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 28, 1996 / / 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 0-24918 SHIVA CORPORATION (Exact name of registrant as specified in its charter) Massachusetts 04-2889151 ------------------------------- --------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization 28 Crosby Drive, Bedford, MA 01730 (Address of principal executive offices, including Zip Code) (617) 270-8300 (Registrant's telephone number, including area code) ____________________________ Indicate 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. [X] YES [ ] NO	 The number of shares outstanding of the registrant's Common Stock as of September 28, 1996 was 28,676,927. Total Number of Pages: 13 SHIVA CORPORATION INDEX ----- PART 1 Financial Information Item 1 Consolidated Financial Statements Consolidated Balance Sheet September 28, 1996 and December 30, 1995 Consolidated Statement of Operations Three and nine months ended September 28, 1996 and September 30, 1995 Consolidated Statement of Cash Flows Nine months ended September 28, 1996 and September 30, 1995 Notes to Consolidated Financial Statements Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Part II Other Information Item 6 Exhibits and Reports on Form 8-K Signature Shiva Corporation Consolidated Balance Sheet (in thousands, except share related data) September 28, December 30, 1996 1995 ------------- ----------- (unaudited) Assets Current assets: Cash and cash equivalents $ 69,750 $ 93,203 Short-term investments 25,689 9,125 Accounts receivable, net of allowances of $6,897 at September 28, 1996 and $5,252 at December 30, 1995 49,088 22,982 Inventories 14,130 7,846 Prepaid expenses and other current assets 4,667 2,351 ------- ------- Total current assets 163,324 135,507 Property, plant and equipment, net 19,945 12,965 Deferred income taxes 4,219 548 Other assets 1,640 1,103 ------- ------- Total assets 189,128 150,123 ======= ======= Liabilities and stockholders' equity Current liabilities: Current portion of long-term debt and capital lease obligations $ 438 $ 700 Accounts payable 15,086 9,032 Accrued compensation and benefits 5,721 5,367 Accrued expenses 15,009 7,509 Deferred revenue 2,650 3,523 ------- ------- Total current liabilities 38,904 26,131 Long-term debt and capital lease obligations 127 452 Other long-term liabilities 389 401 Deferred income taxes 237 235 ------- ------- Total liabilities 39,657 27,219 ------- ------- Stockholders' equity: Preferred stock, $.01 par value; 1,000,000 shares authorized, none issued - - Common stock, $.01 par value; 100,000,000 and 50,000,000 shares authorized, 28,676,927 and 27,960,580 shares issued and outstanding at September 28, 1996 and December 30, 1995, respectively 287 280 Additional paid-in capital 144,650 133,457 Unrealized gain on investments 58 137 Cumulative translation adjustment (481) (586) Retained earnings (accumulated deficit) 4,957 (10,384) --------- ------------ Total stockholders' equity 149,471 122,904 --------- ------------ Total liabilities and stockholders' equity $ 189,128 $ 150,123 ========= =========== <FN> The accompanying notes are an integral part of the consolidated financial statements. Shiva Corporation Consolidated Statement of Operations (in thousands, except per share data) (unaudited) Three months ended Nine months ended --------------------------- -------------------------- September 28, September 30, September 28, September 30, 1996 1995 1996 1995 ------------- ------------- ------------- ------------ Revenues $ 57,109 $ 30,033 $ 151,903 $ 82,147 Cost of revenues 23,761 12,370 62,543 34,628 ------ ------ ------ ------ Gross profit 33,348 17,663 89,360 47,519 ------ ------ ------ ------ Operating expenses: Research and development 5,974 3,878 16,630 10,234 Selling, general and administrative 18,338 11,418 49,844 31,450 Merger expenses - 13,986 1,987 13,986 ------ ------ ------ ------ Total operating expenses 24,312 29,282 68,461 55,670 ------ ------ ------ ------ Income (loss) from operations 9,036 (11,619) 20,899 (8,151) Interest income 836 445 3,167 1,425 Interest expense (85) (103) (383) (565) ------ -------- ------- ------- Income (loss) before income taxes 9,787 (11,277) 23,683 (7,291) Income tax provision 3,760 275 8,342 1,906 ----- -------- ------ ------- Net income (loss) 6,027 (11,552) 15,341 (9,197) ===== ======== ====== ======= Net income (loss) per share 0.19 (0.46) 0.49 (0.35) ===== ======== ====== ======= Shares used in computing net income (loss) per share 31,906 25,015 31,499 26,633 ====== ====== ====== ====== <FN> The accompanying notes are an integral part of the consolidated financial statements. Shiva Corporation Consolidated Statement of Cash Flows Increase (Decrease) in Cash and Cash Equivalents (in thousands) Nine Months Ended ____________________________ September 28, September 30, 1996 1995 ------------- ------------- (unaudited) Cash flows from operating activities Net income(loss) $ 15,341 $ (9,197) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Merger expenses - 3,766 Depreciation and amortization 4,603 2,712 Gain on sale of property, plant and equipment (50) (44) Deferred income taxes (1,511) 97 Changes in assets and liabilities: Accounts receivable (25,940) (4,605) Inventories (6,277) (1,390) Prepaid expenses and other current assets (472) 96 Accounts