##### 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 May 4, 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



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 MAY 4, 2007Certification of Principal Executive OfficerCertification of Principal Financial OfficerSection 906 Certifications
 2




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PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETSUNAUDITED
 May 4,
    
    
    October 31,2007
    
    
    2006(In millions)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    118.9
    
    
    $
    142.3Available-for-sale securities
    
    
    537.2
    
    
    
    395.4Accounts receivable, net of reserves of $8.8 and $10.2
    
    
    175.3
    
    
    
    169.3Unbilled revenue
    
    
    30.2
    
    
    
    23.8Inventories, net of reserves of $34.2 and $35.1
    
    
    172.8
    
    
    
    165.5Assets of discontinued operations
    
    
    2.6
    
    
    
    14.9Prepaid and other current assets
    
    
    29.7
    
    
    
    31.5Total current assets
    
    
    1,066.7
    
    
    
    942.7Property and equipment, net of accumulated depreciation of $384.0 and $370.3
    
    
    204.3
    
    
    
    206.5Restricted cash
    
    
    13.1
    
    
    
    14.0Goodwill
    
    
    239.0
    
    
    
    238.5Intangibles, net of accumulated amortization of $75.8 and $66.5
    
    
    131.2
    
    
    
    142.0Available-for-sale securities
    
    
    7.2
    
    
    
    10.7Long term assets of discontinued operations
    
    
    0.4
    
    
    
    0.3Other assets
    
    
    54.6
    
    
    
    56.7Total assets
    
    $
    1,716.5
    
    
    $
    1,611.4LIABILITIES AND SHAREOWNERS INVESTMENTCurrent Liabilities:Accounts payable
    
    $
    96.6
    
    
    $
    88.4Accrued compensation and benefits
    
    
    53.8
    
    
    
    43.6Other accrued liabilities
    
    
    55.8
    
    
    
    60.6Income taxes payable
    
    
    18.1
    
    
    
    17.7Restructuring accrual
    
    
    20.5
    
    
    
    28.4Liabilities of discontinued operations
    
    
    8.2
    
    
    
    21.4Total current liabilities
    
    
    253.0
    
    
    
    260.1Pension obligations and other long-term liabilities
    
    
    83.5
    
    
    
    77.8Long-term notes payable
    
    
    400.0
    
    
    
    400.0Total liabilities
    
    
    736.5
    
    
    
    737.9Shareowners Investment:(117.3 and 117.2 shares outstanding, respectively)
    
    
    980.0
    
    
    
    873.5Total liabilities and shareowners investment
    
    $
    1,716.5
    
    
    $
    1,611.4
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ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSUNAUDITED
 Three Months Ended
    
    
    Six Months EndedMay 4, 2007
    
    
    April 28, 2006
    
    
    May 4, 2007
    
    
    April 28, 2006(In millions)Net Sales:Product
    
    $
    312.0
    
    
    $
    320.7
    
    
    $
    573.8
    
    
    $
    562.8Service
    
    
    37.4
    
    
    
    37.4
    
    
    
    72.8
    
    
    
    68.1Total net sales
    
    
    349.4
    
    
    
    358.1
    
    
    
    646.6
    
    
    
    630.9Cost of Sales:Product
    
    
    195.9
    
    
    
    207.5
    
    
    
    364.7
    
    
    
    367.3Service
    
    
    33.0
    
    
    
    28.9
    
    
    
    66.4
    
    
    
    55.7Total cost of sales
    
    
    228.9
    
    
    
    236.4
    
    
    
    431.1
    
    
    
    423.0Gross Profit
    
    
    120.5
    
    
    
    121.7
    
    
    
    215.5
    
    
    
    207.9Operating Expenses:Research and development
    
    
    18.1
    
    
    
    19.0
    
    
    
    35.3
    
    
    
    38.0Selling and administration
    
    
    69.2
    
    
    
    75.7
    
    
    
    139.5
    
    
    
    143.9Restructuring and impairment charges
    
    
    (0.9
    )
    
    
    1.8
    
    
    
    (0.3
    )
    
    
    3.2Total operating expenses
    
    
    86.4
    
    
    
    96.5
    
    
    
    174.5
    
    
    
    185.1Operating Income
    
    
    34.1
    
    
    
    25.2
    
    
    
    41.0
    
    
    
    22.8Other income, net
    
    
    61.7
    
    
    
