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Filed Pursuant to Rule 424(b)(2)
File No. 333-37419
PROSPECTUS
ADC TELECOMMUNICATIONS, INC.
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1,313,848 SHARES OF
COMMON STOCK
($.20 PAR VALUE)
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This Prospectus relates to an aggregate of 1,313,848 shares (the "Shares")
of Common Stock, par value $.20 per share (the "Common Stock"), of ADC
Telecommunications, Inc., a Minnesota corporation ("ADC" or the "Company"), that
may be sold from time to time by the stockholders named herein (the "Selling
Shareholders"). See "Selling Shareholders." The Company will not receive any
proceeds from the sale of the Shares. The Company has agreed to pay the expenses
of registration of the Shares, including certain legal and accounting fees.
Any or all of the Shares may be offered from time to time in transactions on
the Nasdaq National Market, in brokerage transactions at prevailing market
prices or in transactions at negotiated prices. See "Plan of Distribution."
The Shares offered hereby have not been registered under the blue sky or
securities laws of any jurisdiction, and any broker or dealer should assure the
existence of an exemption from registration or effectuate such registration in
connection with the offer and sale of the Shares.
The Common Stock is traded on the Nasdaq National Market under the symbol
"ADCT." On October 6, 1997, the last reported sale price of the Common Stock as
reported on the Nasdaq National Market was $35 1/16 per share.
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FOR INFORMATION CONCERNING CERTAIN RISKS RELATED TO THIS OFFERING,
SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offer contained herein, and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell, or a solicitation
of an offer to buy, any securities offered hereby in any jurisdiction in which
it is not lawful or to any person to whom it is not lawful to make any such
offer or solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that
information herein is correct as of any time subsequent to the date hereof.
THE DATE OF THIS PROSPECTUS IS NOVEMBER 26, 1997.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's regional offices at 7
World Trade Center, Suite 1300, New York, New York 10048 and CitiCorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission at (http://www.sec.gov). In addition, the Common Stock of
the Company is listed on the Nasdaq National Market, and reports, proxy
statements and other information concerning the Company can also be inspected at
the offices of the National Association of Securities Dealers, 1735 K. Street
N.W., Washington, D.C. 20006. This Prospectus does not contain all the
information set forth in the Registration Statement and exhibits thereto which
the Company has filed with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"), and to which reference is hereby made.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of the Company which have been filed with the
Commission are hereby incorporated by reference in this Prospectus:
(a) the Annual Report on Form 10-K for the year ended October 31, 1996;
(b) the Quarterly Report on Form 10-Q for the quarter ended January 31,
1997;
(c) the Quarterly Report on Form 10-Q for the quarter ended April 30,
1997;
(d) the Quarterly Report on Form 10-Q for the quarter ended July 31,
1997; and
(e) the description of ADC's Common Stock and Common Stock Purchase
Rights contained in the Company's Registration Statement filed pursuant to
Section 12 of the Exchange Act and any amendment or report filed for the
purpose of updating any such description.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Common Stock shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
respective dates of filing of such documents. Any statement contained herein or
in a document all or part of which is incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated herein by reference (other
than certain exhibits to such documents). Requests for such copies should be
directed to David F. Fisher, Esq., Vice President, General Counsel and Corporate
Secretary, ADC Telecommunications, Inc., 12501 Whitewater Drive, Minnetonka,
Minnesota 55343, telephone number (612) 938-8080.
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RISK FACTORS
The following risk factors should be considered carefully in addition to the
other information contained in or incorporated by reference into this Prospectus
before purchasing the Common Stock offered hereby. This Prospectus, including
the information incorporated herein by reference, contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking statements
represent ADC's expectations or beliefs concerning future events, including the
following: any statements regarding future sales and gross profit percentages,
any statements regarding the continuation of historical trends, any statements
regarding the sufficiency of ADC's cash balances and cash generated from
operating and financing activities for ADC's future liquidity and capital
resource needs. ADC cautions that these statements are further qualified by
important factors that could cause actual results to differ materially from
those projected in the forward-looking statements as a result, in part, of the
risk factors set forth below. In connection with the forward-looking statements
which appear in this Prospectus, including the information incorporated herein
by reference, prospective purchasers of ADC Common Stock offered hereby should
carefully review the factors set forth below.
