<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 March 31, 1997
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)
(972) 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.
<TABLE>
<CAPTION>
Number of Shares Outstanding
Title of Each Class as of April 30, 1997
- --------------------------------- --------------------------------
<S> <C> <C>
Common Stock, $0.01 Par Value 117,343,303
</TABLE>
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------- -----------
(Unaudited)
Assets
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents ...................... $ 178,058 $ 155,101
Marketable securities .......................... 199,884 178,938
Receivables .................................... 360,130 411,947
Inventories .................................... 356,663 343,566
Deferred income taxes .......................... 60,961 61,086
Other current assets ........................... 77,209 52,240
----------- -----------
Total current assets ...................... 1,232,905 1,202,878
----------- -----------
PROPERTY AND EQUIPMENT, at cost .................. 783,548 764,671
Less accumulated depreciation
and amortization .............................. (375,669) (361,075)
----------- -----------
407,879 403,596
----------- -----------
LONG-TERM RECEIVABLES ............................ 46,997 42,965
CAPITALIZED SOFTWARE DEVELOPMENT COSTS ........... 53,832 51,634
COST IN EXCESS OF NET ASSETS OF
BUSINESSES ACQUIRED, NET ....................... 143,778 146,025
OTHER ............................................ 71,983 78,557
----------- -----------
Total assets .......................... $ 1,957,374 $ 1,925,655
=========== ===========
Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Short-term debt ................................ $ 902 $ 906
Accounts payable ............................... 124,542 99,824
Accrued liabilities ............................ 290,269 299,120
Current portion of long-term debt .............. 32,654 33,072
----------- -----------
Total current liabilities ................. 448,367 432,922
----------- -----------
LONG-TERM DEBT, net of current portion ........... 266,263 274,602
NONCURRENT INCOME TAXES
AND OTHER LIABILITIES ........................... 70,172 70,495
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, $ 01 par value, issued -
122,328 in 1997 and 122,241 in 1996;
outstanding - 117,339 in 1997 and
117,252 in 1996 ............................... 1,223 1,222
Additional capital ............................. 732,705 730,743
Unrealized gains (losses) on equity securities,
net of income taxes ........................... 13,580 (147)
Accumulated translation adjustment ............. 1,629 8,743
Retained earnings .............................. 466,546 450,186
----------- -----------
1,215,683 1,190,747
Treasury stock, at cost, 4,989 shares .......... (43,111) (43,111)
----------- -----------
Total shareholders' equity ................ 1,172,572 1,147,636
----------- -----------
Total liabilities and
shareholders' equity ................ $ 1,957,374 $ 1,925,655
=========== ===========
</TABLE>
See the accompanying Notes to Condensed Consolidated Financial Statements.
Page 2 of 17
<PAGE> 3
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Revenue .......................................... $ 346,203 $ 307,897
Cost of revenue .................................. 206,928 178,431
------------ ------------
Gross profit ................................... 139,275 129,466
------------ ------------
Operating costs and expenses:
Research and product development ............... 54,781 53,145
Selling, general and administrative ............ 58,051 55,779
Other operating costs .......................... 2,472 2,582
------------ ------------
Total operating costs and expenses ........... 115,304 111,506
------------ ------------
Operating income ............................... 23,971 17,960
Interest income .................................. 5,038 7,026
Interest expense ................................. (5,824) (7,086)
Other income (expense), net ...................... 3,202 689
------------ ------------
Income before income taxes ................... 26,387 18,589
Income taxes ..................................... 10,027 7,064
------------ ------------
Net income ................................... $ 16,360 $ 11,525
============ ============
Income per share ................................. $ 0.14 $ 0.10
============ ============
Average shares used in per share computation ..... 119,075 118,353
</TABLE>
See the accompanying Notes to Condensed Consolidated Financial Statements.
