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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended October 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Transition period from ___________ to ___________
Commission File No. 0-1424
ADC Telecommunications, Inc.
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(Exact name of registrant as specified in its charter)
Minnesota 41-0743912
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4900 West 78th Street
Minneapolis, Minnesota 55435
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 938-8080
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.20 par value
Common Stock
Purchase Rights
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.
/X/ Yes / / No
The aggregate market value of voting stock held by nonaffiliates of
the registrant, as of December 15, 1993, was approximately $910,884,000 (based
on the last sale price of such stock as reported by the NASDAQ National Market
System).
The number of shares outstanding of the registrant's common stock,
$.20 par value, as of December 15, 1993, was 27,725,682.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. / /
DOCUMENTS INCORPORATED BY REFERENCE
Pursuant to General Instruction G(3), the responses to Items 10, 11,
12 and 13 of Part III of this report are incorporated herein by reference to the
information contained in the Company's definitive proxy statement for its 1994
Annual Meeting of Shareholders to be filed with the Securities and Exchange
Commission on or before February 28, 1994.
PART I
ITEM 1. BUSINESS
ADC Telecommunications, Inc. designs, manufactures and markets a broad
range of transmission and networking systems and physical connectivity products
for broadband telecommunications networks utilizing copper and fiber optic
transmission media. The Company markets its products worldwide through its own
direct sales force, as well as through distributors, dealer organizations and
original equipment manufacturers (OEMs). The Company's products are designed for
use in the public telecommunications networks maintained by telephone operating
companies, interexchange carriers, other telecommunications common carriers and
broadcast and cable TV networks, and for use in private telecommunications
networks maintained by large businesses, government agencies, and educational
and other non-profit institutions.
The Company was incorporated in 1953 as a Minnesota corporation under the
name Magnetic Controls Company. In 1961, Magnetic Controls Company was merged
with ADC Incorporated, a Minnesota corporation incorporated in 1935. In 1984,
the Company sold substantially all of the assets of its magnetics operations.
In 1985, Magnetic Controls Company changed its corporate name to ADC
Telecommunications, Inc. in order to better reflect the Company's commitment to
the telecommunications market and to identify the Company more closely with its
ADC trademark.
In July 1989, ADC acquired Kentrox Industries, Inc. (Kentrox), a
manufacturer of public network service access equipment for private
telecommunications networks, located in Portland, Oregon. In June 1990, the
Company acquired technology and other assets of TELINQ Systems Incorporated,
located in Richardson, Texas. The ADC TELINQ Development Center-SM- (TELINQ) is
an advanced development center for ADC and is responsible for developing high
speed digital transmission products. In July 1990, ADC acquired American
Lightwave Systems, Inc. (ALS). ALS, located in Meriden, Connecticut, designs,
manufactures and markets fiber optic video transmission equipment for the
telephone, cable television, broadcast and government
markets. In May 1991, the Company acquired Fibermux Corporation (Fibermux),
located in Chatsworth, California. Fibermux designs, manufactures, markets, and
installs enterprise-wide communication systems for the interconnection and
transport of Local Area Network (LAN) and other voice, data and video traffic,
primarily in private telecommunications networks. As used herein, the terms
"Company" and "ADC" refer to ADC Telecommunications, Inc. and its wholly-owned
subsidiaries unless the context requires otherwise.
THE TELECOMMUNICATIONS MARKET
The largest market for the Company's broad range of telecommunications
products consists of companies providing service in the public
telecommunications networks and the OEMs which supply such companies. The
Company's transmission and physical connectivity products for the public network
market are primarily located in central transmission facilities (i.e., in
telephone company networks, central office and outside plant facilities which
contain the equipment used in switching and transmitting incoming and outgoing
telephone circuits to complete local and long distance telephone connections).
Another market for the Company's products consists of rapidly growing
private voice, data and video telecommunications networks maintained by
businesses, government agencies, and educational and other non-profit
institutions. The Company's customers in this market primarily include large
businesses and government agencies with their own communications networks and
the OEMs and Value Added Resellers (VARs) which supply such networks. The
Company's products for private networks are located on the private network
customers' premises and consist of enterprise-wide communication systems and
public network service access equipment.
The market for the Company's products has grown in large part due to the
effects of three ongoing developments in the telecommunications industry.
First, rapid technological change has created a demand for new products
employing advanced technologies. Second, the shift to data and video network
traffic has resulted in increasing demand for voice, data and video networking
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capabilities within private networks and, more recently, over the public
networks as well. Third, the policy of deregulation being followed by the
Federal Communications Commission and other similar regulatory agencies
throughout the world has increased opportunities for independent companies to
supply products and services within public telephone system markets and within
private voice, data and video communications markets.
The Company believes that for the foreseeable future technological change
will be the most important development in the continuing evolution of the
telecommunications market. One important technological change in the past
decade has been the increasing replacement of analog technology with digital
technology in transmission networks. In analog technology, information is
converted to a voltage or current wave form for processing or transmission. In
digital technology, information is converted to digital bits and then processed
or transmitted using computer-based components.
A second important change in transmission technology has been the
introduction of fiber optic systems, which are based on a physical property of
light that allows transmission of light pulses in a coded analog or digital
format through a glass fiber approximately the size of a human hair. Fiber
optic systems are increasingly replacing copper-based transmission systems
because of their capacity to carry large volumes of information at high speeds,
their small size and their insensitivity to electromagnetic interference.
A third important technological change in the telecommunications
marketplace is in the use of integrated circuits and miniaturization, which has
facilitated the transfer of certain telecommunications functions from central
switching and transmission locations to locations closer to the business or
residential end-user. In addition, because of the increased use of integrated
circuits in both public and private telecommunications, networks have become
significantly more complex. Increasingly, high speed switching, network
performance monitoring, information compression, and data translation functions
are being performed by network equipment. The Company believes that over the
long term, the majority of new equipment purchased by telephone operating
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companies and private network customers will employ digital technology and that
a significant portion of such equipment will utilize the fiber optic
transmission medium.
PRODUCTS
The Company categorizes its products into the following groups:
TRANSMISSION PRODUCTS: Transmission products permit and enhance the
generation of electronic and optical signals over a telecommunications circuit.
Certain of the transmission products also provide access in order to monitor,
test and reroute circuits within telecommunications transmission systems. ADC's
transmission products are designed for use in copper-based and fiber optic
transmission systems.
NETWORKING PRODUCTS: Networking products provide interconnection and
transportation of voice, data and video signals within a single customer
building or campus as well as network access to the public network. The
Company's networking products are designed for use in copper-based and fiber
optic networks.
BROADBAND CONNECTIVITY PRODUCTS: Broadband connectivity products provide
the physical connectivity (contact points) for connecting different
telecommunications system components and gaining access to telecommunications
system circuits by electromechanical means for the purpose of testing,
monitoring or reconfiguring such circuits. A majority of the Company's
broadband connectivity products are designed for use in copper-based
transmission systems, with the remainder designed for use in fiber optic
transmission systems.
Historically, most of the Company's products have been used in connection
with copper-based telecommunications systems, reflecting the historical
installed base of equipment utilizing copper cable in domestic and international
telecommunications networks. As a direct result of this large installed base,
the Company expects that, for the foreseeable future, a substantial portion of
its existing and new products will be sold to maintain and improve the
functionality of copper-based telecommunications systems. Although the Company
expects to continue to allocate considerable resources to improving existing and
developing new products for these systems, it will also devote significant
resources to the development of fiber optic products because the
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Company believes that such products represent an increasing source of future
growth of broadband connectivity product revenues.
The percentages of total consolidated net sales attributable to each of the
Company's product groups and to fiber optic products in total for the past three
fiscal years are set forth in Part II, Item 7 hereof. As used herein, "copper
products" refer to products used in copper-based telecommunications systems,
and "fiber optic products" refer to products used in fiber optic
telecommunications systems.
TRANSMISSION PRODUCTS
DIGITAL REPEATERS: The Company's copper-based digital repeaters regenerate
digital signals that have degraded because of transmission over long distances,
primarily in central office applications. Digital repeaters are sold primarily
to telephone operating companies and other telecommunications common carriers.
TEST AND MONITORING SYSTEMS: The Company manufactures three remote digital
test and performance monitoring products. The T-Sentry-R- system and
SENTRY 45-TM- system provide non-intrusive remote network performance monitoring
and alarm surveillance on DS1 and DS3 signals. The Company's NetStar-R- system,
a remotely operable, intrusive T1 test and monitoring system, is designed for
high capacity T1 telephone central office testing and private network facility
management.
The Company has developed and recently released for commercial use its open
systems-based FiberWatch-TM- remote fiber test and surveillance system. The
FiberWatch system provides a database of installed fibers, performs scheduled
and on-demand testing, and provides mapping and graphing capability for location
of faults in networks.
ADC also manufactures and sells the Logix control system, a software system
which enables the user to network numerous test and monitoring systems and to
interface with higher level network management systems. The Logix system has an
open architecture that supports
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various standards and provides for the centralized management of all ADC test
and monitoring systems.
The Company's test and monitoring systems are sold to telephone operating
companies, other telecommunications common carriers, OEMs, distributors, and
users of private voice and data communication networks.
COAXIAL MULTIPLEXER: Under contract with a large computer manufacturer,
the Company manufactures a coaxial multiplexer device used to connect up to
eight computer monitors by a single cable to a main computer. The device is
sold exclusively to this customer under an agreement that is cancelable at its
option.
FIBER VIDEO DELIVERY EQUIPMENT: Through its ALS subsidiary, the Company
manufacturers fiber optic based video transmission systems. The LiteAmp-R-,
FN6000-TM-, LC6000-TM- and LX6000-TM- systems transmit a variety of analog
signals over fiber in cable television (CATV) applications, broadcast
applications and interactive systems for distance learning and campus
interconnects. The DV6000-TM- system transmits a variety of signal types using
a high speed, uncompressed digital format (2.4 billion bits per second) over
fiber in broadcast, CATV and private network applications. With the recent
addition of channel drop/add/pass capability, the DV6000 system can now be
utilized in more complex network applications. The PixlNet-TM- DS1 compressed
digital video system, which is expected to be commercially released by ALS
during 1994, will be targeted for video teleconferencing and distance learning
applications.
The Company's fiber video delivery systems are sold directly to CATV
companies, telephone operating companies, other telecommunications common
carriers and users of private data and video communication networks. ALS also
provides fiber optic subsystems for the video portion of the Homeworx product
described below.
CUSTOMER LOOP TRANSMISSION: The Company's fiber loop converter (FLC)
products convert electrical signals to optical signals for transmission over
fiber optic cables at T1 and T3 speeds and supply the power required to transmit
such signals between floors within a building. FLCs deploying from one to four
T1 circuits provide an alternative to multiplexing in high-capacity T1
applications. FLCs deploying T3 circuits provide full bandwidth T3 delivery and
transport at OC-1 speed.
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The Company's Soneplex-TM- products perform the FLC functions as well as
full multi-plexing, performance monitoring, alarming, remote
provisioning/switching and other functions, all at speeds up to the OC-3 level.
The Company is continuing to develop modules for upgrading the functionality of
its Soneplex products.
The Company's Soneplex system chassis can be configured for High bit rate
Digital Subscriber Line (HDSL) transmission. This HDSL product, which the
Company has acquired through a licensing and product development arrangement,
transports electrical signals over copper wire without pre-conditioning of the
circuit or regeneration of the signal. This product enhances existing copper
networks and provides a migration path to fiber transmission.
