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Technology Stocks : Ascend Communications (ASND) -- Ignore unavailable to you. Want to Upgrade?

To: Harry Ehrlich who wrote (23513)	11/14/1997 5:59:00 PM
From: Gary Korn	Read Replies (1) \| Respond to of 61433

Harry, Thx for starting the new thread for ASND-MarketGuide. I've read the 10Q...nothing jumps up at me. I'll dig up and post the Edgar link. Gary Korn

To: Harry Ehrlich who wrote (23513)	11/14/1997 6:20:00 PM
From: Gary Korn	Respond to of 61433

10Q Part 1 Form 10-Q for ASCEND COMMUNICATIONS INC filed on Nov 14 1997 UNITED STATES 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, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from ________ to ________ Commission File Number: 000-23774 ASCEND COMMUNICATIONS, INC. (Exact name of registrant as specified in its charter) Delaware 94-3092033 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Ascend Plaza 1701 Harbor Bay Parkway Alameda, California 94502 (510) 769-6001 (Address of principal executive offices, zip code and telephone number) 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, $0.001 par value, was 189,561,817 as of September 30, 1997. This report, including exhibits, consists of 27 pages. The Index To Exhibits is found on page 25. ASCEND COMMUNICATIONS, INC. FORM 10-Q TABLE OF CONTENTS Part I: Financial Information Page No. -------- Item 1: Financial Statements (Unaudited) Condensed Consolidated Balance Sheets as of September 30, 1997 and December 31, 1996 3 Condensed Consolidated Statements of Operations for the Quarters and Nine Months Ended September 30, 1997 and 1996 4 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1997 and 1996 5 Notes to Condensed Consolidated Financial Statements 6 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Part II: Other Information Item 6: Exhibits and Reports on Form 8-K 22 A: Exhibits 22 B: Reports on Form 8-K 23 Signatures 24 Index to Exhibits 25 2 Part I: Financial Information Item I: Financial Statements ASCEND COMMUNICATIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS UNAUDITED (In Thousands) SEPT. 30, DEC. 31, 1997 1996 ------------ ----------- Current Assets: Cash and cash equivalents................. $ 242,597 $ 312,369 Short-term investments.................. 264,873 173,101 Accounts receivable, net................ 236,478 185,094 Inventories............................. 125,142 68,544 Deferred income taxes................... 64,352 41,789 Other current assets.................... 21,871 26,444 ------------ ----------- Total current assets.................. 955,313 807,341 Investments............................... 85,668 35,771 Furniture, fixtures and equipment, net.... 104,225 73,046 Other assets.............................. 4,694 5,969 ------------ ----------- Total assets.......................... $ 1,149,900 $ 922,127 ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable........................ $ 75,437 $ 60,823 Accrued liabilities and accrued compensation.......................... 180,193 94,071 ------------ ----------- Total current liabilities............. 255,630 154,894 Commitments Stockholders' equity: Common Stock............................ 190 182 Addtional paid-in capital............... 851,044 533,515 Retained earnings....................... 43,036 233,536 ------------ ----------- Total stockholders' equity............ 894,270 767,233 ------------ ----------- Total liabilities and stockholders' equity.............................. $ 1,149,900 $ 922,127 ============ =========== SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 3 ASCEND COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED (In Thousands, Except Per Share Data) Quarter Ended Sept. 30, Nine Months Ended Sept. 30, ----------------------- --------------------------- 1997 1996 1997 1996 --------- -------- --------- -------- Net sales............................. $ 270,372 $248,836 $ 874,805 $602,482 Cost of sales......................... 97,181 86,929 308,245 212,136 --------- -------- --------- -------- Gross profit........................ 173,191 161,907 566,560 390,346 Operating expenses: Research and development............ 40,706 25,314 115,595 64,061 Sales and marketing................. 66,499 42,172 179,616 105,328 General and administrative.......... 8,475 7,670 27,019 21,523 Purchased research and development.. - - 231,100 - Cost of mergers..................... - 13,900 150,271 13,900 --------- -------- --------- -------- Total operating expenses.......... 115,680 89,056 703,601 204,812 --------- -------- --------- -------- Operating income (loss)............... 57,511 72,851 (137,041) 185,534 Interest income, net.................. 6,161 4,406 17,739 12,355 --------- -------- --------- -------- Income (loss) before income taxes..... 63,672 77,257 (119,302) 197,889 Provision for income taxes............ 23,544 32,100 52,648 78,487 --------- -------- --------- -------- Net income (loss)..................... $ 40,128 $ 45,157 $(171,950) $119,402 ========= ======== ========= ======== Net income (loss) per share........... $ 0.20 $ 0.23 $ (0.92) $ 0.61 ========= ======== ========= ======== Number of shares used in per share calculation......................... 199,838 196,502 187,920 195,206 ========= ======== ========= ======== See notes to condensed consolidated financial statements. 4 ASCEND COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED (In Thousands) NINE MONTHS ENDED SEPT. 30 ------------------------------- 1997 1996 ------------ ------------- Operating activities: Net income (loss)....................................... $ (171,950) $ 119,402 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization....................... 31,798 14,309 Purchased research and development.................. 231,100 - Cost of mergers..................................... 150,271 13,900 Deferred income taxes............................... (14,490) (6,159) Changes in operating assets and liabilities: Accounts receivable................................. (60,713) (86,951) Inventories......................................... (68,302) (29,780) Other current assets................................ 5,822 (10,025) Other assets........................................ 2,358 (2,616) Accounts payable.................................... 11,336 14,136 Accrued liabilities and accrued compensation........ (34,406) 677 ------------ ----------- Net cash provided by operating activities........ 82,824 26,893 ------------ ----------- Investing activities: Purchases of investments............................ (403,247) (160,288) Maturities and sales of investments................. 261,578 126,945 Purchases of furniture, fixtures and equipment...... (83,494) (45,989) Effect of business combinations..................... (9,361) 2,830 ------------ ----------- Net cash used in investing activities........... (234,524) (76,502) ------------ ----------- Financing activities: Proceeds from issuance of common stock, net......... 44,753 38,830 Payment of notes payable............................ - (2,108) Tax benefit related to exercise of stock options.... 37,175 62,015 ------------ ----------- Net cash provided by financing activities........ 81,928 98,737 ------------ ----------- Net increase (decrease) in cash and cash equivalents.... (69,722) 49,128 Cash and cash equivalents, beginning of period.......... 312,369 202,524 ------------ ----------- Cash and cash equivalents, end of period................ $ 242,597 $ 251,652 ============ =========== Supplemental non-cash investing and financing activities: Liabilities assumed in business combination......... $ 9,600 $ - ============ =========== Exercise of warrants in exchange for retirement of notes payable................................... $ - $ 2,068 ============ =========== See notes to condensed consolidated financial statements.

