<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 September 30, 1995
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 October 31, 1995
-------------------------------- ------------------------------
Common Stock, $.01 Par Value 115,353,793
Page 1 of 15
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- -------------
(Unaudited)
<S> <C> <C>
Assets
- -------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents............................ $ 234,794 $ 52,942
Marketable securities................................ 298,804 218,380
Receivables.......................................... 286,149 239,740
Inventories.......................................... 274,197 180,674
Contract development costs........................... 12,574 14,202
Other current assets................................. 36,159 32,516
----------- ------------
Total current assets............................ 1,142,677 738,454
----------- ------------
PROPERTY AND EQUIPMENT, at cost........................ 641,242 526,248
Less accumulated depreciation
and amortization.................................... (287,854) (243,285)
----------- ------------
353,388 282,963
----------- ------------
LONG-TERM RECEIVABLES.................................. 42,266 25,691
CAPITALIZED SOFTWARE DEVELOPMENT COSTS................. 42,211 38,583
COST IN EXCESS OF NET ASSETS OF
BUSINESSES ACQUIRED, NET............................. 146,094 152,396
OTHER.................................................. 32,271 30,449
----------- ------------
Total assets................................ $ 1,758,907 $ 1,268,536
=========== ============
Liabilities and Shareholders' Equity
- -------------------------------------------------------
CURRENT LIABILITIES
Short-term debt...................................... $ 42,095 $ 39,791
Accounts payable..................................... 117,250 91,054
Accrued liabilities.................................. 223,472 153,274
Customer advances.................................... 14,073 21,834
Income taxes payable................................. 4,682 22,219
Current portion of long-term debt.................... 37,585 17,248
----------- ------------
Total current liabilities....................... 439,157 345,420
----------- ------------
LONG-TERM DEBT, net of current portion................. 217,482 25,330
NONCURRENT INCOME TAXES
AND OTHER LIABILITIES................................. 79,628 46,686
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, issued -
120,290 in 1995 and 118,514 in 1994;
outstanding - 115,301 in 1995 and
113,525 in 1994..................................... 1,203 1,185
Additional capital................................... 652,143 631,729
Unrealized losses on securities,
net of income taxes................................. (331) (3,764)
Accumulated translation adjustment................... 4,437 --
Retained earnings ................................... 408,299 265,061
----------- ------------
1,065,751 894,211
Treasury stock, at cost, 4,989 shares................ (43,111) (43,111)
----------- ------------
Total shareholders' equity........................ 1,022,640 851,100
----------- ------------
Total liabilities and
shareholders' equity...................... $ 1,758,907 $ 1,268,536
=========== ============
</TABLE>
See the accompanying Notes to Condensed Consolidated Financial Statements.
Page 2 of 15
<PAGE> 3
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue........................................... $ 370,119 $ 260,601 $ 1,048,127 $ 691,049
Cost of revenue................................... 195,713 134,140 537,325 354,706
---------- ---------- ----------- ----------
Gross profit.................................... 174,406 126,461 510,802 336,343
---------- ---------- ----------- ----------
Operating costs and expenses:
Research and product development................ 47,597 33,559 142,482 87,175
Selling, general and administrative............. 52,552 35,579 149,379 100,087
Other operating costs........................... 2,320 949 6,732 5,827
---------- ---------- ----------- ----------
Total operating costs and expenses............ 102,469 70,087 298,593 193,089
---------- ---------- ----------- ----------
Operating income ............................... 71,937 56,374 212,209 143,254
Interest income................................... 7,845 4,473 19,237 12,037
Interest expense.................................. (6,278) (629) (11,605) (1,313)
Other income (expense), net....................... 177 (1,625) (1,744) (3,922)
---------- ---------- ----------- ----------
Income before income taxes.................... 73,681 58,593 218,097 150,056
Income taxes...................................... 24,314 15,397 74,859 40,975
---------- ---------- ----------- ----------
Net income ................................... $ 49,367 $ 43,196 $ 143,238 $ 109,081
========== ========== =========== ==========
Income per share.................................. $ 0.42 $ 0.37 $ 1.21 $ 0.94
========== ========== =========== ==========
Average shares used in computation................ 118,668 116,820 117,946 116,614
</TABLE>
See the accompanying Notes to Condensed Consolidated Financial Statements.
