SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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) July 24, 1998
TELLABS, INC.
(Exact name of registrant as specified in charter)
Delaware 0-9692 36-3831568
(State or other jurisdiction (Commission (IRS employer
of incorporation) file number) identification no.)
4951 Indiana Avenue, Lisle, Illinois 60532
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (630) 378-8800
N/A
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
Tellabs, Inc. (the "Company") issued a letter to stockholders through
the Company's website at www.tellabs.com discussing second quarter
results. A copy of this letter is attached hereto as Exhibit 20.6 and
incorporated herein by reference.
Also attached hereto as Exhibit 20.7 is a copy of the Company's 1998
second quarter news release, which is incorporated into Exhibit 20.6.
On July 23, 1998, the Company announced that the Company and Coherent
Communications Systems Corporation expect to close their merger in
early August. Further details are contained in a copy of the press
release issued by the Company on July 23, 1998 attached hereto as
Exhibit 20.8, which is incorporated by reference herein.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(c) Exhibits
Exhibit 20.6 - Letter to Stockholders for Second Quarter
(including graphs depicting comparisons of the Company's gross
profit margin, book value per share, and return on equity for
fiscal years 1994 - 1997 and year-to-date results for 1998
which have been omitted from this filing.)
Exhibit 20.7 - 1998 Second Quarter News Release
Exhibit 20.8 - Press release issued by Tellabs, Inc. dated
July 23, 1998.
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 hereunto duly authorized.
TELLABS, INC.
July 24, 1998 s\ Michael J. Birck
---------------------
Michael J. Birck
President and Chief
Executive Officer
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Exhibit 20.6
Fellow Stockholders July 24, 1998
The second quarter of 1998 was one of the more eventful quarters in the
history of Tellabs, for several reasons. Certainly it is one of the
most pleasant to report upon in terms of financial results, as the
company set quarterly records for both revenue and earnings, but several
other events occurred during the period that are worth noting, too.
Revenue for the quarter amounted to nearly $388 million, an all-time
record for any quarter and 32.5 percent over revenue of $292.7 million
for the second quarter of 1997. For the first six months of 1998,
revenue amounted to $715.2 million, also 32.5 percent above the $539.8
million reported for the first half of last year and easily our best
first-half performance ever.
Net income for the second quarter was $119 million, well above the
$58.8 million the company earned in the second quarter a year ago. This
number and those that follow are a little misleading without further
explanation, however, and that explanation is forthcoming. For the
first half of 1998, net income was $187.3 million. Net income for the
first half of 1997 was $121.8 million. Diluted per-share earnings for
the second quarter and the first six months of 1998 were 63 cents and
$1.00, respectively. Second quarter diluted earnings per share last
year were 32 cents, and for the first half of this year, 66 cents,
subject to the same explanation promised earlier.
And now for the explanation: During the second quarter of this year,
Tellabs realized a sizable pre-tax gain on the sale of stock held as an
investment, pursuant to a planned program to reduce its holdings in
Advanced Fibre Communications, a company in which we had made an early
investment. The gain from the sale of the AFC stock amounted to $73.4
million. Also during the quarter, the company determined that assets
related to our purchase of the former Steinbrecher Corporation, still on
the books as our Wireless Systems Division, were no longer appropriate
and took a pre-tax write-off amounting to $24.8 million. Had these
transactions not occurred during the quarter, earnings for the quarter
would have shown an increase of nearly 47 percent over those for the
second quarter of 1997 and diluted earnings per share would have
amounted to 46 cents.
Both of those extraordinary transactions affect first-half results too,
of course. Moreover, during the first half of last year, the company
realized a gain amounting to 7 cents a share on sales during the first
quarter of AFC stock. Had none of these transactions occurred, diluted
earnings per share for the first six months this year would have
amounted to 83 cents, compared with 59 cents in 1997. (This quarter
also sets an all-time record for complexity of the earnings statement!)