Page 3 of 17
<PAGE> 4
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ......................................... $ 16,360 $ 11,525
Adjustments to reconcile net income to
net cash provided by (used for) operating
activities:
Depreciation and amortization .................. 23,949 21,864
Amortization of capitalized software
development costs ........................... 6,524 6,712
Decrease in current and long-term receivables ...... 45,065 25,139
Increase in inventories ............................ (14,694) (25,418)
Other, including changes in other current
assets, current payables and other liabilities ... 7,387 (43,916)
---------- ----------
NET CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES ....................... 84,591 (4,094)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment ................ (30,339) (33,880)
Purchases of marketable securities ................. (93,281) (609,876)
Proceeds from sales and maturities of marketable
securities ....................................... 71,900 616,821
Additions to capitalized software
development costs ................................ (8,722) (9,400)
Other .............................................. 729 (623)
---------- ----------
NET CASH USED FOR
INVESTING ACTIVITIES ....................... (59,713) (36,958)
---------- ----------
</TABLE>
Page 4 of 17
<PAGE> 5
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Continued)
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term debt .................. 65 10,630
Payments on long-term borrowings ............. (816) (864)
Proceeds from the sale of common stock
under stock programs ....................... 493 1,645
Other ........................................ (1,094) 226
---------- ----------
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES ................. (1,352) 11,637
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS ................ (569) (736)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ......................... 22,957 (30,151)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 155,101 258,565
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ..... $ 178,058 $ 228,414
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid ................................ $ 1,027 $ 836
========== ==========
Income taxes paid ............................ $ 830 $ 24,341
========== ==========
</TABLE>
See the accompanying Notes to Condensed Consolidated Financial Statements.
Page 5 of 17
<PAGE> 6
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 1997 and 1996 and December 31, 1996
(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
1996 Annual Report to Shareholders for the year ended December 31, 1996.
INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- ---------
<S> <C> <C>
Raw Materials . . . . . . . . . . . . . . . . . . . . . . $ 123,084 $ 127,495
Work in Process . . . . . . . . . . . . . . . . . . . . . 26,939 25,724
Finished Goods . . . . . . . . . . . . . . . . . . . . . . 206,640 190,347
---------- ---------
$ 356,663 $ 343,566
========== =========
</TABLE>
Page 6 of 17
<PAGE> 7
CREDIT AGREEMENTS AND SHORT-TERM DEBT
In 1996, the Company entered into a five-year, unsecured $160.0 million
revolving credit facility with several banks. This facility provides for
borrowings and issuances of letters of credit in various currencies. The
maximum borrowings available under the facility are reduced by the value of
outstanding letters of credit issued by the banks on behalf of the Company.
The letters of credit issued by the banks under this agreement at March 31,
1997 totaled $6.7 million, including $5.2 million issued to support various
foreign subsidiary credit agreements. This facility contains various financial
covenants and there have been no borrowings under this agreement during the
quarter ended March 31, 1997. Two of the Company's foreign subsidiaries also
have credit agreements providing for borrowings of up to $9.1 million with
local banks, of which $0.9 million was outstanding at March 31, 1997.
OTHER INCOME (EXPENSE), NET
Other income/(expense), net in the 1997 first quarter includes a gain of
approximately $4.0 million from the sale of a portion of common stock received
from a settlement of litigation in 1996.
INCOME TAX EXPENSE
The Company's estimated effective income tax rate is 38%. The income tax
expense includes federal, foreign, and state (including Puerto Rico) income
taxes.
Page 7 of 17
<PAGE> 8
COMMITMENTS AND CONTINGENCIES
Contingent Liabilities
The Company periodically sells customer receivables and leases under agreements
which contain recourse provisions. The Company could be obligated to
repurchase a portion of the sales-type and operating lease receivables which
were previously sold on a partial recourse basis, the terms of which allow the
Company to limit its risk of loss to approximately $7.9 million at March 31,
1997. The Company also has guarantees of $30.7 million outstanding at March
31, 1997 supporting bid and performance bonds to customers and others, of which
$1.5 million 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, in management of its exposure to fluctuations in foreign currency
exchange rates, enters into forward foreign exchange contracts to hedge firm
commitments which are denominated in foreign currencies. At March 31, 1997,
the Company had forward foreign exchange contracts of $73.4 million
outstanding.
Litigation
On February 14, 1996, the Company joined Bell Atlantic in bringing an antitrust
action against AT&T Corporation ("AT&T") and Lucent Technologies, Inc.
("Lucent") alleging the use of monopoly power in the central office switch
market as part of a scheme to gain an unfair competitive advantage in the remote
digital terminal market. In July 1996, Lucent brought a counterclaim against the
Company alleging a "false advertising" claim under the Lanham Act. On February
18, 1997, the Company and Bell Atlantic settled their claims against AT&T. The
Company, Bell Atlantic and Lucent settled all claims against each other on March
13, 1997. In conjunction with these settlements, Bell Atlantic agreed to
purchase a significant amount of product from the Company over a period from
1998 through 2001. The agreement requires a minimum annual purchase level
substantially above the amount purchased by Bell Atlantic from the Company in
1996 which totaled approximately $120 million.
