dollar amounts of large orders for the Company's products have
been increasing, and therefore the operating results for a quarter could be
materially adversely affected if a number of large orders are either not
received or are delayed, due for example, to cancellations, delays or deferrals
by customers.
Dependence on New Product Development; Rapid Technological and Market Change
The Company's operating results will depend to a significant extent on its
ability to reduce the costs to produce existing products. In particular, the
Company broadened its product line by introducing network access products. Sales
of these products, which are generally lower priced and carry lower margins than
the Company's core products, have increased more rapidly than sales of the
Company's core products. The success of these and other
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new products is dependent on several factors, including proper new product
definition, product cost, timely completion and introduction of new products,
differentiation of new products from those of the Company's competitors and
market acceptance of these products. The Company has addressed the need to
develop new products through its internal development effort, joint development
with other companies and acquisitions. There can be no assurance that the
Company will successfully identify new product opportunities, develop and bring
new products to market in a timely manner, and achieve market acceptance of its
products or that products and technologies developed by others will not render
the Company's products or technologies obsolete or noncompetitive.
Strategic Alliances
The Company has a number of strategic alliances with companies including
Microsoft, Intel, Hewlett-Packard, GTE, and Alcatel, among others. These
arrangements are generally limited to specific projects, the goal of which is
generally to facilitate product compatibility and adoption of industry
standards. If successful, these relationships will be mutually beneficial and
result in industry growth. However, these alliances carry an element of risk
because, in most cases, the Company must compete in some business areas with a
Company with which it has strategic alliances and, at the same time, cooperate
with such companies in other business areas. Also, if these companies fail to
perform, or if these relationships fail to materialize as expected, Cisco could
suffer delays in product development or other operational difficulties.
Industry Consolidation
There has been a trend toward industry consolidation for several years. During
fiscal 1997, the Company saw this trend continue, with the completion of two
significant industry mergers. In June 1997, 3Com completed its acquisition of
U.S. Robotics and Ascend Communications, Inc. completed its acquisition of
Cascade Communications Corporation. The Company expects this trend toward
industry consolidation to continue as companies attempt to strengthen or hold
their market positions in an evolving industry. The Company believes that
industry consolidation may provide stronger competitors that are better able to
compete as sole-source vendors for customers. This could lead to more
variability in operating results as the Company competes to be a single vendor
solution and could have a material adverse effect on the Company's business,
operating results and financial condition.
Organizational Changes
The Company has realigned its business around three key customer groups or lines
of business. The Company believes this realignment of resources enables it to
better meet the needs of its customers. During fiscal 1997, the Company also
reorganized its sales management teams to better serve customers' needs. There
are risks inherent in any business realignment or reorganization, and the
Company can give no assurance that these organizational changes will meet their
intended objectives.
Entering New or Developing Markets
As the Company focuses on new market opportunities, such as transporting voice,
video and data traffic across the same network, it will increasingly compete
with a variety of large telecommunications equipment suppliers such as Lucent,
Ericsson, and Nortel, among others. Many of these companies have substantially
greater financial, marketing and technical resources than the Company. If the
Company cannot successfully compete with these and other potential competitors,
it
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could have a material adverse effect on the Company's business, operating
results and financial condition.
Variability in Service Provider Sales
Although sales to the service provider market have continued to grow, this
market is characterized by large, and often sporadic purchases. Sales activity
in this industry depends upon the stage of completion of expanding network
infrastructures, the availability of funding, and the extent that service
providers are affected by regulatory and business conditions in the country of
operations. A decline or delay in sales orders from this industry could have a
material adverse effect on the Company's business, operating results and
financial condition.
Manufacturing Risks
Although the Company generally uses standard parts and components for its
products, certain components are presently available only from a single source
or limited sources. The Company has generally been able to obtain adequate
supplies of all components in a timely manner from existing sources, or where
necessary, from alternative sources of supply. A reduction or interruption in
supply or a significant increase in the price of one or more components would
adversely affect the Company's business, operating results and financial
condition and could damage customer relationships.
Changes in Telecommunications Laws and Tariffs
Changes in domestic and international telecommunication requirements could
affect the Company's sales of its products. In particular, the Company believes
it is possible that there may be significant changes in domestic
telecommunications regulations in the near future that could slow the expansion
of the service providers' network infrastructures and adversely affect the
Company's business, operating results and financial condition. Future changes in
tariffs by regulatory agencies or application of tariff requirements to
currently untariffed services could affect the sales of the Company's products
for certain classes of customers. Additionally, in the U.S. the Company's
products must comply with various Federal Communication Commission requirements
and regulations. In countries outside of the U.S., the Company's products must
meet various requirements of local telecommunications authorities. Changes in
tariffs, or failure by the Company to obtain timely approval of products could
have a material adverse effect on the Company's business, operating results and
financial condition.