    2.5
    
    
    
    65.3
    
    
    
    4.9Income before income taxes
    
    
    95.8
    
    
    
    27.7
    
    
    
    106.3
    
    
    
    27.7Provision for income taxes
    
    
    2.7
    
    
    
    2.6
    
    
    
    3.8
    
    
    
    3.9Income from continuing operations
    
    
    93.1
    
    
    
    25.1
    
    
    
    102.5
    
    
    
    23.8Discontinued Operations, Net of TaxLoss from discontinued operations
    
    
    (1.2
    )
    
    
    (2.3
    )
    
    
    (1.9
    )
    
    
    (3.4
    )Gain (loss) on sale of discontinued operations, net
    
    
    0.2
    
    
    
    
    
    
    
    (4.9
    )
    
    
    Total discontinued operations
    
    
    (1.0
    )
    
    
    (2.3
    )
    
    
    (6.8
    )
    
    
    (3.4
    )Earnings before the cumulative effect of a change in
accounting principle
    
    
    92.1
    
    
    
    22.8
    
    
    
    95.7
    
    
    
    20.4Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.6Net Income
    
    $
    92.1
    
    
    $
    22.8
    
    
    $
    95.7
    
    
    $
    21.0Weighted Average Common Shares Outstanding (Basic)
    
    
    117.3
    
    
    
    117.1
    
    
    
    117.3
    
    
    
    116.9Weighted Average Common Shares Outstanding (Diluted)
    
    
    131.8
    
    
    
    117.9
    
    
    
    131.6
    
    
    
    117.6Basic Earnings (Loss) Per Share:Continuing operations
    
    $
    0.79
    
    
    $
    0.21
    
    
    $
    0.87
    
    
    $
    0.20Discontinued operations
    
    $
    (0.01
    )
    
    $
    (0.02
    )
    
    $
    (0.05
    )
    
    $
    (0.03
    )Cumulative effect of a change in accounting principle
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0.01Net income per share
    
    $
    0.78
    
    
    $
    0.19
    
    
    $
    0.82
    
    
    $
    0.18Diluted Earnings (Loss) Per Share:Continuing operations
    
    $
    0.73
    
    
    $
    0.21
    
    
    $
    0.83
    
    
    $
    0.20Discontinued operations
    
    $
    (0.01
    )
    
    $
    (0.02
    )
    
    $
    (0.05
    )
    
    $
    (0.03
    )Cumulative effect of a change in accounting principle
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0.01Net income per share
    
    $
    0.72
    
    
    $
    0.19
    
    
    $
    0.78
    
    
    $
    0.18
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ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSUNAUDITED
 Six Months EndedMay 4, 2007
    
    
    April 28, 2006(In millions)Operating Activities:Income from continuing operations
    
    $
    102.5
    
    
    $
    23.8Adjustments to reconcile income from continuing operations to net cash provided
by (used for) operating activities from continuing operations:Impairments
    
    
    0.1
    
    
    
    0.6Depreciation and amortization
    
    
    34.2
    
    
    
    33.6Change in bad debt reserve
    
    
    (0.9
    )
    
    
    0.2Non-cash stock compensation
    
    
    4.6
    
    
    
    6.5Change in deferred income taxes
    
    
    0.5
    
    
    
    1.4Loss on sale of property and equipment
    
    
    0.5
    
    
    
    0.7Gain on sale of investments
    
    
    (57.5
    )
    
    
    Other, net
    
    
    (2.5
    )
    
    
    (0.5
    )Changes in operating assets and liabilities, net of divestitures:Accounts receivable and unbilled revenues increase
    
    
    (7.8
    )
    
    
    (17.4
    )Inventories increase
    
    
    (4.9
    )
    
    
    (4.3
    )Prepaid and other assets (increase)/decrease
    
    
    4.1
    
    
    
    (7.0
    )Accounts payable increase
    
    
    6.9
    
    
    
    27.1Accrued liabilities decrease
    
    
    (3.8
    )
    
    
    (34.4
    )Total cash provided by operating activities from continuing operations
    
    
    76.0
    
    
    
    30.3Total cash used for operating activities from discontinued operations
    
    
    (9.1
    )
    
    
    (1.9
    )Total cash provided by operating activities
    
    
    66.9
    
    
    
    28.4Investing Activities:Acquisitions, net of cash acquired
    
    
    (2.0
    )
    
