<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission File Number: 0-10018
DSC COMMUNICATIONS CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 54-1025763
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Coit Road, Plano, Texas 75075
----------------------------------------------------
(Address of principal executive offices) (Zip Code)
(214) 519-3000
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Number of Shares Outstanding
Title of Each Class as of July 31, 1994
---------------------------- ----------------------------
Common Stock, $.01 Par Value 112,508,457
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
-------------- -------------
(Unaudited)
<S> <C> <C>
Assets
------
CURRENT ASSETS
Cash and cash equivalents................................. $ 124,616 $ 154,888
Marketable securities..................................... 216,337 158,920
Receivables............................................... 120,939 139,962
Inventories............................................... 155,193 122,869
Contract development costs................................ 9,576 5,978
Other current assets...................................... 28,617 19,414
-------------- -------------
Total current assets................................. 655,278 602,031
-------------- -------------
PROPERTY AND EQUIPMENT, at cost............................. 442,635 380,480
Less accumulated depreciation
and amortization......................................... (221,583) (200,697)
-------------- -------------
221,052 179,783
-------------- -------------
LONG-TERM RECEIVABLES....................................... 14,294 16,515
CAPITALIZED SOFTWARE DEVELOPMENT COSTS...................... 35,102 33,485
COST IN EXCESS OF NET ASSETS OF
BUSINESSES ACQUIRED, NET.................................. 48,755 50,317
OTHER....................................................... 30,983 18,286
-------------- -------------
Total assets..................................... $ 1,005,464 $ 900,417
============== =============
Liabilities and Shareholders' Equity
------------------------------------
CURRENT LIABILITIES
Accounts payable.......................................... $ 56,192 $ 48,450
Accrued liabilities....................................... 127,387 112,993
Customer advances......................................... 18,192 15,712
Income taxes payable...................................... 8,864 4,460
Current portion of long-term debt......................... 13,160 13,664
-------------- -------------
Total current liabilities............................ 223,795 195,279
-------------- -------------
LONG-TERM DEBT, net of current portion...................... 13,147 56,748
NONCURRENT INCOME TAXES
AND OTHER LIABILITIES...................................... 47,992 30,590
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, issued -
117,146 in 1994 and 60,047 in 1993;
outstanding - 112,117 in 1994 and
55,018 in 1993.......................................... 1,171 600
Additional capital........................................ 597,005 558,222
Unrealized losses on securities,
net of income taxes..................................... (2,509) --
Retained earnings ........................................ 168,320 102,435
-------------- -------------
763,987 661,257
Treasury stock, at cost, 5,029 shares....................... (43,457) (43,457)
-------------- -------------
Total shareholders' equity............................. 720,530 617,800
-------------- -------------
Total liabilities and
shareholders' equity........................... $ 1,005,464 $ 900,417
============== =============
</TABLE>
See the accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE> 3
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ---------------------------
1994 1993 1994 1993
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Revenue.......................................... $ 229,574 $ 168,676 $ 430,448 $ 324,869
Cost of revenue.................................. 116,707 95,557 220,566 184,509
------------ ------------ ------------ -------------
Gross profit................................... 112,867 73,119 209,882 140,360
------------ ------------ ------------ -------------
Operating costs and expenses:
Research and product development............... 28,913 19,885 53,616 41,138
Selling, general and administrative............ 33,910 26,679 64,508 52,634
Other operating costs.......................... 2,400 1,935 4,878 3,706
------------ ------------ ------------ -------------
Total operating costs and expenses........... 65,223 48,499 123,002 97,478
------------ ------------ ------------ -------------
Operating income .............................. 47,644 24,620 86,880 42,882
Interest expense................................. 454 1,449 684 3,260
Interest income.................................. (4,078) (1,394) (7,564) (2,577)
Other expense, net............................... 918 571 2,297 1,232
------------ ------------ ------------ -------------
Income before income taxes................... 50,350 23,994 91,463 40,967
Income taxes..................................... 14,066 5,758 25,578 11,359
------------ ------------ ------------ -------------
Net income .................................. $ 36,284 $ 18,236 $ 65,885 $ 29,608
============ ============ ============ =============
Income per share (1)............................. $ 0.31 $ 0.17 $ 0.57 $ 0.29
============ ============ ============ =============
Average shares used in computation (1)........... 116,604 106,426 116,420 101,848
</TABLE>
(1) On April 27, 1994, the Board of Directors declared a two-for-one
stock split, effected in the form of a 100% stock dividend, to
shareholders of record on May 11, 1994. All average shares
and income per share data presented for 1993 have been
restated to retroactively reflect the stock split.