Page 3 of 15
<PAGE> 4
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------
1995 1994
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................. $ 143,238 $ 109,081
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization........... 58,288 38,876
Amortization of capitalized software
development costs.................... 15,144 15,244
Increase in current and
long-term receivables.................... (59,596) (30,385)
Increase in inventories..................... (90,807) (29,840)
Other, including changes in current
payables and other current assets......... 55,486 15,421
Increase in noncurrent income taxes
and other liabilities..................... 40,478 24,534
----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES................ 162,231 142,931
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities.......... (670,757) (289,632)
Proceeds from sales and maturities of market
securities................................ 593,429 232,025
Purchases of property and equipment......... (116,416) (99,031)
Additions to capitalized software
development costs......................... (18,772) (18,720)
Purchase of long-term investment security... -- (12,500)
Other....................................... (1,838) (1,129)
----------- -----------
NET CASH USED FOR
INVESTING ACTIVITIES................ (214,354) (188,987)
----------- -----------
</TABLE>
(Continued)
Page 4 of 15
<PAGE> 5
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Continued)
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------
1995 1994
---------- -----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term borrowings........... 2,304 --
Proceeds from long-term borrowings.......... 241,081 --
Payments on long-term borrowings............ (28,976) (11,323)
Proceeds from the sale of common stock
under stock programs.................... 19,637 11,926
Other....................................... (1,462) (195)
---------- ----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES..................... 232,584 408
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS..................... 1,391 --
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.............................. 181,852 (45,648)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD................................... 52,942 154,888
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.... $ 234,794 $ 109,240
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid............................... $ 1,124 $ 1,453
========== ==========
Income taxes paid........................... $ 53,202 $ 9,944
========== ==========
</TABLE>
See the accompanying Notes to Condensed Consolidated Financial Statements.
Page 5 of 15
<PAGE> 6
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 1995 and 1994 and December 31, 1994
(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, 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 year's 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
1994 Annual Report to Shareholders for the year ended December 31, 1994.
INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Raw Materials . . . . . . . . . . . . . . . . . . . . . . $120,878 $ 66,466
Work in Process . . . . . . . . . . . . . . . . . . . . . 19,640 18,618
Finished Goods . . . . . . . . . . . . . . . . . . . . . . 133,679 95,590
-------- --------
$274,197 $180,674
======== ========
</TABLE>
Page 6 of 15
<PAGE> 7
CREDIT AGREEMENTS AND SHORT-TERM BORROWINGS
The Company has an uncollateralized revolving credit facility, which expires on
February 24, 1998, with two banks providing for borrowings up to $50 million.
The maximum borrowings available are reduced by the value of outstanding
letters of credit issued by the banks on behalf of the Company, which totaled
approximately $32.9 million at September 30, 1995. Outstanding letters of
credit include $27.1 million issued to support various foreign subsidiary
credit arrangements. 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 nine months ended September 30, 1995.
During the second quarter of 1995, two of the Company's foreign subsidiaries
entered into short-term credit agreements providing for borrowings denominated
in foreign currencies of up to $57.8 million, of which $42.1 million were
outstanding at September 30, 1995. The interest rates on these agreements are
floating market rates which ranged from 5% to 10% at September 30, 1995.
LONG-TERM DEBT
On April 21, 1995, the Company borrowed $225 million under a long-term,
unsecured loan agreement with several insurance companies. The loan is payable
in eight equal annual payments beginning in the second quarter of 1996 and
bears interest at a rate of 9%, payable semi-annually. The loan contains
various financial covenants including, among other things, limitations on
additional debt and minimum levels of net worth.
