______________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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, 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 0-16588
OCTEL COMMUNICATIONS CORPORATION
_____________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 77-0029449
____________________________ ______________________
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
1001 Murphy Ranch Road
Milpitas, California 95035-7912
(Address of principal executive offices)
Registrant's telephone number, including area code, is
(408)321-2000
__________________
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 _______
The number of shares outstanding of the registrant's Common
Stock on October 31, 1994, was 23,591,287.
__________________________________________________________________
This document consists of 15 pages of which this is Page 1.
</PAGE>
OCTEL COMMUNICATIONS CORPORATION
INDEX
Page
Number
______
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance
Sheets - September 30, 1994, and
June 30, 1994 3
Condensed Consolidated Statements
of Income - three months ended
September 30, 1994, and 1993 4
Condensed Consolidated Statements
of Cash Flows - three months ended
September 30, 1994, and 1993 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
-2-
</PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OCTEL COMMUNICATIONS CORPORATION
Condensed Consolidated Balance Sheets
(Dollars in thousands, unaudited)
ASSETS
Sept. 30, June 30,
1994 1994
_________ ________
Current assets:
Cash and equivalents $ 17,569 $ 17,889
Short-term investments 52,812 68,463
Accounts receivable, net of allowance
for doubtful accounts of $2,758 at
September 30, 1994, and $2,665 at
June 30, 1994 79,027 90,013
Accounts receivable from related parties 3,274 2,159
Inventories 33,739 28,920
Prepaid expenses and other 12,930 13,865
_______ _______
Total current assets 199,351 221,309
Property and equipment, net of accumulated
depreciation and amortization of
$65,749 at September 30, 1994, and
$64,304 at June 30, 1994 105,055 95,076
Deposits and other assets 31,807 29,743
________ ________
Total $336,213 $346,128
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade payables $ 16,435 $ 16,250
Accrued compensation and employee benefits 17,579 25,010
Income taxes payable 2,710 2,616
Accrued and other liabilities 46,889 44,660
_________ ________
Total current liabilities 83,613 88,536
Long-term obligations 876 1,400
Stockholders' equity:
Preferred stock, $.001 par value -
authorized, 5,000,000 shares; none
outstanding -- --
Common stock, $.001 par value -
authorized, 50,000,000 shares;
outstanding: September 30, 1994,
23,740,721 shares, and June 30, 1994,
24,170,344 shares 173,335 174,356
Retained earnings 79,072 82,736
Unrealized loss on marketable securities
(net of deferred taxes of $289 at
September 30, 1994, and $330 at
June 30, 1994) (473) (540)
Accumulated translation adjustments (210) (360)
_________ ________
Stockholders' equity 251,724 256,192
_________ ________
Total $336,213 $346,128
========= ========
See notes to condensed consolidated financial statements.
- - -3-
</PAGE>
OCTEL COMMUNICATIONS CORPORATION
Condensed Consolidated Statements of Income
(In thousands, except per share amounts, unaudited)
Three Months Ended
_______________________
Sept. 30, Sept. 30,
1994 1993
_______ ________
Net revenues:
Systems $ 69,901 $ 66,302
Service and license 35,844 25,321
_________ ________
Total net revenues 105,745 91,623
Costs and expenses:
Cost of systems 21,537 21,419
Cost of service 20,591 15,364
Research and development 17,538 13,737
Selling, general and administrative 36,581 34,741
Non-recurring charge for acquired
in-process research and development 4,725 --
________ ________
Total costs and expenses 100,972 85,261
_______ ________
Operating income 4,773 6,362
Interest and other income, net 841 848
_______ _______
Income before income taxes 5,614 7,210
Provision for income taxes 1,800 1,250
________ _______
Net income $ 3,814 $ 5,960
======== ========
Net income per common and
equivalent share $ 0.15 $ 0.24
======== =======
Weighted average number of common shares
and equivalents used in computation 25,132 24,542
======= =======
See notes to condensed consolidated financial statements.