The Company's fiber loop converter and Soneplex product families are
intended for large business customer loop transmission. The Company also has a
customer loop transmission system under development for the small business and
residential customer called the Homeworx system. The Company initiated customer
field trials of the Homeworx access transport platform during 1993 and intends
to perform additional customer field trials and commercially release two
versions of this product in 1994. Customer loop transmission products are sold
to telephone operating companies, other telecommunications common carriers and
users of private voice and data communications networks.
ATM SWITCH: Through a licensing and product development arrangement, the
Company recently acquired an Asynchronous Transfer Mode (ATM) switching system
that supports advanced high-speed data and video applications in the public
telecommunications networks. The Company intends to perform a customer field
trial and release this product commercially in 1994. The ATM switching system
will primarily be sold to telephone operating companies, interexchange carriers
and other telecommunications common carriers.
CITYCELL-TM- SYSTEM: The Kentrox CityCell Digital Microcell System is a
fiber-fed, radio frequency digital transmission microcell that extends cellular
communications coverage, primarily in large urban areas. Kentrox sells its
CityCell product primarily to public cellular communications providers and users
of private voice and data communications networks.
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NETWORKING PRODUCTS
PUBLIC NETWORK ACCESS EQUIPMENT: Through its Kentrox subsidiary, the
Company manufactures digital public network service access equipment. These
products, known as the T-SERV-R- Channel Service Unit, T-SMART-R- Intelligent
Channel Service Unit, the DataSMART-TM- DSU/CSU, the D-Serv DSU/CSU, the
DataSMART-TM- E1 SMDSU-TM-, the DataSMART-TM- T3E3 SMDSU-TM- and the DataSMART-
TM- 45 SMDSU-TM- are used to interconnect digitally the common carrier network
and the customer premises network. This equipment monitors circuits and
provides system protection and other network management functions. The T-SMART
product also enables the customer to test the performance of its voice network.
The D-Serv and DataSMART product lines allow connection of both voice and data
circuits.
Kentrox has recently developed and introduced ATM DSUs, at both DS1 and DS3
transmission speeds, for the transport of voice, data and video signals.
Kentrox intends to perform customer field trials and release these products
commercially in 1994.
The Kentrox public network service access equipment is sold through
telephone operating companies, interexchange carriers, other telecommunications
common carriers, OEMs and distributors, or directly to users of private voice
and data communication networks.
INTERNETWORKING PRODUCTS: Through its Fibermux subsidiary, the Company
manufactures internetworking products. The Crossbow-TM- multi-LAN hub family of
products interconnects workstations, personal computers and terminals, utilizing
many different LAN protocols and cabling types. The LightWatch-R- network
management system controls networks based on Crossbow hubs, from one location,
utilizing the Simple Network Management Protocol (SNMP). The Magnum 100-R-
family of products transports multiple voice, data and video signals
simultaneously over a 100-megabit (million bits per second) speed fiber optic
backbone. The Magnum 100 backbones link LANs, mainframes, minicomputers,
personal computers, telephone systems and video equipment with diverse protocols
using time-division multiplexing technology, within the enterprise network or
over the public common carrier network. LightWatch network management software
also controls Magnum 100 networks. The Company also sells LAN backbone products
utilizing other technologies such as fiber distributed data interface (FDDI) and
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internetworking components such as routers, some of which have been acquired by
the Company through licensing and product development arrangements. Fibermux
sells internetworking products principally to users of private data
communication networks.
Fibermux currently has under development its ATMosphere-TM- ATM backbone
wiring hub. The ATMosphere product, in its first phase, will provide a high
speed, ATM-based backbone between Crossbow hubs and virtual networking
management for users attached to Crossbow hubs. Fibermux intends to perform
customer field trials and release this product commercially in 1994.
PATCH/SWITCH SYSTEM AND PATCHMATE-TM- MODULE: The Company's Patch/Switch
system is a data network management product that provides access to, monitors,
tests and reconfigures digital data circuits and permits local or remote
switching to alternate circuits or backup equipment. This system is fully
modular, permitting the user to select and combine the particular functions
desired in a system. The PatchMate Module is a manually operated
electromechanical device used to gain access in order to monitor, test, and
reconfigure digital data circuits. The Patch/Switch System and PatchMate Module
are sold principally to users of private data communication networks.
BROADBAND CONNECTIVITY PRODUCTS
JACKS, PLUGS AND PATCH CORDS: Jacks and plugs are the basic components
used to gain access to copper telecommunications circuits for testing and
maintenance. A jack is a connecting device to which the wires of a circuit are
attached and through which access to that circuit is obtained by the insertion
of the plug. This access permits the circuit to be monitored, tested or
re-routed (patched). Patch cords are wires or cables with a plug on each end.
ADC offers a complete line of jacks and plugs in the longframe and smaller
bantam formats. The bantam products are approximately half the size of the
longframe products. The Company also manufactures a line of jacks in both of
these formats which are designed to be mounted on printed circuit boards
wherever access points are required, as well as a line of coaxial jacks and
plugs used for gaining access to high frequency circuits.
ADC incorporates its jacks, plugs and patch cords into its own products and
also sells them in component form primarily to OEMs, whose products are used by
telephone operating companies
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and other companies providing communication services. These components are
generally manufactured to industry-recognized compatibility and reliability
standards as off-the-shelf items.
JACKFIELDS AND PATCH BAYS: A jackfield is a module containing an assembly
of jacks wired to terminal blocks or connectors and used by telecommunications
companies to gain access to copper communication circuits for testing or
patching the circuits. ADC manufactures jackfields in both longframe and bantam
formats, including prewired and connectorized models. When testing a large
number of circuits, series of jackfields are combined in specialized rack
assemblies, which often may include test modules. These assemblies are called
patch bays. ADC manufactures a range of jackfields and patch bays in various
configurations. The Company's analog jackfields and analog and digital patch
bays are sold primarily to OEMs, telephone operating companies and other
telecommunications common carriers. The Company also manufactures and sells
specialized jackfields for use in audio and video transmission networks in the
broadcast industry.
DSX PRODUCTS: ADC manufactures digital signaling cross-connect (DSX)
modules and bays which are jackfields and patch bays designed to gain access to
and cross-connect digital copper circuits for both voice and data transmission.
Since introduction of DSX products in 1977, the Company has continued to expand
and refine its DSX product offerings, and has become a leading manufacturer of
products for the mechanical termination and interconnection of digital circuits
used in voice and data transmission. During 1993, ADC added the Mini-DSX-3
product, a double-density, double-capacity module, to its DSX product family.
The Company's DSX products are sold primarily to telephone operating companies
and other telecommunications common carriers.
TERMINAL BLOCKS AND FRAME PRODUCTS: Terminal blocks are molded plastic
blocks with contact points used to facilitate multiple wire interconnections.
ADC manufactures a wide variety of terminal blocks. The Company's cross-connect
frames are terminal block assemblies used to connect the external wiring of a
telecommunications network to the internal wiring of a telephone operating
company central office or to interconnect various pieces of equipment within a
telephone company. ADC sells its terminal blocks and cross-connect frames
primarily to OEMs and telephone operating companies.
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FIBER OPTIC PATCH CORDS: Fiber optic patch cords are functionally similar
to copper patch cords and are the basic components used to gain access to fiber
telecommunications circuits for testing, maintenance, cross-connection and
configuration purposes. ADC manufactures its own FC, SC and ST-R-* connectors
for use in the fiber optic patch cords. The Company's LightTracer -TM- fiber
optic patch cord provides immediate identification of fiber optic connections.
The Company incorporates its fiber optic patch cords into its own products and
sells them in component form principally to OEMs, whose products are used by
telephone operating companies and other companies providing communication
services.
FIBER DISTRIBUTION PANELS AND FRAMES: Fiber distribution panels and frames
are functionally similar to copper panels and frames with the added feature of
additional bend protection and provide interconnection points between fiber
optic cables coming into a building and fiber optic cables connected to fiber
optic equipment within the building. The Company sells fiber distribution
products primarily to telephone operating companies and users of private voice
and data communications networks.
FIBERGUIDE-R- SYSTEMS: The FiberGuide system is a modular routing system
which provides a segregated, protected method of storing and routing fiber patch
cords and cables within buildings. ADC sells its FiberGuide systems to
telephone operating companies and users of private telecommunication networks.
ENGINEER, FURNISH AND INSTALL SERVICES: Engineer, furnish and install
(EF&I) services consist of layout and installation of new telecommunications
networks, modification of existing networks or the addition of equipment to
existing networks. The Company sells its EF&I services to telephone operating
companies, other common carriers and users of private telecommunications
networks.
PRODUCT DEVELOPMENT
The Company is committed to an ongoing program of new product development
which combines internal development efforts with acquisition, joint venture,
licensing or marketing
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* (a registered trademark of American Telephone & Telegraph Co.)
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arrangements relating to new products and technologies from sources outside the
Company. Development and product engineering expenses for fiscal 1993, 1992 and
1991 were $40,988,000, $36,063,000 and $32,315,000, respectively (approximately
11.2%, 11.4% and 11.0%, respectively, of consolidated net sales).
The Company's product development program emphasizes the innovative
application of existing technology in the design of new products rather than the
research and development of new technology. The Company's product development
group works closely with marketing personnel in an effort to determine emerging
user needs in the telecommunications market and continually reviews and
evaluates technological changes affecting this market.
The Company is currently conducting development efforts with respect to
technologies and products in each of its three product groups. Among other
projects, the Company's development activities are directed at the integration
of fiber optic technology into additional products and the incorporation of ATM
technology into voice, data and video products for both public and private
telecommunications networks. There is also emphasis on developing copper and
fiber optic products for applications in the local loop.
MARKETING AND DISTRIBUTION
ADC sells its products to customers in three primary markets: (1) the
United States public telecommunications network market, (2) the private and
governmental voice, data and video network market in the United States, and (3)
the international public and private network market.
Major providers in the public telecommunications market in the United
States include the Bell Operating Companies, other local telephone companies
(such as GTE Corporation, United Telecommunications, Inc. and Centel
Corporation), long-distance telephone companies (such as AT&T
Communications/Information Systems, MCI Telecommunications Corp., Sprint and
Williams Telecommunications Co.), CATV companies (such as Cox Enterprises, Inc.
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Liberty Cable Company, TCI, Inc.) other emerging telecommunication common
carriers (such as MFS Communications Company and Teleport Communications
Group, Inc.), and major OEMs which service these same customers (such as AT&T
Technologies, Inc., Northern Telecom, Inc., Alcatel Alsthom Compagnie Generale
D'Electricite, NEC America, Inc., Fujitsu Limited and Tellabs Operations,
Inc.). The Company sells its products to most of the major providers and OEMs.
The private network market includes predominantly large businesses and
state and federal government agencies which own and operate their own voice and
data networks for internal use. The major OEMs in this market include
International Business Machines Corporation (IBM), AT&T Paradyne Corporation,
Digital Equipment Corporation, Northern Telecom, Inc., Codex Corporation and
Racal Corporation.
The Company's products are sold in the United States by approximately 112
field sales representatives located in 24 sales offices throughout the country,
and by several dealer organizations and distributors. The Company also has a
customer service group, which supports field sales personnel and is responsible
for application engineering, customer training, entering orders and supplying
delivery status information, and a field service engineering group, which
provides on-site service to customers.
