##### 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 July 28, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from N/A to N/A
 Commission file number 0-1424
 ADC Telecommunications, Inc.
  Minnesota
    
    41-0743912(State or other jurisdiction of incorporation or organization)
    
    (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. EXHIBITSSIGNATURESCompensation Plan401(k) Excess PlanCertification of Principal Executive OfficerCertification of Principal Financial OfficerCertification Pursuant to Section 906
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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
(In millions)
 July 28,
    
    
    October 31,2006
    
    
    2005ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    127.4
    
    
    $
    108.4Available-for-sale securities
    
    
    378.0
    
    
    
    335.3Accounts receivable, net of reserves of $6.6 and $9.4
    
    
    188.6
    
    
    
    180.6Unbilled revenue
    
    
    26.2
    
    
    
    27.0Inventories, net of reserves of $36.7 and $35.6
    
    
    166.8
    
    
    
    140.4Current assets of discontinued operations
    
    
    14.0
    
    
    
    29.6Prepaid and other current assets
    
    
    39.2
    
    
    
    33.5Total current assets
    
    
    940.2
    
    
    
    854.8Property and equipment, net of accumulated depreciation of $367.8 and $347.3
    
    
    210.3
    
    
    
    220.4Restricted cash
    
    
    16.2
    
    
    
    23.6Goodwill
    
    
    240.2
    
    
    
    240.5Intangibles, net of accumulated amortization of $59.0 and $36.0
    
    
    146.4
    
    
    
    165.0Available-for-sale securities
    
    
    4.9
    
    
    
    12.1Long term assets of discontinued operations
    
    
    0.3
    
    
    
    1.2Other assets
    
    
    15.7
    
    
    
    19.6Total assets
    
    $
    1,574.2
    
    
    $
    1,537.2LIABILITIES AND SHAREOWNERS INVESTMENTCurrent Liabilities:Accounts payable
    
    $
    104.2
    
    
    $
    69.6Accrued compensation and benefits
    
    
    45.6
    
    
    
    78.9Other accrued liabilities
    
    
    60.4
    
    
    
    74.9Income tax payable
    
    
    17.7
    
    
    
    15.9Restructuring accrual
    
    
    20.0
    
    
    
    29.6Current liabilities of discontinued operations
    
    
    15.6
    
    
    
    19.6Notes payable
    
    
    
    
    
    
    0.3Total current liabilities
    
    
    263.5
    
    
    
    288.8Pension obligations and other long-term liabilities
    
    
    82.9
    
    
    
    74.5Long-term notes payable
    
    
    400.0
    
    
    
    400.0Total liabilities
    
    
    746.4
    
    
    
    763.3Shareowners Investment:(117.2 and 116.6 shares outstanding)
    
    
    827.8
    
    
    
    773.9Total liabilities and shareowners investment
    
    $
    1,574.2
    
    
    $
    1,537.2
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ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSUNAUDITED
(In millions, except per share amounts)
 Three Months Ended
    
    
    Nine Months EndedJuly 28, 2006
    
    
    July 29, 2005
    
    
    July 28, 2006
    
    
    July 29, 2005Net Sales:Product
    
    $
    307.5
    
    
    $
    273.6
    
    
    $
    870.3
    
    
    $
    738.5Service
    
    
    36.1
    
    
    
    33.4
    
    
    
    104.2
    
    
    
    98.3Total net sales
    
    
    343.6
    
    
    
    307.0
    
    
    
    974.5
    
    
    
    836.8Cost of Sales:Product
    
    
    201.3
    
    
    
    165.4
    
    
    
    568.6
    
    
    
    438.2Service
    
    
    30.1
    
    
    
    24.1
    
    
    
    85.8
    
    
    
    80.8Total cost of sales
    
    
    231.4
    
    
    
    189.5
    
    
    
    654.4
    
    
    
    519.0Gross Profit
    
    
    112.2
    
    
    
    117.5
    
    
    
    320.1
    
    
    
    317.8Operating Expenses:Research and development
    
    
    17.3
    
    
    
    18.4
    
    
    
    55.3
    
    
    
    51.8Selling and administration
    
    
    67.4
    
    
    
    63.0
    
    
    
    211.3
    
    
    
    186.8Restructuring and impairment charges
    
    
    3.5
    
    
    
    0.2
    
    
    
    6.7
    
    
    
    6.1Total operating expenses
    
    
    88.2
    
    
    
    81.6
    
    
    
    273.3
    
    
    
    244.7Operating Income
    
    
    24.0
    
    
    
    35.9
    
    
    
    46.8
    
    
    
    73.1Other income, net
    
    
    2.3
    
    
    
    3.1
    
    
    
    7.2
    
    
    
    20.5Income before income taxes
    
    
    26.3
    
    
    
    39.0
    
    
    
    54.0
    
    
    
    93.6Provision for income taxes
    
    
    3.1
    
    
    
    1.5
    
    
    
    7.0
    
    
    
    4.8Income from continuing operations
    
    
    23.2
    
    
    
    37.5
    
    
    
    47.0
    
    
    
