EX-99.1 2 a4900140ex991.txt ADC TELECOMMUNICATIONS, INC. EXHIBIT 99.1 Exhibit 99.1 Reports Second Quarter 2005 Results; Broad-Based Sales Strength and Significant EPS Growth MINNEAPOLIS--(BUSINESS WIRE)--June 1, 2005--ADC (NASDAQ:ADCT): -- Net Sales from Continuing Operations Were $316 Million, Up 30% from 1Q05 and 106% from 2Q04 (Excluding KRONE Sales, 2Q05 Net Sales Up 34% from 2Q04) -- Better Than Expected Sales Were Broad-based -- Driven by KRONE Sales of $110 Million and Strong Sales Growth in Connectivity and OmniReach(TM) Fiber-to-the-X Solutions, as well as Digivance(R) Wireless Systems and Professional Services -- International Sales Were 45% of Total Sales; United States Sales Grew 47% from 1Q05 -- Operating Expenses (Excluding Restructuring and Impairment Charges) at 25.9% of Sales Is Best Level Since 1980s and Compares to 31.3% in 1Q05 and 35.3% in 2Q04 -- Operating Margin (Excluding Restructuring and Impairment Charges) Improves to 11.1% in 2Q05 From 2.2% in 1Q05 and 5.5% in 2Q04 -- $0.28 GAAP Diluted Earnings Per Share (EPS) from 2Q05 Continuing Operations (Includes $0.03 of Restructuring and Impairment Charges and $0.03 Gain on Sale of Fixed Assets), Up from $0.12 or 133% in 1Q05 and Loss of $0.03 in 2Q04 -- Total Cash and Securities (Short- and Long-term) Were $586 Million at Quarter End ADC (NASDAQ:ADCT) (www.adc.com) today announced results for its second fiscal quarter ended April 29, 2005 prepared in accordance with generally accepted accounting principles (GAAP). The results are summarized below for ADC and its operating segments, Broadband Infrastructure and Access, and Professional Services, on a continuing operations basis. "Our mission for 2005 is profitable growth and we have delivered better than expected results through the first half of fiscal 2005. The strong performance in our second quarter was a result of increased sales across our broad family of communications infrastructure products and services, improved gross margins to 37.1% and reduced operating expenses (excluding restructuring and impairment charges) to 25.9% of sales, which is the most efficient percentage ADC has operated at since the 1980s," said Robert E. Switz, president and CEO of ADC. "Our better than expected second quarter sales of $316 million grew 30% from the first quarter of 2005 and 106% from last year's second quarter. Excluding KRONE's sales, ADC's second quarter sales grew 34% year-over-year. This significant growth was driven by strong contributions from our copper and fiber connectivity solutions, OmniReach Fiber-to-the-X (FTTX) products, Digivance wireless systems and professional services, as well as the KRONE acquisition. We will continue our focus on sales growth and lowering our cost of operations as we execute on our plans for long-term profitable growth." GAAP Results (dollars in millions, except per share amounts), Continuing Operations 2005 2005 2004 Second First Second ADC Results Quarter Quarter Quarter ----------- ------- ------- ------- Net sales $ 315.7 243.4 153.6 Percent outside U.S. 44.7% 51.1% 29.8% Gross margin 37.1% 33.5% 40.8% Restructuring and impairment charges $ 3.8 3.2 11.6 Operating margin 9.9% 0.9% (2.1)% Income (loss) from continuing operations $ 34.5 13.6 (3.1) Earnings (loss) per share from continuing operations - diluted $ 0.28 0.12 (0.03) Earnings per share are calculated giving effect to the one-for-seven reverse stock split, which became effective on May 10, 2005. GAAP Segment Results (dollars in millions), Continuing Operations Results for our two operating segments, Broadband Infrastructure and Access (BIA) and Professional Services (PS) are summarized below. BIA PS Consolidated --- -- ------------ 2005 Second Quarter: Net sales $ 248.7 67.0 315.7 Restructuring and impairments $ 3.0 0.8 3.8 Operating income (loss) $ 37.4 (6.0) 31.4 2005 First Quarter: Net sales $ 186.3 57.1 243.4 Restructuring and impairments $ 2.4 0.8 3.2 Operating income (loss) $ 6.9 (4.7) 2.2 2004 Second Quarter: Net sales $ 119.7 33.9 153.6 Restructuring and impairments $ 9.0 2.6 11.6 Operating income (loss) $ 6.0 (9.2) (3.2) ADC's Strong EPS Growth Boosted by Significant Improvement in Operating Margin "In addition to broad-based sales strength, our strong growth in GAAP diluted EPS from continuing operations to $0.28 in the second