payable 5,999 (1,024) Accrued compensation and benefits 339 697 Accrued expenses 12,000 4,872 Deferred revenue (854) 1,629 Other long term liabilities (15) (18) ------- -------- Net cash provided (used) by operating activities 3,163 (2,409) ------- -------- Cash flows from investing activities Purchases of property, plant and equipment (10,851) (4,689) Capitalized software development costs (843) (429) Purchases of short-term investments (24,502) (10,344) Proceeds from sales of short-term investments 7,858 550 Change in other assets (279) (139) -------- -------- Net cash used by investing activities (28,617) (15,051) -------- -------- Cash flows from financing activities Net repayments under short-term debt - (1,885) Principal payments on long-term debt and capital lease obligations (590) (3,926) Proceeds from exercise of stock options and warrants 2,732 1,359 Dividends paid - (58) ------ ------- Net cash provided (used) by financing activities 2,142 (4,510) ------ ------- Effects of exchange rate changes on cash and cash equivalents (141) (12) -------- -------- Net decrease in cash and cash equivalents (23,453) (21,982) Cash and cash equivalents, beginning of period 93,203 36,068 Elimination of Spider net cash activity for the three months ended April 1, 1995 - (998) ------- -------- Cash and cash equivalents, end of period 69,750 13,088 ======= ======== <FN> The accompanying notes are an integral part of the consolidated financial statements. SHIVA CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) (unaudited) 1.	BASIS OF PRESENTATION: The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, and have been prepared by the Company in accordance with generally accepted accounting principles. In the opinion of management, these unaudited consolidated financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary for a fair presentation of the Company's financial position, results of operations and cash flows at the dates and for the periods indicated. While the Company believes that the disclosures presented are adequate to make the information not misleading, these consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 1995 and in the Company's Registration Statement on Form S-3 dated August 23, 1996. The results of operations for the three-month and nine-month periods ended September 28, 1996 are not necessarily indicative of the results expected for the full fiscal year. In June 1996, the Company issued approximately 691,587 shares of its common stock in exchange for all the outstanding shares of AirSoft, Inc. (the "AirSoft Acquisition"). AirSoft, Inc. ("AirSoft") designs, manufactures and sells performance enhancement software products. The AirSoft Acquisition has been accounted for as a pooling of interests, and therefore the consolidated financial statements for all periods prior to the AirSoft Acquisition have been restated to include the accounts and operations of AirSoft with those of the Company. Certain amounts have been reclassified with regard to presentation of the financial information of the two companies. Revenues and net income (loss) for each of the previously separate companies for the periods prior to the AirSoft Acquisition are as follows (in thousands): Year Ended Three Months Ended ------------------------------------ ------------------ December 30, December 31, January 1, March 30, April 1, 1995 1994 1994 1996 1995 ------------ ------------ ---------- --------- -------- (Fiscal 95) (Fiscal 94) (Fiscal 93) Revenues: Shiva $117,721 $80,971 $61,259 $42,513 $25,703 AirSoft 860 87 3 796 34 -------- ------- ------- ------- ------- $118,581 $81,058 $61,262 $43,309 $25,737 ======== ======= ======= ======= ======= Net Income (loss): Shiva $ (2,879) $ 3,881 $ 909 $ 4,366 $ 2,157 AirSoft (1,973) (1,841) (493) (27) (775) --------- -------- -------- -------- -------- $ (4,852) $ 2,040 $ 416 $ 4,339 $ 1,382 ========= ======== ======== ======== ======== 	 In connection with the AirSoft Acquisition, the Company incurred charges to operations of $1,987,000 in the quarter ended June 29, 1996, the quarter in which the acquisition was consummated. Such charges include: (a) transaction costs to effect the acquisition, consisting of financial advisor fees of $1,350,000 plus $325,000 for legal, regulatory and accounting expenses and (b) employee severance payments and other miscellaneous expenses of $312,000. 2.	NET INCOME (LOSS) PER SHARE: Net income per share is calculated based on the weighted average number of common shares and common equivalent shares assumed outstanding during the period. Net loss per share excludes common equivalent shares because the effect is antidilutive. 3.	COMMON STOCK: On April 2, 1996, the Company's Board of Directors declared a two-for-one stock split, payable in the form of a stock dividend, on all shares of its common stock, which was paid on April 22, 1996 to stockholders of record on April 12, 1996. These financial statements and related notes have been retroactively adjusted, where appropriate, to reflect this two-for-one stock split. At the Annual Meeting of Stockholders on May 15, 1996, the stockholders of the Company approved (1) an increase in the number of authorized shares of common stock of the Company from 50,000,000 to 100,000,000 shares and (2) an increase in the number of shares available for issuance under the Company's Amended and Restated 1988 Stock Plan from 8,200,000 to 9,700,000 shares. 