<PAGE>
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 January 31, 1998
OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
Commission file number 0-1424
ADC Telecommunications, Inc.
----------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-0743912
-------------------- --------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
12501 Whitewater Drive, Minnetonka, MN 55343
---------------------------------------------
(Address of principal executive offices) (zip code)
(612) 938-8080
----------------------------------------------------
(Registrant's telephone number, including area code)
N/A
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, $.20 par value: 134,268,672 shares as of March 9, 1998
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - UNAUDITED
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
JANUARY 31, OCTOBER 31,
1998 1997
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 97,310 $ 109,794
Accounts receivable 231,976 246,241
Inventories 181,367 168,379
Prepaid income taxes and other assets 28,956 25,053
--------- ----------
Total current assets 539,609 549,467
PROPERTY AND EQUIPMENT, net 225,707 215,677
OTHER ASSETS, principally goodwill 183,213 171,159
--------- ----------
$ 948,529 $ 936,303
--------- ----------
--------- ----------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Current maturities of long-term debt $ 564 $ 650
Accounts payable 56,770 62,879
Accrued liabilities 111,047 118,870
--------- ----------
Total current liabilities 168,381 182,399
LONG TERM DEBT, less current maturities 2,552 3,109
--------- ----------
Total liabilities 170,933 185,508
STOCKHOLDERS' INVESTMENT
(134,139 and 133,508 shares outstanding) 777,596 750,795
--------- ----------
$ 948,529 $ 936,303
--------- ----------
--------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED
JANUARY 31,
----------------------------------------
1998 1997
---------- ----------
<S> <C> <C>
NET SALES $ 286,396 $ 256,777
COST OF PRODUCT SOLD 152,846 139,108
---------- ----------
GROSS PROFIT 133,550 117,669
---------- ----------
Gross profit percentage 46.6% 45.8%
---------- ----------
EXPENSES:
Development and product engineering 30,938 28,119
Selling and administration 62,094 49,444
Goodwill amortization 2,538 2,522
Non-recurring charges - 22,700
---------- ----------
Total expenses 95,570 102,785
---------- ----------
OPERATING INCOME 37,980 14,884
OTHER INCOME (EXPENSE), NET:
Interest 1,444 1,786
Other (333) (427)
---------- ----------
INCOME BEFORE INCOME TAXES 39,091 16,243
PROVISION FOR INCOME TAXES 13,682 5,848
---------- ----------
NET INCOME $ 25,409 $ 10,395
---------- ----------
---------- ----------
BASIC AND DILUTED EARNINGS PER SHARE $ 0.19 $ 0.08
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED
JANUARY 31,
---------------------------------------
1998 1997
--------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 25,409 $ 10,395
Adjustments to reconcile net income to net cash from
operating activities -
Non-recurring charges - 22,700
Depreciation and amortization 15,220 11,727
Reduction in deferred compensation 140 337
Decrease in deferred income taxes - (48)
Other 1,444 668
Changes in assets and liabilities
Accounts receivable 14,073 (6,336)
Inventories (13,370) (4,643)
Prepaid income taxes and other assets (7,295) 208
Accounts payable (5,764) 1,085
Accrued liabilities (6,310) (11,870)
---------- ----------
Total cash from operating activities 23,547 24,223
---------- ----------
INVESTMENT ACTIVITIES:
Acquisitions (16,000) (30,700)
Property and equipment additions, net (24,339) (21,227)
Long-term investments 627 (8,099)
---------- ----------
Total cash used for investment activities (39,712) (60,026)
---------- ----------
FINANCING ACTIVITIES:
Decrease in long term debt (471) (473)
Common stock issued 4,509 2,414
---------- ----------
Total cash from financing activities 4,038 1,941
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (357) 34
---------- ----------