    88.8Discontinued Operations, Net of TaxLoss from discontinued operations
    
    
    (1.3
    )
    
    
    (6.2
    )
    
    
    (4.7
    )
    
    
    (6.8
    )Gain (loss) from sale or write-down of discontinued
operations, net
    
    
    (10.6
    )
    
    
    (7.4
    )
    
    
    (10.6
    )
    
    
    27.8Total discontinued operations
    
    
    (11.9
    )
    
    
    (13.6
    )
    
    
    (15.3
    )
    
    
    21.0Earnings before the cumulative effect of a change in accounting
principle
    
    
    11.3
    
    
    
    23.9
    
    
    
    31.7
    
    
    
    109.8Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    
    
    
    
    0.6
    
    
    
    Net Income
    
    $
    11.3
    
    
    $
    23.9
    
    
    $
    32.3
    
    
    $
    109.8Weighted Average Common Shares Outstanding (Basic)
    
    
    117.2
    
    
    
    116.0
    
    
    
    117.0
    
    
    
    115.8Weighted Average Common Shares Outstanding (Diluted)
    
    
    117.4
    
    
    
    131.4
    
    
    
    117.5
    
    
    
    130.8Basic Earnings (Loss) Per Share:Continuing operations
    
    $
    0.20
    
    
    $
    0.32
    
    
    $
    0.40
    
    
    $
    0.77Discontinued operations
    
    $
    (0.10
    )
    
    $
    (0.12
    )
    
    $
    (0.13
    )
    
    $
    0.18Cumulative effect of a change in accounting principle
    
    $
    
    
    
    $
    
    
    
    $
    0.01
    
    
    $
    Net income per share
    
    $
    0.10
    
    
    $
    0.20
    
    
    $
    0.28
    
    
    $
    0.95Diluted Earnings (Loss) Per Share:Continuing operations
    
    $
    0.20
    
    
    $
    0.30
    
    
    $
    0.40
    
    
    $
    0.73Discontinued operations
    
    $
    (0.10
    )
    
    $
    (0.10
    )
    
    $
    (0.13
    )
    
    $
    0.16Cumulative effect of a change in accounting principle
    
    $
    
    
    
    $
    
    
    
    $
    0.01
    
    
    $
    Net income per share
    
    $
    0.10
    
    
    $
    0.20
    
    
    $
    0.28
    
    
    $
    0.89
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ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSUNAUDITED
(In millions)
 Nine Months EndedJuly 28, 2006
    
    
    July 29, 2005Operating Activities:Net income from continuing operations
    
    $
    47.0
    
    
    $
    88.8Adjustments to reconcile net income from continuing operations to net cash provided by (used
for) operating activities from continuing operations:Fixed asset impairments
    
    
    0.6
    
    
    
    0.1Depreciation and amortization
    
    
    50.3
    
    
    
    41.4Change in bad debt reserves
    
    
    0.1
    
    
    
    (2.8
    )Non-cash stock compensation
    
    
    9.2
    
    
    
    2.2Change in deferred income taxes
    
    
    1.4
    
    
    
    (Gain) loss on sale of property and equipment
    
    
    0.1
    
    
    
    (4.5
    )Other, net
    
    
    0.1
    
    
    
    (0.5
    )Changes in operating assets and liabilities, net of acquisitions and divestitures:Accounts receivable and unbilled revenues
    
    
    (10.1
    )
    
    
    (48.4
    )Inventories
    
    
    (25.0
    )
    
    
    (28.6
    )Prepaid and other assets
    
    
    1.3
    
    
    
    (13.7
    )Accounts payable
    
    
    33.8
    
    
    
    3.5Accrued liabilities
    
    
    (53.9
    )
    
    
    (18.6
    )Total cash provided by operating activities from continuing operations
    
    
    54.9
    
    
    
    18.9Total cash used for operating activities from discontinued operations
    
    
    (3.3
    )
    
    
    (11.0
    )Total cash provided by operating activities
    
    
    51.6
    
    
    
    7.9Investing Activities:Acquisitions, net of cash acquired
    
    
    (3.2
    )
    
    
    (7.1
    )Divestitures, net of cash disposed
    
    
    
    
    
    
    33.7Property, equipment and patent additions
    
    
    (23.1
    )
    
    
    (19.4
    )Proceeds from disposal of property and equipment
    
    
    0.8
    
    
    
    16.7Proceeds from collection of note receivable
    
    
    6.8
    
    
    
    17.8Change in restricted cash
    
    
    7.5
    
    
    
    5.4Purchases of available-for-sale securities
    
    
    (377.0
    )
    
    
    (734.3
    )Sales of available-for-sale securities
    
    
    341.9
    
    
    
    704.4Other
    
    
    0.1
    
    
    
    Total cash (used for) provided by investing activities from continuing operations
    
    
    (46.2
    )
    
    
    17.2Total cash provided by investing activities from discontinued operations
    
    
    0.4
    
    
    
    0.3Total cash (used for) provided by investing activities
    
    
    (45.8
    )
    
