[LOGO OF Computer Network Technology Corporation]
Computer Network Technology Corporation
1995
Annual Report
Computer Network Technology Corporation (CNT) develops and markets high-
performance networking products for the enterprise. Designed for mid- to large-
sized organizations with host-based networks, the Company's Brixton and
Channelink product lines provide open systems connectivity, data center
consolidation and disaster recovery, and network-based storage solutions.
Together, these software and hardware products integrate traditional legacy
systems with today's open system users.
CNT is headquartered in Minneapolis, Minnesota. It has product development and
manufacturing operations in both Cambridge, Massachusetts and Minneapolis,
Minnesota. The Company has over 400 employees, four international operating
subsidiaries, and customers located in 30 countries. Its shares are traded on
the Nasdaq Stock Market under the symbol CMNT.
FINANCIAL HIGHLIGHTS
(in thousands except per share data)
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For the Year 1995 1994 Change
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Revenue $78,837 $79,542 -1%
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Net income before
special charges 5,572* 6,604* -16%
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Net income per share
before special charges .24* .29* -17%
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Net income (loss) 4,022 (4,714) --
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Net income (loss) per share .17 (.21) --
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At Year End
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Total assets $79,134 $73,149 +8%
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Shareholders' equity 60,506 53,979 +12%
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Working capital 44,325 35,387 +25%
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[REVENUE, NET INCOME (LOSS) PER SHARE
AND SHAREHOLDERS' EQUITY BAR CHARTS APPEAR HERE]
Revenue (in millions) Net Income (Loss) Per Share Shareholders' Equity
'91 = $22 '91 = $.13 '91 = $15
'92 = $34 '92 = $.21 '92 = $20
'93 = $56 '93 = $.26 /$.28* '93 = $49
'94 = $80 '94 =($.21)/$.29* '94 = $54
'95 = $79 '95 = $.17 /$.24* '95 = $61
*Excludes charges in 1995 of $2.5 million attributable to a management
reorganization; excludes charges in 1994 of $9.3 million for purchased in-
process research and development in connection with the acquisition of Brixton,
$2.8 million for the write-down of excess inventory, and $.5 million related to
a workforce reduction; excludes a charge in 1993 of $.5 million for purchased
in-process research and development and other Ultra acquisition costs.
1
LETTER TO SHAREHOLDERS
After eight straight years of over 40% annual growth in revenue, CNT's financial
results for 1995 were disappointing. Revenue for the year was $78.8 million,
compared to $79.5 million in 1994. The net income for 1995 was a profit of $4
million, or $.17 per share.
As 1995 progressed, the members of the board became increasingly concerned that
revenue was significantly below management's forecasts and goals. The board
acted on these concerns and initiated a review of the situation. Based on the
results of this review, the board concluded that a fresh approach in leadership
was needed to take CNT to the next level of growth and to increase
profitability, and that this would require the appointment of a new senior
management team.
In December 1995, the board of directors elected Erwin Kelen and me to the
positions of Vice Chairman and Chairman. The Company's President and CEO, Mac
Lewis, stepped down, and the founder of CNT, Gene Misukanis, resigned from the
Company. To fill the position of President and CEO, the Company brought in Bruce
Coleman, on an interim basis, and initiated a national search for a permanent
President and CEO. Bruce Coleman was also elected to the board of directors.
The board's review also showed that, despite the 1995 numbers, CNT continues to
be a strong and successful company. In prior years, it has delivered high growth
and strong earnings, and has maintained a powerful balance sheet with positive
cash flow. The basic strengths of the Company are still very much in place, and
the Company's cash position and ability to successfully invest in technology and
marketing are stronger than ever.
The Company's strength is based on three factors: high and growing market demand
for the type of products produced by the Company; the quality of the Company's
products and customer support; and the strength of the Company's customer base.
CNT's first strength is the large opportunity for market growth, as our
customers and other companies develop high performance data communication
systems to support their global business operations. Most of these companies
are, or will be, re-engineering and integrating their large scale legacy data
processing systems with their burgeoning client/server departmental systems to
create complete enterprise-wide information infrastructures. Within the next few
years, the expenditure on computer networks by most major companies will exceed
the combined cost of all other computer hardware and software. To quote Scott
McNealy of Sun Microsystems, one of our OEM partners: "The network is the
computer."
CNT's second strength is that it is well positioned to take advantage of these
trends in demand for high performance data communications systems by helping our
customers maximize the benefits they can obtain from high-speed connectivity and
enterprise-wide application access. CNT's Channelink systems allow large
organizations to send high volumes of data, over great distances, at high speed,
between legacy systems, data centers, peripherals, remote users, and the growing
base of open system computer servers. With the acquisition of Brixton in 1994,
CNT now
2
has the capability to interconnect Unix-based client/server systems with legacy
systems -- all with the same high performance and reliability that have become
the hallmark of CNT. Also, our customer support is exceptional.
CNT's third strength is its customer base. One- third of all Fortune 500
companies, one half of all Fortune 100 companies, and all Fortune 10 companies
depend on CNT for the high performance elements of their data networking
systems. These companies use CNT products to move massive amounts of precious
corporate data instantaneously, with guaranteed delivery and without stealing
mainframe cycles or making high volume computing and storage systems wait.
Going forward in 1996 and beyond, the board and the Company's new management
team will be focusing on a new growth and profitability program that will
capitalize on these three CNT strengths, and which will be based on sound and
viable corporate, product, and marketing strategies.
CNT's corporate strategy is to develop and maintain leadership in high-speed
connectivity and enterprise-wide application access and interoperability, by
providing products that are technologically advanced, reliable, customer-
oriented, and competitively priced; and by providing the highest quality
customer support in the industry. These intelligent, high performance, network-
based systems allow our customers to access, store, manage, and protect valuable
corporate information and intelligence on an enterprise-wide basis.
A key part of CNT's product strategy is to continually invest in new technology
to upgrade our product lines. In the case of Channelink, we will introduce new
high performance products that incorporate leading edge technology, which was
developed from the technology CNT obtained when it acquired Ultra. In the case
of the Brixton line of products, we will continue to bring cutting-edge
interoperability software to the cross-platform world, which will allow
efficient and secure access by authorized employees and authorized customers
anywhere, anytime, and with a wide variety of platforms from an SNA terminal, a
Unix workstation, or a PC with an Internet browser.
CNT's marketing strategy has been designed to increase sales and market share by
expanding how the Company markets its products. These objectives are being
achieved by making the Company's products more market oriented, identifying new
markets for the Company's products, doubling the size of the Company's sales and
support staff, expanding existing channels of distribution and OEM sales, and by
emphasizing international marketing and distribution.
CNT is going through a transition. It has grown to be a strong and highly
successful company almost exclusively on the basis of the quality of its
products and customer support, and the hard work of its people. It has high
market, product, and customer strengths, and sound corporate, product, and
marketing strategies. Now, we are putting in place a new management team. The
board of directors is confident that this strong new management team will have
the experience, energy, and commitment to increase profitability and take the
Company to the next level of growth and success.
Sincerely,
/s/ John A. Rollwagen
John A. Rollwagen
Chairman of the Board
3
CORPORATE STRATEGY
CNT specializes in two critically important, high potential, niche markets in
the information technology industry. These are high-speed connectivity and
enterprise-wide application access and interoperability.
Our historical market is high-speed connectivity, where we provide hardware
products that allow large organizations to send high volumes of data, over great
distances, at high speed. This market is served by our Channelink line of
products, which provide high-speed connectivity between legacy systems
(mainframe computers), and between legacy systems and storage and peripheral
devices. Our new Channelink SCSI products provide high-speed connectivity within
open-system environments (SCSI to SCSI), and between open-systems (using SCSI)
and legacy systems (using ESCON or bus-and-tag).
Our other market is enterprise-wide application access and interoperability,
where we provide software products that allow desktop computers and other open-
systems (using TCP/IP) to communicate with legacy systems, terminals and
peripherals (using SNA) and midrange systems. This market is served by our
Brixton line of products. New Brixton products are also being developed to allow
customers to combine legacy systems with the new and powerful capabilities of
the Internet. These products and markets are discussed further under Product
Strategy and Marketing Strategy.
CNT's corporate strategy is to develop and maintain leadership in these two
industry sub-segments by providing products that are technologically advanced,
reliable, customer-oriented, and competitively priced; and by providing the
highest quality customer support in the industry.
To implement the Company's corporate strategy, management has already made major
changes in a number of areas. For example, we have implemented a Process Map and
Responsibility Matrix that brings order and control to the product development
process without inhibiting creativity. This management system is improving the
setting of product development priorities, operational and budgetary control,
employee empowerment and motivation, and personal and departmental productivity.
It should improve the quality and market orientation of CNT products and reduce
time to market.
As part of the corporate strategy, the new management team is developing
strategic alliances with leading companies in the information technology
industry. These alliances will benefit our alliance partners by providing them
with access to our products and markets. They will benefit CNT by allowing us to
extend our areas of core competency without diluting our focus and to increase
our market penetration, sales, and market share in extended geographic locations
and in areas where we have a limited presence.
Internationally, CNT products are critical elements in the globalization of
business and information technology because they facilitate high-speed movement
of data over long distances and communication between dissimilar systems. The
Company is developing and implementing a global product strategy and a multi-
domestic marketing strategy to increase CNT's international sales and market
share by penetrating our two niche markets worldwide.
[A SMALL PHOTO APPEARS IN MIDDLE OF THIS PAGE]
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[PHOTO OF Chairman of the Board, John Rollwagen and
Acting President and CEO, Bruce Coleman APPEARS HERE.]
