##### 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 April 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
(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
  YES þ
    
    NO o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
  YES o
    
    NO 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. EXHIBITSSIGNATURESCertification of Principal Executive OfficerCertification of Principal Financial OfficerCertification furnished pursuant to 18 U.S.C. 1350    Table of Contents  
 PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETSUNAUDITED
 (In millions)
 April 28,
    
    
    October 31,2006
    
    
    2005ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    131.9
    
    
    $
    110.1Available-for-sale securities
    
    
    356.9
    
    
    
    335.3Accounts receivable, net of reserves of $8.1 and $9.6
    
    
    198.3
    
    
    
    195.6Unbilled revenue
    
    
    40.0
    
    
    
    38.1Inventories, net of reserves of $36.9 and $35.7
    
    
    145.9
    
    
    
    140.5Prepaid and other current assets
    
    
    47.2
    
    
    
    35.6Total current assets
    
    
    920.2
    
    
    
    855.2Property and equipment, net of accumulated depreciation of $368.0 and $351.2
    
    
    211.8
    
    
    
    221.1Restricted cash
    
    
    22.1
    
    
    
    23.6Goodwill
    
    
    240.2
    
    
    
    240.5Intangibles, net of accumulated amortization of $51.2 and $35.5
    
    
    152.9
    
    
    
    165.0Available-for-sale securities
    
    
    2.0
    
    
    
    12.1Other assets
    
    
    19.3
    
    
    
    19.7Total assets
    
    $
    1,568.5
    
    
    $
    1,537.2LIABILITIES AND SHAREOWNERS INVESTMENTCurrent Liabilities:Accounts payable
    
    $
    103.9
    
    
    $
    77.4Accrued compensation and benefits
    
    
    52.6
    
    
    
    80.9Other accrued liabilities
    
    
    78.4
    
    
    
    81.0Income taxes payable
    
    
    17.5
    
    
    
    15.9Restructuring accrual
    
    
    22.8
    
    
    
    33.3Notes payable
    
    
    0.1
    
    
    
    0.3Total current liabilities
    
    
    275.3
    
    
    
    288.8Pension obligations and other long-term liabilities
    
    
    81.9
    
    
    
    74.5Long-term notes payable
    
    
    400.0
    
    
    
    400.0Total liabilities
    
    
    757.2
    
    
    
    763.3Shareowners Investment:(117.2 and 116.6 shares outstanding)
    
    
    811.3
    
    
    
    773.9Total liabilities and shareowners investment
    
    $
    1,568.5
    
    
    $
    1,537.2
  2




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##### Table of Contents



ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSUNAUDITED
(In millions, except per share amounts)
 Three Months Ended
    
    
    Six Months EndedApril 28, 2006
    
    
    April 29, 2005
    
    
    April 28, 2006
    
    
    April 29, 2005Net Sales:Product
    
    $
    320.7
    
    
    $
    264.8
    
    
    $
    562.8
    
    
    $
    464.9Service
    
    
    44.9
    
    
    
    48.3
    
    
    
    84.6
    
    
    
    89.2Total net sales
    
    
    365.6
    
    
    
    313.1
    
    
    
    647.4
    
    
    
    554.1Cost of Sales:Product
    
    
    207.5
    
    
    
    151.9
    
    
    
    367.3
    
    
    
    272.7Service
    
    
    37.6
    
    
    
    44.3
    
    
    
    74.0
    
    
    
    82.4Total cost of sales
    
    
    245.1
    
    
    
    196.2
    
    
    
    441.3
    
    
    
    355.1Gross Profit
    
    
    120.5
    
    
    
    116.9
    
    
    
    206.1
    
    
    
    199.0Operating Expenses:Research and development
    
    
    19.0
    
    
    
    18.2
    
    
    
    38.0
    
    
    
    33.4Selling and administration
    
    
    76.8
    
    
    
    63.6
    
    
    
    145.8
    
    
    
    124.5Restructuring and impairment charges
    
    
    2.1
    
    
    
