##### Table of Contents



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 August 3, 2007
 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
  þ o o
  o þ




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##### 



TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART II. OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGSITEM 1A. RISK FACTORSITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSITEM 3. DEFAULTS UPON SENIOR SECURITIESITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSITEM 5. OTHER INFORMATIONITEM 6. EXHIBITSSIGNATURESADC TELECOMMUNICATIONS, INC. EXHIBIT INDEX TO FORM 10-Q FOR THE THREE MONTHS
ENDED AUGUST 3, 2007Certification of Principal Executive OfficerCertification of Principal Financial OfficerSection 906 Certifications
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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
 August 3,
    
    
    October 31,2007
    
    
    2006(In millions)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    149.0
    
    
    $
    142.3Available-for-sale securities
    
    
    528.7
    
    
    
    395.4Accounts receivable, net of reserves of $8.0 and $10.2
    
    
    176.7
    
    
    
    169.3Unbilled revenues
    
    
    32.6
    
    
    
    23.8Inventories, net of reserves of $41.0 and $35.1
    
    
    175.1
    
    
    
    165.5Prepaid and other current assets
    
    
    29.8
    
    
    
    31.5Assets of discontinued operations
    
    
    0.7
    
    
    
    14.9Total current assets
    
    
    1,092.6
    
    
    
    942.7Property and equipment, net of accumulated depreciation of $391.4 and $370.3
    
    
    201.9
    
    
    
    206.5Restricted cash
    
    
    12.9
    
    
    
    14.0Goodwill
    
    
    239.0
    
    
    
    238.5Intangibles, net of accumulated amortization of $83.1 and $66.5
    
    
    126.2
    
    
    
    142.0Available-for-sale securities
    
    
    4.0
    
    
    
    10.7Other assets
    
    
    60.8
    
    
    
    56.7Long term assets of discontinued operations
    
    
    
    
    
    
    0.3Total assets
    
    $
    1,737.4
    
    
    $
    1,611.4LIABILITIES AND SHAREOWNERS INVESTMENTCurrent Liabilities:Current portion of long term notes payable
    
    $
    200.7
    
    
    $
    Accounts payable
    
    
    92.0
    
    
    
    88.4Accrued compensation and benefits
    
    
    59.7
    
    
    
    43.6Other accrued liabilities
    
    
    53.9
    
    
    
    61.2Income taxes payable
    
    
    13.4
    
    
    
    17.7Restructuring accrual
    
    
    22.8
    
    
    
    27.8Liabilities of discontinued operations
    
    
    5.3
    
    
    
    21.4Total current liabilities
    
    
    447.8
    
    
    
    260.1Pension obligations and other long-term liabilities
    
    
    87.4
    
    
    
    77.8Long-term notes payable
    
    
    200.6
    
    
    
    400.0Total liabilities
    
    
    735.8
    
    
    
    737.9Shareowners Investment:(117.5 and 117.2 shares outstanding, respectively)
    
    
    1,001.6
    
    
    
    873.5Total liabilities and shareowners investment
    
    $
    1,737.4
    
    
    $
    1,611.4
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ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSUNAUDITED
 Three Months Ended
    
    
    Nine Months EndedAugust 3, 2007
    
    
    July 28, 2006
    
    
    August 3, 2007
    
    
    July 28, 2006(In millions, except per share amounts)Net Sales:Products
    
    $
    306.0
    
    
    $
    307.5
    
    
    $
    879.8
    
    
    $
    870.3Services
    
    
    40.1
    
    
    
    36.1
    
    
    
    112.9
    
    
    
    104.2Total net sales
    
    
    346.1
    
    
    
    343.6
    
    
    
    992.7
    
    
    
    974.5Cost of Sales:Products
    
    
    196.8
    
    
    
    201.3
    
    
    
    561.5
    
    
    
    568.6Services
    
    
    35.7
    
    
    
    30.1
    
    
    
    102.1
    
    
    
    85.8Total cost of sales
    
    
    232.5
    
    
    
    231.4
    
    
    
    663.6
    
    
    
    654.4Gross Profit
    
    
    113.6
    
    
    
    112.2
    
    
    
    329.1
    
    
    
    320.1Operating Expenses:Research and development
    
    
    18.0
    
    
    
    17.3
    
    
    
    53.3
    
    
    
    55.3Selling and administration
    
    
    69.6
    
    
    
    67.4
    
    
    
    209.1
    
    
    
    211.3Impairment charges
    
    
    2.7
    
    
    
    
    
    
    
    2.8
    
    
    
    0.6Restructuring charges
    
    
    9.3
    
    
    
    3.5
    
    
    
    8.9
    
    
    