    
    Divestitures, net of cash disposed
    
    
    0.3
    
    
    
    Property, equipment and patent additions
    
    
    (18.3
    )
    
    
    (13.5
    )Proceeds from disposal of property and equipment
    
    
    0.5
    
    
    
    0.3Proceeds from collection of notes receivable
    
    
    
    
    
    
    2.3Proceeds from sale of investments
    
    
    59.8
    
    
    
    Warrant exercise
    
    
    (1.8
    )
    
    
    Decrease in restricted cash
    
    
    1.2
    
    
    
    1.6Purchase of available-for-sale securities
    
    
    (674.3
    )
    
    
    (240.4
    )Sale of available-for-sale securities
    
    
    536.0
    
    
    
    229.6Other
    
    
    
    
    
    
    0.1Total cash used for investing activities from continuing operations
    
    
    (98.6
    )
    
    
    (20.0
    )Total cash provided by investing activities from discontinued operations
    
    
    1.1
    
    
    
    0.4Total cash used for investing activities
    
    
    (97.5
    )
    
    
    (19.6
    )Financing Activities:Common stock issued
    
    
    2.0
    
    
    
    9.6Total cash provided by financing activities
    
    
    2.0
    
    
    
    9.6Effect of Exchange Rate Changes on Cash
    
    
    5.2
    
    
    
    1.8Increase/(Decrease) in Cash and Cash Equivalents
    
    
    (23.4
    )
    
    
    20.2Cash and Cash Equivalents, beginning of period
    
    
    142.3
    
    
    
    108.4Cash and Cash Equivalents, end of period
    
    $
    118.9
    
    
    $
    128.6
  5




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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
  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
  Warranty
   6




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Accrual
    
    Charged to costs
    
    
    
    
    
    AccrualOctober 31, 2006
    
    and expenses
    
    Deductions
    
    May 4, 2007(In millions)Warranty Reserve
    
    $
    9.5
    
    
    $
    1.2
    
    
    $
    1.6
    
    
    $
    9.1
 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
    
    
    Six Months EndedMay 4,
    
    
    April 28,
    
    
    May 4,
    
    
    April 28,2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)
    
    
    (In millions)Net sales
    
    $
    1.4
    
    
    $
    8.5
    
    
    $
    8.5
    
    
    $
    18.5Loss from discontinued operations
    
    $
    (1.2
    )
    
    $
    (2.3
    )
    
    $
    (1.9
    )
    
    $
    (3.4
    )Gain (loss) on sale of discontinued operations
    
    
    0.2
    
    
    
    
    
    
    
    (4.9
    )
    
    
    Loss from discontinued operations
    
    $
    (1.0
    )
    
    $
    (2.3
    )
    
    $
    (6.8
    )
    
    $
    (3.4
    )
 Note 4: Net Income (Loss) from Continuing Operations Per Share
  Three Months Ended
    
    
    Six Months EndedMay 4,
    
    
    April 28,
    
    
    May 4,
    
    
    April 28,2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions, except
    
    
    (In millions, exceptper share amounts)
    
    
    per share amounts)Numerator:Net income from continuing operations
    
    
    93.1
    
    
    
    25.1
    
    
    
    102.5
    
    
    
    23.8Interest expense for convertible notes
    
    
    3.4
    
    
    
    
    
    
    
    6.8
    
    
    
    Net income from continuing operations  diluted
    
    $
    96.5
    
    
    $
    25.1
    
    
    $
    109.3
    
    
    $
    23.8Denominator:Weighted average common shares outstanding  basic
    
    
    117.3
    
    
    
    117.1
    
    
    
    117.3
    
    
    
    116.9Convertible bonds converted to common stock
    
    
    14.2
    
    
    
    
    
    
    
    14.2
    
    
    
    Employee options and other
    
    
    0.3
    
    
    
    0.8
    
    
    
    0.1
    
    
    
    0.7Weighted average common shares outstanding  diluted
    
    
    131.8
    
    
    
    117.9
    
    
    
    131.6
    
    
    
    117.6Basic income per share from continuing operations
    
    $
    0.79
    
    
    $
    0.21
    
    
    $
    0.87
    
    
    $
    0.20Diluted income per share from continuing operations
    
    $
    0.73
    
    
    $
    0.21
    
    
    $
    0.83
    
    
    $
    0.20
 7




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Note 5: Inventories
  May 4,
    
