##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended February 1, 2008
 OR
 o
    
    TRANSACTION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from N/A to N/A
 Commission file number 0-1424
 ADC Telecommunications, Inc.
  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
  Large Accelerated filer þ
    
    Accelerated filer o
    
    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
    
    
    17ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    27ITEM 4. CONTROLS AND PROCEDURES
    
    
    27PART II. OTHER INFORMATION
    
    
    29ITEM 1. LEGAL PROCEEDINGS
    
    
    29ITEM 1A. RISK FACTORS
    
    
    29ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    29ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    29ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    30ITEM 5. OTHER INFORMATION
    
    
    30ITEM 6. EXHIBITS
    
    
    30SIGNATURES
    
    
    31ADC TELECOMMUNICATIONS, INC. EXHIBIT INDEX TO FORM 10-Q FOR THE THREE MONTHS ENDED FEBRUARY 1, 2008
    
    
    32Form of Incentive Stock Option AgreementForm of Nonqualified Stock Option AgreementForm of Three-Year Time Based Restricted Stock Unit Award AgreementForm of Three-Year Performance Based Restricted Stock Unit Award AgreementForm of Restricted Stock Unit Award AgreementCertification of Principal Executive Officer Required by Rule 13a-14(a)Certification of Principal Financial Officer Required by Rule 13a-14(a)Certifications Pursuant to Section 906
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PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETSUNAUDITED
 February 1,
    
    
    October 31,2008
    
    
    2007(In millions)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    792.6
    
    
    $
    520.2Available-for-sale securities
    
    
    3.3
    
    
    
    61.6Accounts receivable, net of reserves of $6.7 and $6.6
    
    
    220.4
    
    
    
    189.4Unbilled revenue
    
    
    28.6
    
    
    
    34.3Inventories, net of reserves of $41.6 and $41.3
    
    
    197.5
    
    
    
    170.2Prepaid and other current assets
    
    
    37.4
    
    
    
    32.1Assets of discontinued operations
    
    
    
    
    
    
    0.4Total current assets
    
    
    1,279.8
    
    
    
    1,008.2Property and equipment, net of accumulated depreciation of $405.6 and $395.9
    
    
    201.0
    
    
    
    199.2Restricted cash
    
    
    13.1
    
    
    
    12.8Goodwill
    
    
    349.6
    
    
    
    238.4Intangibles, net of accumulated amortization of $106.2 and $95.9
    
    
    188.2
    
    
    
    121.9Long-term available-for-sale securities
    
    
    90.3
    
    
    
    113.8Other assets
    
    
    83.1
    
    
    
    70.5Total assets
    
    $
    2,205.1
    
    
    $
    1,764.8LIABILITIES AND SHAREOWNERS INVESTMENTCurrent Liabilities:Current portion of long-term debt
    
    $
    220.6
    
    
    $
    200.6Accounts payable
    
    
    106.2
    
    
    
    92.5Accrued compensation and benefits
    
    
    59.4
    
    
    
    80.8Other accrued liabilities
    
    
    62.1
    
    
    
    61.2Income taxes payable
    
    
    3.5
    
    
    
    15.5Restructuring accrual
    
    
    16.1
    
    
    
    19.6Liabilities of discontinued operations
    
    
    2.3
    
    
    
    3.9Total current liabilities
    
    
    470.2
    
    
    
    474.1Pension obligations and other long-term liabilities
    
    
    96.8
    
    
    
    82.5Long-term debt
    
    
    651.3
    
    
    
    200.6Total liabilities
    
    
    1,218.3
    
    
    
    757.2Shareowners Investment:(117.6 and 117.6 shares outstanding, respectively)
    
    
    986.8
    
    
    
    1,007.6Total liabilities and shareowners investment
    
    $
    2,205.1
    
    
    $
    1,764.8
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ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSUNAUDITED
 Three Months EndedFebruary 1, 2008
    
    
    February 2, 2007(In millions, except earnings per share)Net Sales:Products
    
    $
    298.4
    
    
    $
    261.8Services
    
    
    40.1
    
    
    
    35.4Total net sales
    
    
    338.5
    
    
    
    297.2Cost of Sales:Products
    
    
    181.8
    
    
    
    168.9Services
    
    
    35.0
    
    
    
    33.4Total cost of sales
    
    
    216.8
    
    
    