To: Harry Ehrlich who wrote (23513)	11/14/1997 6:21:00 PM
From: Gary Korn	Respond to of 61433

10Q Part 2 5 ASCEND COMMUNICATIONS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED General Ascend Communications, Inc. develops, manufactures and sells wide area networking solutions for telecommunications carriers, Internet service providers and corporate customers worldwide that enable them to build: (i) Internet access systems consisting of point-of-presence termination ("POP") equipment for Internet service providers ("ISPs") and remote site Internet access equipment for Internet subscribers; (ii) telecommunications carrier and ISP backbone networks utilizing high speed Frame Relay, Asynchronous Transfer Mode ("ATM") and Internet Protocol ("IP") switches; (iii) extensions and enhancements to corporate backbone networks that facilitate access to these networks by remote offices, telecommuters and mobile computer users; and (iv) videoconferencing and multimedia access facilities. The Company's products support existing digital and analog networks. In February 1997, the Company purchased InterCon Systems Corporation ("InterCon"), a leading developer of remote access client software products for both corporate and ISP markets. The transaction was accounted for as a purchase. The operations of InterCon have been included for periods subsequent to the acquisition (see "Business Combinations"). On April 1, 1997, the Company acquired Whitetree, Inc. ("Whitetree"), a developer and manufacturer of high speed ATM switching products. The transaction was accounted for as a pooling of interests. The operations of Whitetree have been included for periods subsequent to the acquisition. The Company's historical consolidated financial statements prior to the combination have not been restated to reflect the financial results of Whitetree as these results were not material to the Company (see "Business Combinations"). On June 30, 1997, the Company acquired Cascade Communications Corp. ("Cascade"), a leading developer and manufacturer of carrier class Frame Relay, ATM and IP switching products. The transaction was accounted for as a pooling of interests. The consolidated financial statements of Ascend for prior periods have been restated to include the financial position and results of operations of Cascade (see "Business Combinations"). On January 28, 1997, Cascade completed its acquisition of Sahara Networks, Inc. ("Sahara"), a privately held developer of scaleable high-speed broadband access products. The acquisition was accounted for under the purchase method of accounting. The operations of Sahara have been included for periods subsequent to the acquisition. The interim condensed consolidated financial statements of Ascend Communications, Inc. have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. 6 ASCEND COMMUNICATIONS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) General (continued) The information included in this report should be read in conjunction with the Company's audited financial statements and notes thereto included in the Company's Registration Statement on Form S-4/A (No. 333-25287) filed on April 22, 1997 in connection with the acquisition of Cascade and the Company's and Cascade's 1996 Annual Reports on Form 10-K. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary to summarize fairly the financial position, results of operations and cash flows for such periods. The results for the interim period ended September 30, 1997 are not necessarily indicative of the results that may be expected for any future periods. Concentration of Credit Risk The Company sells and distributes a substantial percentage of its products to ISPs, value-added resellers and distributors, and local and long-distance telecommunications carriers throughout North America, Europe and Asia and the Pacific Basin. Accounts receivable are principally from these customers. The Company conducts ongoing credit evaluations of its customers and maintains reserves for potential credit losses. Inventories Inventories are stated at the lower of cost (determined by the first-in, first- out method) or market. Inventories consist of (in thousands): Sept. 30, Dec. 31, 1997 1996 -------- -------- Finished goods................ $ 12,001 $ 10,778 Products in process........... 20,231 7,544 Raw material and supplies..... 92,910 50,222 -------- -------- $125,142 $ 68,544 ======== ======== 7 ASCEND COMMUNICATIONS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Commitments In March 1996, the Company entered into an agreement to lease 13 acres of land located in Alameda, California. Certain buildings currently being used for the Company's headquarters have been constructed on the land. The lessor has funded approximately $24.9 million for the land and construction of the buildings. The lease has an initial term of five years and an option to renew for two years, subject to the lessor's consent. The rent obligation for the lease commenced in December 1996. At any time during the term of the lease, the Company may purchase the land and buildings. If the Company does not exercise its purchase option at the end of the lease, the Company has guaranteed a residual value of approximately $22.4 million. Income Taxes For the nine months ended September 30, 1997, the Company's income taxes currently payable for both federal and state purposes have been reduced by a tax benefit of approximately $37.2 million from stock option transactions which was credited directly to stockholders' equity. The Company made cash payments of approximately $9.6 million and $46.8 million for income taxes during the nine months ended September 30, 1997 and 1996, respectively. Earnings Per Share Earnings per share for the quarters and nine months ended September 30, 1997 and 1996 were computed based on the weighted average outstanding number of common and common equivalent shares except for the nine months ended September 30, 1997 which exclude common equivalent shares as they are anti-dilutive for such period. The computations of the weighted average number of shares outstanding for the quarters and nine months ended September 30, 1997 and 1996 are as follows (in thousands, except per share data): Quarter Ended Sept. 30, Nine Months Ended Sept. 30, 1997 1996 1997 1996 ---------- ---------- ---------- ----------- Common Stock................. 189,562 179,469 187,920 177,464 Common Stock Equivalent...... 10,276 17,033 -- 17,742 -------- -------- --------- -------- Total........................ 199,838 196,502 187,920 195,206 ======== ======== ========= ======== Net Income (Loss)............ $ 40,128 $ 45,157 $(171,950) $119,402 ======== ======== ========= ======== Net Income (Loss) Per Share.. $ 0.20 $ 0.23 $ (0.92) $ 0.61 ======== ======== ========= ======== 8 ASCEND COMMUNICATIONS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Recent Accounting Pronouncements In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact is expected to result in an increase in primary earnings per share of $0.02 and $0.06 for the quarter and nine months ended September 30, 1996, respectively, and an increase of $0.01 per share for the quarter ended September 30, 1997. There is no effect on the earnings per share for the nine months ended September 30, 1997 as the common stock equivalents are already excluded as they are anti-dilutive for such period. Business Combinations On June 30, 1997, the Company acquired Cascade in a transaction that was accounted for as a pooling of interests. The Company issued approximately 66,346,000 shares of its common stock to Cascade stockholders in exchange for all outstanding Cascade shares. Outstanding options to purchase Cascade common stock were converted to options to purchase approximately 8,455,000 shares of Ascend common stock. The historical consolidated financial results of Ascend for prior periods have been restated to include the financial position and results of operations of Cascade. The following table shows the historical results of Ascend and Cascade for the periods prior to the consummation of the merger of the two entities: Three Months Ended March 31, Year Ended Dec. 31, ------------ --------------------------------- 1997 1996 1995 1994 ------------ --------- -------- ------- Net Sales: Ascend................................... $ 202,412 $ 549,297 $152,604 $39,655 Cascade.................................. 