quarter of 2005 was boosted by significant progress in improving ADC's operating margin (excluding restructuring and impairment charges of $3.8 million) to 11.1%. This outstanding operating margin performance compares to 2.2% in the first quarter of 2005 (excluding restructuring and impairment charges of $3.2 million) and 5.5% in the second quarter of 2004 (excluding restructuring and impairment charges of $11.6 million)," said Gokul Hemmady, ADC's chief financial officer. "We remain focused on improving our operating margins through an emphasis on continued operational efficiencies, such as renegotiated purchasing agreements, moving production of certain products to lower-cost locations and achieving improved fixed-cost efficiencies as production volumes increase. We are also improving operational efficiencies through transitioning to a single worldwide enterprise resource planning system as well as to shared service centers supporting each of our three global regions. We expect these actions combined with growing sales to contribute to long-term earnings growth." Other GAAP Data & Related Statistics Certain ADC balance sheet and cash flow information on a GAAP basis and related statistics are summarized below. Balance Sheet Data and Related Statistics April 29, Jan. 28, April 30, (dollars in millions) 2005 2005 2004 ----------------------------------------- ---- ---- ---- Cash and cash equivalents - unrestricted $ 100.3 88.4 68.7 Short-term available for sale securities $ 448.4 425.0 672.7 Long-term available for sale securities $ 18.3 29.1 16.6 Restricted cash $ 19.1 24.9 18.0 --------- -------- --------- Total cash and securities $ 586.1 567.4 776.0 ========= ======== ========= Current ratio 3.4 3.4 4.2 Long-term notes payable $ 400.0 400.0 400.0 ADC's total cash and securities (short- and long-term) were $586 million on April 29, 2005. The increase from the previous quarter was primarily a result of the collection of a note receivable and proceeds from fixed asset sales. The decrease from April 30, 2004 was primarily a result of the KRONE acquisition in May 2004 partially offset by proceeds received from divestitures, the collection of a note receivable and proceeds from fixed asset sales. ADC believes that the resulting cash and securities balance is sufficient for organic growth plans for ADC's core business as $200 million of convertible notes do not mature until June 15, 2008, and the other $200 million of convertible notes do not mature until June 15, 2013. All convertible notes have a conversion price of $28.091 per share. In addition, ADC's deferred tax assets, which are nearly fully reserved at this time, should reduce its income tax payable on taxable earnings in future years. 2005 2005 2004 Cash Flow Data and Related Statistics Second First Second (dollars in millions) Quarter Quarter Quarter ---------------------------------------------- ------- ------- ------- Total cash provided by (used in) operating activities from continuing operations $ (0.9) (17.6) 17.5 Total cash provided by (used in) operating activities from discontinued operations $ (0.3) 1.5 (13.9) Days sales outstanding 54.7 53.7 52.2 Inventory turns - annualized 6.4 5.9 5.3 Depreciation and amortization $ 13.5 13.9 9.0 Property and equipment additions, net of (disposals) $ (9.4) 1.5 3.7 In the quarter ended April 29, 2005, total cash used by operating activities from continuing operations was a result of increased income in the quarter being more than offset by growth in working capital investments. Growth in working capital investments resulted primarily from higher accounts receivables and inventory builds due to broad-based sales strength partially offset by increased current liabilities. In the quarter ended January 28, 2005, total cash used by operating activities from continuing operations was partially driven by inventory builds for future shipments of OmniReach FTTX and wireless products and the pay down of current liabilities. These uses were partially offset by positive income and receivables collections. In the quarter ended April 30, 2004, total cash provided by operating activities from continuing operations was primarily from working capital changes and income excluding non-cash adjustments primarily for depreciation and amortization expense. Total employees were