    
    17.5Financing Activities:Common stock issued
    
    
    9.7
    
    
    
    11.4Total cash provided by financing activities from continuing operations
    
    
    9.7
    
    
    
    11.4Total cash provided by financing activities from discontinued operations
    
    
    
    
    
    
    Total cash provided by financing activities
    
    
    9.7
    
    
    
    11.4Effect of Exchange Rate Changes on Cash
    
    
    3.5
    
    
    
    (1.3
    )Increase in Cash and Cash Equivalents
    
    
    19.0
    
    
    
    35.5Cash and Cash Equivalents, beginning of period
    
    
    108.4
    
    
    
    63.8Cash and Cash Equivalents, end of period
    
    $
    127.4
    
    
    $
    99.3
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ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTSUNAUDITED
 Note 1  Basis of Presentation:
   Fiscal Year
  Reclassifications
  Recently Issued Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109,
 Share-Based Payment: An amendment of FASB Statements
No. 123 and 95
 6




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Summary of Significant Accounting Policies
 for Stock Issued to Employees
 Reverse Stock Split
  Warranty
   Accrual
    
    Charged to costs
    
    Deductions
    
    AccrualOctober 31, 2005
    
    and expenses
    
    (write-offs)
    
    July 28, 2006Warranty Reserve
    
    $
    10.8
    
    
    $
    3.0
    
    
    $
    5.1
    
    
    $
    8.7
 Note 2  Share-Based Compensation:
   Accounting for Stock-Based Compensation
 7




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Three Months
    
    
    Nine MonthsEnded
    
    
    EndedJuly 28, 2006
    
    
    July 28, 2006(In millions, except
    
    
    (In millions, exceptper share amounts)
    
    
    per share amounts)Effect on income before tax
    
    $
    (1.9
    )
    
    $
    (6.9
    )Effect on income from continuing operations
    
    
    (1.9
    )
    
    
    (6.9
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    0.6Net income
    
    $
    (1.9
    )
    
    $
    (6.3
    )Basic and diluted earnings per share
    
    $
    (0.02
    )
    
    $
    (0.05
    )
  Three Months
    
    
    Nine MonthsEnded
    
    
    EndedJuly 29, 2005
    
    
    July 29, 2005(In millions, except
    
    
    (In millions, exceptper share amounts)
    
    
    per share amounts)Net income as reported
    
    $
    23.9
    
    
    $
    109.8Plus: Share-based employee compensation included in reported income
    
    
    0.7
    
    
    
    2.2Less: Stock compensation expense  fair value based method
    
    
    (5.1
    )
    
    
    (15.1
    )Pro forma net income
    
    $
    19.5
    
    
    $
    96.9Net income per shareAs reported  basic
    
    $
    0.20
    
    
    $
    0.95As reported  diluted
    
    $
    0.20
    
    
    $
    0.89Pro forma  basic
    
    $
    0.17
    
    
    $
    0.84Pro forma  diluted
    
    $
    0.17
    
    
    $
    0.79
   8




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Stock Options
    
    
    RestrictedStock Option
    
    
    Weighted Average
    
    
    StockShares
    
    
    Exercise Price
    
    
    Awards/Units(In millions)
    
    
    
    
    
    
    (In millions)Outstanding at October 31, 2005
    
    
    6.8
    
    
    $
    28.95
    
    
    
    0.4Granted
    
    
    0.9
    
    
    
    23.87
    
    
    
    0.3Exercised
    
    
    (0.3
    )
    
    
    (16.71
    )
    
    
    Restrictions lapsed
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Canceled
    
    
    (0.3
    )
    
    
    (33.95
    )
    
    
    Outstanding at January 27, 2006
    
    
    7.1
    
    
    
    28.72
    
    
    
    0.6Granted
    
    
    0.1
    
    
    
    25.06
    
    
    
    0.1Exercised
    
    
    (0.3
    )
    
    
    (16.43
    )
    
    
    Restrictions lapsed
    
    
    
    
    
    
    
    
    
    
    Canceled
    
    
    (0.1
    )
    
    
    (30.45
    )
    
    
    (0.1
    )Outstanding at April 28, 2006
    
    
    6.8
    
    
    
    29.06
    
    
    
    0.6Granted
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    Restrictions lapsed
    
    
    
    
    
    
    
    
    
    
    Canceled
    
    
    (0.1
    )
    
    
    (32.94
    )
    
    
    Outstanding at July 28, 2006
    
    
    6.7
    
    
    
    29.02
    
    
    
    0.6Exercisable at October 31, 2005
    
    
    4.6
    
    
    
    33.70
    
    
    
    Exercisable at July 28, 2006
    
    
    4.6
    
    
    $
    32.68
    
    
    
    
  Weighted AverageRange of

    
    
    
    
    Remaining
    
    
    
    
    
    
    
    WeightedExercise Prices

    
    
    Number
    
    Contractual Life
    
    Weighted Average
    
    
    
    
    AverageBetween

    
    
    Outstanding
    
    (In years)
    