The foreign markets with the greatest potential for sales of the Company's
products consist of the telephone operating companies in the public
telecommunications networks of Canada, Western Europe, Australia, New Zealand,
Mexico and the Asian region. The Company sells its products to foreign
customers through 23 Company-employed field salespersons, eight foreign
independent sales representatives and 81 foreign distributors. On October 31,
1993, the Company's foreign distribution network was selling products in 61
nations throughout the world. To date, the principal foreign market for the
Company's products has been Canada. The Company has wholly-owned subsidiaries
in Canada, the United Kingdom, Belgium, Australia, Mexico, Singapore and
Venezuela. The Company's foreign sales offices are located in Toronto,
Montreal, Ottawa, Vancouver, London, Brussels, Sydney, Mexico City, Singapore
and Caracas.
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Consolidated export sales to unaffiliated customers for fiscal years 1993,
1992 and 1991 were $58,919,000, $49,347,000 and $37,960,000, respectively
(approximately 16.1%, 15.6% and 12.9%, respectively, of consolidated net sales).
The Company warrants most of its products against defects in materials and
workmanship under normal use and service for periods of up to 15 years. To
date, the Company's warranty experience has been favorable, with a low rate of
product return.
COMPETITION
Competition in the telecommunications products market is intense. The
Company manufactures, markets and sells products similar to those manufactured
by numerous other companies, some of which, such as AT&T Technologies, Inc. and
Switchcraft, Inc., a subsidiary of Raytheon Company, have greater resources than
those available to the Company. The Company faces increasing competition from a
number of other smaller competitors. The Company believes its success in
competing with other manufacturers of telecommunications products depends
primarily on its engineering, manufacturing and marketing skills, the price,
quality and reliability of its products, and its delivery and service
capabilities.
The Company's Fibermux subsidiary competes with a number of other
companies, none of which is dominant, and faces both strong price competition
and pressure from alternative distribution strategies utilized by these other
companies. The Company's Kentrox and ALS subsidiaries have various competitors,
none of which is dominant.
The Company believes that technological change, the shift in network
traffic to data and video and continuing industry deregulation will continue to
cause rapid evolution in the competitive environment of the telecommunications
market, the full scope and nature of which is impossible to predict at this
time. The Company believes the most significant competitive effect of
continuing
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industry deregulation has been, and will continue for the immediate future to
be, the creation of new opportunities for suppliers of telecommunications
products like the Company. The Company expects, however, that such
opportunities will attract increased competition from others as well. In
addition, the Company expects that AT&T Technologies, Inc. will continue to be a
major supplier to the Bell Operating Companies, and is competing more
extensively outside the Bell system. The Company also believes that the rapid
technological changes which characterize the telecommunications industry will
continue to make the markets in which the Company competes attractive to new
entrants.
MANUFACTURING AND SUPPLIES
The manufacturing process for the Company's electronic products consists
primarily of assembly and test of electronic systems built from fabricated
parts, printed circuit boards and electronic components. The manufacturing
process for the Company's electromechanical products consists primarily of
fabrication of jacks, plugs, and other basic components from raw materials,
assembly of components and testing. The Company's sheet metal, plastic molding,
stamping and machining capabilities permit the Company to configure components
to customer demand.
The Company purchases raw materials and component parts, consisting
primarily of copper wire, optical fiber, steel, brass, nickel-steel alloys,
gold, plastics, printed circuit boards, solid state components, discrete
electronic components and similar items, from several suppliers. Although a
number of components used by the Company are single sourced, the Company has
experienced no significant difficulties to date in obtaining adequate quantities
of these raw materials and component parts. The Company believes that
alternative sources of supply exist, or can be developed without causing
significant delays, for all of its raw materials and component parts.
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PROPRIETARY RIGHTS
The Company owns a number of United States and foreign patents relating to
its products. These patents, in the aggregate, constitute a valuable asset of
the Company. The Company, however, believes that its business is not dependent
upon any single patent or any group of related patents.
The Company has registered the initials ADC alone and in conjunction with
specific designs as trademarks in the United States and various foreign
countries.
EMPLOYEES
As of October 31, 1993, there were 2,462 persons employed by the Company.
The Company considers relations with its employees to be good.
ITEM 2. PROPERTIES
The Company's corporate headquarters are currently located in two leased
buildings in Minnetonka, Minnesota, comprising 144,700 square feet. A 57,000
square foot facility, also leased in Minnetonka, is occupied by the Company's
Minnesota fiber optic operations. The Company also leases a 119,000 square foot
facility in Minnetonka, Minnesota, in which the engineering, product management,
manufacturing and manufacturing support operations for the Company's
transmission products are located. The Company also owns two buildings
comprising 132,800 square feet in Bloomington, Minnesota, which house
manufacturing and manufacturing support operations.
The Company owns a 76,000 square foot facility and a 20,000 square foot
facility in LeSueur, Minnesota, which are used for electromechanical assembly
and warehouse space. The Company leases additional warehouse space on a short
term basis from time to time to meet its needs. The Company owns an 11,700
square foot facility in Bloomington, Minnesota, which is
16
leased to an unaffiliated company. In addition, the Company owns approximately
38 acres of undeveloped land in Eden Prairie, Minnesota.
The Company's Kentrox subsidiary owns a 105,000 square foot facility in
Portland, Oregon, which serves as its office and manufacturing facility and
leases approximately 4,000 square feet of space in Waseca, Minnesota, which
serves as a research and development center. The Company leases approximately
15,000 square feet of space in Richardson, Texas, for the TELINQ Development
Center. The Company's ALS subsidiary leases approximately 47,000 square feet of
space in Meriden, Connecticut as its office and manufacturing facility. The
Company's Fibermux subsidiary leases approximately 97,000 square feet in
Chatsworth, California as it office and manufacturing facility. The Company
also leases sales office facilities in the United States, Canada, the United
Kingdom, Belgium, Australia, Mexico, Venezuela and Singapore.
Leases for the Company's headquarters, sales offices and manufacturing
facilities expire at different times through 2000 and are generally renewable on
a fixed term or a month-to-month basis. The Company believes that the
facilities used in its operations are very well maintained and in excellent
condition.
For information regarding encumbrances on the Company's properties, see
Note 3 to the Consolidated Financial Statements included in Part II, Item 8, of
this report.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
17
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are as follows:
Name Office Officer Since Age
- ---- ------ ------------- ---
Charles M. Denny, Jr. Chairman of the Board 1970 62
William J. Cadogan President, Chief Executive 1987 45
Officer and Chief Operating
Officer
Lynn J. Davis Senior Vice President, 1984 46
General Manager, Broadband
Connectivity Division
Lawrence D. Asten Vice President, Sales, 1992 46
Customer Services and
Marketing
Joan K. Berg Vice President, Controller 1987 41
Bruce W. Brown Vice President, and 1993 43
President of Fibermux
M. Farooque Mesiya Vice President, and 1992 48
President of ALS
William B. Porter Vice President, and 1991 61
President of Kentrox
Robert E. Switz Vice President, Chief Financial 1994 47
Officer
Jeffrey S. Wetherell Vice President, International 1991 51
18
Executive officers of the Company are elected by the Board of Directors.
The Company's executive officers were last elected to their positions on
February 23, 1993 except for Messrs. Brown and Switz. Messrs. Denny, Cadogan
and Davis and Ms. Berg have served in various capacities with the Company for
more than five years. Biographical information regarding the other named
officers follows.
Mr. Asten joined ADC in February 1992. Prior to such time, he was employed
by Telco Systems, Inc., a manufacturer of fiber optic transmission products and
customer premises network access equipment. At Telco Systems he served as Vice
President, Worldwide Sales, beginning in 1987.
Mr. Brown joined the Company in July 1993. He was employed by
Ungermann-Bass, Inc. from 1990 to July 1993, most recently holding the position
of Executive Vice President, Customer Operations. Prior to joining
Ungermann-Bass, Mr. Brown was Senior Vice President, Marketing, Sales & Service
for McData Corporation, a Colorado-based networking company. He was also
elected a Vice President of ADC in July 1993.
Mr. Mesiya joined the Company in 1990, following the acquisition of ALS.
He has held the position of President of ALS since 1986, and was elected a Vice
President of ADC in October 1992.
Mr. Porter joined the Company in 1989, following the acquisition of
Kentrox. He was named President of Kentrox in December 1991. Before that time
he was Vice President, National Accounts, for ADC for one year. For three years
prior to December 1990, he served as Vice President of Sales and Marketing of
Kentrox.
Mr. Switz joined the Company in January 1994. Prior to that time, he was
employed at Burr-Brown Corporation, most recently as Vice President, Chief
Financial Officer and Director, Ventures and Systems Business.
Mr. Wetherell joined the Company in December 1991. Prior to that time, he
was employed by Telex Communications, Inc., where he held various domestic and
international positions beginning in 1984, and was the President and Chief
Executive Officer from 1989 to 1991.
19
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's Common Stock, $.20 par value, is traded in the
over-the-counter market and is quoted on the NASDAQ National Market System under
the symbol "ADCT".
The following table sets forth the high and low daily sale prices for each
quarter during the fiscal years ended October 31, 1993 and 1992, as reported on
the NASDAQ National Market System. In June 1993, the Company effected a
two-for-one stock split in the form of a 100% stock dividend, and all sales
prices are adjusted to reflect such stock split.
1993 Low High
---- --- ----
Fourth Quarter $29.25 $44.00
Third Quarter 20.13 31.25
Second Quarter 18.63 23.50
First Quarter 18.13 24.75
1992 Low High
---- --- ----
Fourth Quarter $16.13 $19.00
Third Quarter 12.88 18.25
Second Quarter 11.88 14.50
First Quarter 10.25 15.50
No cash dividends have been declared or paid during the past two years and
the Company has no present intention of declaring a cash dividend. The
Company's revolving credit agreements permit cash dividends only to the extent
of 25% of net income for the preceding four quarters.
As of December 15, 1993, there were approximately 1,648 holders of record
of the Company's Common Stock.
20
ITEM 6. SELECTED FINANCIAL DATA
The following is a summary of certain consolidated statement of income and
balance sheet information of ADC Telecommunications, Inc. and Subsidiaries for
the five years ended October 31, 1993. This summary should be read in
conjunction with the consolidated financial statements and notes thereto
appearing elsewhere in this report. All share and per share amounts have been
restated for a two-for-one stock split effected in the form of a 100% stock
dividend in June 1993, and all amounts except per share amounts are presented in
thousands. No cash dividends have been declared or paid in any of the years
presented.
