-----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, I8RfJZYCzhm1ypySSD3NFUhxXOa2Das6gY/AzcZ2PM9OCtkrhuGjin1TXNGZqO4t q/aeiCLmR8O/EZ105Li2hQ== 0000061478-96-000033.txt : 19960916 0000061478-96-000033.hdr.sgml : 19960916 ACCESSION NUMBER: 0000061478-96-000033 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960731 FILED AS OF DATE: 19960913 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADC TELECOMMUNICATIONS INC CENTRAL INDEX KEY: 0000061478 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 410743912 STATE OF INCORPORATION: MN FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-01424 FILM NUMBER: 96630011 BUSINESS ADDRESS: STREET 1: 4900 W 78TH ST CITY: MINNEAPOLIS STATE: MN ZIP: 55343 BUSINESS PHONE: 6129388080 MAIL ADDRESS: STREET 1: 4900 W 78TH ST CITY: MINNEAPOLIS STATE: MN ZIP: 55435 FORMER COMPANY: FORMER CONFORMED NAME: MAGNETIC CONTROLS CO DATE OF NAME CHANGE: 19850605 10-Q 1 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 July 31, 1996 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 of (I.R.S. Employer incorporation or organization) Identification No.) 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: 65,044,111 shares as of September 12, 1996 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - UNAUDITED (In Thousands) ASSETS
July 31, October 31, 1996 1995 ---------- ---------- CURRENT ASSETS: Cash and cash equivalents $159,719 $238,491 Accounts receivable 145,709 107,255 Inventories 126,559 86,559 Prepaid income taxes and other assets 16,288 15,442 ---------- ---------- Total current assets 448,275 447,747 PROPERTY AND EQUIPMENT, net 118,246 78,686 OTHER ASSETS, principally goodwill 137,900 74,650 ---------- ---------- $704,421 $601,083 ========== ========== LIABILITIES AND STOCKHOLDERS' INVESTMENT CURRENT LIABILITIES: Current maturities of long-term debt $45 $410 Accounts payable 36,006 28,820 Accrued liabilities 76,424 59,731 ---------- ---------- Total current liabilities 112,475 88,961 DEFERRED INCOME TAXES 1,190 1,256 LONG-TERM DEBT, less current maturities above 8,777 -- ---------- ---------- Total liabilities 122,442 90,217 STOCKHOLDERS' INVESTMENT (64,891 and 62,737 shares outstanding) 581,979 510,866 ---------- ---------- $704,421 $601,083 ========== ==========
See accompanying notes to consolidated financial statements. 2 ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED (In Thousands, Except per Share Amounts)
For the Quarters Ended For the Nine Months Ended July 31, July 31, ----------------------- ---------------------- 1996 1995 1996 1995 ------------ ---------- ------------ --------- NET SALES $217,313 $150,454 $572,957 $412,570 COST OF PRODUCT SOLD 115,567 78,742 303,884 212,447 ---------- ---------- ---------- ---------- GROSS PROFIT 101,746 71,712 269,073 200,123 ---------- ---------- ---------- ---------- Gross profit percentage 46.8% 47.7% 47.0% 48.5% ---------- ---------- ---------- ---------- EXPENSES: Development and product engineering 22,579 16,202 64,151 45,348 Selling and administration 41,607 31,937 114,030 94,338 Goodwill amortization 1,474 784 3,141 2,350 Personnel reduction -- -- -- 3,914 ---------- ---------- ---------- ---------- Total expenses 65,660 48,923 181,322 145,950 ---------- ---------- ---------- ---------- OPERATING INCOME 36,086 22,789 87,751 54,173 OTHER INCOME (EXPENSE), NET: Interest 2,341 1,929 8,490 3,132 Other (2,221) (229) (3,454) (229) ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES 36,206 24,489 92,787 57,076 PROVISION FOR INCOME TAXES 13,034 8,815 33,403 20,547 ---------- ---------- ---------- ---------- NET INCOME $23,172 $15,674 $59,384 $36,529 ========== ========== ========== ========== AVERAGE COMMON SHARES OUTSTANDING 64,852 59,321 63,866 57,102 ========== ========== ========== ========== EARNINGS PER SHARE $0.36 $0.26 $0.93 $0.64 ========== ========== ========== ==========
See accompanying notes to consolidated financial statements. 3 ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED (In Thousands)
For the Nine Months Ended July 31, ----------------------------- 1996 1995 -------- -------- OPERATING ACTIVITIES: Net income $59,384 $36,529 Adjustments to reconcile net income to net cash from operating activities - Depreciation and amortization 23,007 18,250 Reduction in deferred compensation 388 567 Decrease in deferred income taxes (66) (288) Other 426 252 Changes in assets and liabilities Accounts receivable (28,645) (12,951) Inventories (31,002) (17,948) Prepaid income taxes and other assets 417 (1,654) Accounts payable 1,646 (4,116) Accrued liabilities 1,174 2,890 ---------- ---------- Total cash from operating activities 26,729 21,531 ---------- ---------- INVESTMENT ACTIVITIES: Acquisition payments (46,715) (4,676) Property and equipment additions, net (47,969) (21,011) Long-term investments (10,579) (6,000) ---------- ---------- Total cash used for investment activities (105,263) (31,687) ---------- ---------- FINANCING ACTIVITIES: Decrease in long-term debt (5,292) (400) Common stock issued 4,184 186,900 ---------- ---------- Total cash from financing activities (1,108) 186,500 ---------- ---------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 870 164 ---------- ---------- DECREASE IN CASH AND CASH EQUIVALENTS (78,772) 176,508 CASH AND CASH EQUIVALENTS, beginning of period 238,491 49,512 ---------- ---------- CASH AND CASH EQUIVALENTS, end of period $159,719 $226,020 ========== ==========