International Operations
The Company conducts business on a global basis. Accordingly, the Company's
future results could be adversely affected by a variety of uncontrollable and
changing factors including foreign currency exchange rates; regulatory,
political or economic conditions in a specific country or region; trade
protection measures and other regulatory requirements; government spending
patterns; and natural disasters, among other factors. In fiscal 1997, the
Company experienced slower sales growth in Japan, France and Germany, as well as
in certain other parts of Asia and Europe. Any or all of these factors could
have a material adverse impact on the Company's future international business in
these or other countries.
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Risks Associated With Internet Infrastructure
The Company's management believes that there will be performance problems with
Internet communications in the future which could receive a high degree of
publicity and visibility. As the Company is a large supplier of equipment for
the Internet infrastructure, customers' perceptions of the Company's products
and the marketplace's perception of Cisco as a supplier of networking products,
may be adversely affected, regardless of whether or not these problems are due
to the performance of Cisco's products. Such an event could also result in an
adverse effect on the market price of the Company's Common Stock and could
adversely affect Cisco's business, operating results and financial condition.
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
factors, as well as general economic and political conditions, may adversely
affect the market price of the Company's Common Stock in the future.
EMPLOYEES
As of September 20, 1997, the Company employed approximately 11,000 persons,
including 2,200 in manufacturing, service and support, 4,500 in sales and
marketing, 3,400 in engineering, and 900 in finance and administration.
Approximately 2,000 employees were in international locations.
None of the employees is represented by a labor union, and the Company considers
its relations with its employees to be positive. The Company has experienced no
work stoppages.
Competition for technical personnel in the Company's industry is intense. The
Company believes that its future success depends in part on its continued
ability to hire, assimilate, and retain qualified personnel. To date, the
Company believes that it has been successful in recruiting qualified employees,
but there is no assurance that it will continue to be successful in the future.
ITEM 2. PROPERTIES
The Company's principal corporate offices are located at sites in Santa Clara
and San Jose, California. The Santa Clara facilities are leased through June
1998 and have approximately .1 million square feet of office space. The
Company's main headquarters are situated on 221 acres of leased land in San
Jose, California. There are 15 buildings located at this site, one of which is a
manufacturing facility. The San Jose headquarters consist of approximately 1.6
million square feet of leased office space at the present time. A new site is
under construction that is located near its present corporate offices in San
Jose, California. The Company expects that initial construction on the site will
be completed in April 1998, with total leased office space of
12
13
approximately 1.1 million square feet.
As part of the StrataCom acquisition, the Company also assumed certain operating
leases for buildings. The buildings, including an additional manufacturing
facility, are located at various sites in San Jose, California and total
approximately .5 million square feet.
In addition to the California facilities, the Company leases approximately 45
acres of land in Research Triangle Park, North Carolina, where the InterWorks
Business Unit, as well as a Technical Assistance Center, telesales, and various
other support functions, are located. Three buildings of approximately .3
million square feet have been constructed and are currently occupied under a
lease that expires in July 1999. A fourth building of .1 million square feet is
currently under construction with completion expected in the second quarter of
fiscal 1998.
The Company also leases various small offices throughout the U.S. and on a
worldwide basis. For additional information regarding the Company's obligations
under leases, see Note 7 "Commitments and Contingencies" on page 43 of the
Company's 1997 Annual Report to Shareholders, which is hereby incorporated by
reference.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
13
14
EXECUTIVE OFFICERS OF THE REGISTRANT
POSITION
NAME AGE POSITION HELD SINCE
---------------------------- ------ ------------------------------------------------------ -----------
Larry R. Carter 54 Senior Vice President, Finance and Administration, 1995
Chief Financial Officer, and Secretary
Mr. Carter joined the Company in January 1995 in
his present position. From July 1992 to January
1995, he was Vice President and Corporate
Controller for Advanced Micro Devices. Prior to
that, he was with V.L.S.I. Technology, Inc. for
four years where he held the position of Vice
President, Finance and Chief Financial Officer.