In April 1995, the Company made an unscheduled payment of $9.4 million to
retire the outstanding balance of a 9.5% note.
In July 1995, a foreign subsidiary borrowed $16.1 million under a long-term
loan agreement. The loan bears interest at 8.75% per annum and is repayable in
quarterly installments beginning in the third quarter of 1995 through the
second quarter of 2000.
INCOME TAX EXPENSE
The Company's income tax expense includes federal, foreign, and state
(including Puerto Rico) 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 in the United States and foreign
jurisdictions. The estimated effective tax rate for the first nine months of
1995 was lowered to 34% from 35% for
Page 7 of 15
<PAGE> 8
the first half of 1995 to reflect the most current estimate for the full year.
As these estimates and others are finalized at the end of 1995, the effective
tax rate could change again; also, an adjustment to Additional Capital will
likely be made to the extent tax benefits are realized from employee exercises
of stock options during 1995.
The estimated effective income tax rate is higher in 1995 than in 1994
primarily due to limited availability in 1995 of net operating loss and tax
credit carryforwards.
COMMON STOCK
At the April 26, 1995 Annual Shareholders' Meeting, the shareholders approved
both an increase in the number of authorized shares of common stock from 250
million to 500 million and an increase of 1 million shares of common stock
authorized for issuance under the Company's 1990 Employee Stock Purchase Plan.
COMMITMENTS AND CONTINGENCIES
Contingent Liabilities
The Company has guarantees of $33.9 million outstanding at September 30, 1995
supporting Company and third-party performance bonds to customers and others,
of which $5.8 million were collateralized by letters of credit issued under the
Company's revolving domestic credit facility. The Company believes it has
adequate reserves for any ultimate losses associated with these contingencies.
The Company, in management of its exposure to fluctuations in foreign currency
exchange rates, enters into forward foreign exchange contracts for both firm
commitments and anticipated transactions of sales and purchases which are
denominated in foreign currencies. At September 30, 1995, the Company had
forward foreign exchange contracts of $56.4 million outstanding.
For information regarding litigation, refer to Part II - Other Information,
Item 1. "Legal Proceedings".
Page 8 of 15
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Results of Operations
For the three months ended September 30, 1995, the Company reported revenue of
$370.1 million and net income of $49.4 million, or $0.42 per share, compared to
revenue of $260.6 million and net income of $43.2 million, or $0.37 per share,
for the three months ended September 30, 1994. For the nine months ended
September 30, 1995, the Company reported revenue of $1,048.1 million and net
income of $143.2 million, or $1.21 per share, compared to revenue of $691.0
million and net income of $109.1 million, or $0.94 per share, for the nine
months ended September 30, 1994.
Revenue for the 1995 third quarter and first nine months increased 42% and 52%,
respectively, compared to the same periods in 1994. The growth in revenue was
primarily the result of increased demand for the Company's switching, access and
transmission products as well as the inclusion of revenue from DSC
Communications A/S acquired in November 1994. Gross profit as a percentage of
revenue was 47% and 49% for the third quarter and first nine months of 1995,
respectively, compared to 49% in both the third quarter and nine months ended
September 30, 1994. 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 third quarter of 1995 and 1994
was $47.6 million and $33.6 million, respectively, representing 13% of revenue
for both the third quarter of 1995 and 1994. Research and product development
for the nine months ended September 30, 1995 was $142.5 million, or 14% of
revenue, compared to $87.2 million, or 13% of revenue, for the first nine
months of 1994. The growth in research and product development expenses
includes the development activities of DSC Communications A/S as well as
increases in the Company's on-going development of new products and
enhancements to existing products across all strategic product lines.
Selling, general and administrative expense was $52.6 million and $149.4
million in the third quarter of 1995 and nine months ended September 30, 1995,
respectively, compared to $35.6 million and $100.1 million, respectively, for
the same periods in 1994. As a percentage of revenue, selling, general and
administrative expense for both the three months and nine months ended
September 30, 1995 was 14%, consistent with the same periods of 1994. The
growth in expenses was due primarily to the inclusion of expenses of DSC
Communications
Page 9 of 15
<PAGE> 10
A/S in 1995, increased international selling activities and higher legal costs.