    202.3Gross Profit
    
    
    121.7
    
    
    
    94.9Operating Expenses:Research and development
    
    
    19.5
    
    
    
    16.8Selling and administration
    
    
    82.6
    
    
    
    70.3Restructuring charges
    
    
    1.2
    
    
    
    0.6Total operating expenses
    
    
    103.3
    
    
    
    87.7Operating Income
    
    
    18.4
    
    
    
    7.2Other Income (Loss), Net
    
    
    (44.9
    )
    
    
    3.6Income (loss) before income taxes
    
    
    (26.5
    )
    
    
    10.8Provision for income taxes
    
    
    1.5
    
    
    
    1.1Income (loss) from continuing operations
    
    
    (28.0
    )
    
    
    9.7Discontinued Operations, Net of Tax:Income (loss) from discontinued operations
    
    
    0.7
    
    
    
    (1.0
    )Loss on sale of discontinued operations, net
    
    
    
    
    
    
    (5.1
    )Total discontinued operations, net of tax
    
    
    0.7
    
    
    
    (6.1
    )Net Income (Loss)
    
    $
    (27.3
    )
    
    $
    3.6Weighted Average Common Shares Outstanding (Basic)
    
    
    117.6
    
    
    
    117.2Weighted Average Common Shares Outstanding (Diluted)
    
    
    117.6
    
    
    
    117.3Basic Income (Loss) Per Share:Continuing operations
    
    $
    (0.24
    )
    
    $
    0.08Discontinued operations
    
    $
    0.01
    
    
    $
    (0.05
    )Net income (loss) per share
    
    $
    (0.23
    )
    
    $
    0.03Diluted Income (Loss) Per Share:Continuing operations
    
    $
    (0.24
    )
    
    $
    0.08Discontinued operations
    
    $
    0.01
    
    
    $
    (0.05
    )Net income (loss) per share
    
    $
    (0.23
    )
    
    $
    0.03
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ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSUNAUDITED
 Three Months EndedFebruary 1, 2008
    
    
    February 2, 2007(In millions)Operating Activities:Income (loss) from continuing operations
    
    $
    (28.0
    )
    
    $
    9.7Adjustments to reconcile income (loss) from continuing operations to net cash
provided by operating activities from continuing operations:Inventory write-offs
    
    
    2.8
    
    
    
    2.2Write-down of investments
    
    
    50.2
    
    
    
    Depreciation and amortization
    
    
    20.2
    
    
    
    17.1Provision for bad debt
    
    
    (0.3
    )
    
    
    (0.2
    )Change in warranty reserves
    
    
    (1.5
    )
    
    
    0.8Non-cash stock compensation
    
    
    5.4
    
    
    
    1.9Change in deferred income taxes
    
    
    (2.5
    )
    
    
    Loss on sale of property and equipment
    
    
    
    
    
    
    0.3Other, net
    
    
    (2.5
    )
    
    
    (1.0
    )Changes in operating assets and liabilities, net of acquisitions and divestitures:Accounts receivable and unbilled revenues decrease
    
    
    28.8
    
    
    
    18.5Inventories increase
    
    
    (14.6
    )
    
    
    (3.8
    )Prepaid and other assets decrease/(increase)
    
    
    5.7
    
    
    
    (1.3
    )Accounts payable decrease
    
    
    (15.5
    )
    
    
    (6.2
    )Accrued liabilities decrease
    
    
    (42.6
    )
    
    
    (6.6
    )Total cash provided by operating activities from continuing operations
    
    
    5.6
    
    
    
    31.4Total cash used for operating activities from discontinued operations
    
    
    (0.5
    )
    
    
    (5.6
    )Total cash provided by operating activities
    
    
    5.1
    
    
    
    25.8Investing Activities:Acquisitions, net of cash acquired
    
    
    (197.1
    )
    
    
    Divestitures, net of cash disposed
    
    
    
    
    
    
    0.1Property, equipment and patent additions
    
    
    (7.4
    )
    
    
    (8.7
    )Proceeds from disposal of property and equipment
    
    
    0.1
    
    
    
    0.2Decrease in restricted cash
    
    
    
    
    
    
    1.2Purchase of available-for-sale securities
    
    
    (4.7
    )
    