- - -4-
</PAGE>
OCTEL COMMUNICATIONS CORPORATION
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands, unaudited)
Three Months Ended
______________________
Sept. 30, Sept. 30,
1994 1993
________ _________
INCREASE (DECREASE) IN CASH AND
EQUIVALENTS:
Cash flows from operating activities:
Net income $ 3,814 $ 5,960
Adjustments to reconcile net
income to net cash used by
operating activities:
Depreciation and amortization 7,329 6,480
Amortization of premium on
marketable securities 56 --
Deferred income taxes 191 (2,912)
Deferred compensation -- 55
Changes in assets and liabilities:
Accounts receivable 10,335 706
Inventories (4,615) (2,468)
Prepaid expenses and other (507) 30
Trade payables 277 (2,333)
Accrued compensation and
employee benefits (7,403) (2,464)
Accrued and other liabilities 1,677 172
_______ _______
Net cash provided by operating
activities 11,154 3,226
_______ _______
Cash flows from financing activities:
Sales of common stock, net 1,060 616
Repurchases of common stock (10,987) (5,489)
Proceeds from sale of financial
instruments-put warrants 1,144 --
Repayments of long-term obligations (565) (86)
_______ _______
Net cash used by financing
activities (9,348) (4,959)
_______ _______
Cash flows from investing activities:
Purchases of short-term investments (13,645) (70,901)
Sales and maturities of short-term
investments 29,347 74,857
Property, plant and equipment additions (15,027) (8,336)
Changes in deposits and other assets (2,529) (3,344)
________ ________
Net cash used for investing
activities (1,854) (7,724)
Effect of exchange rate changes on cash (272) 118
_______ _______
Net decrease in cash and equivalents (320) (9,339)
_______ _______
Cash and equivalents:
Beginning of period 17,889 26,576
_______ _______
End of period $17,569 $17,237
======= =======
See notes to condensed consolidated financial statements.
- - -5-
</PAGE>
OCTEL COMMUNICATIONS CORPORATION
Notes to Condensed Consolidated Financial Statements
(September 30, 1994 and 1993 - Unaudited)
1. In the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all
adjustments (consisting of normal recurring adjustments)
necessary to present fairly the financial position as of
September 30, 1994, and the results of operations and cash
flows for the three months ended September 30, 1994, and
1993.
The financial statements and notes are presented as permitted
by Form 10-Q and do not contain certain information included
in the Company's annual financial statements and notes.
Certain fiscal 1994 costs previously reported as selling,
general and administrative expenses have been reclassified to
cost of service to conform to the fiscal 1995 presentation.
2. Short-term Investments
At September 30, 1994, all short-term investments were
classified as "available-for-sale" and consisted of the
following (in thousands):
Unrealized Unrealized Accrued Estimated
Cost Gains Losses Interest Fair Value
______ __________ __________ ________ __________
U.S. Government $ 9,416 $ 5 $(472) $(146) $ 8,803
securities
Municipal notes/
bonds 44,214 195 (422) (710) 43,277
_______ ____ ______ ______ _______
$53,630 $200 $(894) $(856) $52,080
======= ==== ====== ====== =======
At September 30, 1994, these securities were classified on
the balance sheet as follows (in thousands):
Cash equivalents $ 124
Short-term investments 52,812
_______
$52,936
=======
The cost and estimated fair value of available-for-sale debt
securities as of September 30, 1994, by contractual maturity,
consisted of the following (in thousands):
Estimated
Cost Fair Value
_______ __________
Due in less than one year $15,739 $15,467
Due in one to three years 24,223 23,652
Due thereafter 13,668 12,961
_______ _______
$53,630 $52,080
======= =======
- - -6-
</PAGE>
OCTEL COMMUNICATIONS CORPORATION
Notes to Condensed Consolidated Financial Statements
(September 30, 1994 and 1993 - Unaudited)
For the three months ended September 30, 1994, the Company
had $28,209,000 in proceeds from sales of available-for-sale
investments, $61,000 of gross realized gains and $48,000 of
gross realized losses on those sales and a change in net
unrealized holding loss of $67,000 included as a separate
component of stockholders' equity.