    Exercise Price
    
    
    Number Exercisable
    
    Exercise Price$
    8.05
    
    $
    15.68
    
    
    230,998
    
    6.93
    
    $
    13.34
    
    
    184,192
    
    $
    12.8915.75
    
    
    15.82
    
    
    857,229
    
    6.33
    
    
    15.82
    
    
    856,961
    
    
    15.8216.03
    
    
    18.62
    
    
    599,915
    
    7.42
    
    
    17.12
    
    
    424,489
    
    
    17.0318.69
    
    
    18.76
    
    
    857,967
    
    8.39
    
    
    18.76
    
    
    201,121
    
    
    18.7619.11
    
    
    19.81
    
    
    716,478
    
    4.68
    
    
    19.78
    
    
    698,288
    
    
    19.7920.02
    
    
    23.45
    
    
    649,488
    
    7.64
    
    
    20.64
    
    
    339,218
    
    
    20.6523.91
    
    
    23.91
    
    
    866,351
    
    9.38
    
    
    23.91
    
    
    
    
    
    24.01
    
    
    30.59
    
    
    782,907
    
    5.66
    
    
    29.19
    
    
    736,384
    
    
    29.4231.08
    
    
    64.31
    
    
    669,528
    
    3.54
    
    
    45.78
    
    
    662,758
    
    
    45.7464.85
    
    
    293.56
    
    
    445,790
    
    3.05
    
    
    109.76
    
    
    445,790
    
    
    109.76$
    8.05
    
    $
    293.56
    
    
    6,676,651
    
    6.48
    
    $
    29.02
    
    
    4,549,201
    
    $
    32.68
  Three Months Ended
    
    Nine Months EndedJuly 28,
    
    July 29,
    
    July 28,
    
    July 29,2006
    
    2005
    
    2006
    
    2005Expected volatility
    
    NA(1)
    
    
    53.18
    %
    
    
    57.73
    %
    
    
    59.10
    %Risk free interest rate
    
    NA(1)
    
    
    3.63
    %
    
    
    4.33
    %
    
    
    3.68
    %Expected dividends
    
    NA(1)
    
    
    
    
    
    
    
    
    
    
    Expected life (in years)
    
    NA(1)
    
    
    3.23
    
    
    
    4.92
    
    
    
    4.56
 
 (1)
    
    There were no stock based awards granted during the three months ended July 28, 2006. 9




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##### Table of Contents



Note 3  Acquisitions:
    Three Months Ended
    
    
    Nine Months EndedJuly 29, 2005
    
    
    July 29, 2005(In millions, except
    
    
    (In millions, exceptper share amounts)
    
    
    per share amounts)Net sales
    
    $
    327.9
    
    
    $
    903.3Income from continuing operations
    
    
    41.4
    
    
    
    99.0Net income
    
    
    27.8
    
    
    
    120.0Income from continuing operations per sharebasic
    
    
    0.36
    
    
    
    0.85Income from continuing operations per sharediluted
    
    
    0.33
    
    
    
    0.80Net income per sharebasic
    
    
    0.24
    
    
    
    1.04Net income per sharediluted
    
    $
    0.23
    
    
    $
    0.96
  10




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Note 4  Discontinued Operations:
 Accounting for
the Impairment or Disposal of Long-Lived Assets.
 APS France
  SIUK
  Metrica
   Singl.eView
   Three Months Ended
    
    
    Nine Months EndedJuly 28,
    
    
    July 29,
    
    
    July 28,
    
    
    July 29,2006
    
    
    2005
    
    
    2006
    
    
    2005(In millions)
    
    
    (In millions)Net sales
    
    $
    8.6
    
    
    $
    10.3
    
    
    $
    27.1
    
    
    $
    44.3Loss from discontinued operations
    
    $
    (1.3
    )
    
    $
    (6.2
    )
    
    $
    (4.7
    )
    
    $
    (6.8
    )Gain (loss) from sale or write-down of discontinued operations, net
    
    
    (10.6
    )
    
    
    (7.4
    )
    
    
    (10.6
    )
    
    
    27.8Total discontinued operations
    
    $
    (11.9
    )
    
    $
    (13.6
    )
    
    $
    (15.3
    )
    
    $
    21.0
 11




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##### Table of Contents



Note 5  Net Income (Loss) from Continuing Operations Per Share:
  Three Months Ended
    
    
    Nine Months EndedJuly 28,
    
    
    July 29,
    
    
    July 28,
    
    
    July 29,2006
    
    
    2005
    
    
    2006
    
    
    2005(In millions, except
    
    
    (In millions, exceptper share amounts)
    
    
    per share amounts)Numerator:Net income from continuing operations
    
    $
    23.2
    
    
    $
    37.5
    
    
    $
    47.0
    
    
    $
    88.8Interest expense for convertible notes
    
    
    
    
    
    
    2.3
    
    
    
    
    
    
    
    6.1Net income
from continuing operations  diluted
    
    $
    23.2
    
    
    $
    39.8
    
    
    $
    47.0
    
    
    $
    94.9Denominator:Weighted
average common shares outstanding  basic
    
    
    117.2
    
    
    
