##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended January 1, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from N/A to N/A
 Commission file number 0-1424
 ADC Telecommunications, Inc.
  Minnesota
(State or other jurisdiction of incorporation or organization)
    
    41-0743912
(I.R.S. Employer Identification No.)
 13625 Technology Drive, Eden Prairie, MN 55344-2252
 (952) 938-8080
 N/A
  þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ




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##### 



TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATION
    
    
    3ITEM 1. FINANCIAL STATEMENTS
    
    
    3ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
    
    
    21ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    32ITEM 4. CONTROLS AND PROCEDURES
    
    
    32PART II. OTHER INFORMATION
    
    
    33ITEM 1. LEGAL PROCEEDINGS
    
    
    33ITEM 1A. RISK FACTORS
    
    
    33ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    33ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    33ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    33ITEM 5. OTHER INFORMATION
    
    
    34ITEM 6. EXHIBITS
    
    
    35SIGNATURES
    
    
    36EXHIBIT INDEXEX-10.3EX-10.4EX-10.5EX-10.7EX-31.1EX-31.2EX-32
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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETSUNAUDITED
 January 1,
    
    
    September 30,2010
    
    
    2009(In millions)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    558.5
    
    
    $
    535.5Available-for-sale securities
    
    
    51.0
    
    
    
    Accounts receivable, net of reserves of $9.9 and $9.8
    
    
    171.6
    
    
    
    180.1Unbilled revenue
    
    
    14.9
    
    
    
    17.5Inventories, net of reserves of $40.0 and $41.8
    
    
    123.9
    
    
    
    124.6Prepaid and other current assets
    
    
    30.1
    
    
    
    33.3Assets of discontinued operations
    
    
    
    
    
    
    9.8Total current assets
    
    
    950.0
    
    
    
    900.8Property and equipment, net of accumulated depreciation of $417.7 and $410.1
    
    
    158.3
    
    
    
    162.8Restricted cash
    
    
    22.6
    
    
    
    25.0Goodwill
    
    
    5.6
    
    
    
    0.2Intangibles, net of accumulated amortization of $151.0 and $144.4
    
    
    89.0
    
    
    
    93.3Long-term available-for-sale securities
    
    
    23.2
    
    
    
    75.4Other assets
    
    
    87.4
    
    
    
    86.1Total assets
    
    $
    1,336.1
    
    
    $
    1,343.6LIABILITIES AND SHAREOWNERS INVESTMENTCurrent Liabilities:Current portion of long-term debt
    
    $
    0.6
    
    
    $
    0.6Accounts payable
    
    
    73.6
    
    
    
    83.0Accrued compensation and benefits
    
    
    55.1
    
    
    
    57.8Other accrued liabilities
    
    
    70.6
    
    
    
    63.8Income taxes payable
    
    
    3.3
    
    
    
    5.9Restructuring accrual
    
    
    27.0
    
    
    
    22.5Liabilities of discontinued operations
    
    
    0.5
    
    
    
    2.5Total current liabilities
    
    
    230.7
    
    
    
    236.1Pension obligations and other long-term liabilities
    
    
    95.4
    
    
    
    95.6Long-term notes payable
    
    
    650.9
    
    
    
    651.0Total liabilities
    
    
    977.0
    
    
    
    982.7ADC Shareowners InvestmentTotal ADCs Shareowners Investment (96.8 and 96.6 shares outstanding, respectively)
    
    
    354.3
    
    
    
    356.2Non-Controlling Interest
    
    
    4.8
    
    
    
    4.7Total Shareowners Investment
    
    
    359.1
    
    
    
    360.9Total liabilities and shareowners investment
    
    $
    1,336.1
    
    
    $
    1,343.6
  3




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##### Table of Contents



COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSUNAUDITED
 Three Months EndedJanuary 1, 2010
    
    
    December 26, 2008(In millions, except earnings per share)Net Sales:Products
    
    $
    228.0
    
    
    $
    263.4Services
    
    
    37.6
    
    
    
    36.3Total net sales
    
    
    265.6
    
    
    
    299.7Cost of Sales:Products
    
    
    144.8
    
    
    
    197.2Services
    
    
    28.7
    
    
    
    28.2Total cost of sales
    
    
    173.5
    
    
    
    225.4Gross Profit
    
    
    92.1
    
    
    
    74.3Operating Expenses:Research and development
    
    
    16.3
    
    
    
    17.0Selling and administration
    
    
    70.6
    
    
    
    69.2Impairment charges
    
    
    0.1
    
    
    
    4.1Restructuring charges
    
    
    9.2
    
    
    
    8.5Total operating expenses
    
    
    96.2
    
    
    
    98.8Operating Loss
    
    
    (4.1
    )
    
    
    (24.5
    )Other Income (Expense), Net
    
    
    9.1
    
    
    
    (28.0
    )Income (Loss) before income taxes
    
    
    5.0
    
    
    
    (52.5
    )Provision (Benefit) for income taxes
    
    
    1.4
    
    
    
    (4.1
    )Income (Loss) from continuing operations
    
    
    3.6
    
    
    
    (48.4
    )Discontinued Operations, Net of Tax:Loss from discontinued operations
    
    
    (14.6
    )
    
    
    (2.0
    )Net Loss
    
    
    (11.0
    )
    