John T. Chambers 48 President, Chief Executive Officer and Director 1995
Mr. Chambers has been a member of the Board of
Directors since November 1993. He joined the
Company as Senior Vice President in January 1991
and became Executive Vice President in June 1994.
Mr. Chambers became President and Chief Executive
Officer of the Company as of January 31, 1995.
Prior to his services at Cisco, he was with Wang
Laboratories for eight years, most recently as
Senior Vice President of U.S. Operations.
Gary Daichendt 47 Senior Vice President, Worldwide Operations 1997
Mr. Daichendt joined the Company in October 1994 as
Vice President for Intercontinental Operations,
covering Asia, Pacific Rim, Canada, Central and
South America and Mexico. In October 1997,
Mr. Daichendt became Sr. Vice President, Worldwide
Operations at Cisco Systems. He is responsible for
managing the sales and distribution operations of
Cisco offices worldwide. Prior to his services at
Cisco, he spent eight years at Wang Laboratories,
most recently as Vice President of Central
Operations and Vice President of Worldwide
Marketing. Mr. Daichendt also spent ten years
with IBM in various sales, marketing, and management
positions.
Edward R. Kozel 42 Senior Vice President and Chief Technical Officer 1996
Mr. Kozel, has been a member of the Board of
Directors since November 1996. He joined the
Company as Director, Program Management in
March 1989. In April 1992, became Director of
Field Operations and in February 1993, he became Vice
President of Business Development. Since January
1996, he has been Chief Technology Officer of the
Company. Mr. Kozel currently serves on the Board
of Directors of Cybercash, Inc. and
NetFrame Systems, Inc.
Donald J. Listwin 38 Senior Vice President, Service Provider Line of Business 1997
Mr. Listwin joined the Company in 1990 as a Product
Marketing Manager. He held various positions within
the marketing department before being promoted to
Vice President of Marketing in September 1993.
Mr. Listwin was promoted to Vice President and
General Manager of the Access Business Unit in
September of 1995. He became Senior Vice President
of Cisco IOS Development and Marketing in August of
1996. Since April 1997, Mr. Listwin has been the
Senior Vice President of the Service Provider Line
of Business. Mr. Listwin currently serves on the
Board of Directors of Software.com.
14
15
POSITION
NAME AGE POSITION HELD SINCE
---------------------------- ------ ------------------------------------------------------ -----------
Mario Mazzola 50 Senior Vice President, Enterprise Line of Business 1997
Mr. Mazzola was the President and CEO of Crescendo
Communications, Inc. which he founded in 1990.
Crescendo was acquired by Cisco Systems in September
1993. At that time, Mr. Mazzola joined Cisco as the
Vice President and General Manager of the
Workgroup Business Unit. Mr. Mazzola became
Senior Vice President of the Enterprise Line of
Business in April 1997. Mr. Mazzola was
the VP of Engineering of David Systems which he
co-founded in June 1982. Mr. Mazzola holds several
patents on high-speed transmission techniques
on unshielded twisted-pair wiring.
Carl Redfield 50 Senior Vice President, Manufacturing 1993
Mr. Redfield joined the Company in August 1993 as
Director, Supply/Demand of Manufacturing and became
Vice President of Manufacturing in September 1993.
Prior to joining Cisco, he spent eighteen years at
Digital Equipment Company, most recently as Group
Manufacturing and Logistics Manager of the PC Group.
15
16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated by reference to page 51 of
the Company's 1997 Annual Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated by reference to page 21 of
the Company's 1997 Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this Item is incorporated by reference to pages
22-30 of the Company's 1997 Annual Report to Shareholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this Item is incorporated by reference to pages
25-27 of the Company's 1997 Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated by reference to pages
31-51 of the Company's 1997 Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to the information regarding Directors appearing under the
caption "Election of Directors" in the Company's proxy statement mailed to
Shareholders on or about October 1, 1997, which information is incorporated
herein by reference; and to the information under the heading "Executive
Officers of the Registrant" in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing at the end of Part I and under the caption "Executive
Compensation and Related Information" in the Company's proxy statement mailed to
Shareholders on or about October 1, 1997, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing under the captions "Election of Directors" and
"Ownership of Securities" in the Company's proxy statement mailed to
Shareholders on or about October 1, 1997, is incorporated herein by reference.
16
17
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under the caption "Ownership of Securities" and
"Certain Relationships and Related Transactions" in the Company's proxy
statement mailed to Shareholders on or about October 1, 1997, is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The financial statements listed in Item 14(a) are filed or
incorporated by reference as part of this annual report. See
Index to Financial Statements and Financial Statement Schedule
on Page 20.
