UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date Of Earliest Event Reported): February 19, 2003
ADC TELECOMMUNICATIONS, Inc.
(Exact name of registrant as specified in its charter)
Minnesota 0-1424 41-0743912
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
13625 Technology Drive, Eden Prairie, Minnesota 55344
(Address of principal executive offices, including zip code)
(952) 938-8080
(Registrant's telephone number,
including area code)
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits.
Exhibit 99.1: Press Release dated February 19, 2003.
Item 9. Regulation FD Disclosure
ADC Telecommunications, Inc. has reported its 1st quarter 2003 financial
results. The Company's press release dated February 19, 2003 announcing the
results is attached hereto as Exhibit 99.1.
Item 12. Results of Operations and Financial Condition
ADC Telecommunications, Inc. has reported its 1st quarter 2003 financial
results. The Company's press release dated February 19, 2003 announcing the
results is attached hereto as Exhibit 99.1.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADC TELECOMMUNICATIONS, INC.
(Registrant)
Date: February 19, 2003 By: /s/Robert E. Switz
--------------------------------------
Robert E. Switz
Executive Vice President and Chief
Financial Officer
ADC TELECOMMUNCIATIONS, INC.
FORM 8-K REPORT
INDEX TO EXHIBITS
Exhibit No. Description
99.1 Press Release dated February 19, 2003
Exhibit 99.1
ADC Reports First Quarter 2003 Results
MINNEAPOLIS--(BUSINESS WIRE)--Feb. 19, 2003--ADC (Nasdaq:ADCT):
-- Sales of $200 Million of which 40% Were International Sales
-- GAAP Loss Per Share of $0.05 and Pro Forma Loss Per Share of
$0.03
-- GAAP Gross Margin of 35.4% Compared to 20.4% in Fourth Quarter
2002
-- Pro Forma Gross Margin of 35.4% Compared to 24.2% in Fourth
Quarter 2002
-- Improving Quarterly Sales Breakeven Point Toward $215 Million
from $225 Million
-- Total Cash of $509 Million of which $366 Million Is
Unrestricted
-- Long-term Notes Payable of $14 Million
ADC (Nasdaq:ADCT, www.adc.com) today announced results for the
first quarter ended January 31, 2003 prepared in accordance with
generally accepted accounting principles (GAAP), as well as pro forma
results prepared with certain adjustments as noted below. On a GAAP
basis in the first quarter of 2003, sales were $200 million and net
loss was $42 million ($0.05 loss per share). These results compare to
sales of $221 million and net loss of $382 million ($0.48 loss per
share) in the fourth quarter of 2002 and sales of $294 million and net
loss of $45 million ($0.06 loss per share) in the first quarter of
2002 on a GAAP basis.
In addition to GAAP income statement results, ADC also presents
pro forma income statement results. Due to the significance of our
restructuring activities in fiscal 2000 to 2003, we believe that a
more meaningful comparison of our fiscal 2003 results would exclude
impairment charges, non-recurring charges, non-cash stock compensation
expenses and non-recurring non-operating gains/losses, as well as the
results of product lines discontinued or divested in fiscal 2002 and
2001 in deriving pro forma income statements for fiscal 2003 and
historical periods. For an explanation of items excluded from pro
forma income statement results, please refer to the "Items Excluded
from Pro Forma Results" section of this release and review the
attached supplementary schedules that reconcile GAAP results to pro
forma results for the three-month periods ended January 31, 2003 and
2002 and October 31, 2002.
On a pro forma basis, which reflects adjustments to all quarters
related to the exclusion of impairment charges, non-recurring charges,
non-cash stock compensation expense and non-recurring non-operating
gains/losses, as well as the results of product lines that have been
discontinued or divested in fiscal 2002 and 2001, sales were $200
million in the first quarter of 2003 compared to $219 million in the
fourth quarter of 2002 and $288 million in the first quarter of 2002.
In the quarter, Broadband Infrastructure and Access (BIA) GAAP sales
were $133 million compared to $156 million in the fourth quarter of
2002 and $198 million in the first quarter of 2002. BIA pro forma
sales were $133 million in the first quarter of 2003 compared to $154
million in the fourth quarter of 2002 and $192 million in the first
quarter of 2002. Integrated Solutions (IS) GAAP and pro forma sales
were $67 million in the quarter compared to $65 million in the fourth
quarter of 2002 and $96 million in the prior-year first quarter.