    
    (267.4
    )Sale of available-for-sale securities
    
    
    36.7
    
    
    
    245.4Total cash used for investing activities from continuing operations
    
    
    (172.4
    )
    
    
    (29.2
    )Total cash provided by investing activities from discontinued operations
    
    
    
    
    
    
    0.7Total cash used for investing activities
    
    
    (172.4
    )
    
    
    (28.5
    )Financing Activities:Debt issued
    
    
    450.0
    
    
    
    Payments of financing costs
    
    
    (10.7
    )
    
    
    Common stock issued
    
    
    0.3
    
    
    
    0.1Total cash provided by financing activities
    
    
    439.6
    
    
    
    0.1Effect of Exchange Rate Changes on Cash
    
    
    0.1
    
    
    
    1.5Increase (Decrease) in Cash and Cash Equivalents
    
    
    272.4
    
    
    
    (1.1
    )Cash and Cash Equivalents, beginning of period
    
    
    520.2
    
    
    
    142.2Cash and Cash Equivalents, end of period
    
    $
    792.6
    
    
    $
    141.1
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ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTSUNAUDITED
 Note 1: Basis of Presentation
  Accounting for the
Impairment or Disposal of Long-Lived Assets,
 Fiscal Year
  Summary of Significant Accounting Policies
  Accounting for Uncertainty in Income Taxes  an interpretation of
FASB Statement No. 109.
   Increase in retained earnings
    
    $
    1.4Decrease in goodwill in connection with the KRONE acquisition
    
    
    0.9Decrease in cumulative translation adjustment
    
    
    1.5Increase in net deferred income tax assets
    
    
    5.8Increase in liabilities for unrecognized income tax benefits
    
    
    5.0
 Warranty
  6




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Accrual
    
    
    
    
    
    Charged to costs
    
    
    
    
    
    AccrualOctober 31, 2007
    
    Acquisitions
    
    and expenses
    
    Deductions
    
    February 1, 2008(In millions)Warranty Reserve
    
    $
    8.4
    
    
    $
    1.9
    
    
    $
    1.5
    
    
    $
    0.4
    
    
    $
    8.4
 Note 2: Share-Based Compensation
 Share-Based Payment: An amendment of
FASB Statement No. 123 and 95,
 Note 3: Acquisitions
 LGC
     December 3,2007Current assets
    
    $
    42.5Intangible assets
    
    
    61.3Goodwill
    
    
    84.9Other long-term assets
    
    
    4.5Total assets acquired
    
    
    193.2Current liabilities
    
    
    42.9Long-term liabilities
    
    
    1.0Total liabilities assumed
    
    
    43.9Net assets acquired
    
    
    149.3Less:Cash acquired
    
    
    0.6LGC Options exchanged for ADC Options
    
    
    3.0Net cash paid
    
    $
    145.7
 Century Man
  7




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January 10,2008Current assets
    
    $
    39.5Intangible assets
    
    
    13.0Goodwill
    
    
    26.9Other long-term assets
    
    
    3.4Total assets acquired
    
    
    82.8Current liabilities
    
    
    26.4Long-term liabilities
    
    
    Total liabilities assumed
    
    
    26.4Net assets acquired
    
    
    56.4Less cash acquired
    
    
    5.0Net cash paid
    
    $
    51.4
 Pro-Forma Results of Operations
  Three Months EndedFebruary 1,
    
    
    February 2,2008
    
    
    2007Net sales
    
    $
    363.0
    
    
    $
    323.4Income (loss) from continuing operations
    
    
    (25.2
    )
    
    
    8.3Income (loss) from continuing operations per share  basic and diluted
    
    
    (0.21
    )
    
    
    0.07Net income (loss) from continuing operations per share  basic and diluted
    
    $
    (0.22
    )
    
    $
    0.02
  Note 4: Discontinued Operations
   8




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Accounting for
the Impairment or Disposal of Long-Lived Assets.
 Three Months EndedFebruary 1,
    
    
    February 2,2008
    
    
    2007(In millions)Net sales
    
    $
    
    
    
    $
    7.1Income (loss) from discontinued operations
    
    
    0.7
    
    
    
    (1.0
    )Loss on sale of discontinued operations
    
    
    
    
    