DECREASE IN CASH AND CASH EQUIVALENTS (12,484) (33,828)
CASH AND CASH EQUIVALENTS, beginning of period 109,794 183,221
---------- ----------
CASH AND CASH EQUIVALENTS, end of period $ 97,310 $ 149,393
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION - UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1ST 4TH 3RD 2ND
QUARTER QUARTER QUARTER QUARTER
1998 1997 1997 1997
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 286,396 $ 335,162 $ 293,312 $ 279,199
COST OF PRODUCT SOLD 152,846 176,561 156,266 149,876
-------- ------- ------- -------
GROSS PROFIT 133,550 158,601 137,046 129,323
-------- ------- ------- -------
Gross profit percentage 46.6% 47.3% 46.7% 46.3%
-------- ------- ------- -------
EXPENSES:
Development and product engineering 30,938 34,774 29,339 30,406
Selling and administration 62,094 64,721 54,619 52,840
Goodwill amortization 2,538 2,597 2,543 2,351
Non-recurring charges - - - -
-------- ------- ------- -------
Total expenses 95,570 102,092 86,501 85,597
-------- ------- ------- -------
OPERATING INCOME 37,980 56,509 50,545 43,726
OTHER INCOME(EXPENSE), NET:
Interest 1,444 1,824 1,571 1,795
Other (333) (797) (934) (425)
-------- ------- ------- -------
INCOME BEFORE INCOME TAXES 39,091 57,536 51,182 45,096
PROVISION FOR INCOME TAXES 13,682 20,712 18,425 16,235
-------- ------- ------- -------
NET INCOME $ 25,409 $ 36,824 $ 32,757 $ 28,861
-------- ------- ------- -------
-------- ------- ------- -------
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (DILUTED) 136,914 136,358 134,843 133,827
-------- ------- ------- -------
-------- ------- ------- -------
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (BASIC) 133,719 133,405 131,820 131,009
-------- ------- ------- -------
-------- ------- ------- -------
EARNINGS PER SHARE (DILUTED) $ 0.19 $ 0.27 $ 0.24 $ 0.22
-------- ------- ------- -------
-------- ------- ------- -------
EARNINGS PER SHARE (BASIC) $ 0.19 $ 0.28 $ 0.25 $ 0.22
-------- ------- ------- -------
-------- ------- ------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note 1 ACCOUNTING POLICIES: The information furnished in this report is
unaudited but reflects all adjustments which are necessary, in the
opinion of management, for a fair statement of the results for the
interim periods. The operating results for the three months ended
January 31, 1998, are not necessarily indicative of the operating
results to be expected for the full fiscal year. These statements
should be read in conjunction with the Company's most recent Annual
Report on Form 10-K.
Note 2 INVENTORIES: Inventories include material, labor and overhead and are
stated at the lower of first-in, first-out cost or market.
Inventories at January 31, 1998, and October 31, 1997, consisted of
(in thousands):
<TABLE>
<CAPTION>
January 31, 1998 October 31, 1997
---------------- ----------------
<S> <C> <C>
Purchased materials and
manufactured products $ 167,615 $ 154,403
Work-in-process 13,752 13,976
---------------- ----------------
$ 181,367 $ 168,379
---------------- ----------------
---------------- ----------------
</TABLE>
Note 3 NON-RECURRING CHARGES: The non-recurring charges of $22.7 during the
quarter ended January 31, 1997 primarily represent the write-off of
purchased research and development resulting from the acquisition of
the Wireless Infrastructure Group of Pacific Communication Sciences,
Inc., as well as expenses related to the consolidation of the
Company's West Coast operations.
Note 4 ACQUISITIONS: During the first quarter of 1998, the Company acquired
substantially all of the assets and liabilities of W.E. Tech, Inc. for
$16 million in cash. W. E. Tech, Inc., located in Fort Lauderdale,
Florida, is a provider of systems integration services. The
acquisition was accounted for as a purchase, and resulted in the
recognition of goodwill of approximately $14.5 million. The inclusion
of W.E. Tech, Inc. operating results for periods prior to the
acquisition would not have materially affected results of operations.