On June 11, 1996, a federal court entered a $137.7 million judgment in the
Company's favor and against Next Level Corporation ("Next Level") and two
former Company employees. The Company had filed suit in 1995 alleging theft of
trade secrets and diversion of corporate opportunities. On February 28, 1997,
the Fifth Circuit of Appeals upheld the judgment. The Company and Next Level
have appealed to an En Banc panel of judges in the Fifth Circuit. The
defendants are enjoined from disclosing the Company's trade secrets until
the judgment is satisfied.
Page 8 of 17
<PAGE> 9
In August 1996, the Company filed suit against Samsung Information Systems
America, Inc., Samsung Electronics Co., Ltd. and several former employees of
the Company (collectively the "Defendants") alleging claims for breach of
contract, theft of trade secrets, unfair competition and tortious interference
with contract and prospective contractual relations related to the Company's
development of a next generation switching system. The Company is seeking
unspecified damages. The Company is also seeking an injunction against the
Defendants to prevent them from using the Company's trade secrets. In late
December 1996, the Defendants filed a counterclaim against the Company,
alleging claims for declaratory judgment, wrongful injunction, tortious
interference with actual and prospective contractual relations,
misappropriation of trade secrets, unfair competition, exclusion from telephony
switch market, civil conspiracy, fraud and negligent misrepresentation, breach
of fiduciary or confidential relationship, defamation and intentional
infliction of emotional distress. These allegations arise primarily out of the
filing and prosecution of the Company's suit against the Defendants.
In October 1996, the Company filed suit against Pulse Communications, Inc.
("Pulsecom") alleging contributory copyright infringement and misappropriation
of trade secrets relating to the manufacture and sale of a POTS line card
advertised as compatible with the Company's Litespan-2000 system. The Company
sought damages and an injunction barring further infringement of the Company's
intellectual property rights by Pulsecom and its agents. Pulsecom has filed a
counterclaim alleging that the Universal Voice Grade line card manufactured by
the Company for the Litespan-2000 system infringes a patent assigned to
Pulsecom. On May 7, 1997 the Federal District Court for the Eastern District of
Virginia denied the Company's claims. The Company intends to file an appeal.
Pulsecom's patent infringement claims against the Company will be heard in a
separate trial expected to take place during the second or third quarter of
1997.
On May 25, 1994, the Company filed suit against DGI Technologies, Inc. ("DGI"),
alleging that DGI misappropriated the Company's trade secrets regarding digital
trunk interface cards and microprocessor cards. The Company seeks damages and
permanent injunctive relief. DGI brought counterclaims for damages and
injunctive and declaratory relief for alleged violations of federal antitrust
statutes, tortious interference, industrial espionage, misappropriation of
trade secrets, trespass, conversion, and unfair competition, based upon
allegations that the Company's claims constitute "sham" litigation, that the
Company's statements to customers about the impact of their use of DGI products
on the Company's warranties are unlawful attempts to exclude competition, and
that the Company has unlawfully tied the sale of its microprocessors to the
sale of other products. The case was tried in January 1997 and the jury
returned a verdict. The Court sealed the verdict and postponed entering a
judgment pending the outcome of additional mediation.
The Company is also party to other routine legal proceedings incidental to its
business.
The Company does not believe the ultimate resolution of the above
litigation will have a material adverse effect on its consolidated financial
position.
Page 9 of 17
<PAGE> 10
COMMON STOCK
At the April 30, 1997 Annual Shareholders' Meeting, the shareholders approved
an amendment to increase the total number of authorized shares of common stock
available for grant under the DSC Communications Corporation 1993 Employee
Stock Option and Securities Award Plan from 10.0 million shares to 15.75
million shares.
Page 10 of 17
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
Except for historical information, the matters discussed or incorporated by
reference in this Quarterly Report on Form 10-Q are forward-looking statements
that involve risks and uncertainties including, but not limited to, economic
conditions, product demand and industry capacity, competitive products and
pricing, manufacturing efficiencies, research and new product development,
protection of intellectual property, patents, and technology, ability to
attract and retain highly qualified personnel, availability of components and
critical manufacturing equipment, facility construction and startups, the
regulatory and trade environment, and other risks indicated from time to time
in the Company's filings with the Securities and Exchange Commission.
