-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MCdzhfldgOkW0MZiru5EXVRveFEwI54Luk8Ti2aNP7iuBXCmAMaUUTYuYyS/GOn7 eCWJ7vcsnvO/0ZegbXU+uw== 0000317771-98-000046.txt : 19980727 0000317771-98-000046.hdr.sgml : 19980727 ACCESSION NUMBER: 0000317771-98-000046 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980724 ITEM INFORMATION: FILED AS OF DATE: 19980724 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TELLABS INC CENTRAL INDEX KEY: 0000317771 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 363831568 STATE OF INCORPORATION: DE FISCAL YEAR END: 1227 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-09692 FILM NUMBER: 98671369 BUSINESS ADDRESS: STREET 1: 4951 INDIANA AVE CITY: LISLE STATE: IL ZIP: 60532 BUSINESS PHONE: 6303788800 MAIL ADDRESS: STREET 1: 4951 INDIANA AVE CITY: LISLE STATE: IL ZIP: 60532 8-K 1 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) 1 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 2 EX-20.6 2 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!) 1 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 2 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 tom.scottino@tellabs.com 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. 3 EX-20.7 3 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 1 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). 2 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 3 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 =========== =========== ========== 4 EX-20.8 4 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). -----END PRIVACY-ENHANCED MESSAGE-----