At June 30, 1994, all short-term investments were classified
as "available-for-sale" and consisted of the following (in
thousands):
Unrealized Unrealized Accrued Estimated
Cost Gains Losses Interest Fair Value
______ __________ __________ ________ __________
U.S. Government $9,803 $ 9 $(455) $(103) $ 9,256
securities
Municipal notes/
bonds 60,598 17 (441) (891) 59,281
_______ ____ ______ ______ _______
$70,401 $26 $(896) $(994) $68,537
======= === ====== ====== =======
At June 30, 1994, these securities were classified on the
balance sheet as follows (in thousands):
Cash equivalents $ 1,068
Short-term investments 68,463
_______
$69,531
=======
The cost and estimated fair value of available-for-sale debt
securities as of June 30, 1994, by contractual maturity,
consisted of the following (in thousands):
Estimated
Cost Fair Value
_______ __________
Due in less than one year $30,991 $30,525
Due in one to three years 24,087 23,436
Due thereafter 15,323 14,576
_______ _______
$70,401 $68,537
======= =======
- - -7-
</PAGE>
OCTEL COMMUNICATIONS CORPORATION
Notes to Condensed Consolidated Financial Statements
(September 30, 1994 and 1993 - Unaudited)
3. Inventories consist of (in thousands):
Sept. 30, June 30,
1994 1994
________ _______
Finished goods $ 6,241 $ 5,864
Work-in-process 13,051 12,248
Raw materials 14,447 10,808
_______ _______
Total inventories $33,739 $28,920
======= =======
4. Net income per common and equivalent share is computed using
the weighted average number of common and dilutive common
equivalent shares from stock options (using the treasury
stock method) and shares subscribed under the Employee Stock
Purchase Plan.
5. Line of credit and letters of credit
Effective June 1994, the Company obtained a $30 million bank
revolving line of credit which also allows the Company to
obtain stand-by letters of credit. Borrowings under the line
are unsecured and bear interest at either an adjusted LIBOR
rate plus one and one-quarter percent or the greater of the
Bank's base rate or the Federal Funds Effective Rate plus one
half of one percent, at the Company's discretion upon
borrowing the funds. Borrowings under the line are subject
to certain financial covenants and restrictions on
indebtedness, financial guarantees, business combinations and
other related items. The Company was in compliance with
these covenants and had no borrowings under this line as of
September 30, 1994. The line expires in June 1996.
At September 30, 1994, the Company had $2.0 million of stand-
by letters of credit outstanding. The letters of credit are
primarily to guarantee payments for inventory purchases and
facility lease payments. The majority of the letters of
credit are denominated in yen and U.S. dollars and expire on
various dates ranging from October 1994 through April 1995.
6. Interest and other income, net consists of the following (in
thousands):
Three Months Ended
__________________
Sept. 30, Sept. 30,
1994 1993
_________ _________
Interest and investment income $ 751 $ 945
Gain on sale of short-term investments, net 13 143
Foreign exchange gains (losses), net 147 (45)
Other expense (70) (195)
_______ ________
Total interest and other income $ 841 $ 848
======= ========
- - -8-
</PAGE>
OCTEL COMMUNICATIONS CORPORATION
Notes to Condensed Consolidated Financial Statements
(September 30, 1994 and 1993 - Unaudited)
7. Integration costs
In connection with the VMX merger, the Company recorded
integration costs in fiscal 1994 of $18.3 million related to
costs associated with consolidating facilities and personnel.
The balance in the related reserves of $11.5 million is
included in Accrued and other liabilities on the balance
sheet at September 30, 1994.
8. Acquired in-process research and development
In August 1994, the Company purchased certain intellectual
and personal property from another company for $5.1 million.
Of the total purchase price, $4.7 million was allocated to
in-process technology and $0.4 million was allocated to
property and equipment. The in-process technology was
expensed in the first quarter of fiscal 1995.
- - -9-
</PAGE>
OCTEL COMMUNICATIONS CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
NET REVENUES
Total net revenues increased to $105.7 million in the first
quarter of fiscal 1995, a 15 percent increase from total net
revenues of $91.6 million in the first quarter of fiscal 1994.