6
<PAGE>
Note 5 EARNINGS PER SHARE: Basic earnings per common share was calculated by
dividing net income by the weighted average number of common shares
outstanding during the period. Diluted earnings per share was
calculated by dividing net income by the sum of the weighted average
number of common shares outstanding plus all additional common shares
that would have been outstanding if potentially dilutive common shares
had been issued. The following table reconciles the number of shares
utilized in the earnings per share calculations for the quarters ended
January 31, 1998 and 1997.
<TABLE>
<CAPTION>
Quarters Ended January 31,
----------------------------
(IN THOUSANDS EXCEPT EARNINGS PER SHARE) 1998 1997
-------- --------
<S> <C> <C>
Net income $25,409 $10,395
Earnings per common share (basic) $0.19 $0.08
Earnings per common share (diluted) $0.19 $0.08
Weighted average common shares
outstanding (basic) 133,719 130,445
Effect of dilutive securities - stock
options 3,195 3,285
Weighted average common shares
outstanding (diluted) 136,914 133,730
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
ADC Telecommunications, Inc (the "Company" or "ADC") offers a broad range
of products and services that enable its customers to construct and upgrade
their telecommunications networks to support increasing user demand for voice,
data and video services. Telephone companies, cable television operators,
wireless network providers and other public network providers are building the
infrastructure required to offer internet access, higher speed data, video and
telephony services, entertainment and other interactive services to residential
and business customers. Greater and greater amounts of network bandwidth are
required for these services, and the Company's development efforts and product
offerings are focused on "unlocking the capacity of the local loop" by
eliminating bottlenecks and increasing the speed and efficiency of the network.
The local loop is the portion of the public network from the central office
through the equipment that connects the local central office to the subscriber's
equipment, onto the customer premise and across the enterprise or residential
network. The Company's product offerings include equipment, services and
integrated solutions within the following general functional product groups:
transmission, enterprise networking and broadband connectivity. The Company's
transmission products are designed for use in copper based, coax based, fiber
based or wireless transmission networks and are sold primarily to public network
providers worldwide. The Company's enterprise networking products are designed
for use in copper based , fiber optic and wireless networks and are sold
primarily to private voice, data and video network providers around the world.
The Company's broadband connectivity products are designed for use in copper
based, coax, fiber optic or wireless transmission networks and are sold to both
public and private global network providers.
Historically, the Company's principal product offerings have generally
consisted of copper-based and fiber-based products designed to address the needs
of its customers for transmission, enterprise networking and connectivity on
traditional telephony networks. With the growth of multimedia applications and
the related development of enhanced voice, data and video services, the
Company's more recent product offerings and research and development efforts
have increasingly focused on emerging technologies and applications relating to
the broadband telecommunications equipment market. The market for broadband
telecommunications equipment is evolving and rapidly changing. The Company's
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 of the 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 developments, changes to overall market capital expenditure
rates (which could result from the ongoing consolidation of customers in theses
market as well as the addition of new customer entrants to the market) and
end-user demands for integrated voice, data video and other network services.
There can be no assurance that the Company's new or enhanced products will meet
with market acceptance or be profitable.
8
<PAGE>
The Company's operating results may fluctuate significantly from quarter to
quarter due to several factors. The Company is growing through acquisition and
expansion, and results of operations described in this report may not be
indicative of results to be achieved in future periods. The Company's expense
levels are based in part on management's expectations of future revenues.
Although management has and will continue to take measures to adjust expense
levels, if revenue levels in a particular period do not meet expectations,
operating results will be adversely affected. In addition, the Company's
results of operations are subject to seasonal factors. The Company historically
has experienced a stronger demand for its products in the fourth fiscal quarter,
primarily as a result of customer budget cycles and Company year-end incentives,
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. In addition to seasonality, the Company's recent operating results
have been adversely affected by unstable conditions in Asian markets as well as
the spending patterns of certain telecommunications service providers as they
reevaluate their equipment needs in light of industry consolidation.