RAPID TECHNOLOGICAL CHANGE AND IMPORTANCE OF NEW PRODUCTS
The telecommunications equipment industry is characterized by rapid
technological change, evolving industry standards, changing market conditions
and frequent new product introductions and enhancements. The introduction of
products embodying new technologies or the emergence of new industry standards
can render existing products or products under development obsolete or
unmarketable. ADC's ability to anticipate changes in technology and industry
standards and successfully to develop and introduce new products on a timely
basis will be a significant factor in ADC's ability to grow and remain
competitive. New product development often requires long-term forecasting of
market trends, development and implementation of new technologies and processes
and a substantial capital commitment. In particular, ADC has recently invested
substantial resources toward the development of new products such as its
Homeworx-TM- product utilizing hybrid fiber coax technology. ADC is engaging in
extensive field testing and evaluation of its Homeworx-TM- system for video and
telephony applications, and has shipped the Homeworx-TM- system for video
applications to a limited number of customers for initial deployment.
Development and customer acceptance of new products is inherently uncertain, and
there can be no assurance that ADC will successfully complete the development of
the Homeworx-TM- system for telephony applications or other new products on a
timely basis or that such products will be commercially successful. Any failure
by ADC to anticipate or respond on a cost-effective and timely basis to
technological developments, changes in industry standards or customer
requirements, or any significant delays in product development or introduction,
could have a material adverse effect on ADC's business, operating results and
financial condition.
UNCERTAIN MARKET FOR BROADBAND NETWORK PRODUCTS
Over the past several years, ADC's principal product offerings have
generally consisted of copper-based and fiber-based products designed to address
the needs of its customers for connectivity, transmission and networking
applications on traditional telephony networks. However, with the growth of
multimedia and the associated development of enhanced voice, video and data
transmission technologies, ADC's recent product offerings and research and
development efforts have been increasingly focused on addressing the broadband
telecommunications equipment market through the use of new or different
technologies. The market for broadband telecommunications products is emerging
and rapidly changing. ADC's future growth is dependent in part on its ability to
successfully develop and commercially introduce new products in each of its
product groups addressing this market, as well as the growth in this market. The
growth in the market for such broadband telecommunications products is dependent
on a number of factors, including the amount of capital expenditures by public
network providers, regulatory and legal
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developments and end-user demand for integrated voice, video, data and other
network services. There can be no assurance that the market for broadband
telecommunications products will develop rapidly, or that there can be reliable
predictions made of technological trends or products in this field. In addition,
to the extent this market develops, there can be no assurance that ADC's
products will meet with market acceptance or be profitable.
COMPETITION
Competition in the telecommunications equipment industry is intense, and ADC
believes that competition may increase substantially with the deployment of
broadband networks and the recent regulatory changes. See "Changing Regulatory
Environment." Many of ADC's foreign and domestic competitors have more extensive
engineering, manufacturing, marketing, financial and personnel resources than
those of ADC. ADC believes its success in competing with other manufacturers of
telecommunications products depends primarily on its engineering, manufacturing
and marketing skills, the price, quality and reliability of its products, and
its delivery and service capabilities. ADC anticipates increasing pricing
pressures from current and future competitors in certain of the markets for its
products. In addition, ADC believes that technological change, the increasing
addition of data, video and other services to networks, continuing regulatory
change and industry consolidation or new entrants will continue to cause rapid
evolution in the competitive environment of the telecommunications equipment
market, the full scope and nature of which is difficult to predict at this time.
Increased competition could result in price reductions, reduced margins and loss
of market share by ADC. There can be no assurance that ADC will be able to
compete successfully with its existing or new competitors or that competitive
pressures faced by ADC will not materially and adversely affect its business,
operating results and financial condition.
