-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, knKL9y9ZCJ5I5ImGUVLiLTCkNpW8JtcwtCIX3saeqht1QtXW7n61sxT4rFE2dvYw HGDDzzaGvzcf8fQdeFLcRw== 0000792723-94-000016.txt : 19941117 0000792723-94-000016.hdr.sgml : 19941117 ACCESSION NUMBER: 0000792723-94-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OCTEL COMMUNICATIONS CORP CENTRAL INDEX KEY: 0000792723 STANDARD INDUSTRIAL CLASSIFICATION: 3661 IRS NUMBER: 770029449 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16588 FILM NUMBER: 94559573 BUSINESS ADDRESS: STREET 1: 890 TASMAN DR CITY: MILPITAS STATE: CA ZIP: 95035 BUSINESS PHONE: 4083212000 10-Q 1 ______________________________________________________________ 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. 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- EX-27 2
5 1 $ 3-MOS SEP-30-1994 JUL-01-1994 SEP-30-1994 1 17569 52812 85059 (2758) 33739 199351 170804 (65749) 336213 83613 0 173335 0 0 78389 336213 69901 105745 21537 42128 58003 0 0 5614 1800 3814 0 0 0 3814 .15 .15
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