International sales were $80 million or 40% of total sales in this
year's first quarter compared to 25% and 28% of total sales in the
fourth quarter of 2002 and first quarter of 2002, respectively. As
part of the $80 million in the first quarter of 2003, ADC recorded
sales of $16 million, which had previously been treated as deferred
revenue, upon the collection of cash and the sale of a promissory note
receivable from an international customer. Excluding this $16 million
of sales, international sales were 35% of ADC sales in this year's
first quarter, the highest portion of international sales in any
quarter of ADC's history. North America and Europe remained ADC's
largest sales regions in the quarter.
On a GAAP basis, operating loss was $44 million in the first
quarter of 2003 compared to $359 million in the fourth quarter of 2002
and $65 million in the prior-year first quarter. On a pro forma basis,
operating loss was $23 million in the first quarter of 2003 compared
to $39 million in the fourth quarter of 2002 and $30 million in the
prior-year first quarter. Beginning in the fourth quarter of 2002, ADC
is no longer recording a tax benefit for pre-tax losses that are
available as a carryover to reduce future tax liabilities.
Consequently, ADC's pro forma pre-tax loss and net loss in this year's
first quarter were both $20 million ($0.03 loss per share). On a
comparative basis, the pro forma pre-tax loss was $50 million ($0.06
loss per share) in the fourth quarter of 2002 and $39 million ($0.05
loss per share) in the first quarter of 2002. On a GAAP basis, pre-tax
loss was $42 million ($0.05 loss per share) in this year's first
quarter compared to $382 million ($0.48 loss per share) in the fourth
quarter of 2002 and $70 million ($0.09 loss per share) in the first
quarter of 2002.
"With strong sequential quarterly improvement in both gross margin
and loss per share this quarter, we are on course to return to
profitability," said Rick Roscitt, chairman and CEO of ADC. "While our
primary focus this year is on growing revenue and market share, we
will continue our strong emphasis on more cost-efficient, cash-flow
positive operations and an improved breakeven point toward $215
million in quarterly sales. To this end, we have been winning
multi-year or extended contracts with many large communications
service providers. These include contract wins in the first quarter
and the past year, some of which have not been announced. In addition,
we are continuing our corporate-wide effort to foster competitive
strength through continuous cost and efficiency improvements. We
expect these efforts to increase ADC's earnings power when sales
growth resumes."
Strong Financial Condition
"ADC's balance sheet remains strong and improved in the first
fiscal quarter," said Robert E. Switz, executive vice president and
CFO of ADC. "At January 31, 2003, total cash was $509 million, of
which $366 million was unrestricted. As a result of the carryback of
its fiscal 2002 tax loss, ADC received an income tax refund of $103
million in January and is expecting an additional refund of
approximately $30 million in the second fiscal quarter of 2003.
Additional cash proceeds are expected when we generate cash from
operating activities and obtain proceeds from assets held for sale.
Current ratio (current assets divided by current liabilities) was 1.9
and long-term notes payable was $14 million at January 31, 2003."
Days sales outstanding in accounts receivable at the end of the
quarter remained low at 47 days in both this year's first quarter and
the fourth quarter of 2002 and 61 days in the first quarter of 2002.
Inventory turns (annualized) at the end of the quarter remained good
at 5.6 times in the first quarter of 2003 compared to 7.4 times in
last year's fourth quarter and 3.4 times in last year's first quarter.
Depreciation and amortization was $15 million in this year's first
quarter compared to $22 million in the fourth quarter of 2002 and $28
million in the first quarter of 2002. Capital expenditures were $6
million in the first quarter of 2003 and a negative $5 million (due to
disposal proceeds exceeding expenditures) in the fourth quarter of
2002 and $17 million in the first quarter of 2002.
The majority of the $143 million of restricted cash represents
interest-earning cash pledged to various financial institutions to
secure and potentially settle three long-term operating lease
obligations of $103 million and is not expected to become available as
working capital. The remainder of the restricted cash secures letters
of credit, guarantees and currency hedging arrangements, and is
expected to become available as working capital upon satisfaction of
these obligations. The lease obligations and restricted cash amounts
were reduced from the October 31, 2002 balances of $149 million and
$177 million, respectively, primarily as a result of selling certain
facilities during the quarter.
At January 31, 2003, ADC had an $81 million restructuring accrual
in current liabilities, reduced from $124 million at October 31, 2002,
that is estimated to be paid as follows:
-- $43 million from cash in current assets to settle
restructuring liabilities related primarily to employee
severance costs and leases on certain facilities; and
-- $38 million from restricted cash set aside in long-term assets
to pay the excess of the purchase price on the above-mentioned
long-term operating lease obligations over the lower estimated
market value of the related facilities.