90,328 340,976 134,834 50,060 --------- --------- -------- ------- Total.................................. $ 292,740 890,273 287,438 89,715 ========= ========= ======== ======= ----------------------------------------------------------------------------------------------------------------- Net Income (loss): Ascend................................... $ 35,093 $ 113,111 $ 27,535 $ 6,550 Cascade.................................. (198,334) 70,779 25,410 9,266 --------- --------- -------- ------- Total.................................. (163,241) 183,890 52,945 15,816 --------- --------- -------- ------- Pro Forma effect of Sahara acquisition... (984) (7,332) _ - Pro Forma exclusion of purchased research and development: InterCon, net of income taxes........ 11,160 - - - Sahara............................... 213,100 - - - --------- --------- -------- ------- Pro forma net income, as restated........ $ 60,035 $ 176,558 $ 52,945 $15,816 ========= ========= ======== ======= 9 ASCEND COMMUNICATIONS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Business Combinations (continued) In February 1997, the Company acquired all of the outstanding stock of InterCon. The purchase price consisted of a cash payment of $12.0 million, the assumption of approximately $9.0 million of liabilities and transaction costs of approximately $600,000. The acquisition was accounted for under the purchase method of accounting. Accordingly, the total purchase price of $21.6 million was allocated to the net assets acquired based upon their estimated fair values. The estimated fair value of tangible net assets acquired was $600,000. In addition, $18.0 million of the purchase price was allocated to purchased research and development that had not reached technological feasibility and that had no alternative future use, and $3.0 million was allocated to purchased software. On April 1, 1997, the Company acquired Whitetree in a transaction that was accounted for as a pooling of interests. The Company issued approximately 1,315,000 shares of its common stock to Whitetree shareholders in exchange for all outstanding Whitetree shares. In addition, the Company assumed all outstanding Whitetree stock options to purchase approximately 99,000 shares of the Company's stock. The results of operations of Whitetree, which have not been material in relation to those of the Company, are included in the consolidated results of operations for periods subsequent to the acquisition. The Company's historical consolidated financial statements prior to the combination have not been restated to reflect the financial results of Whitetree as these results were not material to the Company. On January 28, 1997, Cascade completed its acquisition of Sahara. Cascade issued approximately 3.4 million shares of Cascade common stock in exchange for all the outstanding shares of Sahara. In addition, Cascade assumed all outstanding Sahara stock options to purchase approximately 400,000 shares of Cascade common stock. The acquisition was accounted for under the purchase method of accounting. Accordingly, the purchase price of approximately $219.0 million was allocated to the net assets acquired based upon their estimated fair market value. The estimated fair value of the tangible net assets acquired was approximately $6.0 million. In addition, approximately $213.0 million of the purchase price was allocated to in-process research and development that had not reached technological feasibility and that had no alternative future use.

To: Harry Ehrlich who wrote (23513)	11/14/1997 6:22:00 PM
From: Gary Korn	Respond to of 61433

10Q Part 3 10 ASCEND COMMUNICATIONS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Litigation On April 16, 1997, a civil action was filed against Sahara, its three founders and ten employees of Sahara by General Datacomm Industries, Inc. in the Superior Court for the State of Connecticut. The complaint alleges several causes for action, including: breach of contract; tortious interference with contractual relations; misappropriation of trade secrets; unfair competition and violation of the Connecticut Unfair Trade Practices Act. The plaintiff seeks relief of unspecified monetary damages, costs and injunctive relief. Based on the Company's preliminary investigation, the Company believes the allegations of the lawsuit are without merit and plans to vigorously defend this lawsuit; however, the ultimate outcome of this matter cannot yet be determined. No provision for any liability that may result from the action has been recognized in the consolidated financial statements. In the opinion of management, resolution of this litigation is not expected to have a material adverse effect on the financial position of the Company. However, depending on the amount and timing, an unfavorable resolution of this matter could materially affect the Company's future results or cash flows in a particular period. On April 18, 1997, the Company received a claim and request for royalties alleging patent infringement on four separate patents. Subsequently, the claim and request for loyalties was amended to include four additional patents. The Company is currently investigating the claims of such infringement and thus the ultimate outcome of this claim cannot yet be determined. No provision for any liability that may result from the claim has been recognized in the consolidated financial statements. In the opinion of management, resolution of this matter is not expected to have a material adverse effect on the financial position of the Company. However, depending on the amount and timing, an unfavorable resolution of this matter could materially affect the Company's future results or cash flows in a particular period. 11 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations ASCEND COMMUNICATIONS, INC. This Report contains forward-looking statements which reflect the current views of the Company with respect to future events that will have an effect on its future financial performance. These statements include the words "expects," "believes," "estimates," and similar expressions. These forward-looking statements are subject to various risks and uncertainties, including those referred to under "Factors That May Affect Future Results" and elsewhere herein, that could cause actual future results to differ materially from historical results or those currently anticipated. Readers are cautioned not to place undue reliance on these forward-looking statements. The information set forth below should be read in conjunction with the unaudited interim condensed consolidated financial statements and notes thereto included in Part 1 - Item 1 of this Quarterly Report and the audited financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 1996 contained in the Company's Registration Statement on Form S-4/A (No. 333-25287) filed on April 22, 1997 in connection with the acquisition of Cascade and the Company's and Cascade's 1996 Annual Reports on Form 10-K. Results of Operations The following table sets forth, for the periods indicated, the percentage of net sales represented by certain line items from the Company's Condensed Consolidated Statements of Operations for the quarter and nine months ended September 30, 1997 and 1996, respectively: Quarter Ended Sept. 30, Nine Months Ended Sept. 30, ----------------------- --------------------------- 1997 1996 1997 1996 ---- ---- ---- ---- Net sales................................ 100% 100% 100% 100% Cost of sales............................ 36 35 35 35 ---- ---- ---- ---- Gross margin........................... 64 65 65 65 Operating expenses: Research and development............... 15 10 13 11 Sales and marketing.................... 24 17 21 17 General and administrative............. 3 3 3 4 Purchased research and development..... - - 27 - Cost of mergers........................ - 6 17 2 ---- ---- ---- ---- Total operating expenses............. 42 36 81 34 ---- ---- ---- ---- Operating income (loss).................. 22 29 (16) 31 Interest income, net..................... 2 2 2 2 ---- ---- ---- ---- Income (loss) before income taxes........ 24 31 (14) 33 Provision for income taxes............... 9 13 6 13 ---- ---- ---- ---- Net income(loss)......................... 15% 18% (20)% 20% ==== ==== ==== ==== See notes to condensed consolidated financial statements. 