Chairman of the Board, John Rollwagen, and Acting President and CEO,
Bruce Coleman, lead CNT's corporate strategy by focusing on new growth
and profitability.
PRODUCT STRATEGY
CNT's product strategy is to continually invest in new technology and to upgrade
the Company's products. The objective is to ensure that CNT products are
technologically advanced, reliable, and customer oriented, and that they remain
competitively priced.
The market for CNT's Channelink products has two parts. Part one is for products
that provide high-speed connectivity within legacy environments. Although this
market is relatively mature, it should continue to provide reliable long-term
demand. CNT holds a strong position in this market and will continue to develop
new and improved products, including Asynchronous Transfer Mode (ATM) and Fibre
Channel for large legacy system environments. It is important to note that many
expert projections that forecast the decline and disappearance of legacy systems
have been refuted by the facts. Sales of mainframes are up, and for both
technical and economic reasons legacy systems will continue to be the system of
choice for many applications.
Part two of the Channelink market is for products that provide high-speed
connectivity within open-systems environments (SCSI to SCSI), and between open-
system storage and peripheral devices (using SCSI) and legacy systems (using
ESCON or bus-and-tag). CNT was the first company to market a SCSI/ESCON
connectivity product and is a market leader in this strong growth market.
In addition, the ATM and Fibre Channel products in development will facilitate
high-speed tape vaulting and data movement on local and wide area networks. In
developing these products, we are drawing on the high-speed switching technology
that CNT obtained when it acquired Ultra.
CNT's Brixton products allow organizations to leverage their legacy environments
by mixing desktop computers and other open-systems, legacy systems, midrange
systems, workstations and peripherals in the same network.
There are also several new Brixton products at various stages of development. In
response to the growing importance of the Internet, the World Wide Web and
corporate Intranets, CNT is experimenting with techniques that will allow
desktops to use a web browser to access applications on a legacy system. The
Company is also experimenting with network-centric products that will allow
application software to reside in the network rather than at the desktop.
Three critical elements in CNT's product strategy are its technology, its
manufacturing, and its customer support. CNT invests 14% of its revenue in R&D,
which has recently produced ATM, Fibre Channel, and other cutting-edge products
and has provided CNT's customers with increased integration and interoperability
options and solutions. CNT's concern for quality manufacturing and support
resulted in it being the first networking company to receive ISO 9002
certification, which it has held since 1993. CNT's customer support is the best
in the industry, due to the quality of its account and diagnostic engineers, its
7x24 telephone support, its remote diagnostics capability, and its commitment to
100% customer satisfaction.
[A SMALL PHOTO APPEARS IN MIDDLE OF THIS PAGE]
6
[PHOTO APPEARS HERE]
CNT continues to invest in new technology and ensure that CNT's products
are technologically advanced, reliable and customer-oriented.
MARKETING STRATEGY
CNT is implementing a comprehensive marketing strategy that will significantly
change how the Company markets its products. This strategy, which incorporates
best practices from the high-tech industry and sophisticated marketing methods
from other industries, has been designed to increase the market penetration,
sales and market share of CNT's two lines of products.
Internally, the Company is making changes to maximize the effectiveness of the
elements of its marketing mix, including market research, marketing
communications, direct mail, advertising, public relations, trade show
presentations, collaterals and CNT's Web site (http://www.cnt.com). These
changes will allow the complementary use of all mix elements and will allow
CNT's marketing personnel to provide high quality support and assistance to the
Company's customers and to its sales and support staff.
Other internal changes relate to making CNT products more market-oriented. This
is being achieved by including marketing management in all steps of the product
development process, by making marketing responsible for all product development
steps that directly impact customer and user suitability, and by including user
needs requirements from all parts of the world where a product will be marketed.
The result is global, market-oriented products that satisfy all technical user
requirements and also satisfy the non-technical factors that affect in-use
performance and suitability.
Externally, the Company's sales performance has been hampered by insufficient
sales coverage and a lack of sales support. This is being corrected by doubling
the size of CNT's sales and support staff and by the internal marketing changes
that are improving the quality and delivery of sales support. To further improve
sales performance, the Company is increasing its use of marketing partnerships
and other strategic alliances to expand CNT's channels of distribution and to
emphasize OEM sales.
The other external priority will be the development of new markets by
identifying new applications for existing products and by introducing new
products. For example, high-speed remote backup is a new application for an
existing product. It uses a current Channelink high-speed connectivity product
to send data to a remote storage location to provide high-speed recoverable
backup. This solution has security, cost, and convenience benefits over
traditional telecommunication access methods, and over the inconvenience of
shipping boxes of backup tapes to and from an off-site sealed storage vault.
Examples of the use of new products to effect new market development are the ATM
and Fibre Channel products currently in development and the Brixton software we
are developing which will allow customers to combine legacy systems with the new
and powerful capabilities of the Internet.
Internationally, CNT is developing and implementing a global product strategy
and a multi-domestic marketing strategy. The global product strategy means that
product development and manufacture will be based on the premise that CNT's
products will be sold (and must perform perfectly) in all parts of the world
with minimum modification.
[A SMALL PHOTO APPEARS IN MIDDLE OF THIS PAGE]
8
[PHOTO APPEARS HERE]
CNT employees meet locally and by conference phone calls to implement and
incorporate methods designed to increase market penetration,
sales and market share.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
As an aid to understanding the Company's operating results, the following table
sets forth certain information derived from the Consolidated Statements of
Operations of the Company. (All amounts are expressed as a percentage of total
revenue except gross profit, which is expressed as a percentage of the related
revenue.)
Percentage of Revenue 1995 1994 1993
Revenue:
- ------------------------------------------------------
Product sales 77.2% 82.1% 83.1%
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Service fees 22.8 17.9 16.9
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Total revenue 100.0 100.0 100.0
Gross Profit:
- ------------------------------------------------------
Product sales 70.8 63.8 69.0
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Service fees 17.7 9.9 16.1
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Total gross profit 58.7 54.2 60.1
Operating Expenses:
- ------------------------------------------------------
Sales and marketing 27.8 25.8 24.9
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Engineering and development 16.1 14.3 14.3
- ------------------------------------------------------
General and administrative 8.5 6.2 6.0
- ------------------------------------------------------
Purchased in-process research
and development -- 11.7 .4
- ------------------------------------------------------
Total operating expenses 52.4 58.0 45.6
Income (loss) from operations 6.3 (3.8) 14.5
- ------------------------------------------------------
Other income (expense), net 2.0 1.6 (.3)
- ------------------------------------------------------
Income (loss) before
income taxes 8.3 (2.2) 14.2
- ------------------------------------------------------
Provision for income taxes (3.2) (3.7) (5.2)
- ------------------------------------------------------
Net income (loss) 5.1% (5.9)% 9.0%
Revenue
The Company's revenue primarily includes the sale and support of its Channelink
products for the high-speed connectivity market and licensing, sale, and support
of its Brixton hardware and software products for the enterprise-wide
application access and interoperability market. The Company's consolidated
financial statements include the results of Brixton's operations since its
acquisition on March 10, 1994.
Revenue decreased slightly in 1995, compared with increases of 43% and 63% in
1994 and 1993, respectively. Revenue from the Company's Channelink product line
totaled $65.9 million in 1995, a decrease of 3% when compared with revenue of
$67.8 million in 1994. Revenue from the Channelink product line totaled $50.7
million in 1993. Revenue from the Company's Brixton product line totaled $11.5
million in 1995, an increase of 75% when compared to the $6.6 million of revenue
reported by Brixton in 1994. Revenue from the Company's UltraNet product line
decreased to $1.4 million in 1995, compared to $5.2 million and $4.9 million in
1994 and 1993, respectively. The Company discontinued active marketing of this
product line in 1994.
Revenue from product sales decreased 7% in 1995, compared with increases of 41%
and 58% in 1994 and 1993, respectively. The decrease in product sales for 1995
is primarily attributable to a decrease in Channelink product sales of 12%,
which was partially offset by an increase in Brixton product sales of 74%. The
decrease in Channelink product sales primarily resulted from a reduction in
orders from North America end user customers for traditional data center
consolidation applications for Channelink products, and was partially offset by
an increase in sales to the Company's international distributors. The expected
reduction in product sales from the Company's discontinued UltraNet product line
also contributed to the decrease.
[REVENUE BY PRODUCT LINE BAR CHART APPEARS HERE]
Revenue by Product Line
(in millions)
Channelink Brixton UltraNet
'93 = $51 '93 = $0 '93 = $5
'94 = $68 '94 = $7 '94 = $5
'95 = $66 '95 = $12 '95 = $1
10
The increase in product sales for 1994 can be primarily attributed to increased
sales of Channelink products to end user customers in North America and initial
product sales from the Brixton product line.
Revenue from service fees, which primarily reflects purchased maintenance
service from the Company's technical support personnel, increased 26%, 51%, and
90% in 1995, 1994 and 1993, respectively. The 1995 increase reflects a 42%
increase in Channelink service fees, which were partially offset by the expected
decline in service fees from the UltraNet product line. The year-to-year growth
in service fees has primarily resulted from the growing base of installed
Channelink equipment and service fees from the UltraNet product line.
In 1995, international revenue increased 4% compared with increases of 32% and
114% in 1994 and 1993, respectively. The Company derived 29%, 28%, and 30% of
its revenue from international customers in 1995, 1994, and 1993, respectively.