Systems revenues in the first quarter of fiscal 1995 increased to
$69.9 million, or 5 percent, from $66.3 million in the same
quarter of fiscal 1994. The growth in systems revenue was
primarily attributable to the sale of systems to new and existing
customers and the sale of upgrades, expansions and new features to
existing customers in the Customer Premise Equipment (CPE) and
Voice Information Service (VIS) sectors. CPE revenues increased
in the first quarter of fiscal 1995 as compared to the first
quarter of fiscal 1994 primarily due to an increase in
international CPE revenues. VIS revenues for the first quarter of
fiscal 1995 increased over the same quarter in fiscal 1994,
primarily due to an increase in sales in the domestic market,
offset in part by a decrease in sales to the international market.
Revenue in future quarters could be affected by the extent and
timing of new orders from VIS providers and such orders are
typically significant in size and, therefore, could impact the
revenue volume and mix in any given quarter.
Service and license revenues increased to $35.8 million in
the first quarter of fiscal 1995, a 42 percent increase from
revenues of $25.3 million in the same quarter of fiscal 1994. In
addition, service and license revenues continue to grow as a
percentage of total net revenues and accounted for 34 percent of
total net revenues for the first quarter of fiscal 1995 as
compared to 28 percent in the same quarter of fiscal 1994.
Service and license revenues grew in the first quarter of fiscal
1995 as compared to the same quarter of the prior year as a result
of the increase in Octel Network Services (ONS) revenues,
including revenue related to converting a customer to ONS
services, as well as revenues from the Company's increasing
installed base of customers.
Total net revenues in the first quarter of fiscal 1995
decreased $10.8 million from total net revenues of $116.5 million
in the fourth quarter of fiscal 1994. A traditionally slow first
quarter, domestically and internationally, contributed to the
revenue decrease from the fourth quarter of fiscal 1994.
COST OF SALES
As a percentage of total net revenues, total cost of sales
remained flat at 40 percent in the first quarter of fiscal 1995 as
compared to the first quarter of fiscal 1994. Cost of systems was
31 percent of systems revenues for the first quarter of fiscal
1995 compared to 32 percent for the same quarter of fiscal 1994 as
a result of a greater proportion of higher margin products sold in
the first quarter of fiscal 1995. Cost of service was 57 percent
and 61 percent of service and license
- - -10-
</PAGE>
OCTEL COMMUNICATIONS CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
revenues in the first quarter of fiscal 1995 and 1994,
respectively. This decrease is primarily due to revenue
recognized by ONS related to converting a customer to ONS services
with relatively lower associated costs as well as the increase in
ONS revenue, which has a higher margin structure, as a percent of
service and license revenue. On a quarter-to-quarter basis, the
channel and product mix of sales can fluctuate significantly.
Such fluctuations can have a positive or negative impact on
operating margins. These fluctuations are difficult to predict.
RESEARCH AND DEVELOPMENT
Research and development expenses were $17.5 million in the
first quarter of fiscal 1995, an increase of 28 percent over the
$13.7 million expended in the first quarter of fiscal 1994. As a
percentage of net revenues, research and development expenses were
17 percent and 15 percent in the first quarters of fiscal 1995 and
1994, respectively. The increase in research and development
expenses is due to the Company's increased spending on projects to
meet customer commitments, the adaptation of existing products and
technology for international markets, the continued commitment to
development of new products and enhancements to existing products.
The Company believes that additional research and development
expenses will be required to maintain market position and expects
that expenses will increase in absolute terms and could increase
as a percentage of net revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased as a
percentage of net revenues from 38 percent in the first quarter of
fiscal 1994 to 35 percent in the first quarter of fiscal 1995.
