<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended January 26, 1997
Commission file number 1-13316
Newbridge Networks Corporation
(Exact name of registrant as specified in its charter)
Canada 98-0077506
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 March Road, Kanata, Ontario, Canada K2K 2E6
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (613) 591-3600
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 Common Shares of the registrant outstanding as at March 7, 1997
was 171,669,346.
(Exhibit index located on page 25)
(Page 1 of 27)
<PAGE>
NEWBRIDGE NETWORKS CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Consolidated Statements of Earnings and Retained
Earnings-- Fiscal quarter and three fiscal quarters
ended January 26, 1997 and January 28, 1996....................3
Consolidated Balance Sheets --
January 26, 1997 and April 30, 1996............................4
Consolidated Statements of Cash Flows --
Fiscal quarter and three fiscal quarters
ended January 26, 1997 and January 28, 1996....................5
Notes to the Consolidated Financial Statements................6-15
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................16-22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................23
Item 5. Other Information.................................................23
Item 6. Exhibits and Reports on Form 8-K..................................23
SIGNATURES....................................................................24
</TABLE>
(Page 2 of 27)
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
NEWBRIDGE NETWORKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(Canadian dollars, amounts in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Fiscal quarter ended Three fiscal quarters ended
--------------------------- -----------------------------
January 26, January 28, January 26, January 28,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $333,267 $236,678 $935,386 $649,304
Cost of sales 120,006 82,603 332,934 223,952
------- -------- ------- -------
Gross margin 213,261 154,075 602,452 425,352
Expenses
Selling, general and administration 81,986 57,434 226,382 167,770
Research and development 38,311 23,107 103,713 68,617
-------- -------- ------- --------
Income from operations 92,964 73,534 272,357 188,965
Interest income 5,530 5,815 16,322 17,329
Interest expense on long term obligations (933) (146) (1,191) (435)
Other expenses (2,398) 2,043 (7,277) (2,984)
--------- --------- --------- ---------
Earnings before income taxes
and non-controlling interest 95,163 81,246 280,211 202,875
Provision for income taxes 29,500 26,609 88,973 67,449
Non-controlling interest 2,632 756 4,625 (943)
-------- ---------- --------- ----------
Net earnings 63,031 53,881 186,613 136,369
Retained earnings, beginning of the period 734,813 490,855 611,231 408,367
------- ------- ------- -------
Retained earnings, end of the period $797,844 $544,736 $797,844 $544,736
======= ======= ======= =======
Earnings per share (Note 10)
Basic $0.37 $0.32 $1.10 $0.82
Fully diluted $0.36 $0.31 $1.06 $0.80
Weighted average number of shares
Basic 170,941 166,548 170,140 165,842
Fully diluted 185,037 180,534 183,640 179,665
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
(Page 3 of 27)
<PAGE>
NEWBRIDGE NETWORKS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Canadian dollars in thousands)
<TABLE>
<CAPTION>
January 26, April 30,
1997 1996
----------- ---------
(unaudited)
Assets
<S> <C> <C>
Cash and cash equivalents (Note 7) $ 355,994 $ 455,749
Accounts receivable, net of provision for returns and
doubtful accounts of $9,407 (April 30, 1996 - $6,651) 353,327 244,784
Inventories (Note 8) 152,993 103,555
Prepaid expenses and other current assets 61,956 21,107
----------- -----------
924,270 825,195
Property, plant and equipment 260,865 193,796
Deferred income taxes 47,505 --
Purchased in process research and development (Note 3) 96,940 --
Goodwill (Note 9) 109,467 26,672
Software development costs 20,977 18,285
Other assets 78,666 29,469
----------- -----------
$ 1,538,690 $ 1,093,417
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 103,220 $ 64,289
Accrued liabilities 100,914 46,033
Provision for restructuring (Note 3) 53,979 --
Income taxes 81,559 54,484
Current portion of long term obligations 4,917 2,302
----------- -----------
344,589 167,108
Long term obligations 8,488 860
Deferred income taxes 28,675 9,902
Non-controlling interest 23,464 12,861
----------- -----------
405,216 190,731
Common shares - 171,279,256 outstanding
(April 30, 1996 - 168,676,280 outstanding) 339,442 290,170
Accumulated foreign currency translation adjustment (3,812) 1,285
Retained earnings 797,844 611,231
----------- -----------
1,133,474 902,686
----------- -----------
$ 1,538,690 $ 1,093,417
=========== ===========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
(Page 4 of 27)
<PAGE>
NEWBRIDGE NETWORKS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Canadian dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Fiscal quarter ended Three fiscal quarters ended
--------------------------- ---------------------------
January 26, January 28, January 26, January 28,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operating activities
Net earnings $ 63,031 $ 53,881 $186,613 $136,369
Items not affecting cash
Depreciation and amortization 20,701 14,616 57,509 40,887
Deferred income taxes 2,065 1,863 7,936 3,847
Non-controlling interest 2,632 762 4,625 (907)
Other 2,611 (3,439) 4,933 (2,383)
Cash effect of changes in:
Accounts receivable 1,344 5,209 (61,629) (9,286)
Inventories (11,567) (12,292) (16,273) (32,910)
Prepaid expenses and other current assets (5,792) 181 (14,841) (355)
Accounts payable and accrued liabilities 295 1,794 (1,919) (2,289)
Income taxes 9,534 2,395 26,875 4,360
--------- --------- -------- --------
84,854 64,970 193,829 137,333
--------- --------- -------- --------
Investing activities
Additions to property, plant and equipment (33,172) (24,796) (81,611) (57,677)
(Acquisition) disposition of subsidiaries,
excluding cash acquired (Note 2) (171,863) 5,550 (206,960) 3,928
Capitalized software development costs (3,061) (2,478) (9,025) (7,482)
Additions to other assets (14,971) (4,093) (40,573) (11,587)
--------- --------- -------- --------
(223,067) (25,817) (338,169) (72,818)
--------- --------- -------- --------
Financing activities
Issue of common shares 10,396 14,931 42,284 23,982
Purchase of common shares -- -- -- (7,277)
Increase in long term obligations 424 -- 1,451 --
Repayment of long term obligations (1,018) (467) (4,374) (2,332)
--------- --------- -------- --------
9,802 14,464 39,361 14,373
--------- --------- -------- --------
Increase (decrease)in cash
and cash equivalents (128,411) 53,617 (104,979) 78,888
Effect of foreign currency translation on cash (1,215) 1,721 (4,664) 3,925
Cash from acquisition (disposition) of
subsidiaries (Note 2) 3,723 (527) 9,888 (527)
--------- --------- -------- --------
(125,903) 54,811 (99,755) 82,286
Cash and cash equivalents,
beginning of period 481,897 375,632 455,749 348,157
--------- --------- -------- --------
Cash and cash equivalents, end of period $ 355,994 $ 430,443 $355,994 $430,443
========= ========= ======== ========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
(Page 5 of 27)
<PAGE>
NEWBRIDGE NETWORKS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Canadian dollars, tabular amounts in thousands except per share data)
(Unaudited)
1. Basis of Presentation
The accompanying unaudited interim consolidated financial statements of
Newbridge Networks Corporation (the "Company") have been prepared in accordance
with accounting principles generally accepted in Canada for interim financial
information. These accounting principles are also generally accepted in the
United States ("U.S. GAAP") in all material respects except for the write off of
purchased in process research and development, as disclosed in Note 3,
disclosure of certain cash equivalents on the Consolidated Balance Sheets and
investing activities on the Consolidated Statements of Cash Flows, as disclosed
in Note 7, and the method of calculation of earnings per share, as disclosed in
Note 10.