The percentage of revenue derived from international customers for any given
period is subject to fluctuation because of the variable timing of sizable
orders from customers and the variability of revenue in North America.
During 1994 and the first half of 1995, the Company attempted to use its
existing Channelink sales force to sell its Brixton products. The Company has
determined that this approach diverted sales focus away from the Company's
traditional Channelink market and was not an effective approach for the sale of
Brixton products. As a result, the Company decided to hire additional sales and
marketing personnel to focus exclusively on market opportunities for Brixton
products. Under this plan, the Company proposed to more than triple the number
of Brixton sales representatives, double the Brixton tele-sales staff, and hire
additional pre-sales and post-sales systems engineers dedicated to the Brixton
product line. In addition, the Company has hired staff focused on the sale of
Brixton products through alternate distribution channels. As of December 31,
1995, the Company had hired approximately 50% of the additional sales and
marketing personnel it planned to hire under its strategy to have a separate
sales and marketing staff dedicated exclusively to the Brixton market.
The Company believes that delays by IBM in the introduction of certain storage
products have had a negative impact on its Channelink product revenue in 1995.
Both the Company and IBM expect these products to be released in 1996.
The Company believes that the improved product function associated with new
Brixton products released in the second quarter of 1995 and anticipated growth
in market size, coupled with the increase in the number of employees dedicated
to market and sell the Brixton products, should increase Brixton revenues in
1996. While the Company has experienced a decline in orders for data center
consolidation applications for its Channelink products, it believes that
additional network-based storage applications should result in continuing demand
for the Channelink products.
In 1996, the Company believes service fees for its Channelink and Brixton
product lines will grow at approximately the same rate as the installed base of
these products. The Company believes it will experience a steady decline in
service fees from the UltraNet product line.
The Company expects to continue to see quarter to quarter fluctuations in
revenue. The timing of sizable orders, because of their relative impact on total
quarterly sales, may contribute to such fluctuations. When compared to the same
periods of 1995, the Company anticipates that revenue in the first two quarters
of 1996 will be relatively flat but should start to increase in the second half
of 1996 for the reasons stated above.
[REVENUE BY GEOGRAPHICAL AREA BAR CHART APPEARS HERE]
Revenue by Geographical Area
(in millions)
International North America
'93 = $17 '93 = $39
'94 = $22 '94 = $58
'95 = $23 '95 = $56
11
Special Charges
During 1995, the Company recorded a $2.5 million pre-tax charge related to its
management reorganization, which was included in the consolidated statements of
operations, as follows: sales and marketing -- $155,000; engineering and
development -- $1,503,000; general and administrative -- $842,000. In connection
with the management reorganization, the Company issued a common equity put
option to a former officer and director under which the former officer can,
under certain circumstances, require the Company to repurchase up to 280,000
shares of its common stock on the last trading day of calendar year 1997 for a
price of $8.50 per share. (See note 6 to the consolidated financial statements.)
The management reorganization charge includes an expense of $1,120,000 relating
to this potential obligation. The Company will adjust compensation expense in
future periods as the market price of its common stock increases or decreases
until the Company has no remaining obligation pursuant to the common equity put
option.
During 1994, the Company recorded a pre-tax charge of approximately $500,000
related to a reduction in work force, which was included in the Consolidated
Statements of Operations as follows: cost of service fees -- $81,000; sales and
marketing -- $196,000; engineering and development -- $190,000; general and
administrative -- $33,000. Also during 1994, the Company recorded a pre-tax
charge of approximately $2.8 million associated with its UltraNet product line.
The charge associated with this inventory write-down is recorded in the
Consolidated Statements of Operations under the caption "Cost of Product Sales."
Gross Profit
In 1995, the gross profit margin from product sales was 71%, as compared to 68%
in 1994, excluding the UltraNet inventory charge, and 69% in 1993. The increase
in gross margins from product sales in 1995 primarily resulted from a larger
percentage of total product revenue coming from the sale of Brixton software
products, which are higher margin than the Company's Channelink product line.
The slight percentage decrease in 1994 (excluding the inventory charge) to 68%,
from 69% in 1993, primarily resulted from a change in product mix and a
competitive pricing environment. The relatively high gross margins from the sale
of Brixton software products in 1994 partially offset these negative factors.
As a result of continuing worldwide competition, the Company anticipates that
its gross profit margin on sales of its Channelink products will be somewhat
lower in 1996 as compared to 1995. The Company believes that the anticipated
decrease in gross profit margins from its Channelink products may be offset in
1996 by an increase in the percentage of product sales coming from the Company's
higher margin Brixton software products. Actual gross profit margins on product
sales in 1996 will depend on a number of factors, including the mix of products,
market acceptance of the Brixton product line, the relative amount of products
sold through indirect distribution sources, and the level of continuing price
competition.
Gross profit margin from service fees was 18%, 10%, and 16% in 1995, 1994, and
1993, respectively. The increase in gross profit margins from service fees in
1995 primarily resulted from a steadily increasing base of installed Channelink
units covered by maintenance contracts, which provides economies of scale. The
decrease in gross profit margins from service fees in 1994 primarily resulted
from higher costs of technical support labor and spares.
The Company anticipates that it will make additional investments in its service
business, particularly to support the Brixton product line. As a result of these
additional investments, the Company anticipates that gross profit margins from
its service business will be somewhat lower in 1996 when compared to 1995.
[GROSS PROFIT MARGIN ON PRODUCT SALES BAR CHART APPEARS HERE]
Gross Profit Margin on Product Sales
'93 = 69%
'94 = 64%
'95 = 71%
12
Operating Expenses
Sales and marketing expenses, excluding special charges, increased 7%, 46%, and
55% in 1995, 1994, and 1993, respectively. The increase in sales and marketing
expenses for 1995 is primarily attributable to an increase in employee
recruitment (including additions to the Brixton sales and marketing force) and
other costs associated with continued expansion of the Company's sales
organization, which were partially offset by lower commission expense. The
increases in 1994 and 1993 resulted from continuing expansion of the Company's
sales organization, marketing and customer support programs, and higher
commission expense due to the higher level of orders and sales in those years.
The Company expects to continue to expand its domestic and international sales
and marketing organizations in 1996, with a continued emphasis on new employees
to expand sales of the Brixton product line.
Engineering and development costs, excluding special charges, primarily
consisting of compensation and related fringe benefits, depreciation, and
consulting expenses related to new product development and enhancements to
existing products, remained relatively flat in 1995 when compared to 1994.
Engineering and development costs, excluding special charges, increased 40% in
both 1994 and 1993. As a percentage of total revenue, engineering and
development expenses excluding special charges totaled 14% of revenue each year
during the 1993 to 1995 period. The Company anticipates investing approximately
14% of total revenue on engineering and development in 1996, which includes
investments in current and future products.
[OPERATING EXPENSES BAR CHART APPEARS HERE]
Operating Expenses
(in millions)
Sales & Marketing Engineering & Development General & Administrative
'93 = $14 '93 = $8 '93 = $3
'94 = $20 '94 = $11 '94 = $5
'95 = $22 '95 = $13 '95 = $7
The Company believes a sustained high level of investment is essential to
customer satisfaction and future revenue.
General and administrative expenses, excluding special charges, increased 19%,
47%, and 61% in 1995, 1994, and 1993, respectively. These increases have
resulted from expansion of the Company's administrative organization due to
actual or planned increases in the level of orders and revenue. General and
administrative expenses, excluding special charges, were 7% of total revenue in
1995 and 6% of total revenue in 1994 and 1993. The Company anticipates that
general and administrative expenses will be approximately 7% of total revenue in
1996.
Interest income increased in 1995 and 1994 because of higher average balances of
cash and marketable securities, and higher average interest rates. Interest
income was down slightly in 1993 because of lower average balances of cash and
marketable securities and lower interest rates.
In 1995, the Company recorded a provision for income taxes at an effective rate
of 38%. In 1994, excluding a $9.3 million nondeductible charge for purchased in-
process research and development, the Company recorded a provision for income
taxes at an effective rate of 39%, as compared to 37% in 1993. The Company
anticipates that its effective income tax rate for 1996 will be approximately
35% due to an estimated reduction in the level of nondeductible foreign losses.
New Accounting Pronouncements
Beginning in 1996, the Company will be required to adopt the provisions of
Statement of Financial Accounting Standards No. 123 "Accounting for Stock Based
Compensation" ("SFAS No. 123"). Under SFAS No. 123, companies are permitted to
adopt a new method of accounting for stock compensation awards which is based on
recognition of a charge equal to the estimated fair value of the award on the
date of grant. Alternatively, companies may continue using the methodology
specified in APB No. 25, "Accounting for Stock Issued to Employees" to account
for stock based compensation, with expanded disclosure in the notes to the
financial statements of the pro forma effects on net income and earnings per
share, assuming application of the new accounting method outlined in SFAS No.
123. At the present time, management does not expect this new pronouncement to
have a significant impact on its financial position or results of operations.
13
Liquidity and Capital Resources
The Company has historically financed its operations through the private and
public sales of equity securities, bank borrowings under lines of credit,
capital equipment leases, and cash generated from operations.
Cash, cash equivalents, and marketable securities at December 31, 1995 totaled
$28.4 million, an increase of $10.1 million during 1995. This increase resulted
from an aggregate $15.1 million increase due to cash provided by operations,
financing activities (primarily consisting of proceeds from the issuance of
common stock), and the effects of exchange rate changes, partially offset by the
cash used for investing in property and equipment, field support spares and
other assets of $5.0 million.