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As has been the case for some time now, the robust revenue and earnings
numbers derive from two primary product lines, the TITAN (a registered
trademark of Tellabs Operations, Inc.) family of digital cross-connect
products and the MartisDXX (a trademark of Tellabs Oy) digital
multiplexer. Sales of the TITAN 5500 digital cross-connect system
during the first half of 1998 were well above our expectations and
almost 46 percent ahead of last year's first-half revenue. The primary
driver here is the need by service providers to manage increasing
amounts of traffic and a growing facilities base. While not up as
dramatically, sales of the MartisDXX digital multiplexer product were
also well above last year's levels, as were sales of echo cancellers,
though both of these products were adversely affected by the ongoing
problems in the Asia-Pacific region.
During the quarter, Tellabs announced a major strategic initiative, the
agreement to merge with CIENA Corporation, a company with leading-edge
technology and products in the dense-wave-division-multiplexing area.
Wave-division multiplexing is an increasingly popular technique for
dramatically increasing the capacity of optical fiber facilities and the
forerunner of optical networking. We believe that CIENA has
state-of-the-art technology in both products and manufacturing
resources, and we are extremely pleased that Pat Nettles and the CIENA
organization are joining us in building a truly major company in this
most exciting industry. We anticipate that the merger will close during
the current third quarter.
And finally, as a sequel to our first-quarter announcement of a
definitive agreement to acquire Coherent Communications Systems
Corporation, both we and Coherent were asked by the Department of
Justice for more information as part of its Hart-Scott-Rodino review.
Tellabs and Coherent have been advised by the U.S. Department of
Justice that the Department has completed its review of the merger and
has determined to take no further action. Consequently, we anticipate
the closing of the merger in early August.
Clearly, things are gaining momentum here. We appreciate the support
and encouragement of our customers, employees and stockholders as we
continue to address the challenges and opportunities of modern-day
telecommunications.
Sincerely,
s\ Michael J. Birck
- -----------------------
Michael J. Birck
Chief Executive Officer
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Second Quarter Earnings Release (website link to this information which
is attached hereto as Exhibit 20.7)
Results of Operations
Condensed Consolidated Balance Sheet
Common Stock Market Data
Tellabs' common stock is listed on The Nasdaq Stock Market under
the symbol TLAB and appears in most daily newspaper stock tables as
Tellabs. At July 20, 1998, there were approximately 3,700 stockholders
of record. Tellabs is a component of the Nasdaq-100 Index and the
Standard & Poor's 500 Index.
10-K Report
Stockholders may obtain without charge a copy of the Tellabs 1997
Form 10-K as filed with the Securities and Exchange Commission upon
request to:
Secretary
Tellabs, Inc.
4951 Indiana Avenue
Lisle, Illinois 60532 U.S.A.
Edgar Archives
For Tellabs investor relations contact:
Tom Scottino
1.630.378.7504
[email protected]
Except for historical information, the matters discussed or
incorporated by reference in this letter are forward-looking statements
that involve risks and uncertainties including, but not limited to,
economic conditions, product demand and industry capacity, competitive
products and pricing, manufacturing efficiencies, research and new
product development, protection of and access to intellectual property,
patents, and technology, ability to attract and retain highly qualified
personnel, availability of components and critical manufacturing
equipment, ability of vendors and third parties to respond to Year 2000
issues, facility construction and start-ups, the regulatory and trade
environment, the availability and terms of future acquisitions and the
uncertainties relating to the synergies, charges, and expenses
associated with the proposed mergers described in the Company's filings,
as well as other risks that may be detailed from time to time in
Tellabs' filings with the Securities and Exchange Commission. Tellabs'
actual future results could differ materially from those discussed here.
Tellabs undertakes no obligation to revise or update these
forward-looking statements.