See accompanying notes to consolidated financial statements. 4 ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES SUPPLEMENTAL FINANCIAL INFORMATION - UNAUDITED (In Thousands, Except Per Share Amounts)
3rd 2nd 1st 4th Quarter Quarter Quarter Quarter 1996 1996 1996 1995 -------- -------- -------- -------- NET SALES $217,313 $193,053 $162,591 $173,652 COST OF PRODUCT SOLD 115,567 103,636 84,681 89,647 -------- -------- -------- -------- GROSS PROFIT 101,746 89,417 77,910 84,005 -------- -------- -------- -------- Gross profit percentage 46.8% 46.3% 47.9% 48.4% -------- -------- -------- -------- EXPENSES: Development and product engineering 22,579 21,629 19,943 21,112 Selling and administration 41,607 37,516 34,907 35,959 Goodwill amortization 1,474 883 784 783 -------- -------- -------- -------- Total expenses 65,660 60,028 55,634 57,854 -------- -------- -------- -------- OPERATING INCOME 36,086 29,389 22,276 26,151 OTHER INCOME(EXPENSE), NET: Interest 2,341 2,597 3,552 3,671 Other (2,221) (892) (341) (669) -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 36,206 31,094 25,487 29,153 PROVISION FOR INCOME TAXES 13,034 11,195 9,174 10,496 -------- -------- -------- -------- NET INCOME $23,172 $19,899 $16,313 $18,657 ======== ======== ======== ======== AVERAGE COMMON SHARES OUTSTANDING 64,852 64,024 62,758 62,655 ======== ======== ======== ======== EARNINGS PER SHARE $0.36 $0.31 $0.26 $0.30 ======== ======== ======== ========
See accompanying notes to consolidated financial statements. 5 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 nine months ended July 31, 1996 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 July 31, 1996, and October 31, 1995, consisted of (in thousands):
1996 1995 --------- --------- Purchased materials and manufactured products $115,818 $75,694 Work-in-process 10,741 10,865 -------- -------- $126,559 $86,559 ======== ========
Note 3 Acquisitions: During the second quarter, the Company exchanged a total of 1,176,950 shares of its common stock in two separate business combinations for all the outstanding shares of Da Tel Fibernet, Inc. ("Da Tel") and Information Transmission Systems Corp. ("ITS"). Both transactions were accounted for as poolings of interests. Da Tel provides engineering, design and installation services for telecommunications companies. ITS designs and manufactures wireless television transmission products for the cable and broadcast industries. During the third quarter, the Company exchanged 715,431 shares of its common stock for all of the outstanding capital stock of Metrica Systems Limited ("Metrica"). The acquisition was accounted for as a pooling of interests. Metrica, based in London, England, designs and manufactures network management software. Financial data for periods prior to the poolings has not been restated for these combinations because neither the net assets or operating results were material, individually or in the aggregate, to the Company's consolidated financial statements. 6 During the second quarter, the Company purchased all of the outstanding stock of Skyline Technology, Inc. ("Skyline") for an initial cash payment of $12 million and an additional amount not to exceed $20 million. The additional amounts will be payable over a three year period beginning November 1, 1996, subject to the achievement of certain performance goals. Skyline designs and manufactures ISDN/Frame Relay access products. The Skyline acquisition was accounted for as a purchase. The purchase price exceeded the fair value of the acquired assets by approximately $11 million. This amount is being amortized over an average life of ten years. During the third quarter, the Company purchased 80% of the outstanding common stock of Solitra Oy ("Solitra"), based in Kempele, Finland, with a commitment to acquire the remaining 20% over a three year period. The stock was acquired for an initial cash payment of approximately $41 million plus additional amounts which are payable subject to the achievement of certain performance goals. The additional amounts will be payable over a three year period beginning November 1, 1996. Solitra designs and manufactures components for cellular network base stations as well as high specification filters for mobile phones. The acquisition of Solitra was accounted for as a purchase. The initial purchase price exceeded the fair value of the acquired assets by approximately $44 million. This amount is being amortized over 15 years on a straight line basis. The inclusion of Skyline and Solitra historical financial data prior to the dates of acquisition would not have materially affected reported results. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Company offers a broad range of products to address key areas of the telecommunications network infrastructure. To meet its customers' needs, the Company offers equipment, services and integrated solutions within the following general functional product groups: transmission, enterprise networking and broadband connectivity. The Company's transmission products are sold primarily to public network providers in the United States and internationally. The Company's enterprise networking products are sold primarily to private voice, data and video network providers around the world. The Company's broadband connectivity products are sold to both public and private 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 associated 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. There can be no assurance that the Company's new or enhanced products will meet with market acceptance or be profitable. The Company's operating results may fluctuate significantly from quarter to quarter due to several factors. The Company is experiencing growth through acquisition and expansion and results of operations described in this Form 10-Q may not be indicative of results to be achieved in future periods. The Company'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, 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. 8 RESULTS OF OPERATIONS The percentage relationships to net sales of certain income and expense items for the quarters and nine months ended July 31, 1996 and 1995 and the percentage changes in these income and expense items between periods are contained in the following table:
Percentage Increase Percentage of Net Sales Between Periods ------------------------------------- ------------------- Quarters Ended Nine Months Ended Quarters Nine Months July 31, July 31, Ended Ended ---------------- ----------------- 1996 1995 1996 1995 July 31, July 31, ------ ------ ------ ------ -------- -------- Net Sales 100.0% 100.0% 100.0% 100.0% 44.4% 38.9% Cost of Product Sold (53.2) (52.3) (53.0) (51.5) 46.8 43.0 ------ ------ ------ ------ Gross Profit 46.8 47.7 47.0 48.5 41.9 34.5 Expenses: Development and product engineering (10.4) (10.8) (11.2) (11.0) 39.4 41.5 Selling and administration (19.1) (21.2) (19.9) (22.9) 30.3 20.9 Goodwill amortization (0.7) (0.5) (0.6) (0.6) 88.0 33.7 Personnel reduction - - - (0.9) - - ------ ------ ------ ------ Operating Income 16.6 15.2 15.3 13.1 58.3 62.0 Other Income (Expense), Net: Interest 1.1 1.3 1.5 0.8 21.4 171.1 Other (1.0) (0.2) (0.6) (0.1) 870.0 1408.3 ------ ------ ------ ------ Income Before Income Taxes 16.7 16.3 16.2 13.8 47.8 62.6 Provision for Income Taxes (6.0) (5.9) (5.8) (4.9) 47.9 62.6 ------ ------ ------ ------ Net Income 10.7% 10.4% 10.4% 8.9% 47.8 62.6 ====== ====== ====== ======
Net Sales: The following table sets forth the Company's net sales for the quarters and nine-month periods ended July 31, 1996 and 1995 for each of the Company's functional product groups described above:
Quarters Ended July 31, Nine Months Ended July 31, ------------------------------ ------------------------------ 1996 1995 1996 1995 -------------- -------------- -------------- -------------- Product Group Net Sales % Net Sales % Net Sales % Net Sales % - ------------- ---------- --- ---------- --- ---------- --- --------- --- Transmission $84,127 38.7% $48,752 32.4% $203,207 35.5% $123,503 29.9% Enterprise Networking 37,394 17.2 32,342 21.5 106,638 18.6 94,454 22.9 Broadband Connectivity 95,792 44.1 69,360 46.1 263,112 45.9 194,613 47.2 -------- ----- -------- ----- -------- ----- -------- ---- Total $217,313 100.0% $150,454 100.0% $572,957 100.0% $412,570 100.0% ======== ===== ======== ===== ======== ===== ======== =====
Net sales for the three-month and nine-month periods ended July 31, 1996 increased 44.4% and 38.9% to $217.3 million and $573.0 million, respectively, over the comparable 1995 time periods. These increases are the result of increases in net sales for all three product groups plus revenue contributions from companies acquired during 1996. Such revenue contributions from acquired companies totaled $24.0 million for the quarter and $36.0 million for the nine months ended July 31, 1996, respectively. 9 During the quarter and nine months ended July 31, 1996, net sales of transmission products increased 72.6% and 64.5%, respectively, over the comparable 1995 time periods. In addition to revenue contributions from companies acquired during 1996, these increases primarily resulted from increased sales of transmission systems sold to public telecommunications network providers. Net sales of broadband connectivity products increased 38.1% and 35.2% during the quarter and nine months ended July 31, 1996, respectively, over the comparable 1995 time periods, primarily reflecting the Company's success in selling these products into expanding global broadband market applications and revenue contributions from companies acquired during 1996. The Company believes that future sales of broadband connectivity products will continue to account for a substantial portion of the Company's revenues, although net sales of these products may continue to decline as a percentage of total net sales primarily due to the ongoing evolution of technologies in the telecommunications marketplace. During the quarter and nine months ended July 31, 1996, net sales of enterprise networking products increased 