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NETWORK SYSTEMS REPORTS FIRST-QUARTER 1992 RESULTS

 NETWORK SYSTEMS REPORTS FIRST-QUARTER 1992 RESULTS
 MINNEAPOLIS, April 23 /PRNewswire/ -- Network Systems Corporation


(NASDAQ-NMS: NSCO) today announced unaudited results for the three months ended March 31, 1992. Revenues for the period were $48,711,000, up 45 percent from revenues of $33,604,000 for the 1991 first quarter. Net income for the period was $1,812,000, or $.06 per share, down 9 percent from $1,985,000, or $.07 per share, earned in the comparable 1991 period.
 Revenues for Network Systems' Minnesota-based operations totaled $39,656,000 up 18 percent from $33,604,000 for the comparable 1991 period, largely because of a 25 percent increase in domestic sales from the year-ago quarter. International sales of the Minnesota-based operations were up 11 percent over last year. Increasing sales of internetworking and channel extension products were chiefly responsible for the gains. Revenues from Vitalink, the company's California-based subsidiary acquired in June 1991, were $9,055,000, down 17 percent from the previous quarter.
 The company stated that the major cause for the profit decline was a delay in completing certain protocols for the 6600 Series single-board router needed by Vitalink for sales to its customer base. As a consequence, Vitalink's sales and profits were below expectations and were not sufficient to cover the goodwill amortization or the loss of interest income on the cash invested to purchase Vitalink. These items, plus the dilutive effect of converting Vitalink stock options to company stock options, negatively impacted income per share be approximately $.06. The company stated that it expects the acquisition will have a similar effect on income per share in the second quarter.
 Lyle Altman, chairman and chief executive officer, said that the protocols needed by Vitalink for the 6600 and the FDDI version of the 6600 are expected to be available in June. "Meanwhile," he said, "we have shipped nearly 600 Ethernet versions of the 6600 unit to customers and they are performing well." Altman said that although he was disappointed that the acquisition of Vitalink had penalized earnings in the short run, he expected that situation to be corrected in the second half of the year.
 Network Systems Corporation, based in Minneapolis, makes high- performance networking systems. The company's stock is traded on the NASDAQ National Market System.
 NETWORK SYSTEMS CORPORATION
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (Unaudited)
 (In thousands except per-share amounts)
 Three Months Ended
 3/31/92 3/31/91
 Total revenues $48,711 $33,604
 Costs and expenses:
 Cost of revenues 23,672 16,485
 Marketing, general and administrative 16,897 12,909
 Research and development 5,947 4,390
 Amortization of intangibles 814 --
 Total costs and expenses 47,330 33,784
 Income (loss) from operations 1,381 (180)
 Interest:
 Income 1,852 3,563
 Expense (291) (308)
 Net interest income 1,561 3,255
 Income before income taxes 2,942 3,075
 Income taxes 1,130 1,090
 Net income $1,812 $1,985
 Net income per common and common
 equivalent shares $.06 $.07
 Average common and common equivalent shares 31,385 29,998
 NETWORK SYSTEMS CORPORATION
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands)
 3/31/92 12/31/31 (a)
 (unaudited)
 Assets:
 Cash and short-term investments
 and marketable securities $69,159 $68,533
 Trade receivables, net 57,955 64,962
 Other receivables 3,918 3,673
 Inventories 25,317 25,051
 Other current assets 11,136 10,387
 Total current assets 167,485 172,606
 Net property, plant and equipment 38,179 37,082
 Marketable securities 53,218 52,494
 Goodwill and other intangible
 assets, net 50,844 51,658
 Other assets 29,076 28,971
 -- 338,802 342,811
 Liabilities and stockholders' equity
 Total current liabilities $39,055 $44,578
 Long-term debt 2,814 2,822
 Other long-term liabilities 6,435 6,677
 Deferred revenue 3,000 3,500
 Deferred compensation 8,505 8,151
 Deferred income taxes 2,940 2,940
 Total stockholders' equity 276,062 274,143
 -- $338,802 $342,811
 (a) The balance sheet at Dec. 31, 1991, has been condensed from the audited statements.
 -0- 4/23/92
 /CONTACT: R.A. Fisher of Network Systems, 612-424-4888/
 (NSCO) CO: Network Systems Corporation ST: Minnesota IN: CPR SU: ERN


AL -- MN008 -- 2115 04/23/92 16:29 EDT
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Date:Apr 23, 1992
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