approximately 8,600 as of April 29, 2005 compared to approximately 7,600 as of January 28, 2005 and approximately 5,900 as of April 30, 2004. The increase in employees from January 28, 2005 was primarily a result of increased manufacturing capacity in Mexico to support higher sales volumes. The year-over-year increase of employees in the quarter was primarily a result of the KRONE acquisition and increased manufacturing capacity in Mexico to support higher sales volumes offset by divestitures in 2004 and workforce reductions related to the integration of the KRONE acquisition. Review of Operating Segments Sales from ADC's operating segments from continuing operations are summarized above. Commentary on the changes in the sales results follows. Broadband Infrastructure and Access (BIA) On a quarterly sequential basis from the first quarter of 2005, BIA sales of $249 million in the second quarter of 2005 were 33% higher due to broad-based sales of ADC's comprehensive communications infrastructure solutions. This strong sequential growth was primarily driven by a 17% increase in KRONE product sales, a 38% increase in OmniReach Fiber-to-the-X product sales, a 42% increase in ADC's copper connectivity sales, a 38% increase in ADC's traditional fiber connectivity sales, a 442% increase in Digivance wireless systems sales and a 13% increase in wireline systems sales. Comparing second quarters on a year-over-year basis, BIA sales were $129 million higher as a result of the $93 million addition of KRONE product sales in the second quarter of 2005 due to the acquisition being finalized on May 18, 2004, as well as strong growth in ADC's copper and fiber connectivity sales, OmniReach FTTX sales and Digivance wireless sales partially offset by lower sales primarily in the wireline systems business. Professional Services On a quarterly sequential basis from the first quarter of 2005, Professional Services sales of $67 million in the second quarter of 2005 increased 17% primarily as a result of growth in the United States mainly from work on wireless network deployments and increased work on data centers and telecom testing labs. Comparing second quarters on a year-over-year basis, 2005 sales for Professional Services increased by $33 million primarily as a result of the $17 million addition of KRONE Service sales as described in the BIA commentary, as well as growth primarily in the United States mainly from work on wireless network deployments and increased work on data centers and telecom testing labs. Restructuring Charges, Acquired Intangibles Amortization and Certain Nonoperating Gains/Losses The table below shows the impact of restructuring charges, acquired intangibles amortization and certain non-operating gains/losses included in GAAP results. In addition, the table reconciles GAAP results to adjusted income (loss) from continuing operations and related earnings per share. Reconciliation 2005 2005 2004 (dollars in millions, Second First Second except per share amounts) Quarter Quarter Quarter --------------------------------------------- ------- ------- ------- GAAP income (loss) from continuing Operations $ 34.5 13.6 (3.1) Restructuring charges $ 3.2 3.2 10.1 Impairment charges $ 0.6 - 1.5 Acquired intangibles amortization $ 2.6 2.6 - (Gain) on sale of note receivable $ - (9.0) - ------- ------- ------- Adjusted income from continuing Operations $ 40.9 10.4 8.5 ======= ======= ======= Adjusted earnings per share from Continuing operations - diluted $ 0.33 0.09 0.07 ======= ======= ======= Average shares outstanding - diluted (millions) 130.5 115.9 115.4 Convertible note interest add back in EPS computation 2.0 - - Outlook The following guidance is presented on a GAAP basis. When it reports future results, ADC intends to show the impact of restructuring and impairment charges, acquired intangibles amortization and certain non-operating gains/losses included in its actual GAAP results. Depending on sales mix and other factors, ADC currently estimates that sales in the third quarter of fiscal 2005 will be around $310-$320 million (approximately 36%-41% higher than third quarter 2004) and GAAP diluted earnings per share from continuing operations will be around $0.26-$0.30 (compares to $0.03 in the third quarter 2004), subject to reductions for any significant