In the opinion of Management, the unaudited interim consolidated financial
statements reflect all normal and recurring adjustments considered necessary for
fair presentation.
The results of operations for the third fiscal quarter and the three fiscal
quarters ended January 26, 1997 are not necessarily indicative of the results to
be expected for the fiscal year ending April 30, 1997.
2. Acquisitions and Dispositions of Subsidiaries
The impact on cash flows of the Company derived from activities in acquiring and
divesting controlling interests' in subsidiaries is summarized as follows.
<TABLE>
<CAPTION>
Fiscal quarter ended Three fiscal quarters ended
-------------------- ---------------------------
January 26, January 28, January 26, January 28,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(Acquisition) disposition of
subsidiaries excluding
cash acquired
Ungermann-Bass
Networks Inc. (Note 3) $(146,590) $ -- $(146,590) $ --
Coasin Chile S.A. (Note 4) (14,129) -- (14,129) --
Danring A/S (Note 5) (11,144) -- (11,144) --
Ouest Standard
Telematique (Note 6) -- -- (34,231) --
Other -- 5,550 (866) 3,928
-------- ------ -------- -----
$(171,863) $ 5,550 $(206,960) $ 3,928
======== ====== ======== =====
</TABLE>
(Page 6 of 27)
<PAGE>
NEWBRIDGE NETWORKS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Canadian dollars, tabular amounts in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Fiscal quarter ended Three fiscal quarters ended
--------------------- ---------------------------
January 26, January 28, January 26, January 28,
1997 1996 1997 1996
---------- --------- ------------- ------------
<S> <C> <C> <C> <C>
Cash from acquisition (disposition)
of subsidiaries
Ungermann-Bass
Networks Inc. (Note 3) $11,981 $ -- $11,981 $ --
Coasin Chile S.A. (Note 4) (11,320) -- (11,320) --
Danring A/S (Note 5) 3,062 -- 3,062 --
Ouest Standard
Telematique (Note 6) -- -- 6,165 --
Tundra Semiconductor Corp. -- (527) -- (527)
------- --- ------- ---
$ 3,723 $(527) $ 9,888 $(527)
======= === ======= ===
</TABLE>
3. Acquisition of Ungermann-Bass Networks Inc.
On January 17, 1997, the Company acquired a 100% equity interest in
Ungermann-Bass Networks, Inc. ("UB Networks"), a manufacturer of local area
network equipment based in Santa Clara, California, by the purchase of shares
for cash consideration of $146,590,000. The purchase price includes professional
fees and other direct costs of the acquisition, and excludes additional
contingent payments which may be made over the next two years based on 50% of
the gross margin earned on UB Networks' products above a certain amount which
approximates the gross margin earned on the products prior to the acquisition,
up to a maximum of 50% of the purchase price paid to the seller. The acquisition
has been accounted for by the purchase method of accounting. Technology
acquired, related to UB Networks' research and development in process, is stated
at fair value and is being amortized on a straight line basis over three years.
Amortization will commence in the period in which the technology acquired
results in product sales. Goodwill is being amortized on a straight line basis
over a ten year period, commencing in the fiscal period following that in which
the investment was made. The recoverability of purchased in process research and
development as well as goodwill are reviewed on an ongoing basis. The Company's
investment in UB Networks is summarized below.
(Page 7 of 27)
<PAGE>
NEWBRIDGE NETWORKS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Canadian dollars, tabular amounts in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Accounts receivable, net of provision for returns and
doubtful accounts $ 36,443
Inventories 12,774
Prepaid expenses and other current assets 15,768
--------
Non-cash current assets 64,985
Property, plant and equipment 24,708
Deferred income tax assets 36,769
Purchased in process research and development 96,940
Goodwill 7,331
Other long term assets 8,290
--------
Non-cash assets acquired 239,023
--------
Accounts payable (25,802)
Accrued liabilities (36,214)
Provision for restructuring (53,979)
Income taxes (2,344)
Current portion of long term obligations (59)
--------
Current liabilities (118,398)
Long term obligations (836)
Non-controlling interest (1,060)
--------
Liabilities acquired (120,294)
--------
Net non-cash assets acquired 118,729
Cash acquired 11,981
--------
130,710
Goodwill upon acquisition 15,880
--------
Total consideration paid $146,590
========
</TABLE>
Under U.S. GAAP, purchased in process research and development acquired by the
Company on the acquisition of UB Networks would be written off at the time of
acquisition. Accordingly, the determination of net earnings (loss) under U.S.
GAAP is as follows.
<TABLE>
<CAPTION>
Fiscal quarter ended Three fiscal quarters ended
---------------------------- ----------------------------
January 26, January 28, January 26, January 28,
1997 1996 1997 1996
------------ -------------- ----------- ---------------
<S> <C> <C> <C> <C>
Net earnings, as reported $63,031 $53,881 $186,613 $136,369
Write off of purchased in process
research and development
upon acquisition of
UB Networks (96,940) -- (96,940) --
------- ------- -------- --------
Net earnings (loss), U.S. GAAP $(33,909) $53,881 $ 89,673 $136,369
======= ======= ======== ========
</TABLE>
(Page 8 of 27)
<PAGE>
NEWBRIDGE NETWORKS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Canadian dollars, tabular amounts in thousands except per share data)
(Unaudited)
The provision for restructuring relates to programs instituted by the Company to
integrate the operations of UB Networks with the Company and to eliminate
redundant functions. The provision for restructuring comprises the following
components.