    
    (5.1
    )Income (loss) from discontinued operations
    
    $
    0.7
    
    
    $
    (6.1
    )
 Note 5: Net Income (Loss) from Continuing Operations Per Share
  Three Months EndedFebruary 1,
    
    
    February 2,2008
    
    
    2007(In millions, exceptper share amounts)Numerator:Income (loss) from continuing operations
    
    $
    (28.0
    )
    
    $
    9.7Denominator:Weighted average common shares outstanding  basic
    
    
    117.6
    
    
    
    117.2Employee options
    
    
    
    
    
    
    0.1Weighted average common shares outstanding  diluted
    
    
    117.6
    
    
    
    117.3Basic and diluted income (loss) per share from continuing operations
    
    $
    (0.24
    )
    
    $
    0.08
   Convertible Shares
    
    Conversion(In millions)
    
    (In millions)
    
    Price$200 convertible subordinated note, 1.0% fixed rate, due June 15, 2008
    
    
    7.1
    
    
    $
    28.091$200 convertible subordinated note, 6-month LIBOR plus 0.375%, due June 15, 2013
    
    
    7.1
    
    
    
    28.091$225 convertible subordinated note, 3.5% fixed rate, due July 15, 2015
    
    
    8.3
    
    
    
    27.00$225 convertible subordinated note, 3.5% fixed rate, due July 15, 2017
    
    
    7.9
    
    
    
    28.55Total
    
    
    30.4
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Note 6: Inventories
  February 1,
    
    
    October 31,2008
    
    
    2007(In millions)Manufactured products
    
    $
    146.0
    
    
    $
    135.7Purchased materials
    
    
    85.1
    
    
    
    71.2Work-in-process
    
    
    8.0
    
    
    
    4.6Less: Inventory reserve
    
    
    (41.6
    )
    
    
    (41.3
    )Total inventories, net
    
    $
    197.5
    
    
    $
    170.2
 Note 7: Property and Equipment
  February 1,
    
    
    October 31,2008
    
    
    2007(In millions)Land and buildings
    
    $
    143.5
    
    
    $
    143.9Machinery and equipment
    
    
    413.5
    
    
    
    405.8Furniture and fixtures
    
    
    39.8
    
    
    
    39.4Less: Accumulated depreciation
    
    
    (405.6
    )
    
    
    (395.9
    )Total
    
    
    191.2
    
    
    
    193.2Construction-in-progress
    
    
    9.8
    
    
    
    6.0Total property and equipment, net
    
    $
    201.0
    
    
    $
    199.2
 Note 8: Goodwill and Intangible Assets
  (In millions)Balance as of October 31, 2007
    
    $
    238.4Goodwill acquired during the year
    
    
    111.8Other
    
    
    (0.6
    )Balance as of February 2, 2008
    
    $
    349.6
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Note 9: Long-Term Debt
  (In millions)
    
    February 1, 2008
    
    
    October 31, 2007Convertible subordinated note, 1.0% fixed rate, due June 15, 2008
    
    $
    200.0
    
    
    $
    200.0Convertible subordinated note, 6-month LIBOR plus 0.375%, due
June 15, 2013
    
    
    200.0
    
    
    
    200.0Convertible subordinated note, 3.5% fixed rate, due July 15, 2015
    
    
    225.0
    
    
    
    Convertible subordinated note, 3.5% fixed rate, due July 15, 2017
    
    
    225.0
    
    
    
    Total convertible subordinated notes
    
    
    850.0
    
    
    
    400.0Note, 1.5% fixed rate, due July 10, 2012
    
    
    0.7
    
    
    
    0.7Note, variable rate, renews monthly
    
    
    0.5
    
    
    
    0.5$10.0 million LGC line of credit, variable rate, due March 1, 2008
    
    
    8.2
    
    
    
    LGC Notes, 8% fixed rate, various due dates
    
    
    7.9
    
    
    
    LGC capital leases, various due dates
    
    
    1.2
    
    
    
    Century Man notes, variable rate, various due dates
    
    
    3.4
    
    
    
    Total debt
    
    
    871.9
    
    
    
    401.2Less: Current portion of long-term debt
    
    
    220.6
    
    
    
    200.6Long-term debt and capital lease obligations
    
    $
    651.3
    
    
    $
    200.6
    11




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Note 10: Income Taxes
     Major Jurisdictions
    