    
    (50.4
    )Net Income (Loss) Available to Non-controlling Interest
    
    
    (0.2
    )
    
    
    0.7Net Loss Available to ADC Common Shareowners
    
    $
    (11.2
    )
    
    $
    (49.7
    )Comprehensive Earnings Available to ADC Common Shareowners
    
    $
    (7.7
    )
    
    $
    (71.0
    )Comprehensive Earnings Available to Non-controlling Interest
    
    
    0.1
    
    
    
    (1.2
    )Comprehensive Earnings
    
    $
    (7.6
    )
    
    $
    (72.2
    )Weighted Average Common Shares Outstanding (Basic)
    
    
    96.6
    
    
    
    105.5Weighted Average Common Shares Outstanding (Diluted)
    
    
    97.9
    
    
    
    105.5Basic Income (Loss) Per Share:Continuing operations available to ADC common shareowners
    
    $
    0.04
    
    
    $
    (0.46
    )Discontinued operations available to ADC common shareowners
    
    $
    (0.16
    )
    
    $
    (0.01
    )Net loss per share available to ADC common shareowners
    
    $
    (0.12
    )
    
    $
    (0.47
    )Diluted Income (Loss) Per Share:Continuing operations available to ADC common shareowners
    
    $
    0.04
    
    
    $
    (0.46
    )Discontinued operations available to ADC common shareowners
    
    $
    (0.15
    )
    
    $
    (0.01
    )Net loss per share available to ADC common shareowners
    
    $
    (0.11
    )
    
    $
    (0.47
    )
  4




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ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSUNAUDITED
 Three Months EndedJanuary 1, 2010
    
    
    December 26, 2008(In millions)Operating Activities:Income (Loss) from continuing operations
    
    $
    3.6
    
    
    $
    (48.4
    )Adjustments to reconcile loss from continuing operations to net cash provided by (used
for) operating activities from continuing operations:Inventory write-offs
    
    
    3.0
    
    
    
    18.4Write-down of intangibles and fixed assets
    
    
    
    
    
    
    4.1Write-down of available-for-sale investments
    
    
    
    
    
    
    26.4Restructuring charges
    
    
    9.2
    
    
    
    8.5Depreciation and amortization
    
    
    15.6
    
    
    
    19.0Provision for bad debt
    
    
    
    
    
    
    1.4Change in warranty reserves
    
    
    0.4
    
    
    
    2.3Non-cash stock compensation
    
    
    6.4
    
    
    
    4.1Change in deferred income taxes
    
    
    (0.3
    )
    
    
    (0.1
    )Gain on sale of property and equipment
    
    
    
    
    
    
    (0.9
    )Gain on sale of RF signal management product line
    
    
    (15.9
    )
    
    
    Other, net
    
    
    (0.1
    )
    
    
    12.8Changes in operating assets and liabilities, net of acquisitions and divestitures:Accounts receivable and unbilled revenues decrease
    
    
    13.3
    
    
    
    33.9Inventories increase
    
    
    (2.5
    )
    
    
    (6.1
    )Prepaid and other assets increase
    
    
    (4.3
    )
    
    
    (3.4
    )Accounts payable decrease
    
    
    (9.4
    )
    
    
    (4.9
    )Accrued liabilities decrease
    
    
    (3.0
    )
    
    
    (47.6
    )Total cash provided by operating activities from continuing operations
    
    
    16.0
    
    
    
    19.5Total cash (used for) provided by  operating activities from discontinued operations
    
    
    (1.7
    )
    
    
    2.5Total cash provided by operating activities
    
    
    14.3
    
    
    
    22.0Investing Activities:Acquisitions, net of cash acquired
    
    
    (0.2
    )
    
    
    2.7Divestitures, net of cash disposed
    
    
    12.7
    
    
    
    Property, equipment and patent additions
    
    
    (6.7
    )
    
    
    (9.2
    )Proceeds from disposal of property and equipment
    
    
    
    
    
    
    4.4Decrease in restricted cash
    
    
    2.3
    
    
    
    (1.8
    )Sale of available-for-sale securities
    
    
    2.0
    
    
    
    11.8Total cash provided by investing activities
    
    
    10.1
    
    
    
    7.9Financing Activities:Payments of financing costs
    
    
    (1.5
    )
    
    
    Debt payments
    
    
    (0.2
    )
    
    
    (0.9
    )Common stock repurchase
    
    
    
    
    
    
    (101.2
    )Total cash used for financing activities
    
    
    (1.7
    )
    
    
    (102.1
    )Effect of Exchange Rate Changes on Cash
    
    
    0.3
    
    
    
    (8.8
    )Increase (Decrease) in Cash and Cash Equivalents
    
    
    23.0
    
    
    
    (81.0
    )Cash and Cash Equivalents, beginning of period
    
    
    535.5
    
    
    
    601.9Cash and Cash Equivalents, end of period
    
    $
    558.5
    
    
    $
    520.9
  5




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ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTSUNAUDITED
 Note 1: Basis of Presentation
   Fiscal Year
  st th
 Warranty
   Accrual
    
    Charged to costs
    
    
    
    
    