<TABLE>
<CAPTION>
<S> <C>
Reduction in work force $26,153
Reduction in facilities 11,582
Discontinued activities 9,787
Other restructuring costs 6,457
-------
$53,979
=======
</TABLE>
The provision for reduction in work force includes severance, related medical
and other benefits, relocation costs and other obligations to employees. The
provision includes termination benefits for approximately 300 employees. The
work force reductions are in all functions and in all regions in which UB
Networks operates. The Company anticipates that these work force reductions will
be substantially completed by the second quarter of fiscal 1998.
The provision for reduction in facilities comprises primarily lease payments and
fixed costs associated with plans to close sales, support and administrative
facilities in the Americas, Europe and Asia Pacific geographic areas.
The provision for discontinued activities includes costs associated with the
disposition of assets and fulfilling prior commitments related to certain
discontinued product lines and activities. The Company anticipates these costs
to be incurred over the next year.
The provision for other restructuring costs comprises various direct incremental
costs associated with the integration of operations of UB Networks with the
Company.
The operating results of UB Networks from the acquisition date of January 17,
1997 to the end of the third fiscal quarter ended January 26, 1997 were not
material and therefore not consolidated into the operating results of the
Company. The Consolidated Balance Sheet as at January 26, 1997 includes the
assets acquired and liabilities assumed of UB Networks, the components of which
are shown in the table of the Company's investment in UB Networks above.
4. Acquisition of Coasin Chile S.A.
Effective November 1, 1996 the Company acquired a 51% equity interest in Coasin
Chile S.A. ("Coasin"), a Chilean systems integrator of networking products, by
the purchase of shares in the amount of $14,129,000. The purchase price excludes
additional contingent payments which may be made over the next two years
depending upon the financial performance of Coasin, up to a maximum of
US$2,595,000. The acquisition has been accounted for by the purchase method of
accounting. Goodwill is being amortized on a straight line basis over a twenty
year period.
(Page 9 of 27)
<PAGE>
NEWBRIDGE NETWORKS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Canadian dollars, tabular amounts in thousands except per share data)
(Unaudited)
The Company's investment in Coasin is summarized below.
<TABLE>
<CAPTION>
<S> <C>
Non-cash current assets $26,138
Property, plant and equipment 3,842
Other long term assets 1,393
-------
Non-cash assets acquired 31,373
Current liabilities (8,960)
Long term liabilities assumed (3,428)
------
Net non-cash assets acquired 18,985
Cash acquired (bank indebtedness assumed) (11,320)
-------
7,665
Non-controlling interest upon acquisition (3,755)
-------
Company's share of assets acquired 3,910
Goodwill upon acquisition 10,219
-------
Total consideration paid $14,129
=======
</TABLE>
Because Coasin's fiscal quarters end at calendar quarter ends, two months of
Coasin's results were consolidated with those of the Company for the fiscal
quarter ended January 26, 1997.
5. Acquisition of Danring A/S
On January 16, 1997, the Company acquired a 100% equity interest in Danring A/S
("Danring"), a Danish systems integrator of networking products, by the purchase
of shares in the amount of $11,144,000. The acquisition has been accounted for
by the purchase method of accounting. Goodwill is being amortized on a straight
line basis over a twenty year period.
The Company's investment in Danring is summarized below.
<TABLE>
<CAPTION>
<S> <C>
Non-cash current assets $ 6,649
Property, plant and equipment 119
Other long term assets --
------
Non-cash assets acquired 6,768
Current liabilities (6,877)
Long term liabilities assumed --
------
Net non-cash assets acquired (109)
------
Cash acquired 3,062
------
2,953
Goodwill upon acquisition 8,191
------
Total consideration paid $11,144
======
</TABLE>
(page 10 of 27)
<PAGE>
The operating results of Danring from the acquisition date of January 16, 1997
to the end of the third fiscal quarter ended January 26, 1997 were not material
and therefore not consolidated into the operating results of the Company. The
Consolidated Balance Sheet at January 26, 1997 includes the assets acquired and
liabilities assumed of Danring, the components of which are shown in the table
of the Company's investment in Danring above.
6. Acquisition of Ouest Standard Telematique
In August 1996, the Company acquired a 100% equity interest in Ouest Standard
Telematique S.A. ("OST"), a manufacturer of local area network equipment based
in France, by the purchase of shares in the amount of $34,231,000. The purchase
price excludes additional contingent payments which may be made over the next
three years depending on the financial performance of OST, up to a maximum of
US$10,000,000. The acquisition has been accounted for by the purchase method of
accounting. Goodwill is being amortized on a straight line basis over a twenty
year period.
The Company's investment in OST is summarized below.
<TABLE>
<CAPTION>
<S> <C>
Non-cash current assets $ 9,984
Property, plant and equipment 6,157
Other long term assets 490
--------
Non-cash assets acquired 16,631
Current liabilities (27,017)
Long term liabilities assumed (6,313)
------
Net non-cash assets acquired (16,699)
Cash acquired 6,165
--------
(10,534)
Goodwill upon acquisition 44,765
--------
Total consideration paid $34,231
========
</TABLE>
7. Cash and Cash Equivalents
Components of cash and cash equivalents are:
<TABLE>
<CAPTION>
January 26, April 30,
1997 1996
----------- --------
<S> <C> <C>
Cash $180,908 $285,054
Held to maturity marketable securities
(at amortized cost, which
approximates fair market value) 173,253 152,280
Available for sale marketable securities
(at fair market value) 1,833 18,415
--------- --------
$355,994 $455,749
========= ========
</TABLE>
Held to maturity marketable securities are investments with original maturities
of three months or more. Available for sale marketable securities are common
shares of publicly traded companies acquired upon the Company's disposition of
minority interests in privately held companies. Under accounting principles
generally accepted in the United States ("U.S. GAAP"), marketable securities
would be disclosed as a separate caption on the Consolidated Balance Sheets.
(Page 11 of 27)
<PAGE>
NEWBRIDGE NETWORKS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Canadian dollars, tabular amounts in thousands except per share data)
(Unaudited)
If the Consolidated Statements of Cash Flows were prepared under U.S. GAAP,
maturities, purchases and sales of marketable securities would be disclosed as
an investing activity. Disclosure in the Consolidated Statements of Cash Flows
prepared under U.S. GAAP would be as follows.