Recent Wins and Achievements
Roscitt added, "While not all of our customers allow us to make
timely announcements of new contracts, we are delighted to have signed
and recently announced several significant wins." ADC announced the
following wins and achievements since the end of fiscal 2002.
-- ADC announced the three-year extension of an agreement to
supply copper and fiber connectivity equipment to SBC
Services, Inc., an SBC Communications Inc. company. The new
extension makes ADC a preferred supplier of connectivity
products to SBC.
-- Cox Communications, Inc. plans to install ADC's Cuda(TM) 12000
IP Access Switches in its Pensacola/Ft. Walton, Fla. and
Hampton Roads, Va. systems, the two newest Cox systems to
deploy the Cuda 12000. In addition, Cox has committed to the
purchase of additional Cuda platforms for its Orange County,
Middle America, Northern Virginia and Phoenix systems - four
of its largest and fastest growing networks. Including these
two new regions, 11 Cox systems nationwide are now deploying
over 130 Cuda 12000 platforms, including three - Middle
America, Northern Virginia and Kansas - that use the Cuda
platform exclusively. This agreement included the third order
from the Middle America region, a clear recognition of the
proven performance of the DOCSIS(TM) 1.1-qualified Cuda 12000
in Cox's high-speed data networks.
-- ADC's FastFlow(TM) Broadband Provisioning Manager (BPM) has
now provisioned more than one million Cox(R) High Speed
Internet(SM) subscribers. FastFlow BPM is a carrier-class
provisioning solution that automates the configuration and
activation of cable modems and media terminal adapters for
delivering advanced services such as tiered data services and
PacketCable-compliant VoIP.
-- Nanjing CATV, one of the largest and most advanced cable
operators in China, selected ADC's Cuda CMTS and FastFlow BPM
for advanced data services. Nanjing CATV will use multiple
Cuda 12000 platforms to begin the rollout of broadband
Internet access to its base of 800,000 subscribers. In
addition, Nanjing CATV has also purchased the Cuda 1000 CMTS.
-- TELUS is installing ADC's Metrica(R) Performance Manager for
its TELUS Mobility wireless services across Canada. Metrica
Performance Manager will be rolled out across TELUS's
multi-vendor, multi-technology network. TELUS Mobility
selected Metrica based on demonstrated capabilities to perform
complex real-time analysis of large volumes of performance
data from a wide variety of technologies, which will give
TELUS an end-to-end view of its network. TELUS is the largest
telecommunications company in Western Canada and the second
largest in the country. TELUS Mobility provides its 2.9
million clients across Canada with a full suite of wireless
voice, Internet and data services through its Mike and PCS
digital wireless networks.
-- ADC achieved a significant international milestone with the
installation and live operation of its Singl.eView(TM)
convergent billing platform at TOT Corp. The installation,
which enables billing for TOT's new 1900-megahertz GSM
wireless network, took less than 90 days to complete and
included a complex Thai language implementation. TOT is
Thailand's leading incumbent telecommunications provider with
more than seven million telephone lines.
-- ADC was awarded a license expansion by SingTel Optus Pty.
Limited (Optus) for ADC's Singl.eView(TM) convergent billing,
commerce and customer-management solution. Under the terms of
the agreement, Optus can use Singl.eView to bill several
million services, which represents a tenfold increase from the
previous licensing agreement. Optus is an Australian leader in
integrated communications - serving more than five million
customers each day. The company provides a broad range of
communications services including mobile, national and long
distance services, local telephony, international telephony,
business network services, Internet and satellite services and
pay television. Optus is a wholly owned subsidiary of SingTel
Group.
-- ADC's new Virtual IP Call Center went live around the world
providing seamless integration of its global technical support
and customer service activities. The solution based on
state-of-the-art Voice-over-IP (VoIP) technology links ADC's
network of worldwide technical assistance centers with the
same common functionality and is designed to ensure 24-hour
support to ADC customers around the world. By implementing
this new technology, ADC has established a virtual contact
center whereby customers are routed automatically to the most
appropriate agent to deal with their call, no matter where the
agent in question is physically located. The system provides
web "click to chat" functionality, which opens up new
opportunities for enhanced customer service in the future. ADC
customer service employees are based at facilities in
Brussels, Belgium; Dusseldorf, Germany; Beijing and Shanghai,
China; Singapore; Mexico City, Mexico; and in Raleigh, N.C.;
Richardson, Texas; Tustin, Calif.; and Westborough, Mass.