    AccrualSeptember 30, 2009
    
    and expenses
    
    Deductions
    
    January 1, 2010(In millions)Warranty Reserve
    
    $
    6.2
    
    
    $
    0.4
    
    
    $
    0.3
    
    
    $
    6.3
 Share-Based Compensation
 Share-Based Payment: An amendment of FASB Statement No. 123 and 95
 Summary of Significant Accounting Policies
  6




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Recently Adopted Accounting Pronouncements
 Business combinations and non-controlling interests
  Fair Value Measurements
   Accounting for Convertible Debt Instruments That May be Settled in Cash upon Conversion
(Including Partial Cash Settlement)
  Determining Whether an Instrument (or an Embedded Feature) is Indexed to an Entitys Own Stock
  Note 2: Discontinued Operations
 GSM Base Station and Switching Business
  7




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Assets/Liabilities Measured on a Non-Recurring Basis
  APS Germany
  APS France
   Three Months EndedJanuary 1,
    
    
    December 26,2010
    
    
    2008(In millions)Net sales
    
    $
    2.3
    
    
    $
    3.9Loss from discontinued operations, net of tax
    
    
    (1.8
    )
    
    
    (2.0
    )Loss on sale of discontinued operations, net of tax
    
    
    (12.8
    )
    
    
    Total loss from discontinued operations, net of tax
    
    $
    (14.6
    )
    
    $
    (2.0
    )
 Note 3: Net Income (loss) from Continuing Operations Per Share
  Three Months EndedJanuary 1,
    
    
    December 26,2010
    
    
    2008(In millions, exceptper share amounts)Numerator:Income (loss) from continuing operations
    
    $
    3.6
    
    
    $
    (48.4
    )Denominator:Weighted average common shares outstanding  basic
    
    
    96.6
    
    
    
    105.5Employee options and other
    
    
    1.3
    
    
    
    Weighted average common shares outstanding  diluted
    
    
    97.9
    
    
    
    105.5Basic Income
(loss) per share from continuing operations available to ADC
common shareowners
    
    $
    0.04
    
    
    $
    (0.46
    )Diluted
Income (loss) per share from continuing operations available to
ADC
common shareowners
    
    $
    0.04
    
    
    $
    (0.46
    )
 8




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##### Table of Contents



Convertible Subordinated Notes
    
    Convertible Shares
    
    
    Conversion Price(In millions)$200 million, 6-month LIBOR plus 0.375%, due June 15, 2013
    
    
    7.1
    
    
    $
    28.091$225 million, 3.5% fixed rate, due July 15, 2015
    
    
    8.3
    
    
    
    27.00$225 million, 3.5% fixed rate, due July 15, 2017
    
    
    7.9
    
    
    
    28.55Total
    
    
    23.3
  Note 4: Inventories
  January 1,
    
    
    September 30,2010
    
    
    2009(In millions)Manufactured products
    
    $
    111.7
    
    
    $
    111.9Purchased materials
    
    
    46.5
    
    
    
    48.6Work-in-process
    
    
    5.7
    
    
    
    5.9Less: Inventory reserve
    
    
    (40.0
    )
    
    
    (41.8
    )Total inventories, net
    
    $
    123.9
    
    
    $
    124.6
 Note 5: Property and Equipment
  January 1,
    
    
    September 30,2010
    
    
    2009(In millions)Land and buildings
    
    $
    136.5
    
    
    $
    135.5Machinery and equipment
    
    
    391.8
    
    
    
    390.3Furniture and fixtures
    
    
    37.9
    
    
    
    38.0Less: Accumulated depreciation
    
    
    (417.7
    )
    
    
    (410.1
    )Total
    
    
    148.5
    
    
    
    153.7Construction-in-progress
    
    
    9.8
    
    
    
    9.1Total property and equipment, net
    
    $
    158.3
    
    
    $
    162.8
 9




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##### Table of Contents



Note 6: Investments
  Other-Than-TemporaryCost
    
    
    Unrealized
    
    
    Realized
    
    
    Impairment
    
    
    FairBasis
    
    
    Gain
    
    
    Loss
    
    
    Loss
    
    
    Value(In millions)January 1, 2010Corporate bonds
    
    $
    50.7
    
    
    $
    0.3
    
    
    $
    
    
    
    $
    
    
    
    $
    51.0Auction-rate securities
    
    
    167.1
    
    
    
    0.9
    
    
    
    
    
    
    
    
    
    
    
    23.2
    (1)Total available-for-sale securities
    
    $
    217.8
    
    
    $
    1.2
    
    
    $
    
    
    
    $
    
    
    
    $
    74.2September 30, 2009Corporate bonds
    
    $
    50.7
    
    
    $
    0.4
    
    
    $
    
    
    
    $
    
    
    
    $
    51.1Equity securities
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    
    
    
    
    Auction-rate securities
    
    
    169.8
    
    
    
    2.3
    
    
    
    
    
    
    
    (18.4
    )
    
    
    24.3
    (2)Total available-for-sale securities
    
    $
    220.6
    
    
    $
    2.8
    
    
    $
    0.1
    
    
    $
    (18.4
    )
    
    $
    75.4
 
 (1)
    
    Net of cumulative unrealized gains of $3.8 million and other-than-temporary losses of $148.4
million(2)
    
    Net of cumulative unrealized gains of $2.9 million and other-than-temporary losses of $148.4
million        10