15.6% and 12.9%, respectively, over the quarter and nine months ended July 31, 1995. These increases reflect significant growth in net sales of access equipment, which was partially offset by a decrease in net sales of Local Area Network (LAN) equipment. Recognizing changes in the competitive environment for LAN equipment, the Company realigned its Kentrox and Fibermux subsidiaries into one enterprise networking group during second quarter 1995 to better address the industry trend toward integration of LAN and Wide Area Network (WAN) technologies and products. Gross Profit: Gross profit percentages were 46.8% and 47.0% of net sales in the three-month and nine-month periods ended July 31, 1996, respectively. These gross profit percentages compared to 47.7% and 48.5% for the three-month and nine-month periods ended July 31, 1995. The declines in gross profit percentages during the 1996 time periods were primarily the result of a change in product sales mix toward sales of newer, lower margin products which address emerging broadband applications. The Company anticipates that its future gross profit percentage will continue to be affected by product mix, the timing of new product introductions and manufacturing volume, among other factors. Operating Expenses: Total operating expenses for the quarter and nine months ended July 31, 1996 were $65.7 million and $181.3 million, representing 30.2% and 31.6% of net sales, respectively. Total operating expenses for the quarter and nine months ended July 31, 1995 were $48.9 million and $146.0 million, representing 32.5% and 35.4% of net sales, respectively. The 1996 decrease in operating expenses as a percentage of net sales for both the quarter and nine-month period reflects the Company's operating leverage on increased net sales. The increases in absolute dollars of operating expenses during the quarter and nine months ended July 31, 1996 of 34.2% and 24.2%, respectively, were due primarily to the expanded operations associated with higher revenue levels in 1996. Expenses during the nine months ended July 31, 1995 included a charge of $3.9 million related primarily to a personnel reduction at Fibermux resulting from the realignment of the Company's Kentrox and Fibermux 10 subsidiaries. This charge increased operating expenses as a percentage of net sales by 0.9% during the nine months ended July 31, 1995. Development and product engineering expenses were $22.6 million for the quarter ended July 31, 1996, an increase of 39.4% over $16.2 million for the quarter ended July 31, 1995. For the nine months ended July 31, 1996, development and product engineering expenses were $64.2 million, an increase of 41.5% over $45.3 million for the nine months ended July 31, 1995. These increases reflect substantial product development efforts in each of the Company's three functional product groups. The Company believes that, given the rapidly changing technological and competitive environment in the telecommunications equipment industry, continued commitment to product development efforts will be required for the 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 $41.6 million for the quarter ended July 31, 1996, an increase of 30.3% over $31.9 million for the quarter ended July 31, 1995. For the nine months ended July 31, 1996, selling and administration expenses were $114.0 million, an increase of 20.9% over $94.3 million for the nine months ended July 31, 1995. These increases reflect selling activities associated with new product introductions and additional personnel costs related to expanded operations. Two of the Company's 1996 acquisitions were accounted for as purchase transactions and the initial purchase prices exceeded the fair value of the acquired assets by approximately $55.0 million. The amortization of these amounts over 10 to 15 years on a straight line basis resulted in increased goodwill amortization expense for the quarter and nine-month period ended July 31, 1996. See Note 3 to the Consolidated Financial Statements included in this report for a discussion of acquisitions during the quarter and nine months ended July 31, 1996. Other Income (Expense), Net: For the three-month and nine-month periods ended July 31, 1996, net interest income was $2.3 million and $8.5 million, respectively. Net interest income for the three-month and nine-month periods ended July 31, 1995 was $1.9 million and $3.1 million, respectively. Net interest income represents interest income on cash balances for all periods presented. The 1996 increases in net interest income primarily reflect $182.0 million of cash proceeds from the Company's June 1995 secondary public offering of 6.3 million shares of common stock. See "Liquidity and Capital Resources" below for a discussion of cash levels. Other expense for the three-month and nine-month periods ended July 31, 1996 of $2.2 million and $3.5 million, respectively, primarily represented the Company's share of net operating results of its venture investments accounted for on an equity basis. For both the three-month and nine-month periods ended July 31, 1995, other expense of $0.2 million primarily represented miscellaneous expense. 