FLUCTUATIONS IN OPERATING RESULTS
ADC's operating results may fluctuate significantly from quarter to quarter
due to several factors, including, without limitation, the volume and timing of
orders from, and shipments to, major customers, the timing of and the ability to
obtain new customer contracts, the timing of new product announcements and the
availability of product by ADC or its competitors, overall level of capital
expenditures by public network providers, market acceptance of new and enhanced
versions of ADC's products, variations in the mix of products ADC sells or its
sales channels, and the availability and cost of key components. In addition,
ADC is experiencing growth through acquisition and expansion, and its recent
results of operations may not be indicative of results to be achieved in future
periods. ADC's expense levels are based in part on expectations of future
revenues. If revenue levels in a particular period do not meet expectations,
operating results will be adversely affected. In addition, ADC's results of
operations are subject to seasonal factors. ADC historically has experienced a
stronger demand for its products in the fourth fiscal quarter, primarily as a
result of ADC year-end incentives and customer budget cycles, and has
experienced a weaker demand for its products in the first fiscal quarter,
primarily as a result of the number of holidays in late November, December and
early January and a general industry slowdown during that period. There can be
no assurance that these historical seasonal trends will continue in the future.
CHANGING REGULATORY ENVIRONMENT
The telecommunications industry is subject to regulation in the United
States and other countries. ADC's business is dependent upon the continued
growth of the telecommunications industry in the United States and
internationally. Federal and state regulatory agencies regulate most of ADC's
domestic customers. On January 3, 1996, the U.S. Congress passed the
Telecommunications Act of 1996 (the "Telecommunications Act"). The President of
the United States signed the Telecommunications Act into law on February 8,
1996. The Telecommunications Act has lifted certain restrictions on the ability
of companies, including Regional Bell Operating Companies ("RBOCs") and other
customers of ADC, to
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compete with one another and will generally reduce the regulation of the
telecommunications industry. While ADC believes that the deregulation of the
telecommunications industry could increase ADC's opportunities to provide
solutions for its customers' voice, data and video needs, this is dependent on
the reaction of ADC's existing and prospective customers to such regulatory
trends. The effect on the market for ADC's products is difficult to predict at
this time, and there can be no assurance that competition in ADC's product
market will not intensify as a result of such deregulation. Changes in current
or future laws or regulations, in the United States or elsewhere, could
materially and adversely affect ADC's business.
INTERNATIONAL OPERATIONS
Export sales accounted for 15%, 18% and 21% of ADC's net sales in fiscal
1994, 1995 and 1996, respectively, and ADC expects that export sales may
increase as a percentage of net sales in the future. In addition, ADC owns or
subcontracts manufacturing operations located in Mexico, Australia, China,
Finland and the United Kingdom. Due to its export sales and its international
manufacturing operations, ADC is subject to the risks of conducting business
internationally, including unexpected changes in, or impositions of, legislative
or regulatory requirements, fluctuations in the U.S. dollar, which could
materially and adversely affect U.S. dollar revenues or operating expenses,
tariffs and other barriers and restrictions, potentially longer payment cycles,
greater difficulty in accounts receivable collection, potentially adverse taxes,
and the burdens of complying with a variety of foreign laws and
telecommunications standards. ADC also is subject to general geopolitical risks,
such as political and economic instability and changes in diplomatic and trade
relationships, in connection with its international operations. There can be no
assurance that such factors will not materially and adversely affect ADC's
operations in the future or require ADC to modify significantly its current
business practices. In addition, the laws of certain foreign countries may not
protect ADC's proprietary technology to the same extent as do the laws of the
United States.
DEPENDENCE ON PROPRIETARY TECHNOLOGY
ADC's future success depends in part upon its proprietary technology.