<TABLE>
<CAPTION>
Fiscal quarter ended Three fiscal quarters ended
-------------------- ---------------------------
January 26, January 28, January 26, January 28,
1997 1996 1997 1996
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Investing activities in short term
marketable securities:
Held to maturity securities
Maturities $139,795 $127,904 $305,469 $188,179
Purchases (44,972) (59,124) (326,442) (285,773)
Sales -- -- -- --
-------- -------- --------- --------
94,823 68,780 (20,973) (97,594)
Available for sale securities
Sales -- -- 16,538 --
-------- -------- -------- --------
94,823 68,780 (4,435) (97,594)
Investing activities, as reported (223,067) (25,817) (338,169) (72,818)
------- ------- ------- -------
Investing activities, U.S. GAAP $(128,244) $ 42,963 $(342,604) $(170,412)
======= ======== ======= =======
Increase (decrease) in cash and
cash equivalents, as reported $(125,903) $ 54,811 $ (99,755) $ 82,286
Investing activities in short
term marketable securities 94,823 68,780 (4,435) (97,594)
-------- -------- --------- --------
Increase (decrease) in cash and
cash equivalents, U.S. GAAP $ (31,080) $123,591 $(104,190) $ (15,308)
======== ======= ======= ========
</TABLE>
8. Inventories
<TABLE>
<CAPTION>
January 26, April 30,
1997 1996
------- -------
<S> <C> <C>
Finished goods $108,626 $ 60,824
Work in process 13,981 12,711
Raw materials 30,386 30,020
-------- --------
$152,993 $103,555
======= =======
</TABLE>
Inventories at January 26, 1997 include inventories of UB Networks of
$12,774,000 (April 30, 1996-- nil); Coasin of $8,963,000 (April 30, 1996-- nil);
Danring of $5,257,000 (April 30, 1996-- nil); and OST of $5,734,000 (April 30,
1996-- nil).
(Page 12 of 27)
<PAGE>
NEWBRIDGE NETWORKS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Canadian dollars, tabular amounts in thousands except per share data)
(Unaudited)
9. Goodwill
Goodwill, net of accumulated amortization, is as follows.
<TABLE>
<CAPTION>
January 26, April 30,
1997 1996
------ ------
<S> <C> <C>
UB Networks (Note 3) $ 15,880 $ --
Coasin Chile S.A. (Note 4) 10,219 --
Danring A/S (Note 5) 8,191 --
Quest Standard Telematique (Note 6) 40,852 --
Transistemas S.A. 15,830 15,510
Advanced Computer Communications 18,495 11,162
------- ------
$109,467 $26,672
======= ======
</TABLE>
10. Earnings per Share
Under accounting principles generally accepted in Canada, basic earnings per
share is calculated as net earnings for the period divided by the daily weighted
average number of Common Shares outstanding during the period. Fully diluted
earnings per share is calculated as net earnings plus after tax imputed earnings
on the cash which would have been received on the exercise of options, divided
by the daily weighted average number of Common Shares and common share
equivalents outstanding during the period.
Under U.S. GAAP earnings per share is calculated using the treasury stock
method. Earnings per share in U.S. dollars is disclosed for the convenience of
the reader. The exchange rates used for translation are based on the daily
average exchange rate of a Canadian dollar for U.S. dollars as reported by the
Federal Reserve Bank of New York. The calculation of net earnings (loss) and
earnings (loss) per share under U.S. GAAP are as follows.
(Page 13 of 27)
<PAGE>
NEWBRIDGE NETWORKS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Canadian dollars, tabular amounts in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Fiscal quarter ended Three fiscal quarters ended
-------------------- ---------------------------
January 26, January 28, January 26, January 28,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings, as reported $63,031 $53,881 $186,613 $136,369
Write off of purchased in process
research and development
upon acquisition of
UB Networks (Note 3) (96,940) -- (96,940) --
-------- ------- --------- ---------
Net earnings (loss), U.S. GAAP $(33,909) $53,881 $ 89,673 $136,369
======== ======= ========= ========
Earnings per share
Primary $(0.20) $0.31 $0.51 $0.81
======== ======= ========= ========
Fully diluted $(0.20) $0.31 $0.51 $0.79
======== ======= ========= ========
Earnings per share -- in U.S. dollars
Primary $(0.15) $0.23 $0.38 $0.59
======== ======= ========= ========
Fully diluted $(0.15) $0.23 $0.38 $0.58
======== ======= ========= ========
Weighted average number of shares
Primary 170,941 171,158 174,807 169,226
======== ======= ========= ========
Fully diluted 170,941 172,729 174,807 171,860
======== ======= ========= ========
</TABLE>
11. Litigation
During the fiscal year ended April 30, 1995, the Company was served with one of
several complaints filed in United States District Court in Washington, D.C. by
certain persons purporting to be purchasers of Common Shares of the Company. On
or about May 8, 1995 these complaints were combined into a single consolidated
and amended complaint (the "First Amended Complaint") which named the Company
and certain of its executive officers as defendants. The First Amended Complaint
purported to be a class action on behalf of a class of persons who purchased
securities of the Company between March 29 and August 1, 1994 and alleged that
the Company made false and misleading statements in violation of United States
securities law and common law, for which damages were sought in unspecified
amounts. On June 3, 1996, the Court issued an order granting in part and denying
in part the defendants' motion to dismiss. Among other things, the Court
dismissed with prejudice the claim alleging violation of common law. The Court
also dismissed the majority of plaintiffs' allegations of violation of United
States securities law, but granted plaintiffs leave to replead these allegations
in a Second Amended Complaint, which plaintiffs filed on July 3, 1996. The Court
further conditionally certified the action as a class action without prejudice
to the Company's right to
(Page 14 of 27)
<PAGE>
renew its objection to class action certification upon completion of discovery.
The defendants have moved to dismiss the Second Amended Complaint. The Company
intends to continue to defend this action vigorously. Based upon its present
understanding of the laws in the United States and the facts, the Company
believes it has meritorious defenses to the action. Because the outcome of the
action is not certain at this time, no provision for any liability that may
result upon adjudication has been made in these financial statements.
(Page 15 of 27)
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
During the quarter ended January 26, 1997, the Company acquired 100% equity
interests in Ungermann-Bass Networks, Inc. ("UB Networks") and Danring A/S
("Danring"), as well as a 51% equity interest in Coasin Chile S.A. ("Coasin").
UB Networks is a manufacturer of local area network equipment based in Santa
Clara, California. Danring and Coasin are systems integrators of networking
products in Denmark and Chile respectively. The operating results of both UB
Networks and Danring from the acquisition date to the end of the third fiscal
quarter ended January 26, 1997 were not material and therefore not consolidated
into the operating results of the Company. Coasin was acquired effective
November 1, 1996. Because Coasin's fiscal quarters end at calendar quarter ends,
two months of Coasin's results were consolidated with those of the Company for
the fiscal quarter ended January 26, 1997. The Consolidated Balance Sheet as at
January 26, 1997 includes the assets acquired and liabilities assumed of UB
Networks, Danring and Coasin.