4.	CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS: The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents, and those with maturities of greater than three months to be short-term investments. At September 28, 1996, the Company had $25,689,000 of short-term investments, including an unrealized gain of $58,000 recorded as a separate component of stockholders' equity in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The Company's short-term investments at September 28, 1996, classified as available-for-sale, consisted of municipal and U.S. Treasury securities with various maturity dates through September 1998. Realized gains or losses on the sale of securities are calculated using the specific identification method. The Company has had no realized gains or losses on its securities to date. 5.	INVENTORIES: Inventories consist of the following: (in thousands) September 28, December 30, 1996 1995 ------------- ------------ Raw materials $ 6,179 $3,137 Work-in-process 1,281 1,037 Finished goods 6,670 3,672 ------- ------ $14,130 $7,846 ======= ====== MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three-Month Period Ended September 28, 1996 Compared with the Three-Month Period Ended September 30, 1995. Results of Operations Revenues. Revenues increased by 90%, to $57,109,000 for the three-month period ended September 28, 1996, from $30,033,000 in the comparable period in fiscal 1995. This increase was principally due to higher revenues from the Company's remote access products. Remote access product revenues increased by 144%, to $52,690,000, in the three-month period ended September 28, 1996 from $21,579,000 during the comparable period in fiscal 1995, principally due to higher revenues from the Company's LanRover(R) product family, including the LanRover Access Switch[TM]. Sales to OEM customers accounted for 28% and 11% of revenues in the three-month periods ended September 28, 1996 and September 30, 1995, respectively. These increases were partially offset by a 54% decline in revenues from the Company's other communications products. The Company anticipates that revenues from other communications products will continue to decline and will account for a decreasing percentage of revenue in future periods. The Company provides its distributors and resellers with product return rights for stock balancing and product evaluation. Revenues were reduced by provisions for product returns of $3,326,000 and $2,013,000 in the three month periods ended September 28, 1996 and September 30, 1995, respectively, representing 6% of gross revenues in each period. International revenues increased to $17,148,000 or 30% of revenues, in the three-month period ended September 28, 1996 from $13,798,000, or 46% of revenues, in the comparable period in fiscal 1995. The decrease in international revenues as a percentage of total revenues was primarily due to increased revenues from OEM customers which are classified as domestic. Gross Profit. Gross profit decreased as a percentage of revenues to 58% in the three-month period ended September 28, 1996, compared to 59% for the comparable period in fiscal 1995. This decrease was primarily attributable to increased revenues from the Company's OEM remote access products, which carry lower gross margins than the Company's other remote access products. Research and Development. Research and development expenses increased to $5,974,000, or 11% of revenues, in the three-month period ended September 28, 1996 from $3,878,000, or 13% of revenues, during the comparable period in fiscal 1995. The absolute increase in these expenses was primarily due to the hiring of additional research and development staff. Research and development expenses during the three-month period ended September 28, 1996 related primarily to continued enhancements and development of the Company's remote access products, including the LanRover Access Switch and the Shiva AccessPort[TM]. Customer-funded development fees reimbursed to the Company, which are reflected as an offset to research and development expenses, were $536,000 in the three-month period ended September 28, 1996 compared to $199,000 for the comparable period in fiscal 1995. Capitalized software development costs were $251,000 in the three-month period ended September 28, 1996 compared with $166,000 in the comparable period in fiscal 1995. Capitalized software development costs are amortized to cost of goods sold over the economic useful lives of the related products, typically eighteen months. The Company anticipates continued significant investment in research and development. Selling, General and Administrative. Selling, general and administrative expenses increased to $18,338,000 for the three-month period ended September 28, 1996 from $11,418,000 for the comparable period in fiscal 1995. These expenses represented 32% and 38% of revenues in the three-month periods ended September 28, 1996 and September 30, 1995, respectively. The absolute increase in expenses was primarily due to expansion of the Company's sales, marketing and administrative operations necessary to support the Company's growth and new products. The Company plans to further invest in its distribution channels in order