restructuring and impairment charges and certain non-operating gains/losses the amounts of which are uncertain at this time. This guidance takes into account the following three items in GAAP diluted earnings per share from continuing operations: -- Gain on sale of fixed assets of $0.03 per diluted share in the second quarter of 2005; -- Increased expense estimated to be around $0.01 per diluted share in the third quarter of 2005 compared to the second quarter of 2005 related to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002; and -- An estimated provision for income taxes of around $2 to $3 million per quarter. As a result of sales and earnings running higher than previously expected for both the second and third quarters of fiscal 2005, ADC believes it is difficult to forecast fiscal fourth quarter 2005 sales and GAAP diluted earnings per share at this time. Currently, ADC expects that sales and GAAP diluted earnings per share in the fourth quarter of fiscal 2005 will be comparable to the estimated results of the third quarter of fiscal 2005. This fourth quarter 2005 expectation compares to fourth quarter 2004 sales of $266 million and GAAP diluted earnings per share of $0.13. This guidance assumes operating margins of around 11% to 12% based on gross margins of around 37% to 38%, depending on sales mix, and operating expenses at around 25% to 27% of sales, depending on the actual amount of the above-mentioned expenses related to Section 404 of the Sarbanes-Oxley Act of 2002, other variable expenses and subject to any significant restructuring and impairment charges of which the amounts are uncertain at this time. ADC remains focused on progressing toward its long-term goal of operating margins in the range of 14%-18% in the next 2-3 years. This goal assumes gross margins of around 38%-41% and operating expenses of around 23%-24% of sales, subject to any significant restructuring and impairment charges of which the amounts are uncertain at this time. For the calculation of GAAP diluted earnings per share (EPS) from continuing operations, this guidance is based on the if-converted method, which assumes that our convertible notes are converted to equity. This method results in the fully diluted EPS calculation for continuing operations using a: -- Numerator of the sum of income from continuing operations plus a convertible note interest add back of around $2.0-$2.5 million per quarter. -- Denominator of around 130-133 million average shares outstanding. Starting in the third quarter of fiscal 2002, the tax benefits of ADC's pre-tax losses have been added to deferred tax assets with an offsetting valuation reserve. As of April 29, 2005, ADC had a total of $1,050 million in deferred tax assets (primarily for U.S. income taxes) that have been offset by a nearly full valuation reserve and as a result have been shown on the balance sheet at an insignificant amount. Approximately $227 million of these deferred tax assets relate to capital loss carryovers that can be utilized only against realized capital gains through October 31, 2009. As it generates pre-tax income in future periods, ADC currently expects to record minimal income tax expense until either its deferred tax assets are fully utilized to reduce future income tax liabilities or the value of its deferred tax assets are restored on the balance sheet. Excluding the deferred tax assets related to capital loss carryovers, most of the remaining deferred tax assets are not expected to expire until after 2021. A copy of this news release, including the financial guidance it contains, can be accessed at http://www.adc.com/investorrelations/newsandcommunications/ earningsreleases/. (Due to its length, this URL may need to be copied/pasted into your Internet browser's address field. Remove the extra space if one exists.) Today's Earnings Conference Call And Webcast at 5:00 p.m. Eastern ADC will discuss its second quarter 2005 results and current outlook on a conference call scheduled today, June 1, at 5:00 p.m. Eastern time. The conference call can be accessed by domestic callers at (800) 399-7506 and by international callers at (706) 634-2489 or on the Internet at www.adc.com/investor, by clicking on Webcasts. Starting today at 6:30 p.m. Eastern time, the replay of the call can be accessed until 