    
    October 31,2007
    
    
    2006(In millions)Purchased materials
    
    $
    72.0
    
    
    $
    66.9Manufactured products
    
    
    130.8
    
    
    
    129.2Work-in-process
    
    
    4.2
    
    
    
    4.5Less: Inventory reserve
    
    
    (34.2
    )
    
    
    (35.1
    )Total inventories, net
    
    $
    172.8
    
    
    $
    165.5
 Note 6: Property & Equipment
  May 4,
    
    
    October 31,2007
    
    
    2006(In millions)Land and buildings
    
    $
    142.1
    
    
    $
    141.2Machinery and equipment
    
    
    394.7
    
    
    
    386.3Furniture and fixtures
    
    
    39.6
    
    
    
    39.0Less: Accumulated depreciation
    
    
    (384.0
    )
    
    
    (370.3
    )Total
    
    
    192.4
    
    
    
    196.2Construction-in-progress
    
    
    11.9
    
    
    
    10.3Total property & equipment, net
    
    $
    204.3
    
    
    $
    206.5
 Note 7: Goodwill and Intangible Assets
  8




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Balance as of October 31, 2006
    
    $
    238.5Goodwill acquired during the year
    
    
    0.5Balance as of May 4, 2007
    
    $
    239.0
  Note 8: Income Taxes
 Accounting for Income Taxes,
   Note 9: Comprehensive Income
   Three Months Ended
    
    
    Six Months EndedMay 4,
    
    
    April 28,
    
    
    May 4,
    
    
    April 28,2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)
    
    
    (In millions)Net income (loss)
    
    $
    92.1
    
    
    $
    22.8
    
    
    $
    95.7
    
    
    $
    21.0Change in cumulative translation adjustment (1)
    
    
    4.1
    
    
    
    (1.4
    )
    
    
    4.6
    
    
    
    0.8Unrealized gain (loss) from securities classified as available-for-sale
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    0.7Total comprehensive income
    
    $
    96.2
    
    
    $
    21.8
    
    
    $
    100.3
    
    
    $
    22.5
  
 (1)
    
    The change in cumulative translation adjustment for the three and six months ended May 4,
2007 was mainly due to the strengthening of the Euro and Indian Rupee in relation to the
U.S. dollar. 9




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Note 10: Pension Benefits
   Three Months Ended
    
    
    Six Months EndedMay 4,
    
    
    April 28,
    
    
    May 4,
    
    
    April 28,2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)
    
    
    (In millions)Service cost
    
    $
    0.1
    
    
    $
    0.1
    
    
    $
    0.1
    
    
    $
    0.2Interest cost
    
    
    0.8
    
    
    
    0.7
    
    
    
    1.6
    
    
    
    1.4Net periodic benefit cost
    
    $
    0.9
    
    
    $
    0.8
    
    
    $
    1.7
    
    
    $
    1.6
 Note 11: Segment and Geographic Information
  
    
    Our Broadband Infrastructure and Access business segment has been redefined into three
reportable segments  Global Connectivity Solutions, Wireless Solutions and Wireline
Solutions.
    
    In the prior periods, 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.
   
    
    Global Connectivity Solutions
    
    Wireless Solutions
    
    Wireline Solutions
    
    Professional Services
 Global Connectivity Solutions
 Wireless Solutions
 10




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Wireline Solutions
 Professional Services
    Professional
    
    
    
    
    
    
    Restructuring and
    
    
    GAAPConnectivity
    
    
    Wireless
    
    
    Wireline
    
    
    Services
    
    
    Consolidated
    
    
    Impairment
    
    
    Consolidated(In millions)Three Months Ended May 4, 2007External net sales:Products
    
    $
    272.1
    
    
    $
    12.8
    
    
    $
    13.7
    
    
    $
    13.4
    
    
    $
    312.0
    
    
    
    
    
    
    $
    312.0Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37.4
    
    
    
    37.4
    
    
    
    
    
    
    
    37.4Total external net sales
    
    $
    272.1
    
    
    $
    12.8
    
    
    $
    13.7
    
    
    $
    50.8
    
    
    $
    349.4
    
    
    
    
    
    
    $
    349.4Depreciation and amortization
    
    $
    14.6
    
    
    $
    0.8
    
    
    $
    0.5
    
    
    $
    1.2
    
    
    $
    17.1
    
    
    