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Note 7: Goodwill and Intangible Assets
     NetworkConnectivity
    
    
    Solutions
    
    
    Total(In millions)Balance as of September 30, 2009
    
    $
    0.2
    
    
    $
    
    
    
    $
    0.2Century Man 2009 Earn-out
    
    
    5.4
    
    
    
    
    
    
    
    5.4Balance as of January 1, 2010
    
    $
    5.6
    
    
    $
    
    
    
    $
    5.6
  Note 8: Notes Payable
  January 1, 2010
    
    
    September 30, 2009(In millions)Convertible subordinated notes, six-month LIBOR plus 0.375%, due June 15, 2013
    
    $
    200.0
    
    
    $
    200.0Convertible subordinated notes, 3.5% fixed rate, due July 15, 2015
    
    
    225.0
    
    
    
    225.0Convertible subordinated notes, 3.5% fixed rate, due July 15, 2017
    
    
    225.0
    
    
    
    225.0Total convertible subordinated notes
    
    
    650.0
    
    
    
    650.0Other, variable rate, various due dates
    
    
    1.5
    
    
    
    1.6Total debt
    
    
    651.5
    
    
    
    651.6Less: Current portion of long-term debt
    
    
    0.6
    
    
    
    0.6Long-term debt
    
    $
    650.9
    
    
    $
    651.0
  11




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Credit Facility
     Note 9: Income Taxes
    Note 10: Comprehensive Income (Loss)
  12




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##### Table of Contents



Three Months EndedJanuary 1,
    
    
    December 26,2010
    
    
    2008(In millions)Net loss available to ADC common shareowners
    
    $
    (11.2
    )
    
    $
    (49.7
    )Change in cumulative translation adjustment
    
    
    1.5
    
    
    
    (9.6
    )Unrealized gain (loss) on interest rate swap
    
    
    1.2
    
    
    
    (15.1
    )Unrealized gain/(loss) on foreign currency hedge
    
    
    0.2
    
    
    
    (2.8
    )Pension obligation adjustment, net
    
    
    
    
    
    
    6.4Unrealized gain on securities
    
    
    0.6
    
    
    
    (0.2
    )Total comprehensive loss available to ADC common shareowners
    
    
    (7.7
    )
    
    
    (71.0
    )Comprehensive earnings (loss) available to non-controlling interests
    
    
    0.1
    
    
    
    (1.2
    )Total comprehensive loss
    
    $
    (7.6
    )
    
    $
    (72.2
    )
  Note 11: Changes in Shareowners Equity
  ADC Common
    
    
    Non-controllingShareowners
    
    
    Interests
    
    
    Total(In millions)Balance as of September 30, 2009
    
    $
    356.2
    
    
    $
    4.7
    
    
    $
    360.9Net Income (loss)
    
    
    (11.0
    )
    
    
    (0.2
    )
    
    
    (11.2
    )Other Comprehensive Income (loss)
    
    
    3.3
    
    
    
    0.3
    
    
    
    3.6Total Other Comprehensive Income (loss)
    
    
    (8.7
    )
    
    
    0.1
    
    
    
    (8.6
    )Common Stock
    
    
    
    
    
    
    
    
    
    
    Treasury Stock
    
    
    
    
    
    
    
    
    
    
    Paid in capital
    
    
    5.8
    
    
    
    
    
    
    
    5.8Shareholders equity, January 1, 2010
    
    $
    354.3
    
    
    $
    4.8
    
    
    $
    359.1
 Note 12: Segment and Geographic Information
   
    
    Connectivity
    
    Network Solutions
    
    Professional Services
 Connectivity
 13




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Network Solutions
  Professional Services
   Network
    
    
    Professional
    
    
    
    
    
    
    Restructuring
    
    
    GAAPConnectivity
    
    
    Solutions
    
    
    Services
    
    
    Consolidated
    
    
    and Impairment
    
    
    Consolidated(In millions)Three Months Ended January 1, 2010External net sales:Products
    
    $
    200.2
    
    
    $
    18.4
    
    
    $
    9.4
    
    
    $
    228.0
    
    
    
    
    
    
    $
    228.0Services
    
    
    1.3
    
    
    
    6.8
    
    
    
    29.5
    
    
    
    37.6
    
    
    
    
    
    
    
    37.6Total external net sales
    
    $
    201.5
    
    
    $
    25.2
    
    
    $
    38.9
    
    
    $
    265.6
    
    
    
    
    
    
    $
    265.6Depreciation and amortization
    
    $
    13.7
    
    
    $
    1.1
    
    
    $
    0.8
    
    
    $
    15.6
    
    
    
    
    
    
    $
    15.6Operating income (loss)
    
    $
    9.5
    
    
    $
    (4.8
    )
    
    $
    0.4
    
    
    $
    5.1
    
    
    $
    (9.2
    )
    
    $
    (4.1
    )Three Months Ended December 26, 2008External net sales:Products
    
    $
    234.7
    
    
    $
    16.7
    
    
    $
    12.0
    
    
    $
    263.4
    
    
    
    
    
    
    $
    263.4Services
    
    
    
    
    
    
    6.4
    
    
    
    29.9
    
    
    
    36.3
    
    
    
    
    
    
    