    116.0
    
    
    
    117.0
    
    
    
    115.8Convertible bonds converted to common stock
    
    
    
    
    
    
    14.2
    
    
    
    
    
    
    
    14.2Employee options and other
    
    
    0.2
    
    
    
    1.2
    
    
    
    0.5
    
    
    
    0.8Weighted
average common shares outstanding  diluted
    
    
    117.4
    
    
    
    131.4
    
    
    
    117.5
    
    
    
    130.8Basic income per share from continuing operations
    
    $
    0.20
    
    
    $
    0.32
    
    
    $
    0.40
    
    
    $
    0.77Diluted income per share from continuing operations
    
    $
    0.20
    
    
    $
    0.30
    
    
    $
    0.40
    
    
    $
    0.73
    Note 6  Inventories:
  July 28,
    
    
    October 31,2006
    
    
    2005(In millions)Purchased materials
    
    $
    63.1
    
    
    $
    64.3Manufactured products
    
    
    134.1
    
    
    
    102.6Work-in-process
    
    
    6.3
    
    
    
    9.1Less: Inventory reserve
    
    
    (36.7
    )
    
    
    (35.6
    )Total inventories, net
    
    $
    166.8
    
    
    $
    140.4
 12




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##### Table of Contents



Note 7  Property & Equipment:
  July 28,
    
    
    October 31,2006
    
    
    2005(In millions)Land and buildings
    
    $
    140.3
    
    
    $
    136.7Machinery and equipment
    
    
    382.7
    
    
    
    360.5Furniture and fixtures
    
    
    40.8
    
    
    
    50.5Less: Accumulated depreciation
    
    
    (367.8
    )
    
    
    (347.3
    )Total
    
    
    196.0
    
    
    
    200.4Construction in progress
    
    
    14.3
    
    
    
    20.0Total property & equipment, net
    
    $
    210.3
    
    
    $
    220.4
 Note 8  Goodwill and Intangible Assets:
   Balance as of October 31, 2005
    
    $
    240.5Purchase accounting adjustments
    
    
    (0.3
    )Balance as of July 28, 2006
    
    $
    240.2
  Note 9  Income Taxes:
 Accounting for Income Taxes
  Note 10  Comprehensive Income:
  13




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedJuly 28,
    
    
    July 29,
    
    
    July 28,
    
    
    July 29,2006
    
    
    2005
    
    
    2006
    
    
    2005(In millions)
    
    
    (In millions)Net income
    
    $
    11.3
    
    
    $
    23.9
    
    
    $
    32.3
    
    
    $
    109.8Change in cumulative translation adjustment
    
    
    2.4
    
    
    
    (4.0
    )
    
    
    3.2
    
    
    
    (4.6
    )Reclassification adjustment for realized losses on
securities classified as available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized gain (loss) from securities classified as available-for-sale
    
    
    (0.2
    )
    
    
    0.1
    
    
    
    0.5
    
    
    
    (0.3
    )Total comprehensive income
    
    $
    13.5
    
    
    $
    20.0
    
    
    $
    36.0
    
    
    $
    104.9
 Note
11  Pension Benefits
   Three Months Ended
    
    
    Nine Months EndedJuly 28,
    
    
    July 29,
    
    
    July 28,
    
    
    July 29,2006
    
    
    2005
    
    
    2006
    
    
    2005(In millions)
    
    
    (In millions)Service cost
    
    $
    0.1
    
    
    $
    
    
    
    $
    0.2
    
    
    $
    0.1Interest cost
    
    
    0.7
    
    
    
    0.8
    
    
    
    2.2
    
    
    
    2.4Net periodic benefit cost
    
    $
    0.8
    
    
    $
    0.8
    
    
    $
    2.4
    
    
    $
    2.5
 Note 12  Segment and Geographic Information:
 Segment Information
   
    
    Connectivity systems and components that provide the infrastructure to wireline,
wireless, cable, broadcast and enterprise networks to connect high-speed Internet, data,
video and voice services to the network over copper, coaxial and fiber-optic cables, and
    
    Access systems used in the last mile/kilometer of wireline and wireless networks
to deliver high-speed Internet, data and voice services.
    14




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedJuly 28,
    
    
    July 29,
    
    
    July 28,
    
    
    July 29,2006
    
    
    2005
    
    
    2006
    
    
    2005(In millions)
    
    
    (In millions)Broadband Infrastructure and Access:Infrastructure Products (Connectivity)
    
    $
    267.5
    
    
    $
    217.0
    
    
    $
    755.1
    
    
    $
    592.2Access Products (Wireline and Wireless)
    
    
    25.6
    
    
    
    42.4
    
    
    
    72.4
    
    
    
    102.2Total Broadband Infrastructure and Access
    
    
    293.1
    
    
    
    259.4
    
    
    
    827.5
    
    
    
    694.4Professional Services
    
    
    50.5
    
    
    
    47.6
    
    
    
    147.0
    
    
    