See the accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE> 4
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------------
1994 1993
-------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income......................................... $ 65,885 $ 29,608
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization.................. 25,271 21,371
Amortization of capitalized software
development costs........................... 10,597 8,742
Income tax benefit related
to stock options............................ -- 3,000
(Increase) decrease in current and
long-term receivables............................ 20,244 (23,489)
Increase in inventory.............................. (32,324) (13,793)
Increase (decrease) in customer advances........... 2,480 (26,686)
Other, including changes in current
payables and other assets........................ 17,082 18,889
Increase in noncurrent income taxes
and other liabilities............................ 17,402 7,534
-------------- ---------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES....................... 126,637 25,176
-------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities................. (263,251) --
Proceeds from sales and maturities of marketable
securities....................................... 201,666 --
Purchases of property and equipment................ (63,861) (35,471)
Additions to capitalized software
development costs................................ (12,214) (8,819)
Purchase of long-term investment security.......... (12,500) --
Other.............................................. (1,189) (377)
-------------- ---------------
NET CASH USED FOR
INVESTING ACTIVITIES....................... (151,349) (44,667)
-------------- ---------------
</TABLE>
(Continued)
<PAGE> 5
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Continued)
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------------
1994 1993
-------------- ---------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term borrowings............................... -- 20,070
Payments of long-term borrowings................... (8,781) (11,446)
Proceeds from the sale of common stock
from employee stock programs..................... 3,847 9,336
Redemptions of 8% subordinated
convertible debentures........................... (1,696) --
Other.............................................. 1,070 (755)
-------------- ---------------
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES....................... (5,560) 17,205
-------------- ---------------
NET DECREASE IN CASH AND CASH EQUIVALENTS ........... (30,272) (2,286)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD..... 154,888 69,839
-------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........... $ 124,616 $ 67,553
============== ===============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid...................................... $ 1,285 $ 5,422
============== ===============
Income taxes paid.................................. $ 7,008 $ 3,131
============== ===============
</TABLE>
See the accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE> 6
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 1994 and 1993 and December 31, 1993
(Unaudited)
BASIS OF PRESENTATION
The accompanying unaudited Condensed Consolidated Financial Statements reflect,
in the opinion of management, all adjustments necessary to present fairly the
Company's financial position and results of operations and cash flows. Such
adjustments are of a recurring nature unless otherwise disclosed herein.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to rules and regulations promulgated by
the Securities and Exchange Commission. However, the Company believes that the
disclosures contained herein are adequate to make the information presented not
misleading. Quarterly consolidated financial results may not be indicative of
annual consolidated financial results.
The Company has not paid or declared a cash dividend on its common stock since
its organization.
Certain prior years' financial statement information has been reclassified to
conform with the current year financial statement presentation.