1993 1992 1991 1990 1989
-----------------------------------------------------
STATEMENT OF INCOME DATA
NET SALES $ 366,118 $ 316,496 $ 293,839 $ 259,802 $ 196,388
COST OF PRODUCTS SOLD 178,572 155,074 148,614 133,802 107,764
--------- --------- --------- --------- ---------
Gross Profit 187,546 161,422 145,225 126,000 88,624
--------- --------- --------- --------- ---------
EXPENSES:
Selling 70,432 61,329 53,577 45,297 34,742
Development and product engineering 40,988 36,063 32,315 25,462 17,360
Administration 22,879 21,637 20,792 17,496 13,838
Personnel reduction --- 3,800 -- -- --
--------- --------- --------- --------- ---------
Total expenses 134,299 122,829 106,684 88,255 65,940
--------- --------- --------- --------- ---------
OPERATING INCOME 53,247 38,593 38,541 37,745 22,684
OTHER INCOME (EXPENSE), NET:
Interest 183 (942) (108) 1,255 2,831
Other (3,693) (2,925) (2,028) (828) 730
--------- --------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 49,737 34,726 36,405 38,172 26,245
PROVISION FOR INCOME TAXES 18,101 13,700 14,380 15,269 9,842
--------- --------- --------- --------- ---------
NET INCOME $ 31,636 $ 21,026 $ 22,025 $ 22,903 $ 16,403
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
AVERAGE COMMON SHARES
OUTSTANDING 27,499 27,088 26,738 26,530 26,334
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
EARNINGS PER SHARE $ 1.15 $ .78 $ .82 $ .86 $ .62
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
ORDERS $ 375,637 $ 322,823 $ 284,993 $ 265,272 $ 206,418
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
BALANCE SHEET DATA (October 31)
CASH AND CASH EQUIVALENTS $ 16,324 $ 20,484 $ 30,109 $ 25,978 $ 17,576
TOTAL ASSETS 280,054 240,762 247,169 181,665 143,831
LONG-TERM OBLIGATIONS:
Current maturities of long-term debt 300 324 1,412 1,257 444
Long-term debt 810 14,110 43,634 4,841 4,691
TOTAL STOCKHOLDERS' INVESTMENT 220,394 182,188 158,374 134,013 110,470
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The percentage relationships to net sales of certain income and expense
items for the three years ended October 31, 1993 and the percentage changes in
these income and expense items between years are contained in the following
table:
Percentage Increase
Percentage of Net Sales (Decrease) Between Years
----------------------------- ------------------------
1993 vs. 1992 vs.
1993 1992 1991 1992 1991
---- ---- ---- ------ -------
NET SALES 100.0% 100.0% 100.0% 15.7% 7.7%
COST OF PRODUCTS SOLD (48.8) (49.0) (50.6) 15.2 4.3
----- ----- -----
GROSS PROFIT 51.2 51.0 49.4 16.2 11.2
EXPENSES:
Selling (19.2) (19.4) (18.2) 14.8 14.5
Development and
product engineering (11.2) (11.4) (11.0) 13.7 11.6
Administration (6.3) (6.8) (7.1) 5.7 4.1
Personnel reduction -- (1.2) -- -- --
----- ----- -----
Operating Income 14.5 12.2 13.1 38.0 .1
Other Income
(Expense), Net:
Interest .1 (.3) - - -
Other (1.0) (.9) (.7) 26.3 44.2
----- ----- -----
Income Before
Income Taxes 13.6 11.0 12.4 43.2 (4.6)
Provision for
Income Taxes (5.0) (4.4) (4.9) 32.1 (4.7)
----- ----- -----
Net Income 8.6% 6.6% 7.5% 50.5 (4.5)
----- ----- -----
----- ----- -----
RESULTS OF OPERATIONS
NET SALES: Net sales for the three years ended October 31, 1993 reflect
the following volume increases (decreases) by product group and in total
(dollars in thousands):
Percentage
Increase (Decrease)
Net Sales Between Years
--------------------------------------------------------------------------------------------
1993 1992 1991 1993 1992
--------------------------------------------------------------------- vs. vs.
Net Sales % Net Sales % Net Sales % 1992 1991
-------------------- -------------------- ------------------- ------------------
Transmission $ 69,386 18.9% $ 60,500 19.1% $ 51,355 17.5% 14.7% 17.8%
Networking 95,540 26.1 84,227 26.6 54,214 18.4 13.4 55.4
Broadband
Connectivity * 201,192 55.0 171,769 54.3 188,270 64.1 17.1 (8.8)
--------- ----- --------- ----- --------- ----- ---- -----
Total $ 366,118 100.0% $ 316,496 100.0% $ 293,839 100.0% 15.7 7.7
--------- ----- --------- ----- --------- ----- ---- -----
--------- ----- --------- ----- --------- ----- ---- -----
- ----------------------
* Previously reported as Cable Management.
The 1993 and 1992 increases in net sales of transmission products are
primarily attributable to sales of new products and, in 1993, increased sales of
fiber video delivery systems to public
22
telecommunications network providers. The Company intends to continue
introducing new transmission products in 1994. If such new products meet with
reasonable market acceptance, the Company anticipates that net sales of all
transmission products will grow as a percentage of the Company's total net
sales.
The 1993 increase in net sales of networking products primarily represents
increased sales of public network access equipment to private network customers.
The 1992 increase in net sales of networking products primarily reflects the
acquisition of Fibermux in May 1991. Due to the timing of the acquisition,
Fibermux product revenues were included in net sales of networking products
for all of 1993 and 1992 and for six months in 1991.
Although the Fibermux acquisition contributed to increased net sales and
orders during all of 1992 and the last six months of 1991, net sales and orders
for the Company as a whole were lower than anticipated during that 18-month
period due to the effects of recession in the public network market. These
effects are reflected in the 1992 decrease in net sales of broadband
connectivity products. The Company began experiencing improvement in its public
network market business during the second quarter of 1992 which continued
throughout the remainder of 1992 and 1993.
Within the broadband connectivity product group, net sales of ADC's copper
products utilizing telephone jacks have declined as a percentage of total net
sales during the last three years as shown in the following table:
Percentage of Net Sales for
Year Ended October 31,
------------------------------
1993 1992 1991
------------------------------
DSX products 28.7% 29.0% 35.5%
Wired assemblies and communication
component products 4.5 5.7 7.0
Although these products currently account for a substantial portion of the
Company's revenues, management believes that future sales of copper products
utilizing telephone jacks will continue gradually to decline as a percentage of
total net sales primarily due to the ongoing evolution of technologies within
the telecommunications marketplace (see Item 1 Business -- The
Telecommunications Market) and the addition of new products to the ADC product
portfolio.
Net sales of fiber optic products represented 34.2%, 29.9% and 20.9% of
total net sales in 1993, 1992 and 1991, respectively. These year-to-year
increases reflect the Company's increasing emphasis on development and marketing
of fiber optic products. Management anticipates increasing the Company's fiber
optic product offerings which should expand total sales of such products.
23
GROSS PROFIT: The 1993 and 1992 increases in gross profit percentage to
51.2% and 51.0% of net sales, respectively, from 49.4% of net sales in 1991
primarily reflect more favorable product sales mix, successful manufacturing
cost reduction efforts and higher net sales volumes.
OPERATING EXPENSES: Total operating expenses represented 36.7%, 38.8% and
36.3% of net sales in 1993, 1992 and 1991, respectively. The 1992 increase
primarily reflects the first full year of Fibermux operating expenses, and a
$3,800,000 personnel reduction charge ($.09 per share after taxes) recorded in
the Company's first quarter 1992. This charge represented employee separation
costs related to the elimination of positions during that quarter.
The 14.8% and 14.5% increases in selling expenses in 1993 and 1992,
respectively, also reflect increased marketing and selling activities associated
with new product introductions and expansion of markets.
The 13.7% and 11.6% increases in development and product engineering
expenses in 1993 and 1992, respectively, also reflect significant investments
in product development and introduction. The Company has been able to maintain
its development and product engineering expenses as a relatively constant
percentage of net sales during the 1991 to 1993 period by planning for and
controlling such expenditures.
The 5.7% and 4.1% increases in administration expenses in 1993 and 1992,
respectively, primarily reflect the growth of the Company. Due to effective
management of expenditures, the Company has decreased its ratio of
administration expenses as a percentage of net sales over the three-year period.
The major technological changes underway in the telecommunications industry
(see Item 1 Business -- The Telecommunications Market) will require the Company
to continue investing significantly in product development. Company management
recognizes the need to balance the cost of product development with expense
control and remains committed to minimizing the rate of increase of such
expenses.
OTHER INCOME (EXPENSE), NET: The interest income (expense) category
reflected net interest income earned on cash balances during 1993 and the
Company's first two quarters of 1991. In May 1991, the Company borrowed $40
million to acquire Fibermux, resulting in net interest expense from that date
through 1992. (See "Liquidity and Capital Resources" below for a discussion of
the Company's borrowings.)
24
Other expense primarily represented amortization of the goodwill portions
of the Fibermux, Kentrox and ALS acquisition prices, beginning at their
respective acquisition dates.
INCOME TAXES: See Note 6 to the Consolidated Financial Statements
included in Part II, Item 8 of this report for a reconciliation of the federal
statutory tax rate to effective tax rates of 36%, 39% and 40% in 1993, 1992 and
1991, respectively. In addition to the non-deductible goodwill amortization
amounts discussed above which impact all three years, the 1993 rate reflects a
1% higher federal statutory rate as well as the beneficial impact of tax
credits.
In February 1992 the Financial Accounting Standards Board issued Statement
No. 109, "Accounting for Income Taxes" (FASB 109), which the Company intends to
implement in the first quarter of 1994. Management has determined that the
impact of adopting FASB 109 will not be significant to the Company in fiscal
1994.
NET INCOME: For the year ended October 31, 1993, net income of
$31,636,000, or $1.15 per share, represented a 50.5% increase over net income
for the year ended October 31, 1992 of $21,026,000, or $.78 per share. Net
income for 1992 represented a 4.5% decrease from 1991 net income of $22,025,000,
or $.82 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 $4,160,000 and $9,625,000
during 1993 and 1992, respectively, and increased $4,131,000 during 1991. In
1993 and 1992, property and equipment additions and long-term debt repayments,
offset by cash generated from operating activities, represented the majority of
the decreases. The Company's Fibermux acquisition utilized approximately $10
million of cash generated by operating activities and $39 million of long-term
debt in 1991. Repayment of the Fibermux and other long-term debt consumed
approximately $13 million and $31 million of cash during 1993 and 1992,
respectively. The other major use of cash generated by operating activities was
property and equipment additions which expenditures approximated $21 million,
$16 million and $25 million in 1993, 1992 and 1991, respectively.
The Company may borrow up to $40 million under revolving credit agreements.
Borrowings under these agreements bear interest at floating short-term market
rates, can be repaid any time without penalty and can be converted to term loans
bearing interest principally at the prime rate, payable in annual installments
through December 2000. In May 1991, the Company's
25
acquisition of Fibermux was partially financed by borrowing the total $40
million. The full $40 million was outstanding until April 1992, when the
Company began repaying the debt. At October 31, 1993, all revolving credit
borrowings had been repaid, $40 million of revolving borrowing remained
available to the Company and its long-term debt to total capitalization ratio
was .4%. The long-term debt to total capitalization ratio was 7.2% at October
31, 1992.
Management expects that cash generated from operating activities plus
borrowings available under revolving credit agreements will be adequate to fund
operating requirements and property and equipment expenditures in 1994.
However, management recognizes the dynamic nature of the telecommunications
industry and the possibility that one or more of the Company's product
initiatives may achieve strong market acceptance during the year. In such
event, the Company would consider appropriate financing alternatives. Total
property and equipment additions for 1994 are expected to be approximately $25
million.
26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(A) STATEMENT OF REGISTRANT
No separate financial statements of the Company's subsidiaries are included
herein because the Company is primarily an operating company and its
subsidiaries are wholly-owned.
(B) Consolidated Statements
Report of Independent Public Accountants . . . . . . . . . . . . . . . . 28
Consolidated Balance Sheets as of October 31, 1993 and 1992. . . . . . . 29
Consolidated Statements of Income for the years ended
October 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . 30
Consolidated Statements of Changes in Stockholders' Investment
for the years ended October 31, 1993, 1992 and 1991 . . . . . . . . 31
Consolidated Statements of Cash Flows for the years ended
October 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . 32
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . 33
Supplemental Schedules to Consolidated Financial Statements
Schedules V and VI -- Property and Equipment and
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . 40
Schedule X -- Supplementary Income Statement Information. . . . . . 41
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission have been
omitted as not required, not applicable or the information required has been
included elsewhere in the financial statements and related notes.