to continue its global market penetration. Interest Income and Expense. Interest income increased to $836,000 during the three-month period ended September 28, 1996 due to higher investment balances related to funds generated by the Company's secondary public offering in November 1995. Interest expense decreased due to the Company's repayment of a portion of the outstanding debt of Spider Systems, Ltd. ("Spider") assumed as part of the Spider Acquisition in the third quarter of fiscal 1995. Merger Expenses. In connection with the Spider Acquisition, the Company incurred charges to operations of approximately $13,986,000 in the quarter ended September 30, 1995, the quarter in which the Spider Acquisition was consummated. Such charges include: (a) transaction costs to effect the acquisition, consisting of $2,619,000 for financial advisor fees plus $3,656,000 for legal, regulatory and accounting fees, printing expenses and other miscellaneous expenses; (b) employee severance payments of $1,482,000 and phantom stock compensation of $2,644,000 and (c) $3,585,000 for the integration of operational activities of the companies, including elimination of duplicative assets, employee relocation and travel, and the marketing costs related to the introduction of the combined entity. Income Tax Provision. The Company's effective tax rate was 38% for the three- month period ended September 28, 1996. The Company had an income tax provision of $275,000 in the three-month period ended September 30, 1995, despite a pre-tax loss, primarily due to non-tax deductible merger expenses incurred in connection with the Spider Acquisition. Nine-Month Period Ended September 28, 1996 Compared with the Nine-Month Period Ended September 30, 1995. Results of Operations Revenues. Revenues increased by 85%, to $151,903,000 for the nine-month period ended September 28, 1996, from $82,147,000 in the comparable period in fiscal 1995. This increase was principally due to higher revenues from the Company's remote access products. Remote access product revenues increased by 139%, to $131,706,000, in the nine-month period ended September 28, 1996 from $55,077,000 during the comparable period in fiscal 1995, principally due to higher revenues from the Company's LanRover product family, including the LanRover Access Switch[TM]. Sales to OEM customers accounted for 23% and 7% of revenues in nine-month periods ended September 28, 1996 and September 30, 1995, respectively. These increases were partially offset by a 33% decline in revenues from the Company's other communications products. The Company anticipates that revenues from other communications products will continue to decline and will account for a decreasing percentage of revenue in future periods. The Company provides its distributors and resellers with product return rights for stock balancing and product evaluation. Revenues were reduced by provisions for product returns of $7,304,000 and $6,090,000 in the three month periods ended September 28, 1996 and September 30, 1995, respectively, representing 5% and 7% of gross revenues, respectively. International revenues increased to $54,395,000 or 36% of revenues, in the nine-month period ended September 28, 1996 from $41,057,000 or 50% of revenues, in the comparable period in fiscal 1995. The decrease in international revenues as a percentage of total revenues was primarily due to increased revenues from OEM customers which are classified as domestic. Gross Profit. Gross profit increased as a percentage of revenues to 59% in the nine-month period ended September 28, 1996, compared to 58% for the comparable period in fiscal 1995. This increase was primarily attributable to increased revenues from the Company's LanRover product family, which carry higher gross margins than the Company's other products, partially offset by increased revenues from lower margin OEM remote access products. Research and Development. Research and development expenses increased to $16,630,000, or 11% of revenues, in the nine-month period ended September 28, 1996 from $10,234,000, or 12% of revenues, during the comparable period in fiscal 1995. The absolute increase in these expenses was primarily due to the hiring of additional research and development staff. Research and development expenses during the nine-month period ended September 28, 1996 related primarily to continued enhancements and development of the Company's remote access products, including the LanRover Access Switch and the Shiva AccessPort[TM]. Customer-funded development fees reimbursed to the Company, which are reflected as an offset to research and development expenses, were $1,387,000 in the nine-month period ended September 28, 1996 compared to $714,000 for the comparable period in fiscal 1995. Capitalized software development costs were $844,000 in the nine-month period ended September 28, 1996 compared with $430,000 in the comparable period in fiscal 1995. Capitalized software development costs are amortized to cost of goods sold over the economic useful lives of the related products, typically eighteen months. The Company anticipates continued significant investment in research and development. Selling, General and Administrative. Selling, general and administrative expenses increased to $49,844,000 for the nine-month period ended September 