    3.3
    
    
    
    3.5
    
    
    
    6.4Total operating expenses
    
    
    97.9
    
    
    
    85.1
    
    
    
    187.3
    
    
    
    164.3Operating Income
    
    
    22.6
    
    
    
    31.8
    
    
    
    18.8
    
    
    
    34.7Other income, net
    
    
    2.8
    
    
    
    5.3
    
    
    
    5.5
    
    
    
    17.5Income before income taxes
    
    
    25.4
    
    
    
    37.1
    
    
    
    24.3
    
    
    
    52.2Provision for income taxes
    
    
    2.6
    
    
    
    2.3
    
    
    
    3.9
    
    
    
    3.3Income from continuing operations
    
    
    22.8
    
    
    
    34.8
    
    
    
    20.4
    
    
    
    48.9Discontinued Operations, Net of TaxIncome (loss) from discontinued operations
    
    
    
    
    
    
    (0.5
    )
    
    
    
    
    
    
    1.7Gain (loss) on sale of discontinued operations, net
    
    
    
    
    
    
    (0.9
    )
    
    
    
    
    
    
    35.3Total discontinued operations
    
    
    
    
    
    
    (1.4
    )
    
    
    
    
    
    
    37.0Earnings before the cumulative effect of a change in
accounting principle
    
    
    22.8
    
    
    
    33.4
    
    
    
    20.4
    
    
    
    85.9Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    
    
    
    
    0.6
    
    
    
    Net Income
    
    $
    22.8
    
    
    $
    33.4
    
    
    $
    21.0
    
    
    $
    85.9Weighted Average Common Shares Outstanding (Basic)
    
    
    117.1
    
    
    
    115.7
    
    
    
    116.9
    
    
    
    115.7Weighted Average Common Shares Outstanding (Diluted)
    
    
    117.9
    
    
    
    130.5
    
    
    
    117.6
    
    
    
    130.5Basic Earnings (Loss) Per Share:Continuing operations
    
    $
    0.19
    
    
    $
    0.30
    
    
    $
    0.18
    
    
    $
    0.42Discontinued operations
    
    $
    
    
    
    $
    (0.01
    )
    
    $
    
    
    
    $
    0.32Cumulative effect of a change in accounting principle
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Net income per share
    
    $
    0.19
    
    
    $
    0.29
    
    
    $
    0.18
    
    
    $
    0.74Diluted Earnings (Loss) Per Share:Continuing operations
    
    $
    0.19
    
    
    $
    0.28
    
    
    $
    0.18
    
    
    $
    0.40Discontinued operations
    
    $
    
    
    
    $
    (0.01
    )
    
    $
    
    
    
    $
    0.29Cumulative effect of a change in accounting principle
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Net income per share
    
    $
    0.19
    
    
    $
    0.27
    
    
    $
    0.18
    
    
    $
    0.69
  3




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##### Table of Contents



ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSUNAUDITED
(In millions)
 Six Months EndedApril 28, 2006
    
    
    April 29, 2005Operating Activities:Net income from continuing operations
    
    $
    20.4
    
    
    $
    48.9Adjustments to reconcile net income from continuing operations to net cash provided by (used
for) operating activities from continuing operations:Inventory and fixed asset write-offs
    
    
    0.6
    
    
    
    0.1Depreciation and amortization
    
    
    33.7
    
    
    
    27.3Change in bad debt reserves
    
    
    0.2
    
    
    
    (1.9
    )Non-cash stock compensation
    
    
    6.5
    
    
    
    1.5Change in deferred income taxes
    
    
    1.4
    
    
    
    (Gain) loss on sale of property and equipment
    
    
    0.8
    
    
    
    (4.3
    )Other, net
    
    
    (0.3
    )
    
    
    (1.6
    )Changes in operating assets and liabilities, net of acquisitions and divestitures:Accounts receivable and unbilled revenues
    
    
    (10.0
    )
    