Results of Operations
For the three months ended March 31, 1997, the Company reported revenue of
$346.2 million and net income of $16.4 million, or $0.14 per share, compared to
revenue of $307.9 million and net income of $11.5 million, or $0.10 per share,
for the three months ended March 31, 1996.
Revenue increased 12% in the first quarter of 1997 compared to the same period
last year primarily as a result of a higher volume of access product deliveries
and increased sales of the Company's international transmission products.
Gross profit as a percentage of revenue was 40% for the 1997 first quarter
compared to 42% in the same period of 1996. Gross profit in the first quarter
of 1997 was impacted by the continued shift in revenue from higher margin
switching products to lower margin access and international transmission
products, as discussed above. As experienced in the past, the Company's gross
margin percentage in future periods could vary significantly from period to
period due to changes in the relative mix of product deliveries and software
content. Operating results in future periods could continue to be impacted by
these types of product mix changes.
DSC Communications A/S, the Company's Danish subsidiary, continued to incur
operating losses in the first quarter of 1997 due primarily to the delayed
introduction of a new generation of optical transmission equipment. Deliveries
of certain of these products have begun and it is anticipated that the
development effort will be completed later in 1997. Future near-term
profitability of the Company's Danish operations is dependent upon the
successful completion and market acceptance of these products.
Page 11 of 17
<PAGE> 12
Research and product development expenses were $54.8 million, or 16% of
revenue, for the three month period ended March 31, 1997 compared to $53.1
million, or 17% of revenue, for the three month period ended March 31, 1996.
The Company continues to make a substantial investment in research and
development to maintain the Company's ongoing development of new products and
enhancements to existing products across all strategic product areas. Selling,
general and administrative expenses totaled $58.1 million, or 17% of revenue,
for the three month period ended March 31, 1997 compared to $55.8 million, or
18% for the same period in 1996. The Company continues to actively pursue
claims related to its intellectual property rights and, as a result, legal
expenses may continue at a high level in the future as this litigation
progresses. See "Litigation" under "Commitment and Contingencies" in Notes to
Condensed Consolidated Financial Statements for further discussion.
Other income/(expense), net in the 1997 first quarter includes a gain related
to the sale of a portion of common stock received from the settlement of
litigation in 1996. At the end of March 1997, the Company held approximately
631,000 shares which had a market value of approximately 22 million and is
included in Other Current Assets on the Condensed Consolidated Balance Sheet.
The contractual and selling restrictions on these shares are now expected to
terminate during the second and third quarters of 1997.
The Company's estimated effective income tax rate was 38% for the quarter ended
March 31, 1997. 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
effective tax rate could change as estimates of these and other variables
change throughout the year. The Company believes that its existing deferred
tax assets on the Condensed Consolidated Balance Sheet will be realizable based
on the Company's profitable operating history and an assessment that the
Company will generate taxable earnings in domestic and foreign tax
jurisdictions in the future. Should the Company's Danish subsidiary incur
additional tax losses throughout the remainder of 1997, the Company's effective
tax rate could increase depending on a subsequent review of the realization of
the additional tax loss carryforward. See "Income Taxes" in Notes to Condensed
Consolidated Financial Statements for more information.
The Company's future quarterly and annual operating results may be affected by
a number of factors, including the introduction and market acceptance of new
products on a timely basis; mix of products sold; 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; 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 operating results.
Page 12 of 17
<PAGE> 13
Financial Condition and Liquidity
The Company's cash and cash equivalents at March 31, 1997 were $178.1 million
compared to $155.1 million at December 31, 1996, and marketable securities were
$199.9 million at March 31, 1997 compared to $178.9 million at December 31,
1996.
Cash of $84.6 million was generated from operating activities. This was
primarily the result of improved earnings and a decrease in accounts
receivable, partially offset by an increase in inventories as a result of
existing and anticipated customer demand for the Company's products.
Investing activities during the three months ended March 31, 1997 included
additions to property and equipment of $30.3 million. The Company anticipates
that capital expenditures for 1997 could be in the range of $150 million to
$170 million. This amount includes expected capital additions related to an
expansion of the Costa Rican manufacturing capacity, the establishment of
additional manufacturing facilities in Ireland and additional office space at
the Plano campus. However, the timing and extent of any future capital
expenditures is dependent upon future business growth.
As discussed in "Credit Agreements and Short-Term Borrowings" in Notes to
Condensed Consolidated Financial Statements, the Company has an unsecured
$160.0 million revolving credit agreement. No borrowings were outstanding
under the credit facilities existing at March 31, 1997. Outstanding letters of
credit, which totaled $6.7 million at March 31, 1997, reduce the amount of
available borrowings. Two of the Company's foreign subsidiaries also have
credit agreements providing for borrowings of up to $9.1 million with local
banks, of which $0.9 million was outstanding at March 31, 1997.