RESULTS OF OPERATIONS
Sales increased in the third fiscal quarter of fiscal 1997 ended January 26,
1997 by 41% compared to sales in the third quarter of fiscal 1996 ended January
28, 1996. The increase in sales resulted in net earnings of $63,031,000 for the
third quarter of fiscal 1997, an increase of 17% over net earnings for the third
quarter of fiscal 1996. For the first nine months of fiscal 1997 sales increased
44% compared to sales in the first nine months of fiscal 1996, resulting in net
earnings of $186,613,000 for the first nine months of fiscal 1997, an increase
of 37% over net earnings for the first nine months of fiscal 1996.
<TABLE>
<CAPTION>
Sales
Fiscal Quarter Ended Three Fiscal Quarters Ended
---------------------------------- ---------------------------------
Jan 26, Jan 28, % Jan 26, Jan 28, %
1997 1996 Increase 1997 1996 Increase
-------- -------- -------- -------- --------- --------
(Canadian dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Sales $333,267 $236,678 41% $935,386 $649,304 44%
======= ======= ======= =======
</TABLE>
Product line enhancements and new products introduced in fiscal 1995 and fiscal
1996 resulted in increased sales in the third quarter and first nine months of
fiscal 1997 relative to the third quarter and first nine months of fiscal 1996
in the public networking and private corporate networking markets worldwide.
This increase principally reflected growth in sales in Europe, the Asia Pacific
region and Latin America, as well as higher sales of products based on ATM
(asynchronous transfer mode) and other packet-based technologies and advanced
circuit switched networking multiplexers. The Company's sales in the third
quarter and first nine months of fiscal 1997 to telephone companies and other
carriers for central office applications for tariffed services, for use within
their internal networks and for resale to end users increased relative to the
overall increase in sales compared to the third quarter and first nine months of
fiscal 1996. Sales to carriers represented 70% of total sales in the third
quarter of fiscal 1997 and 69% for the first nine months of fiscal 1997,
compared to 65% of total sales in the third quarter and 64% in the first nine
months of fiscal 1996. Deliveries to original equipment manufacturers (OEMs) for
carrier customers and deliveries under certain large contracts with carriers
contributed significantly to sales in the third quarter and first nine months of
fiscal 1997 and the third quarter and first nine months of fiscal 1996. Sales to
Siemens A.G. and subsidiaries, generally under OEM arrangements for resale to
end users, were greater than 10% of total sales for the third quarter and first
nine months of fiscal 1997.
(Page 16 of 27)
<PAGE>
The Company expects the proportion of sales derived from products based on
packet technologies to continue to increase relative to sales derived from
circuit switched networking multiplexers in fiscal 1997 when compared to fiscal
1996. The Company is also subject to a greater degree of variation in quarterly
sales of circuit switched networking multiplexers as an increasing proportion of
sales of these products is expected to be derived from less mature, high growth
markets outside of North America.
Product sales and service revenues attributable to UB Networks are expected to
represent between 15% and 25% of the Company's consolidated revenues for the
fourth quarter of fiscal 1997 ending April 30, 1997. In addition, because UB
Networks products are generally sold into corporate networks, the proportion of
sales to carriers is expected to decline to less than 60% of total sales in the
fourth quarter of fiscal 1997.
A significant portion of the Company's sales are derived from products shipped
against orders received in each fiscal quarter and from products shipped against
firm purchase orders released in that fiscal quarter. Unforeseen delays in
product deliveries or closing large sales, introductions of new products by the
Company or its competitors, seasonal patterns of customer capital expenditures
or other conditions affecting the networking industry in particular or the
economy generally during any fiscal quarter could cause quarterly revenue and,
to a greater degree, net earnings, to vary greatly.
Because substantial portions of the Company's sales, cost of sales and other
expenses are denominated in U.S. dollars and Pounds Sterling, the Company's
results of operations are subject to change based on fluctuations in the rates
of exchange of those currencies for the Canadian dollar. During the third
quarter of fiscal 1997, the decrease in the value of the Canadian dollar against
the Pound Sterling, offset by an increase in the Canadian dollar against the
U.S. dollar, relative to exchange rates in the third quarter of fiscal 1996,
resulted in no material variance in reported sales, gross margin or income from
operations. During the first nine months of fiscal 1997, the decrease in the
value of the Canadian dollar against the U.S. dollar and the Pound Sterling,
relative to exchange rates in the first nine months of fiscal 1996, resulted in
no material variance in reported sales, gross margin or income from operations.
Cost of Sales and Gross Margin
<TABLE>
<CAPTION>
Fiscal Quarter Ended Three Fiscal Quarters Ended
-------------------- ---------------------------
Jan 26, Jan 28, Jan 26, Jan 28,
1997 1996 1997 1996
-------- ------- --------- ---------
(Canadian dollars in thousands)
<S> <C> <C> <C> <C>
Gross margin $213,261 $154,075 $602,452 $425,352
======= ======= ======= =======
As % of sales 64% 65% 64% 66%
</TABLE>
Cost of sales consists of manufacturing costs, warranty expense and costs
associated with the provision of services. The gross margin as a percentage of
sales declined slightly in the third quarter and first nine months of fiscal
1997 relative to the third quarter and first nine months of fiscal 1996. The
decline was primarily the result of a decline in the proportion of total
revenues derived from sales of products earning high gross margins expressed as
a percentage of sales, such as network management software and advanced
networking multiplexers. Revenues generating gross margins below the Company's
average gross margins, such as service revenues, increased as a proportion of
overall revenues. In addition, gross margins earned on product sales and service
revenues of companies acquired during fiscal 1997 have been below the average
gross margins earned on the Company's other products. If the proportion of
revenues
(Page 17 of 27)
<PAGE>
derived from service and lower margin products increases or selling prices
decline, the gross margin expressed as a percentage of sales could decline
further.
Based on historical gross margins achieved by UB Networks, the Company expects
the consolidation of the operating results of UB Networks in the fourth quarter
of fiscal 1997 to reduce the overall gross margin of the Company, expressed as a
percentage of sales, by 3% to 6%.