    
    (46.7
    )Inventories
    
    
    (4.4
    )
    
    
    (22.0
    )Prepaid and other assets
    
    
    (7.2
    )
    
    
    (8.0
    )Accounts payable
    
    
    26.0
    
    
    
    10.5Accrued liabilities
    
    
    (40.4
    )
    
    
    (22.0
    )Pension liabilities
    
    
    2.6
    
    
    
    2.1Total cash provided by (used for) operating activities from continuing operations
    
    
    29.9
    
    
    
    (16.1
    )Total cash provided by (used for) operating activities from discontinued
operations
    
    
    
    
    
    
    (0.8
    )Total cash provided by (used for) operating activities
    
    
    29.9
    
    
    
    (16.9
    )Investing Activities:Divestitures, net of cash disposed
    
    
    
    
    
    
    33.7Property, equipment and patent additions
    
    
    (13.5
    )
    
    
    (10.5
    )Proceeds from disposal of property and equipment
    
    
    0.3
    
    
    
    16.7Proceeds from collection of note receivable
    
    
    2.7
    
    
    
    9.0Change in restricted cash
    
    
    1.6
    
    
    
    2.8Purchases of available-for-sale securities
    
    
    (240.4
    )
    
    
    (561.1
    )Sales of available-for-sale securities
    
    
    229.6
    
    
    
    555.4Other
    
    
    0.1
    
    
    
    Total cash (used for) provided by investing activities
    
    
    (19.6
    )
    
    
    46.0Financing Activities:Common stock issued
    
    
    9.6
    
    
    
    2.4Total cash provided by financing activities
    
    
    9.6
    
    
    
    2.4Effect of Exchange Rate Changes on Cash
    
    
    1.9
    
    
    
    1.9Increase in Cash and Cash Equivalents
    
    
    21.8
    
    
    
    33.4Cash and Cash Equivalents, beginning of period
    
    
    110.1
    
    
    
    66.2Cash and Cash Equivalents, end of period
    
    $
    131.9
    
    
    $
    99.6
  4




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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
 Share-Based Payment: An amendment of FASB
Statements No. 123 and 95
 Summary of Significant Accounting Policies
 Accounting for Stock Issued to Employees
 Reverse Stock Split
  5




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Warranty
   Accrual
    
    Charged to other
    
    Charged to costs
    
    Deductions
    
    AccrualOctober 31, 2005
    
    accounts
    
    and expenses
    
    (write-offs)
    
    April 28, 2006(In millions)Warranty Reserve
    
    $
    10.8
    
    
    $
    
    
    
    $
    2.4
    
    
    $
    3.5
    
    
    $
    9.7
 Note 2  Share-Based Compensation:
   Accounting for Stock-Based Compensation
   6




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Three Months
    
    
    Six MonthsEnded
    
    
    EndedApril 28, 2006
    
    
    April 28, 2006(In millions, except
    
    
    (In millions, exceptper share amounts)
    
    
    per share amounts)Effect on income before tax
    
    $
    (2.3
    )
    
    $
    (5.1
    )Effect on income from continuing operations
    
    
    (2.3
    )
    
    
    (5.1
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    0.6Net income
    
    $
    (2.3
    )
    
    $
    (4.5
    )Basic and diluted earnings per share
    
    $
    (0.02
    )
    
    $
    (0.04
    )
  Three Months
    
    
    Six MonthsEnded
    
    
    EndedApril 29, 2005
    
    
    April 29, 2005(In millions, except
    
    
    (In millions, exceptper share amounts)
    
    
    per share amounts)Net income as reported
    
    $
    33.4
    
    
    $
    85.9Plus: Share-based employee compensation included in reported income
    
    
    0.8
    
    
    
    1.5Less: Stock compensation expense  fair value based method
    
    
    (5.5
    )
    