    Open Tax YearsAustralia
    
    
    2003-2007France
    
    
    2004-2007Germany
    
    
    2002-2007United Kingdom
    
    
    2005-2007United States
    
    
    2004-2007
 Accounting for Income Taxes,
   12




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Note 11: Comprehensive Income (Loss)
   Three Months EndedFebruary 1,
    
    
    February 2,2008
    
    
    2007(In millions)Net income (loss)
    
    $
    (27.3
    )
    
    $
    3.6Change in cumulative translation adjustment
    
    
    (3.3
    )
    
    
    0.5Total comprehensive income (loss)
    
    $
    (30.6
    )
    
    $
    4.1
  Note 12: Pension Benefits
   Three Months EndedFebruary 1, 2008
    
    
    February 2, 2007(In millions)Service cost
    
    $
    0.1
    
    
    $
    0.1Interest cost
    
    
    0.9
    
    
    
    0.7Net periodic benefit cost
    
    $
    1.0
    
    
    $
    0.8
 Note 13: Segment and Geographic Information
    
    
    Global Connectivity Solutions
    
    Network Solutions
    
    Professional Services
 Global Connectivity Solutions
 Network Solutions
 Professional Services
 13




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Three Months EndedFebruary 1,
    
    
    February 2,2008
    
    
    2007(In millions)Connectivity
    
    $
    246.3
    
    
    $
    226.0Network Solutions
    
    
    39.9
    
    
    
    22.5Professional Services
    
    
    52.3
    
    
    
    48.7Total net sales
    
    $
    338.5
    
    
    $
    297.2
  Network
    
    
    Professional
    
    
    
    
    
    
    
    
    
    
    GAAPConnectivity
    
    
    Solutions
    
    
    Services
    
    
    Consolidated
    
    
    Restructuring
    
    
    Consolidated(In millions)Three Months Ended February
1, 2008External net sales:Products
    
    $
    246.3
    
    
    $
    39.9
    
    
    $
    12.2
    
    
    $
    298.4
    
    
    
    
    
    
    $
    298.4Services
    
    
    
    
    
    
    
    
    
    
    40.1
    
    
    
    40.1
    
    
    
    
    
    
    
    40.1Total external net sales
    
    $
    246.3
    
    
    $
    39.9
    
    
    $
    52.3
    
    
    $
    338.5
    
    
    
    
    
    
    $
    338.5Depreciation and amortization
    
    $
    14.1
    
    
    $
    4.4
    
    
    $
    1.7
    
    
    $
    20.2
    
    
    
    
    
    
    $
    20.2Operating income (loss)
    
    $
    28.3
    
    
    $
    (5.7
    )
    
    $
    (3.0
    )
    
    $
    19.6
    
    
    $
    1.2
    
    
    $
    18.4Three Months Ended February
2, 2007External net sales:Products
    
    $
    226.0
    
    
    $
    22.5
    
    
    $
    13.3
    
    
    $
    261.8
    
    
    
    
    
    
    $
    261.8Services
    
    
    
    
    
    
    
    
    
    
    35.4
    
    
    
    35.4
    
    
    
    
    
    
    
    35.4Total external net sales
    
    $
    226.0
    
    
    $
    22.5
    
    
    $
    48.7
    
    
    $
    297.2
    
    
    
    
    
    
    $
    297.2Depreciation and amortization
    
    $
    14.1
    
    
    $
    1.3
    
    
    $
    1.7
    
    
    $
    17.1
    
    
    
    
    
    
    $
    17.1Operating income (loss)
    
    $
    12.6
    
    
    $
    (2.1
    )
    
    $
    (2.7
    )
    
    $
    7.8
    
    
    $
    0.6
    
    
    $
    7.2
 Geographic Information
  Three Months EndedFebruary 1,
    
    
    February 2,Geographic Sales Information:
    
    2008
    
    
    2007(In millions)Inside the United States
    
    $
    198.0
    
    
    $
    172.5Outside the United States:Asia Pacific (Australia, China, Hong Kong, India, Japan,
Korea, New Zealand, Southeast Asia and Taiwan)
    
    
    33.3
    
    
    
    31.1EMEA (Europe (excluding Germany), Middle East and Africa)
    
    
    67.6
    
    
    
    44.4Germany (1)
    
    
    18.3
    
    
    
    27.3Americas (Canada, Central and South America)
    