    6.1Total operating expenses
    
    
    99.6
    
    
    
    88.2
    
    
    
    274.1
    
    
    
    273.3Operating Income
    
    
    14.0
    
    
    
    24.0
    
    
    
    55.0
    
    
    
    46.8Other income, net
    
    
    5.0
    
    
    
    2.3
    
    
    
    70.3
    
    
    
    7.2Income before income taxes
    
    
    19.0
    
    
    
    26.3
    
    
    
    125.3
    
    
    
    54.0Provision for income taxes
    
    
    2.0
    
    
    
    3.1
    
    
    
    5.8
    
    
    
    7.0Income from continuing operations
    
    
    17.0
    
    
    
    23.2
    
    
    
    119.5
    
    
    
    47.0Discontinued Operations, Net of TaxLoss from discontinued operations
    
    
    (0.6
    )
    
    
    (1.3
    )
    
    
    (2.5
    )
    
    
    (4.7
    )Gain (loss) on sale of discontinued operations, net
    
    
    0.2
    
    
    
    (17.3
    )
    
    
    (4.7
    )
    
    
    (17.3
    )Total discontinued operations
    
    
    (0.4
    )
    
    
    (18.6
    )
    
    
    (7.2
    )
    
    
    (22.0
    )Earnings before the cumulative effect of a change in
accounting principle
    
    
    16.6
    
    
    
    4.6
    
    
    
    112.3
    
    
    
    25.0Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.6Net Income
    
    $
    16.6
    
    
    $
    4.6
    
    
    $
    112.3
    
    
    $
    25.6Weighted Average Common Shares Outstanding (Basic)
    
    
    117.4
    
    
    
    117.2
    
    
    
    117.3
    
    
    
    117.0Weighted Average Common Shares Outstanding (Diluted)
    
    
    117.8
    
    
    
    117.4
    
    
    
    131.8
    
    
    
    117.5Basic Earnings (Loss) Per Share:Continuing operations
    
    $
    0.14
    
    
    $
    0.20
    
    
    $
    1.02
    
    
    $
    0.40Discontinued operations
    
    $
    
    
    
    $
    (0.16
    )
    
    $
    (0.06
    )
    
    $
    (0.19
    )Cumulative effect of a change in accounting principle
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0.01Net income per share
    
    $
    0.14
    
    
    $
    0.04
    
    
    $
    0.96
    
    
    $
    0.22Diluted Earnings (Loss) Per Share:Continuing operations
    
    $
    0.14
    
    
    $
    0.20
    
    
    $
    0.98
    
    
    $
    0.40Discontinued operations
    
    $
    
    
    
    $
    (0.16
    )
    
    $
    (0.05
    )
    
    $
    (0.19
    )Cumulative effect of a change in accounting principle
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0.01Net income per share
    
    $
    0.14
    
    
    $
    0.04
    
    
    $
    0.93
    
    
    $
    0.22
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ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSUNAUDITED
 Nine Months EndedAugust 3, 2007
    
    
    July 28, 2006(In millions)Operating Activities:Income from continuing operations
    
    $
    119.5
    
    
    $
    47.0Adjustments to reconcile income from continuing operations to net cash provided
by (used for) operating activities from continuing operations:Inventory write-offs
    
    
    8.9
    
    
    
    Impairments
    
    
    2.8
    
    
    
    0.6Depreciation and amortization
    
    
    51.4
    
    
    
    50.3Provision for bad debt
    
    
    (0.3
    )
    
    
    0.1Non-cash stock compensation
    
    
    7.2
    
    
    
    9.2Change in deferred income taxes
    
    
    0.7
    
    
    
    1.4Loss on sale of property and equipment
    
    
    0.5
    
    
    
    0.1Gain on sale of investments
    
    
    (57.5
    )
    
    
    Other, net
    
    
    (3.8
    )
    
    
    0.1Changes in operating assets and liabilities, net of divestitures:Accounts receivable and unbilled revenues increase
    
    
    (12.2
    )
    
    
    (10.1
    )Inventories increase
    
    
    (14.2
    )
    
    
    (25.0
    )Prepaid and other assets decrease
    
    
    6.2
    
    
    
    1.3Accounts payable increase
    
    
    2.1
    
    
    
    33.8Accrued liabilities decrease
    
    
    (5.6
    )
    
    
    (53.9
    )Total cash provided by operating activities from continuing operations
    
    
    105.7
    
    
    
    54.9Total cash used for operating activities from discontinued operations
    
    
    (10.0
    )
    
    
    (3.3
    )Total cash provided by operating activities
    
    
    95.7
    
    
    
    51.6Investing Activities:Acquisitions, net of cash acquired
    
    
    (1.6
    )
    
