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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 1, 1998
DSC COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-10018 54-1025763
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1000 Coit Road
Plano, Texas 75075
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (972) 519-3000
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ITEM 5. Other Events.
On April 1, 1998, DSC Communications Corporation, a Delaware corporation
(the "Company"), announced in a press release that its expected operating
results for the first quarter of 1998 would be lower than previously
anticipated resulting in a net loss which the Company anticipates to be in the
range of $0.15 to $0.25 per share.
As a result of the Company's expected net loss for the first quarter of
1998, the Company will be in violation of certain financial covenants and
cross-default provisions under its senior debt and revolving credit
arrangements. At the end of February 1998, the Company had approximately $257
million of senior debt outstanding. Additionally, the Company had a $160
million revolving credit agreement under which there had been no borrowings,
however, at the end of February 1998, approximately $3 million in letters of
credit had been issued under the agreement. The Company believes it will be
able to reach an agreement with its senior lenders to amend such agreements.
However, there can be no assurance that the senior lenders will agree to the
necessary amendments, which may result in the Company repaying some or all of
its outstanding senior debt. The Company currently has adequate resources to
fund any required debt repayment.
A copy of the press release is attached as Exhibit 99.1 to this Current
Report on Form 8-K.
ITEM 7. Exhibits.
Exhibit No. Description.
99.1 Press Release dated April 1, 1998, entitled "DSC to Report
Lower than Expected First Quarter Results"
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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, hereunto duly authorized.
DSC COMMUNICATIONS CORPORATION
Date: April 2, 1998 By: /s/ Kenneth R. Vines
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Kenneth R. Vines,
Vice President, Finance
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EXHIBIT INDEX
<TABLE>
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Exhibit No. Description.
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<S> <C>
99.1 Press Release dated April 1, 1998, entitled "DSC to Report Lower than Expected First Quarter Results"
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CONTACT: TERRY ADAMS OR MICHAEL HAASE
972/519-4358 972/519-6855
DSC TO REPORT LOWER THAN EXPECTED
FIRST QUARTER RESULTS
Dallas, TX., April 1, 1998...DSC Communications Corporation announced today
that, based upon preliminary estimates, operating results for the 1998 first
quarter are expected to be lower than analyst estimates. Total revenue for the
quarter is anticipated to be between $340 and $360 million, with gross profit
margin percentage in the upper-20 percent range. The resulting first quarter
net loss is likely to approximate $0.15 to $0.25 per share.
DSC chairman and chief executive officer, James L. Donald, commented, "This
quarter's financial performance has been extremely disappointing. Although we
recognized early on that first quarter bookings and shipments would be back-end
loaded, it was expected that weakness in certain areas of our business could be
overcome by strength in others. This obviously did not occur.
"It is our belief that merger and restructuring activity among two of our
larger long-distance customers led them to defer certain capital purchases,
most likely until the second half of this year. We also experienced softness
in deliveries of wireless switch platforms. In addition, the Asian economic
crisis appears to be causing reduced capital spending by a key switch customer
based in Japan. In each of these instances, the result has been a delay in
purchases of our software-intensive, high- margin switch products.
"We also experienced an unusual perturbation within our access business in what
is seasonably the weakest quarter for regional holding company capital
spending. While shipments of mechanical assemblies or base infrastructure
associated with the company's Litespan(R)-2000 system increased more than 30
percent, the relative level of line card expansions shipped decreased
significantly. Revenues were therefore impacted and the overall gross profit
margin was reduced.
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"While in each of these instances there were customer-specific issues driving
the reduced level of purchasing, we believe that the spending pattern has
shifted, not been canceled. In fact, we remain strong in our expectation that
the company's addressed markets will continue to grow in excess of 20 percent
per year over the long-term.
"To ensure that DSC fully shares in the long-term opportunity which is present
in the telecommunications equipment marketplace, I have taken a number of
actions that are designed to return us to our traditional growth track. Among
these actions is the centralization of operations activities under Wylie D.
Basham, senior vice president, product group operations, and of all finance and
administration activities under Gerald F. Montry, senior vice president and
chief financial officer. In concert with Basham, Montry and other members of
our senior management team, we are evaluating long-term prospects for each of
our core technology areas. In so doing, we are focusing on those areas of
expertise in which we excel and which have the best potential for market
acceptance and growth. In other words, we may address fewer opportunities, but
the ones we choose will be done better.
"As part of this process, it is crucial that we optimize each dollar that is
spent on research and development. Development schedules and accountability
must be adhered to and milestones continuously met."
DSC Communications (NASDAQ:DIGI) is a global provider of advanced
telecommunications products, including digital switching, transmission, access
and network management systems. DSC's integrated network solutions support
voice, data and broadband services, such as intelligent networking, wireless
and switched digital video applications. DSC had 1997 annual revenues of
approximately $1.6 billion and is active in more than 60 countries worldwide.
For more information about DSC and its products, please visit the company's web
site at http://www.dsccc.com.
Litespan is a registered trademark of DSC Communications Corporation.
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"Safe Harbor" statement under the Private Securities Litigation
Reform Act of 1995:
Except for the historical information contained herein, the matters discussed
herein, including the matters relating to future performance, are forward
looking statements that are dependent upon a number of risks and uncertainties
that could cause actual results to differ materially from those in the forward
looking statements. These risks and uncertainties include, but are not limited
to, economic conditions, product demand and industry capacity, competitive
products and pricing, manufacturing efficiencies, research and new product
development, protection of intellectual property, patents, and technology,
ability to attract and retain highly qualified personnel, quarterly
fluctuations from factors such as a shift in products delivered including the
amount of software content and the impact of sales price changes, availability
of components and critical manufacturing equipment, facility construction and
startups, the regulatory and trade environment, and other risks indicated from
time to time in the company's filings with the Securities and Exchange
Commission.
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