Although ADC attempts to protect its proprietary technology through patents,
copyrights and trade secrets, it also believes that its future success will
depend upon product development, technological expertise and distribution
channels. There can be no assurance that ADC will be able to protect its
technology, or that competitors will not be able to develop similar technology
independently. ADC has received and may in the future receive from third
parties, including some of its competitors, notices claiming that it is
infringing third-party patents or other proprietary rights. There can be no
assurance that ADC would prevail in any litigation over third-party claims, or
that it would be able to license any valid and infringed patents on commercially
reasonable terms. Furthermore, litigation, regardless of its outcome, could
result in substantial cost to and diversion of effort by ADC. Any litigation or
successful infringement claims by third parties could materially and adversely
affect ADC's business, operating results and financial condition.
VOLATILITY OF STOCK PRICE
Based on the trading history of its stock, ADC believes factors such as
announcements of new products by ADC or its competitors, quarterly fluctuations
in ADC's financial results, customer contract awards, developments in
telecommunications regulation and general conditions in the telecommunications
equipment industry have caused and are likely to continue to cause the market
price of ADC's Common Stock to fluctuate substantially. In addition,
telecommunications equipment company stocks have experienced significant price
and volume fluctuations that often have been unrelated to the operating
performance of such companies. This market volatility may adversely affect the
market price of ADC's Common Stock.
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ADC TELECOMMUNICATIONS, INC.
GENERAL
ADC designs, manufactures and markets transmission, enterprise networking
and connectivity products for use in broadband global markets. ADC's wide range
of products employ fiber, hybrid fiber coax, wireless and traditional
copper-based technologies. ADC's customers include: public network providers,
which consist of all seven of the RBOCs, other telephone companies, long
distance carriers, wireless service providers, the major cable TV operators and
other domestic public network providers; private and governmental network
providers (such as various large business customers and governmental agencies);
and international network operators. ADC also sells indirectly to these
customers through the major telecommunications original equipment manufacturers
("OEMs"). ADC's products enable these network providers to build and upgrade
their networks to support increasing user demand for voice, data and video
services.
ADC seeks to capitalize on opportunities in the evolving global
telecommunications market by providing equipment, services and integrated
solutions for its customers' voice, data and video needs. Key components of
ADC's strategy include: (i) focusing on broadband (1,544 Mbps or higher) network
opportunities, (ii) providing end-to-end network solutions, (iii) leveraging
technological capabilities across product groups, (iv) expanding international
presence and (v) pursuing strategic alliances and acquisitions. ADC offers a
broad line of telecommunications equipment that provides customers with
solutions for key network needs from the central office, through the local loop,
into the customer premises and across the enterprise network. ADC seeks to
leverage its substantial expertise in fiber optics, broadband, video and
wireless technologies across its product groups in order to develop new product
architectures and network management tools for its customers' evolving voice,
data and video network needs in a variety of applications.
ADC's products can be categorized into three general product groups:
transmission, enterprise networking and broadband connectivity. These product
groups accounted for 37%, 18% and 45%, respectively, of ADC's net sales for the
year ended October 31, 1996. ADC's emphasis on fiber optic products is
demonstrated by ADC's increasing net sales of fiber optic products over each of
the last three years.
ADC sells its products to customers in three primary markets: (i) the United
States public telecommunications network market, which consists of all seven of
the RBOCs, other telephone companies, long distance carriers, wireless service
providers, the major cable TV operators and other domestic public network
providers; (ii) the private and governmental voice, data and video network
market in the United States, such as various large business customers and
governmental agencies that own and operate their own voice, data and video
networks for internal use; and (iii) the international public and private
network market. A majority of ADC's sales are made by a direct sales force, and
ADC maintains sales offices throughout the United States and also maintains
offices in Canada, Europe, Australia, Asia and Central and South America. The
public network providers, private and governmental network providers and
international sales accounted for 58%, 21% and 21%, respectively, of ADC's net
sales for the year ended October 31, 1996; 58%, 24% and 18%, respectively, of
ADC's net sales for the year ended October 31, 1995; and 57%, 28% and 15%,
respectively, of ADC's net sales for the year ended October 31, 1994.
ADC was incorporated under the laws of the State of Minnesota in 1953. ADC's
principal offices are located at 12501 Whitewater Drive, Minnetonka, Minnesota
55343, and its telephone number at that location is (612) 938-8080.