    36.3Total external net sales
    
    $
    234.7
    
    
    $
    23.1
    
    
    $
    41.9
    
    
    $
    299.7
    
    
    
    
    
    
    $
    299.7Depreciation and amortization
    
    $
    15.6
    
    
    $
    2.6
    
    
    $
    0.8
    
    
    $
    19.0
    
    
    
    
    
    
    $
    19.0Operating income (loss)
    
    $
    0.4
    
    
    $
    (14.7
    )
    
    $
    2.4
    
    
    $
    (11.9
    )
    
    $
    (12.6
    )
    
    $
    (24.5
    )
 Geographic Information
  Three Months EndedJanuary 1,
    
    
    December 26,2010
    
    
    2008(In millions)Geographic Sales Information:Inside the United States
    
    $
    153.5
    
    
    $
    168.5Outside the United States:Asia Pacific (Australia, Hong Kong, India, Japan, Korea, New Zealand, Southeast Asia and Taiwan)
    
    
    28.8
    
    
    
    31.1China (1)
    
    
    23.2
    
    
    
    18.7EMEA (Europe (excluding Germany), Middle East and Africa)
    
    
    34.1
    
    
    
    45.8Germany (1)
    
    
    8.7
    
    
    
    11.2Americas (Canada, Central and South America)
    
    
    17.3
    
    
    
    24.4Total net sales
    
    $
    265.6
    
    
    $
    299.7Property and Equipment, Net: (2)Inside the United States
    
    $
    105.2Outside the United States
    
    
    53.1Total property and equipment
    
    $
    158.3
 
 (1)
    
    Due to the significance of their sales, China and Germany are broken out for geographic
purposes.(2)
    
    Other than the U.S., no single country has property and equipment sufficiently material to
disclose. 14




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##### Table of Contents



Note 13: Impairment and Restructuring Charges
  Three Months EndedJanuary 1,
    
    
    December 26,2010
    
    
    2008(In millions)Impairments:Fixed asset write-downs
    
    $
    0.1
    
    
    $
    0.7Intangibles
    
    
    
    
    
    
    3.4Total impairment charges
    
    
    0.1
    
    
    
    4.1Restructuring charges:Employee severance
    
    
    9.0
    
    
    
    8.0Facilities consolidation and lease termination
    
    
    0.2
    
    
    
    0.5Total restructuring charges
    
    
    9.2
    
    
    
    8.5Other disposal charges: Inventory write-offs
    
    
    
    
    
    
    14.0Total impairment, restructuring and other disposal charges
    
    $
    9.3
    
    
    $
    26.6
 Impairment Charges:
 Restructuring Charges:
   Other Disposal Charges:
 15




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##### Table of Contents



ContinuingAccrual
    
    
    Operations Net
    
    
    Cash payments
    
    
    AccrualType of Charge
    
    September 30, 2009
    
    
    Additions
    
    
    Charged to accrual
    
    
    January 1, 2010(In millions)Employee severance costs
    
    $
    29.1
    
    
    $
    9.0
    
    
    $
    4.7
    
    
    $
    33.4Facilities consolidation
    
    
    7.6
    
    
    
    0.2
    
    
    
    0.4
    
    
    
    7.4Total restructuring accrual
    
    $
    36.7
    
    
    $
    9.2
    
    
    $
    5.1
    
    
    $
    40.8
  Severance
    
    
    Facilities(In millions)2010
    
    $
    24.3
    
    
    $
    1.62011
    
    
    3.0
    
    
    
    1.42012
    
    
    2.6
    
    
    
    1.22013
    
    
    1.8
    
    
    
    1.22014
    
    
    1.1
    
    
    
    1.0Thereafter
    
    
    0.6
    
    
    
    1.0Total
    
    $
    33.4
    
    
    $
    7.4
  Note 14: Other Income (Expense), Net
  Three months endedJanuary 1,
    
    
    December 26,2010
    
    
    2008(In millions)Interest income on investments
    
    $
    1.2
    
    
    $
    5.2Interest expense on borrowings
    
    
    (6.7
    )
    
    
    (6.8
    )Interest income (expense), net
    
    
    (5.5
    )
    
    
    (1.6
    )Impairment loss on available-for-sale securities
    
    
    
    
    
    
    (26.4
    )Foreign exchange loss
    
    
    (1.2
    )
    
    
    (1.0
    )Gain on sale of fixed assets
    
    
    
    
    
    
    0.9Gain on sale of product line
    
    
    15.9
    
    
    
    Other, net
    
    
    (0.1
    )
    
    
    0.1Subtotal
    
    
    14.6
    
    
    
    (26.4
    )Total Other Income (Expense), net
    
    $
    9.1
    
    
    $
    (28.0
    )
   16




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##### Table of Contents



Note 15: Commitments and Contingencies
 Legal Contingencies
  Change of Control
 Note 16: Fair Value Measurements
  Fair Value Hierarchy
  17




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##### Table of Contents



Level 1
  Level 2
   
    
    Determining which instruments are most similar to the instrument being priced requires
management to identify a sample of similar securities based on the coupon rates, maturity,
issuer, credit rating and instrument type, and subjectively select an individual security or
multiple securities that are deemed most similar to the security being priced; and
    
    Determining whether a market is considered active requires management judgment.
 Level 3
   Assets and Liabilities Measured at Fair Value on a Recurring Basis
  Fair Value Measurements at Reporting Date UsingQuoted Prices inActive Markets
    