For the first quarter of fiscal 1995 these expenses increased five
percent in absolute dollars over the corresponding period of
fiscal 1994. The increase in absolute dollars resulted from the
Company's continuing efforts to develop and manage its
organization, train new and existing personnel and the commitment
of resources to support international opportunities and the
increase in legal expenses of approximately $0.9 million related
to ongoing patent litigation, which were partially offset by
reduced occupancy costs due to the consolidation of certain sales
facilities. Although the Company intends to vigorously defend
itself against ongoing patent litigation, it expects that legal
expenses on a quarterly basis will decline somewhat from the first
quarter of fiscal 1995. The Company believes that additional
selling, general and administrative expenses will be required to
maintain its competitive position, including expanded
international sales activities, and expects that these expenses
will increase in absolute terms and could increase as a percentage
of net revenues.
NON-RECURRING CHARGE FOR ACQUIRED IN-PROCESS RESEARCH AND
DEVELOPMENT
In August 1994, the Company purchased certain intellectual
property and fixed assets from another company for $5.1 million.
Of the total purchase price, $4.7 million was allocated to in-
process technology and $0.4 million was allocated to property and
equipment. The in-process technology was expensed in the first
quarter of fiscal 1995.
- - -11-
</PAGE>
OCTEL COMMUNICATIONS CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
INTEREST AND OTHER INCOME, NET
Interest and other income, net for the first quarter of
fiscal 1995 of $0.8 million remained flat compared with the first
quarter of fiscal 1994; however, the factors affecting interest
and other income, net varied in several ways between the two
quarters. Interest income was lower due to lower cash and
equivalent and short-term investment balances in the first quarter
of fiscal 1995 as compared to the same period in the prior year.
The Company had net foreign exchange gains in the first quarter of
fiscal 1995 as compared to net losses in the same period in fiscal
1994. In the first quarter of fiscal 1995 there were smaller net
gains on the sale of short-term investments as compared to the
first quarter of fiscal 1994. Other expense declined in the
first quarter of fiscal 1995 over the first quarter of fiscal
1994.
INCOME TAXES
The Company's effective tax rate was 33 percent in the first
quarter of fiscal 1995, as compared to 17 percent in the
corresponding period of fiscal 1994. The effective rate was lower
in fiscal 1994 due to the retroactive reinstatement of the federal
research and development credit for the fiscal year ended June 30,
1993, which had a favorable impact on the effective tax rate in
fiscal 1994.
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
The Company believes that in the future its results of
operations could be affected by factors such as market acceptance
of new products and upgrades, growth in the worldwide voice
processing market, competition, expansion of services by its VIS
customers, the outcome of litigation and changes in general
economic conditions in any of the countries in which the Company
does business.
The Company believes that the successful introduction of new
and enhanced products and services will be essential for it to
maintain its competitive position. The Company believes that its
backlog on a quarterly basis will not generally be large enough to
assure that the Company will meet its revenue targets for a
particular quarter. Furthermore, a large percentage of any
quarter's shipments have traditionally been booked in the last
month of the quarter. Consequently, quarterly revenues and
operating results will depend on the volume and timing of new
orders received during a quarter, which is difficult to forecast.
The integration of certain operations as a result of the merger
with VMX, Inc. continues to require the dedication of management
resources which may temporarily distract attention from the day-
to-day business of the Company. The Company intends to reduce
expenses by consolidating operations, eliminating duplicate
facilities, employees, marketing programs and other expenses.
There can be no assurance that Octel will be able to reduce
expenses in this fashion, that there will not be high costs
associated with such activities, that such reductions will not
result in a decrease in revenues or that there will not be other
material adverse effects of such activities. Although it believes
there are opportunities to gain from synergies, the Company cannot
determine the ultimate effect that new products and services and
the integration of Octel and VMX will have on revenues, earnings
or stock price.
- - -12-
</PAGE>
OCTEL COMMUNICATIONS CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Due to the factors noted above, the Company's future earnings
and stock price may be subject to significant volatility,
particularly on a quarterly basis. Past financial performance
should not be considered a reliable indicator of future
performance and investors should not use historical trends to
anticipate results or trends in future periods. Any shortfall in
revenue or earnings from the levels anticipated by securities
analysts could have an immediate and significant effect on the
trading price of the Company's common stock in any given period.