11:59 p.m. Eastern time on June 7 by domestic callers at (800) 642-1687 and by international callers at (706) 645-9291 (conference ID number is 5959903) or on the Internet at www.adc.com/investor, by clicking on Webcasts. About ADC ADC provides the connections for wireline, wireless, cable, broadcast, and enterprise networks around the world. ADC's innovative network infrastructure equipment and professional services enable high-speed Internet, data, video, and voice services to residential, business and mobile subscribers. ADC (NASDAQ: ADCT) has sales into more than 150 countries. Learn more about ADC at www.adc.com. Cautionary Statement under the Private Securities Litigation Reform Act of 1995 All forward-looking statements contained herein, particularly those pertaining to ADC's expectations or future operating results, reflect management's current expectations or beliefs as of the date of such statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. ADC Telecommunications cautions that any forward-looking statements made by us in this report or in other announcements made by us are qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements. These factors include, without limitation: the magnitude and duration of the recovery from the significant downturn in the communications equipment industry which began in 2001, particularly with respect to the demand for equipment by telecommunication service providers, from which a majority of our sales are derived; our ability to restructure our business to achieve and maintain operating profitability; macroeconomic factors that influence the demand for telecommunications services and the consequent demand for communications equipment; possible consolidation among our customers, competitors or vendors which could cause disruption in our customer relationships or displacement of us as an equipment vendor to the surviving entity in a customer consolidation; our ability to keep pace with rapid technological change in our industry; our ability to make the proper strategic choices with respect to product line acquisitions or divestitures; our ability to integrate the operations of any acquired businesses with our own operations; increased competition within our industry and increased pricing pressure from our customers; our dependence on relatively few customers for a majority of our sales as well as potential sales growth in market segments we presently feel have the greatest growth potential; fluctuations in our operating results from quarter-to-quarter, which are influenced by many factors outside of our control, including variations in demand for particular products in our portfolio which have varying profit margins; the impact of regulatory changes on our customers' willingness to make capital expenditures for our equipment and services; financial problems, work interruptions in operations or other difficulties faced by some of our customers, which can influence future sales to these customers as well as our ability to collect amounts due us; economic and regulatory conditions outside of the United States, as approximately 47% of our sales come from non-U.S. jurisdictions; our ability to protect our intellectual property rights and defend against infringement claims made by third parties; possible limitations on our ability to raise additional capital if required, either due to unfavorable market conditions, lack of investor demand or the current corporate charter limitation on our ability to issue additional shares of common stock; our ability to attract and retain qualified employees; our ability to maintain key competencies during a period of reduced resources and restructuring; potential liabilities that could arise if there are design or manufacturing defects with respect to any of our products; our ability to obtain raw materials and components, and our increased dependence on contract manufacturers to make certain of our products; changes in interest rates, foreign currency exchange rates and equity securities prices, all of which will impact our operating results; our ability to successfully defend or satisfactorily settle our pending litigation; and other risks and uncertainties, including those identified in the Risk Factors included in Exhibit 99 of ADC's Quarterly Report on Form 10-Q for the