    
    (3.2
    )Purchase of interest in unconsolidated affiliates
    
    
    (8.1
    )
    
    
    Divestitures, net of cash disposed
    
    
    0.5
    
    
    
    Property, equipment and patent additions
    
    
    (25.1
    )
    
    
    (23.1
    )Proceeds from disposal of property and equipment
    
    
    1.0
    
    
    
    0.8Proceeds from collection of notes receivable
    
    
    
    
    
    
    6.8Proceeds from sale of investments
    
    
    59.8
    
    
    
    Warrant exercise
    
    
    (1.8
    )
    
    
    Decrease in restricted cash
    
    
    1.6
    
    
    
    7.5Purchase of available-for-sale securities
    
    
    (883.1
    )
    
    
    (377.0
    )Sale of available-for-sale securities
    
    
    756.4
    
    
    
    341.9Other
    
    
    
    
    
    
    0.1Total cash used for investing activities from continuing operations
    
    
    (100.4
    )
    
    
    (46.2
    )Total cash provided by investing activities from discontinued operations
    
    
    1.1
    
    
    
    0.4Total cash used for investing activities
    
    
    (99.3
    )
    
    
    (45.8
    )Financing Activities:Common stock issued
    
    
    3.6
    
    
    
    9.7Total cash provided by financing activities
    
    
    3.6
    
    
    
    9.7Effect of Exchange Rate Changes on Cash
    
    
    6.7
    
    
    
    3.5Increase in Cash and Cash Equivalents
    
    
    6.7
    
    
    
    19.0Cash and Cash Equivalents, beginning of period
    
    
    142.3
    
    
    
    108.4Cash and Cash Equivalents, end of period
    
    $
    149.0
    
    
    $
    127.4
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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
  Reclassifications
  Recently Issued Accounting Pronouncements
 Accounting Changes and Error Corrections-a replacement of APB Opinion No. 20 and FASB Statement
No. 3 Accounting Changes Reporting Accounting Changes in Interim Financial Statements
 The Fair Value Option for Financial Assets
and Financial Liabilities  Including an amendment of FASB Statement No. 115 .
 Summary of Significant Accounting Policies
  6




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Warranty
   Accrual
    
    Charged to costs
    
    
    
    
    
    AccrualOctober 31, 2006
    
    and expenses
    
    Deductions
    
    August 3, 2007(In millions)Warranty Reserve
    
    $
    9.5
    
    
    $
    1.0
    
    
    $
    2.0
    
    
    $
    8.5
 Note 2: Share-Based Compensation
 Share-Based Payment: An amendment
of FASB Statement No. 123 and 95,
 Note 3: Discontinued Operations
   Accounting for the Impairment or Disposal of
Long-Lived Assets.
 Three Months Ended
    
    
    Nine Months EndedAugust 3,
    
    
    July 28,
    
    
    August 3,
    
    
    July 28,2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)
    
    
    (In millions)Net sales
    
    $
    
    
    
    $
    8.6
    
    
    $
    8.5
    
    
    $
    27.1Loss from discontinued operations
    
    $
    (0.6
    )
    
    $
    (1.3
    )
    
    $
    (2.5
    )
    
    $
    (4.7
    )Gain (loss) on sale of discontinued operations
    
    
    0.2
    
    
    
    (17.3
    )
    
    
    (4.7
    )
    
    
    (17.3
    )Loss from discontinued operations
    
    $
    (0.4
    )
    
    $
    (18.6
    )
    
    $
    (7.2
    )
    
    $
    (22.0
    )
 7




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Note 4: Net Income (Loss) from Continuing Operations Per Share
  Three Months Ended
    
    
    Nine Months EndedAugust 3,
    
    
    July 28,
    
    
    August,
    
    
    July 28,2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions, except
    
    
    (In millions, exceptper share amounts)
    
    
    per share amounts)Numerator:Net income from continuing operations
    
    $
    17.0
    
    
    $
    23.2
    
    
    $
    119.5
    
    
    $
    47.0Interest expense for convertible notes
    
    
    
    
    
    
    
    
    
    
    10.2
    
    
    
    Net income from continuing operations  diluted
    
    $
    17.0
    
    
    $
    23.2
    
    
    $
    129.7
    
    
    $
    47.0Denominator:Weighted average common shares outstanding  basic
    
    
    117.4
    
    
    
    117.2
    
    
    
    117.3
    
    
    
    117.0Convertible bonds converted to common stock
    
    
    
    
    
    
    
    
    
    
    14.2
    
    
    
    Employee options and other
    
    
    0.4
    
    
    
    0.2
    
    
    