    
    
    
    $
    17.1Operating income (loss)
    
    $
    38.3
    
    
    $
    (3.2
    )
    
    $
    (0.3
    )
    
    $
    (1.6
    )
    
    $
    33.2
    
    
    $
    0.9
    
    
    $
    34.1Three Months Ended April 28, 2006External net sales:Products
    
    $
    279.6
    
    
    $
    9.4
    
    
    $
    16.8
    
    
    $
    14.9
    
    
    $
    320.7
    
    
    
    
    
    
    $
    320.7Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37.4
    
    
    
    37.4
    
    
    
    
    
    
    
    37.4Total external net sales
    
    $
    279.6
    
    
    $
    9.4
    
    
    $
    16.8
    
    
    $
    52.3
    
    
    $
    358.1
    
    
    
    
    
    
    $
    358.1Depreciation and amortization
    
    $
    13.6
    
    
    $
    0.7
    
    
    $
    0.8
    
    
    $
    2.0
    
    
    $
    17.1
    
    
    
    
    
    
    $
    17.1Operating income (loss)
    
    $
    32.2
    
    
    $
    (6.4
    )
    
    $
    1.1
    
    
    $
    0.1
    
    
    $
    27.0
    
    
    $
    (1.8
    )
    
    $
    25.2
 Professional
    
    
    
    
    
    
    Restructuring and
    
    
    GAAPConnectivity
    
    
    Wireless
    
    
    Wireline
    
    
    Services
    
    
    Consolidated
    
    
    Impairment
    
    
    Consolidated(In millions)Six Months Ended May 4, 2007External net sales:Products
    
    $
    499.9
    
    
    $
    20.2
    
    
    $
    28.9
    
    
    $
    24.8
    
    
    $
    573.8
    
    
    
    
    
    
    $
    573.8Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72.8
    
    
    
    72.8
    
    
    
    
    
    
    
    72.8Total external net sales
    
    $
    499.9
    
    
    $
    20.2
    
    
    $
    28.9
    
    
    $
    97.6
    
    
    $
    646.6
    
    
    
    
    
    
    $
    646.6Depreciation and amortization
    
    $
    29.2
    
    
    $
    1.6
    
    
    $
    1.0
    
    
    $
    2.4
    
    
    $
    34.2
    
    
    
    
    
    
    $
    34.2Operating income (loss)
    
    $
    52.8
    
    
    $
    (7.5
    )
    
    $
    1.6
    
    
    $
    (6.2
    )
    
    $
    40.7
    
    
    $
    0.3
    
    
    $
    41.0Six Months Ended April 28, 2006External net sales:Products
    
    $
    487.5
    
    
    $
    14.4
    
    
    $
    32.4
    
    
    $
    28.5
    
    
    $
    562.8
    
    
    
    
    
    
    $
    562.8Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68.1
    
    
    
    68.1
    
    
    
    
    
    
    
    68.1Total external net sales
    
    $
    487.5
    
    
    $
    14.4
    
    
    $
    32.4
    
    
    $
    96.6
    
    
    $
    630.9
    
    
    
    
    
    
    $
    630.9Depreciation and amortization
    
    $
    26.5
    
    
    $
    1.2
    
    
    $
    1.6
    
    
    $
    4.3
    
    
    $
    33.6
    
    
    
    
    
    
    $
    33.6Operating income (loss)
    
    $
    38.0
    
    
    $
    (12.7
    )
    
    $
    2.6
    
    
    $
    (1.9
    )
    
    $
    26.0
    
    
    $
    (3.2
    )
    
    $
    22.8
 11




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##### Table of Contents



Geographic Information
  Three Months Ended
    
    

Six Months EndedMay 4,
    
    
    April 28,
    
    
    May 4,
    
    
    April 28,2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)
    
    
    (In millions)Sales:Inside the United States
    
    $
    225.8
    
    
    $
    219.5
    
    
    $
    398.8
    
    
    $
    375.7Outside the United States:Asia Pacific (Australia, China, Hong Kong, India, Japan,
Korea, New Zealand, Southeast Asia and Taiwan)
    
    
    30.5
    
    
    
    26.5
    
    
    
    61.6
    
    
    
    50.0EMEA (Europe (excluding Germany), Middle East and Africa)
    
    
    45.4
    
    
    
    44.5
    
    
    
    89.9
    
    
    