YEAR 2000 MATTERS
The Company is currently evaluating the potential impact of the situation
commonly referred to as the "Year 2000 Issue," which involves the inability of
certain software and systems to properly recognize and process date information
relating to the Year 2000. In this regard, the Company has assigned a team to
evaluate the nature and extent of the work required to make its systems,
products and infrastructure Year 2000 compliant. The Company's product
development processes currently contain steps to include Year 2000 compliance
verification for all current and future products. ADC continues to evaluate the
estimated costs associated with its efforts to ensure that its existing systems,
products and infrastructure are Year 2000 compliant. While these on-going
efforts will involve additional costs, ADC believes, based on available
information, that it is and will continue to effectively manage its total Year
2000 transition without any material adverse effect on its business, results of
operations or financial condition.
9
<PAGE>
RESULTS OF OPERATIONS
The percentage relationships to net sales of certain income and expense
items for the quarters ended January 31, 1998 and 1997 and the percentage
changes in these income and expense items between periods are contained in the
following table:
<TABLE>
<CAPTION>
PERCENTAGE
INCREASE
PERCENTAGE OF NET SALES (DECREASE)
FOR THE QUARTERS ENDED BETWEEN
JANUARY 31 PERIODS
------------------------------- -----------
1998 1997
-------- --------
<S> <C> <C> <C>
NET SALES 100.0% 100.0% 11.5%
COST OF PRODUCT SOLD (53.4) (54.2) 9.9
------ ------
GROSS PROFIT 46.6 45.8 13.5
EXPENSES:
Development and product engineering (10.7) (10.9) 10.0
Selling and administration (21.7) (19.3) 25.6
Goodwill amortization (0.9) (1.0) 0.6
Non-recurring charges - (8.8) (100.0)
------ ------
OPERATING INCOME 13.3 5.8 155.2
OTHER INCOME (EXPENSE), NET:
Interest 0.5 0.7 (19.1)
Other (0.1) (0.2) 22.0
------ ------
INCOME BEFORE INCOME TAXES 13.7 6.3 140.7
PROVISION FOR INCOME TAXES (4.8) (2.3) 134.0
------ ------
NET INCOME 8.9% 4.0% 144.4
------ ------
------ ------
</TABLE>
NET SALES: The following table sets forth the Company's net sales for the
quarters ended January 31, 1998 and 1997 for each of the Company's functional
product groups described above:
<TABLE>
<CAPTION>
QUARTER ENDED JANUARY 31, ($ IN THOUSANDS)
-----------------------------------------------------------
1998 1997
------------------------ ------------------------
PRODUCT GROUP NET SALES % NET SALES %
- ------------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C>
TRANSMISSION $135,763 47.4% $105,312 41.0%
ENTERPRISE NETWORKING 32,196 11.2 39,828 15.5
BROADBAND CONNECTIVITY 118,437 41.4 111,637 43.5
--------- ---------- --------- ---------
TOTAL $286,396 100.0% $256,777 100.0%
--------- ---------- --------- ---------
--------- ---------- --------- ---------
</TABLE>
Net sales for the quarter ended January 31, 1998 were $286.4 million, a
$29.6 million or 11.5 % increase over the comparable 1997 quarter. This net
increase is the result of increases in net sales for the transmission product
group plus revenue contributions from companies acquired since January 31, 1997.
Such revenue contributions from acquired companies totaled $14.4 million for the
quarter ended January 31, 1998. The Company believes that its first quarter
sales were adversely impacted by the seasonal buying patterns of its customers
and unstable conditions in Asian markets as discussed above.
10
<PAGE>
During the quarter ended January 31, 1998, net sales of transmission
products increased 28.9% over the comparable 1997 quarter. The increase
predominately reflected strong growth from the core transmission business
through increased sales of transmission systems to public telecommunications
network providers.
Net sales of broadband connectivity products represent 41.4% of total
revenues and increased 6.1% during the quarter ended January 31, 1998. The
slower growth in this product group is attributable in part to declines in sales
of wireless infrastructure equipment by the Company's Solitra subsidiary. The
Company believes that a portion of the decline in sales of wireless
infrastructure equipment is attributable to conditions in the Asian markets. In
addition, the Company believes that the consolidation of certain
telecommunications service providers adversely affected product orders during
the first quarter. The Company expects that future sales of broadband
connectivity products will continue to account for a substantial portion of the
Company's revenues, although these products may decline as a percentage of total
net sales primarily due to the ongoing evolution of technologies in the
telecommunications marketplace.