    142.4Total
    
    $
    343.6
    
    
    $
    307.0
    
    
    $
    974.5
    
    
    $
    836.8
  BroadbandInfrastructure
    
    
    Professionaland Access
    
    
    Services
    
    
    Consolidated(In millions)Three Months Ended July 28, 2006External sales:Products
    
    $
    293.1
    
    
    $
    14.4
    
    
    $
    307.5Services
    
    
    
    
    
    
    36.1
    
    
    
    36.1Total external sales
    
    
    293.1
    
    
    
    50.5
    
    
    
    343.6Contribution margin
    
    
    73.0
    
    
    
    5.1
    
    
    
    78.1Depreciation and amortization
    
    
    14.7
    
    
    
    1.8
    
    
    
    16.5Operating income (loss)
    
    $
    25.4
    
    
    $
    (1.4
    )
    
    $
    24.0Three Months Ended July 29, 2005External sales:Products
    
    $
    259.4
    
    
    $
    14.2
    
    
    $
    273.6Services
    
    
    
    
    
    
    33.4
    
    
    
    33.4Total external sales
    
    
    259.4
    
    
    
    47.6
    
    
    
    307.0Contribution margin
    
    
    85.2
    
    
    
    4.0
    
    
    
    89.2Depreciation and amortization
    
    
    12.1
    
    
    
    2.3
    
    
    
    14.4Operating income (loss)
    
    $
    39.3
    
    
    $
    (3.4
    )
    
    $
    35.9
 BroadbandInfrastructure
    
    
    Professionaland Access
    
    
    Services
    
    
    Consolidated(In millions)Nine Months Ended July 28, 2006External sales:Products
    
    $
    827.5
    
    
    $
    42.8
    
    
    $
    870.3Services
    
    
    
    
    
    
    104.2
    
    
    
    104.2Total external sales
    
    
    827.5
    
    
    
    147.0
    
    
    
    974.5Contribution margin
    
    
    198.6
    
    
    
    14.9
    
    
    
    213.5Depreciation and amortization
    
    
    44.2
    
    
    
    6.1
    
    
    
    50.3Operating income (loss)
    
    $
    56.1
    
    
    $
    (9.3
    )
    
    $
    46.8Nine Months Ended July 29, 2005External sales:Products
    
    $
    694.4
    
    
    $
    44.1
    
    
    $
    738.5Services
    
    
    
    
    
    
    98.3
    
    
    
    98.3Total external sales
    
    
    694.4
    
    
    
    142.4
    
    
    
    836.8Contribution margin
    
    
    224.0
    
    
    
    14.9
    
    
    
    238.9Depreciation and amortization
    
    
    34.2
    
    
    
    7.2
    
    
    
    41.4Operating income (loss)
    
    $
    81.2
    
    
    $
    (8.1
    )
    
    $
    73.1
 15




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##### Table of Contents



Regional Information
  Three Months Ended
    
    
    Nine Months EndedJuly 28,
    
    
    July 29,
    
    
    July 28,
    
    
    July 29,2006
    
    
    2005
    
    
    2006
    
    
    2005(In millions)
    
    
    (In millions)Americas (United States, Canada and Central and South America)
    
    $
    21.1
    
    
    $
    24.2
    
    
    $
    42.7
    
    
    $
    54.6EMEA (Europe, Middle East and Africa)
    
    
    3.5
    
    
    
    7.8
    
    
    
    3.5
    
    
    
    16.6Asia Pacific (China, Korea, Australia, India, Japan and Southeast Asia)
    
    
    2.9
    
    
    
    4.1
    
    
    
    7.3
    
    
    
    8.0Operating income before restructuring costs
    
    
    27.5
    
    
    
    36.1
    
    
    
    53.5
    
    
    
    79.2Restructuring costs
    
    
    (3.5
    )
    
    
    (0.2
    )
    
    
    (6.7
    )
    
    
    (6.1
    )Operating income after restructuring costs
    
    $
    24.0
    
    
    $
    35.9
    
    
    $
    46.8
    
    
    $
    73.1
 Geographic Information
  Geographic Sales Information:
 Three Months Ended
    
    
    Nine Months EndedJuly 28,
    
    
    July 29,
    
    
    July 28,
    
    
    July 29,2006
    
    
    2005
    
    
    2006
    
    
    2005(In millions)
    
    
    (In millions)Inside the United States
    
    $
    208.9
    
    
    $
    180.6
    
    
    $
    584.6
    
    
    $
    476.1Outside the United States:Asia Pacific (China, Korea, Australia, India, Japan and Southeast Asia)
    
    
    27.7
    
    
    
    28.0
    
    
    
    77.7
    
    
    
    74.9EMEA (Europe (excluding Germany), Middle East and Africa)
    
    
    50.5
    
    
    
    33.0
    
    
    
    131.6
    
    
    
    97.5Germany
    
    
    32.0
    
    
    
    41.5
    
    
    
    112.1
    
    
    
    127.6Americas (Canada, Central and South America)
    
    
    24.5
    
    
    
    23.9
    
    
    
    68.5
    
    
    