Expenditures for capital equipment and field support spares have been, and will
likely continue to be, a significant capital requirement. The Company plans to
continue to invest aggressively in productivity tools for its employees and in
its field support spares.
The Company believes that the current balances of cash, cash equivalents, and
marketable securities, when combined with anticipated cash flow from operations,
will be adequate to fund its operating plans and meet its currently anticipated
aggregate capital requirements, at least through 1996. However, if the Company
does not generate revenue as expected or incurs unanticipated expenses, or needs
additional investment funds to react to changes in its marketplace, it may need
additional capital earlier or in amounts greater than would otherwise be
required.
The Company believes that inflation has not had a material impact on its
operations or liquidity to date.
[CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES BAR CHART APPEARS HERE]
Cash, Cash Equivalents, and Marketable Securities
(in millions)
'93 = $24
'94 = $18
'95 = $28
Forward Looking Information
Except for the historical information contained herein, the matters discussed in
this Management's Discussion and Analysis of Financial Condition and Results of
Operations are forward looking statements that involve risks and uncertainties,
including market acceptance of the Brixton products, the availability of new
employees experienced in the Brixton marketplace, growth and timing of new
applications for the Company's Channelink products, particularly in the area of
network-based storage, uncertainties due to the Company's recently announced
management reorganization, including its ability to retain a new Chief Executive
Officer, changes in general economic conditions, cost and availability of
components, and fluctuations in foreign exchange rates. In addition, the markets
for the Company's products are characterized by significant competition, and the
Company's results may be adversely affected by the actions of existing or future
competitors, including the development of new technologies, the introduction of
new products, and the reduction of prices by such competitors to gain or retain
market share.
[BOOK VALUE PER SHARE BAR CHART APPEARS HERE]
Book Value Per Share
'93 = $2.31
'94 = $2.41
'95 = $2.64
14
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31 1995 1994 1993
--------------------------------------------------------------------------
Revenue: Product sales $60,889,828 $65,332,961 $46,292,641
--------------------------------------------------------------------------
Service fees 17,946,819 14,208,812 9,394,677
--------------------------------------------------------------------------
Total revenue 78,836,647 79,541,773 55,687,318
==========================================================================
Cost of Revenue: Cost of product sales 17,799,484 23,664,972 14,339,334
--------------------------------------------------------------------------
Cost of service fees 14,772,744 12,808,784 7,883,929
--------------------------------------------------------------------------
Total cost of revenue 32,572,228 36,473,756 22,223,263
==========================================================================
Gross Profit: 46,264,419 43,068,017 33,464,055
==========================================================================
--------------------------------------------------------------------------
Operating Expenses: Sales and marketing 21,882,903 20,499,023 13,868,710
--------------------------------------------------------------------------
Engineering and development 12,718,295 11,347,683 7,956,552
--------------------------------------------------------------------------
General and administrative 6,736,444 4,968,251 3,358,359
--------------------------------------------------------------------------
Purchased in-process research
and development -- 9,302,212 221,298
--------------------------------------------------------------------------
Total operating expenses 41,337,642 46,117,169 25,404,919
==========================================================================
Income (loss) from operations 4,926,777 (3,049,152) 8,059,136
==========================================================================
--------------------------------------------------------------------------
Other Income (Expense): Interest income 1,616,503 629,064 345,118
--------------------------------------------------------------------------
Interest expense (59,825) (125,181) (161,308)
--------------------------------------------------------------------------
Other, net 50,993 755,884 (341,565)
--------------------------------------------------------------------------
Other income (expense), net 1,607,671 1,259,767 (157,755)
==========================================================================
--------------------------------------------------------------------------
Income (loss) before income taxes 6,534,448 (1,789,385) 7,901,381
--------------------------------------------------------------------------
Provision for income taxes 2,512,000 2,925,000 2,900,000
--------------------------------------------------------------------------
Net Income (Loss): $ 4,022,448 $(4,714,385) $ 5,001,381
==========================================================================
Net Income (Loss) per Common
and Common Equivalent Share: $ 0.17 $ (.21) $ .26
==========================================================================
Weighted Average Number
of Common and Common
Equivalent Shares: 23,443,137 21,971,983 19,228,048
==========================================================================
See accompanying notes to consolidated financial statements.
15
CONSOLIDATED BALANCE SHEETS
December 31 1995 1994
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Assets: Current Assets:
-------------------------------------------------------------------------------------
Cash and cash equivalents $ 5,959,931 $15,855,905
-------------------------------------------------------------------------------------
Marketable securities 22,448,987 2,486,234
-------------------------------------------------------------------------------------
Receivables, net 18,545,363 23,451,598
-------------------------------------------------------------------------------------
Inventories 10,534,152 8,060,363
-------------------------------------------------------------------------------------
Deferred tax asset 2,559,000 2,120,000
-------------------------------------------------------------------------------------
Other current assets 1,477,568 1,088,164
-------------------------------------------------------------------------------------
Total current assets 61,525,001 53,062,264
=====================================================================================
-------------------------------------------------------------------------------------
Property and equipment, net 8,598,666 9,285,714
-------------------------------------------------------------------------------------
Field support spares, net 4,406,225 5,473,078
-------------------------------------------------------------------------------------
Purchased technology, net 3,534,849 4,215,391
-------------------------------------------------------------------------------------
Goodwill, net 722,167 780,479
-------------------------------------------------------------------------------------
Other assets 347,209 331,848
-------------------------------------------------------------------------------------
$79,134,117 $73,148,774
=====================================================================================
Liabilities and
Shareholders' Equity: Current Liabilities:
-------------------------------------------------------------------------------------
Accounts payable $ 2,578,188 $ 2,163,054
-------------------------------------------------------------------------------------
Accrued liabilities 7,248,785 5,125,365
-------------------------------------------------------------------------------------
Deferred revenue 7,254,446 7,463,821
-------------------------------------------------------------------------------------
Income taxes payable -- 2,663,096
-------------------------------------------------------------------------------------
Current installments of obligations under
capital leases 118,712 259,540
-------------------------------------------------------------------------------------
Total current liabilities 17,200,131 17,674,876
=====================================================================================
-------------------------------------------------------------------------------------
Obligations under capital leases, less
current installments 42,912 163,028
-------------------------------------------------------------------------------------
Deferred tax liability 1,385,000 1,332,000
-------------------------------------------------------------------------------------
Total liabilities 18,628,043 19,169,904
=====================================================================================
-------------------------------------------------------------------------------------
Shareholders' Equity:
-------------------------------------------------------------------------------------
Preferred stock, authorized 1,000,000 shares;
none issued and outstanding -- --
-------------------------------------------------------------------------------------
Common stock, $.01 par value; authorized
30,000,000 shares; issued and outstanding
22,929,360 at December 31, 1995 and
22,360,122 at December 31, 1994 229,294 223,601
-------------------------------------------------------------------------------------
Additional paid-in capital 58,150,984 55,801,073
-------------------------------------------------------------------------------------
Retained earnings (deficit) 2,365,812 (1,656,636)
-------------------------------------------------------------------------------------
Cumulative translation adjustment (240,016) (389,168)
-------------------------------------------------------------------------------------
Total shareholders' equity 60,506,074 53,978,870
=====================================================================================
$79,134,117 $73,148,774
=====================================================================================
See accompanying notes to consolidated financial statements.
16
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Additional Retained Cumulative
Common Stock Paid-In Earnings Translation
Shares Amount Capital (Deficit) Adjustment Total
---------------------------------------------------------------------------
Balance, December 31, 1992 17,027,288 $170,273 $22,338,748 $(1,943,632) $(362,526) $20,202,863
===========================================================================
Shares issued pursuant to the
employee stock purchase plan
and exercise of stock options
and warrants, net of 7,281
shares redeemed 594,200 5,942 1,313,943 -- -- 1,319,885
---------------------------------------------------------------------------
Shares issued to public, net of
issuance costs of $338,549 2,951,420 29,514 19,303,151 -- -- 19,332,665
---------------------------------------------------------------------------
Shares issued in connection
with acquisition of Ultra 425,115 4,251 2,193,593 -- -- 2,197,844
---------------------------------------------------------------------------
Tax benefits related to employee
stock option transactions -- -- 593,000 -- -- 593,000
---------------------------------------------------------------------------
Change in cumulative
translation adjustment -- -- -- -- (97,478) (97,478)
---------------------------------------------------------------------------
Net income -- -- -- 5,001,381 -- 5,001,381
---------------------------------------------------------------------------
Balance, December 31, 1993 20,998,023 209,980 45,742,435 3,057,749 (460,004) 48,550,160
===========================================================================
Shares issued pursuant to the
employee stock purchase plan and
exercise of stock options,
net of 1,844 shares redeemed 376,005 3,760 1,202,383 -- -- 1,206,143
---------------------------------------------------------------------------
Shares issued in connection
with acquisition of Brixton 986,094 9,861 8,501,255 -- -- 8,511,116
---------------------------------------------------------------------------
Tax benefits related to employee
stock option transactions -- -- 355,000 -- -- 355,000
---------------------------------------------------------------------------
Change in cumulative
translation adjustment -- -- -- -- 70,836 70,836
---------------------------------------------------------------------------
Net loss -- -- -- (4,714,385) -- (4,714,385)
---------------------------------------------------------------------------
Balance, December 31, 1994 22,360,122 223,601 55,801,073 (1,656,636) (389,168) 53,978,870
===========================================================================
Shares issued pursuant to the
employee stock purchase plan
and exercise of stock options
and warrants, net of 86,308
shares redeemed 569,238 5,693 1,445,911 -- -- 1,451,604
---------------------------------------------------------------------------
Tax benefits related to employee
stock option transactions -- -- 904,000 -- -- 904,000
---------------------------------------------------------------------------
Change in cumulative
translation adjustment -- -- -- -- 149,152 149,152
---------------------------------------------------------------------------
Net income -- -- -- 4,022,448 -- 4,022,448
---------------------------------------------------------------------------
Balance, December 31, 1995 22,929,360 $229,294 $58,150,984 $ 2,365,812 $(240,016) $60,506,074
===========================================================================
See accompanying notes to consolidated financial statements.