2. Financial Statement Schedule
The financial statement schedule listed in Item 14(a) is filed
as part of this annual report. See Index to Financial Statements
and Financial Statement Schedule on Page 20.
3. Exhibits
The exhibits listed in the accompanying Index to Exhibits on
pages 23-25 are filed or incorporated by reference as part of
this annual report.
(b) Reports on Form 8-K
The Company filed one report on form 8-K during the fourth
quarter ended July 26, 1997. The date of the filing was July 1,
1997. The item reported on was the acquisition of Global
Internet Software Group.
17
18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Report on Form 10-K to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Jose, State of
California on this 17th day of October, 1997.
Cisco Systems, Inc.
/s/ John T. Chambers
----------------------------------------
(John T. Chambers, President and
Chief Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this Report on Form
10-K has been signed by the following persons in the capacities and on the dates
indicated.
Signature Title Date
President and Chief
Executive Officer
/s/ John T. Chambers (Principal Executive October 17, 1997
- ------------------------------------------ Officer and Director)
John T. Chambers
Senior Vice President,
Finance and Administration,
Chief Financial Officer and
/s/ Larry R. Carter Secretary October 17, 1997
- ------------------------------------------ (Principal Financial and
Larry R. Carter Accounting Officer)
/s/ John P. Morgridge Chairman of the October 17, 1997
- ------------------------------------------ Board and Director
John P. Morgridge
/s/ Donald T. Valentine Vice Chairman of the October 17, 1997
- ------------------------------------------ Board and Director
Donald T. Valentine
/s/ Carol A. Bartz Director October 17, 1997
- ------------------------------------------
Carol A. Bartz
/s/ James F. Gibbons Director October 17, 1997
- ------------------------------------------
Dr. James F. Gibbons
/s/ Edward R. Kozel Senior Vice President, October 17, 1997
- ------------------------------------------ Chief Technical Officer
Edward R. Kozel and Director
/s/ Richard M. Moley Director October 17, 1997
- ------------------------------------------
Richard M. Moley
18
19
Signature Title Date
/s/ Robert L. Puette Director October 17, 1997
- ------------------------------------------
Robert L. Puette
Director October , 1997
- ------------------------------------------
Masayoshi Son
/s/ Steven M. West Director October 17, 1997
- ------------------------------------------
Steven M. West
19
20
CISCO SYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
ITEM 14(a)
Page
------------------------------
1997 Annual
Report to
Form 10-K Shareholders
Data incorporated by reference from the 1997
Annual Report to Shareholders of
Cisco Systems, Inc.:
Financial Statements:
Consolidated statements of operations for each
of the three years in the period
ended July 26, 1997 ............................ 31
Consolidated balance sheets at July 26, 1997
and July 28, 1996 ............................... 32
Consolidated statements of cash flows for each of
the three years in the period ended July 26, 1997 33
Consolidated statements of shareholders' equity
for each of the three years in the period
ended July 26, 1997.............................. 34-35
Notes to consolidated financial statements.......... 36-49
Report of Independent Accountants................... 50
Supplementary financial data:
Fiscal years 1997 and 1996 by quarter (unaudited) 51
Data submitted herewith:
Financial Statement Schedule:
Report of independent accountants................. 21
II Valuation and qualifying accounts............ 22
All other schedules have been omitted since the required information is not
present in amounts sufficient to require submission of the schedules, or because
the information required is included in the consolidated financial statements or
notes thereto.
With the exception of the consolidated financial statements and the independent
accountants' report thereon listed in the above index, the information referred
to in Items 1, 5, 6, 7 and 7A and the supplementary quarterly financial
information referred to in Item 8, all of which is included in the Company's
Annual Report to Shareholders incorporated by reference into this Form 10-K
Annual Report, the 1997 Annual Report to Shareholders is not to be deemed
"filed" as part of this report.
20
21
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders
Cisco Systems, Inc.
San Jose, California
Our report on the consolidated financial statements of Cisco Systems, Inc. and
its subsidiaries has been incorporated by reference in this Form 10-K from Page
50 of the 1997 Annual Report to Shareholders of Cisco Systems, Inc. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedule listed in the index on page 20 of this
Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ Coopers & Lybrand L.L.P.