    60.7Total
    
    $
    343.6
    
    
    $
    307.0
    
    
    $
    974.5
    
    
    $
    836.8Property and Equipment, Net:Inside the United States
    
    $
    136.3Outside the United States
    
    
    74.0Total
    
    $
    210.3
 Note 13  Restructuring and Impairment Charges:
  Three Months Ended
    
    
    Nine Months EndedJuly 28,
    
    
    July 29,
    
    
    July 28,
    
    
    July 29,2006
    
    
    2005
    
    
    2006
    
    
    2005(In millions)
    
    
    (In millions)Employee severance
    
    $
    1.3
    
    
    $
    (1.1
    )
    
    $
    3.7
    
    
    $
    2.5Facilities consolidation and lease termination
    
    
    2.0
    
    
    
    1.3
    
    
    
    2.2
    
    
    
    3.5Fixed asset impairments
    
    
    
    
    
    
    
    
    
    
    0.6
    
    
    
    0.1Other
    
    
    0.2
    
    
    
    
    
    
    
    0.2
    
    
    
    Total restructuring and impairment charges
    
    $
    3.5
    
    
    $
    0.2
    
    
    $
    6.7
    
    
    $
    6.1
  16




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ContinuingAccrual
    
    
    Operations Net
    
    
    Cash Payments
    
    
    AccrualType of Charge
    
    October 31, 2005
    
    
    Additions
    
    
    Charged to Accrual
    
    
    July 28, 2006(In millions)Employee severance costs
    
    $
    5.0
    
    
    $
    3.7
    
    
    $
    5.7
    
    
    $
    3.0Facilities consolidation
    
    
    24.6
    
    
    
    2.2
    
    
    
    9.8
    
    
    
    17.0Total
    
    $
    29.6
    
    
    $
    5.9
    
    
    $
    15.5
    
    
    $
    20.0
   Note 14  Other Income, Net:
  Three months ended
    
    
    Nine months endedJuly 28,
    
    
    July 29,
    
    
    July 28,
    
    
    July 29,2006
    
    
    2005
    
    
    2006
    
    
    2005(In millions)
    
    
    (In millions)Interest income on investments
    
    $
    6.1
    
    
    $
    5.8
    
    
    $
    15.4
    
    
    $
    13.4Interest expense
    
    
    (6.2
    )
    
    
    (3.0
    )
    
    
    (12.9
    )
    
    
    (8.2
    )Interest income (expense), net
    
    
    (0.1
    )
    
    
    2.8
    
    
    
    2.5
    
    
    
    5.2Foreign exchange income (loss)
    
    
    (0.1
    )
    
    
    0.3
    
    
    
    1.3
    
    
    
    1.2Gain on sale of note receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.0Gain (loss) on sale of fixed assets
    
    
    0.6
    
    
    
    0.1
    
    
    
    (0.1
    )
    
    
    4.5Other
    
    
    1.9
    
    
    
    (0.1
    )
    
    
    3.5
    
    
    
    0.6Non-operating income, net
    
    
    2.4
    
    
    
    0.3
    
    
    
    4.7
    
    
    
    15.3Total other income, net
    
    $
    2.3
    
    
    $
    3.1
    
    
    $
    7.2
    
    
    $
    20.5
  17




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##### Table of Contents



Note 15  Commitments and Contingencies:
 Legal Contingencies In Re ADC Telecommunications, Inc. ERISA Litigation
  Income Tax Contingencies
  Other Contingencies
 Change of Control
 16
 Subsequent Event  Andrew Corporation Merger:
   18




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
   
    
    Broadband Infrastructure and Access; and
    
    Professional Services.
  
    
    connectivity systems and components that provide the infrastructure to networks to
connect Internet, data, video and voice services over copper, coaxial and fiber-optic
cables; and
    
    access systems used in the last mile/kilometer of wireline and wireless networks
to deliver high-speed Internet, data and voice services.
  Marketplace Conditions
   19




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®
     20




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Results of Operations
 Net Sales
  Three Months EndedJuly 28, 2006
    
    
    July 29, 2005Net Sales
    
    
    %
    
    
    Net Sales
    
    
    %(In millions)
    
    
    
    
    
    
    (In millions)Broadband Infrastructure and Access
    
    $
    293.1
    
    
    
    85.3
    %
    
    $
    259.4
    
    
    
    84.5
    %Professional Services:Product
    
    
    14.4
    
    
    
    4.2
    %
    
    
    14.2
    
    
    
    4.6
    %Service
    
    
    36.1
    
    
    
    10.5
    %
    
    
    33.4
    
    
    
    10.9
    %Total Professional Services
    
    
    50.5
    
    
    
    14.7
    %
    
    
    47.6
    
    
    
    15.5
    %Total
    
    $
    343.6
    
    
    
    100.0
    %
    
    $
    307.0
    
    
    
    100.0
    %
 Nine Months EndedJuly 28, 2006
    
    
    July 29, 2005Net Sales
    
    
    %
    
    
    Net Sales
    
    
    %(In millions)
    
    
    
    
    
    
    (In millions)Broadband Infrastructure and Access
    
    $
    827.5
    
    
    