    
    21.3
    
    
    
    21.9Total net sales
    
    $
    338.5
    
    
    $
    297.2Property and Equipment, Net:Inside the United States
    
    $
    118.0Outside the United States
    
    
    83.0Total property and equipment, net
    
    $
    201.0
 
 (1)
    
    Due to the significance of its sales, Germany is broken out for geographic purposes.  14




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Note 14: Restructuring Charges
  Three Months EndedFebruary 1,
    
    
    February 2,2008
    
    
    2007(In millions)Employee severance
    
    $
    1.1
    
    
    $
    0.2Facilities consolidation and lease termination
    
    
    0.1
    
    
    
    0.4Total restructuring charges
    
    $
    1.2
    
    
    $
    0.6
    ContinuingAccrual
    
    
    Operations Net
    
    
    Cash payments
    
    
    AccrualType of Charge
    
    October 31, 2007
    
    
    Additions
    
    
    Charged to accrual
    
    
    February 1, 2008(In millions)Employee severance costs
    
    $
    7.6
    
    
    $
    1.1
    
    
    $
    3.0
    
    
    $
    5.7Facilities consolidation
    
    
    12.0
    
    
    
    0.1
    
    
    
    1.7
    
    
    
    10.4Total restructuring accrual
    
    $
    19.6
    
    
    $
    1.2
    
    
    $
    4.7
    
    
    $
    16.1
  15




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Note 15: Other Income (Loss), Net
  Three months endedFebruary 1,
    
    
    February 2,2008
    
    
    2007(In millions)Interest income on investments
    
    $
    9.9
    
    
    $
    7.2Interest expense on borrowings
    
    
    (5.6
    )
    
    
    (4.1
    )Interest income, net
    
    
    4.3
    
    
    
    3.1Impairment loss on available-for-sale securities
    
    
    (50.2
    )
    
    
    Foreign exchange income
    
    
    1.0
    
    
    
    0.6Loss on sale of fixed assets
    
    
    
    
    
    
    (0.3
    )Gain on investments
    
    
    
    
    
    
    0.4Other, net
    
    
    
    
    
    
    (0.2
    )Subtotal
    
    
    (49.2
    )
    
    
    0.5Total other income (loss), net
    
    $
    (44.9
    )
    
    $
    3.6
 The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments.
 Note 16: Commitments and Contingencies
 Legal Contingencies
  Other Contingencies
 Change of Control
 16




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
      
    
    Global Connectivity Solutions
    
    Network Solutions
    
    Professional Services
 Global Connectivity Solutions
 Network Solutions
 Professional Services
 17




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Marketplace Conditions
   
    
    First, businesses and consumers worldwide increasingly are becoming dependent on broadband,
multi-service communications networks to conduct daily communications tasks for a wide range
of business and personal purposes (e.g., emails with large amounts of data, online gaming,
video streaming and photo sharing). Specifically, individuals and businesses increasingly are
using a wide variety of broadband applications through all types of networks. This demand for
additional broadband services in turn increases the need for broadband network infrastructure
products.
    
    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
connection.
      18




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##### Table of Contents



® ®
  
    
    migrating sales volume to customer-preferred, leading technology products and sunsetting
end of life products;
    
    improving our customers ordering experience through a faster, simpler, more efficient
inquiry-to-invoice process;
    
    redesigning product lines to gain efficiencies from the use of more common components and
improve customization capabilities;
    
    increasing direct material savings from strategic global sourcing;
    
    improving cash flow from supplier-managed inventory and lead-time reduction programs;
    
    relocating certain manufacturing, engineering and other operations from higher-cost
geographic areas to lower-cost areas; and
    
    focusing our resources on core operations, and, where appropriate, using third parties to
perform non-core processes.
       19




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Results of Operations
 Net Sales
  PercentageFebruary 1,
    
    
    February 2,
    
    
    Increase (Decrease)2008
    
    
    2007
    
    
    Between Periods(In millions)Net sales
    
    $
    338.5
    
    
    $
    297.2
    
    
    
    13.9
    %Cost of sales
    
    
    216.8
    
    
    
    202.3
    
    
    
    7.2Gross profit
    
    
    121.7
    
    
    
    94.9
    
    
    