Outlook
ADC is currently planning that revenues in the second quarter of
2003 may not exceed $200 million and related pro forma earnings per
share - with no tax benefit for pre-tax loss - are currently expected
to be around a $0.03 loss. ADC cautions investors that forecasting in
these soft industry conditions combined with geopolitical
uncertainties remains extremely difficult and subject to change,
especially with respect to the timing of closing large contracts that
can delay the start of new revenue sources. Sales by business segment
as a percent of total ADC sales are expected to be in the ranges of
65%-70% for BIA and 30%-35% for IS.
As previously announced, ADC will no longer accrue tax benefits
for pre-tax losses since it has fully utilized its carryback benefits
with the fiscal 2002 tax loss. Starting in the fourth quarter of
fiscal 2002, the tax benefits of ADC's pre-tax losses have been added
to its deferred tax assets with an offsetting valuation reserve. As of
January 31, 2003, ADC had a total of $725 million in deferred tax
assets that have been offset by a full valuation reserve and as a
result have been shown on the balance sheet at zero. As it generates
pre-tax income in future periods, ADC does not currently expect to
record significant 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. Most of the deferred tax assets are not expected to expire
until 2022.
Subject to the unknown impact of soft industry conditions and
geopolitical uncertainties, ADC currently believes that a modest
sequential increase in quarterly sales from the level expected in the
second quarter of 2003 will enable it to report sequential quarterly
improvement in pro forma earnings per share during fiscal 2003. Pro
forma results in this outlook exclude impairment charges,
non-recurring charges, non-cash stock compensation expenses and
non-recurring non-operating gains/losses.
ADC is unable to provide an outlook for earnings per share on a
GAAP basis at this time. Although the amount of expected non-cash
stock compensation expense will not likely cause a difference between
GAAP and pro forma earnings per share, ADC may incur additional
impairment charges, non-recurring charges and non-recurring
non-operating gains/losses during fiscal 2003 if it takes actions
designed to further lower its breakeven point or restructure its
operations. The amount of any such additional charges is uncertain and
will depend on many factors including the evolving outlook for
industry conditions and ADC's businesses. If charges are incurred they
could result in a significant difference between GAAP and pro forma
earnings per share.
Review of Business Segments
A review of ADC's results for its two business segments -
Broadband Infrastructure and Access, and Integrated Solutions -
follows.
Broadband Infrastructure and Access
In the quarter, Broadband Infrastructure and Access (BIA) GAAP
sales were $133 million compared to $156 million in the fourth quarter
of 2002 and $198 million in the first quarter of 2002. BIA pro forma
sales were $133 million in the first quarter of 2003 compared to $154
million in the fourth quarter of 2002 and $192 million in the first
quarter of 2002. On a quarterly sequential basis, BIA sales decreased
in all business units except for increased sales in cable
telephony/data systems. Broadband connectivity sales decreased less
than expected for the second quarter in a row. On a year-over-year
basis, lower BIA sales were primarily a result of lower sales from
broadband connectivity systems and a smaller dollar and percent sales
decline from HDSL/DLC systems partially offset by increased sales of
cable telephony/data systems. BIA GAAP operating loss was $9 million
in the first quarter of 2003 compared to $59 million in the fourth
quarter of 2002 and $39 million in the first quarter of 2002. On a pro
forma basis, BIA operating loss was $9 million in the first quarter of
2003 compared to $26 million in the fourth quarter of 2002 and $30
million in the first quarter of 2002.
Integrated Solutions
Integrated Solutions (IS) GAAP and pro forma sales were $67
million in the quarter compared to $65 million in the fourth quarter
of 2002 and $96 million in the prior-year first quarter. On a
quarterly sequential basis, an increase in software sales was
partially offset by lower sales of systems integration services. On a
year-over-year basis, sales of systems integration services and
software were both lower in the first quarter of 2003. On a GAAP and
pro forma basis, IS operating loss was $9 million in the first quarter
of 2003 compared to $6 million in both the fourth and first quarters
of 2002.
Items Excluded from Pro Forma Results
Pro forma income statement results in both fiscal 2003 and 2002
exclude impairment charges, non-recurring charges, non-cash stock
compensation expenses and non-recurring non-operating gains/losses. To
provide a comparable basis for measuring the results of ADC in fiscal
2003, pro forma results in fiscal 2002 also exclude from all quarters
the financial results of product lines discontinued or divested in
fiscal 2002 and 2001.
