Cascade reports fourth quarter 1996 revenue of $110.3 million.

WESTFORD, Mass.--(BUSINESS WIRE)--Jan. 23, 1997--

Earnings Per Share Increase 140 Percent on Revenue Increase of 139

Percent

Cascade Communications Corp. (NASDAQ: CSCC), a global provider of scalable, carrier-class Frame Relay, Asynchronous Transfer Mode (ATM), Internet Protocol (IP) and Remote Access wide area network (WAN) switching products today reported results for the fourth quarter and fiscal year ended December 31, 1996.

Revenue for the fourth quarter increased 139 percent, to $110.3 million from $46.2 million recorded for the same period in 1995. Net income for the quarter increased to $23.4 million, or $0.24 per share, compared with net income of $9.1 million, or $0.10 per share, for the same period in 1995.(a)

For the 12 months ended December 31, 1996, revenue increased to $341.0 million from $134.8 million for the year ended December 31, 1995. Net income for fiscal year 1996 was $70.8 million, or $0.72 per share, compared to $25.4 million, or $0.28 per share, in 1995.1

"We continue to be pleased with Cascade's growth," said Daniel E. Smith, Cascade's president and chief executive officer. "Our fourth quarter and fiscal year 1996 financial results are evidence of Cascade's enhanced presence in the wide area network."

"During 1996, Cascade began the evolution from a single-product company to an organization with a diversified product family," continued Smith. "In addition to achieving increased market share in Frame Relay, in the last year, Cascade expanded its existing product portfolio to include the CBX 500 ATM Switch, the AX 800 and AX 1600 High Capacity Remote Access Switches and IP Navigator(tm), our carrier-class IP solution. As a result of our recently announced acquisition, we also have added Sahara Networks' forthcoming broadband access products. With the entire product portfolio unified under CascadeView network management, Cascade will be positioned to offer a complete wide area network solution with guaranteed end-to-end Quality of Service."

Cascade made several strategic announcements during the quarter, including the introduction of IP Navigator, Cascade's carrier-class IP solution for WANs. IP Navigator is a software upgrade that combines the efficiency of WAN switching with the intelligence of IP routing in a single platform. Expected to extend across Cascade's complete product line, including the AX Remote Access products and Sahara Networks' soon-to-be-released broadband access products, IP Navigator will deliver IP transport with end-to-end Quality of Service (QoS) guarantees. Cascade believes that IP Navigator is the only standards-based IP routing solution designed to meet the rigorous capacity, scalability and reliability requirements of carrier-class IP networks. Supporting up to 250,000 routes in its initial release, IP Navigator will deliver the technology necessary to scale service provider networks to effectively address the growth in IP traffic.

Cascade continues to expand the breadth of speeds supported by its product platforms. With the fourth quarter introduction of both OC-12c/STM-4 and T1/E1 cards for its CBX 500 ATM Switch, Cascade became one of the first vendors to offer network service providers a complete range of ATM speeds in a single platform. The comprehensive family of ATM cards: T1/E1, T3/E3, OC-3c/STM-1 and OC-12c/STM-4; gives network service providers the benefits of ATM at speeds ranging from 1.544 Mbps to 622 Mbps and the flexibility to choose the speed that best suits their needs.

The Company also made numerous customer announcements during the quarter. These included LDDS WorldCom's purchase of CBX 500 ATM Switches for deployment of the first worldwide carrier-class OC-12c backbone for its existing Frame Relay service. The CBX 500 switches also will enable LDDS WorldCom to further expand its native ATM offerings. Wiltech will use a combination of CBX 500 ATM Switches and B-STDX 9000 Frame Relay Multiservice Switches as the core for its nationwide Frame Relay and ATM backbone network. In addition, Cascade products were chosen domestically by Brooks Fiber and Rocky Mountain Internet and internationally by ISIS Multimedia Net GmbH.

As part of its ongoing effort to better serve the needs of its carrier-class customers, Cascade launched Continuis(tm), a comprehensive global service program designed to meet the critical support requirements of network service providers. With Continuis, Cascade has aligned its service programs to each phase of a network service provider's network life cycle, developing specialized technical, educational and consulting services to support the planning, design, implementation and management phases of the network life cycle.