    81.2Germany
    
    
    26.2
    
    
    
    43.5
    
    
    
    52.9
    
    
    
    80.0Americas (Canada, Central and South America)
    
    
    21.5
    
    
    
    24.1
    
    
    
    43.4
    
    
    
    44.0Total net sales
    
    $
    349.4
    
    
    $
    358.1
    
    
    $
    646.6
    
    
    $
    630.9Property and Equipment, Net:Inside the United States
    
    $
    131.2Outside the United States
    
    
    73.1Total property and equipment, net
    
    $
    204.3
  Note 12: Restructuring Charges
  Three Months Ended
    
    
    Six Months EndedMay 4,
    
    
    April 28,
    
    
    May 4,
    
    
    April 28,2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)
    
    
    (In millions)Employee severance
    
    $
    0.4
    
    
    $
    1.1
    
    
    $
    0.6
    
    
    $
    2.4Facilities consolidation and lease termination
    
    
    (1.4
    )
    
    
    0.1
    
    
    
    (1.0
    )
    
    
    0.2Fixed asset write-downs
    
    
    0.1
    
    
    
    0.6
    
    
    
    0.1
    
    
    
    0.6Total restructuring and impairment charges
    
    $
    (0.9
    )
    
    $
    1.8
    
    
    $
    (0.3
    )
    
    $
    3.2
    12




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##### Table of Contents



ContinuingAccrual
    
    
    Operations Net
    
    
    Cash Payments
    
    
    AccrualType of Charge
    
    October 31, 2006
    
    
    Additions
    
    
    Charged to Accrual
    
    
    May 4, 2007(In millions)Employee severance costs
    
    $
    12.5
    
    
    $
    0.6
    
    
    $
    5.2
    
    
    $
    7.9Facilities consolidation
    
    
    15.9
    
    
    
    (1.0
    )
    
    
    2.3
    
    
    
    12.6Total restructuring accrual
    
    $
    28.4
    
    
    $
    (0.4
    )
    
    $
    7.5
    
    
    $
    20.5
   Note 13: Other Income (Expense), Net
  Three months ended
    
    
    Six months endedMay 4,
    
    
    April 28,
    
    
    May 4,
    
    
    April 28,2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)
    
    
    (In millions)Interest income on investments
    
    $
    8.2
    
    
    $
    4.9
    
    
    $
    15.4
    
    
    $
    9.5Interest expense on borrowings
    
    
    (4.2
    )
    
    
    (3.6
    )
    
    
    (8.3
    )
    
    
    (6.9
    )Interest income, net
    
    
    4.0
    
    
    
    1.3
    
    
    
    7.1
    
    
    
    2.6Foreign exchange income
    
    
    0.9
    
    
    
    0.8
    
    
    
    1.5
    
    
    
    1.4Loss on sale of fixed assets
    
    
    (0.2
    )
    
    
    (0.2
    )
    
    
    (0.5
    )
    
    
    (0.7
    )Gain on sale of investments
    
    
    57.1
    
    
    
    
    
    
    
    57.5
    
    
    
    Other, net
    
    
    (0.1
    )
    
    
    0.6
    
    
    
    (0.3
    )
    
    
    1.6Subtotal
    
    
    57.7
    
    
    
    1.2
    
    
    
    58.2
    
    
    
    2.3Total other income (expense), net
    
    $
    61.7
    
    
    $
    2.5
    
    
    $
    65.3
    
    
    $
    4.9
    Note 14: Commitments and Contingencies
 Legal Contingencies
 13




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##### Table of Contents



Income Tax Contingencies
  Other Contingencies
  Change of Control
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
  14




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##### Table of Contents




    
    Our Broadband Infrastructure and Access business segment has been redefined into three
reportable segments  Global Connectivity Solutions, Wireless Solutions and Wireline
Solutions.
    