    
    
    
    
    
    Significantfor Identical
    
    
    Significant Other
    
    
    UnobservableJanuary 1,
    
    
    Assets
    
    
    Observable Inputs
    
    
    InputsDescription
    
    2010
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Cash and cash equivalents
    
    $
    558.5
    
    
    $
    558.5
    
    
    $
    
    
    
    $
    Available-for-sale securities
    
    
    51.0
    
    
    
    51.0
    
    
    
    
    
    
    
    Restricted cash
    
    
    22.6
    
    
    
    22.6
    
    
    
    
    
    
    
    Foreign currency hedges
    
    
    0.3
    
    
    
    0.3
    
    
    
    
    
    
    
    Long-term available-for-sale securities (auction-rate securities)
    
    
    23.2
    
    
    
    
    
    
    
    
    
    
    
    23.2Total assets measured at fair value
    
    $
    655.6
    
    
    $
    632.4
    
    
    $
    
    
    
    $
    23.2Liabilities:Interest rate swap liabilities (included in other noncurrent liabilities)
    
    
    11.0
    
    
    
    
    
    
    
    11.0
    
    
    
    Total liabilities measured at fair value
    
    $
    11.0
    
    
    $
    
    
    
    $
    11.0
    
    
    $
    
 18




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##### Table of Contents



Fair ValueMeasurements UsingSignificantUnobservable Inputs(Level 3)Beginning balance
    
    $
    24.3Total gains or losses (realized or unrealized)Included in earnings
    
    
    Included in other comprehensive income
    
    
    0.9Purchases, sales, issuance, and settlements
    
    
    (2.0
    )Transfers in and /or out of Level 3
    
    
    Ending balance
    
    $
    23.2
  Note 17: Derivative Instruments and Hedging Activities
    Cash flow hedges
  19




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##### Table of Contents



Year Swapentered into
    
    Fixed Rate
    
    Notional Amount
    
    Expiration Date2008
    
    
    4.0
    %
    
    $
    200,000,000
    
    
    June 2013
    Derivatives in cash flow hedging relationships
    
    Interest rate swap (1)
    
    
    Mexican peso hedge (2)
    
    
    TotalBalance as of September 30, 2009
    
    $
    (12.2
    )
    
    $
    0.4
    
    
    $
    (11.8
    )Amount of (gain) loss recognized in OCI on
derivative (effective portion)
    
    
    (0.3
    )
    
    
    0.2
    
    
    
    (0.1
    )Amount of (gain) loss reclassified from OCI
into income (effective portion) (3)
    
    
    1.5
    
    
    
    (0.3
    )
    
    
    1.2Balance as of January 1, 2010
    
    $
    (11.0
    )
    
    $
    0.3
    
    
    $
    (10.7
    )
 
 (1)
    
    Short-term portion included in other accrued liabilities and long-term portion included in
other long-term liabilities on the consolidated balance sheet. The short-term and long-term
portions for January 1, 2010 were liabilities of $6.6 million and $4.4 million, respectively.
The short-term and long-term portions for September 30, 2009 were liabilities of $5.0 million
and $7.2 million, respectively.(2)
    
    Assets are included in prepaid expenses and other current assets and liabilities are
included in other accrued liabilities on the consolidated balance sheet.(3)
    
    Gains and losses are reclassified to interest income (expense) for the interest rate swap and
cost of goods sold for the Mexican peso hedge.     Derivatives not designated as
    
    Amount of gain (loss) recognizedhedging instruments
    
    in income on derivativeLocation of gain (loss)
    
    Three months endedrecognized in income on derivative
    
    January 1, 2010
    
    December 26, 2008Foreign currency hedges
    
    Other income (expense), net
    
    $
    (0.1
    )
    
    $
    3.4
 20




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##### Table of Contents



Note 18: Common Stock Repurchase Plan
  Note 19: Subsequent Events
  
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
     
    
    Connectivity
    
    Network Solutions
    
    Professional Services
 Connectivity
 Network Solutions
 21




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##### Table of Contents



Professional Services
 Marketplace Conditions
   Industry Conditions
   
    
    First, businesses and consumers worldwide are becoming increasingly dependent on
broadband, multi-service communications networks to conduct a wide range of daily
communications tasks (e.g., emails with large amounts of data, teleconferencing, social
networking, video streaming and photo sharing).
    
    Second, end-users of communications services increasingly expect to do business over a
single network connection at a low price. Both public networks operated by communications
service providers and private enterprise networks are evolving to provide combinations of
Internet, data, video and voice services that can be offered over the same high-speed
network.
  i.e.
  22




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##### Table of Contents



Strategy
  
    
    Business growth in fiber-based and wireless communications networks, and in growing
markets and geographies;
    
    Operational excellence that drives low-cost industry leadership and provides our
customers with superior products and support; and
    
    Improved customer service and focus through alignment with the next generation network
needs of our global customer base.
 Business Growth in Areas of High Strategic Importance.
  Operational Excellence and Low Cost Industry Leadership
  Improved Customer Service and Focus
  23