In deriving pro forma results for the first quarter of 2003, ADC
excluded charges of $21 million ($0.02 per share) of which $14 million
were for non-cash items. These charges were comprised of:
-- Impairment charges for fixed assets of $10 million ($0.01 per
share);
-- Non-recurring charges of $8 million ($0.01 per share)
primarily related to employee reductions and facilities
consolidations;
-- Non-cash stock compensation expenses of $2 million ($0.00 per
share) resulting from previous acquisitions; and
-- Non-recurring non-operating net loss of $1 million ($0.00 per
share) primarily related to divestiture and investment
activities.
In deriving pro forma results for the fourth quarter of 2002, ADC
excluded sales of $2 million and a net loss of $8 million ($0.01 loss
per share) related to product lines that were discontinued or divested
in fiscal 2002 and 2001. ADC also excluded charges of $324 million
($0.41 per share) of which $264 million were for non-cash items. These
charges were comprised of:
-- Impairment charges for fixed assets and goodwill of $170
million ($0.21 per share);
-- Non-recurring charges of $140 million ($0.18 per share)
primarily related to employee reductions and facilities
consolidation;
-- Non-cash stock compensation expenses of $2 million ($0.00 per
share) resulting from previous acquisitions; and
-- Non-recurring non-operating net loss of $12 million ($0.02 per
share) primarily related to divestiture and investment
activities.
In deriving pro forma results for the first quarter of 2002, ADC
excluded sales of $6 million and a net loss of $18 million ($0.02 loss
per share) related to product lines that were discontinued or divested
in fiscal 2002 and 2001. Also excluded were net charges of $3 million
($0.01 per share) of which $7 million were for non-cash items. These
net charges were comprised of:
-- Impairment charges for fixed assets and goodwill of $2 million
($0.00 per share);
-- Non-recurring charges of $3 million ($0.00 per share)
primarily related to employee reductions and facilities
consolidation;
-- Non-cash stock compensation expenses of $3 million ($0.00 per
share) resulting from previous acquisitions; and
-- Non-recurring non-operating net gain of $5 million ($0.00 per
share) primarily related to divestiture and investment
activities.
Today's Earnings Conference Call And Webcast at 5:00 pm Eastern
ADC will discuss its first quarter 2003 results and current
outlook on a conference call scheduled today, February 19, 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
News & Communications, then clicking on Webcasts. Starting today at
8:00 p.m. Eastern, the replay of the call can be accessed until 8:00
p.m. Eastern on February 26 by domestic callers at (800) 642-1687 and
by international callers at (706) 645-9291 (conference ID number is
7703775) or on the Internet at www.adc.com/investor, by clicking on
News & Communications, then clicking on Webcasts.
About ADC
ADC is The Broadband Company(TM). ADC offers high-quality,
value-added solutions of network equipment, software and systems
integration services that enable communications service providers to
deliver high-speed Internet, data, video and voice services to
consumers and businesses worldwide. ADC (Nasdaq:ADCT) has sales into
nearly 100 countries. Learn more about ADC Telecommunications, Inc. 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 readers that future actual results could
differ materially from those in forward-looking statements depending
on the outcome of certain factors. All such forward-looking statements
are subject to certain risks and uncertainties, including, but not
limited to, significant difficulties in forecasting sales and market
trends; uncertainties regarding the level of capital spending by
telecommunications service providers, as the majority of ADC's
revenues are derived from these companies; the overall demand for
ADC's products or services; the demand for particular products or
services within the overall mix of products sold, as our products and
services have varying profit margins; changing market conditions and
growth rates either within ADC's industry or generally within the