Selling, General and Administration Expenses
<TABLE>
<CAPTION>
Fiscal Quarter Ended Three Fiscal Quarters Ended
----------------------------------- ---------------------------------
Jan 26, Jan 28, % Jan 26, Jan 28, %
1997 1996 Increase 1997 1996 Increase
-------- -------- -------- -------- -------- --------
(Canadian dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Selling, general and
administration
expenses $81,986 $57,434 43% $226,382 $167,770 35%
====== ====== ======= =======
Net expenses as
a % of sales 25% 24% 24% 26%
</TABLE>
Selling, general and administration expenses increased in the third quarter and
first nine months of fiscal 1997 relative to the third quarter and first nine
months of fiscal 1996 primarily as a result of increases in sales and service
personnel as the Company invested in programs to strengthen its sales and
support infrastructure throughout the world and to market new products. The
growth in sales and service personnel from the first nine months of fiscal 1996
to the first nine months of fiscal 1997 was less than the rate of growth in
sales over the same period, and as a result, selling, general and administration
expenses decreased as a percentage of sales.
The acquisition of UB Networks is expected to result in an increase in selling,
general and administration expenses, expressed as a percentage of sales, of 2%
to 4% in the fourth quarter of fiscal 1997.
(page 18 of 27)
<PAGE>
Research and Development
<TABLE>
<CAPTION>
Fiscal Quarter Ended Three Fiscal Quarters Ended
--------------------------------- -----------------------------------
Jan 26, Jan 28, % Jan 26, Jan 28, %
1997 1996 Increase 1997 1996 Increase
-------- -------- -------- --------- --------- --------
(Canadian dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Gross research and
development expenditures $48,231 $32,169 50% $131,602 $93,114 41%
Investment tax credits 6,600 5,522 20% 18,400 15,674 17%
Customer, government
and other funding 2,369 2,743 (14%) 6,796 6,384 6%
Net deferral (amortization) of
software development costs 951 797 19% 2,693 2,439 10%
------ ------ ------- ------
Net research and
development expenses $38,311 $23,107 66% $103,713 $68,617 51%
====== ====== ======= ======
Gross expenditures
as a % of sales 14% 14% 14% 14%
Recoveries as a %
of gross expenditures 21% 28% 21% 26%
Net expenses as a % of sales 11% 10% 11% 11%
</TABLE>
Research and development expenditures consist primarily of software and hardware
engineering personnel expenses, subcontracted research and development costs and
costs associated with equipment and facilities. The increased costs in the third
quarter and first nine months of fiscal 1997 compared to the third quarter and
first nine months of fiscal 1996 reflect spending on new networking products and
features and product enhancements, particularly for integral ATM and frame relay
products in both wide area network and local area network interworking
applications.
Recoveries decreased as a percentage of gross expenditures in the third quarter
and first nine months of fiscal 1997 compared to the third quarter and first
nine months of fiscal 1996 due to a decline in investment tax credits and
customer, government and other funding as a proportion of gross research and
development expenditures. Based on Management's estimates of the proportion of
fiscal 1997 gross research and development expenditures eligible for investment
tax credits, current levels of committed funding, and estimated amortization of
deferred software development costs, Management expects the level of recoveries
as a percentage of gross research and development expenditures in fiscal 1997 to
decline relative to fiscal 1996.
Of the acquisitions made by the Company in the third quarter of fiscal 1997 only
UB Networks undertakes research and development activities. Management expects
for the fourth quarter of fiscal 1997, research and development spending,
expressed as a percentage of sales, will not materially increase due to the
acquisition of UB Networks.
The markets for the Company's products are characterized by continuing
technological change. As a result, Management believes that continued
significant expenditures for research and development will be required in the
future.
(Page 19 of 27)
<PAGE>
Interest and Other Expenses
<TABLE>
<CAPTION>
Fiscal Quarter Ended Three Fiscal Quarters Ended
--------------------------------- ----------------------------------
Jan 26, Jan 28, % Jan 26, Jan 28, %
1997 1996 Increase 1997 1996 Increase
-------- -------- -------- --------- --------- --------
(Canadian dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest income $5,530 $5,815 (5%) $16,322 $17,329 (6%)
Interest expense on
long term obligations 933 146 539% 1,191 435 174%
Other expenses (income) 2,398 (2,043) 217% 7,277 2,984 144%
</TABLE>
Interest income for the third quarter and first nine months of fiscal 1997
decreased compared to the third quarter and first nine months of fiscal 1996
despite the increased cash position maintained throughout eight of the first
nine months of fiscal 1997 compared to fiscal 1996 due to a decline in interest
rates earned on investments. Interest expense on long term obligations increased
in the third quarter of fiscal 1997 due to the assumption of long term
obligations of companies acquired by the Company during fiscal 1997. Other
expenses represented less than 1% of sales in the third quarter and first nine
months of fiscal 1997 and fiscal 1996. Other expenses in the third quarter of
fiscal 1996 include a gain of $3,967,000 on the divestiture related to the sale
of a 61% equity interest in Tundra Semiconductor Corporation through a private
placement.
Income Taxes
<TABLE>
<CAPTION>
Fiscal Quarter Ended Three Fiscal Quarters Ended
-------------------- ---------------------------
Jan 26, Jan 28, Jan 26, Jan 28,
1997 1996 1997 1996
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Income tax rate 31% 33% 32% 33%
</TABLE>
The composite rates of income tax for the third quarter and first nine months of
fiscal 1997 and fiscal 1996 were reduced from the statutory rate primarily as a
result of the application of certain deductions related to manufacturing and
processing activities and to research and development expenditures in Canada.
Future changes in the composite rate of income tax will be primarily due to the
relative profitability of operations and the national tax policies in each of
the various countries in which the Company operates. Management believes that
the composite rate of income tax will remain lower than the statutory rate
through the application of deductions related to manufacturing and processing
activities and research and development expenditures in Canada as well as other
tax planning measures undertaken by the Company.
Non-Controlling Interest
The non-controlling interests' share of net earnings of $2,632,000 in the third
quarter ($4,625,000 in the first nine months) of fiscal 1997 was derived from
net earnings of Transistemas S.A., an Argentine systems integrator of networking
products, Coasin Chile S.A., a systems integrator of networking products and
ACC, a manufacturer of local area network bridges and routers. The Company has a
51% equity interest in Transistemas S.A., Coasin Chile S.A., and ACC. The
non-controlling interests' share of net losses of $943,000 in the first nine
months of fiscal 1996 was due primarily to restructuring costs incurred by ACC.
(Page 20 of 27)
<PAGE>
Net Earnings
An increase in sales resulted in net earnings of $63,031,000 for the third
quarter of fiscal 1997, an increase of 17% over net earnings for the third
quarter of fiscal 1996. Net earnings of $186,613,000 for the first nine months
of fiscal 1997 increased 37% relative to net earnings of $136,369,000 for the
first nine months of fiscal 1996 principally due to the increase in sales of 44%
over the same period.