The 19.2% decrease in net sales of enterprise networking group products
reflected reduced sales of Channel Service Units/Data Service Units (CSU/DSU)
products and ATM access concentrators due in part to strong competition in this
market.
GROSS PROFIT: The gross profit percentage for first quarter 1998, 46.6% of
net sales, was a slight improvement over the 45.8% gross profit percentage for
first quarter 1997 primarily due to a product sales mix that was weighted toward
sales of higher margin products. Future gross profit percentages will continue
to be affected by the mix of products the Company sells, the timing of new
product introductions and manufacturing volume, among other factors.
OPERATING EXPENSES: Total operating expenses for the quarters ended
January 31, 1998 and 1997 were $95.6 million and $102.8 million (including
non-recurring charges of $22.7 million in the first quarter of 1997),
respectively. The 1997 non-recurring charges primarily represent the write-off
of purchased research and development resulting from the acquisition of the
Wireless Infrastructure Group from Pacific Communication Sciences, Inc., as well
as expenses related to the consolidation and streamlining of the Company's West
Coast operations. Operating expenses before non-recurring charges for the
quarters ended January 31, 1998 and 1997 were $95.6 million and $80.1 million,
representing 33.4% and 31.2% of net sales, respectively. The increase in
absolute dollars of operating expenses before non-recurring charges was due
primarily to costs associated with acquired companies and expanded operations
necessary to support higher revenue levels during the quarter ended January 31,
1998.
Development and product engineering expenses were $30.9 million for the
quarter ended January 31, 1998, representing a 10.0% increase over the quarter
ended January 31, 1997. The increase reflects substantial product development
and introduction efforts in each of the Company's three functional product
groups. The Company believes that, given the rapidly changing technology and
competitive environment in the telecommunications equipment industry, continued
commitment to product development efforts will be required for the
11
<PAGE>
Company to remain competitive. Accordingly, the Company intends to continue to
allocate substantial resources to product development for each of its three
functional product groups. However, the Company recognizes the need to balance
the cost of product development with expense control and remains committed to
carefully managing the rate of increase of such expenses.
Selling and administration expenses were $62.1 million for the quarter
ended January 31, 1998, representing a 25.6% increase over the quarter ended
January 31, 1997. The increase reflects selling activities associated with new
product introductions and additional personnel costs related to expanded
operations and acquisitions.
Because first quarter 1998 revenues were below the Company's planned
revenue levels for that quarter, the Company is taking steps to reduce its
planned expense levels as management monitors the results of operations during
the remainder of the fiscal year. However, if revenue levels during the
remainder of the 1998 fiscal year do not meet management's expectations,
operating results for that period will be adversely affected.
OTHER INCOME (EXPENSE), NET: For the quarters ended January 31, 1998 and
1997, the net interest income (expense) category represented net interest income
on cash and cash equivalents. (See "Liquidity and Capital Resources" below for
a discussion of cash levels.)
Other expense primarily represented the gain or loss on the sale of fixed
assets and the Company's share of net operating results of its investments in
other companies accounted for on an equity basis.
INCOME TAXES: The effective income tax rate was 35.0% and 36.0% for the
quarters ended January 31, 1998 and 1997, respectively. In addition to the
non-deductible goodwill amortization included in operating expenses each
quarter, the rates reflect the beneficial impact of tax credits.
NET INCOME: Net income was $25.4 million (or $.19 per share) for the
quarter ended January 31, 1998, an increase of 144.4% over $10.4 million (or
$0.08 per share) for the quarter ended January 31, 1997. Before the
non-recurring charges of $22.7 million, net income for the quarter ended January
31, 1997 was $24.9 million (or $.19 per share).