    28.2Gross margin
    
    
    36.0
    %
    
    
    31.9
    %Operating expenses:Research and development
    
    
    19.5
    
    
    
    16.8
    
    
    
    16.1Selling and administration
    
    
    82.6
    
    
    
    70.3
    
    
    
    17.5Restructuring charges
    
    
    1.2
    
    
    
    0.6
    
    
    
    100.0Total operating expenses
    
    
    103.3
    
    
    
    87.7
    
    
    
    17.8Operating income
    
    
    18.4
    
    
    
    7.2
    
    
    
    155.6Operating margin
    
    
    5.4
    %
    
    
    2.4
    %Other income (expense), net:Interest income, net
    
    
    4.3
    
    
    
    3.1
    
    
    
    38.7Other, net
    
    
    (49.2
    )
    
    
    0.5
    
    
    
    Income before income taxes
    
    
    (26.5
    )
    
    
    10.8
    
    
    
    (345.4
    )Provision for income taxes
    
    
    1.5
    
    
    
    1.1
    
    
    
    36.4Income from continuing operations
    
    $
    (28.0
    )
    
    $
    9.7
    
    
    
    (388.7
    %)
  PercentageFebruary 1,
    
    
    February 2,
    
    
    Increase (Decrease)Reportable Segment
    
    2008
    
    
    2007
    
    
    Between Periods(In millions)Connectivity
    
    $
    246.3
    
    
    $
    226.0
    
    
    
    9.0
    %Network Solutions
    
    
    39.9
    
    
    
    22.5
    
    
    
    77.3Professional Services:Products
    
    
    12.2
    
    
    
    13.3
    
    
    
    (8.3
    )Services
    
    
    40.1
    
    
    
    35.4
    
    
    
    13.3Total Professional Services
    
    
    52.3
    
    
    
    48.7
    
    
    
    7.4Total Net Sales
    
    $
    338.5
    
    
    $
    297.2
    
    
    
    13.9
    %
   20




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##### Table of Contents



Gross Profit
   Operating Expenses
  Research and development:
 Selling and administration:
 Restructuring charges:
 21




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##### Table of Contents



Other Income (Loss), Net
  Three months endedFebruary 1,
    
    
    February 2,2008
    
    
    2007(In millions)Interest income on investments
    
    $
    9.9
    
    
    $
    7.2Interest expense on borrowings
    
    
    (5.6
    )
    
    
    (4.1
    )Interest income, net
    
    
    4.3
    
    
    
    3.1Impairment loss on available-for-sale securities
    
    
    (50.2
    )
    
    
    Foreign exchange income
    
    
    1.0
    
    
    
    0.6Loss on sale of fixed assets
    
    
    
    
    
    
    (0.3
    )Gain on investments
    
    
    
    
    
    
    0.4Other, net
    
    
    
    
    
    
    (0.2
    )Subtotal
    
    
    (49.2
    )
    
    
    0.5Total other income (loss), net
    
    $
    (44.9
    )
    
    $
    3.6
 The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments.
 Income Taxes
     22




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Acquisitions
 LGC
    Century Man
    Discontinued Operations
   23




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##### Table of Contents



Application of Critical Accounting Policies and Estimates
  Liquidity and Capital Resources
 Liquidity
   February 1,
    
    
    October 31,(In millions)
    
    2008
    
    
    2007Current available-for-sale securities
    
    $
    3.3
    
    
    $
    61.6Long-term available-for sale securities
    
    
    90.3
    
    
    
    113.8Total available for sale securities
    
    $
    93.6
    
    
    $
    175.4
   Operating Activities
   24




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##### Table of Contents



Investing Activities
   Financing Activities
  Unsecured Debt
  February 1,
    
    
    Conversion(In millions)
    
    2008
    
    
    PriceConvertible subordinated note, 1.0% fixed rate, due June 15, 2008
    
    $
    200.0
    
    
    $
    28.091Convertible subordinated note, 6-month LIBOR plus 0.375%, due June 15, 2013
    
    
    200.0
    
    
    
    28.091Convertible subordinated note, 3.5% fixed rate, due July 15, 2015
    
    
    225.0
    
    
    
    27.00Convertible subordinated note, 3.5% fixed rate, due July 15, 2017
    
    
    225.0
    
    
    