12 ASCEND COMMUNICATIONS, INC. Net Sales Net sales for the quarter ended September 30, 1997 were $270.4 million, an increase of 9% over net sales of $248.8 million for the third quarter of 1996. Net sales for the nine months ended September 30, 1997 were $874.8 million, an increase of 45% over net sales of $602.5 million for the nine months ended September 30, 1996. UUNET, an Internet service provider, accounted for approximately 15% and 10% of net sales for the quarters ended September 30, 1997 and 1996, respectively. UUNET accounted for approximately 16% of net sales for the nine months ended September 30, 1997. International sales accounted for approximately 29% of net sales for the quarter ended September 30, 1997 compared to 36% of net sales for the same period in 1996. International sales accounted for approximately 33% of net sales for the nine months ended September 30, 1997 compared to 34% of net sales for the same period in 1996. These decreases were principally due to decreased sales of the Company's products in Europe and Japan. The following table provides a breakdown of net sales by business unit as a percentage of total Company net sales for the quarters and nine months ended September 30, 1997 and 1996, respectively: Quarter Ended Sept. 30, Nine Months Ended Sept. 30, ----------------------- --------------------------- BUSINESS UNIT 1997 1996 1997 1996 ------------------------ ---- ---- ---- ---- Access Concentrators........ 50% 49% 55% 47% Core Switching.............. 36 36 33 37 Remote Access............... 5 7 5 8 Multimedia.................. 4 5 3 6 Other....................... 5 3 4 2 --- --- --- --- Total Company............ 100% 100% 100% 100% === === === === Access Concentrators - The Access Concentrators business unit is composed of the MAX family of products. MAX products accounted for 50% and 49% of total Company net sales for the quarters ended September 30, 1997 and 1996, respectively. MAX products accounted for 55% and 47% of total Company net sales for the nine months ended September 30, 1997 and 1996, respectively. The increase in unit shipments of MAX products was primarily attributable to the growth in business from Internet service providers ("ISP's") and increased demand for corporate remote networking applications. 13 ASCEND COMMUNICATIONS, INC. Net Sales (continued) Core Switching The Core Switching business unit is composed of the BSTDX family of Frame Relay switches, the CBX500 family of ATM switches and the GRF family of Internet Protocol ("IP") switches. B-STDX products accounted for 25% and 31% of total Company net sales for the quarters ended September 30, 1997 and 1996, respectively. BSTDX products accounted for 25% and 34% of total Company net sales for the nine months ended September 30, 1997 and 1996, respectively. The decline in BSTDX sales as a percent of net sales was primarily attributable to the increase in the sales of the MAX family of products. CBX500 products accounted for 9% and 4% of total Company net sales for the quarters ended September 30, 1997 and 1996, respectively. CBX500 products accounted for 6% and 2% of total Company net sales for the nine months ended September 30, 1997 and 1996, respectively. GRF products, which were first shipped in volume in the first quarter of 1997, accounted for 2% of total Company net sales for both the quarter and the nine months ended September 30, 1997. Remote Access The Remote Access business unit is composed of the Pipeline family of products. Pipeline products accounted for 5% and 7% of total Company net sales for the quarters ended September 30, 1997 and 1996, respectively. Pipeline products accounted for 5% and 8% of total Company net sales for the nine months ended September 30, 1997 and 1996, respectively. The decline of Pipeline net sales as a percent of total Company net sales was primarily attributable to the increase in the sales of the MAX family of products and price reductions of the Pipeline products due to increased competition. Multimedia The Multimedia business unit is composed of the Multiband family of products and the MAX Video family of products. Multimedia products accounted for 4% and 5% of total Company net sales for the quarters ended September 30, 1997 and 1996, respectively. Multimedia products accounted for 3% and 6% of total Company net sales for the nine months ended September 30, 1997 and 1996, respectively. The decline of Multimedia net sales as a percent of total Company net sales was primarily attributable to the increase in the sales of the MAX family of products. Gross Margin Gross margin was 64% and 65% for the quarters ended September 30, 1997 and 1996, respectively. The decrease in gross margin for the quarter ended September 30, 1997 was primarily due to increased manufacturing period costs. Gross margin was 65% for both the nine months ended September 30, 1997 and 1996. In the future, the Company's gross margins may be affected by several factors, including the mix of products sold, the price of products sold, the introduction of new products with lower gross margins, the distribution channels used, price competition, increases in material costs and changes in other components of cost of sales. 14 ASCEND COMMUNICATIONS, INC. Research and Development Research and development expenses increased 61% to $40.7 million in the third quarter of 1997 from $25.3 million in the third quarter of 1996. Research and development expenses increased 80% to $115.6 million for the nine months ended September 30, 1997 from $64.1 million for the nine months ended September 30, 1996. Research and development expenses as a percent of net sales increased to 15% for the third quarter of 1997 compared to 10% for the same quarter of 1996. Research and development expenses as a percent of net sales increased to 13% for the first nine months of 1997 compared to 11% for the same period of 1996. These increases were primarily due to the addition of engineering personnel, payments for consulting services in connection with developing and enhancing the Company's existing and new products, payments for consulting services related to filing applications and product testing required to obtain governmental approvals to resell the Company's products outside of North America, addition of research and development laboratory equipment and material costs associated with new product prototypes. In addition, research and development expenses increased in part through the addition of engineering personnel and facilities as a result of the Company's merger and acquisition activities. Sales and Marketing Sales and marketing expenses increased 58% to $66.5 million for the third quarter of 1997 from $42.2 million for the third quarter of 1996. Sales and marketing expenses increased 71% to $179.6 million for the first nine months of 1997 from $105.3 million for the same period of 1996. Sales and marketing expenses as a percent of net sales increased to 24% for the third quarter of 1997 as compared to 17% for the same quarter of 1996. Sales and marketing expenses as a percent of net sales increased to 21% for the first nine months of 1997 as compared to 17% for the same period of 1996. These increases were primarily due to the addition of sales, marketing and technical support personnel, increased commissions, spending for marketing materials and trade shows, advertising and promotions, expenditures for demonstration and loaner equipment used by customers, and expenses associated with opening additional sales offices in North America, Europe and Asia and the Pacific Basin. The growth in sales, marketing and technical support personnel was primarily due to the need to manage the activities of an increased number of value-added resellers and distributors, end-user customers and new products. General and Administrative General and administrative expenses increased 11% to $8.5 million for the third quarter of 1997 from $7.7 million for the third quarter of 1996. General and administrative expenses increased 26% to $27.0 million for the first nine months of 1997 from $21.5 million for the first nine months of 1996. This increase was primarily due to the addition of finance, information systems and administrative personnel, accruals for performance bonuses, increased facilities costs and the cost of investor relations activities. General and administrative expenses as a percent of net sales were 3% for the quarters ended September 30, 1997 and 1996. General and administrative expenses as a percent of net sales decreased to 3% for the nine months ended September 30, 1997 from 4% for the same period of 1996. This decrease in general and administrative expenses as a percentage of net sales was due primarily to increased net sales.