These unaudited financial statements should be read in conjunction with the
audited financial statements and accompanying notes included in the Company's
1993 Annual Report to Shareholders for the year ended December 31, 1993.
INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
----------- ------------
<S> <C> <C>
Raw Materials . . . . . . . . . . . $ 53,098 $ 47,845
Work in Process . . . . . . . . . . 11,557 12,471
Finished Goods . . . . . . . . . . 90,538 62,553
-------- --------
$155,193 $122,869
======== ========
</TABLE>
<PAGE> 7
CREDIT AGREEMENT
On February 24, 1994, the Company entered into an uncollateralized revolving
credit facility, which expires on February 24, 1997, with two banks providing
for borrowings up to $50,000,000. The maximum borrowings available are reduced
by the value of outstanding letters of credit issued by the banks on behalf of
the Company up to $25,000,000. Borrowings under the facility bear interest at
the prime rate or at 0.75% to 1.50% above the LIBOR rate. A commitment fee of
0.35% on the daily average unused portion of the facility is also assessed.
The agreement contains various financial covenants. There have been no
borrowings under the credit facility during the six months ended June 30, 1994.
Letters of credit issued by the banks under this agreement on behalf of the
Company were approximately $6,708,000 at June 30, 1994.
DEBT
On January 14, 1994, the Company called for the redemption of all of the
outstanding 8% subordinated convertible debentures. The debentures were
convertible, at the option of the holder, into shares of the Company's common
stock at $54.50 per share. In February 1994, $34,720,000 of debentures were
converted into approximately 637,000 shares of common stock, and $1,696,000 of
debentures were redeemed for cash.
INCOME TAX EXPENSE
The Company's income tax expense includes foreign, state (primarily related to
Puerto Rico) and federal income taxes. The estimated effective income tax rate
is based upon estimates for the full year for a number of variables including,
among other things, forecasted income, a deduction for gains by employees from
exercises of stock options and the degree to which net operating losses may be
utilized. The effective tax rate could change as estimates of these variables
change throughout the year.
COMMON STOCK
On April 27, 1994, the shareholders approved an increase in the number of
authorized shares of common stock from 100 million to 250 million shares. In
addition, on April 27, 1994 the Board of Directors authorized a two-for-one
stock split, effected in the form of a 100% stock dividend, to shareholders of
record on May 11, 1994. The par-value of common stock was not changed from
$0.01. The stock split resulted in the issuance of 56,004,000 new shares of
common stock and the transfer of $560,040 from Additional Capital to Common
Stock, representing the par value of the shares issued. All 1993 average
<PAGE> 8
shares and per share data have been restated to retroactively reflect the stock
split.
COMMITMENTS AND CONTINGENCIES
Contingent Liabilities
The Company periodically sells customer receivables and operating leases under
agreements which contain recourse provisions. The Company could be obligated
to repurchase receivables and operating leases which were previously sold on a
partial recourse basis, the terms of which allow the Company to limit its risk
of loss to $4,222,000 at June 30, 1994. The Company has guarantees of
$9,770,000 outstanding at June 30, 1994, supporting Company and third-party
performance bonds to customers and others, of which $6,708,000 were
collateralized by letters of credit issued under the Company's credit facility.
The Company believes it has adequate reserves for any ultimate losses
associated with these contingencies.
The Company enters into forward foreign exchange contracts to hedge certain
receivables and firm contracts for delivery of products and services which are
denominated in foreign currencies. At June 30, 1994, the Company had forward
foreign exchange contracts of $21,578,000 to hedge future receipts in such
currencies. Gains and losses related to the forward contracts are recognized
as part of the cost of the underlying transactions being hedged. Forward
foreign exchange contracts generally have maturities of one year or less and
contain an element of risk that the counterparty may be unable to meet the
terms of the agreement. However, the Company minimizes such risk exposure by
limiting the counterparty to major financial institutions. Management believes
the risk of incurring such losses is remote and any losses therefrom would be
immaterial.
For information regarding litigation, refer to Part II - Other Information,
Item 1. "Legal Proceedings".