    0.3
    
    
    
    0.5Weighted average common shares outstanding  diluted
    
    
    117.8
    
    
    
    117.4
    
    
    
    131.8
    
    
    
    117.5Basic income per share from continuing operations
    
    $
    0.14
    
    
    $
    0.20
    
    
    $
    1.02
    
    
    $
    0.40Diluted income per share from continuing operations
    
    $
    0.14
    
    
    $
    0.20
    
    
    $
    0.98
    
    
    $
    0.40
    Note 5: Inventories
  August 3,
    
    
    October 31,2007
    
    
    2006(In millions)Manufactured products
    
    $
    137.9
    
    
    $
    129.2Purchased materials
    
    
    73.6
    
    
    
    66.9Work-in-process
    
    
    4.6
    
    
    
    4.5Less: Inventory reserve
    
    
    (41.0
    )
    
    
    (35.1
    )Total inventories, net
    
    $
    175.1
    
    
    $
    165.5
 8




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Note 6: Property & Equipment
  August 3,
    
    
    October 31,2007
    
    
    2006(In millions)Land and buildings
    
    $
    142.8
    
    
    $
    141.3Machinery and equipment
    
    
    402.0
    
    
    
    386.2Furniture and fixtures
    
    
    39.8
    
    
    
    39.0Less: Accumulated depreciation
    
    
    (391.4
    )
    
    
    (370.3
    )Total
    
    
    193.2
    
    
    
    196.2Construction-in-progress
    
    
    8.7
    
    
    
    10.3Total property & equipment, net
    
    $
    201.9
    
    
    $
    206.5
 Note 7: Goodwill
   Note 8: Income Taxes
 Accounting for Income Taxes,
   Note 9: Comprehensive Income
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Three Months Ended
    
    
    Nine Months EndedAugust 3,
    
    
    July 28,
    
    
    August 3,
    
    
    July 28,2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)
    
    
    (In millions)Net income
    
    $
    16.6
    
    
    $
    4.6
    
    
    $
    112.3
    
    
    $
    25.6Change in cumulative translation adjustment (1)
    
    
    0.8
    
    
    
    9.1
    
    
    
    5.4
    
    
    
    9.9Unrealized gain (loss) from securities classified as available-for-sale
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    0.5Total comprehensive income
    
    $
    17.4
    
    
    $
    13.5
    
    
    $
    117.7
    
    
    $
    36.0
  
 (1)
    
    The change in cumulative translation adjustment for the three and nine months ended August 3,
2007 was mainly due to the increased value of the Euro, Australian dollar and British pound in
relation to the U.S. dollar. The change in cumulative translation adjustment for the three
and nine months ended July 28, 2006 was mainly due to the currency translation adjustment
associated with the placement of APS France into discontinued operations.
 Note 10: Pension Benefits
   Three Months Ended
    
    
    Nine Months EndedAugust 3,
    
    
    July 28,
    
    
    August 3,
    
    
    July 28,2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)
    
    
    (In millions)Service cost
    
    $
    0.1
    
    
    $
    0.1
    
    
    $
    0.2
    
    
    $
    0.2Interest cost
    
    
    0.8
    
    
    
    0.7
    
    
    
    2.4
    
    
    
    2.2Net periodic benefit cost
    
    $
    0.9
    
    
    $
    0.8
    
    
    $
    2.6
    
    
    $
    2.4
 Note 11: Segment and Geographic Information
   
    
    Our Broadband Infrastructure and Access business segment has been divided into three
reportable segments  Global Connectivity Solutions, Wireless Solutions and Wireline
Solutions.
    
    Previously, our business unit level reports presented results through contribution
margin. Our current reporting presents fully allocated business unit results through
operating income.
    
    We have eliminated reporting at the regional level.
  10




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
    
    Global Connectivity Solutions
    
    Wireless Solutions
    
    Wireline Solutions
    
    Professional Services
 Global Connectivity Solutions
 Wireless Solutions
 Wireline Solutions
 Professional Services
   11




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Professional
    
    
    
    
    
    
    Restructuring and
    
    
    GAAPConnectivity
    
    
    Wireless
    
    
    Wireline
    
    
    Services
    
    
    Consolidated
    
    
    Impairment
    
    
    Consolidated(In millions)Three Months Ended
August 3, 2007External net sales:Products
    
    $
    268.7
    
    
    $
    12.6
    
    
    $
    11.9
    
    
    $
    12.8
    
    
    $
    306.0
    
    
    $
    
    
    
    $
    306.0Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40.1
    
    
    
    40.1
    
    
    
    
    
    
    
