-----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, As8t4te6Fr0XqRqRbIzujcAu1m46ld9LyDK3A0WAjtJWO/MU1j4BifR1V8C5zTWC 6NLe6VxxOVeOPqJYPOzfCA== 0001047469-98-009663.txt : 19980317 0001047469-98-009663.hdr.sgml : 19980317 ACCESSION NUMBER: 0001047469-98-009663 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980131 FILED AS OF DATE: 19980313 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: SEC FILE NUMBER: 000-01424 FILM NUMBER: 98564731 BUSINESS ADDRESS: STREET 1: 12501 WHITEWATER DR CITY: MINNETONKA 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 10-Q 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 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - UNAUDITED (IN THOUSANDS) ASSETS
JANUARY 31, OCTOBER 31, 1998 1997 ----------- ----------- 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 --------- ---------- --------- ----------
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 JANUARY 31, ---------------------------------------- 1998 1997 ---------- ---------- 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 ---------- ---------- ---------- ----------
See accompanying notes to consolidated financial statements. 3 ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED (IN THOUSANDS)
FOR THE QUARTERS ENDED JANUARY 31, --------------------------------------- 1998 1997 --------- ---------- 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 ---------- ---------- ---------- ----------
See accompanying notes to consolidated financial statements. 4
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 ----------- ---------- ----------- ----------- 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 -------- ------- ------- ------- -------- ------- ------- -------
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 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):
January 31, 1998 October 31, 1997 ---------------- ---------------- Purchased materials and manufactured products $ 167,615 $ 154,403 Work-in-process 13,752 13,976 ---------------- ---------------- $ 181,367 $ 168,379 ---------------- ---------------- ---------------- ----------------
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 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.
Quarters Ended January 31, ---------------------------- (IN THOUSANDS EXCEPT EARNINGS PER SHARE) 1998 1997 -------- -------- 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
7 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 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 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:
PERCENTAGE INCREASE PERCENTAGE OF NET SALES (DECREASE) FOR THE QUARTERS ENDED BETWEEN JANUARY 31 PERIODS ------------------------------- ----------- 1998 1997 -------- -------- 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 ------ ------ ------ ------
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:
QUARTER ENDED JANUARY 31, ($ IN THOUSANDS) ----------------------------------------------------------- 1998 1997 ------------------------ ------------------------ PRODUCT GROUP NET SALES % NET SALES % - ------------- --------- ---------- --------- --------- 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% --------- ---------- --------- --------- --------- ---------- --------- ---------
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 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 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 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 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
VOTES AUTHORITY NAME FOR WITHHELD ----------------------------------------------------------- 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
ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits 14 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 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 ADC TELECOMMUNICATIONS, INC. EXHIBIT INDEX TO FORM 10-Q FOR THE QUARTER ENDED JANUARY 31, 1998
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-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....................................
17 EX-10.A 2 EXHIBIT 10-A 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 EX-27 3 EXHIBIT 27-A
5 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. 1,000 3-MOS OCT-31-1998 NOV-01-1997 JAN-31-1998 97,310 0 231,976 3,489 181,367 539,609 414,982 (189,275) 948,529 168,381 0 0 0 26,826 750,770 948,529 286,396 286,396 152,846 152,846 95,570 436 212 39,091 13,682 25,409 0 0 0 25,409 .19 .19 Amount is net of allowance for bad debts and returns and allowances Amount is net is net of obsolescence reserves
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