17
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31 1995 1994 1993
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Operating Activities: Net income (loss) $ 4,022,448 $ (4,714,385) $ 5,001,381
------------------------------------------------------------------------------------------
Depreciation and amortization 7,418,179 6,717,541 4,570,300
------------------------------------------------------------------------------------------
Provisions for returns and credit losses 489,000 318,000 --
------------------------------------------------------------------------------------------
Purchase of in-process research and development -- 9,302,212 221,298
------------------------------------------------------------------------------------------
Change in deferred tax asset (386,000) (1,392,844) (306,000)
------------------------------------------------------------------------------------------
Reduction in goodwill due to utilization of
acquired net operating loss carryforwards -- -- 115,000
------------------------------------------------------------------------------------------
Changes in Operating Assets
and Liabilities Net of the
Effect of Acquired Companies: Receivables 4,417,235 (5,345,197) (5,159,516)
------------------------------------------------------------------------------------------
Inventories (2,473,789) 1,856,000 (3,466,947)
------------------------------------------------------------------------------------------
Other current assets (389,404) 587,381 (660,324)
------------------------------------------------------------------------------------------
Accounts payable 415,134 (2,666,173) 1,015,221
------------------------------------------------------------------------------------------
Accrued liabilities (539,676) 949,482 3,079,315
------------------------------------------------------------------------------------------
Deferred revenue (209,375) 2,143,449 1,011,067
------------------------------------------------------------------------------------------
Cash provided by operating activities 12,763,752 7,755,466 5,420,795
==========================================================================================
------------------------------------------------------------------------------------------
Investing Activities: Additions to property and equipment (3,299,233) (4,309,070) (5,856,257)
------------------------------------------------------------------------------------------
Additions to field support spares (1,562,608) (4,707,027) (2,877,640)
------------------------------------------------------------------------------------------
Purchase of Brixton and Ultra,
net of cash acquired -- (5,455,671) 1,717,046
------------------------------------------------------------------------------------------
Purchase of marketable securities (31,639,572) (2,486,234) (1,027,091)
------------------------------------------------------------------------------------------
Redemption of marketable securities 11,676,819 -- 3,000,000
------------------------------------------------------------------------------------------
Other (106,114) (91,862) 9,194
------------------------------------------------------------------------------------------
Cash used in investing activities (24,930,708) (17,049,864) (5,034,748)
==========================================================================================
------------------------------------------------------------------------------------------
Financing Activities: Proceeds from issuance of common stock,
including related tax benefits 2,355,604 1,561,143 21,245,549
------------------------------------------------------------------------------------------
Repayments of obligations under capital leases (260,944) (943,892) (668,450)
------------------------------------------------------------------------------------------
Cash provided by financing activities 2,094,660 617,251 20,577,099
==========================================================================================
------------------------------------------------------------------------------------------
Effects of exchange rate changes 176,322 80,315 (84,941)
------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Cash and Cash Equivalents: (9,895,974) (8,596,832) 20,878,205
==========================================================================================
Cash and Cash Equivalents --
Beginning of Year: 15,855,905 24,452,737 3,574,532
==========================================================================================
Cash and Cash Equivalents --
End of Year: $ 5,959,931 $ 15,855,905 $ 24,452,737
==========================================================================================
See accompanying notes to consolidated financial statements.
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994, and 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Computer Network Technology Corporation is engaged in the development,
marketing, and support of high-performance networking products and connectivity
software under the Channelink and Brixton trademarks.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Computer Network Technology Corporation and its wholly owned subsidiaries
(together, the "Company"). All significant intercompany balances and
transactions are eliminated in consolidation.
Revenue Recognition
Revenue from product sales requiring installation by the Company is recognized
when the equipment is installed and ready for use or upon signed customer
acceptance, depending on contract terms. Revenue from product sales where no
further performance is required by the Company is recognized upon shipment.
Revenue from software license agreements with original equipment manufacturers
(OEM) for redistribution to the OEM's customers is recognized when the OEM
reports delivery of the software to their customer. Service fees are recognized
as revenue when earned, which is generally on a straight-line basis over the
contracted service period.
Deferred revenue primarily consists of the unearned portion of service
agreements billed in advance and amounts billed to customers prior to
recognition by the Company of the applicable revenue.
Cash Equivalents
The Company considers investments in highly liquid debt securities having an
initial maturity of three months or less to be cash equivalents.
Marketable Securities
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS No. 115"). At December 31, 1995, the Company's marketable
securities are classified as available-for-sale in accordance with SFAS No. 115.
Prior to December 31, 1995, the Company's investments in marketable securities
were classified as held-to-maturity. No unrealized holding gain or loss existed
at the date of transfer. Available-for-sale securities are carried at fair
value, and unrealized gains and losses are excluded from earnings and are
reported as a separate component of shareholders' equity.
Inventories
Inventories are stated at the lower of cost (determined on a first-in, first-out
basis) or market.
Property and Equipment
Property and equipment owned by the Company is carried at cost and depreciated
using the straight-line method over three to eight years. Property and equipment
under capital lease and leasehold improvements are amortized using the straight-
line method over the terms of the respective leases. Expenditures for repairs
and maintenance are charged to expense as incurred.
Field Support Spares
Field support spares are carried at cost and depreciated using the straight-line
method over three years.
Purchased Technology
Purchased technology acquired in connection with the acquisition of Brixton
Systems, Inc. (see note 3) is carried at cost and amortized using the straight-
line method over its estimated useful life of seven years. At December 31, 1995
and 1994, accumulated amortization was $1,228,947 and $548,405, respectively.
19
Goodwill
Goodwill represents the excess of cost over the fair value of net assets
acquired and is amortized on a straight-line basis over 20 years. At December
31, 1995 and 1994, accumulated amortization was $158,464 and $113,868,
respectively.
Allowance for Returns and Credit Losses
An allowance is made for potential returns and uncollectible accounts based on
current and historical experience. The allowance for returns and credit losses
at December 31, 1995 and 1994 was approximately $1,131,000 and $692,000,
respectively.
Engineering and Development
The Company accounts for engineering and development costs in accordance with
Statement of Financial Accounting Standards No. 86 "Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed" ("SFAS No. 86"). The
Company has expensed all engineering and development costs to date as such costs
do not meet the criteria for capitalization outlined in SFAS No. 86.
Net Income (Loss) Per Share
For the years ended December 31, 1995 and 1993, net income per common and common
equivalent share was determined by dividing net income by the weighted average
number of common and common equivalent shares outstanding during the year.
Common equivalent shares primarily result from dilutive stock options and
warrants. For the year ended December 31, 1994, net loss per common and common
equivalent share was computed using the weighted average number of common shares
outstanding; stock options and warrants were excluded due to their antidilutive
effect.
Foreign Currency
The financial statements of the Company's international subsidiaries have been
translated into U.S. dollars in accordance with the provisions of Statement of
Financial Accounting Standards No. 52 "Foreign Currency Translation" ("SFAS No.
52"). Under SFAS No. 52, assets and liabilities are translated into U.S. dollars
at year-end exchange rates, while equity accounts are translated at historical
rates. Income and expenses are translated at the average exchange rates during
the year. The resulting translation adjustments are recorded as a separate
component of shareholders' equity.
Foreign currency transaction gains and losses are included in determining net
income (loss). For the years ended December 31, 1995 and 1994, the Company
recorded foreign currency transaction gains of $77,037 and $632,133,
respectively. For the year ended December 31, 1993, the Company recorded foreign
currency transaction losses of $415,926.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year
presentation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from these estimates.
2. MARKETABLE SECURITIES
The Company's investments in marketable securities are summarized as follows:
December 31 1995 1994
- -----------------------------------------------------------------------------
Corporate debt securities $16,945,004 $ --
- -----------------------------------------------------------------------------
U.S. Government and
Agency securities 5,503,983 2,486,234
- -----------------------------------------------------------------------------
$22,448,987 $ 2,486,234
=============================================================================
The amount of gross unrealized gains and losses with respect to the Company's
investments in marketable securities at December 31, 1995 and 1994 were not
significant. The Company realized no significant gains or losses from the sale
of marketable securities during the three-year period ended December 31, 1995.
Proceeds from the sale of marketable securities during 1995 were $3,518,755.
There were no sales of marketable securities during 1994. The Company's
investments in marketable securities mature at varying times prior to December
1997.
20
3. ACQUISITIONS
On March 10, 1994, the Company acquired all of the outstanding common and
preferred stock of Brixton Systems, Inc. ("Brixton") in exchange for 986,094
unregistered shares of its common stock valued at $6,515,000, $5,500,000 in
cash, assumption of $1,600,000 in liabilities and the conversion of existing
Brixton employee stock options into stock options of the Company valued at
$1,996,116. The shares exchanged by the Company were valued at fair market
value, reflecting a 33% discount because of their restricted nature. The
purchase price was allocated to the (i) identifiable tangible assets acquired
based on their estimated fair market values, (ii) purchased technology in the
amount of $4,763,796, and (iii) research and development activities that were in
process at the time of the acquisition and had not yet reached technological
feasibility. The amount allocated to in process research and development of
$9,302,212 was charged to expense upon completion of the acquisition. The
Company's consolidated financial statements include the results of Brixton's
operations since March 10, 1994.