    40.1Total external net sales
    
    $
    268.7
    
    
    $
    12.6
    
    
    $
    11.9
    
    
    $
    52.9
    
    
    $
    346.1
    
    
    $
    
    
    
    $
    346.1Depreciation and amortization
    
    $
    14.8
    
    
    $
    0.9
    
    
    $
    0.4
    
    
    $
    1.1
    
    
    $
    17.2
    
    
    $
    
    
    
    $
    17.2Operating income (loss)
    
    $
    28.7
    
    
    $
    (2.7
    )
    
    $
    1.3
    
    
    $
    (1.3
    )
    
    $
    26.0
    
    
    $
    12.0
    
    
    $
    14.0Three Months Ended July 28,
2006External net sales:Products
    
    $
    267.6
    
    
    $
    9.6
    
    
    $
    16.0
    
    
    $
    14.3
    
    
    $
    307.5
    
    
    $
    
    
    
    $
    307.5Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36.1
    
    
    
    36.1
    
    
    
    
    
    
    
    36.1Total external net sales
    
    $
    267.6
    
    
    $
    9.6
    
    
    $
    16.0
    
    
    $
    50.4
    
    
    $
    343.6
    
    
    $
    
    
    
    $
    343.6Depreciation and amortization
    
    $
    13.3
    
    
    $
    0.8
    
    
    $
    0.6
    
    
    $
    2.0
    
    
    $
    16.7
    
    
    $
    
    
    
    $
    16.7Operating income (loss)
    
    $
    29.9
    
    
    $
    (3.6
    )
    
    $
    1.0
    
    
    $
    0.2
    
    
    $
    27.5
    
    
    $
    3.5
    
    
    $
    24.0
 Professional
    
    
    
    
    
    
    Restructuring and
    
    
    GAAPConnectivity
    
    
    Wireless
    
    
    Wireline
    
    
    Services
    
    
    Consolidated
    
    
    Impairment
    
    
    Consolidated(In millions)Nine Months Ended
August 3, 2007External net sales:Products
    
    $
    768.6
    
    
    $
    32.8
    
    
    $
    40.8
    
    
    $
    37.6
    
    
    $
    879.8
    
    
    $
    
    
    
    $
    879.8Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112.9
    
    
    
    112.9
    
    
    
    
    
    
    
    112.9Total external net sales
    
    $
    768.6
    
    
    $
    32.8
    
    
    $
    40.8
    
    
    $
    150.5
    
    
    $
    992.7
    
    
    $
    
    
    
    $
    992.7Depreciation and amortization
    
    $
    44.0
    
    
    $
    2.5
    
    
    $
    1.4
    
    
    $
    3.5
    
    
    $
    51.4
    
    
    $
    
    
    
    $
    51.4Operating income (loss)
    
    $
    81.6
    
    
    $
    (10.2
    )
    
    $
    2.9
    
    
    $
    (7.6
    )
    
    $
    66.7
    
    
    $
    11.7
    
    
    $
    55.0Nine Months Ended July 28,
2006External net sales:Products
    
    $
    755.1
    
    
    $
    24.0
    
    
    $
    48.4
    
    
    $
    42.8
    
    
    $
    870.3
    
    
    $
    
    
    
    $
    870.3Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104.2
    
    
    
    104.2
    
    
    
    
    
    
    
    104.2Total external net sales
    
    $
    755.1
    
    
    $
    24.0
    
    
    $
    48.4
    
    
    $
    147.0
    
    
    $
    974.5
    
    
    $
    
    
    
    $
    974.5Depreciation and amortization
    
    $
    39.8
    
    
    $
    2.0
    
    
    $
    2.2
    
    
    $
    6.3
    
    
    $
    50.3
    
    
    $
    
    
    
    $
    50.3Operating income (loss)
    
    $
    67.9
    
    
    $
    (16.3
    )
    
    $
    3.6
    
    
    $
    (1.7
    )
    
    $
    53.5
    
    
    $
    6.7
    
    
    $
    46.8
 12




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##### Table of Contents



Geographic Information
  Three Months Ended
    
    
    Nine Months EndedAugust 3,
    
    
    July 28,
    
    
    August 3,
    
    
    July 28,2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)
    
    
    (In millions)Sales:Inside the United States
    
    $
    215.2
    
    
    $
    208.9
    
    
    $
    609.9
    
    
    $
    584.6Outside the United States:Asia Pacific (Australia, China, Hong Kong, India, Japan,
Korea, New Zealand, Southeast Asia and Taiwan)
    
    
    35.4
    
    
    
    27.7
    
    
    
    97.4
    
    
    
    77.7EMEA (Europe (excluding Germany), Middle East and Africa)
    
    
    49.7
    
    
    
    50.5
    
    
    