To: Harry Ehrlich who wrote (23513)	11/14/1997 6:26:00 PM
From: Gary Korn	Respond to of 61433

10Q Part 4 15 ASCEND COMMUNICATIONS, INC. Purchased Research and Development Purchased research and development costs were $231.1 million for the first nine months of 1997. These costs were for the purchase of technology and related assets associated with the acquisitions of InterCon Systems Corporation and Sahara Networks, Inc. during the first quarter of 1997. These acquisitions provide technology and expertise that the Company is using to enhance and expand the breadth of its offerings to end-user markets. Cost of Mergers For the nine months ended September 30, 1997, the Company charged to operations one-time merger costs of approximately $150.3 million. These costs related to the acquisitions of Cascade Communications Corp. and Whitetree, Inc. and consist primarily of investment and professional fees and other direct costs associated with the merger. Of the $150.3 million in one-time merger costs, approximately $44.9 million are not deductible for tax purposes. Interest Income, Net Interest income (net) increased by approximately $1.8 million to $6.2 million (2% of net sales) for the third quarter of 1997 compared to $4.4 million for the same quarter of 1996. Interest income (net) increased by approximately $5.3 million to $17.7 million (2% of net sales) for the first nine months of 1997 compared to $12.4 million for same period of 1996. This increase in interest income (net) is due primarily to the investment of proceeds from the exercise of stock options and issuance of common stock in connection with the Company's employee and outside director stock plans and cash from operations. Provision for Income Taxes The Company's effective tax rate for the quarter and nine months ended September 30, 1997 was 37.0% and 37.6%, respectively, exclusive of the effect of one-time non-deductible in-process research and development expenses and certain merger related expenses. The effective tax rate for the quarter and nine months ended September 30, 1996 was 38.2% and 38.3%, respectively, exclusive of the effect of one time non-deductible merger related expenses. The lower effective tax rate for 1997 is primarily attributable to a larger benefit from the Company's Foreign Sales Corporation. 16 ASCEND COMMUNICATIONS, INC. Liquidity and Capital Resources At September 30, 1997, the Company's principal sources of liquidity included $593.1 million of cash and cash equivalents, short-term investments and investments, and an unsecured $15.0 million revolving line of credit which expires in November 1997. There were no borrowings under the line of credit during the nine months ended September 30, 1997. The decrease in cash and cash equivalents of $69.8 million for the period was principally due to $234.5 million of funds used in investing activities, partially offset by $81.9 million of proceeds from, and tax benefits related to, the exercise of stock options and issuance of common stock in connection with the Company's employee and outside director stock plans and by $82.8 million of funds provided by operations. The net cash provided by operating activities for the nine months ended September 30, 1997 was primarily due to increases in accrued liabilities, accrued compensation and accounts payable and increased net income adjusted for depreciation, purchased research and development, cost of mergers and deferred income taxes, partially offset by increases in accounts receivable and inventories. Net cash used in investing activities of $234.5 million for the nine months ended September 30, 1997 related primarily to net purchases, maturities and sales of investments, expenditures for furniture, fixtures, and equipment and the effect of business combinations. Financing activities provided $81.9 million for the nine months ended September 30, 1997, primarily due to proceeds from, and tax benefits related to, the exercise of stock options and issuance of common stock in connection with the Company's employee and outside director stock plans. At September 30, 1997, the Company had $699.7 million in working capital. The Company currently has no significant capital commitments other than commitments under facilities and operating leases. The Company believes that its available sources of funds and anticipated cash flow from operations will be adequate to finance current operations, anticipated investments and capital expenditures for at least the next twelve months. Factors That May Affect Future Results The Company's quarterly and annual operating results are affected by a wide variety of risks and uncertainties as discussed in the Company's Registration Statement on Form S-4/A (No. 333-25287) filed on April 22, 1997 in connection with the acquisition of Cascade and the Company's and Cascade's Annual Reports for the year ended December 31, 1996 on Form 10-K. This Report on Form 10-Q should be read in conjunction with such Forms S-4 and 10-K, particularly the section entitled "Risk Factors". These risks and uncertainties include but are not limited to competition, the mix of products sold, the mix of distribution channels employed, the Company's success in developing, introducing and shipping new products, the Company's success in integrating acquired operations, the Company's dependence on single or limited source suppliers for certain components used in its products, price reductions for the Company's products, risks inherent in international sales, changes in the levels of inventory held by third-party resellers, the timing of orders from and shipments to customers, seasonality and general economic conditions. 17 ASCEND COMMUNICATIONS, INC. Factors That May Affect Future Results (continued) In particular, a substantial portion of the Company's sales of MAX and Pipeline products is related to the Internet industry. In North America, the Company sells a substantial percentage of its products, particularly its MAX products, to ISPs. There can be no assurance that this industry and its infrastructure will continue to develop or that acceptance of the Company's products by this industry will be sustained. The Company believes competition in the Internet industry will increase significantly in the future and could adversely affect the Company's business, results of operations and financial condition. The Company has concluded the acquisition of four companies in 1996 and three companies in 1997. Achieving the anticipated benefits of these acquisitions or any other acquisitions the Company may undertake will depend in part upon whether the integration of the acquired companies' products and technologies, research and development activities, and sales, marketing and administrative organizations is accomplished in an efficient and effective manner, and there can be no assurance that this will occur. Moreover, the integration process may temporarily divert management attention from the day-to-day business of the Company. Failure to successfully accomplish the integration of the acquired companies could have a material adverse effect on the Company's business, financial condition and/or results of operations. The Company expects that its gross margins could be adversely affected in future periods by price adjustments as a result of increased competition. In addition, increased sales of Pipeline products as a percentage of net sales may adversely affect the Company's gross margins in future periods as these products have lower gross margins than the Company's other products. In addition, the Company's use of third parties to distribute its products to other value-added resellers may adversely affect the Company's gross margins. The Company expects that international sales will continue to account for a significant portion of the Company's net sales in future periods. International sales are subject to certain inherent risks, including unexpected changes in regulatory requirements and tariffs, difficulties in staffing and managing foreign operations, longer payment cycles, problems in collecting accounts receivable and potentially adverse