On July 1, 1993, the Company acquired substantially all of the assets of Ultra
Network Technologies, Inc. ("Ultra") in exchange for 425,115 shares of its
common stock, valued at $2,197,844, and direct costs relating to the acquisition
of $177,155. The excess of the purchase price and liabilities assumed over the
fair market value of the assets acquired, amounting to $221,298, was charged to
expense in 1993 as research and development activities that were in process at
the time of the acquisition and had not yet reached technological feasibility.
The Company's consolidated financial statements include the results of Ultra's
operations since July 1, 1993.
The aforementioned acquisitions have been accounted for as purchases and,
accordingly, the acquired assets and liabilities were recorded at their
estimated fair market values at the date of acquisition.
4. COMPONENTS OF SELECTED BALANCE SHEET ACCOUNTS
December 31 1995 1994
- ----------------------------------------------------------------
Inventories:
- ----------------------------------------------------------------
Components and subassemblies $ 4,471,969 $ 3,712,084
- ----------------------------------------------------------------
Work in process 1,498,588 709,000
- ----------------------------------------------------------------
Finished goods 4,563,595 3,639,279
- ----------------------------------------------------------------
$10,534,152 $ 8,060,363
================================================================
Property and equipment:
- ----------------------------------------------------------------
Machinery and equipment $10,489,189 $ 9,791,090
- ----------------------------------------------------------------
Office and data processing equipment 7,443,064 6,433,342
- ----------------------------------------------------------------
Furniture and fixtures 1,074,412 909,998
- ----------------------------------------------------------------
Leasehold improvements 1,739,304 1,492,605
- ----------------------------------------------------------------
$20,745,969 $18,627,035
================================================================
- ----------------------------------------------------------------
Less accumulated depreciation
and amortization 12,147,303 9,341,321
- ----------------------------------------------------------------
$ 8,598,666 $ 9,285,714
================================================================
Field support spares:
- ----------------------------------------------------------------
Field support spares $ 9,577,421 $12,535,916
- ----------------------------------------------------------------
Less accumulated depreciation 5,171,196 7,062,838
- ----------------------------------------------------------------
$ 4,406,225 $ 5,473,078
================================================================
Accrued liabilities:
- ----------------------------------------------------------------
Compensation $ 5,341,660 $ 2,934,367
- ----------------------------------------------------------------
Other 1,907,125 2,190,998
- ----------------------------------------------------------------
$ 7,248,785 $ 5,125,365
================================================================
5. OPERATING LEASES
The Company leases all office and manufacturing space and certain equipment
under noncancelable operating leases. Certain of the leases contain renewal
options. In addition, the Company has an option to lease an additional 18,000
square feet of office space beginning December 1, 1996 which, if exercised,
would require a three-year extension of an existing lease for 72,000 square feet
of office space.
21
Future minimum operating lease payments, excluding executory costs such as real
estate taxes, insurance and maintenance expense, by year and in the aggregate
are as follows:
Year Ending December 31
- ---------------------------------------------------------------------------
1996 $2,176,369
- ---------------------------------------------------------------------------
1997 1,071,517
- ---------------------------------------------------------------------------
1998 850,734
- ---------------------------------------------------------------------------
1999 653,349
- ---------------------------------------------------------------------------
2000 639,975
- ---------------------------------------------------------------------------
Thereafter 339,863
- ---------------------------------------------------------------------------
Total minimum lease payments $5,731,807
- ---------------------------------------------------------------------------
Certain of the Company's leases contain concessions such as an allowance for
moving costs and an abatement of real estate taxes. At December 31, 1995 and
1994, an accrued obligation of $405,448 and $416,915, respectively, representing
the rental concessions for these leases is reflected in the accompanying balance
sheets.
Rent expense under noncancelable operating leases, exclusive of executory costs,
for the years ended December 31, 1995, 1994, and 1993, was approximately
$2,332,000, $2,351,000, and $1,573,000, respectively.
6. SHAREHOLDERS' EQUITY
Common Equity Put Option
In connection with a severance agreement entered into with a former officer and
director, the Company has the obligation to repurchase from such former officer
and director up to 280,000 shares of its common stock on the last trading day of
calendar year 1997 for a price of $8.50 per share. The obligation will expire
if, for any five consecutive trading days prior to the last trading day of 1997,
the closing market price for the Company's common stock equals or exceeds $8.50
per share.
During 1995, the Company recorded severance expense relating to this agreement
in the amount of $1,120,000. The Company will adjust compensation expense in
future periods as the market price of its common stock increases or decreases,
until such time as the Company has no remaining obligation under the common
equity put option.
Employee Stock Purchase Plan
The 1992 Employee Stock Purchase Plan (the "Purchase Plan") is a qualified plan
pursuant to Internal Revenue Code Section 423. The Purchase Plan allows eligible
employees an opportunity to purchase an aggregate of 400,000 shares of the
Company's common stock through a series of annual offerings at a per share price
equal to 85% of the lesser of the fair market value of the Company's common
stock at the beginning or the end of each annual offering period. No more than
$5,000 in fair market value of shares of common stock, as determined at the
beginning of each purchase period, may be purchased by any participant during
any calendar year.
During 1995 and 1994, the Company issued 83,331 shares of common stock at $6.27
per share and 102,625 shares of common stock at $4.41 per share, respectively,
pursuant to this plan.
Stock Options
The 1992 Stock Award Plan provides for the grant of stock options and
performance units to officers, other employees, consultants, and independent
contractors as determined by the Compensation Committee of the board of
directors. The Stock Award Plan also provides for automatic stock option grants
to nonemployee directors of 50,000 shares upon their initial election or
appointment, and 20,000 shares each year to nonemployee directors who are
elected, re-elected, or are serving an unexpired term as a director at any
annual meeting of shareholders during the term of the plan.
All stock options granted under the Stock Award Plan have an exercise price
equal to fair market value on the date of grant, vest and become exerciseable
over individually defined periods, and expire ten years from the date of grant.
Performance units entitle participants to payments of cash, stock or a
combination thereof and are based upon the achievement of specified performance
targets as determined by the Compensation Committee. A maximum of 3,250,000
shares of common stock are issuable under the terms of the Stock Award Plan.
Prior to implementation of the 1992 Stock Award Plan, the Company granted stock
options under other incentive and nonqualified stock options plans. All
remaining shares of common stock which had been available for grant under these
plans have been canceled. In addition, in connection with the acquisition of
Brixton, the Company agreed to convert existing Brixton employee stock options
into stock options of the Company.
22
Information with respect to stock options is summarized as follows:
Option Price
Shares (Per Share)
Balance, December 31, 1992 1,552,384 $1.00 -- $ 5.78
===========================
Granted 760,750 5.25 -- 9.00
---------------------------
Exercised (312,838) 1.00 -- 4.38
---------------------------
Canceled (82,625) 2.06 -- 6.06
---------------------------
Balance, December 31, 1993 1,917,671 $1.47 -- $ 9.00
===========================
Acquisition of Brixton 229,241 .01 -- 6.00
---------------------------
Granted 496,750 6.00 -- 10.00
---------------------------
Exercised (275,224) 1.47 -- 6.00
---------------------------
Canceled (184,197) .50 -- 10.00
---------------------------
Balance, December 31, 1994 2,184,241 $ .01 -- $10.00
===========================
Granted 1,293,000 6.13 -- 12.63
---------------------------
Exercised (457,215) .01 -- 9.50
---------------------------
Canceled (337,063) .01 -- 11.13
---------------------------
Balance, December 31, 1995 2,682,963 $ .25 -- $12.63
===========================
At December 31, 1995, 1,035,252 shares of common stock subject to stock options
were exerciseable and 758,877 shares of common stock were available for future
stock option and performance unit grants.