28, 1996 from $31,450,000 for the comparable period in fiscal 1995. These expenses represented 33% and 38% of revenues in the nine-month periods ended September 28, 1996 and September 30, 1995, respectively. The absolute increase in expenses was primarily due to expansion of the Company's sales, marketing and administrative operations necessary to support the Company's growth and new products. The Company plans to further invest in its distribution channels in order to continue its global market penetration. Interest Income and Expense. Interest income increased to $3,167,000 during the nine-month period ended September 28, 1996 due to higher investment balances related to funds generated by the Company's secondary public offering in November 1995. Interest expense decreased due to the Company's repayment of a portion of the outstanding debt assumed as part of the Spider Acquisition in the third quarter of fiscal 1995. Merger Expenses. In connection with the AirSoft Acquisition, the Company incurred charges to operations of $1,987,000 in the quarter ended June 29, 1996, the quarter in which the AirSoft Acquisition was consummated. Such charges include (a) transaction costs to effect the acquisition, consisting of financial advisor fees of $1,350,000 plus $325,000 for legal, regulatory and accounting expenses and (b) employee severance payments and other miscellaneous expenses of $312,000. In connection with the Spider Acquisition, the Company incurred charges to operations of $13,986,000 in the quarter ended September 30, 1995, the quarter in which the Spider Acquisition was consummated. Such charges include: (a) transaction costs to effect the acquisition, consisting of $2,619,000 for financial advisor fees plus $3,656,000 for legal, regulatory and accounting fees, printing expenses and other miscellaneous expenses; (b) employee severance payments of $1,482,000 and phantom stock compensation of $2,644,000 and (c) $3,585,000 for the integration of operational activities of the companies, including elimination of duplicative assets, employee relocation and travel, and the marketing costs related to the introduction of the combined entity. Income Tax Provision. The Company's effective tax rate was 35% for the nine- month period ended September 28, 1996. This effective rate differs from the combined federal and state statutory rate primarily due to tax-exempt interest income and a reduction in the net deferred tax asset valuation allowance as a result of certain net operating losses that have been realized, partially offset by non-deductible merger expenses. The Company had an income tax provision of $1,906,000 in the nine-month period ended September 30, 1995, despite a pre-tax loss, primarily due to non-tax deductible merger expenses incurred in connection with the Spider Acquisition. Foreign Currency Fluctuations A substantial portion of the Company's international revenues is denominated in currencies other than the U.S. dollar and is consequently subject to foreign exchange fluctuations. The net income impact of such fluctuations, however, is offset to the extent expenses of the Company in international operations are incurred in the same currencies as its revenues. Foreign currency fluctuations did not have a significant impact on the comparison of results of operations in the three-month and nine-month periods ended September 28, 1996 with those comparable periods in fiscal 1995. Liquidity and Capital Resources As of September 28, 1996, the Company had $69,750,000 of cash and cash equivalents and $25,689,000 of short-term investments. Working capital increased to $124,420,000 at September 28, 1996 from $109,376,000 at December 30, 1995. Net cash provided by operations totaled $3,163,000 for the nine-month period ended September 28, 1996 compared with net cash used by operations of $2,409,000 during the comparable period in fiscal 1995. Net cash provided by operations during the nine-month period ended September 28, 1996 consisted primarily of net income adjusted for non-cash expenses including depreciation and amortization, and increased current liabilities, partially offset by increased accounts receivable and inventories. The increase in accounts receivable was due to increased revenue levels and the timing of quarterly shipments. The increase in inventories is necessary to support the Company's revenue growth and the introduction of the Company's LanRover Access Switch product. Cash used by operations for the nine-month period ended September 30, 1995 consisted primarily of net loss due to expenses associated with the Spider Acquisition, partially offset by increased accrued expenses, depreciation and amortization, and non-cash merger expenses. Net cash used by investing activities totaled $28,617,000 for the nine-month period ended September 28, 1996, compared to $15,051,000 during the comparable period in fiscal 1995. Investment activity during the nine-month period ended September 28, 1996 consisted primarily of purchases of short-term investments as well as property, plant and equipment to support the Company's growth, partially offset by proceeds from short-term investments upon maturity. Investment activity in the comparable period in fiscal 1995 consisted primarily of purchases of short-term investments and property, plant and equipment. Net cash provided by financing activities totaled $2,142,000 for the nine- month period ended September 28, 1996, compared to net cash used by financing activities of $4,510,000 during the comparable period in fiscal 1995. Net cash provided by financing activities in the nine-months ended September 28, 1996 consisted of proceeds from stock option exercises, partially offset by principal payments on long-term debt and capital lease obligations. Net cash used by financing activities in the nine-months ended September 30, 1995 consisted primarily of principal payments on the Company's debt assumed as a result of the Spider Acquisition, partially offset by proceeds from stock option exercises.	 