(C) SUPPLEMENTAL FINANCIAL INFORMATION -- Unaudited . . . . . . . . . . . . 42
27
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ADC Telecommunications, Inc.:
We have audited the accompanying consolidated balance sheets of ADC
TELECOMMUNICATIONS, INC. AND SUBSIDIARIES as of October 31, 1993 and 1992, and
the related consolidated statements of income, changes in stockholders'
investment and cash flows for each of the three years in the period ended
October 31, 1993. These financial statements and the schedules referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ADC Telecommunications, Inc.
and Subsidiaries as of October 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in the period ended
October 31, 1993, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules to
consolidated financial statements are presented for purposes of complying with
the Securities and Exchange Commission's rules and are not part of the basic
consolidated financial statements. These schedules have been subjected to the
auditing procedures applied in the audits of the basic consolidated financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Minneapolis, Minnesota
December 15, 1993
28
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - OCTOBER 31
(IN THOUSANDS)
ASSETS
1993 1992
--------- ----------
CURRENT ASSETS:
Cash and cash equivalents $ 16,324 $ 20,484
Accounts receivable, net of reserves of $2,541
and $2,651 66,830 47,414
Inventories, net of reserves of $5,048
and $3,807 48,278 39,063
Prepaid income taxes and other 11,099 8,394
--------- ---------
Total current assets 142,531 115,355
--------- ---------
PROPERTY AND EQUIPMENT:
Land and buildings 30,794 28,922
Machinery and equipment 100,117 84,462
Furniture and fixtures 15,617 14,057
Accumulated depreciation and amortization (83,652) (69,496)
--------- ---------
Total property and equipment 62,876 57,945
OTHER ASSETS, principally goodwill 74,647 67,462
--------- ---------
$ 280,054 $ 240,762
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Current maturities of long-term debt $ 300 $ 324
Accounts payable 21,194 12,445
Accrued compensation and benefits 20,490 15,847
Accrued income taxes 2,368 1,254
Other accrued liabilities 10,549 10,201
--------- ---------
Total current liabilities 54,901 40,071
--------- ---------
DEFERRED INCOME TAXES 3,949 4,393
LONG-TERM DEBT, less current maturities above 810 14,110
--------- ---------
Total liabilities 59,660 58,574
--------- ---------
STOCKHOLDERS' INVESTMENT:
Common stock (27,697 and 13,610 shares issued
and outstanding) 5,539 2,722
Paid-in capital 29,465 25,745
Retained earnings 186,405 154,769
Deferred compensation (1,015) (1,048)
--------- ---------
Total stockholders' investment 220,394 182,188
--------- ---------
$ 280,054 $ 240,762
--------- ---------
--------- ---------
The accompanying notes are an integral part of these consolidated balance
sheets.
29
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED OCTOBER 31
(IN THOUSANDS, EXCEPT PER SHARE STATISTICS)
1993 1992 1991
--------- --------- ---------
NET SALES $ 366,118 $ 316,496 $ 293,839
COST OF PRODUCT SOLD 178,572 155,074 148,614
--------- --------- ---------
GROSS PROFIT 187,546 161,422 145,225
--------- --------- ---------
Gross profit percentage 51.2% 51.0% 49.4%
--------- --------- ---------
EXPENSES:
Selling 70,432 61,329 53,577
Development and product engineering 40,988 36,063 32,315
Administration 22,879 21,637 20,792
Personnel reduction -- 3,800 --
--------- --------- ---------
Total expenses 134,299 122,829 106,684
--------- --------- ---------
OPERATING INCOME 53,247 38,593 38,541
--------- --------- ---------
OTHER INCOME (EXPENSE), NET:
Interest 183 (942) (108)
Other (3,693) (2,925) (2,028)
--------- --------- ---------
INCOME BEFORE INCOME TAXES 49,737 34,726 36,405
PROVISION FOR INCOME TAXES 18,101 13,700 14,380
--------- --------- ---------
NET INCOME $ 31,636 $ 21,026 $ 22,025
--------- --------- ---------
--------- --------- ---------
AVERAGE COMMON SHARES
OUTSTANDING 27,499 27,088 26,738
--------- --------- ---------
--------- --------- ---------
EARNINGS PER SHARE $ 1.15 $ 0.78 $ 0.82
--------- --------- ---------
--------- --------- ---------
The accompanying notes are an integral part of these consolidated statements.
30
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' INVESTMENT
FOR THE YEARS ENDED OCTOBER 31
(IN THOUSANDS)
Common Stock
-------------------- Paid-in Retained Deferred
Shares Amount Capital Earnings Compensation
-------- --------- --------- --------- ------------
BALANCE OCTOBER 31, 1990 13,289 $ 2,658 $ 20,093 $ 111,718 $ (456)
Stock issued for employee
benefit plans 140 28 2,192 -- (348)
Reduction of deferred
compensation -- -- -- -- 464
Net income -- -- -- 22,025 --
-------- --------- --------- --------- ---------
BALANCE
OCTOBER 31, 1991 13,429 2,686 22,285 133,743 (340)
Stock issued for employee
benefit plans 181 36 3,460 -- (1,484)
Reduction of deferred
compensation -- -- -- -- 776
Net income -- -- -- 21,026 --
-------- --------- --------- --------- ---------
BALANCE OCTOBER 31, 1992 13,610 2,722 25,745 154,769 (1,048)
Stock split effected in the form
of a stock dividend 13,778 2,756 (2,756) -- --
Stock issued for employee
benefit plans 309 61 6,476 -- (781)
Reduction of deferred
compensation -- -- -- -- 814
Net income -- -- -- 31,636 --
-------- --------- --------- --------- ---------
BALANCE OCTOBER 31, 1993 27,697 $ 5,539 $ 29,465 $ 186,405 $ (1,015)
-------- --------- --------- --------- ---------
-------- --------- --------- --------- ---------
The accompanying notes are an integral part of these consolidated statements.
31
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31
(IN THOUSANDS)
1993 1992 1991
----------- ----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 31,636 $ 21,026 $ 22,025
Adjustments to reconcile net income to net cash from
operating activities -
Depreciation and amortization 20,587 19,878 17,954
Reduction in deferred compensation 814 776 464
Decrease in deferred income taxes (444) (243) (840)
Changes in assets and liabilities
Accounts receivable (19,416) (6,041) 3,987
Inventories (9,215) 1,364 (2,114)
Prepaid income taxes and other assets (3,586) (921) (1,996)
Accounts payable 2,967 560 (2,121)
Accrued liabilities 6,105 (1,644) (192)
--------- --------- ---------
Total cash from operating activities 29,448 34,755 37,167
--------- --------- ---------
CASH FLOWS FROM INVESTMENT ACTIVITIES:
Property and equipment additions, net (21,243) (15,780) (24,567)
Acquisition payments (2,199) -- (49,289)
Investment in technology (763) -- --
Long-term investments (1,835) -- --
--------- --------- ---------
Total cash used for investment activities (26,040) (15,780) (73,856)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in long-term debt (13,324) (30,612) 38,948
Common stock issued 5,756 2,012 1,872
--------- --------- ---------
Total cash from (used for) financing activities (7,568) (28,600) 40,820
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,160) (9,625) 4,131
CASH AND CASH EQUIVALENTS, beginning of period 20,484 30,109 25,978
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 16,324 $ 20,484 $ 30,109
--------- --------- ---------
--------- --------- ---------
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 308 $ 2,271 $ 1,402
Income taxes paid $ 18,206 $ 13,361 $ 13,242
--------- --------- ---------
--------- --------- ---------
The accompanying notes are an integral part of these consolidated statements.
32
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS AND OPERATIONS - The consolidated financial statements include the
accounts of ADC Telecommunications, Inc. (a Minnesota corporation) and its
wholly-owned subsidiaries, referred to collectively herein as the Company. All
significant intercompany transactions and balances have been eliminated in
consolidation.
The Company designs, manufactures and markets products that serve a broad range
of transmission, networking, and broadband connectivity functions in
telecommunications networks utilizing copper and fiber optic transmission media.
Revenue is recognized at the time of shipment. Export sales were $58,919,000,
$49,347,000 and $37,960,000 in 1993, 1992 and 1991, respectively.
CASH EQUIVALENTS - Cash equivalents primarily represent short-term investments
in commercial paper with maturities of less than three months which yielded 3%
and 4% at October 31, 1993 and 1992, respectively. These investments are
reflected in the accompanying consolidated balance sheets at cost, which
approximates market.
INVENTORIES - Inventories include material, labor and overhead and are stated at
the lower of first-in, first-out cost or market. Inventories at October 31
consisted of:
1993 1992
--------- --------
(In Thousands)
Purchased materials and manufactured
products $ 42,889 $ 35,302
Work-in-process 5,389 3,761
-------- --------
$ 48,278 $ 39,063
-------- --------
-------- --------
PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost. Additions
and improvements to property and equipment are capitalized at cost while
maintenance and repair expenditures are charged to operations as incurred.
Depreciation charges are computed using the straight-line method for financial
reporting purposes and both straight-line and accelerated methods for income tax
purposes. For financial reporting purposes, depreciation is provided over the
following estimated useful lives:
Years
------
Buildings and improvements 5-30
Machinery and equipment 3-10
Furniture and fixtures 3-10
-----
-----
GOODWILL AND OTHER INTANGIBLES - The excess of the cost over the net assets of
acquired businesses (goodwill of $77,000,000 and $70,000,000 at October 31,
1993 and 1992, respectively) is being amortized on a straight-line basis over
25 years. Related accumulated amortization at October 31, 1993 and 1992 was
$8,653,000 and $5,856,000, respectively. Other intangibles are being amortized
on a straight-line basis over 5 years.
RESEARCH AND DEVELOPMENT COSTS - The Company's policy is to expense all research
and development costs in the period incurred.
WARRANTY COSTS - The Company warrants most of its products against defects in
materials and workmanship under normal use and service for periods extending to
fifteen years. Historically, warranty costs have been insignificant. The
Company maintains reserves for warranty costs based on this experience.
33
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(2) ACQUISITIONS:
Effective May 6, 1991, the Company acquired Fibermux Corporation (Fibermux).
During the third quarter of 1990, the Company acquired technology and other
assets of TELINQ Systems Incorporated and the stock of American Lightwave
Systems, Inc. (ALS). Payments and accruals related to these acquisitions through
October 31, 1993, totalled $74,463,000.
These acquisitions have been accounted for as purchases, and, accordingly, the
total purchase prices were allocated to the net assets acquired based on
estimated fair values at the dates of the acquisitions. The excess of cost over
the net assets has been recorded as goodwill. The results of operations have
been included in the Consolidated Statements of Income from the respective
acquisition dates. The inclusion of financial data for these acquisitions prior
to the dates of acquisition would not have materially affected reported
results.
(3) DEBT:
Under revolving credit agreements, the Company has credit arrangements which
permit borrowing, on an unsecured basis, up to $40,000,000 through December
1996, principally at prevailing market rates of interest. The agreements
require, among other matters, that the Company meet certain defined net worth,
interest coverage and liability to equity ratios, and restrict cash dividends.
The Company was in compliance with these covenants at October 31, 1993. The
revolving credit borrowings can be repaid at any time prior to maturity without
penalty. At maturity, the Company will have an option to convert any
outstanding revolving credit loan balances to term loans bearing interest
principally at the prime rate, payable in annual installments through December
2000. The Company is required to pay commitment fees based upon the average
unused amounts of the commitments. There are no compensating balance
requirements.