    In the prior periods, 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
 Connectivity
 Wireless
 Wireline
 Professional Services
 Marketplace Conditions
   15




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##### Table of Contents




    
    First, businesses and consumers worldwide increasingly are becoming dependent on
broadband, multi-service communications networks to conduct daily communications tasks.
People and businesses are increasingly 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.
     
    
    relocating certain manufacturing, engineering and other operations from higher-cost geographic areas to lower-cost areas;
    
    redesigning product lines to utilize more common components;
    
    increasing direct material savings from strategic sourcing globally;
 16




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##### Table of Contents




    
    sunsetting end of life products; and
    
    improving our order-to-delivery processes.
     Results of Operations
 Net Sales
  Three months ended
    
    
    PercentageMay 4,
    
    
    April 28,
    
    
    Increase (Decrease)2007
    
    
    2006
    
    
    Between Periods(In millions)Net sales
    
    $
    349.4
    
    
    $
    358.1
    
    
    
    (2.4
    )%Cost of sales
    
    
    228.9
    
    
    
    236.4
    
    
    
    (3.2
    )Gross profit
    
    
    120.5
    
    
    
    121.7
    
    
    
    (1.0
    )Operating expenses:Research and development
    
    
    18.1
    
    
    
    19.0
    
    
    
    (4.7
    )Selling and administration
    
    
    69.2
    
    
    
    75.7
    
    
    
    (8.6
    )Restructuring and impairment charges
    
    
    (0.9
    )
    
    
    1.8
    
    
    
    (150.0
    )Total operating expenses
    
    
    86.4
    
    
    
    96.5
    
    
    
    (10.5
    )Operating income
    
    
    34.1
    
    
    
    25.2
    
    
    
    35.3Other income (expense), net:Interest income, net
    
    
    4.0
    
    
    
    1.3
    
    
    
    207.7Other, net
    
    
    57.7
    
    
    
    1.2
    
    
    
    4,708.3Income before income taxes
    
    
    95.8
    
    
    
    27.7
    
    
    
    245.8Provision for income taxes
    
    
    2.7
    
    
    
    2.6
    
    
    
    3.8Income from continuing operations
    
    $
    93.1
    
    
    $
    25.1
    
    
    
    270.9
    %
 17




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##### Table of Contents



Six months ended
    
    
    PercentageMay 4,
    
    
    April 28,
    
    
    Increase (Decrease)2007
    
    
    2006
    
    
    Between Periods(In millions)Net sales
    
    $
    646.6
    
    
    $
    630.9
    
    
    
    2.5
    %Cost of sales
    
    
    431.1
    
    
    
    423.0
    
    
    
    1.9Gross profit
    
    
    215.5
    
    
    
    207.9
    
    
    
    3.7Operating expenses:Research and development
    
    
    35.3
    
    
    
    38.0
    
    
    
    (7.1
    )Selling and administration
    
    
    139.5
    
    
    
    143.9
    
    
    
    (3.1
    )Restructuring and impairment charges
    
    
    (0.3
    )
    
    
    3.2
    
    
    
    (109.4
    )Total operating expenses
    
    
    174.5
    
    
    
    185.1
    
    
    
    (5.7
    )Operating income
    
    
    41.0
    
    
    
    22.8
    
    
    
    79.8Other income (expense), net:Interest income, net
    
    
    7.1
    
    
    
    2.6
    
    
    
    173.1Other, net
    
    
    58.2
    
    
    
    2.3
    
    
    
    2,430.4Income before income taxes
    
    
    106.3
    
    
    
    27.7
    
    
    
    283.8Provision for income taxes
    
    
    3.8
    
    
    
    3.9
    
    
    
    (2.6
    )Income from continuing operations
    
    $
    102.5
    
    
    $
    23.8
    
    
    
    330.7
    %
  Three months ended
    
    
    PercentageMay 4,
    
    
    April 28,
    
    
    Increase (Decrease)Reportable Segment
    
    2007
    
    
    2006
    
    
    Between Periods(In millions)Connectivity
    
    $
    272.1
    
    
    $
    279.6
    
    
    
    (2.7
    )%Wireless
    
    
    12.8
    
    
    
    9.4
    
    
    
    36.2Wireline
    
    
    13.7
    
    
    
    16.8
    
    
    
    (18.5
    )Professional Services:Product
    
    
    13.4
    
    
    
    14.9
    
    
    
    (10.1
    )Service
    
    
    37.4
    
    
    
    37.4
    
    
    
    Total Professional Services
    
    
    50.8
    
    
    
    52.3
    
    
    
    (2.9
    )Total Net Sales
    
    $
    349.4
    
    
    $
    358.1
    
    
    
    (2.4
    )%
 Six months ended
    
    
    PercentageMay 4,
    
    
    April 28,
    
    
    Increase (Decrease)Reportable Segment
    
    2007
    
    
    2006
    
    
    Between Periods(In millions)Connectivity
    
    $
    499.9
    
    
    $
    487.5
    
    
    
