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NETWORK SYSTEMS REPORTS YEAR-END, FOURTH-QUARTER 1991 RESULTS

 NETWORK SYSTEMS REPORTS YEAR-END, FOURTH-QUARTER 1991 RESULTS
 MINNEAPOLIS, Feb. 12 /PRNewswire/ -- Network Systems Corporation (NASDAQ: NSCO) today announced unaudited results for the year ended Dec. 31, 1991. Revenues were $198,728,000, up 21 percent from revenues of $163,638,000 for 1990. This included revenues of $28,047,000 from Vitalink Communications, which was acquired in June 1991. Net income for the year, after a pre-tax charge of $3,974,000 associated with the Vitalink acquisition, was $15,214,000, or $.50 per share, down 31 percent from $21,973,000, or $.74 per share, earned last year.
 Revenues for the three months ended Dec. 31, 1991, were $65,329,000 up 38 percent from revenues of $47,466,000 for the 1990 fourth quarter. Net income for the period was $5,581,000, or $.18 per share, down 25 percent from $7,412,000, or $.25 per share, earned in the comparable 1990 period. The company said the principal cause of the earnings decline was a decision to set up reserves for the discontinuance of several third-party arrangements for certain hardware and software products, and, to a lesser extent, higher-than-normal engineering changes on new products and a write-off of an investment in a company that was developing a product for Network Systems. The after-tax cost of these items amounted to $3,199,000, or $.10 per share.
 Commenting on the quarter, Lyle Altman, chairman and chief executive officer, said, "Excluding the $.10 per share earnings charge, the company performed very well in the fourth quarter." Product sales were $50,181,000 up 44 percent from $34,957,000 for the year-ago quarter. Service revenues of $15,147,000 for the quarter were 21 percent higher than the $12,509,000 achieved in the 1990 fourth quarter. Excluding Vitalink, revenues from the Network Systems side of the business were up 15 percent to $54,368,000, a new record. This included record product sales of $41,203,000, up 18 percent from the year-ago fourth-quarter total of $34,957,000. Altman said, "These results reflected strong demand for the company's DX-based products, including its new line of 6000 Series bridge-routers and RDS channel extension products." He also said that the company was now shipping Ethernet and T-1 models of its 6600 bridge-routers, a RISC-based single-board design. About 200 of these units were shipped in the fourth quarter.
 Vitalink's revenues were approximately 10 percent below plan due to limited availability of the 6600 Series bridge-routers. However, sales of Vitalink's TransLAN product line exceeded expectations, and traditional Vitalink margins and profitability were maintained.
 Looking ahead, Altman said that the company entered the first quarter with a better-than-normal backlog and despite uncertain economic conditions, the marketing forecast is encouraging. He cautioned, however, that the company's


first quarter is typically the lowest quarterly period of the year. Although production of the 6600 Series has commenced, a full introduction of this product line won't occur until the second half of the year.
 Network Systems Corporation, based in Minneapolis, makes high- performance data communications 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 Twelve Months Ended
 12/31/91 12/31/90 12/31/91 12/31/90
 Total revenues $65,329 $47,466 $198,728 $163,638
 Costs and expenses:
 Cost of revenues 33,187 21,622 96,305 73,133
 Marketing, general and
 administrative 18,680 13,714 62,214 52,005
 Research and development 6,016 3,908 21,417 16,040
 Amortization of intangibles 840 -- 1,960 --
 Costs of acquisition -- -- 3,974 --
 Total costs and expenses 58,723 39,244 185,870 141,178
 Income from operations 6,606 8,222 12,858 22,460
 Interest:
 Income 2,247 3,298 11,787 12,429
 Expense (102) (278) (1,241) (886)
 Net interest income 2,145 3,020 10,546 11,543
 Income before income taxes 8,751 11,242 23,404 34,003
 Income taxes 3,170 3,830 8,190 12,030
 Net income $5,581 $7,412 $15,214 $21,973
 Net income per common and
 common equivalent share $.18 $.25 $.50 $.74
 Average common and common
 equivalent shares 31,295 29,720 30,686 29,757
 NETWORK SYSTEMS CORPORATION
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands)
 Dec. 31, 1991 Dec. 31, 1990(a)
 (Unaudited)
 Assets:
 Cash and short-term investments
 and marketable securities $68,533 $99,035
 Trade receivables, net 64,962 50,448
 Other receivables 3,673 5,888
 Inventories 25,051 14,726
 Other current assets 7,537 8,747
 Total current assets 169,756 178,844
 Net property, plant and equipment 37,082 28,122
 Marketable securities 52,494 67,876
 Goodwill and other intangible
 assets, net 52,298 --
 Other assets 28,347 18,426
 -- $339,977 $293,268
 Liabilities and stockholders' equity:
 Current liabilities $41,971 $29,572
 Long-term debt 2,822 2,859
 Other long-term liabilities 6,683 --
 Deferred revenue 3,500 5,500
 Deferred compensation 8,151 6,158
 Deferred income taxes 2,710 2,710
 Total stockholders' equity 274,140 246,469
 -- $339,977 $293,268
 (a) The balance sheet at Dec. 31, 1990, has been condensed from the audited statements.
 -0- 2/12/92
 /CONTACT: R.A. Fisher of Network Systems, 612-424-4888/
 (NSCO) CO: Network Systems Corporation ST: Minnesota IN: SU: ERN


AL -- MN018 -- 9389 02/12/92 16:26 EST
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Date:Feb 12, 1992
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