RECENT DEVELOPMENTS
On October 1, 1997, ADC Software Systems, Inc., a subsidiary of ADC ("ADC
Systems"), completed the acquisition of NewNet, Inc. ("NewNet") from the Selling
Shareholders identified herein. NewNet
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develops intelligent network telecommunications software including Signaling
Systems 7 (SS7) technology and other wireless intelligent network products such
as short messaging servers.
In the NewNet transaction, valued at approximately $53 million, shares of
ADC Common Stock were exchanged for shares of NewNet. The transaction was to be
accounted for using the "pooling-of-interests" method. NewNet, which was merged
with and into ADC Systems, will be part of the ADC Wireless Systems Group.
SELLING SHAREHOLDERS
The following table sets forth certain information as to the maximum number
of Shares that may be sold by each of the Selling Shareholders pursuant to this
Prospectus.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OWNED NUMBER OF
PRIOR TO THE SHARES OFFERED
NAME OFFERING HEREBY
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<S> <C> <C>
Ilhan Sevket Bagoren............................................................... 429,098 429,098
Esref Salih Ozulkulu............................................................... 431,699 431,699
Bekir Sami Serbetcioglu............................................................ 426,498 426,498
Bagoren 1997 Trust................................................................. 5,201 5,201
Ozulkulu 1997 Trust................................................................ 2,601 2,601
Serbetcioglu 1997 Trust............................................................ 7,801 7,801
Bagoren 1996 Trust................................................................. 3,650 3,650
Ozulkulu 1996 Trust................................................................ 3,650 3,650
Serbetcioglu 1996 Trust............................................................ 3,650 3,650
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1,313,848 1,313,848
</TABLE>
The Selling Shareholders are the sole former shareholders of NewNet. The
Selling Shareholders acquired the Shares in connection with ADC's acquisition of
NewNet on October 1, 1997. See "ADC Telecommunications, Inc.--Recent
Developments." Pursuant to the NewNet acquisition, ADC Systems acquired all of
the issued and outstanding shares of common stock of NewNet in exchange for the
Shares.
PLAN OF DISTRIBUTION
The Shares will be offered and sold by the Selling Shareholders for their
own accounts. The Company will not receive any proceeds from the sale of the
Shares pursuant to this Prospectus. The Company has agreed to pay the expenses
of registration of the Shares, including a certain amount of legal and
accounting fees.
The Selling Shareholders may offer and sell the Shares from time to time in
transactions on the Nasdaq National Market, in brokerage transactions at
prevailing market prices or in transactions at negotiated prices. Sales may be
made to or through brokers or dealers who may receive compensation in the form
of discounts, concessions or commissions from the Selling Shareholders or the
purchasers of Shares for whom such brokers or dealers may act as agent or to
whom they may sell as principal, or both. As of the date of this Prospectus, the
Company is not aware of any agreement, arrangement or understanding between any
broker or dealer and the Selling Shareholders.
The Selling Shareholders and any brokers or dealers acting in connection
with the sale of the Shares hereunder may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, and any commissions received
by them and any profit realized by them on the resale of Shares as principals
may be deemed underwriting compensation under the Securities Act.
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EXPERTS
The consolidated financial statements incorporated by reference in this
Prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and incorporated herein by reference in reliance
upon the authority of such firm as experts in giving said report.
LEGAL MATTERS
The validity of the Shares offered hereby has been passed upon for the
Company by Dorsey & Whitney LLP, 220 South Sixth Street, Minneapolis, Minnesota
55402.
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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING SHAREHOLDER
OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
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TABLE OF CONTENTS
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<CAPTION>
PAGE
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<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents By
Reference.................................... 2
Risk Factors................................... 3
ADC Telecommunications, Inc.................... 6
Selling Shareholders........................... 7
Plan of Distribution........................... 7
Experts........................................ 8
Legal Matters.................................. 8
</TABLE>
1,313,848 SHARES
ADC
TELECOMMUNICATIONS, INC.
COMMON STOCK
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PROSPECTUS
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NOVEMBER 26, 1997
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