fiscal quarter ended January 28, 2005. ADC disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - UNAUDITED (In millions) ASSETS April 29, October 31, 2005 2004 ---------------------- CURRENT ASSETS: Cash and cash equivalents $100.3 $67.0 Short-term marketable securities 448.4 434.6 Accounts receivable 191.9 158.0 Unbilled revenue 55.8 36.5 Inventories 123.9 97.8 Assets of discontinued operations - 16.6 Prepaid and other current assets 34.2 25.1 ---------------------- Total current assets 954.5 835.6 PROPERTY AND EQUIPMENT, net 219.0 233.0 ASSETS HELD FOR SALE - 6.6 RESTRICTED CASH 19.1 21.9 GOODWILL 175.8 180.1 INTANGIBLES 87.9 93.0 LONG-TERM MARKETABLE SECURITIES 18.3 26.8 OTHER ASSETS 24.6 31.1 ---------------------- TOTAL ASSETS $1,499.2 $1,428.1 ====================== LIABILITIES & SHAREOWNERS' INVESTMENT CURRENT LIABILITIES: Accounts payable $86.5 $72.8 Accrued compensation and benefits 58.7 65.9 Other accrued liabilities 78.9 81.4 Income taxes payable 25.9 27.6 Restructuring accrual 30.0 38.4 Liabilities of discontinued operations - 15.6 Notes payable 0.3 0.3 ---------------------- Total current liabilities 280.3 302.0 PENSION OBLIGATIONS & OTHER LT OBLIGATIONS 69.9 66.8 LONG-TERM NOTES PAYABLE 400.0 400.0 ---------------------- Total liabilities 750.2 768.8 SHAREOWNERS' INVESTMENT (115.8 and 115.7 shares outstanding) 749.0 659.3 ---------------------- TOTAL LIABILITIES AND SHAREOWNERS' INVESTMENT $1,499.2 $1,428.1 ====================== ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED GAAP BASIS (In Millions, Except Per Share Amounts) For the For the Three Months Ended Six Months Ended ---------------------------- ------------------- April 29, Jan. 28, April 30, April 29, April 30, 2005 2005 2004 2005 2004 --------- -------- --------- --------- --------- NET SALES $315.7 $243.4 $153.6 $559.1 $290.3 COST OF PRODUCT SOLD 198.7 161.8 91.0 360.5 173.8 --------- -------- --------- --------- --------- GROSS PROFIT 117.0 81.6 62.6 198.6 116.5 --------- -------- --------- --------- --------- GROSS MARGIN 37.1% 33.5% 40.8% 35.5% 40.1% EXPENSES: Research and development 18.2 15.2 14.3 33.4 26.7 Selling and administration 63.6 61.0 39.9 124.6 71.2 Impairment charges 0.6 - 1.5 0.6 1.5 Restructuring charges 3.2 3.2 10.1 6.4 11.9 --------- -------- --------- --------- --------- Total Expenses 85.6 79.4 65.8 165.0 111.3 --------- -------- --------- --------- --------- As a Percentage of Net Sales 27.1% 32.6% 42.8% 29.5% 38.3% OPERATING INCOME 31.4 2.2 (3.2) 33.6 5.2 OPERATING MARGIN 9.9% 0.9% (2.1%) 6.0% 1.8% OTHER INCOME (EXPENSE), NET: Interest 1.5 0.9 1.5 2.4 2.3 Other 3.9 11.5 (0.9) 15.4 6.1 --------- -------- --------- --------- --------- INCOME BEFORE INCOME TAXES 36.8 14.6 (2.6) 51.4 13.6 PROVISION (BENEFIT) FOR INCOME TAXES 2.3 1.0 0.5 3.3 0.4 --------- -------- --------- --------- --------- INCOME FROM CONTINUING OPERATIONS 34.5 13.6 (3.1) 48.1 13.2 DISCONTINUED OPERATIONS, NET OF TAX: Income (loss) from discontinued operations (0.2) 2.7 (24.8) 2.5 (39.9) Gain (loss) on sale of subsidiary (0.9) 36.2 1.3 35.3 (2.3) --------- -------- --------- --------- --------- (1.1) 38.9 (23.5) 37.8 (42.2) NET INCOME (LOSS) $33.4 $52.5 $(26.6) $85.9 $(29.0) ========= ======== ========= ========= ========= NET MARGIN 10.6% 21.6% (17.3%) 15.4% (10.0%) AVERAGE COMMON SHARES OUTSTANDING - BASIC 115.7 115.6 115.4 115.7 115.4 ========= ======== ========= ========= ========= AVERAGE COMMON SHARES OUTSTANDING - DILUTED 130.5 115.9 115.4 130.5 116.1 ========= ======== ========= ========= ========= EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS - BASIC $0.30 $0.12 $(0.03) $0.42 $0.11 ========= ======== ========= ========= ========= EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS - DILUTED $0.28 $0.12 $(0.03) $0.40 $0.11 ========= ======== ========= ========= ========= EARNINGS (LOSS) PER SHARE FROM DISCONTINUING OPERATIONS - BASIC $(0.01) $0.33 $(0.20) $0.32 $(0.36) ========= ======== ========= ========= ========= EARNINGS (LOSS) PER SHARE FROM DISCONTINUING OPERATIONS - DILUTED $(0.01) $0.33 $(0.20) $0.29 $(0.36) ========= ======== ========= ========= ========= NET EARNINGS (LOSS) PER SHARE - BASIC $0.29 $0.45 $(0.23) $0.74 $(0.25) ========= ======== ========= ========= ========= NET EARNINGS (LOSS) PER SHARE - DILUTED $0.27 $0.45 $(0.23) $0.69 $(0.25) ========= ======== ========= ========= ========= SUPPLEMENTARY SCHEDULE ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES EARNINGS PER SHARE CALCULATION - UNAUDITED GAAP BASIS (In Millions, Except Per Share Amounts) For the Numerator: For the Three Months Ended Six Months Ended ---------------------------- ------------------- April 29, Jan. 28, April 30, April 29, April 30, 2005 2005 2004 2005 2004 ---------------------------- ------------------- Net income (loss) from continuing operations 34.5 13.6 (3.1) 48.1 13.2 Convertible note interest 2.0 - - 3.9 - Net income (loss) from continuing operations - diluted $36.5 $13.6 $(3.1) $52.0 $13.2 ============================ =================== Denominator: Weighted average common shares outstanding - basic 115.7 115.6 115.4 115.7 115.4 Convertible bonds converted to common stock 14.2 - - 14.2 - Employee options and other 0.6 0.3 - 0.6 0.7 ---------------------------- ------------------- Weighted average common shares outstanding - diluted 130.5 115.9 115.4 130.5 116.1 ============================ =================== Basic income (loss) per share from continuing operations $0.30 $0.12 $(0.03) $0.42 $0.11 ============================ =================== Diluted income (loss) per share from continuing operations $0.28 $0.12 $(0.03) $0.40 $0.11 ============================ =================== ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED (in millions) SUBJECT TO RECLASSIFICATION Three Months Ended Six Months Ended ---------------------------- ------------------- April 29, Jan. 28, April 30, April 29, April 30, 2005 2005 2004 2005 2004 --------- -------- --------- --------- --------- Cash Flows from Operating Activities: Net Income From Continuing Operations $34.5 $13.6 $(3.1) $48.1 $13.2 Adjustments: Impairments 0.6 - 1.4 0.6 1.4 Depreciation and amortization 13.5 13.9 9.0 27.4 18.9 Change in bad debt reserves (1.7) (0.4) 0.8 (2.1) (1.4) Change in inventory reserves 1.3 (0.4) (0.9) 0.9 (1.1) Change in warranty reserves (0.2) (1.2) - (1.4) - Non-cash stock compensation 0.8 0.7 0.1 1.5 0.7 Change in deferred income taxes (0.6) 0.6 - - - Gain on sale of an investment - - - - (4.4) Loss on sale of business and product lines - - 3.1 - 3.4 Gain on sale of fixed assets (3.7) (0.6) 0.1 (4.3) (0.3) Other 13.0 (11.2) - 1.8 (0.7) Changes in assets & liabilities, net of acquisitions Accounts receivable and unbilled revenues (64.0) 15.5 (9.9) (48.5) 1.8 Inventories (12.9) (10.1) (7.8) (23.0) (12.5) Prepaid income taxes and other assets (6.1) (3.6) (13.7) (9.7) (7.4) Accounts payable 11.5 (0.8) 4.2 10.7 4.7 Accrued liabilities 13.1 (33.6) 34.2 (20.5) 20.2 --------- -------- --------- --------- --------- Total cash provided (used) by operating activities from continuing operations (0.9) (17.6) 17.5 (18.5) 36.5 Total cash provided (used) by operating activities from discontinued operations (0.3) 1.5 (13.9) 1.2 (39.8) --------- -------- --------- --------- --------- Total cash used by operating activities (1.2) (16.1) 3.6 (17.3) (3.3) Cash Flows from Investing Activities: Divestitures, net of cash disposed - 33.6 (1.3) 33.6 3.7 Property and equipment additions, net of disposals (4.2) (4.6) (3.7) (8.8) (6.6) Proceeds from disposal of property and equipment 13.6 3.1 - 16.7 5.6 Proceeds from sale of note receivable 9.0 - - 9.0 - Change in restricted cash 5.8 (3.0) (2.2) 2.8 (2.4) Change in Investments (13.0) 7.3 4.5 (5.7) (213.3) --------- -------- --------- --------- --------- Total cash provided by investing activities 11.2 36.4 (2.7) 47.6 (213.0) Cash Flows from Financing Activities: Increase (Decrease) in debt - - (7.5) - (8.3) Common stock issued 1.5 0.9 2.8 2.4 4.6 --------- -------- --------- --------- --------- Total cash provided by financing activities 1.5 0.9 (4.7) 2.4 (3.7) Effect of exchange rate on cash 0.4 0.2 - 0.6 (0.1) --------- -------- --------- --------- --------- Increase in cash and cash equivalents 11.9 21.4 (3.8) 33.3 (220.1) Cash and cash equivalents, beginning of period 88.4 67.0 72.5 67.0 288.8 --------- -------- --------- --------- --------- Cash and cash equivalents, end of period $100.3 $88.4 $68.7 $100.3 $68.7 ========= ======== ========= ========= ========= CONTACT: ADC, Minneapolis Investor Relations: Mark Borman, 952-917-0590 or Public Relations: Chuck Grothaus, 952-917-0306