tax consequences. The Company depends on third party resellers for a substantial portion of its international sales. Certain of these third party resellers also act as resellers for competitors of the Company that can devote greater effort and resources to marketing competitive products. The loss of certain of these third party resellers could have a material adverse effect on the Company's business and results of operations. Although the Company's sales are denominated in U.S. dollars, fluctuations in currency exchange rates could cause the Company's products to become relatively more expensive to customers in a particular country, leading to a reduction in sales and profitability in that country. Furthermore, future international activity may result in foreign currency denominated sales, and, in such event, gains and losses on the conversion to U.S. dollars of accounts receivable and accounts payable arising from international operations may contribute to fluctuations in the Company's results of operations. In addition, sales in Europe and certain other parts of the world typically are adversely affected in the third quarter of each calendar year as many customers reduce their business activities during the summer months. These seasonal factors may have an effect on the Company's business, results of operations and financial condition. 18 ASCEND COMMUNICATIONS, INC. Factors That May Affect Future Results (continued) The Company typically operates with a relatively small backlog. As a result, quarterly sales and operating results generally depend on the volume of, timing of and ability to fulfill orders received within the quarter, which are difficult to forecast. In the Company's most recent quarter, the sequential sales growth slowed from prior levels, and a disproportionate share of the sales occurred in the last month of the quarter. These occurrences are extremely difficult to predict and may happen in the future. The Company's ability to meet financial expectations could be hampered if the nonlinear sales pattern continues in future periods. Accordingly, the cancellation or delay of even a small percentage of customer purchases could adversely affect the Company's results of operations in the quarter. A significant portion of the Company's net sales in prior periods has been derived from relatively large sales to a limited number of customers, and therefore the failure of the Company to secure expected large sales may have a material adverse impact on results of operations. A significant portion of the Company's expense levels is relatively fixed in advance based in large part on the Company's forecasts of future sales. If sales are below expectations in any given quarter, the adverse impact of the shortfall on the Company's operating results may be magnified by the Company's inability to adjust spending to compensate for the shortfall. The Company may also increase spending in the future in response to competition or to pursue new market opportunities. The market for the Company's products is characterized by rapidly changing technologies, evolving industry standards, frequent new product introductions and short product life cycles. The introduction of new products requires the Company to manage the transition from older products in order to minimize disruption in customer ordering patterns, avoid excessive levels of older product inventories and ensure that adequate supplies of new products can be delivered to meet customer demand. Furthermore, products such as those offered by the Company may contain undetected or unresolved hardware problems or software errors when they are first introduced or as new versions are released. There can be no assurance that, despite extensive testing by the Company, hardware problems or software errors will not be found in new products after commencement of commercial shipments, resulting in delay in or loss of market acceptance. Future delays in the introduction or shipment of new or enhanced products, the inability of such products to gain market acceptance or problems associated with new product transitions could adversely affect the Company's business, results of operations and financial condition. The Company mainly competes in four segments of the data networking market : (i) wide area network ("WAN") and Internet access, (ii) WAN and Internet backbone switching, (iii) remote LAN access and Internet subscriber access, and (iv) videoconferencing and multimedia access. The Company competes in one or more of these market segments with Cisco Systems, Inc., 3Com Corporation, Bay Networks, Inc., Newbridge Networks, Inc., Shiva Corporation, Northern Telecom, Inc., Teleos Communications (a subsidiary of Madge Networks, Inc.), Adtran, Promptus Communications (a subsidiary of GTI) and many others. Some of these competitors have substantially greater financial, marketing and technical resources than the Company. The Company expects additional competition from existing competitors and from a number of other companies, some of which may have substantially greater financial, marketing and technical resources than the Company, that may enter the Company's existing and future markets. Increased competition could result in price reductions, reduced profit margins and loss of market share, each of which would adversely affect the Company's business, results of operations and financial condition. 19 ASCEND COMMUNICATIONS, INC. Factors That May Affect Future Results (continued) The Company's sales are, to a significant degree, made through telecommunications carriers, value-added resellers ("VARs") and distributors. Accordingly, the Company is dependent on the continued viability and financial stability of these companies. While the Company has contractual relationships with many telecommunications carriers, VARs and distributors, these agreements do not require these companies to purchase the Company's products and can be terminated by these companies at any time. There can be no assurance that any of the telecommunications carriers, VARs or distributors will continue to market the Company's products. The telecommunications carrier customers, to the extent they are resellers, VARs and distributors, generally offer products of several different companies, including products that are competitive with the Company's products. Accordingly, there is a risk that these companies may give higher priority to products of other suppliers, thus reducing their efforts to sell the Company's products. Any special distribution arrangement and product pricing arrangement that the Company may implement in one or more distribution channels for strategic purposes could adversely affect gross profit margins. The Company's success depends to a significant degree upon the continuing contributions of its key management, sales, marketing and product development personnel. The Company does not have employment contracts with its key personnel and does not maintain any key person life insurance policies. The loss of key personnel could adversely affect the Company. The Company is currently experiencing rapid growth and expansion, which has placed, and will continue to place, a significant strain on its administrative, operational and financial resources and increased demands on its systems and controls. This growth has resulted in a continuing increase in the level of responsibility for both existing and new management personnel. The Company anticipates that its continued growth will require it to recruit and hire a substantial number of new engineering, sales, marketing and managerial personnel. There can be no assurance that the Company will be successful at hiring or retaining these personnel. The Company's ability to manage its growth successfully will also require the Company to continue to expand and improve its operational, management and financial systems and controls and to expand its manufacturing capacity. If the Company's management is unable to manage growth effectively, the Company's business, results of operations and financial condition may be materially and adversely affected.