In May 1991, the Company borrowed $40,000,000 under the revolving credit
agreements to partially finance the acquisition of Fibermux. The debt
outstanding under such agreements was repaid during 1993 and 1992. The weighted
average annual interest rates during the period borrowings were outstanding were
4.9%, 5.3% and 6.6% for 1993, 1992 and 1991, respectively.
At October 31, 1993 and 1992, the Company had a mortgage note payable of
$1,100,000 and $1,434,000 respectively, collateralized by certain land,
buildings and equipment. The note is payable in annual installments of
approximately $300,000 through 1996 and bears interest at a rate of 7.55%.
34
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(4) EMPLOYEE BENEFIT PLANS:
PENSION PLAN - The Company maintains a defined benefit plan covering a
majority of its employees. The Company funds the plan in accordance with the
requirements of Federal laws and regulations. Plan assets consist of fixed
income securities and a managed portfolio of equity securities.
Pension expense included the following components:
1993 1992 1991
-------- --------- --------
(In Thousands)
Service cost for benefits
earned during the period $ 1,828 $ 1,412 $ 1,364
Interest cost on the projected
benefit obligation 1,348 1,207 984
Return on assets (2,137) (1,216) (2,250)
Net amortization and deferral 984 266 1,590
-------- -------- --------
$ 2,023 $ 1,669 $ 1,688
-------- -------- --------
-------- -------- --------
Discount rate used to determine
actuarial present value of
benefits at October 31 7.0% 7.0% 7.5%
-------- -------- --------
-------- -------- --------
The rate of compensation used to measure the projected benefit obligation was 5%
in 1993 and 6% in 1992 and 1991. The expected long-term rate of return on plan
assets was 9%.
The following table sets forth the funded status of the plan as of October 31:
1993 1992
----------- ----------
(In Thousands)
Accumulated benefit obligation:
Vested $ (16,282) $ (11,964)
Nonvested (1,248) (2,271)
--------- ---------
Total (17,530) (14,235)
Excess of projected benefit
obligation over accumulated
benefit obligation (4,216) (5,016)
--------- ---------
Projected benefit obligation (21,746) (19,251)
Market value of plan assets 16,990 14,467
--------- ---------
Unfunded projected benefit obligation (4,756) (4,784)
Unrecognized net (gain) loss (872) 969
Unrecognized prior service cost 2,092 1,285
Unrecognized transition liability 993 1,064
--------- ---------
Total accrued pension liability $ (2,543) $ (1,466)
--------- ---------
--------- ---------
35
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(4) EMPLOYEE BENEFIT PLANS (CONTINUED):
The Company also maintains supplemental defined benefit retirement plans for
members of the Board of Directors and for certain officers. The cost of these
plans was $210,000, $257,000 and $494,000 for 1993, 1992 and 1991, respectively.
RETIREMENT SAVINGS PLAN - The Company has a voluntary plan of investment
available to any employee who has completed one year of service. The Company
contributes 1% of wages to the Retirement Savings Plan on behalf of all
employees covered under the plan. Based on Company performance, salary
deferrals up to 6% of wages are partially matched by the Company. Employees are
fully vested in salary deferrals and Company contributions at all times. The
contributions to this plan totalled $3,210,000, $2,639,000 and $2,415,000 in
1993, 1992 and 1991, respectively. A portion of the cash contributions is
invested in the Company's stock by the Plan's trustee.
STOCK AWARD PLANS - The Company maintains a Stock Incentive Plan which provides
for the granting of certain stock awards, including stock options at fair market
value and restricted shares, to key employees of the Company.
The Company also maintains a Non-Employee Director Stock Option Plan in order to
enhance the ability to attract and retain the services of experienced and
knowledgeable outside directors. The plan provides for granting of a maximum of
110,000 nonqualified stock options at the fair market value.
During 1993, 1992, and 1991, the Company issued shares of common stock to
certain employees which are restricted as to their transferability through
October 31, 1996. The market value of such stock at the date of issuance is
being amortized to income over the restricted period. The unamortized amount of
the resulting deferred compensation is recorded as a reduction of shareholders'
investment. In addition, the Company awarded stock retention bonuses which
provide for cash payments to offset the personal income taxes incurred upon the
lapsing of stock restrictions. The compensation expense associated with this
plan was $1,938,000, $1,008,000 and $970,000 in 1993, 1992 and 1991,
respectively.
36
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(4) EMPLOYEE BENEFIT PLANS(CONTINUED):
The following schedule summarizes activity in the plans:
Stock Restricted Grant
Options Stock Price
---------- ---------- --------
Outstanding at October 31, 1991 997,026 137,172 $7-$18
Granted 873,400 113,400 $13-$18
Exercised (335,564) -- $7-$12
Restrictions lapsed -- (106,854) $12-$18
Cancelled (132,022) (19,250) $7-$12
---------- ----------
Outstanding at October 31, 1992 1,402,840 124,468 $7-$18
Granted 93,200 28,300 $20-$42
Exercised (474,737) -- $7-$18
Restrictions lapsed -- (23,000) $10-$18
Cancelled (78,933) (19,210) $13-$26
---------- ----------
Outstanding at October 31, 1993 942,370 110,558 $7-$42
---------- ----------
---------- ----------
Exercisable at October 31, 1993 619,092 -- $7-$23
---------- ----------
---------- ----------
(5) CAPITAL STOCK:
AUTHORIZED STOCK - The Company is authorized to issue 50,000,000 shares of
common stock at 20 cents par value and 10,000,000 shares of preferred
stock, no par value. The Board of Directors has the power to determine the
dividend, voting, conversion and redemption rights of each series of
preferred stock which they may create. There are no preferred shares
issued.
STOCK SPLIT - On May 26, 1993, the Company declared a two-for-one stock
split effected in the form of a 100% stock dividend paid June 28, 1993 to
shareholders of record as of June 15, 1993. The share and per share
information in this report (except balance sheet data) have been adjusted
to reflect the effect of the dividend.
SHAREHOLDER RIGHTS PLAN - The Company has a Shareholder Rights Plan which
provides that if any person or group acquires 20% or more of the Company's
common stock, each Right not owned by such person or group will entitle its
holder to purchase, at the Right's then-current purchase price ($16 2/3 at
October 31, 1993), common stock of the Company having a value of twice the
Right's purchase price. The Rights would not be triggered, however, if the
acquisition of 20% or more of the Company's common stock is pursuant to a
tender offer or exchange for all outstanding shares of the Company's common
stock which is determined by the Board of Directors to be fair and in the
best interests of the Company and its shareholders. If the Board of
Directors determines that a 10% shareholder's interest is likely to have an
adverse effect on the long-term interests of the Company and its
shareholders, the Rights may also become exercisable. The Rights are
redeemable at 1 2/3 cents any time prior to the time they become
exercisable. The Rights will expire on October 6, 1996 if not previously
redeemed or exercised.
37
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(6) INCOME TAXES:
The components of the provision for income taxes are as follows:
1993 1992 1991
--------- --------- ---------
(In Thousands)
Current taxes payable -
Federal $ 17,820 $ 12,071 $ 12,807
Foreign 426 567 828
State 2,859 1,629 1,802
--------- --------- ---------
21,105 14,267 15,437
Deferred (3,004) (567) (1,057)
--------- --------- ---------
Total provision $ 18,101 $ 13,700 $ 14,380
--------- --------- ---------
--------- --------- ---------
The Company records a reduction in income taxes payable for qualifying tax
credits in the year in which they occur.
The benefit for deferred taxes is primarily due to timing differences in the tax
deductibility of employee benefit plan costs, depreciation and certain accrued
expenses and reserves which are not yet deductible for income tax purposes.
The effective income tax rate differs from the Federal statutory rate as
follows:
1993 1992 1991
---- ---- ----
Federal statutory rate 35% 34% 34%
Current year tax credits utilized
for research and development (2) (3) (3)
Goodwill 2 3 2
State income taxes, net 3 3 3
Other, net (2) 2 4
---- ---- ----
Effective income tax rate 36% 39% 40%
---- ---- ----
---- ---- ----
In February 1992 the Financial Accounting Standards Board issued Statement
No. 109, "Accounting for Income Taxes" (FASB 109), which the Company intends to
implement in the first quarter of 1994. Management has determined that the
impact of adopting FASB 109 will not be significant to the Company in fiscal
1994.
The Company's United States income tax returns for the years 1990 and 1991 are
currently under examination. Management believes that adequate provision for
income taxes has been made for all years through 1993.
38
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(7) COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES - A portion of the Company's operations are conducted
using leased equipment and facilities. These leases are non-cancellable
and renewable with expiration dates ranging through the year 2000. The
rental expense included in the accompanying consolidated income statements
was $5,347,000, $5,324,000 and $4,834,000 for 1993, 1992 and 1991,
respectively.
The following is a schedule of future minimum rental payments required
under all non-cancellable operating leases as of October 31, 1993:
(In Thousands)
--------------
1994 $ 4,528
1995 4,059
1996 2,817
1997 1,694
1998 and Thereafter 2,536
--------
$ 15,634
--------
--------
CONTINGENCIES - The Company is exposed to a number of asserted and
unasserted potential claims encountered in the normal course of business.
In the opinion of management, the resolution of these matters will not have
a material adverse effect on the Company's financial position or results of
operations.
CHANGE OF CONTROL - The Board of Directors has approved the extension of
certain employee benefits, including salary continuation to key employees,
in the event of a change of control of the Company. The Board has retained
the flexibility to cancel such provisions under certain circumstances.
(8) PERSONNEL REDUCTION:
During the first quarter of 1992, the Company recorded a one-time charge
associated with a workforce reduction program designed to reduce payroll
costs.
39
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULES TO CONSOLIDATED FINANCIAL STATEMENTS
SCHEDULES V AND VI - PROPERTY AND EQUIPMENT AND ACCUMULATED DEPRECIATION:
Transactions in property and equipment and accumulated depreciation accounts for
the years ended October 31, 1993, 1992, and 1991 were as follows:
Machinery Furniture
Land and and and
Buildings Equipment Fixtures Total
--------- --------- --------- ---------
(In Thousands)
PROPERTY AND EQUIPMENT
Balance at October 31, 1990 $ 20,259 $ 63,596 $ 11,110 $ 94,965
Additions 5,961 18,504 2,619 27,084*
Retirements (1,518) (3,384) (368) (5,270)
--------- --------- --------- ---------
Balance at October 31, 1991 24,702 78,716 13,361 116,779
Additions 4,320 10,844 1,427 16,591
Retirements (100) (5,098) (731) (5,929)
--------- --------- --------- ---------
Balance at October 31, 1992 28,922 84,462 14,057 127,441
Additions 2,073 17,803 1,670 21,546
Retirements (201) (2,148) (110) (2,459)
--------- --------- --------- ---------
Balance at October 31, 1993 $ 30,794 $ 100,117 $ 15,617 $ 146,528
--------- --------- --------- ---------
--------- --------- --------- ---------
ACCUMULATED DEPRECIATION
Balance at October 31, 1990 $ 8,050 $ 35,644 $ 5,887 $ 49,581
Provisions 1,716 11,315 1,423 14,454
Retirements (1,495) (3,268) (301) (5,064)
--------- --------- --------- ---------
Balance at October 31, 1991 8,271 43,691 7,009 58,971
Provisions 1,699 12,439 1,505 15,643
Retirements (3) (4,403) (712) (5,118)
--------- --------- --------- ---------
Balance at October 31, 1992 9,967 51,727 7,802 69,496
Provisions 1,852 13,026 1,435 16,313
Retirements (201) (1,859) (97) (2,157)
--------- --------- --------- ---------
Balance at October 31, 1993 $ 11,618 $ 62,894 $ 9,140 $ 83,652
--------- --------- --------- ---------
--------- --------- --------- ---------
* Includes $2,311,000 acquired in connection with the purchase of Fibermux in
1991 (see note 2 to the consolidated financial statements).