The Company's interest expense has increased substantially in 1995 over 1994
due primarily to the significant amount of new borrowings during 1995,
including the $225 million of long-term debt which was funded on April 21,
1995. Interest income has also increased as proceeds from the $225 million loan
have been invested in short-term investments until required for future business
purposes.
The Company's estimated effective income tax rate was 33% and 34% for the three
and nine month periods ended September 30, 1995, respectively, compared to 26%
and 27% for the same period in 1994. The increase in the effective income tax
rate for both the quarter and nine months is due primarily to limited net
operating loss and tax credit carryforwards available to reduce taxable
earnings in 1995 compared to 1994 and increased foreign taxes.
The Company has certain forward exchange contracts which are based on
anticipated future business transactions in various foreign countries,
primarily Germany and Italy, which totaled approximately $13.0 million at
September 30, 1995. Future earnings could be affected since forward contracts
related to anticipated transactions are marked-to-market each period.
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
certain 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; significant fluctuations in foreign
currency exchange rates; and changes in general worldwide economic conditions,
any of which could have an adverse impact on operations.
Financial Condition and Liquidity
The Company's cash and cash equivalents at September 30, 1995 were $234.8
million compared to $52.9 million at December 31, 1994 while marketable
securities were $298.8 million at September 30, 1995 compared to $218.4 million
at December 31, 1994.
In April 1995, the Company received proceeds from a $225 million long-term loan
bearing interest at 9%. Interest payments will be made semi-annually, and
principal payments will be made in eight equal annual installments beginning in
the second quarter of 1996. The proceeds from the loan are expected to be used
for general corporate purposes, including capital expenditures, although
currently the majority of the proceeds from the loan have been used to purchase
short-term investments. See "Long-term Debt" in the Notes to Condensed
Consolidated Financial Statements for further information.
Cash of $162.2 million was generated from operating activities. This was
primarily the result of strong earnings and an increase in non-debt
liabilities, partially offset by an increase in receivables and
Page 10 of 15
<PAGE> 11
inventories. The inventory growth is to support existing and anticipated
customer requirements for the last quarter of 1995 and early 1996, including
new product introductions.
Investing activities during the nine months ended September 30, 1995 included
additions to property and equipment of $116.4 million. These additions include
the purchase of land and construction costs incurred on new facilities currently
under construction in Copenhagen, Denmark. These new facilities are expected to
cost approximately $50 million with occupancy of one building in late 1995 and
the other building in early 1996. The new facilities will consolidate the
operations of DSC Communications A/S which are currently located in numerous
leased facilities. The Company's rapid business expansion and expected future
domestic and international growth have and will continue to increase capital
requirements, including facilities and manufacturing and development equipment.
It is anticipated that 1995 capital expenditures will approximate $160 million
to $180 million.
In 1995 several of the Company's foreign subsidiaries entered into short-term
credit arrangements totaling $57.8 million, of which $42.1 million was
outstanding at September 30, 1995. Additionally, in July 1995 a foreign
subsidiary borrowed $16.1 million under a long-term loan facility. These
arrangements are being used to fund foreign facilities expansion and working
capital needs and are repayable in the foreign subsidiaries' local currencies.
See "Credit Agreements and Short-term Borrowings" and "Long-term Debt" in the
Notes to Condensed Consolidated Financial Statements for further information.
Other financing activities during the first nine months of 1995 included the
repayment of the remaining $39.8 million of short-term borrowings obtained to
fund a portion of the DSC Communications A/S acquisition, an unscheduled
payment of $9.4 million to retire a 9.5% note in April 1995, and $19.6 million
of scheduled payments on long-term borrowings. Financing activities during the
nine months ended September 30, 1995 also includes proceeds of $19.6 million
from the issuance of the Company's common stock under stock programs.