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents, primarily short-term investments in
commercial paper with maturities of less than 90 days, decreased $12.5
million and $33.8 million during the quarters ended January 31, 1998 and
1997, respectively. The major elements of the 1998 decrease were cash
provided by operations of $23.5 million offset by cash used in the
acquisition of W.E. Tech, Inc. ($16 million) and the purchase of property and
equipment ($24.3 million). The major elements of the 1997 decrease were cash
provided by operations of $24.2 million, offset by cash used in acquisitions
of $30.7 million, property and equipment additions of $21.2 million and
long-term investments of $8.1 million.
12
<PAGE>
At January 31, 1998 and October 31, 1997, the Company had approximately
$3.1 million and $3.8 million of debt outstanding, respectively. This entire
amount represents debt of acquired companies.
Management believes that current cash balances and cash generated from
operating activities will be adequate to fund working capital requirements and
capital expenditures during the remainder of the fiscal year. However, the
Company may find it necessary to seek additional sources of financing to support
its capital needs, for additional working capital, potential investments or
acquisitions, or otherwise.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.
The foregoing Management's Discussion and Analysis of Financial Condition
and Results of Operations contains various "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements represent the Company'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, and any statements regarding the sufficiency of the Company's
cash balances and cash generated from operating and financing activities for the
Company's future liquidity and capital resource needs. The Company cautions
that any forward-looking statements made by the Company in this Form 10-Q or in
other announcements made by the Company are further qualified by important
factors that could cause actual results to differ materially from those in the
forward-looking statements, including, without limitations, the factors set
forth on Exhibit 99-a to the Company's Report on Form 10-K for the year ended
October 31, 1997.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a. An annual meeting of shareholders was held on February 24, 1998.
b. Proxies for the meeting were solicited pursuant to Regulation 14
under the Securities and Exchange Act of 1934, there was no
solicitation in opposition to the management's nominees for
director as listed in the proxy statement and all such nominees
were elected.
c-1. The following table shows the vote totals with respect to the
election of the four directors:
For terms expiring in 2001
<TABLE>
<CAPTION>
VOTES AUTHORITY
NAME FOR WITHHELD
-----------------------------------------------------------
<S> <C> <C>
Thomas E. Holloran 115,615,451 4,874,967
Charles W. Oswald 115,652,657 4,837,761
Alan E. Ross 115,675,369 4,815,049
Warde F. Wheaton 115,637,248 4,853,170
</TABLE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
14
<PAGE>
4-a Form of certificate for shares of Common Stock of ADC
Telecommunications, Inc. (Incorporated by reference to Exhibit 4-a to
the Company's Form 10-Q for the quarter ended January 31, 1996.)
4-b Restated Articles of Incorporation of ADC Telecommunications, Inc., as
amended. (Incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-3 dated April 15, 1997.)
4-c Restated Bylaws of ADC Telecommunications, Inc., as amended.
(Incorporated by reference to Exhibit 4.2 to the Company's
Registration Statement on Form S-3 dated April 15, 1997.)
4-d Second Amended and Restated Rights Agreement, amended and restated as
of November 28, 1995, between ADC Telecommunications, Inc. and Norwest
Bank Minnesota, N.A. (amending and restating the Rights Agreement
dated as of September 23, 1986, as amended and restated as of August
16, 1989), which includes as Exhibit A thereto the form of Right
Certificate. (Incorporated by reference to Exhibit 4 to the Company's
Form 8-K dated December 11, 1995.)
10-a Addendum dated February 24, 1998 to ADC Telecommunications, Inc. 1991
Stock Incentive Plan.
27-a Financial Data Schedule.
b. Reports on Form 8-K
Current Report on Form 8-K dated January 23, 1998 filed on January 26,
1998 in connection with the Company's press release dated January 23,
1998 announcing information on first quarter results.
Current Report on Form 8-K dated February 18, 1998 filed on February
19, 1998 in connection with the Company's press release dated February
18, 1998 announcing final results for the first fiscal quarter.
15
<PAGE>
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, thereunto duly authorized.