Under U.S. GAAP, purchased in process research and development acquired by the
Company on the acquisition of UB Networks would be written off at the time of
acquisition. Accordingly, the determination of net earnings (loss) under U.S.
GAAP is as follows.
<TABLE>
<CAPTION>
Fiscal quarter ended Three fiscal quarters ended
------------------------- ---------------------------
January 26, January 28, January 26, January 28,
1997 1996 1997 1996
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net earnings, as reported $ 63,031 $53,881 $186,613 $136,369
Write off of purchased in process
research and development
upon acquisition of
UB Networks (96,940) -- (96,940) --
------ ------ ------- -------
Net earnings (loss), U.S. GAAP $(33,909) $53,881 $ 89,673 $136,369
====== ====== ======= =======
</TABLE>
The Company expects that the acquisitions of UB Networks, Danring and Coasin
will not have a material effect on operating income from continuing operations
for the fourth quarter of fiscal 1997 ending April 30, 1997.
FINANCIAL CONDITION
During the first nine months of fiscal 1997 ended January 26, 1997 working
capital decreased from $658,087,000 to $579,681,000. As at January 26, 1997 the
Company had $355,994,000 of cash and cash equivalents, which decreased by
$99,755,000 during the first nine months of fiscal 1997. The decrease is due to
cash used for the acquisitions of subsidiaries of $206,960,000 and additions to
property, plant and equipment of $81,611,000, offset by net earnings for the
first nine months of fiscal 1997 of $186,613,000.
Two principal components of the Company's working capital are accounts
receivable and inventory. Management believes that the payment terms and
conditions extended to the Company's customers, arrangements with the Company's
suppliers, and the levels of inventory the Company carries relative to its
levels of sales are consistent with practices generally prevailing in the
networking industry.
Existing short term bank credit facilities consist of operating lines of credit
with certain banks in the aggregate amount of $66,872,000. At January 26, 1997
there were no outstanding borrowings under these lines of credit.
On January 17, 1997, the Company acquired a 100% equity interest in UB Networks
by the purchase of shares in the amount of $146,590,000. The purchase price
includes professional fees and other direct costs of the acquisition, and
excludes additional contingent payments which may be made over the next two
years based on 50% of the gross margin earned on UB Networks' products above a
certain amount which approximates the gross margin earned on the products prior
to the acquisition, up to a maximum of 50% of the purchase price paid to the
seller. The acquisition has been accounted for by the purchase method of
accounting.
(Page 21 of 27)
<PAGE>
Effective November 1, 1996 the Company acquired a 51% equity interest in Coasin
by the purchase of shares in the amount of $14,129,000. The purchase price
excludes additional contingent payments which may be made over the next two
years depending upon the financial performance of Coasin, up to a maximum of
US$2,595,000. The acquisition has been accounted for by the purchase method of
accounting.
On January 16, 1997, the Company acquired a 100% equity interest in Danring by
the purchase of shares in the amount of $11,144,000. The acquisition has been
accounted for by the purchase method of accounting.
In August 1996, the Company acquired a 100% equity interest in OST, a
manufacturer of local area network equipment based in France, by the purchase of
shares in the amount of $34,231,000. The purchase price excludes additional
contingent payments which may be made over the next three years depending on the
financial performance of OST, up to a maximum of US$10,000,000. The acquisition
was accounted for by the purchase method of accounting.
Management anticipates that capital expenditures for fiscal 1997 will exceed
those of fiscal 1996 as the Company invests in new facilities in Canada, in
research and development and manufacturing equipment and in information systems.
The Company also anticipates increasing its current investments in subsidiaries
and associated companies, and intends to extinguish its existing long term
obligations as they become due. The Company intends to fund the increased
capital expenditures, increased investments and retirement of long term
obligations with existing cash and cash generated from operations during fiscal
1997. In addition, the Company may use a portion of its cash resources,
supplemented as appropriate by the issuance of shares, to continue to extend or
enhance its business and diversify its marketing and distribution channels
through acquisitions of or investments in businesses, products or technologies
or through the formation of strategic partnerships with other companies.
During August 1996, the Company filed a notice of intention with The Toronto
Stock Exchange to make a normal course issuer bid for common share repurchases
in open market transactions in the United States and Canada. The Company may
purchase up to 4,000,000 outstanding Common Shares in future if Management
considers such investments appropriate.
Management believes that the Company's liquidity in the form of existing cash
resources and its credit facilities, as well as cash generated from operations,
will prove adequate to meet its operating and capital expenditure requirements
through the end of fiscal 1997 and into the foreseeable future.
Certain parts of the foregoing discussion and analysis may be forward-looking
statements that involve a number of risks and uncertainties. As a consequence,
actual results might differ materially from results forecast or suggested in any
forward-looking statements. See "Market for Registrant's Common Equity and
Related Stockholder Matters -- Cautionary Statement Regarding Forward-Looking
Information" in the Company's Annual Report on Form 10-K, which is incorporated
by reference herein.
(Page 22 of 27)
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
During the fiscal year ended April 30, 1995, the Company was served with one of
several complaints filed in United States District Court in Washington, D.C. by
certain persons purporting to be purchasers of Common Shares of the Company. On
or about May 8, 1995 these complaints were combined into a single consolidated
and amended complaint (the "First Amended Complaint") which named the Company
and certain of its executive officers as defendants. The First Amended Complaint
purported to be a class action on behalf of a class of persons who purchased
securities of the Company between March 29 and August 1, 1994 and alleged that
the Company made false and misleading statements in violation of United States
securities law and common law, for which damages were sought in unspecified
amounts. On June 3, 1996, the Court issued an order granting in part and denying
in part the defendants' motion to dismiss. Among other things, the Court
dismissed with prejudice the claim alleging violation of common law. The Court
also dismissed the majority of plaintiffs' allegations of violation of United
States securities law, but granted plaintiffs leave to replead these allegations
in a Second Amended Complaint, which plaintiffs filed on July 3, 1996. The Court
further conditionally certified the action as a class action without prejudice
to the Company's right to renew its objection to class action certification upon
completion of discovery. The defendants have moved to dismiss the Second Amended
Complaint. The Company intends to continue to defend this action vigorously.
Based upon its present understanding of the laws in the United States and the
facts, the Company believes it has meritorious defenses to the action.
Item 5. OTHER INFORMATION
The "Cautionary Statement Regarding Forward-Looking Information" contained in
"Market for Registrant's Common Equity and Related Stockholder Matters" in the
Company's Annual Report on Form 10-K for the fiscal year ended April 30, 1996 is
incorporated herein by reference and made a part hereof.