7. INCOME TAXES
The components of income (loss) before income taxes and income tax expense for
each of the years in the three-year period ended December 31, 1995 consists of
the following:
1995 1994 1993
- -------------------------------------------------------------
Income (loss) before
income taxes:
- -------------------------------------------------------------
U.S................... $7,398,633 $(2,409,036) $8,097,823
- -------------------------------------------------------------
Foreign............... (864,185) 619,651 (196,442)
- -------------------------------------------------------------
Total................ $6,534,448 $(1,789,385) $7,901,381
=============================================================
Income tax provision
Current:
- -------------------------------------------------------------
U.S................... $2,014,000 $ 3,570,000 $2,411,000
- -------------------------------------------------------------
Foreign............... 243,000 140,000 305,000
- -------------------------------------------------------------
State and other....... 428,000 415,000 490,000
- -------------------------------------------------------------
Total current........ 2,685,000 4,125,000 3,206,000
=============================================================
Deferred:
- -------------------------------------------------------------
U.S................... (195,000) (1,000,000) (306,000)
- -------------------------------------------------------------
State and other....... 22,000 (200,000) --
- -------------------------------------------------------------
Total deferred....... (173,000) (1,200,000) (306,000)
=============================================================
Total income
tax expense........ $2,512,000 $ 2,925,000 $2,900,000
=============================================================
The reconciliation of the statutory federal tax rate and the effective tax rate
for each of the years in the three-year period ended December 31, 1995 is as
follows:
1995 1994 1993
- -------------------------------------------------------------
Statutory tax rate 34.0% (34.0%) 34.0%
- -------------------------------------------------------------
Increase (decrease) in taxes
resulting from:
- -------------------------------------------------------------
Purchased in-process research
and development -- 176.7 --
- -------------------------------------------------------------
Foreign sales corporation and
foreign tax rate differential (7.1) (6.1) 5.5
- -------------------------------------------------------------
State taxes, net of federal
tax benefit 4.6 15.3 3.6
- -------------------------------------------------------------
Change in valuation allowance 8.1 10.6 (5.5)
- -------------------------------------------------------------
Other (1.2) 0.9 (0.9)
- -------------------------------------------------------------
Total 38.4% 163.4% 36.7%
=============================================================
The tax effects of temporary differences that give rise to significant portions
of the Company's deferred tax assets and (liabilities) as of December 31, 1995
and 1994 were as follows:
December 31 1995 1994
- -----------------------------------------------------------------
Deferred tax assets:
- -----------------------------------------------------------------
Accrued compensation $ 1,245,000 $ 283,000
- -----------------------------------------------------------------
Foreign net operating
loss carryforwards 827,000 301,000
- -----------------------------------------------------------------
Inventory obsolescence and
timing differences 790,000 1,629,000
- -----------------------------------------------------------------
Reserves for bad debts and
sales returns 419,000 138,000
- -----------------------------------------------------------------
Federal and state tax credits 136,000 87,000
- -----------------------------------------------------------------
Capital leases 66,000 151,000
- -----------------------------------------------------------------
Other 124,000 312,000
- -----------------------------------------------------------------
Total gross deferred tax assets 3,607,000 2,901,000
=================================================================
Valuation allowance (827,000) (301,000)
=================================================================
Net deferred tax assets 2,780,000 2,600,000
=================================================================
Deferred tax liabilities:
- -----------------------------------------------------------------
Purchased technology (1,449,000) (1,686,000)
- -----------------------------------------------------------------
Other (157,000) (126,000)
- -----------------------------------------------------------------
Total gross deferred tax liabilities (1,606,000) (1,812,000)
=================================================================
Net deferred income taxes $ 1,174,000 $ 788,000
=================================================================
23
During 1995, the Company's valuation allowance increased by $526,000 due to the
nonrecognition of the tax benefit associated with the loss carryforward from
foreign operations. During 1994, the Company's valuation allowance was reduced
by $1,073,000 in connection with the acquisition of Brixton based upon the
cumulative tax attributes of the combined companies. During 1993, the reduction
in the valuation allowance of $1,400,000 included tax benefits from acquired net
operating losses which were offset against goodwill of $115,000, and
compensation expense deductions which were credited to additional paid-in
capital of $593,000.
8. SUCCESS SHARING BONUS PLAN
The Company's Success Sharing Bonus Plan (the "Plan") provides a formula for
determination of cash bonus payments to employees. All full-time employees who
do not participate in other incentive compensation plans are eligible to
participate in the Plan starting with the employee's first full calendar quarter
of employment. The Plan provides for employee bonus payments based on a defined
percentage of a participant's eligible base compensation multiplied by the CNT
Performance Factor (CPF). The CPF is derived from a matrix formulated by the
board of directors with axes consisting of defined levels of revenue growth and
pre-tax profit (determined after deducting the cost of the success sharing
bonuses).
The success sharing bonus expense for the years ended December 31, 1995, 1994
and 1993 was $325,332, $562,003, and $1,561,167, respectively.
9. 401(K) SALARY SAVINGS PLAN
Effective January 1, 1991, the Company adopted a 401(k) Salary Savings Plan
("401(k) Plan"). All employees of the Company are eligible to participate and
benefits provided under the 401(k) Plan are funded by a qualified retirement
trust managed by an outside trustee. The Company has not contributed to the
401(k) Plan.
10. Financial Information by Geographic Area
The Company's revenue, income (loss) from operations, and total assets,
summarized by geographic area is as follows:
1995 1994 1993
- -------------------------------------------------------------------
Revenue:
- -------------------------------------------------------------------
United States
- -------------------------------------------------------------------
North America $56,073,533 $ 57,548,718 $ 39,026,273
- -------------------------------------------------------------------
European export 8,693,053 6,927,614 9,190,327
- -------------------------------------------------------------------
Pacific Rim export 5,849,359 6,136,794 4,133,623
- -------------------------------------------------------------------
Other 539,330 657,186 363,678
- -------------------------------------------------------------------
Total United States 71,155,275 71,270,312 52,713,901
- -------------------------------------------------------------------
- -------------------------------------------------------------------
European subsidiaries 11,363,084 11,595,574 9,987,524
- -------------------------------------------------------------------
Eliminations (3,681,712) (3,324,113) (7,014,107)
- -------------------------------------------------------------------
Total $78,836,647 $ 79,541,773 $ 55,687,318
===================================================================
Income (loss) from
operations:
- -------------------------------------------------------------------
United States $ 5,605,124 $ (4,316,540) $ 8,850,718
- -------------------------------------------------------------------
European subsidiaries (912,466) 34,445 311,716
- -------------------------------------------------------------------
Eliminations 234,119 1,232,943 (1,103,298)
- -------------------------------------------------------------------
Total $ 4,926,777 $ (3,049,152) $ 8,059,136
===================================================================
Total assets:
- -------------------------------------------------------------------
United States $77,963,266 $ 91,478,669 $ 69,194,745
- -------------------------------------------------------------------
European subsidiaries 7,123,604 8,144,664 13,505,944
- -------------------------------------------------------------------
Eliminations (5,952,753) (26,474,559) (16,599,313)
- -------------------------------------------------------------------
Total $79,134,117 $ 73,148,774 $ 66,101,376
===================================================================
11. NONCASH FINANCING AND INVESTING ACTIVITIES AND SUPPLEMENTAL CASH FLOW
INFORMATION
During 1994, in connection with the acquisition of Brixton, the Company acquired
noncash assets and liabilities of approximately $6.4 million and $1.6 million,
respectively, in exchange for approximately $5.5 million in cash, common stock
valued at approximately $6.5 million and stock options valued at approximately
$2.0 million.
During 1993, in connection with the acquisition of Ultra, the Company acquired
noncash assets and liabilities of approximately $3.3 million and $3.0 million,
respectively, and issued common stock valued at approximately $2.2 million.
24
During 1993, the Company entered into capital leases for new equipment totaling
$27,085.
Cash payments for interest expense for the years ended December 31, 1995, 1994
and 1993 were $60,419, $67,967, and $160,422, respectively.
Cash payments for income taxes, net of refunds received, for the years ended
December 31, 1995, 1994, and 1993 were $5,305,879, $1,047,532, and $1,326,441,
respectively.
12. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair values of
financial instruments:
Cash and Cash Equivalents and Marketable Securities
The carrying amount approximates fair value because of the short maturity of
those instruments.
Common Equity Put Option
The carrying value of the common equity put option (see note 6) is equal to the
difference between the aggregate exercise price of the option and the year-end
market value for the underlying shares. The Company believes the carrying value
of the common equity put option approximates its fair value.
25
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND SHAREHOLDERS
Computer Network Technology Corporation:
We have audited the accompanying consolidated balance sheets of Computer Network
Technology Corporation and subsidiaries as of December 31, 1995 and 1994, and
the related consolidated statements of operations, shareholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1995.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Computer Network
Technology Corporation and subsidiaries as of December 31, 1995 and 1994, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1995 in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 1, 1996
REPORT OF MANAGEMENT
The accompanying consolidated financial statements, including the notes thereto,
and other financial information presented in the Annual Report were prepared by
management, which is responsible for their integrity and objectivity. The
financial statements have been prepared in accordance with generally accepted
accounting principles and include amounts that are based upon our best estimates
and judgements.
Computer Network Technology Corporation maintains an effective system of
internal accounting control. We believe this system provides reasonable
assurance that transactions are executed in accordance with management
authorization and are appropriately recorded in order to permit preparation of
financial statements in conformity with generally accepted accounting principles
and to adequately safeguard, verify, and maintain accountability of assets. The
concept of reasonable assurance is based on the recognition that the cost of a
system of internal control should not exceed the benefits derived.
KPMG Peat Marwick LLP, independent certified public accountants, is retained to
audit the Company's financial statements. Their accompanying report is based on
an audit conducted in accordance with generally accepted auditing standards. The
audit includes a review of the internal accounting control structure to gain a
basic understanding of the accounting system in order to design an effective and
efficient audit approach and not for the purpose of providing assurance on the
system of internal control.
The Audit Committee of the board of directors is composed of three outside
directors and is responsible for recommending the independent accounting firm to
be retained for the coming year, subject to shareholder approval. The Audit
Committee meets periodically and privately with the independent accountants, as
well as with management, to review accounting, auditing, internal accounting
controls, and financial reporting matters.