    143.3
    
    
    
    131.6Germany
    
    
    21.1
    
    
    
    32.0
    
    
    
    74.0
    
    
    
    112.1Americas (Canada, Central and South America)
    
    
    24.7
    
    
    
    24.5
    
    
    
    68.1
    
    
    
    68.5Total net sales
    
    $
    346.1
    
    
    $
    343.6
    
    
    $
    992.7
    
    
    $
    974.5Property and Equipment, Net:Inside the United States
    
    $
    125.6Outside the United States
    
    
    76.3Total property and equipment, net
    
    $
    201.9
  Note 12: Impairment, Restructuring and Other Disposal Charges
  Three Months Ended
    
    
    Nine Months EndedAugust 3,
    
    
    July 28,
    
    
    August 3,
    
    
    July 28,2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)
    
    
    (In millions)Impairments:Fixed asset write-downs
    
    $
    2.7
    
    
    $
    
    
    
    $
    2.8
    
    
    $
    0.6Restructuring charges:Employee severance
    
    
    7.7
    
    
    
    1.3
    
    
    
    8.3
    
    
    
    3.7Facilities consolidation and lease termination
    
    
    1.6
    
    
    
    2.0
    
    
    
    0.6
    
    
    
    2.2Other
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    0.2Total restructuring charges
    
    
    9.3
    
    
    
    3.5
    
    
    
    8.9
    
    
    
    6.1Other disposal charges:Inventory write-offs
    
    
    8.9
    
    
    
    
    
    
    
    8.9
    
    
    
    Total impairment, restructuring and other disposal charges
    
    $
    20.9
    
    
    $
    3.5
    
    
    $
    20.6
    
    
    $
    6.7
 Impairment Charges:
  13




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##### Table of Contents



Restructuring Charges:
  Other Disposal Charges:
  ContinuingAccrual
    
    
    Operations Net
    
    
    Cash Payments
    
    
    AccrualType of Charge
    
    October 31, 2006
    
    
    Additions
    
    
    Charged to Accrual
    
    
    August 3, 2007(In millions)Employee severance costs
    
    $
    12.5
    
    
    $
    8.3
    
    
    $
    10.1
    
    
    $
    10.7Facilities consolidation
    
    
    15.3
    
    
    
    0.6
    
    
    
    3.8
    
    
    
    12.1Total restructuring accrual
    
    $
    27.8
    
    
    $
    8.9
    
    
    $
    13.9
    
    
    $
    22.8
   Note 13: Other Income (Expense), Net
  Three Months Ended
    
    
    Nine Months EndedAugust 3,
    
    
    July 28,
    
    
    August 3,
    
    
    July 28,2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)
    
    
    (In millions)Interest income on investments
    
    $
    8.7
    
    
    $
    6.1
    
    
    $
    24.1
    
    
    $
    15.6Interest expense on borrowings
    
    
    (4.0
    )
    
    
    (6.2
    )
    
    
    (12.3
    )
    
    
    (13.1
    )Interest income (expense), net
    
    
    4.7
    
    
    
    (0.1
    )
    
    
    11.8
    
    
    
    2.5Foreign exchange income (loss)
    
    
    0.7
    
    
    
    (0.1
    )
    
    
    2.2
    
    
    
    1.3Gain (loss) on sale of fixed assets
    
    
    
    
    
    
    0.6
    
    
    
    (0.5
    )
    
    
    (0.1
    )Gain on sale of investments
    
    
    
    
    
    
    
    
    
    
    57.5
    
    
    
    Other, net
    
    
    (0.4
    )
    
    
    1.9
    
    
    
    (0.7
    )
    
    
    3.5Subtotal
    
    
    0.3
    
    
    
    2.4
    
    
    
    58.5
    
    
    
    4.7Total other income (expense), net
    
    $
    5.0
    
    
    $
    2.3
    
    
    $
    70.3
    
    
    $
    7.2
 14




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Note 14: Commitments and Contingencies
 Legal Contingencies
   Income Tax Contingencies
  15




---



##### Table of Contents



Other Contingencies
 Change of Control
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
     
    
    Our Broadband Infrastructure and Access business segment has been divided into three
reportable segments  Global Connectivity Solutions, Wireless Solutions and Wireline
Solutions.
    
    Previously, our business unit level reports presented results through contribution
margin. Our current reporting presents fully allocated business unit results through
operating income.
    
    We eliminated reporting at the regional level.
  