    84.9
    %
    
    $
    694.4
    
    
    
    83.0
    %Professional Services:Product
    
    
    42.8
    
    
    
    4.4
    %
    
    
    44.1
    
    
    
    5.3
    %Service
    
    
    104.2
    
    
    
    10.7
    %
    
    
    98.3
    
    
    
    11.7
    %Total Professional Services
    
    
    147.0
    
    
    
    15.1
    %
    
    
    142.4
    
    
    
    17.0
    %Total
    
    $
    974.5
    
    
    
    100.0
    %
    
    $
    836.8
    
    
    
    100.0
    %
     21




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Gross Profit
  Operating Expenses
     22




---



##### Table of Contents



Other Income, Net
  Three months ended
    
    
    Nine months endedJuly 28,
    
    
    July 29,
    
    
    July 28,
    
    
    July 29,2006
    
    
    2005
    
    
    2006
    
    
    2005(In millions)
    
    
    (In millions)Interest income on short-term investments
    
    $
    6.1
    
    
    $
    5.8
    
    
    $
    15.4
    
    
    $
    13.4Interest expense
    
    
    (6.2
    )
    
    
    (3.0
    )
    
    
    (12.9
    )
    
    
    (8.2
    )Interest income (expense), net
    
    
    (0.1
    )
    
    
    2.8
    
    
    
    2.5
    
    
    
    5.2Foreign exchange income (loss)
    
    
    (0.1
    )
    
    
    0.3
    
    
    
    1.3
    
    
    
    1.2Gain on sale of note receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.0Gain (loss) on sale of fixed assets
    
    
    0.6
    
    
    
    0.1
    
    
    
    (0.1
    )
    
    
    4.5Other
    
    
    1.9
    
    
    
    (0.1
    )
    
    
    3.5
    
    
    
    0.6Non-operating income, net
    
    
    2.4
    
    
    
    0.3
    
    
    
    4.7
    
    
    
    15.3Total other income, net
    
    $
    2.3
    
    
    $
    3.1
    
    
    $
    7.2
    
    
    $
    20.5
    Income Taxes
  Income from Continuing Operations
  Acquisitions
  23




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Discontinued Operations
 Accounting for the Impairment or Disposal of Long-Lived Assets
 Share-Based Compensation
    Three Months
    
    
    Nine MonthsEnded
    
    
    EndedJuly 28, 2006
    
    
    July 28, 2006(In millions, except
    
    
    (In millions, exceptper share amounts)
    
    
    per share amounts)Effect on income before tax
    
    $
    (1.9
    )
    
    $
    (6.9
    )Effect on income from continuing operations
    
    
    (1.9
    )
    
    
    (6.9
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    0.6Net income
    
    $
    (1.9
    )
    
    $
    (6.3
    )Basic and diluted earnings per share
    
    $
    (0.02
    )
    
    $
    (0.05
    )
 Application of Critical Accounting Policies and Estimates
  Share-Based Compensation:
 Recoverability of Long-Lived Assets
 24




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##### Table of Contents



Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109
 Share-Based Payment: An amendment of FASB
Statements No. 123 and
95
 Liquidity and Capital Resources
 Liquidity
   25




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##### Table of Contents



Operating Activities
   Investing Activities
   Financing Activities
  Unsecured Debt
  Financing Arrangements
  26




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##### Table of Contents



Off-Balance-Sheet Arrangements and Contractual Obligations
  Working Capital and Liquidity Outlook
  
    
    $3.0 million for employee severance will be paid by the end of the second quarter of
fiscal 2007;
    
    $5.1 million for facilities consolidation costs, which relate principally to excess
leased facilities, will be paid by the end of the second quarter of fiscal 2007; and
    
    the remainder of $11.9 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
  27




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28




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Managements Report on Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  29




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PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 In Re ADC Telecommunications, Inc.
ERISA Litigation.
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  30




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SIGNATURES
  Dated: August 30, 2006
    
    ADC TELECOMMUNICATIONS, INC.By:
    
    /s/ Gokul V. HemmadyGokul V. HemmadyVice 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 JULY 28, 2006
 ExhibitNo.
    
    Description2-a
    
    Agreement and Plan of Merger by and among ADC Telecommunications, Inc., Hazeltine Merger Sub,
Inc. and Andrew
Corporation dated as of May 30, 2006 (Incorporated by reference to Exhibit 2.1 of ADCs Form
8-K filed on June 1,
2006.)3-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 3-a 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 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-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.)10-a
    
    Compensation Plan for Non-employee Directors of ADC Telecommunications, Inc. restated as of
May 23, 200610-b
    
    ADC Telecommunications, Inc. 401(k) Excess Plan (2006 Restatement), as restated on July 31, 200610-c
    
    Mutual Termination Agreement by and among ADC Telecommunications, Inc., Hazeltine Merger Sub,
Inc. and Andrew
Corporation dated as of August 9, 2006 (Incorporated by reference to Exhibit 10.1 of ADCs Form
8-K filed on August
10, 2006.)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
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