11 Income Taxes: The Company's effective income tax rate was 36.0% for the three-month and nine-month periods ended July 31, 1996 and 1995. These rates reflect the varying amounts of non-deductible goodwill amortization included in operating expenses in each of the time periods and the beneficial impact of tax credits. Net Income: Reflecting all of the matters discussed above, net income was $23.2 million (or $.36 per share) for the three months ended July 31, 1996, an increase of 47.8% over $15.7 million (or $.26 per share) for the three months ended July 31, 1995, and was $59.4 million (or $.93 per share) for the nine months ended July 31, 1996, an increase of 62.6% over $36.5 million (or $.64 per share) for the nine months ended July 31, 1995. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents, primarily short-term investments in commercial paper with maturities of less than 90 days, decreased $78.8 million and increased $176.5 million during the nine months ended July 31, 1996 and 1995, respectively. The major elements of the 1996 decrease were net income before depreciation and amortization of $82.4 million offset by the $59.6 million increase in receivables and inventory levels, acquisition payments and long- term investments of $57.3 million and property and equipment additions of $48.0 million. The 1996 increases in receivables and inventory levels and property and equipment additions reflect growth in business. See Note 3 to the Consolidated Financial Statements included in this report for a discussion of 1996 acquisitions. The major elements of the 1995 increase were the $182.0 million net proceeds from the Company's June 1995 secondary public offering of 6.3 million shares of common stock and net income before depreciation and amortization of $54.8 million, offset by the $30.9 million increase in inventory and receivable levels (reflecting growth in business), property and equipment additions of $21.0 million and acquisition payments and long-term investments of $10.7 million. The Company may borrow up to $40.0 million under revolving credit agreements. Borrowings under these agreements bear interest at floating short- term market rates, may be repaid at any time without penalty and may be converted to term loans bearing interest principally at the prime rate, payable in annual installments through December 2000. At July 31, 1996 and October 31, 1995, the entire $40.0 million of revolving borrowing remained available to the Company. At July 31, 1996, the long-term debt outstanding related to the companies acquired during the nine months ended July 31, 1996. Management believes that current cash balances, cash generated from operating activities and borrowings available under revolving credit agreements will be adequate to fund working capital requirements, capital expenditures (approximately $32.0 million committed at July 31, 1996) and possible acquisitions or strategic alliances for 1996. 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. 12 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 such forward-looking statements, including, without limitations, the factors set forth on Exhibit 99 to the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 1996. 13 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 None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits 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-8 dated May 24, 1996) 4-c Composite Restated Bylaws of ADC Telecommunications, Inc., as amended (Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1989) 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) 27 Financial Data Schedule b. Reports on Form 8-K Current Report on Form 8-K dated July 1, 1996 in connection with the acquisition of Solitra Oy, a Finnish corporation. 14 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: September 13, 1996 ADC TELECOMMUNICATIONS, INC. By: /s/ Robert E. Switz ------------------------------------- Robert E. Switz Vice President, Chief Financial Officer (Principal Financial Officer, Duly Authorized Officer) 15 ADC TELECOMMUNICATIONS, INC. EXHIBIT INDEX TO FORM 10-Q FOR THE QUARTER ENDED JULY 31, 1996 Exhibit No. Description ----------- ----------- 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-8 dated May 24, 1996) 4-c Composite Restated Bylaws of ADC Telecommunications, Inc., as amended (Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1989) 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) 27 Financial Data Schedule................................. 16 EX-27 2
5 This schedule contains summary financial information extracted from the financial statements for ADC Telecommunications, Inc. and Subsidiaries, for the nine month period ended July 31, 1996, and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS OCT-31-1996 JUL-31-1996 159,719 0 145,709 4,302 126,559 448,275 252,683 (134,437) 704,421 112,475 0 0 0 12,977 569,002 704,421 572,957 572,957 303,884 303,884 181,322 483 254 92,787 33,403 59,384 0 0 0 59,384 0.93 0.93 Amount is net of allowance for bad debts and returns and allowances. Amount is net of obsolescence reserves.
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