Finally, shortly following the close of the quarter, Cascade announced its intent to acquire Sahara Networks, a privately owned developer of broadband access technology. Under the terms of the agreement, Cascade will acquire Sahara in exchange for 3.8 million shares of Cascade common stock. The transaction will be accounted for under the purchase method of accounting and is expected to be completed in January 1997.

IP Navigator and Continuis are trademarks of Cascade Communications Corp.

Note to Investors

This press release contains certain forward-looking statements which involve a number of risks and uncertainties that could cause actual results to differ materially. Specifically, comments related to the demand for, revenue from and acceptance of the Company's products, including the size, characteristics and expected growth of the Frame Relay, ATM, IP, remote access and broadband access markets and the Company's position in those markets, may be considered forward- looking and subject to a number of risks and uncertainties, including, but not limited to: the rate of growth in market demand for data communications services; the acceptance of the Company's products; intense competitive conditions; rapid technological change; frequent new product introductions and evolving domestic and international standards which may render existing products and services obsolete.

In addition, revenue and earnings in the data networking equipment industry are subject to fluctuation and the growth rates recently experienced by the Company do not necessarily represent future operating results. The Company's future operating results may fluctuate as a result of a number of factors including timing of orders from and shipments to customers; the timing and acceptance of new product introductions; increased competition and changes in the broadband packet equipment market's growth rates. Investors should not use any one quarter's results as a benchmark for future growth.

For a more detailed description of the risk factors associated with the Company and the data networking industry, please refer to the Company's 1995 Form 10-K and Third Quarter 1996 Form 10-Q.

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(a) Since the Company's initial public offering in July 1994, it has effected a total of three splits of its common stock: a two-for-one split in June 1995, a three-for-two in February 1996 and a two-for-one in May 1996. All share and per share information has been restated to reflect the effects of all stock splits.

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                       CASCADE COMMUNICATIONS CORP.
                   Consolidated Statements of Operations
                   (in thousands, except per share data)

                           Three Months Ended Twelve Months Ended
                            Dec. 31, Dec. 31,  Dec. 31, Dec. 31,
                               1996     1995      1996     1995

Revenue                     $110,300  $46,204  $340,976 $134,834
Cost of revenue               38,622   16,406   119,519   48,563
     Gross profit             71,678   29,798   221,457   86,271

Operating expenses:
  Research and development    16,955    7,506    53,378   20,651
  Sales and marketing         14,454    6,205    44,687   20,587
  General and administrative   3,799    2,190    13,110    6,955
     Total operating expense  35,208   15,901   111,175   48,193
Income from operations        36,470   13,897   110,282   38,078
Interest income                1,563      948     5,307    3,238

Income before income taxes    38,033   14,845   115,589   41,316
Provision for income taxes    14,637    5,715    44,810   15,906

Net income                   $23,396   $9,130   $70,779  $25,410

Net income per common share    $0.24    $0.10     $0.72    $0.28

Weighted average shares outs  98,725   92,325    97,767   91,220


                    CASCADE COMMUNICATIONS CORP.
                    Consolidated Balance Sheets
                           (in thousands)


                                       Dec. 31,  Dec. 31,
                                        1996      1995
ASSETS

Current assets:
Cash and cash equivalents              $98,399  $55,474
Marketable securities                   13,920    5,120
Accounts receivable, net                81,949   19,910
Notes receivable                         1,750    1,548
Inventories                             19,303    7,645
Other current assets                    19,721    5,043
     Total current assets              235,042   94,740

Property and equipment, net             33,012   13,980
Other assets                             2,207    3,139

     Total assets                     $270,261 $111,859

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities                     50,478   25,553
Stockholders' equity                   219,783   86,306

     Total liabilities and
      stockholders'                   $270,261 $111,859

CONTACT: Investor Contact:

Suzanne M. DuLong

Cascade Communications Corp.

[phone] email: [e-mail]

or

Press Contact:

Lucia F. Graziano

Cascade Communications Corp.

[phone] email: [e-mail]