40
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION:
The following amounts were charged to cost of products sold and operating
expenses as follows:
1993 1992 1991
------- ------- -------
(In Thousands)
Advertising $ 4,284 $ 3,836 $ 3,646
------- ------- -------
------- ------- -------
The amounts of royalties, taxes other than payroll and income taxes, and
repairs and maintenance are not material in the aggregate.
41
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION - UNAUDITED
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
1993
-----------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
--------- --------- --------- --------- ---------
Net Sales $ 78,648 $ 88,999 $ 93,346 $ 105,125 $ 366,118
--------- --------- --------- --------- ---------
Gross Profit 40,138 45,291 48,638 53,479 187,546
--------- --------- --------- --------- ---------
Income
Before Income Taxes 8,350 11,212 14,345 15,830 49,737
Provision
for Income Taxes 3,090 4,148 5,164 5,699 18,101
--------- --------- --------- --------- ---------
Net Income $ 5,260 $ 7,064 $ 9,181 $ 10,131 $ 31,636
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Average Common
Shares Outstanding 27,324 27,484 27,544 27,641 27,499
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Earnings Per Share $ 0.19 $ 0.26 $ 0.33 $ 0.37 $ 1.15
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
1992
-----------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
--------- --------- --------- --------- ---------
Net Sales $ 64,754 $ 78,829 $ 83,847 $ 89,066 $ 316,496
--------- --------- --------- --------- ---------
Gross Profit 30,826 40,525 42,969 47,102 161,422
--------- --------- --------- --------- ---------
Income
Before Income Taxes (2,092) 10,235 12,461 14,122 34,726
Provisions
for Income Taxes (816) 3,992 4,860 5,664 13,700
--------- --------- --------- --------- ---------
Net Income $ (1,276) $ 6,243 $ 7,601 $ 8,458 $ 21,026
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Average Common
Shares Outstanding 26,956 27,062 27,140 27,196 27,088
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Earnings Per Share $ (0.05) $ 0.23 $ 0.28 $ 0.31 $ 0.78
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
42
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See Part I of this Report for information with respect to executive
officers of the Company. Pursuant to General Instruction G(3), reference is
made to the information contained under the captions "Election of Directors" and
"Section 16(a) Reporting" in the Company's definitive proxy statement for its
1994 Annual Meeting of Shareholders to be filed with the Securities and Exchange
Commission on or before February 28, 1994, which information is incorporated
herein.
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G(3), reference is made to the
information contained under the caption "Executive Compensation" (except for the
information set forth under the subcaption "Compensation and Organization
Committee Report on Executive Compensation," which is not incorporated herein)
in the Company's definitive proxy statement for its 1994 Annual Meeting of
Shareholders to be filed with the Securities and Exchange Commission on or
before February 28, 1994, which information is incorporated herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Pursuant to General Instruction G(3), reference is made to the
information contained under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Company's definitive proxy statement
for its 1994 Annual Meeting of Shareholders to be filed with the Securities and
Exchange Commission on or before February 28, 1994, which information is
incorporated herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G(3), reference is made to the information
contained in the last paragraph under the caption "Election of Directors --
Compensation of Directors" in the Company's definitive proxy statement for its
1994 Annual Meeting of Shareholders to be filed with the Securities and Exchange
Commission on or before February 28, 1994, which information is incorporated
herein.
43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K(a)
(a) 1. FINANCIAL STATEMENTS
The following consolidated financial statements of the Company are
included in Part II, Item 8 of this Annual Report on Form 10-K:
Report of Independent Public Accountants.
Consolidated Balance Sheets as of October 31, 1993 and 1992.
Consolidated Statements of Income for the years ended October 31,1993,
1992 and 1991.
Consolidated Statements of Changes in Stockholders' Investment for
the years ended October 31, 1993, 1992 and 1991.
Consolidated Statements of Cash Flows for the years
ended October 31, 1993, 1992 and 1991.
Notes to Consolidated Financial Statements.
Supplemental Financial Information (Unaudited).
2. FINANCIAL STATEMENT SCHEDULES
The following financial statement schedules are included in Part II,
Item 8 of this Annual Report on Form 10-K:
Schedules V --Property and Equipment and Accumulated
and VI Depreciation.
Schedule X --Supplementary Income Statement Information.
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission have been
omitted as not required or not applicable, or the information required has been
included elsewhere in the financial statements and related notes.
3. LISTING OF EXHIBITS
Exhibit
Number Description
--------- -----------
3-a Restated Articles of Incorporation of ADC
Telecommunications, Inc., as amended to date. (Incorporated
by reference to Exhibit 3-a to the Company's Annual Report
on Form 10-K for the fiscal year ended October 31, 1991.)
3-b Composite Restated Bylaws of ADC Telecommunications, Inc.,
as amended to date (Incorporated by reference to Exhibit
3-b to the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1989.)
4-a Specimen certificate for shares of Common Stock of ADC
Telecommunications, Inc. (Incorporated by reference to
Exhibit 4-a to the Company's Quarterly Report on Form 10-Q
for the quarter ended July 31, 1989.)
44
Exhibit
Number Description
--------- -----------
4-b Restated Articles of Incorporation of ADC
Telecommunications, Inc., as amended to date. (Incorporated
by reference to Exhibit 4-b to the Company's Annual Report
on Form 10-K for the fiscal year ended October 31, 1991.)
4-c Composite Restated Bylaws of ADC Telecommunications, Inc.,
as amended to date (Incorporated by reference to Exhibit
3-b to the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1989.)
4-d Amended and Restated Rights Agreement, amended and restated
as of August 16, 1989, between ADC Telecommunications, Inc.
and Norwest Bank Minnesota, N.A., as Rights Agent.
(Incorporated by reference to Exhibit 1 to Amendment No. 1
on Form 8 dated August 16, 1989, to the Company's
Registration Statement on Form 8-A dated September 23,
1986.)
10-a* Stock Option and Restricted Stock Plan, restated as of
January 26, 1988. (Incorporated by reference to Exhibit
19-a to the Company's Quarterly Report on Form 10-Q for the
quarter ended April 30, 1988.)
10-b* Amendment to Stock Option and Restricted Stock Plan dated as
of September 26, 1989. (Incorporated by reference to
Exhibit 10-e to the Company's Annual Report on Form 10-K for
the fiscal year ended October 31, 1989.)
10-c* The ADC Telecommunications, Inc. 1991 Stock Incentive Plan,
as amended. (Incorporated by reference to Exhibit 10-a to
the Company's Quarterly Report on Form 10-Q for the quarter
ended January 31, 1993.)
10-d* Management Incentive Plan for the fiscal year ended October
31, 1991. (Incorporated by reference to Exhibit 10-e to the
Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1991.)
10-e* Management Incentive Plan for the fiscal year ended October
31, 1992. (Incorporated by reference to Exhibit 10-e to the
Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1992.)
10-f* Management Incentive Plan for the fiscal year ended October
31, 1993.
10-g* FITL Management Incentive Plan for the fiscal year ended
October 31, 1993.
10-h* International Management Incentive Plan for the fiscal year
ended October 31, 1993.
10-i* Transmission Market Development Management Incentive Plan
for the fiscal year ended October 31, 1993.
10-j* Vice President of Sales and Customer Service Management
Incentive Plan for the fiscal year ended October 31, 1993.
10-k* Fibermux Management Incentive Plan for the fiscal year ended
October 31, 1993.
10-l* Kentrox Management Incentive Plan for the fiscal year ended
October 31, 1993.
10-m* Agreement, dated as of November 1, 1991, between ADC
Telecommunications, Inc. and Charles M. Denny, Jr., related
to retirement and consulting arrangements. (Incorporated by
reference to Exhibit 10-h to the Company's Annual Report on
Form 10-K for the fiscal year ended October 31, 1991.)
10-n* ADC Telecommunications, Inc. Change in Control Severance Pay
Plan Statement and Summary Plan Description. (Incorporated
by reference to Exhibit 10-q to the Company's Annual Report
on Form 10-K for the fiscal year ended October 31, 1989.)
45
Exhibit
Number Description
--------- -----------
10-o* Compensation Plan for Directors of ADC Telecommunications,
Inc., restated as of December 31, 1988. (Incorporated by
reference to Exhibit 19-b to the Company's Quarterly Report
on Form 10-Q for the quarter ended January 31, 1989.)
10-p* First Amendment of the Compensation Plan for Directors of
ADC Telecommunications, Inc. restated as of December 31,
1988. (Incorporated by reference to Exhibit 10-s to the
Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1989.)
10-q* ADC Telecommunications, Inc. Directors' Supplemental
Retirement Plan dated as of January 23, 1990. (Incorporated
by reference to Exhibit 10-m to the Company's Annual Report
on Form 10-K for the fiscal year ended October 31, 1990.)
10-r* ADC Telecommunications, Inc. Nonemployee Director Stock
Option Plan. (Incorporated by reference to Exhibit 19-b of
the Company's Quarterly Report on Form 10-Q for the quarter
ended April 30, 1991.)
10-s* ADC Telecommunications, Inc. Deferred Compensation Plan,
dated as of November 1, 1978. (Incorporated by reference to
Exhibit 10-n to the Company's Annual Report on Form 10-K for
the fiscal year ended October 31, 1990.)
10-t* ADC Telecommunications, Inc. Excess Benefits Plan, dated as
of January 1, 1985. (Incorporated by reference to Exhibit
10-o to the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1990.)
10-u* ADC Telecommunications, Inc. 401(k) Excess Plan, dated as of
September 1, 1990. (Incorporated by reference to Exhibit
10-p to the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1990.)
10-v Lease, dated February 25, 1991, between American Lightwave
Systems, Inc. and 999 Research Parkway, Inc. (Incorporated
by reference to Exhibit 10-t to the Company's Annual Report
on Form 10-K for the fiscal year ended October 31, 1991.)
10-w Lease, dated March 1, 1986, between ADC Telecommunications,
Inc. and Metro International Ltd. as amended. (Incorporated
by reference to Exhibit 10-w to the Company's Annual Report
on Form 10-K for the fiscal year ended October 31, 1991.)
10-x Lease Agreement, dated October 26, 1990, between Lutheran
Brotherhood and ADC Telecommunications, Inc. (Incorporated
by reference to Exhibit 10-w to the Company's Annual Report
on Form 10-K for the fiscal year ended October 31, 1990.)
10-y Lease Agreement, dated August 21, 1990, between Minnetonka
Corporate Center I Limited Partnership and ADC
Telecommunications, Inc. (Incorporated by reference to
Exhibit 10-x to the Company's Annual Report on Form 10-K for
the fiscal year ended October 31, 1990.)
10-z Sublease Agreement, dated October 31, 1990, between Seagate
Technology, Inc. and ADC Telecommunications, Inc.
(Incorporated by reference to Exhibit 10-y to the Company's
Annual Report on Form 10-K for the fiscal year ended October
31, 1990.)