    28.55Total convertible subordinated notes
    
    $
    850.0
   25




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Off-Balance-Sheet Arrangements and Contractual Obligations
  Working Capital and Liquidity Outlook
      26




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Cautionary Statement Regarding Forward Looking Information
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  27




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Changes in Internal Control over Financial Reporting
  28




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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
  29




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##### Table of Contents



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  For
    
    WithheldMickey P. Foret
    
    102,052,547
    
    2,363,660J. Kevin Gilligan
    
    102,591,522
    
    1,824,685John D. Wunsch
    
    101,565,050
    
    2,851,157
  Votes For
    
    Votes Against
    
    Abstentions68,993,697
    
    14,475,615
    
    1,072,582
  Votes For
    
    Votes Against
    
    Abstentions103,678,008
    
    638,584
    
    99,614
 
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  30




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##### Table of Contents



SIGNATURES
  Dated: March 7, 2008
    ADC TELECOMMUNICATIONS, INC.By:
    /s/ James G. MathewsJames G. MathewsVice President, Chief Financial Officer
(Principal Financial Officer and Duly Authorized Officer)




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##### Table of Contents



ADC TELECOMMUNICATIONS, INC.
EXHIBIT INDEX TO FORM 10-Q
FOR THE THREE MONTHS ENDED FEBRUARY 1, 2008
 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 April 18, 2005.
(Incorporated by reference to Exhibit 3-f to ADCs Quarterly Report on Form 10-Q for
the quarter ended April 29, 2005.)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 July 30, 2003, between ADC
Telecommunications, Inc. and Computershare Investor Services, LLC as Rights Agent.
(Incorporated by reference to Exhibit 4-b to ADCs Form 8-A/A filed on July 31,
2003.)4.3
    
    Indenture dated as of June 4, 2003, between ADC Telecommunications, Inc. and U.S.
Bank National Association. (Incorporated by reference to Exhibit 4-g of ADCs
Quarterly Report on Form 10-Q for the quarter ended July 31, 2003.)4.4
    
    Registration Rights Agreement dated as of June 4, 2003, between ADC
Telecommunications, Inc. and Banc of America Securities LLC, Credit Suisse First
Boston LLC and Merrill Lynch Pierce Fenner & Smith Incorporated as representations
of the Initial Purchase of ADCs 1% Convertible Subordinated Notes due 2008 and
Floating Rate Convertible Subordinated Notes due 2013. (Incorporated by reference to
Exhibit 4-h to ADCs Quarterly Report on Form 10-Q for the quarter ended July 31,
2003.)4.5
    
    Indenture dated as of December 26, 2007, between ADC Telecommunications, Inc. and
U.S. Bank National Association. (Incorporated by reference to Exhibit 4.1 of ADCs
Current Report on Form 8-K dated December 19, 2007.)4.6
    
    Indenture dated as of December 26, 2007, between ADC Telecommunications, Inc. and
U.S. Bank National Association. (Incorporated by reference to Exhibit 4.2 of ADCs
Current Report on Form 8-K dated December 19, 2007.)10.1
    
    ADC Telecommunications, Inc. 2008 Global Stock Incentive Plan. (Incorporated by
reference to Appendix A of ADCs Revised Definitive Proxy Statement on Schedule 14A
filed on January 17, 2008.)10.2
    
    Form of ADC Telecommunications, Inc. Incentive Stock Option Agreement provided to
employees with respect to option grants made under the ADC Telecommunications, Inc.
Global Stock Incentive Plan beginning December 17, 2007.*10.3
    
    Form of ADC Telecommunications, Inc. Nonqualified Stock Option Agreement provided to
employees with respect to option grants made under the ADC Telecommunications, Inc.
Global Stock Incentive Plan beginning December 17, 2007.*10.4
    
    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. Global Stock Incentive Plan beginning
December 17, 2007.*10.5
    
    Form of ADC Telecommunications, Inc. Three-Year Performance Based Restricted Stock
Unit Award Agreement provided to employees with respect to restricted stock unit
grants made under the ADC Telecommunications, Inc. Global Stock Incentive Plan
beginning December 17, 2007.*10.6
    
    Form of Restricted Stock Unit Award Agreement provided to non-employee directors
with respect to restricted stock unit grants made under the ADC Telecommunications
Inc. 2008 Global Stock Incentive Plan beginning March 7, 2008.*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
 32