Dated: March 11, 1998 ADC TELECOMMUNICATIONS, INC.
By: /s/ Robert E. Switz
---------------------------------------
Robert E. Switz
Senior Vice President, Chief Financial
Officer (Principal Financial Officer,
Duly Authorized Officer)
16
<PAGE>
ADC TELECOMMUNICATIONS, INC.
EXHIBIT INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JANUARY 31, 1998
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
4-a Form of certificate for shares of Common Stock of ADC
Telecommunications, Inc. (Incorporated by reference to
Exhibit 4-a to the Company's Form 10-Q for the quarter ended
January 31, 1996.)
4-b Restated Articles of Incorporation of ADC
Telecommunications, Inc., as amended. (Incorporated by
reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-3 dated April 15, 1997.)
4-c Restated Bylaws of ADC Telecommunications, Inc., as amended.
(Incorporated by reference to Exhibit 4.2 to the Company's
Registration Statement on Form S-3 dated April 15, 1997.)
4-d Second Amended and Restated Rights Agreement, amended and
restated as of November 28, 1995, between ADC
Telecommunications, Inc. and Norwest Bank Minnesota, N.A.
(amending and restating the Rights Agreement dated as of
September 23, 1986, as amended and restated as of August 16,
1989), which includes as Exhibit A thereto the form of Right
Certificate. (Incorporated by reference to Exhibit 4 to the
Company's Form 8-K dated December 11, 1995.)
10-a Addendum dated February 24, 1998 to ADC
Telecommunications,Inc. 1991 Stock Incentive Plan..........
27-a Financial Data Schedule....................................
</TABLE>
17
<PAGE>
Exhibit 10-a
------------
ADC TELECOMMUNICATIONS, INC.
1991 STOCK INCENTIVE PLAN
-------------------------
PLAN ADDENDUM FOR OPTION GRANTS IN AUSTRALIA
FEBRUARY 24, 1998
The following provisions shall apply with respect to the extension of the
ADC Telecommunications, Inc. 1991 Stock Incentive Plan to employees of ADC
Telecommunications Australian Pty. Limited (ACN 059 167 510) and AOFR Pty.
Limited (ACN 008 586 838).
1. The references to the purchase price of an Option in Section 6(a)(i)
shall mean the U.S. Dollar purchase price.
2. If the purchase price of an Option is to be paid in cash or check as
provided in Section 6(b)(iii), the cash or check shall be in U.S. Dollars.
3. Notwithstanding Section 6(f)(iii), the Committee shall not permit the
purchase price of the Option to be paid in installments or on a deferred cash
basis.
4. No monetary consideration shall be payable for an Option grant.
5. No shares of Common Stock or other assets shall be issued or delivered
under the Plan in Australia until and unless there shall have been compliance
with all the requirements of law or of any regulatory bodies having jurisdiction
over such issuance and delivery.
1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES FOR THE
FISCAL QUARTER ENDED JANUARY 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 97,310
<SECURITIES> 0
<RECEIVABLES> 231,976<F1>
<ALLOWANCES> 3,489
<INVENTORY> 181,367<F2>
<CURRENT-ASSETS> 539,609
<PP&E> 414,982
<DEPRECIATION> (189,275)
<TOTAL-ASSETS> 948,529
<CURRENT-LIABILITIES> 168,381
<BONDS> 0
0
0
<COMMON> 26,826
<OTHER-SE> 750,770
<TOTAL-LIABILITY-AND-EQUITY> 948,529
<SALES> 286,396
<TOTAL-REVENUES> 286,396
<CGS> 152,846
<TOTAL-COSTS> 152,846
<OTHER-EXPENSES> 95,570
<LOSS-PROVISION> 436
<INTEREST-EXPENSE> 212
<INCOME-PRETAX> 39,091
<INCOME-TAX> 13,682
<INCOME-CONTINUING> 25,409
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,409
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
<FN>
<F1>Amount is net of allowance for bad debts and returns and allowances
<F2>Amount is net is net of obsolescence reserves
</FN>
</TABLE>
