UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 2
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1701 Harbor Bay Parkway, Alameda, CA 94502
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (510) 769-6001
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
common stock, $0.001 Par Value
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of December 31, 1998 the approximate aggregate market value of voting
stock held by non-affiliates of the Registrant was $11,672,400,250 (based
upon the closing price for shares of the Registrant's common stock as
reported by the Nasdaq National Market on that date). Shares of common
stock held by each officer, director and holder of 5% or more of the
outstanding common stock have been excluded in that such persons may be
deemed to be affiliates. The determination of affiliate status is not
necessarily a conclusive determination for other purposes.
As of February 28, 1999, 222,250,267 shares of the Registrant's common stock
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Not applicable.
PORTIONS AMENDED
The Registrant hereby amends and restates Footnote 9 to the Registrant's
Consolidated Financial Statements set forth in this Report on Form 10-K, as
set forth below.
9. Segment and Geographical Information
Segment Disclosures -- The Company operates in three business segments,
within the global communications networking industry. For management
purposes, the Company is divided into three primary business segments: Core
Systems, Access Switching and Enterprise Access. Each of these groups has a
vice president who reports directly to the Chief Executive Officer ("CEO"),
who is the Chief Operating Decision Maker as defined by SFAS 131. The
measures of profitability reviewed by the CEO for these segments consist of
sales, gross profit and contribution margin, which includes only certain
identifiable operating expenses. The majority of the Company's operating
expenses are not allocated to the business units, but are treated as
corporate expenses (unallocated). Fiscal year 1998 revenues and expenses
attributable to each business segment are described in the table below.
Similar cost of sales and operating expense data for fiscal 1997 and 1996
is not available, as the Company was not organized in a similar manner. It
is impracticable for the Company to restate the corresponding information
for earlier periods. In addition, there is no allocation, direct or
indirect, of the assets and liabilities to these business segments. The
Company had no inter-segment sales in 1998, 1997 and 1996. The following is
a summary of the Company's business segments:
Core Systems - Offers frame relay switches, the CBX 500 family of ATM
switches, and the GRF family of IP switches used to improve the speed,
performance and reliability of backbone carrier networks as well as the
intelligent networking fault tolerance product.
Access Switching - Produces the MAX family of products which provide band-
width-on-demand for wide area network (WAN), internet and multimedia access
over a common set of digital access lines. The MAX TNT is a carrier class
WAN access switch.
Enterprise Access - Offers the Pipeline family of remote access equipment
as well as the Multiband family of inverse multiplexing equipment. The
Pipeline product family provides access equipment for remote office,
telecommuting and small office/home office and Internet access. The Ascend
Multiband family of controllers is used for video-conferencing and
multimedia networks.
Unallocated - Representing "All Other," Unallocated is primarily sales from
customer service, maintenance, and professional services. Related cost of
sales is primarily labor and parts for the respective sales.
<TABLE>
<CAPTION>
Core % Access % Enterprise %
Systems Switching Access Unallocated Consolidated
-------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $688,890 $603,523 $103,135 $ 83,134 $1,478,682
Cost of sales 229,370 33% 227,371 38% 44,043 43% 43,187 543,971
-------- --------- ----------
GROSS PROFIT 459,520 67% 376,152 62% 59,092 57% 39,947 934,711
OPERATING EXPENSES:
Research and development 117,847 17% 75,509 13% 8,233 8% 14,646 216,235
Sales and marketing 15,608 2% 2,931 0.5% 4,905 5% 278,601 302,045
General and administrative 12,752 2% 8 0.0% 1,093 1% 65,011 78,864
Purchased in-process research
and development 266,953 266,953
Costs of Mergers (18,279) (18,279)
-------- --------- ---------- ----------
TOTAL OPERATING EXPENSES 146,207 21% 78,448 13% 14,231 14% 606,932 845,818
-------- --------- ---------- ---------- ------------
OPERATING INCOME (LOSS) (1) $313,313 45% $297,704 49% $ 44,861 43% $(566,985) $ 88,893
-------- --------- ---------- ---------- ------------
Interest income 28,102 28,102
Income before income taxes 116,995 116,995
Provision for income taxes 136,649 136,649
NET LOSS $ (19,654)
============
</TABLE>
(1) Contribution margin is identified as operating income for Core Systems,
Access Switching and Enterprise Access segments in this schedule.
Prior to 1998 the Company operated within one business segment with
the CEO and Vice-Presidents only receiving net sales information as
categorized by the primary business units. Sales attributable each business
unit in 1997 and 1996 were as follows:
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996
---- ----
Core Systems $ 410,144 $ 320,498
Access Switching 605,906 427,331
Enterprise Access 100,291 115,735
Other (unallocated) 51,011 26,709
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$1,167,352 $890,273
============ =============
Major Customers and Revenues by Geographic Area -- One customer accounted
for 13% and 17% of net sales in 1998 and 1997, respectively. The customer
primarily purchased products from the Company's Core Systems and Access
Switching segments. No customer accounted for more than 10% of net sales in
1996. Net sales were derived from customers based in the following
geographic areas (in thousands):
YEAR ENDED DECEMBER 31
------------------------------------------
1998 1997 1996
----------- ----------- -----------
North America................. $ 1,051,160 $ 805,012 $ 576,996
Europe........................ 184,128 157,960 129,126
Asia and Pacific Basin........ 212,184 189,675 170,747
Latin and South America....... 31,210 14,705 13,404
----------- ----------- -----------
$ 1,478,682 $ 1,167,352 $ 890,273
=========== =========== ===========
Substantially all of the Company's identifiable assets at December
31, 1998 and 1997 were attributable to North American operations.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 May 21, 1999 by /S/ Mory Ejabat
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Mory Ejabat, President, Chief Executive
Officer and Director