    2.5
    %Wireless
    
    
    20.2
    
    
    
    14.4
    
    
    
    40.3Wireline
    
    
    28.9
    
    
    
    32.4
    
    
    
    (10.8
    )Professional Services:Product
    
    
    24.8
    
    
    
    28.5
    
    
    
    (13.0
    )Service
    
    
    72.8
    
    
    
    68.1
    
    
    
    6.9Total Professional Services
    
    
    97.6
    
    
    
    96.6
    
    
    
    1.0Total Net Sales
    
    $
    646.6
    
    
    $
    630.9
    
    
    
    2.5
    %
   18




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##### Table of Contents



Gross Profit
   Operating Expenses
  Research and development:
 Selling and administration:
 19




---



##### Table of Contents



Restructuring and impairment charges:
   Other Income (Expense), Net
  Three months ended
    
    
    Six months endedMay 4,
    
    
    April 28,
    
    
    May 4,
    
    
    April 28,2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)
    
    
    (In millions)Interest income on investments
    
    $
    8.2
    
    
    $
    4.9
    
    
    $
    15.4
    
    
    $
    9.5Interest expense on borrowings
    
    
    (4.2
    )
    
    
    (3.6
    )
    
    
    (8.3
    )
    
    
    (6.9
    )Interest income, net
    
    
    4.0
    
    
    
    1.3
    
    
    
    7.1
    
    
    
    2.6Foreign exchange income
    
    
    0.9
    
    
    
    0.8
    
    
    
    1.5
    
    
    
    1.4Loss on sale of fixed assets
    
    
    (0.2
    )
    
    
    (0.2
    )
    
    
    (0.5
    )
    
    
    (0.7
    )Gain on sale of investments
    
    
    57.1
    
    
    
    
    
    
    
    57.5
    
    
    
    Other, net
    
    
    (0.1
    )
    
    
    0.6
    
    
    
    (0.3
    )
    
    
    1.6Subtotal
    
    
    57.7
    
    
    
    1.2
    
    
    
    58.2
    
    
    
    2.3Total other income (expense), net
    
    $
    61.7
    
    
    $
    2.5
    
    
    $
    65.3
    
    
    $
    4.9
    20




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##### Table of Contents



Income Taxes
   Discontinued Operations
   Application of Critical Accounting Policies and Estimates
  Liquidity and Capital Resources
 Liquidity
    21




---



##### Table of Contents



Operating Activities
   Investing Activities
   Financing Activities
  Unsecured Debt
  Off-Balance-Sheet Arrangements and Contractual Obligations
  22




---



##### Table of Contents



Working Capital and Liquidity Outlook
  
    
    $7.9 million for employee severance will be paid by the end of fiscal 2007;
    
    $2.4 million for facilities consolidation costs, which relate principally to excess
leased facilities, will be paid in fiscal 2007; and
    
    the remainder of $10.2 million, which also relates to excess leased facilities, will be
paid over the respective lease terms ending through 2015.
    Cautionary Statement Regarding Forward Looking Information
  23




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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
  24




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25




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
   
 ITEM 1A. RISK FACTORS
  We are becoming increasingly dependent on significant capital deployment initiatives driven by
our customers.
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  26




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##### Table of Contents



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  For
    
    WithheldJohn J. Boyle III
    
    
    94,007,314
    
    
    
    7,325,986William R. Spivey Ph.D.
    
    
    98,543,039
    
    
    
    2,790,261Robert E. Switz
    
    
    98,480,971
    
    
    
    2,852,328Larry W. Wangberg
    
    
    98,869,590
    
    
    
    2,463,710
  For
    
    Against
    
    Abstain94,936,912
    
    5,567,729
    
    828,657
  For
    
    Against
    
    Abstain99,988,174
    
    522,511
    
    822,614
 
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
   27




---



##### Table of Contents



SIGNATURES
  Dated: June 6, 2007
    ADC TELECOMMUNICATIONS, INC.By:
    /s/ James G. MathewsJames G. MathewsVice President, Chief Financial Officer
(Principal Financial Officer and Duly Authorized Officer) 28




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##### Table of Contents



ADC TELECOMMUNICATIONS, INC.
EXHIBIT INDEX TO FORM 10-Q
FOR THE THREE MONTHS ENDED MAY 4, 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.
 29