The Company has a $5,000,000 unsecured revolving credit facility with a bank which expires in June 1997. Borrowings under the revolving credit facility bear interest at the bank's prime rate. The terms of the credit facility require the Company to maintain a minimum level of profitability and specified financial ratios. The Company had no borrowings outstanding under this line at September 28, 1996. The Company also has a foreign credit facility of approximately $1,563,000. There were no borrowings available under this foreign credit facility at September 28, 1996. Available borrowings under this facility are decreased by the value of the outstanding debt payable to the European Coal and Steel Community Fund and guarantees on certain foreign currency and other transactions. The terms of the foreign credit facility require the Company to maintain a minimum level of profitability and specified financial ratios. There were no borrowings outstanding under this foreign credit facility at September 28, 1996. The Company enters into forward exchange contracts to hedge against certain foreign currency transactions for periods consistent with the terms of the underlying transactions. The forward exchange contracts have maturities that do not exceed one year. At September 28, 1996, the total amount of forward exchange transactions covered by hedging contracts was $19,179,000. The Company believes that its existing cash and short-term investment balances, together with borrowings available under the Company's bank line of credit, will be sufficient to meet the Company's cash requirements for the foreseeable future. Factors That May Affect Future Results From time to time, information provided by the Company or statements made by its employees may contain 'forward-looking' information which involve risks and uncertainties. In particular, statements contained in the Management's Discussion and Analysis of Financial Condition and Results of Operations which are not historical facts (including, but not limited to, statements concerning anticipated operating expense levels and the availability of funds to meet cash requirements) may be 'forward-looking' statements. The Company's actual future results may differ significantly from those stated in any for- ward looking statements. Factors that may cause such differences are discussed more fully in the Company's Annual Report to Stockholders, Form 10-K and the Company's other Securities and Exchange Commission filings. PART II - OTHER INFORMATION Item 6.	Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No. Description of Exhibit 11 Statement of Computation of Earnings per share included herein on page 12. 27 Financial Data Schedule (b) Reports on Form 8-K: On July 9, 1996, the Company filed a report on Form 8-K/A amending certain financial information with respect to AirSoft, Inc. and Shiva Corporation that was included in the Form 8-K dated June 27, 1996. On August 13, 1996, the Company filed a report on Form 8-K/A amending certain financial information with respect to AirSoft, Inc. and Shiva Corporation that was included in the Form 8-K dated June 27, 1996. 						 Exhibit 11 Shiva Corporation Computation of Earning Per Share (1) Three months ended Nine months ended --------------------------- --------------------------- September 28, September 30, September 28, September 30, 1996 1995 (2) 1996 1995 (2) ------------- ------------- ------------- ------------- Weighted Average Common and Common Equivalent Shares: Weighted Average Common Shares Outstanding During the Period 28,581,648 25,014,919 28,317,851 24,579,539 Weighted Average Common Equivalent Shares 3,324,775 - 3,181,488 2,053,544 ---------- ---------- ---------- ---------- 31,906,423 25,014,919 31,499,339 26,633,083 ========== ========== ========== ========== Net Income (Loss) $6,027,000 ($11,552,000) $15,341,000 ($9,197,000) Primary Net Income (Loss) Per Share $0.19 ($0.46) $0.49 ($0.35) <FN> (1) Fully diluted net income per share has not been separately presented, as the amounts would not be materially different from primary net income per share <FN> (2) Retroactively adjusted to reflect the one-for-one stock dividend on all shares of the Company's common stock declared by the Company's Board of Directors on April 2, 1996. The stock dividend was paid on April 22, 1996, to all stockholders of record on April 12, 1996. 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. SHIVA CORPORATION Date: November 12, 1996 by: /s/ Cynthia M. Deysher Cynthia M. Deysher Senior Vice President Finance and Administration and Chief Financial Officer (Principal Financial and Accounting Officer)