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NEWS RELEASE EXHIBIT 20.7
FOR IMMEDIATE RELEASE CONTACT: Peter A. Guglielmi
07/16/98 (630) 378- 6111
TELLABS REPORTS RECORD SALES AND EARNINGS
FOR SECOND QUARTER AND FIRST HALF OF 1998
Gain on Stock Sale and Write-Off of Assets Affect Net Earnings
Lisle, Ill. -- Tellabs, Inc., announced Thursday record sales and
earnings for the second quarter and the first half of 1998.
Sales for the second quarter ended July 3 were $387,719,000, up 32.5
percent over sales of $292,701,000 in the similar period of 1997. This
marks the 28th consecutive quarter in which Tellabs' sales surpassed
prior-year levels. Sales for the first six months of the year were
$715,221,000, up 32.5 percent compared with sales of $539,824,000 a year
earlier.
Net income for the second quarter was $119,042,000 compared with
$58,761,000 a year earlier. Results for the second quarter of 1998
include a pre-tax gain of $73,374,000 on the sale of stock held as an
investment and the settlement of hedge contracts on those shares as well
as a pre-tax write-off of $24,793,000 on assets of the company's
Wireless Systems Division that were determined to be impaired. Excluding
the effect of the second-quarter gain and charge, earnings increased
46.8 percent over those recorded in the second quarter of last year.
Net income for the first six months of 1998 was $187,286,000 compared
with $121,848,000 a year earlier (which included a pre-tax gain of
$20,803,000 on the sale of stock held as an investment). Excluding the
effect of the 1997 and 1998 gains on the sales of stock and the effect
of the 1998 write-off, net income for the first half of 1998 was 43.1
percent greater than the level recorded in the first half of 1997.
Diluted earnings per share of common stock for the second quarter of
1998 were 63 cents (or 46 cents excluding the effect of the stock sale
and write-off) compared with 32 cents for the second quarter of 1997.
For the first six months of 1998, diluted earnings per share were $1.00
(83 cents excluding the effect of the stock sale and write-off) compared
with 66 cents (59 cents excluding the effect of the 1997 stock sale) a
year earlier.
"The second quarter followed a very familiar pattern," said Tellabs
President and CEO Michael J. Birck. "Sales of the SONET-based TITAN (a
registered trademark of Tellabs Operations, Inc.) 5500 system exceeded
last year's second quarter levels by 51 percent, while MartisDXX (a
trademark of Tellabs Oy) system sales increased 21 percent. Echo
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canceller sales were 23 percent below last year's robust second-quarter
level. Anticipated softness, following the all-time record level of
echo canceller sales experienced in the first quarter of this year, was
heightened by less than expected sales outside the United States."
In February, Tellabs and Coherent Communications Systems Corporation
announced a definitive merger agreement under which Tellabs will
exchange 0.72 shares of its stock for each share of Coherent common
stock. During the Hart-Scott-Rodino review, the Department of Justice
requested additional information from both parties. Tellabs and
Coherent have fully complied with this second request for information.
Both companies remain fully committed to completing the merger.
In June, Tellabs and CIENA Corporation announced a definitive merger
agreement under which Tellabs will exchange one share of its stock for
each share of CIENA stock. Both companies expect this transaction to
close during the third quarter.
Tellabs designs, manufactures, markets and services voice and data
transport and network access systems. The company's products are used
worldwide by the providers of communications services. Tellabs stock is
listed on the NASDAQ stock market (TLAB).
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TELLABS, INC.
RESULTS OF OPERATIONS
(Dollars in thousands, except per-share data)
(Unaudited)
Three Months Ended Six Months Ended
07/03/98 06/27/97 07/03/98 06/27/97
----------- ----------- ----------- ----------
Net Sales $387,719 $292,701 $715,221 $539,824
Cost of Goods Sold 138,885 111,445 259,104 206,865
----------- ----------- ----------- ----------
Gross Profit 248,834 181,256 456,117 332,959
Operating Exp.