San Jose, California
August 4, 1997
21
22
CISCO SYSTEMS, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Balance at Balance at
Beginning Charged to End of
of Period Expenses Deductions Period
------------ ------------ -------------- -----------
Year ended July 30, 1995:
Allowance for doubtful accounts 9,882 15,213 6,668 18,427
Allowance for excess and obsolete
inventory 19,531 55,783 29,072 (1) 46,242
Year ended July 28, 1996:
Allowance for doubtful accounts 18,427 18,548 15,901 21,074
Allowance for excess and obsolete
inventory 46,242 53,025 37,481 (1) 61,786
Year ended July 26, 1997:
Allowance for doubtful accounts 21,074 13,318 12,052 22,340
Allowance for excess and obsolete
inventory 61,786 123,431 104,404 (1) 80,813
(1) Deductions principally relate to charges for standards changes.
22
23
INDEX TO EXHIBITS
(Item 14 (a))
Exhibit
Number Exhibit Description
- ------ -------------------
2.01** Agreement and Plan of Reorganization dated as of September 20, 1993
among the Company, Crescendo Communications Inc., and Co Acquisition
Corporation
2.02** Agreement of Merger among the Company, Crescendo Communications Inc.,
and Co Acquisition Corporation
2.03# Agreement and Plan of Reorganization dated as of July 11, 1994 among the
Company, Newport Systems Solutions, Inc. and New Acquisition Corporation
2.04@ Agreement and Plan of Reorganization dated as of October 21, 1994 among
the Company, Kalpana, Inc. and Pan Acquisition Corporation
2.05@@ Asset Purchase Agreement dated as of December 8, 1994 among the Company
and LightStream Corporation
2.06& Agreement and Plan of Reorganization by and among the Company, Jet
Acquisition Corporation, and StrataCom, Inc., dated as of April 21, 1996
3.01* The Company's Restated Articles of Incorporation, as currently in effect
3.02* The Company's Bylaws, as currently in effect
4.01## The Company's 1987 Stock Option Plan, as currently in effect
4.02* Form of Incentive Stock Option Agreement for granting incentive stock
options under the Company's 1987 Stock Option Plan
4.03* Series A Preferred Stock Purchase Agreement between the Company and
certain investors dated December 22, 1987, as amended
10.05* Form of Restricted Stock Purchase Agreement for sales of Common Stock to
employees, officers, directors and consultants
10.10* License Agreement between the Company and Network Equipment Technologies
Inc dated February 14, 1989
10.12* License Agreement between the Company and The Board of Trustees of
Leland Stanford Junior University dated April 15, 1987, as amended
10.13* 1989 Employee Stock Purchase Plan
10.14 Cisco Systems, Inc. Senior Management Incentive Plan- President, Vice
President & Director Fiscal Year 1997
10.16* Agreement between the Company and American Telephone and Telegraph
Company dated February 1, 1990
10.19* Letter of Employment between the Company and John T. Chambers dated
January 9, 1991
10.23* Lease Agreement between the Company and SGA Development Partnership,
Ltd., dated February 19, 1993, for the Company's site in San Jose,
California
10.24* Lease Agreement between the Company and Sumitomo Bank Leasing and
Finance, Inc., dated May 13, 1993 for the Company's facilities in San
Jose, California
10.25* Lease Agreement between the Company and SGA Development Partnership,
Ltd., dated February 19, 1993, for the Company's site in San Jose,
California
10.26* Lease Agreement between the Company and the State of California Public
Employees' Retirement System dated March 11, 1993, for the Company's
facilities at 3100 Smoketree Court
10.27* Lease Agreement between the Company and Sumitomo Bank Leasing and
Finance, Inc., dated July 11, 1994 for the Company's site in Wake
County, North Carolina
10.28* Lease Agreement between the Company and Sumitomo Bank Leasing and
Finance, Inc., dated August 12, 1994 for the Company's facilities in
Wake County, North Carolina
23
24
Exhibit
Number Exhibit Description
- ------ -------------------
10.29&& Lease (Buildings "I" and "J") by and between Sumitomo Bank of New
York Trust Company ("SBNYTC"), as trustee under that certain Trust
Agreement dated May 22, 1995 between Sumitomo Bank Leasing and Finance,
Inc. and SBNYTC ("SB Trust"), as Landlord, and the Company, as tenant,
dated May 22, 1995
10.30&& First Amendment to Lease (Buildings "I" and "J") between SB Trust and