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Results of Operations
For the three months ended June 30, 1994, the Company reported revenue of
$229.6 million and net income of $36.3 million, or $0.31 per share, compared to
revenue of $168.7 million and net income of $18.2 million, or $0.17 per share,
for the three months ended June 30, 1993. For the six months ended June 30,
1994, the Company recorded revenue of $430.4 million and net income of $65.9
million, or $0.57 per share, compared to revenue of $324.9 million and a net
income of $29.6 million, or $0.29 per share, for the first half of 1993. All
average shares and income per share data presented for 1993 have been restated
to retroactively reflect the stock split. See "Common Stock" in Notes to
Condensed Consolidated Financial Statements for further information.
Revenue for the 1994 second quarter and first six months increased more than
36% and 32%, respectively, compared to the same periods in 1993. The growth in
revenue was primarily the result of continuing strong demand for switching and
access products. In particular, deliveries of switching products to cellular
customers experienced substantial growth. Gross profit as a percentage of
revenue was approximately 49% for both the second quarter and six month period
ended June 30, 1994 compared to 43% for each of the same periods last year.
Continued improvement in operating efficiencies, higher business levels and a
favorable product mix all contributed to this improvement. The Company's gross
margin percentage can vary significantly from period to period due to changes
in the relative mix of product deliveries, including software enhancements.
Research and product development expense in the second quarter of 1994 and 1993
was $28.9 million, or 13% of revenue, and $19.9 million, or 12% of revenue,
respectively. Research and product development expense for the six months
ended June 30, 1994 was $53.6 million, or 12% of revenue, compared to $41.1
million, or 13% of revenue, for the six months in 1993. These increases in
research and product development expense represent the Company's on-going
commitment to develop new products and enhance existing products across all
strategic product areas.
Selling, general and administrative expense was $33.9 million and $64.5 million
in the second quarter of 1994 and six months ended June 30, 1994, respectively,
compared to $26.7 million and $52.6 million, respectively, for the same periods
in 1993. As a percentage of revenue, selling, general and administrative
expense for both the three months and six months ended June 30, 1994 declined
to 15% from 16% as compared to the same periods in 1993.
<PAGE> 10
Income before income taxes for the second quarter and first half of 1994 was
favorably impacted by an increase in interest income and substantially lower
interest expense. Interest income for the three months and six months ended
June 30, 1994 increased by $2.7 million and $5.0 million, respectively, from
the same periods in 1993 due primarily to the investment of the proceeds from
the November 1993 equity offering in marketable securities. Interest expense
for the three and six months ended June 30, 1994 declined $1.0 million and $2.6
million, respectively, from the same periods in 1993. This was primarily due
to the conversion of substantially all of the Company's outstanding
subordinated convertible debentures in 1993 and early 1994 into shares of the
Company's common stock.
The Company's estimated effective income tax rate was 28% for the three month
and six month periods ended June 30, 1994. See "Income Taxes" in Notes to
Condensed Consolidated Financial Statements for further information.
The Company's future quarterly and annual operating results may be affected by
a number of factors, including the timing and ultimate receipt of orders from
customers which continue to constitute a large portion of the Company's
revenue; the successful enhancement of existing products; introduction and
market acceptance of new products on a timely basis; mix of products sold;
product costs; manufacturing lead times; and changes in general economic
conditions, any of which could have an adverse impact on operations.
Financial Condition and Liquidity
The Company's cash and cash equivalents at June 30, 1994 were $124.6 million
compared to $154.9 million at December 31, 1993 while marketable securities
were $216.3 million at June 30, 1994 compared to $158.9 million at December 31,
1993.
Cash of $126.6 million was generated from operating activities. This was
primarily the result of strong earnings, a reduction in accounts receivable and
an increase in non-debt liabilities, partially offset by a growth in
inventories. The $32.3 million inventory growth primarily relates to finished
goods built to support existing customer order backlog and additional customer
requirements for the last half of 1994.