Additionally, the Company may not learn of such shortfalls until
late in a fiscal quarter, which could result in an even more
immediate and adverse effect on the trading price of the Company's
common stock. Finally, the Company participates in a highly
dynamic industry which often results in volatility of the
Company's common stock price.
The Company has been and may in the future continue to be
required to litigate enforcement of its intellectual property or
commercial rights or to defend itself in litigation arising out of
claims of third parties. Such litigation, even if the Company is
ultimately victorious, can be extremely expensive and may have a
material adverse effect on the Company's results of operations in
any particular period. Litigation may also occupy management
resources that would otherwise be available to address other
aspects of the Company's business.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and equivalents and short-term investments
in the first quarter of fiscal 1995 decreased a net $16.0 million
from June 30, 1994. The primary uses of cash during the first
quarter of fiscal 1995 were the investment in property and
equipment of $15.0 million, the repurchase of common stock for
approximately $11.0 million under the Company's stock repurchase
plan, and partial payment of $0.9 million for the August 1994
purchase of certain intellectual property and fixed assets. Cash
flows from operations resulted in a net source of cash.
As of September 30, 1994, the Company had invested $45.3
million in the purchase of land and the development of the
Company's new corporate offices on that land. The Company expects
to spend approximately $1.2 million during the remainder of fiscal
1995 in connection with the final construction of the Company's
new corporate offices. The Company also expects to purchase
additional equipment and make certain leasehold improvements
during the remainder of fiscal 1995. The Company anticipates that
its property and equipment investments will eventually result in
reduced operating expenses, greater efficiencies and increased
flexibility for the Company.
In connection with the VMX merger, the Company recorded $18.3
million of integration costs in fiscal 1994. As of September 30,
1994, there was a balance of $11.5 million of expected future cash
expenditures. The majority of this amount will be spent in the
remainder of fiscal 1995.
In addition to the integration costs recorded in fiscal 1994,
the Company may incur additional merger-related integration costs,
which will be charged to operations over the next several
quarters. Such integration charges are expected to be in the form
of cash expenditures estimated at approximately $4.1 million for
literature design for name change and other modifications to
literature for the merged Company, for consolidating processes and
computer systems of the merged Company and for personnel related
expenses.
- - -13-
</PAGE>
OCTEL COMMUNICATIONS CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
In July 1994, the Company's Board of Directors approved the
repurchase of up to an additional 3.5 million shares of its Common
Stock over a period of approximately two years. As of September
30, 1994, the Company repurchased 510,000 shares of its Common
Stock at an average price of $22.
In August 1994, the Company purchased certain intellectual property
and fixed assets from another company for $5.1 million. Of
the total purchase price, $4.7 million was allocated to in-process
technology and $0.4 million was allocated to property and
equipment. As of September 30, 1994, $.9 million in cash had been
paid and another $4.2 million will be paid during the remainder of
fiscal 1995.
The Company anticipates that cash flow from operations and
existing cash and equivalents and short-term investment balances,
together with its existing bank line, will be adequate to meet the
Company's cash requirements through the end of fiscal 1995.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
The Company and Northern Telecom were engaged in a jury trial
versus Theis Research, Inc. ("Theis") in the Northern District of
California during the past quarter. The trial centered on Theis'
allegation that Octel and Northern Telecom were infringing three
patents held by Theis. In October 1994, the jury returned a
verdict finding, among other things, that Octel and Northern
Telecom were correct in their claim that the three patents at
issue were invalid. Post-trial motions are pending, and, if no
settlement between the parties is reached, it is anticipated that
Theis will appeal the verdict.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - none
(b) Report on Form 8-K
No report on Form 8-K was filed by the Company during
its fiscal quarter ended September 30, 1994.
- - -14-
</PAGE>
SIGNATURE
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.
OCTEL COMMUNICATIONS CORPORATION
Dated: November 14, 1994
/s/ ROBERT COHN
_________________________________
Robert Cohn, President and Chief
Executive Officer
/s/ HERZEL ASHKENAZI
________________________________
Herzel Ashkenazi, Controller
(Chief Accounting Officer)
- - -15-
</PAGE>
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<NET-INCOME> 3814
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