46
Exhibit
Number Description
--------- -----------
10-aa Renewal of Lease, dated July 9, 1990, between ADC
Telecommunications, Inc. and Metro International General
Partner Canada, Inc. (Incorporated by reference to Exhibit
10-z to the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1990.)
10-bb Lease, dated September 30, 1993, between American Lightwave
Systems, Inc. and 999 Research Parkway, Inc.
10-cc Lease, dated August 2, 1993, between ADC Telecommunications,
Inc. and Engelsma Limited Partnership.
10-dd Lease, dated December 18, 1992, between Fibermux Corporation
and Greenville Dallas Delaware, Inc.
10-ee* Supplemental Executive Retirement Plan Agreement for
William J. Cadogan, dated as of November 1, 1990, between
ADC Telecommunications, Inc. and William J. Cadogan.
21-a Subsidiaries of the Company.
23-a Consent of Independent Public Accountants to incorporation
by reference of financial material included in this report
into Company's Registration Statement on Form S-8 (File No.
2-83584), Registration Statement on Form S-8 (File No.
322654), Registration Statement on Form S-8 (File No.
33-40356) and Registration Statement on Form S-8 (File No.
33-40357.)
24-a Powers of attorney.
There have been excluded from the exhibits filed with this
report instruments defining the rights of holders of
long-term debt of the Company where the total amount of the
securities authorized under such instruments does not exceed
10% of the total assets of the Company. The Company hereby
agrees to furnish a copy of any such instruments to the
Commission upon request.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended October 31, 1993.
(c) See Exhibit Index and Exhibits attached to this report.
(d) See Financial Statement Schedules included in Part II, Item
8 of this report.
__________________
* Management contract or compensatory plan or arrangement required to be filed
as an Exhibit to the Annual Report on Form 10-K.
47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: January 11, 1994 By: /s/ Robert E. Switz
------------------------
Robert E. Switz
Vice President, Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
William J. Cadogan* President, Chief Executive Officer,
Chief Operating Officer and Director
(principal executive officer)
By: /s/ Robert E. Switz Vice President,
-------------------- Chief Financial Officer
Robert E. Switz (principal financial officer)
By: /s/ Joan K. Berg Vice President, By: /s/ Joan K. Berg
------------------- Controller ----------------
Joan K. Berg (principal accounting officer) Joan K. Berg
Attorney-in-Fact*
Dated: January 11, 1994
Charles M. Denny, Jr.* Director
Thomas E. Holloran* Director
B. Kristine Johnson* Director
Charles W. Oswald* Director
Jean-Pierre Rosso* Director
Donald M. Sullivan* Director
Warde F. Wheaton* Director
John D. Wunsch* Director
* By Power of Attorney filed with this report as Exhibit 24-a hereto.
48
ADC TELECOMMUNICATIONS, INC.
Annual Report on Form 10-K
For the Fiscal Year Ended October 31, 1993
EXHIBIT INDEX
Exhibit
Number Description Page
--------- ----------- ----
3-a Restated Articles of Incorporation of N/A
ADC Telecommunications, Inc., as amended
to date. (Incorporated by reference to
Exhibit 3-a to the Company's Annual
Report on Form 10-K for the fiscal year
ended October 31, 1991.)
3-b Composite Restated Bylaws of ADC Telecommunications, N/A
Inc., as amended to date (Incorporated
by reference to Exhibit 3-b to the
Company's Annual Report on Form 10-K for
the fiscal year ended October 31, 1989.)
4-a Specimen certificate for shares of Common Stock N/A
of ADC Telecommunications, Inc.
(Incorporated by reference to Exhibit
4-a to the Company's Quarterly Report on
Form 10-Q for the quarter ended July 31,
1989.)
4-b Restated Articles of Incorporation of ADC N/A
Telecommunications, Inc., as amended to
date. (Incorporated by reference to
Exhibit 4-b to the Company's Annual
Report on Form 10-K for the fiscal year
ended October 31, 1991.)
4-c Composite Restated Bylaws of ADC Telecommunications, N/A
Inc., as amended to date (Incorporated
by reference to Exhibit 3-b to the
Company's Annual Report on Form 10-K for
the fiscal year ended October 31, 1989.)
4-d Amended and Restated Rights Agreement, amended N/A
and restated as of August 16, 1989,
between ADC Telecommunications, Inc. and
Norwest Bank Minnesota, N.A., as Rights
Agent. (Incorporated by reference to
Exhibit 1 to Amendment No. 1 on Form 8
dated August 16, 1989, to the Company's
Registration Statement on Form 8-A dated
September 23, 1986.)
10-a Stock Option and Restricted Stock Plan, restated N/A
as of January 26, 1988. (Incorporated
by reference to Exhibit 19-a to the
Company's Quarterly Report on Form 10-Q
for the quarter ended April 30, 1988.)
10-b Amendment to Stock Option and Restricted Stock Plan N/A
dated as of September 26, 1989. (Incorporated by
reference to Exhibit 10-e to the Company's Annual Report
on Form 10-K for the fiscal year ended October 31, 1989.)
10-c The ADC Telecommunications, Inc. 1991 Stock N/A
Incentive Plan, as amended.
(Incorporated by reference to Exhibit
10-a to the Company's Quarterly Report
on Form 10-Q for the quarter ended
January 31, 1993.)
49
Exhibit
Number Description Page
-------- ----------- ----
10-d Management Incentive Plan for the fiscal year N/A
ended October 31, 1991. (Incorporated
by reference to Exhibit 10-e to the
Company's Annual Report on Form 10-K for
the fiscal year ended October 31, 1991.)
10-e Management Incentive Plan for the fiscal year N\A
ended October 31, 1992. (Incorporated
by reference to Exhibit 10-e to the
Company's Annual Report on Form 10-K for
the fiscal year ended October 31, 1992.)
10-f Management Incentive Plan for the fiscal year xx
ended October 31, 1993.
10-g FITL Management Incentive Plan for the fiscal xx
year ended October 31, 1993.
10-h International Management Incentive Plan for the xx
fiscal year ended October 31, 1993.
10-i Transmission Market Development Management Incentive xx
Plan for the fiscal year ended October 31, 1993.
10-j Vice President of Sales and Customer Service xx
Management Incentive Plan for the fiscal year ended
October 31, 1993.
10-k Fibermux Management Incentive Plan for the fiscal xx
year ended October 31, 1993.
10-l Kentrox Management Incentive Plan for the fiscal xx
year ended October 31, 1993.
10-m Agreement, dated as of November 1, 1991, between ADC N/A
Telecommunications, Inc. and Charles M.
Denny, Jr., related to retirement and
consulting arrangements. (Incorporated
by reference to Exhibit 10-h to the
Company's Annual Report on Form 10-K for
the fiscal year ended October 31, 1991.)
10-n ADC Telecommunications, Inc. Change in Control N/A
Severance Pay Plan Statement and Summary Plan
Description. (Incorporated by reference to
Exhibit 10-q to the Company's Annual Report on
Form 10-K for the fiscal year ended
October 31, 1989.)
10-o Compensation Plan for Directors of ADC N/A
Telecommunications, Inc., restated as of
December 31, 1988. (Incorporated by
reference to Exhibit 19-b to the
Company's Quarterly Report on Form 10-Q
for the quarter ended January 31,
1989.)
10-p First Amendment of the Compensation Plan N/A
for Directors of ADC Telecommunications,
Inc. restated as of December 31, 1988.
(Incorporated by reference to Exhibit
10-s to the Company's Annual Report on
Form 10-K for the fiscal year ended
October 31, 1989.)
10-q ADC Telecommunications, Inc. Directors' N/A
Supplemental Retirement Plan dated as of
January 23, 1990. (Incorporated by
reference to Exhibit 10-m to the
Company's Annual Report on Form 10-K for
the fiscal year ended October 31, 1990).
10-r ADC Telecommunications, Inc. Nonemployee N/A
Director Stock Option Plan.
(Incorporated by reference to Exhibit
19-b of the Company's Quarterly Report
on Form 10-Q for the quarter ended April
30, 1991).
50
Exhibit
Number Description Page
-------- ----------- ----
10-s ADC Telecommunications, Inc. Deferred N/A
Compensation Plan, dated as of November
1, 1978. (Incorporated by reference to
Exhibit 10-n to the Company's Annual
Report on Form 10-K for the fiscal year
ended October 31, 1990.)
10-t ADC Telecommunications, Inc. Excess Benefits N/A
Plan, dated as of January 1, 1985.
(Incorporated by reference to Exhibit
10-o to the Company's Annual Report on
Form 10-K for the fiscal year ended
October 31, 1990).
10-u ADC Telecommunications, Inc. 401(k) Excess N/A
Plan, dated as of September 1, 1990.
(Incorporated by reference to Exhibit
10-p to the Company's Annual Report on
Form 10-K for the fiscal year ended
October 31, 1990).
10-v Lease, dated February 25, 1991, between N/A
American Lightwave Systems, Inc. and 999
Research Parkway, Inc. (Incorporated by
reference to Exhibit 10-t to the
Company's Annual Report on Form 10-K for
the fiscal year ended October 31, 1991).
10-w Lease, dated March 1, 1986, between ADC N/A
Telecommunications, Inc. and Metro
International Ltd. as amended.
(Incorporated by reference to Exhibit
10-w to the Company's Annual Report on
Form 10-K for the fiscal year ended
October 31, 1991).
10-x Lease Agreement, dated October 26, 1990, N/A
between Lutheran Brotherhood and ADC
Telecommunications, Inc. (Incorporated
by reference to Exhibit 10-w to the
Company's Annual Report on Form 10-K for
the fiscal year ended October 31, 1990).
10-y Lease Agreement, dated August 21, 1990, N/A
between Minnetonka Corporate Center I
Limited Partnership and ADC
Telecommunications, Inc. (Incorporated
by reference to Exhibit 10-x to the
Company's Annual Report on Form 10-K for
the fiscal year ended October 31, 1990).
10-z Sublease Agreement, dated October 31, 1990, N/A
between Seagate Technology, Inc. and ADC
Telecommunications, Inc. (Incorporated
by reference to Exhibit 10-y to the
Company's Annual Report on Form 10-K for
the fiscal year ended October 31, 1990).
10-aa Renewal of Lease, dated July 9, 1990, between N/A
ADC Telecommunications, Inc. and Metro
International General Partner Canada,
Inc. (Incorporated by reference to
Exhibit 10-z to the Company's Annual
Report on Form 10-K for the fiscal year
ended October 31, 1990).
10-bb Lease, dated September 30, 1993, between xx
American Lightwave Systems, Inc. and 999
Research Parkway, Inc.
10-cc Lease, dated August 2, 1993, between ADC xx
Telecommunications, Inc. and Engelsma
Limited Partnership.
10-dd Lease, dated December 18, 1992, between xx
Fibermux Corporation and Greenville
Dallas Delaware, Inc.
51
Exhibit
Number Description Page
--------- ----------- ----
10-ee Supplemental Executive Retirement Plan xx
Agreement for William J. Cadogan, dated as
of November 1, 1990, between ADC
Telecommunications, Inc. and William J.
Cadogan.
21-a Subsidiaries of the Company.
23-a Consent of Independent Public Accountants xx
to incorporation by reference of
financial material included in this
report into Company's Registration
Statement on Form S-8 (File No.
2-83584), Registration Statement on Form
S-8 (File No. 33-22654), Registration
Statement on Form S-8 (File No.
33-40356) and Registration Statement on
Form S-8 (File No. 33-40357.)
24-a Manually signed powers of attorney. xx
52