economy; ADC's ability to complete our restructuring initiative and
streamline our operations successfully; ADC's ability to dispose of
excess assets on a timely and cost-effective basis; new competition
and technologies; increased costs associated with protecting
intellectual property rights; the retention of key employees;
pressures on the pricing of the products or services ADC offers;
performance of contract manufacturers used by ADC to make certain
products; possible consolidation among communications service
providers; the availability of materials to make products; variations
in the value of assets held or used by ADC in the operation of its
business and other risks and uncertainties, including those identified
in Exhibit 99-a to ADC's Report on Form 10-K for the fiscal year ended
October 31, 2002. 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
January 31, October 31,
2003 2002
CURRENT ASSETS:
Cash and cash equivalents $366.3 $278.9
Available-for-sale securities 2.7 0.5
Accounts receivable 105.0 115.1
Unbilled revenue 22.7 25.8
Inventories 91.8 94.9
Prepaid income taxes 20.9 126.6
Prepaid and other current assets 31.8 44.5
----------- -----------
Total current assets 641.2 686.3
PROPERTY AND EQUIPMENT, net 190.7 206.8
ASSETS HELD FOR SALE 15.7 20.0
RESTRICTED CASH 142.5 177.0
OTHER ASSETS
Intangibles 18.4 18.5
Other Assets 31.9 35.6
----------- -----------
TOTAL ASSETS $1,040.4 $1,144.2
=========== ===========
LIABILITIES & STOCKOWNERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable $62.3 $73.0
Accrued compensation and benefits 66.1 74.1
Other accrued liabilities 105.4 110.8
Restructuring accrual 81.0 124.2
Notes payable 15.8 15.7
----------- -----------
Total current liabilities 330.6 397.8
LONG-TERM NOTES PAYABLE 14.3 10.8
OTHER LONG-TERM LIABILITIES 3.2 3.4
----------- -----------
Total liabilities 348.1 412.0
SHAREOWNERS' INVESTMENT
(801.8 and 799.6 shares outstanding) 692.3 732.2
----------- -----------
TOTAL LIABILITIES AND SHAREOWNERS'
INVESTMENT $1,040.4 $1,144.2
=========== ===========
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(In Millions, Except Per Share Amounts)
For the Three Months
Ended
---------------------
January 31,
2003 2002
------- -------
NET SALES $199.9 $293.5
COST OF PRODUCT SOLD 129.1 198.7
------- -------
GROSS PROFIT 70.8 94.8
------- -------
GROSS MARGIN 35.4 % 32.3 %
EXPENSES:
Research and development 31.0 42.5
Selling and administration 63.2 110.0
Impairment charges 10.3 1.9
Non-recurring charges 8.2 3.0
Non-cash stock compensation 2.1 2.8
------- -------
Total Expenses 114.8 160.2
------- -------
As a Percentage of Net Sales 57.4 % 54.6 %
OPERATING LOSS (44.0) (65.4)
OPERATING MARGIN (22.0) % (22.3) %
OTHER INCOME (EXPENSE), NET:
Interest 1.1 0.8
Other 1.4 (5.3)
------- -------
LOSS BEFORE INCOME TAXES (41.5) (69.9)
BENEFIT FOR INCOME TAXES - (25.1)
------- -------
NET LOSS $(41.5)(a) $(44.8)(b)
======= =======
NET MARGIN (20.8) % (15.3) %
AVERAGE COMMON SHARES OUTSTANDING
(BASIC AND DILUTED) 801.1 793.4
======= =======
LOSS PER SHARE (BASIC AND DILUTED) $(0.05)(a) $(0.06)(b)
======= =======
(a) Excluding $2.1 million non-cash stock compensation expense; $8.2
million non-recurring charges; $10.3 million impairment charges;
non-recurring non-operating loss of $2.7 million related to the
write-down of investment portfolio; $4.7 million gain on sale of
investments; $2.8 million loss related to sale of divested product
lines, net loss and diluted EPS would have been $20.1 million and
$(0.03) for the quarter ended January 31, 2003, respectively.
(b) Excluding $17.5 million, net-of-tax, net loss related to product
lines that were divested or discontinued prior to the first
quarter of 2003; $2.7 million, net-of-tax, non-cash stock
compensation expense; $2.0 million, net-of-tax, non-recurring
charges; $1.2 million, net-of-tax, impairment charges;
non-recurring non-operating loss of $1.5 million, net-of-tax,
related to the write-down of investment portfolio; $4.4 million,
net-of-tax, gain on sale of investments, net loss and diluted EPS
would have been $24.3 million and $(0.03) for the quarter ended
January 31, 2002, respectively.