On December 19, 1996, Peter Sommerer was appointed as Vice Chairman of the Board
of Directors of the Company. He has held a variety of positions with the Company
since February 1987, most recently as President and Chief Operating Officer
since June 1993. Peter D. Charbonneau has replaced Mr. Sommerer as President and
Chief Operating Officer of the Company. He has held a variety of positions with
the Company since January 1987 and has been Executive Vice President and Chief
Financial Officer of the Company since June 1993. Replacing Mr. Charbonneau as
Chief Financial Officer was Kenneth B. Wigglesworth, who has held a variety of
positions with the Company since July 1987 and has been Vice President, Finance
of the Company since June 1993.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit 11.1 Computation of earnings per share
under accounting principles generally
accepted in Canada.
Exhibit 11.2 Computation of earnings per share
under accounting principles generally
accepted in the United States.
b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated January
17, 1997 related to the purchase of Ungermann-Bass Networks, Inc.
(Page 23 of 27)
<PAGE>
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.
NEWBRIDGE NETWORKS CORPORATION
(Registrant)
Date: March 11, 1997 By: /s/Terence H. Matthews
----------------------
Terence H. Matthews,
Chairman of the Board of
Directors and Chief
Executive Officer
Date: March 11, 1997 By: /s/Kenneth B. Wigglesworth
--------------------------
Kenneth B. Wigglesworth,
Vice President,
Chief Financial Officer
(Page 24 of 27)
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
11.1 Computation of earnings per share under accounting
principles generally accepted in Canada............................26
11.2 Computation of earnings per share under accounting
principles generally accepted in the United States.................27
</TABLE>
(Page 25 of 27)
<PAGE>
EXHIBIT 11.1
NEWBRIDGE NETWORKS CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(Accounting principles generally accepted in Canada)
(Canadian dollars, amounts in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Fiscal quarter ended Three fiscal quarters ended
-------------------- ---------------------------
Jan 26, Jan 28, Jan 26, Jan 28,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic earnings per share
Net earnings $63,031 $53,881 $186,613 $136,369
====== ====== ======= =======
Common Shares outstanding
at the beginning of the period 170,741 165,752 168,676 164,515
Weighted average number of Common Shares
issued, net of Common Shares
repurchased, during the period 200 796 1,464 1,327
------- ------- ------- -------
Weighted average number of Common Shares
outstanding at the end of the period 170,941 166,548 170,140 165,842
======= ======= ======= =======
Basic earnings per share $0.37 $0.32 $1.10 $0.82
======= ======= ======= =======
Fully diluted earnings per share
Earnings before imputed earnings $63,031 $53,881 $186,613 $136,369
After tax imputed earnings from the investment
of funds received through dilution 2,693 2,721 8,241 7,589
------- ------- ------- -------
Adjusted net earnings $65,724 $56,602 $194,854 $143,958
====== ====== ======= =======
Weighted average number of Common Shares
outstanding at the end of the period 170,941 166,548 170,140 165,842
Weighted average common share
equivalents based on conversion of
outstanding stock options 14,096 13,986 13,500 13,823
------- ------- -------- -------
Weighted average number of Common
Shares and equivalents outstanding at
the end of the period 185,037 180,534 183,640 179,665
======= ======= ======= =======
Fully diluted earnings per share $0.36 $0.31 $1.06 $0.80
======= ======= ======= =======
Earnings per share expressed in U.S. Dollars
Daily average exchange rate of a Canadian
dollar for U.S. dollars as reported by the
Federal Reserve Bank of New York $0.7406 $0.7342 $0.7346 $0.7354
Basic earnings per share, in U.S. dollars $0.27 $0.24 $0.81 $0.60
======= ======= ======= =======
Fully diluted earnings per share, in U.S. dollars $0.26 $0.23 $0.78 $0.59
======= ======= ======= =======
</TABLE>
(Page 26 of 27)
<PAGE>
EXHIBIT 11.2
NEWBRIDGE NETWORKS CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(Accounting principles generally accepted in the United States)
(Canadian dollars, amounts in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Fiscal quarter ended Three fiscal quarters ended
-------------------- ---------------------------
Jan 26, Jan 28, Jan 26, Jan 28,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings (loss) (U.S. GAAP)
Net earnings, as reported, under Canadian GAAP $63,031 $53,881 $186,613 $136,369
Write off of purchased in process research and
development upon acquisition of UB Networks (96,940) -- (96,940) --
------ ------ ------- -------
Net earnings, under U.S. GAAP $(33,909) $53,881 $ 89,673 $136,369
====== ====== ======= =======
Earnings (loss) per share (U.S. GAAP) - Primary
Net earnings (loss) $(33,909) $53,881 $ 89,673 $136,369
====== ====== ======= =======
Weighted average number of Common Shares
outstanding at the end of the period 170,941 166,548 170,140 165,842
Net effect of dilutive stock options
based on the treasury stock method -- 4,610 4,667 3,384
------- ------- ------- -------
Weighted average number of Common
Shares and equivalents outstanding at
the end of the period 170,941 171,158 174,807 169,226
======= ======= ======= =======
Earnings (loss) per share (U.S. GAAP) $(0.20) $0.31 $0.51 $0.81
======= ======= ======= =======
Earnings (loss) per share (U.S. GAAP) - Fully Diluted
Net earnings (loss) $(33,909) $53,881 $ 89,673 $136,369
======= ====== ======== =======
Weighted average number of Common Shares
outstanding at the end of the period 170,941 166,548 170,140 165,842
Net effect of dilutive stock options
based on the treasury stock method -- 6,181 4,667 6,018
------- ------- ------- --------
Weighted average number of Common
Shares and equivalents outstanding at
the end of the period 170,941 172,729 174,807 171,860
======= ======= ======= =======
Earnings (loss) per share (U.S. GAAP) $(0.20) $0.31 $0.51 $0.79
======= ======= ======= =======
Earnings (loss) per share expressed in U.S. Dollars
Daily average exchange rate of a Canadian
dollar for U.S. dollars as reported by the
Federal Reserve Bank of New York $0.7406 $0.7342 $0.7346 $0.7354
Earnings (loss) per share (U.S. GAAP)
- Primary, in U.S. dollars $(0.15) $0.23 $0.38 $0.59
======= ======= ======= =======
Earnings (loss) per share (U.S. GAAP)
- Fully diluted, in U.S. dollars $(0.15) $0.23 $0.38 $0.58
======= ======= ======= =======
</TABLE>
(page 27 of 27)