Page 13 of 17
<PAGE> 14
The Company is party to certain litigation, as disclosed in "Litigation" under
"Commitment and Contingencies" in Notes to Condensed Consolidated Financial
Statements, the outcome of which the Company believes will not have a material
adverse effect on its consolidated financial position. As discussed in Notes
to Condensed Consolidated Financial Statements, the Federal Court entered a
$137.7 million judgment in the Company's favor associated with the Next Level
litigation. This judgment was upheld by the Fifth Circuit Court of Appeals in
late February 1997. The Company and Next Level have appealed to an En Banc
panel of judges in the Fifth Circuit. The Company believes that it should
receive the proceeds from this judgment subsequent to the appeal process.
The Company believes that its existing cash and short-term investments and
available credit facilities will be adequate to support the Company's financial
resource needs, including working capital requirements, capital expenditures,
operating lease obligations and debt payments. In order to be competitive in
the future, the Company believes that it will become increasingly necessary to
offer financing alternatives to both domestic and international customers. To
the extent such financing becomes significant or other business requirements
arise, additional financing could become necessary.
Page 14 of 17
<PAGE> 15
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's 1997 Annual Meeting of Stockholders was held on April 30, 1997.
The following matters were voted on by the stockholders:
1. Election of two Class I Directors. Raymond J. Dempsey and James L. Fischer
were elected to the Board of Directors as Class I Directors for terms
extending through the 2000 Annual Meeting of Stockholders. The vote was
106,553,729 shares in favor of Raymond J. Dempsey, with 1,641,031 votes
withheld, 106,538,833 shares in favor of James L. Fischer, with 1,655,927
votes withheld.
2. Approval of an increase of 5,750,000 shares of Common Stock of the Company
subject to the Company's 1993 Employee Stock Option and Securities Award
Plan. Under the terms of the 1993 Employee Stock Option and Securities
Award Plan, as amended, the Company may grant Plan Awards with respect to
an aggregate of 10,000,000 shares of Common Stock. At the 1996 Annual
Meeting of Stockholders, the Company's stockholders approved the increase
in the shares. The vote was 86,662,086 shares in favor, 17,721,929 shares
against, 477,725 shares abstaining and 3,333,020 broker non-votes.
Page 15 of 17
<PAGE> 16
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
March 31, 1997.
Page 16 of 17
<PAGE> 17
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: May 15, 1997 By: /s/ Kenneth R. Vines
---------------------------
Kenneth R. Vines
Vice President, Finance,
duly authorized officer
and principal accounting
officer
Page 17 of 17
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
11. Computation of Income Per Share.
27. Financial Data Schedule (for EDGAR filing purposes only).
</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 months ended March 31, 1997 and
1996.
Average Shares Used in Income per Share Calculation:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Weighted average
shares outstanding
during the period ............ 117,325 115,815
Common share equivalents
outstanding:
Options and warrants
issued and
contingently issuable ...... 5,588 3,921
Assumed purchase of
treasury shares ............ (3,838) (1,383)
---------- ----------
Weighted average shares
used in calculation .......... 119,075 118,353
========== ==========
</TABLE>
Fully diluted income per share is not shown since the dilutive effect is less
than three percent for the three months ended March 31, 1997 and 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 178,058
<SECURITIES> 199,884
<RECEIVABLES> 360,130
<ALLOWANCES> 0
<INVENTORY> 356,663
<CURRENT-ASSETS> 1,232,905
<PP&E> 783,548
<DEPRECIATION> 375,669
<TOTAL-ASSETS> 1,957,374
<CURRENT-LIABILITIES> 448,367
<BONDS> 266,263
0
0
<COMMON> 1,223
<OTHER-SE> 1,171,349
<TOTAL-LIABILITY-AND-EQUITY> 1,957,374
<SALES> 346,203
<TOTAL-REVENUES> 346,203
<CGS> 206,928
<TOTAL-COSTS> 206,928
<OTHER-EXPENSES> 57,253
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,824
<INCOME-PRETAX> 26,387
<INCOME-TAX> 10,027
<INCOME-CONTINUING> 16,360
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,360
<EPS-PRIMARY> .14
<EPS-DILUTED> 0
</TABLE>