the Company, dated July 18, 1995
10.31&& Lease (Buildings "K" and "L") by and between SB Trust and the
Company, dated May 22, 1995
10.32&& First Amendment to Lease (Buildings "K" and "L") between SB Trust and
the Company, dated July 18, 1995
10.33&& Lease (Improvements Phase "C") by and between SB Trust and the
Company, dated May 22, 1995
10.34&& First Amendment to Lease (Improvements Phase "C") between SB Trust
and the Company, dated July 18, 1995
10.35&& Ground Lease (Parcel 2 and Lot 54) by and between Irish Leasing
Corporation ("Irish"), as Landlord, and the Company, as Tenant, dated
February 28, 1995 for the Company's site in San Jose, California
10.36&& First Amendment to Lease (Parcel 2 and Lot 54) by and between Irish
and the Company dated as of May 1, 1995
10.37&& Second Amendment to Lease (Parcel 2 and Lot 54) by and between Irish
and the Company dated as of May 22, 1995
10.38&& Ground Lease (Lots 58 and 59) by and between Irish and the Company
dated February 28, 1995 for the Company's site in San Jose, California
10.39&& First Amendment to Lease (Lots 58 and 59) by and between Irish and
the Company dated as of May 1, 1995
10.40&& Second Amendment to Lease (Lots 58 and 59) by and between Irish and
the Company dated as of May 22, 1995
10.41&& Ground Lease (Tasman Phase C) by and between Irish and the Company
dated April 12, 1995 for the Company's site in San Jose, California
10.42&& First Amendment to Lease (Tasman Phase C) by and between Irish and
the Company dated as of May 1, 1995
10.43&& Second Amendment to Lease (Tasman Phase C) by and between Irish and
the Company dated as of May 22, 1995
10.44&& Credit Agreement between the Company, the Banks Listed Herein, Bank
of America National Trust and Savings Association, as Administrative
Agent, Morgan Guaranty Trust Company of New York, as Documentation Agent
and Bank of America National Trust and Savings Association, as Issuing
Bank dated as of May 22, 1995
10.45(1) Employment Agreement with Don LeBeau
10.46(2) Lease Agreement between the Company and First State Realty of
America, Inc., dated February 7, 1997, for the Company's site in Santa
Clara, California
10.47(2) Lease Agreement between the Company and Berg & Berg Enterprises,
Inc., dated December 31, 1996, for the Company's site in Santa Clara,
California
10.48(2) Lease (Buildings "A" and "C") by and between SBC&D Co., Inc. and the
Company, dated November 26, 1996, located in San Jose, California
10.49(2) Lease (Buildings "B" and "D") by and between SBC&D Co., Inc. and the
Company, dated November 26, 1996, located in San Jose, California
10.50 Lease agreement between the Company and Lincoln-Whitehall Realty(West)
L.L.C., dated December 12, 1996, for the Company's site in San Jose, CA
10.51 Lease agreement between the Company and Lincoln-Whitehall Realty(West)
L.L.C., dated December 18, 1996, for the Company's site in San Jose, CA
10.52 Master Lease between the Company, as the Lessee, and UBS MORTGAGE
FINANCE INC. as the Lessor, dated December 27, 1996
10.53 Credit Agreement dated as of July 2, 1997 among Cisco Systems, Inc., and
Citicorp USA, Inc., as Administrative Agent, Morgan Guaranty Trust
Company of New York, as Documentation Agent, Bank of America National
Trust and Savings Association, the Chase Manhattan Bank, as Co-Agents,
and Citicorp Securities, Inc., and J.P. Morgan Securities Inc. Arrangers
ll.01 Statement Regarding Computation of Net Income Per Share
13.01 Pages 21 through 51 of the Registrant's 1997 Annual Report to
Shareholders
21.01 Subsidiaries of the Company
23.02 Consent of Independent Accountants
27 Financial Data Schedule
* Previously filed with registrant's registration statements (File
#33-32778)
** Previously filed with registrant's Form 8-K dated October 8, 1993
@ Previously filed with registrant's Form 8-K dated December 9, 1994
@@ Previously filed with registrant's Form 8-K dated January 25, 1995
# Previously filed with registrant's Form 8-K dated August 19, 1994
## Previously filed with registrant's Proxy statement dated October 2, 1995
& Previously filed with registrant's Form S-4 dated June 7, 1996
&& Previously filed with registrant's Form 10-K dated October 26, 1995
(1) Previously filed with registrant's Form 10-Q dated January 25, 1997
(2) Previously filed with registrant's Form 10-Q dated April 26, 1997
24