SUPPLEMENTARY SCHEDULE
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
RECONCILIATION OF GAAP RESULTS TO PRO FORMA RESULTS
(In Millions, Except Per Share Amounts)
For the Three Months Ended
January 31, 2003
GAAP Restructuring Proforma
Results and Other Results
Charges (a) (a)
--------------------------------
NET SALES $199.9 $- $199.9
COST OF PRODUCT SOLD 129.1 129.1
------- ------------ --------
GROSS PROFIT 70.8 - 70.8
------- ------------ --------
GROSS MARGIN 35.4 % 35.4 %
EXPENSES:
Research and development 31.0 - 31.0
Selling and administration 63.2 - 63.2
Impairment charges 10.3 (10.3) -
Non-recurring charges 8.2 (8.2) -
Non-cash stock compensation 2.1 (2.1) -
------- ------------ --------
Total Expenses 114.8 (20.6) 94.2
------- ------------ --------
As a Percentage of Net Sales 57.4 % 47.1 %
OPERATING INCOME (LOSS) (44.0) 20.6 (23.4)
OPERATING MARGIN (22.0)% (11.7)%
OTHER INCOME (EXPENSE), NET:
Interest 1.1 - 1.1
Other 1.4 0.8 2.2
------- ------------ --------
INCOME (LOSS) BEFORE INCOME
TAXES (41.5) 21.4 (20.1)
PROVISION (BENEFIT) FOR INCOME TAXES - - -
------- ------------ --------
NET INCOME $(41.5) $21.4 $(20.1)
======= ============ ========
NET MARGIN (20.8)% (10.1)%
AVERAGE COMMON SHARES OUTSTANDING
(BASIC AND DILUTED) 801.1 801.1 801.1
======= ============ ========
LOSS PER SHARE (BASIC AND DILUTED) $(0.05) $0.02 $(0.03)
======= ============ ========
For the Three Months Ended
January 31, 2002
GAAP Restructuring Results from Proforma
Results and Other Divestitures Results
Charges (b) (b) (b)
----------------------------------------------
NET SALES $293.5 $- $(5.6) $287.9
COST OF PRODUCT
SOLD 198.7 - (13.5) 185.2
--------- ------------ ----------- -------
GROSS PROFIT 94.8 - 7.9 102.7
--------- ------------ ----------- -------
GROSS MARGIN 32.3 % 35.7 %
EXPENSES:
Research and
development 42.5 - (10.3) 32.2
Selling and
administration 110.0 - (9.1) 100.9
Impairment charges 1.9 (1.9) - -
Non-recurring
charges 3.0 (3.0) - -
Non-cash stock
compensation 2.8 (2.8) - -
--------- ------------ ----------- -------
Total Expenses 160.2 (7.7) (19.4) 133.1
--------- ------------ ----------- -------
As a Percentage of
Net Sales 54.6 % 46.2 %
OPERATING INCOME
(LOSS) (65.4) 7.7 27.3 (30.4)
OPERATING MARGIN (22.3)% (10.6)%
OTHER INCOME (EXPENSE),
NET:
Interest 0.8 - - 0.8
Other (5.3) (4.6) 0.3 (9.6)
--------- ------------ ----------- -------
INCOME (LOSS)
BEFORE INCOME
TAXES (69.9) 3.1 27.6 (39.2)
PROVISION (BENEFIT) FOR
INCOME TAXES (25.1) 0.1 10.1 (14.9)
--------- ------------ ----------- -------
NET INCOME $(44.8) $3.0 $17.5 $(24.3)
========= ============ =========== =======
NET MARGIN (15.3)% (8.4)%
AVERAGE COMMON SHARES
OUTSTANDING
(BASIC AND DILUTED) 793.4 793.4 793.4 793.4
========= ============ =========== =======
LOSS PER SHARE (BASIC
AND DILUTED) $(0.06) $0.01 $0.02 $(0.03)
========= ============ =========== =======
(a) Excluding $2.1 million non-cash stock compensation expense; $8.2
million non-recurring charges; $10.3 million impairment charges;
non-recurring non operating loss of $2.7 million related to the
write-down of investment portfolio; $4.7 million gain on sale of
investments; $2.8 million loss related to sale of divested product
lines, net loss and diluted EPS would have been $20.1 million and
$(0.03) for the quarter ended January 31, 2003, respectively.
(b) Excluding $17.5 million, net-of-tax, net loss related to product
lines that were divested or discontinued prior to the first
quarter of 2003; $2.7 million, net-of-tax, non-cash stock
compensation expense; $2.0 million, net-of-tax, non-recurring
charges; $1.2 million, net-of-tax, impairment charges;
non-recurring non-operating loss of $1.5 million, net-of-tax,
related to the write-down of investment portfolio; $4.4 million,
net-of-tax, gain on sale of investments, net loss and diluted EPS
would have been $24.3 million and $(0.03) for the quarter ended
January 31, 2002, respectively.