/s/ Bruce T. Coleman
Bruce T. Coleman
Acting President and Chief Executive Officer
/s/John R. Brintnall
John R. Brintnall
Vice President of Finance, Chief Financial Officer,
and Treasurer
26
SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED STATEMENTS OF OPERATIONS DATA
(in thousands except per share data)
Years Ended December 31 1995 1994 1993 1992 1991
--------------------------------------------
Revenue $78,837 $79,542 $55,687 $34,265 $22,278
--------------------------------------------
Income (loss) before
income taxes $ 6,534 $(1,789) $ 7,901 $ 3,832 $ 2,227
--------------------------------------------
Net income (loss) $ 4,022 $(4,714) $ 5,001 $ 3,552 $ 2,042
--------------------------------------------
Net income (loss) per common
and common equivalent share $ .17 $ (.21) $ .26 $ .21 $ .13
--------------------------------------------
Weighted average number of
common and common
equivalent shares 23,443 21,972 19,228 17,263 15,230
--------------------------------------------
SELECTED CONSOLIDATED BALANCE SHEET DATA
(in thousands except employee data)
December 31 1995 1994 1993 1992 1991
--------------------------------------------
Current assets $61,525 $53,062 $53,506 $23,075 $16,244
--------------------------------------------
Current liabilities 17,200 17,675 17,103 9,470 4,514
--------------------------------------------
Working capital $44,325 $35,387 $36,403 $13,605 $11,730
--------------------------------------------
Total assets $79,134 $73,149 $66,101 $30,295 $20,505
--------------------------------------------
Long-term obligations $ 43 $ 163 $ 448 $ 622 $ 987
--------------------------------------------
Shareholders' equity $60,506 $53,979 $48,550 $20,203 $15,004
--------------------------------------------
Number of full-time employees 408 338 326 212 174
--------------------------------------------
QUARTERLY FINANCIAL DATA (UNAUDITED)
(in thousands except per share data)
First Second Third Fourth
Year Ended December 31 Quarter Quarter Quarter Quarter*
--------------------------------------------
1995
--------------------------------------------
Revenue $18,731 $21,776 $16,587 $21,743
--------------------------------------------
Income (loss) from operations 2,480 3,443 244 (1,240)
--------------------------------------------
Net income (loss) 1,748 2,434 467 (626)
--------------------------------------------
Net income (loss) per common
and common equivalent share .07 .10 .02 (.03)
--------------------------------------------
1994
--------------------------------------------
Revenue $15,596 $18,056 $23,833 $22,057
--------------------------------------------
Income (loss) from operations (8,553) 432 853 4,219
--------------------------------------------
Net income (loss) (8,690) 472 705 2,799
--------------------------------------------
Net income (loss) per common
and common equivalent share (.41) .02 .03 .12
--------------------------------------------
*The 1995 fourth quarter includes a $2.5 million pre-tax charge
attributable to a management reorganization.
27
INVESTOR INFORMATION
PRINCIPAL OUTSIDE COUNSEL
Faegre & Benson LLP
Minneapolis, Minnesota
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Minneapolis, Minnesota
TRANSFER AGENT
Chemical Mellon Shareholder Services L.L.C.
Richfield Park, New Jersey
FORM 10-K
A copy of our annual report on Form 10-K, filed with the Securities and Exchange
Commission, will be furnished free of charge to any CNT shareholder upon either
telephone request to (612) 797-6130 or written request to:
Investor Relations
Computer Network Technology Corporation
605 North Highway 169 -- Suite 800
Minneapolis, Minnesota 55441
Information on CNT is also available through the World Wide Web at
http://www.cnt.com
ANNUAL MEETING
Shareholders, employees and friends are invited to attend CNT's annual meeting
on Friday, May 17, 1996 at 10:00 a.m. at the Minneapolis Marriott City Center,
30 South Seventh Street, Minneapolis, Minnesota.
PRICE RANGE OF THE COMPANY'S COMMON STOCK
The following table sets forth the range of high and low sales prices and volume
for the Company's Common Stock (symbol CMNT), as reported on the Nasdaq Stock
Market.
Common Stock
------------------------------
High Low Volume
- ------------------------------------------------------------------------
1995:
- ------------------------------------------------------------------------
First Quarter $ 9.38 $5.88 10,149,178
- ------------------------------------------------------------------------
Second Quarter $11.88 $7.63 10,875,501
- ------------------------------------------------------------------------
Third Quarter $12.75 $4.75 20,863,956
- ------------------------------------------------------------------------
Fourth Quarter $ 7.25 $4.25 9,083,629
- ------------------------------------------------------------------------
1994:
- ------------------------------------------------------------------------
First Quarter $12.38 $8.63 13,600,473
- ------------------------------------------------------------------------
Second Quarter $10.50 $6.50 7,126,219
- ------------------------------------------------------------------------
Third Quarter $ 8.25 $5.13 11,776,789
- ------------------------------------------------------------------------
Fourth Quarter $ 7.88 $5.63 7,354,229
- ------------------------------------------------------------------------
As of March 20, 1996, there were 1,124 shareholders of record. The Company
estimates that an additional 10,000 shareholders own stock held for their
accounts at brokerage firms and financial institutions.
DIVIDENDS
The Company has never paid cash dividends on any of its securities. The Company
currently intends to retain any earnings for use in its operations and does not
anticipate paying cash dividends in the foreseeable future.
28
CORPORATE INFORMATION
BOARD OF DIRECTORS
Bruce T. Coleman
Acting President and Chief Executive Officer
Chief Executive Officer
El Salto Advisors
Erwin A. Kelen
Vice Chairman of the Board
Private Investor
Kelen Ventures
Lawrence Perlman
Chairman and Chief Executive Officer
Ceridian Corporation
John A. Rollwagen
Chairman of the Board
Private Investor
John A. Rollwagen Company
EXECUTIVE OFFICERS
Bruce T. Coleman
Acting President and Chief Executive Officer
John R. Brintnall
Vice President of Finance, Chief Financial
Officer, and Treasurer
Kathleen E. Brush
Acting Vice President of Marketing
Richard E. Carlson
Vice President of Manufacturing
William C. Collette
Vice President of Engineering
Peter Dixon
Vice President of International
Richard G. Helgeson
Vice President of Sales
Scott A. McCourt
Vice President of Brixton Development
Kristine E. Ochu
Vice President of Human Resources
Julie C. Quintal
Vice President of Customer Support
[LOGO OF COMPUTER NETWORK TECHNOLOGY CORPORATION]
Corporate Locations:
Computer Network Technology Corporation
6500 Wedgwood Road
Maple Grove, Minnesota 55311-3640
Tel: 612-550-8000
Fax: 612-550-8800
Computer Network Technology Corporation
605 North Highway 169, Suite 800
Minneapolis, Minnesota 55441
Tel: 612-797-6000
Fax: 612-797-6813
Web: http://www.cnt.com
Computer Network Technology Corporation
125 CambridgePark Drive
Cambridge, Massachusetts 02140
Tel: 617-498-2300
Fax: 617-498-2480
Wholly Owned Subsidiaries:
CNT Asia Pacific Pty Ltd.
North Sydney NSW 2060
Australia
Tel: 61-29-922-4177
CNT France S.A.
92250 LaGarenneColombes
France
Tel: 33-1-4130-1212
CNT International Ltd.
Langley, Slough SL3 6EX
United Kingdom
Tel: 44-1753-792400
Joint Ventures:
CNTware Vernetzungssysteme GmbH
63128 Dietzenbach
Germany
Tel: 49-6074-82770
International Distributors:
Korea Computer Maintenance Corporation
Seoul, Korea
Tel: 82-2-771-5800
ECU 10 -- (IPM)
Barcelona, Spain
Tel: 34-3-477-0436
World Information Technologies Co., Ltd.
Bangkok, Thailand
Tel: 66-2-233-2261
CMA Computer Marketing A/S
Oslo, Norway
Tel: 47-2-266-0722
Telematics & Services
Brussels, Belgium
Tel: 32-2-346-2586
Controlware AG
Pfaeffikon, Switzerland
Tel: 41-0-5548-6116
Controlware GmbH
Dietzenbach, Germany
Tel: 49-6074-858-247
Telena Telecomunicazioni Spa
Milano, Italy
Tel: 39-2-582-001
Kanematsu Electronics Limited
Tokyo, Japan
Tel: 81-3-5250-6161
CESCE Equip'amentos Informaticos, Lda.
Lisboa, Portugal
Tel: 351-1315-6190
Techniva, S.A. de C.V.
Zona Rosa, Mexico D.F.
Tel: 525-207-7295
ComTec
Bryanston, South Africa
Tel: 27-11-463-6450
Memorex Telex P.R. Inc.
San Juan, Puerto Rico
Tel: 809-154-7936
IBM Brasil -- Industria,
maquinas e Servicos Ltda.
Rio de Janeiro, Brasil
Tel: 55-21-532-5473
CMA Computer Marketing A/S
Stockholm, Sweden
Tel: 46-8-666-0800
Paradigm Systems Brasil
Sao Paulo, Brasil
Tel: 55-11-851-0949
Benton Software International b.v.
Hoofddorp, The Netherlands
Tel: 31-2503-12268
Interlink Computer Communications, Ltd.
Ramat-Gan, Israel
Tel: 972-3-7513135
Sistemas Informaticos Abiertos
Madrid, Spain
Tel: 34-1-683-4781
Open Technologies Ltd.
Moscow, Russia
Tel: 7-095-132-5292
UNIXPAC Pty. Limited
Sydney, Australia
Tel: 61-2-9953-8366
Hysys
Seoul, Korea
Tel: 82-2-783-2903
LG Electronics Inc.
Seoul, Korea
Tel: 82-2-3459-5319
Padraoix
Brasilia, Brasil
Tel: 55-61-274-6092
Copyright (C) 1996 by Computer Network Technology Corporation (CNT). All rights
reserved. Any reproduction of these materials without the prior written consent
of CNT is strictly prohibited.
CNT, the CNT logo, Channelink, and Brixton are trademarks or registered
trademarks of Computer Network Technology Corporation.
All other trademarks identified herein are the property of their respective
owners. CNT is an equal opportunity employer.