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##### Table of Contents



Results of Operations
 st th
 Net Sales
  Percentage IncreaseJanuary 1,
    
    
    December 26,
    
    
    (Decrease) Between2010
    
    
    2008
    
    
    Periods(In millions)Net sales
    
    $
    265.6
    
    
    $
    299.7
    
    
    
    (11.4
    )%Cost of sales
    
    
    173.5
    
    
    
    225.4
    
    
    
    (23.0
    )Gross profit
    
    
    92.1
    
    
    
    74.3
    
    
    
    24.0Gross margin
    
    
    34.7
    %
    
    
    24.8
    %Operating expenses:Research and development
    
    
    16.3
    
    
    
    17.0
    
    
    
    (4.1
    )Selling and administration
    
    
    70.6
    
    
    
    69.2
    
    
    
    2.0Impairment charges
    
    
    0.1
    
    
    
    4.1
    
    
    
    (97.6
    )Restructuring charges
    
    
    9.2
    
    
    
    8.5
    
    
    
    8.2Total operating expenses
    
    
    96.2
    
    
    
    98.8
    
    
    
    (2.6
    )Operating loss
    
    
    (4.1
    )
    
    
    (24.5
    )
    
    
    83.3Operating margin
    
    
    (1.5
    )%
    
    
    (8.2
    )%Other income (expense), net:Interest income, net
    
    
    (5.5
    )
    
    
    (1.6
    )
    
    
    (243.8
    )Other, net
    
    
    14.6
    
    
    
    (26.4
    )
    
    
    155.3
    %Income before income taxes
    
    
    5.0
    
    
    
    (52.5
    )Provision (benefit) for income taxes
    
    
    1.4
    
    
    
    (4.1
    )Income from continuing operations
    
    $
    3.6
    
    
    $
    (48.4
    )
  PercentageJanuary 1,
    
    
    December 26,
    
    
    Increase (Decrease)Reportable Segment
    
    2010
    
    
    2008
    
    
    Between Periods(In millions)ConnectivityProducts
    
    $
    200.2
    
    
    $
    234.7
    
    
    
    (14.7
    )%Services
    
    
    1.3
    
    
    
    
    
    
    
    Total Connectivity
    
    
    201.5
    
    
    
    234.7
    
    
    
    (14.1
    )Network Solutions:Products
    
    
    18.4
    
    
    
    16.7
    
    
    
    10.2Services
    
    
    6.8
    
    
    
    6.4
    
    
    
    6.3Total Network Solutions
    
    
    25.2
    
    
    
    23.1
    
    
    
    9.1Professional Services:Products
    
    
    9.4
    
    
    
    12.0
    
    
    
    (21.7
    )Services
    
    
    29.5
    
    
    
    29.9
    
    
    
    (1.3
    )Total Professional Services
    
    
    38.9
    
    
    
    41.9
    
    
    
    (7.2
    )Total Net Sales
    
    $
    265.6
    
    
    $
    299.7
    
    
    
    (11.4
    )%
 24




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##### Table of Contents



Gross Profit
  Operating Expenses
  Research and development:
 25




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##### Table of Contents



Selling and administration:
 Restructuring charges:
   Other Disposal Charges:
 Impairments:
 Other Income (Expense), Net
  Three months endedJanuary 1,
    
    
    December 26,2010
    
    
    2008(In millions)Interest income on investments
    
    $
    1.2
    
    
    $
    5.2Interest expense on borrowings
    
    
    (6.7
    )
    
    
    (6.8
    )Interest income (expense), net
    
    
    (5.5
    )
    
    
    (1.6
    )Impairment loss on available-for-sale securities
    
    
    
    
    
    
    (26.4
    )Foreign exchange loss
    
    
    (1.2
    )
    
    
    (1.0
    )Gain on sale of fixed assets
    
    
    
    
    
    
    0.9Gain on sale of product line
    
    
    15.9
    
    
    
    Other, net
    
    
    (0.1
    )
    
    
    0.1Subtotal
    
    
    14.6
    
    
    
    (26.4
    )Total Other Income (Expense), net
    
    $
    9.1
    
    
    $
    (28.0
    )
 26




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##### Table of Contents



Income Taxes
   Three Months EndedJanuary 1, 2010
    
    
    December 26, 2008(In millions, except tax rates)Provision (Benefit) For Income Taxes
    
    $
    1.4
    
    
    $
    (4.1
    )Income (Loss) Before Income Taxes
    
    $
    5.0
    
    
    $
    (52.5
    )Effective income tax rate
    
    
    28.0
    %
    
    
    7.8
    %
    27




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##### Table of Contents



Discontinued Operations
 GSM Base Station and Switching Business
  APS Germany
  APS France
  Application of Critical Accounting Policies and Estimates
  Recently Adopted Accounting Pronouncements
 Business combinations and non-controlling interests
  Fair Value Measurements
  28




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##### Table of Contents



Accounting for Convertible Debt Instruments That May be Settled in Cash upon Conversion
(Including Partial Cash Settlement)
  Determining Whether an Instrument (or an Embedded Feature) is Indexed to an Entitys Own Stock
  Liquidity and Capital Resources
 Liquidity
     29




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##### Table of Contents



Operating Activities
    Investing Activities
   Financing Activities
      30




---



##### Table of Contents



Off-Balance-Sheet Arrangements and Contractual Obligations
  Working Capital and Liquidity Outlook
     Cautionary Statement Regarding Forward Looking Information
  31