During the first six months of 1994, the Company invested $63.9 million in
property and equipment. The Company's rapid business expansion during 1993 and
1994 and expected future domestic and international growth have and will
continue to increase capital requirements, including facilities and
manufacturing and development equipment. The Company has initiated a major
facilities expansion
<PAGE> 11
plan at its current campus location. The Company purchased 148 acres of land
near the Company's present campus location for approximately $16.4 million. In
addition, construction of a warehouse and an office building began on a portion
of the new land which is expected to be completed in early 1995 and cost
approximately $50 million. Also, in July 1994 the Company purchased a
previously leased building on its campus for approximately $5 million. It is
anticipated that 1994 capital requirements for the full year could exceed $150
million. Also included in investing activities in the first half of 1994 is
the purchase of $12.5 million of long-term interest bearing investment
securities collateralized by U.S. Treasury obligations.
Financing activities during the six months ended June 30, 1994 included
proceeds of $3.8 million from the issuance of the Company's common stock
related to employee stock programs. Additionally, the Company made $8.8
million of scheduled payments on long-term borrowings during the six months
ended June 30, 1994. The Company periodically finances facilities and
equipment requirements under operating leases. During the first half of 1994,
future minimum operating lease obligations increased significantly primarily
due to the Company's expansion into new facilities under a long-term lease in
the United Kingdom and certain new short term facilities leases.
As discussed in the Notes to Condensed Consolidated Financial Statements,
debentureholders converted approximately $34.7 million of debentures into
approximately 637,000 shares of common stock and approximately $1.7 million of
debentures were redeemed for cash.
In February 1994, the Company entered into a new unsecured revolving credit
facility, which expires on February 24, 1997, providing for borrowings up to
$50.0 million. The maximum available borrowings are reduced by the value of
outstanding letters of credit issued on behalf of the Company up to $25.0
million. The agreement contains various financial covenants. There have been
no borrowings under the credit facility during the six months ended June 30,
1994. At June 30, 1994, the Company could borrow up to $43.3 million under the
credit agreement, net of outstanding letters of credit. See "Credit Agreement"
in Notes to Condensed Consolidated Financial Statements for further
information.
The Company believes that its existing cash and short term investments,
combined with its available financing alternatives, will be adequate to support
its expected business growth, including working capital expansion, necessary
capital expenditure requirements, operating lease obligations and scheduled
debt payments.
<PAGE> 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Litigation
On January 26, 1994, C. L. Grimes, a shareholder of the Company, filed a
suit in Delaware Chancery Court (the "Court"), derivatively purportedly on
behalf of the Company as the real party in interest and as a shareholder of the
Company, seeking a declaration that the Employment Agreement of James L. Donald,
his Executive Income Continuation Plan, and the 1990 Long-Term Incentive
Compensation Plan, as it applies to Mr. Donald as well as other employment
benefits of Mr. Donald are null and void. The defendants in the suit are Mr.
Donald, all current non-employee directors, and two former directors of the
Company. The Company itself is a nominal defendant. The plaintiff contends
that Mr. Donald's employment contract contains an improper delegation of the
Board of Directors' authority to Mr. Donald and excess payments. The suit also
contends that the salary and benefits established for Mr. Donald pursuant to the
Donald agreements referred to above and by the Company's Board of Directors are
excessive and constitute a diversion and waste of corporate assets. The suit
seeks an injunction restraining Mr. Donald from exercising any stock options,
taking any action to implement any of the Donald agreements, or declaring a
constructive termination of his employment, and also seeks unspecified damages
against the defendants and Grimes' legal fees. On June 1, 1994, Mr. Grimes
filed a first amended and supplemental complaint, which adds claims of various
defects in the Company's proxy statement transmitted to stockholders in
connection with its Annual Meeting held on April 27, 1994. The plaintiff seeks
a decree from the Court that the proxy statement in so far as it relates to the
Company's 1994 Long Term Incentive Plan (the "LTIP") and actions taken pursuant
to the proxy statement with respect to the LTIP are null and void and seeks to
enjoin this Company from implementing the LTIP. All defendants have filed
answers denying Grimes' claims and have moved to dismiss such claims, with the
exception of the recently added claim relating to the proxy statement, and
intend to vigorously contest all claims.