    
    Connectivity
    
    Wireless
    
    Wireline
    
    Professional Services
 16




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##### Table of Contents



Connectivity
 Wireless
 Wireline
 Professional Services
 Marketplace Conditions
   
    
    First, businesses and consumers worldwide increasingly are becoming dependent on
broadband, multi-service communications networks to conduct daily communications tasks. This
includes people and businesses accessing the Internet and using Web-based software
applications through broadband connections. Further, the growing popularity of applications
such as digital video and audio programs, uploading and downloading content, podcasting,
wireless data and video services, video conferencing from personal computers, video e-mail,
video on demand, interactive entertainment and gaming via the Internet, distance learning,
telemedicine and high-speed imaging is increasing the need for broadband network
infrastructure.
    
    Second, end-users of communications services increasingly expect to do business over a
single network connection at a low price either with service providers or by developing
their own networks that can provide all of their communications needs. 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 versus individual services being conducted over
separate connections. We believe the competition among service providers to retain new
customers over these more fully integrated networks is causing services to be offered more
often at low, flat-rate prices as opposed to prices based on metered usage.
  17




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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 improve customization and gain efficiencies from the use of
more common components;
    
    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.
    18




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Results of Operations
 Net Sales
  Three months ended
    
    
    PercentageAugust 3,
    
    
    July 28,
    
    
    Increase (Decrease)2007
    
    
    2006
    
    
    Between Periods(In millions)Net sales
    
    $
    346.1
    
    
    $
    343.6
    
    
    
    0.7
    %Cost of sales
    
    
    232.5
    
    
    
    231.4
    
    
    
    0.5Gross profit
    
    
    113.6
    
    
    
    112.2
    
    
    
    1.2Gross margin
    
    
    32.8
    %
    
    
    32.7
    %
    
    
    0.1Operating expenses:Research and development
    
    
    18.0
    
    
    
    17.3
    
    
    
    4.0Selling and administration
    
    
    69.6
    
    
    
    67.4
    
    
    
    3.3Restructuring and impairment charges
    
    
    12.0
    
    
    
    3.5
    
    
    
    242.9Total operating expenses
    
    
    99.6
    
    
    
    88.2
    
    
    
    12.9Operating income
    
    
    14.0
    
    
    
    24.0
    
    
    
    (41.7
    )Operating margin
    
    
    4.0
    %
    
    
    7.0
    %
    
    
    (3.0
    )Other income (expense), net:Interest income, net
    
    
    4.7
    
    
    
    (0.1
    )
    
    
    4,800.0Other, net
    
    
    0.3
    
    
    
    2.4
    
    
    
    (87.5
    )Income before income taxes
    
    
    19.0
    
    
    
    26.3
    
    
    
    (27.8
    )Provision for income taxes
    
    
    2.0
    
    
    
    3.1
    
    
    
    (35.5
    )Income from continuing operations
    
    $
    17.0
    
    
    $
    23.2
    
    
    
    (26.7
    )%
 Nine months ended
    
    
    PercentageAugust 3,
    
    
    July 28,
    
    
    Increase (Decrease)2007
    
    
    2006
    
    
    Between Periods(In millions)Net sales
    
    $
    992.7
    
    
    $
    974.5
    
    
    
    1.9
    %Cost of sales
    
    
    663.6
    
    
    
    654.4
    
    
    
    1.4Gross profit
    
    
    329.1
    
    
    
    320.1
    
    
    
    2.8Gross margin
    
    
    33.2
    %
    
    
    32.8
    %
    
    
    0.4Operating expenses:Research and development
    
    
    53.3
    
    
    
    55.3
    
    
    
    (3.6
    )Selling and administration
    
    
    209.1
    
    
    
    211.3
    
    
    
    (1.0
    )Restructuring and impairment charges
    
    
    11.7
    
    
    
    6.7
    
    
    
    74.6Total operating expenses
    
    
    274.1
    
    
    
    273.3
    
    
    
    0.3Operating income
    
    
    55.0
    
    
    
    46.8
    
    
    
    17.5Operating margin
    
    
    5.5
    %
    
    
    4.8
    %
    
    
    0.7Other income (expense), net:Interest income, net
    
    
    11.8
    
    
    
    2.5
    
    
    
    372.0Other, net
    
    
    58.5
    
    
    
    4.7
    
    
    
    1,144.7Income before income taxes
    
    
    125.3
    
    
    
    54.0
    
    
    
    132.0Provision for income taxes
    
    
    5.8
    
    
    
    7.0
    
    
    
    (17.1
    )Income from continuing operations
    
    $
    119.5
    
    
    $
    47.0
    
    
    
    154.3
    %
 19




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##### Table of Contents



Three months ended
    
    
    PercentageAugust 3,
    
    
    July 28,
    
    
    Increase (Decrease)Reportable Segment
    
    2007
    
    
    2006
    
    
    Between Periods(In millions)Connectivity
    
    $
    268.7
    
    
    $
    267.6
    
    
    