Mktg. & G.A. 75,418 55,850 142,019 101,424
Research & Dev. 47,919 37,532 91,225 70,768
Asset Impairment 24,793 --- 24,793 ---
Goodwill Amort. 1,374 1,517 2,850 3,023
----------- ----------- ----------- ----------
Total Oper. Exp. 149,504 94,899 260,887 175,215
Oper. Profit 99,330 86,357 195,230 157,744
Interest/Other-Net 77,029 3,537 82,231 26,875
----------- ----------- ----------- ----------
Profit Before Tax 176,359 89,894 277,461 184,619
Income Taxes 57,317 31,133 90,175 62,771
----------- ----------- ----------- ----------
Net Profit $119,042 $58,761 $187,286 $121,848
=========== =========== =========== ==========
Earnings per Share
Basic $0.65 $0.33 $1.03 $0.68
=========== =========== =========== ==========
Diluted $0.63 $0.32 $1.00 $0.66
=========== =========== =========== ==========
Average Number of Shares
of Common Stock Outstanding
Basic 182,390 180,749 182,132 180,437
Diluted 187,482 186,055 187,214 185,883
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TELLABS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
(Unaudited)
1998 1998 1997
2nd Qtr. 1st Qtr. Year End
Assets ----------- ----------- ----------
Current Assets
Cash and investments $577,800 $600,486 $487,034
Accounts receivable, less allowance 293,628 259,595 284,084
Inventories 100,223 94,467 89,614
Other current assets 4,538 1,376 2,202
----------- ----------- ----------
Total Current Assets 976,189 955,924 862,934
Property, Plant, and Equipment 361,264 352,108 338,296
Less accumulated depreciation (138,057) (134,170) (128,967
----------- ----------- ----------
223,207 217,938 209,329
Goodwill 52,361 58,482 61,453
Other Assets 44,222 54,373 49,663
----------- ----------- ----------
Total Assets $1,295,979 $1,286,717 $1,183,379
=========== =========== ==========
Liabilities
Current Liabilities
Accounts payable $57,185 $48,098 $50,422
Accrued liabilities 63,312 123,620 115,917
Income taxes 72,782 57,417 59,481
----------- ----------- ----------
Total Current Liabilities 193,279 229,135 225,820
Long-Term Debt 2,850 2,850 2,850
Other Long-Term Liabilities 17,544 15,494 14,870
Deferred Income Taxes 10,186 6,188 6,730
----------- ----------- ----------
Total Liabilities 223,859 253,667 250,270
Stockholders' Equity
Common Stock, $.01 Par Value 1,825 1,822 1,816
Additional Paid-In Capital 153,421 147,684 130,378
Cumulative Translation Adjustment (36,639) (43,150) (27,901
Unrealized Holding Gains
on Securities 33,401 125,624 95,990
Retained Earnings 920,112 801,070 732,826
----------- ----------- ----------
Total Stockholders' Equity 1,072,120 1,033,050 933,109
----------- ----------- ----------
Total Liab. & Stockholders' Equity$1,295,979 $1,286,717 $1,183,379
=========== =========== ==========
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NEWS RELEASE EXHIBIT 20.8
FOR IMMEDIATE RELEASE CONTACT: Thomas P. Scottino
07/23/98 (630) 378-7504
TELLABS AND COHERENT TO COMPLETE MERGER
Lisle, Ill. -- Tellabs, Inc., and Coherent Communications Systems
Corporation have been advised by the staff of the Antitrust Division of
the U.S. Department of Justice that the Division has completed its
review of the merger of Tellabs and Coherent and has determined to take
no further action. Consequently, Tellabs and Coherent anticipate
closing their merger in early August.
Coherent Communications Systems Corporation designs, manufactures and
markets echo cancellation and conferencing products for major
international telecommunications companies, cellular and PCS providers,
network operators, and Fortune 500 companies.
Tellabs designs, manufactures, markets and services voice and data
transport and network access systems. The company's products are used
worldwide by the providers of communications services. Tellabs stock is
listed on the NASDAQ stock market (TLAB).