On July 20, 1993, the Company filed suit against Advanced Fibre
Communications ("AFC"), a California corporation; Quadrium Corporation
("Quadrium"), a California corporation; Alan E. Negrin ("Negrin"); and Henri
Sulzer ("Sulzer") in the United States District Court for the Eastern District
of Texas, Marshall Division, Civil Action No. 2-93CV126. The Company seeks a
declaratory judgment that Negrin and Sulzer are not entitled to any stock
options or cash payments under the Company's 1990 Stock Option and Cash Payment
Plan because of these defendants' alleged breaches of certain employment-related
agreements
<PAGE> 13
entered into with the Company. The Company further seeks a declaration that
AFC's products, including the UMC 1000 Digital Loop Carrier, are the
proprietary property of the Company under the terms of certain Proprietary
Information Agreements or certain Consulting Agreements with Quadrium. The
Company also seeks unspecified damages for breach of contract, civil
conspiracy, and tortious interference. The individual defendants have both
filed counterclaims whereby they claim entitlement to certain stock options and
cash payments under several of the Company's stock option plans. AFC has also
filed a counterclaim alleging that the Company has violated the Sherman
Antitrust Act and a California statutory antitrust act known as the Cartwright
Act. AFC further claims that the Company has (a) tortiously interfered with
existing and prospective contractual relationships, (b) committed industrial
espionage and misappropriation, (c) trespassed on AFC's business premises, (d)
converted certain property of AFC, and (e) committed unfair competition. AFC
also seeks a declaratory judgment that it owns all rights to its product, the
UMC Digital Loop Carrier. AFC asks the court to award unspecified actual
damages, treble damages under the antitrust statutes, punitive damages,
injunctive relief, and attorneys' fees. Although the outcome of litigation is
inherently uncertain, the Company believes that it has valid and substantial
claims against all of the defendants and valid defenses to all of the
counterclaims. The case is still in discovery, and the Company intends to
vigorously prosecute its claims and defend all of the defendants'
counterclaims.
The Company does not believe that the ultimate resolution of any of
these suits will have a material adverse effect on its consolidated financial
position.
The Company is also a party to other legal proceedings which, in the
opinion of management, are not expected to have a material adverse effect on the
Company's consolidated financial position.
<PAGE> 14
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits.
11. Computation of Income Per Share.
B. Reports on Form 8-K.
No reports on Form 8-K have been filed during the three months
ended June 30, 1994.
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DSC COMMUNICATIONS CORPORATION
Dated: August 12, 1994 By: /s/ KENNETH R. VINES
Kenneth R. Vines
Vice President and
Controller, duly
authorized officer and
principal accounting
officer
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- - ------- -----------
<S> <C>
11. Computation of Income Per Share.
</TABLE>
<PAGE> 1
Exhibit 11
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Computation of Income per Share
(In thousands)
(Unaudited)
The following table sets forth the computation of shares used in the
calculation of income per share for the three and six months ended June 30,
1994 and 1993. All 1993 amounts presented have been restated to retroactively
reflect a two-for-one stock split, effected in the form of a 100% stock
dividend, declared by the Board of Directors on April 27, 1994 for shareholders
of record on May 11, 1994.
Average Shares Used in Income per Share Calculation:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
Weighted average
shares outstanding
during the period................ 111,981 97,826 111,425 93,714
Common share equivalents
outstanding:
Options and warrants
issued and
contingently issuable.......... 6,029 11,078 6,516 10,312
Assumed purchase of
treasury shares................ (1,406) (2,478) (1,521) (2,178)
------- ------- ------- -------
Weighted average shares
used in calculation.............. 116,604 106,426 116,420 101,848
======= ======= ======= =======
</TABLE>
Fully diluted income per share is not shown since the dilutive effect is less
than three percent for the three and six months ended June 30, 1994 and 1993.