To: Harry Ehrlich who wrote (23513)	11/14/1997 6:28:00 PM
From: Gary Korn	Respond to of 61433

10Q Part 5 20 ASCEND COMMUNICATIONS, INC. Factors That May Affect Future Results (continued) Although the Company generally uses standard parts and components for its products, certain components, including certain key microprocessors and integrated circuits, are presently available only from a single source or from limited sources. The Company has no supply commitments from its vendors and generally purchases components on a purchase order basis as opposed to entering into long term procurement agreements with vendors. The Company has generally been able to obtain adequate supplies of components in a timely manner from current vendors or, when necessary to meet production needs, from alternate vendors. The Company believes that, in most cases, alternate vendors can be identified if current vendors are unable to fulfill needs. However, delays or failure to identify alternate vendors, if required, or a reduction or interruption in supply, or a significant increase in the price of components could adversely affect the Company's revenues and financial results and could impact customer relations. The Company's common stock has experienced significant price volatility, and such volatility may occur in the future, particularly as a result of quarter-to- quarter variations in the actual or anticipated financial results of the Company or other companies in the networking industry, announcements by the Company or competitors regarding new product introductions or other developments affecting the Company and/or changes in financial estimates by public market analysts. In addition, the market has experienced extreme price and volume fluctuations that have affected the market price of many technology companies' stocks and that have been unrelated or disproportionate to the operating performance of these companies. These broad market fluctuations may adversely affect the market price of the Company's common stock. In the past, following periods of volatility in the market price of a company's securities, securities class action litigation has often been instituted against such a company. Such litigation could result in substantial costs and a diversion of management's attention and resources, which would have a material adverse effect on the operating results and financial condition of the Company. In consideration of these factors, there can be no assurance that the Company will be able to sustain growth in revenues or profitability, particularly on a period-to-period basis. 21 Item 6: Exhibits and Reports on Form 8-K: A: Exhibits NO. DESCRIPTION ------------ ------------------------------------------------------------ /(6)/ 3.1 Certificate of Incorporation. /(1)/ 3.2 By-Laws. /(1)/ 10.1 First Amended and Restated 1989 Stock Option Plan and forms of stock option agreements used thereunder. /(1)/ 10.2 Ascend Communications, Inc. 1994 Employee Stock Purchase Plan. /(1)/ 10.3 Ascend Communications, Inc. 1994 Outside Directors Stock Option Plan. /(1)/ 10.4 Loan Agreement and related agreements, dated October 21, 1993, by and between the Registrant and First Interstate Bank of California. /(1)/ 10.5 Lease dated August 8, 1991, by and between the Registrant and Harbor Bay Isle Associates, the First Addendum thereto, dated August 8, 1991, and the Second Addendum thereto, dated February 25, 1994. /(1)/ 10.8 Form of Indemnity Agreement for directors and officers. /(2)/ 10.9 Loan Agreement and related agreements, dated July 29, 1994, by and between the Registrant and First Interstate Bank of California. /(3)/ 10.10 Lease Agreement, Lease Rider and Second Lease Rider, dated May 17, 1995 by and between the Registrant and Resurgence Properties, Inc. /(4)/ 10.11 Loan Agreement and related agreements, dated November 30, 1995, by and between the Registrant and Wells Fargo Bank of California. /(5)/ 10.12 Lease agreement dated March 27, 1996, by and between the registrant and Sumitomo Bank Leasing and Financing, Inc. /(7)/ 10.13 Ascend Communications, Inc. 1996 Restricted Stock Plan. /(8)/ 10.14 Cascade Communications Corp. Amended and Restated 1991 Stock Plan. /(9)/ 10.15 Cascade Communications Corp. 1994 Employee Stock Purchase Plan. /(9)/ 10.16 Cascade Communications Corp. 1994 Non-Employee Director Stock Plan. /(9)/ 10.17 Letter of Employment dated March 12, 1992 between the Registrant and Daniel E. Smith. /(9)(10)(11)/ 10.18 Lease dated July 27, 1993 between Glenborough Corporation and the Registrant; as amended by the first amendment thereto dated February 24, 1994; as amended by the second amendment thereto date July 24, 1994; as amended by the third amendment thereto dated November 10, 1994; as amended by the fourth amendment thereto dated December 1, 1995. /(12)/ 10.19 Lease dated November 14, 1996 between the Registrant and Nashoba View Associated, LLC. 22 (A) Exhibits (continued) NO. DESCRIPTION ------------ ------------------------------------------------------------ 11.1 Statement regarding computation of earnings per share included in notes to condensed consolidation financial statements page 8. 27.0 Financial Data Schedule. /(1)/ Incorporated by reference from the Company's Registration Statement (No.33-77146), effective May 12, 1994. /(2)/ Incorporated by reference from the Company's Form 10-Q for the quarter ended September 30, 1994. /(3)/ Incorporated by reference from the Company's Form 10-Q for the quarter ended June 30, 1995. /(4)/ Incorporated by reference from the Company's Form 10-K for the year ended December 31, 1995. /(5)/ Incorporated by reference from the Company's Form 10-Q for the quarter ended March 31, 1996. /(6)/ Incorporated by reference from the Company's Form 10-Q for the quarter ended June 30, 1996. /(7)/ Incorporated by reference from the Company's Form 10-K for the year ended December 31, 1996. /(8)/ Incorporated by references from Cascade Communications Corp.'s Registration Statement on Form S-8 (File NO. 33-93152) filed with the Securities Commission and Exchange Commission (the "Commission") on June 6, 1995. /(9)/ Incorporated by reference from Cascade Communications Corp.'s Registration Statement on Form S-1 (File No. 33-79330) filed with the Commission on May 26, 1994, as amended, which Registration Statement became effective on July 28, 1994. /(10/ Incorporated by reference to the corresponding exhibit previously filed as an exhibit to Cascade Communications Corp.'s Form 10-K filed for the fiscal year ended December 31, 1994 on March 29, 1995. /(11)/ Incorporated by reference to the corresponding exhibit previously filed as an exhibit to Cascade Communications Corp.'s Form 10-K filed for the fiscal year ended December 31, 1995 on March 1, 1996. /(12)/ Incorporated by reference to the corresponding exhibit previously filed as an exhibit to Cascade Communications Corp.'s Form 10-K filed for the fiscal year ended December 31, 1996 on March 14, 1997. Reports on Form 8K: The Company filed a report on Form 8-K on July 11, 1997 announcing the completion of the merger with Cascade. On July 30, 1997, the Company filed on Form 8-K/A an amendment to the Form 8-K previously filed on July 11, 1997 to include, as exhibits, historical financial statements of Cascade and Pro Form Financial Information. In connection with the merger with Cascade, the Company filed a Report on Form 8-K on August 11, 1997 announcing consolidated net sales and net income for the month ended July 31, 1997. 