SUPPLEMENTARY SCHEDULE
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
RECONCILIATION OF GAAP RESULTS TO PRO FORMA RESULTS
(In Millions, Except Per Share Amounts)
For the Three Months Ended
January 31, 2003
GAAP Restructuring Proforma
Results and Other Results
Charges (a) (a)
----------------------------------
NET SALES $199.9 $- $199.9
COST OF PRODUCT SOLD 129.1 - 129.1
--------- ------------ -------
GROSS PROFIT 70.8 - 70.8
--------- ------------ -------
GROSS MARGIN 35.4 % 35.4 %
EXPENSES:
Research and development 31.0 - 31.0
Selling and administration 63.2 - 63.2
Impairment charges 10.3 (10.3) -
Non-recurring charges 8.2 (8.2) -
Non-cash stock compensation 2.1 (2.1) -
--------- ------------ -------
Total Expenses 114.8 (20.6) 94.2
--------- ------------ -------
As a Percentage of Net Sales 57.4 % 47.1 %
OPERATING INCOME (LOSS) (44.0) 20.6 (23.4)
OPERATING MARGIN (22.0)% (11.7)%
OTHER INCOME (EXPENSE), NET:
Interest 1.1 - 1.1
Other 1.4 0.8 2.2
--------- ------------ -------
INCOME (LOSS) BEFORE
INCOME TAXES (41.5) 21.4 (20.1)
PROVISION (BENEFIT) FOR INCOME TAXES - - -
NET INCOME $(41.5) $21.4 $(20.1)
========= ============ =======
NET MARGIN (20.8)% (10.1)%
AVERAGE COMMON SHARES OUTSTANDING
(BASIC AND DILUTED) 801.1 801.1 801.1
========== ============ =======
LOSS PER SHARE (BASIC AND DILUTED) $(0.05) $0.02 $(0.03)
========= ============ =======
For the Three Months Ended
October 31, 2002
GAAP Restructuring Results from Proforma
Results and Other Divestitures Results
Charges (b) (b) (b)
-------------------------------------------------
NET SALES $220.7 $(1.7) $219.0
COST OF PRODUCT SOLD 175.7 (4.4) (5.2) 166.1
--------- ------------- ------------ --------
GROSS PROFIT 45.0 4.4 3.5 52.9
--------- ------------- ------------ --------
GROSS MARGIN 20.4 % 24.2%
EXPENSES:
Research and
development 33.4 (3.6) 29.8
Selling and
administration 58.8 4.5 (1.5) 61.8
Impairment charges 169.5 (169.5) - -
Non-recurring
charges 139.5 (139.5) - -
Non-cash stock
compensation 2.5 (2.5) - -
--------- ------------- ------------ --------
Total Expenses 403.7 (307.0) (5.1) 91.6
--------- ------------- ------------ --------
As a Percentage of
Net Sales 182.9 % 41.8 %
OPERATING INCOME
(LOSS) (358.7) 311.4 8.6 (38.7)
OPERATING MARGIN (162.5)% (17.7)%
OTHER INCOME
(EXPENSE), NET:
Interest 3.1 - (0.0) 3.1
Other (26.2) 12.1 (0.6) (14.7)
--------- ------------- ------------ --------
INCOME (LOSS)
BEFORE INCOME
TAXES (381.8) 323.5 8.0 (50.3)
PROVISION (BENEFIT)
FOR INCOME TAXES - - - -
NET INCOME $(381.8) $323.5 $8.0 $(50.3)
========== ============= ============ ========
NET MARGIN (173.0)% (23.0)%
AVERAGE COMMON SHARES
OUTSTANDING
(BASIC AND
DILUTED) 797.6 797.6 797.6 797.6
========= ============= ============ ========
LOSS PER SHARE (BASIC
AND DILUTED) $(0.48) $0.41 $0.01 $(0.06)
========= ============= ============ ========
(a) Excluding $2.1 million non-cash stock compensation expense; $8.2
million non-recurring charges; $10.3 million impairment charges;
non-recurring non-operating loss of $2.7 million related to the
write-down of investment portfolio; $4.7 million gain on sale of
investments; and $2.8 million loss on sale of divested product
lines, net loss and diluted EPS would have been $20.1 million and
$(0.03) for the quarter ended January 31, 2003, respectively.
(b) Excluding $8.0 million loss related to product lines that were
divested or discontinued prior to the first quarter of 2003; $2.5
million non-cash stock compensation expense; $139.4 million non-
recurring charges; $169.5 million impairment charges;
non-recurring non-operating loss of $7.0 million related to the
write-down of investment portfolio; $1.3 million gain on sale of
investments; $5.2 million loss on sale leasebacks related to
various facilities; and $1.2 million loss on sale of divested
product lines, net loss and diluted EPS would have been $50.3
million and $(0.06) for the quarter ended October 31, 2002,
respectively.
CONTACT: ADC, Minneapolis
Investor Relations:
Mark Borman, 952/917-0590
or
Public Relations:
Rob Clark, 952/917-0304