The Company has a $50.0 million unsecured revolving credit facility, which
expires on February 24, 1998, with $17.1 million of available borrowings at
September 30, 1995, net of outstanding letters of credit. There have been no
borrowings under the credit facility during the nine months ended September 30,
1995. See "Credit Agreements and Short- term Borrowings" in the Notes to
Condensed Consolidated Financial Statements for further information.
The Company believes that its existing cash and marketable securities and
available credit facilities will be adequate to support the Company's short and
long-term financial resource needs, including
Page 11 of 15
<PAGE> 12
working capital requirements, capital expenditures, operating lease
obligations, and debt payments.
Page 12 of 15
<PAGE> 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Litigation
On July 20, 1993, the Company filed suit against Advanced Fibre
Communications ("AFC"), a California corporation; Quadrium Corporation
("Quadrium"), a California corporation; and two individuals. The Company seeks a
declaratory judgment that the two individuals 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 with the Company. The Company further seeks a declaration that
AFC's products 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 breaches 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 certain state antitrust statutes, and
further claims that the Company has (1) tortiously interfered with existing and
prospective contractual relationships, (2) committed industrial espionage and
misappropriation, (3) trespassed on AFC's business premises, (4) converted
certain property of AFC, (5) committed unfair competition and (6) committed
acts in violation of the Racketeering Influenced Corrupt Organization Act. The
Company believes that it has valid and substantial claims against all of the
defendants. The Company intends to vigorously defend all of the defendants'
counterclaims, and further believes it has valid defenses to all of the
counterclaims. The Company does not believe that the ultimate resolution of
this suit 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 13 of 15
<PAGE> 14
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits.
11. Computation of Income Per Share.
27. Financial Data Schedule (for EDGAR filing purposes only)
B. Reports on Form 8-K.
No reports on Form 8-K have been filed during the three months ended
September 30, 1995.
Page 14 of 15
<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: November 10, 1995 By: /s/ Kenneth R. Vines
---------------------------
Kenneth R. Vines
Vice President, Finance,
duly authorized officer
and principal accounting
officer
Page 15 of 15
<PAGE> 16
INDEX TO EXHIBITS
Exhibit
No. Description
------- -----------
11. Computation of Income Per Share.
27. Financial Data Schedule (for EDGAR filing purposes only)
<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 months and nine months ended
September 30, 1995 and 1994.
Average Shares Used in Income per Share Calculation:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
1995 1994 1995 1994
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Weighted average
shares outstanding
during the period..................... 115,011 112,684 114,445 111,850
Common share equivalents
outstanding:
Options and warrants
issued and
contingently issuable............... 5,284 5,452 5,217 6,309
Assumed purchase of
treasury shares..................... (1,627) (1,316) (1,716) (1,545)
--------- --------- --------- ---------
Weighted average shares
used in calculation................... 118,668 116,820 117,946 116,614
========= ========= ========= =========
</TABLE>
Fully diluted income per share is not shown since the dilutive effect is less
than three percent for the three months and nine months ended September 30,
1995 and 1994.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 234,794
<SECURITIES> 298,804
<RECEIVABLES> 286,149
<ALLOWANCES> 0
<INVENTORY> 274,197
<CURRENT-ASSETS> 1,142,677
<PP&E> 641,242
<DEPRECIATION> (287,854)
<TOTAL-ASSETS> 1,758,907
<CURRENT-LIABILITIES> 439,157
<BONDS> 217,482
<COMMON> 1,203
0
0
<OTHER-SE> 1,021,437
<TOTAL-LIABILITY-AND-EQUITY> 1,758,907
<SALES> 1,048,127
<TOTAL-REVENUES> 1,048,127
<CGS> 537,325
<TOTAL-COSTS> 537,325
<OTHER-EXPENSES> 298,593
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,605
<INCOME-PRETAX> 218,097
<INCOME-TAX> 74,859
<INCOME-CONTINUING> 143,238
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 143,238
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 0
</TABLE>