    0.4
    %Wireless
    
    
    12.6
    
    
    
    9.6
    
    
    
    31.3Wireline
    
    
    11.9
    
    
    
    16.0
    
    
    
    (25.6
    )Professional Services:Products
    
    
    12.8
    
    
    
    14.3
    
    
    
    (10.5
    )Services
    
    
    40.1
    
    
    
    36.1
    
    
    
    11.1Total Professional Services
    
    
    52.9
    
    
    
    50.4
    
    
    
    5.0Total Net Sales
    
    $
    346.1
    
    
    $
    343.6
    
    
    
    0.7
    %
 Nine months ended
    
    
    PercentageAugust 3,
    
    
    July 28,
    
    
    Increase (Decrease)Reportable Segment
    
    2007
    
    
    2006
    
    
    Between Periods(In millions)Connectivity
    
    $
    768.6
    
    
    $
    755.1
    
    
    
    1.8
    %Wireless
    
    
    32.8
    
    
    
    24.0
    
    
    
    36.7Wireline
    
    
    40.8
    
    
    
    48.4
    
    
    
    (15.7
    )Professional Services:Products
    
    
    37.6
    
    
    
    42.8
    
    
    
    (12.1
    )Services
    
    
    112.9
    
    
    
    104.2
    
    
    
    8.3Total Professional Services
    
    
    150.5
    
    
    
    147.0
    
    
    
    2.4Total Net Sales
    
    $
    992.7
    
    
    $
    974.5
    
    
    
    1.9
    %
      20




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




---



##### Table of Contents



Other Income (Expense), Net
  Three months ended
    
    
    Nine months endedAugust 3,
    
    
    July 28,
    
    
    August 3,
    
    
    July 28,2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)
    
    
    (In millions)Interest income on investments
    
    $
    8.7
    
    
    $
    6.1
    
    
    $
    24.1
    
    
    $
    15.6Interest expense on borrowings
    
    
    (4.0
    )
    
    
    (6.2
    )
    
    
    (12.3
    )
    
    
    (13.1
    )Interest income (expense), net
    
    
    4.7
    
    
    
    (0.1
    )
    
    
    11.8
    
    
    
    2.5Foreign exchange income (loss)
    
    
    0.7
    
    
    
    (0.1
    )
    
    
    2.2
    
    
    
    1.3Gain (loss) on sale of fixed assets
    
    
    
    
    
    
    0.6
    
    
    
    (0.5
    )
    
    
    (0.1
    )Gain on sale of investments
    
    
    
    
    
    
    
    
    
    
    57.5
    
    
    
    Other, net
    
    
    (0.4
    )
    
    
    1.9
    
    
    
    (0.7
    )
    
    
    3.5Subtotal
    
    
    0.3
    
    
    
    2.4
    
    
    
    58.5
    
    
    
    4.7Total other income (expense), net
    
    $
    5.0
    
    
    $
    2.3
    
    
    $
    70.3
    
    
    $
    7.2
    Income Taxes
  22




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Discontinued Operations
   Application of Critical Accounting Policies and Estimates
  Liquidity and Capital Resources
 Liquidity
     23




---



##### Table of Contents



Operating Activities
   Investing Activities
   Financing Activities
  Unsecured Debt
  24




---



##### Table of Contents



Off-Balance-Sheet Arrangements and Contractual Obligations
  Working Capital and Liquidity Outlook
     Cautionary Statement Regarding Forward Looking Information
  25




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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
 Application of FASB Statement No.
52 to an Investment Being Evaluated for Impairment That Will Be Disposed of
   Changes in Internal Control over Financial Reporting
   26




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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
  27




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##### Table of Contents



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
   28




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##### Table of Contents



SIGNATURES
  Dated: September 5, 2007
    ADC TELECOMMUNICATIONS, INC.By:
    /s/ James G. MathewsJames G. MathewsVice President, Chief Financial Officer
(Principal Financial Officer and Duly Authorized Officer) 29




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##### Table of Contents



ADC TELECOMMUNICATIONS, INC.
EXHIBIT INDEX TO FORM 10-Q
FOR THE THREE MONTHS ENDED AUGUST 3, 2007
 ExhibitNo.
    
    Description3a
    
    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b
    
    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
July 29, 2005.)4a
    
    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b
    
    Rights Agreement, as amended and restated as of May 9, 2007, between the Company 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 Rights 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 10, 2007.)4c
    
    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d
    
    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.)31a
    
    Certification of principal executive officer required by Exchange Act Rule 13a-14(a).31b
    
    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.
 30