23 ASCEND COMMUNICATIONS, INC. 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. ASCEND COMMUNICATIONS, INC. Date November 14, 1997 by /s/ Michael F.G. Ashby ----------------------- --------------------------------------- Michael F.G. Ashby, Vice President, Finance and Chief Financial Officer (Principal Financial Officer) Date November 14, 1997 by /s/ Michael J. Johnson ----------------------- --------------------------------------- Michael J. Johnson, Controller and Chief Accounting Officer (Principal Accounting Officer)

To: Harry Ehrlich who wrote (23513)	11/14/1997 6:30:00 PM
From: Gary Korn	Read Replies (2) \| Respond to of 61433

10Q Part 6 24 ASCEND COMMUNICATIONS, INC. INDEX TO EXHIBITS NO. DESCRIPTION ------------ ------------------------------------------------------------ /(6)/ 3.1 Certificate of Incorporation. /(1)/ 3.2 By-Laws. /(1)/ 10.1 First Amended and Restated 1989 Stock Option Plan and forms of stock option agreements used thereunder. /(1)/ 10.2 Ascend Communications, Inc. 1994 Employee Stock Purchase Plan. /(1)/ 10.3 Ascend Communications, Inc. 1994 Outside Directors Stock Option Plan. /(1)/ 10.4 Loan Agreement and related agreements, dated October 21, 1993, by and between the Registrant and First Interstate Bank of California. /(1)/ 10.5 Lease dated August 8, 1991, by and between the Registrant and Harbor Bay Isle Associates, the First Addendum thereto, dated August 8, 1991, and the Second Addendum thereto, dated February 25, 1994. /(1)/ 10.8 Form of Indemnity Agreement for directors and officers. /(2)/ 10.9 Loan Agreement and related agreements, dated July 29, 1994, by and between the Registrant and First Interstate Bank of California. /(3)/ 10.10 Lease Agreement, Lease Rider and Second Lease Rider, dated May 17, 1995 by and between the Registrant and Resurgence Properties, Inc. /(4)/ 10.11 Loan Agreement and related agreements, dated November 30, 1995, by and between the Registrant and Wells Fargo Bank of California. /(5)/ 10.12 Lease agreement dated March 27, 1996, by and between the registrant and Sumitomo Bank Leasing and Financing, Inc. /(7)/ 10.13 Ascend Communications, Inc. 1996 Restricted Stock Plan. /(8)/ 10.14 Cascade Communications Corp. Amended and Restated 1991 Stock Plan. /(9)/ 10.15 Cascade Communications Corp. 1994 Employee Stock Purchase Plan. /(9)/ 10.16 Cascade Communications Corp. 1994 Non-Employee Director Stock Plan. /(9)/ 10.17 Letter of Employment dated March 12, 1992 between the Registrant and Daniel E. Smith. /(9)(10)(11)/ 10.18 Lease dated July 27, 1993 between Glenborough Corporation and the Registrant; as amended by the first amendment thereto dated February 24, 1994; as amended by the second amendment thereto dated July 24, 1994; as amended by the third amendment thereto dated November 10, 1994; as amended by the fourth amendment thereto dated December 1, 1995. /(12)/ 10.19 Lease dated November 14, 1996 between the Registrant and Nashoba View Associated, LLC. /(1)/ Incorporated by reference from the Company's Registration Statement (No.33-77146), effective May 12, 1994. /(2)/ Incorporated by reference from the Company's Form 10-Q for the quarter ended September 30, 1994. /(3)/ Incorporated by reference from the Company's Form 10-Q for the quarter ended June 30, 1995. /(4)/ Incorporated by reference from the Company's Form 10-K for the year ended December 31, 1995. /(5)/ Incorporated by reference from the Company's Form 10-Q for the quarter ended March 31, 1996. /(6)/ Incorporated by reference from the Company's Form 10-Q for the quarter ended June 30, 1996. /(7)/ Incorporated by reference from the Company's Form 10-K for the year ended December 31, 1996. /(8)/ Incorporated by references from Cascade Communications Corp.'s Registration Statement on Form S-8 (File NO. 33-93152) filed with the Securities Commission and Exchange Commission (the "Commission") on June 6, 1995. /(9)/ Incorporated by reference from Cascade Communications Corp.'s Registration Statement on Form S-1 (File No. 33-79330) filed with the Commission on May 26, 1994, as amended, which Registration Statement became effective on July 28, 1994. /(10/ Incorporated by reference to the corresponding exhibit previously filed as an exhibit to Cascade Communications Corp.'s Form 10-K filed for the fiscal year ended December 31, 1994 on March 29, 1995. /(11)/ Incorporated by reference to the corresponding exhibit previously filed as an exhibit to Cascade Communications Corp.'s Form 10-K filed for the fiscal year ended December 31, 1995 on March 1, 1996. /(12)/ Incorporated by reference to the corresponding exhibit previously filed as an exhibit to Cascade Communications Corp.'s Form 10-K filed for the fiscal year ended December 31, 1996 on March 14, 1997. Reports on Form 8K: The Company filed a report on Form 8-K on July 11, 1997 announcing the completion of the merger with Cascade. On July 30, 1997, the Company filed on Form 8-K/A an amendment to the Form 8-K previously filed on July 11, 1997 to include, as exhibits, historical financial statements of Cascade and Pro Form Financial Information. In connection with the merger with Cascade, the Company filed a Report on Form 8-K on August 11, 1997 announcing consolidated net sales and net income for the month ended July 31, 1997. 25 Index to Exhibits (continued) NO. DESCRIPTION ------------ ------------------------------------------------------------ 11.1 Statement regarding computation of earnings per share included in notes to condensed consolidation financial statements page 8. 27.0 Financial Data Schedule. /(1)/ Incorporated by reference from the Company's Registration Statement (No.33-77146), effective May 12, 1994. /(2)/ Incorporated by reference from the Company's Form 10-Q for the quarter ended September 30, 1994. /(3)/ Incorporated by reference from the Company's Form 10-Q for the quarter ended June 30, 1995. /(4)/ Incorporated by reference from the Company's Form 10-K for the year ended December 31, 1995. /(5)/ Incorporated by reference from the Company's Form 10-Q for the quarter ended March 31, 1996. /(6)/ Incorporated by reference from the Company's Form 10-Q for the quarter ended June 30, 1996. /(7)/ Incorporated by reference from the Company's Form 10-K for the year ended December 31, 1996. 26