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  32




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
   
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  Voted For
    
    Withheld
    

Broker Non-votesJohn J. Boyle III
    
    52,169,389
    
    10,021,211
    
    21,561,646William R. Spivey, Ph.D
    
    54,172,586
    
    8,018,014
    
    21,561,646Robert E. Switz
    
    51,607,308
    
    10,583,292
    
    21,561,646Larry W. Wangberg
    
    54,333,389
    
    7,857,211
    
    21,561,646
  Votes For
    
    Votes Against
    
    Abstentions81,601,068
    

1,826,556
    

324,622
 33




---



##### Table of Contents



Votes For
    
    Votes Against
    
    Abstentions
    
    Broker Non-votes49,804,938
    
    11,445,646
    
    940,016
    
    21,561,646
  Votes For
    
    Votes Against
    
    Abstentions81,591,678
    
    1,874,617
    
    285,951
 
 ITEM 5. OTHER INFORMATION
 2010 GSIP
       Fiscal 2010 Restructuring
  Annual Meeting Voting Results
  34




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##### Table of Contents



ITEM 6. EXHIBITS
  35




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##### Table of Contents



SIGNATURES
  Dated: February 9, 2010
    ADC TELECOMMUNICATIONS, INC.By:
    /s/ James G. MathewsJames G. MathewsVice President, Chief Financial Officer
(Principal Financial Officer and Duly Authorized Officer) 36




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##### Table of Contents



ADC TELECOMMUNICATIONS, INC.
EXHIBIT INDEX TO FORM 10-Q
FOR THE THREE MONTHS ENDED JANUARY 1, 2010
 ExhibitNo.
    
    Description3.1
    
    Restated Articles of Incorporation of ADC Telecommunications, Inc., conformed to
incorporate amendments dated January 20, 2000, June 30, 2000, August 13, 2001, March 2,
2004 and May 9, 2005. (Incorporated by reference to Exhibit 3-a to ADCs Quarterly Report
on Form 10-Q for the quarter ended July 29, 2005.)3.2
    
    Restated Bylaws of ADC Telecommunications, Inc. effective December 9, 2008 (incorporated
by reference to Exhibit 3.1 to ADCs Current Report on Form 8-K filed on December 12,
2008).4.1
    
    Form of certificate for shares of Common Stock of ADC Telecommunications, Inc.
(Incorporated by reference to Exhibit 4-a to ADCs Quarterly Report on Form 10-Q for the
quarter ended April 29, 2005.)4.2
    
    Rights Agreement, as amended and restated as of May 9, 2007, between ADC
Telecommunications, Inc. and Computershare Investor Services, LLC, as Rights Agent (which
includes as Exhibit A, the Form of Certificate of Designation, Preferences and Right of
Series A Junior Participating Preferred Stock, as Exhibit B, the Form of Right
Certificate, and as Exhibit C, the Summary of Rights to Purchase Preferred Shares).
(Incorporated by reference to Exhibit 4-b to ADCs Form 8-A/A filed on May 11, 2007.)10.1
    
    ADC Telecommunications, Inc. Management Incentive Plan for Fiscal Year 2010 (incorporated
by reference to Exhibit 10.6 to ADCs Annual Report on Form 10-KT filed on November 23,
2009).10.2
    
    ADC Telecommunications, Inc. Executive Management Incentive Plan for Fiscal Year 2010
(incorporated by reference to Exhibit 10.7 to ADCs Annual Report on Form 10-KT filed on
November 23, 2009).10.3
    
    Form of ADC Telecommunications, Inc. Incentive Stock Option Agreement provided to
employees with respect to option grants made under the ADC Telecommunications, Inc. 2008
Global Stock Incentive Plan beginning November 23, 2009.*10.4
    
    Form of ADC Telecommunications, Inc. Nonqualified Stock Option Agreement provided to
employees with respect to option grants made under the ADC Telecommunications, Inc. 2008
Global Stock Incentive Plan beginning November 23, 2009.*10.5
    
    Form of ADC Telecommunications, Inc. Three-Year Time-Based Restricted Stock Unit Award
Agreement provided to employees with respect to restricted stock unit grants made under
the ADC Telecommunications, Inc. 2008 Global Stock Incentive Plan beginning November 23,
2009.*10. 6
    
    Loan and Security Agreement dated December 18, 2009 by and among ADC Telecommunications,
Inc., ADC Telecommunications Sales, Inc. and LGC Wireless, Inc. as borrowers; ADC DSL
Systems, Inc., ADC International OUS, Inc., ADC Optical Systems, Inc. and ADC
International Holding Inc. as guarantors and Wachovia Bank, National Association as
lender, administrative and collateral agent, syndication agent, lead arranger and lead
bookrunner (Incorporated by reference to Exhibit 10.1 to ADCs Current Report on Form 8-K
filed on December 18, 2009.)10.7
    
    ADC Telecommunications, Inc. 2010 Global Stock Incentive Plan.*31.1
    
    Certification of principal executive officer required by Exchange Act Rule 13a-14(a)*31.2
    
    Certification of principal financial officer required by Exchange Act Rule 13a-14(a)*32
    
    Certifications furnished pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002*
 
 *
    
    Filed herewith 37