    
    (10.0
    )Pro forma net income
    
    $
    28.7
    
    
    $
    77.4Net income per shareAs reported  basic
    
    $
    0.29
    
    
    $
    0.74As reported  diluted
    
    $
    0.27
    
    
    $
    0.69Pro forma  basic
    
    $
    0.25
    
    
    $
    0.67Pro forma  diluted
    
    $
    0.24
    
    
    $
    0.62
    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
    
    
    
    0.1
 7




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##### Table of Contents



Stock Options
    
    RestrictedStock Option
    
    Weighted Average
    
    StockShares
    
    Exercise Price
    
    Awards/Units(In millions)
    
    
    
    
    
    (In millions)Exercised
    
    
    (0.3
    )
    
    
    (16.43
    )
    
    
    Restrictions lapsed
    
    
    
    
    
    
    
    
    
    
    Canceled
    
    
    (0.1
    )
    
    
    (30.45
    )
    
    
    (0.1
    )Outstanding at April 28, 2006
    
    
    6.8
    
    
    
    29.06
    
    
    
    0.6Exercisable at October 31, 2005
    
    
    4.6
    
    
    
    33.70
    
    
    
    Exercisable at April 28, 2006
    
    
    4.6
    
    
    $
    32.90
    
    
    
    
  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
    
    
    
    235,052
    
    
    
    7.18
    
    
    
    $  13.34
    
    
    
    185,976
    
    
    
    $  12.8715.75
    
    
    
    15.82
    
    
    
    862,881
    
    
    
    6.58
    
    
    
    15.82
    
    
    
    862,524
    
    
    
    15.8216.03
    
    
    
    18.62
    
    
    
    606,922
    
    
    
    7.67
    
    
    
    17.12
    
    
    
    381,327
    
    
    
    16.9718.69
    
    
    
    18.76
    
    
    
    865,562
    
    
    
    8.64
    
    
    
    18.76
    
    
    
    201,530
    
    
    
    18.7619.11
    
    
    
    19.81
    
    
    
    720,069
    
    
    
    4.93
    
    
    
    19.78
    
    
    
    691,856
    
    
    
    19.7920.02
    
    
    
    23.45
    
    
    
    655,705
    
    
    
    7.88
    
    
    
    20.62
    
    
    
    340,792
    
    
    
    20.6523.91
    
    
    
    23.91
    
    
    
    869,351
    
    
    
    9.63
    
    
    
    23.91
    
    
    
    
    
    
    
    24.01
    
    
    
    30.59
    
    
    
    791,519
    
    
    
    5.90
    
    
    
    29.19
    
    
    
    744,835
    
    
    
    29.4231.08
    
    
    
    61.25
    
    
    
    676,955
    
    
    
    3.91
    
    
    
    44.80
    
    
    
    666,557
    
    
    
    44.7361.47
    
    
    
    293.56
    
    
    
    476,162
    
    
    
    3.16
    
    
    
    107.15
    
    
    
    476,162
    
    
    
    107.15$
    8.05
    
    
    
    $293.56
    
    
    
    6,760,178
    
    
    
    6.72
    
    
    
    $  29.06
    
    
    
    4,551,559
    
    
    
    $  32.90
  Three Months Ended
    
    Six Months EndedApril 28,
    
    April 29,
    
    April 28,
    
    April 29,2006
    
    2005
    
    2006
    
    2005Expected volatility
    
    
    56.46
    %
    
    
    57.86
    %
    
    
    56.46%-57.83
    %
    
    
    57.86%-59.31
    %Risk free interest rate
    
    
    4.73
    %
    
    
    3.85
    %
    
    
    4.30%-4.73
    %
    
    
    3.67%-3.85
    %Expected dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expected life (in years)
    
    
    4.92
    
    
    
    4.61
    
    
    
    4.92
    
    
    
    4.59-4.61
       8




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##### Table of Contents



Note 3  Acquisitions:
    Three Months Ended
    
    
    Six Months EndedApril 29, 2005
    
    
    April 29, 2005(In millions, except
    
    
    (In millions, exceptper share amounts)
    
    
    per share amounts)Net sales
    
    $
    340.2
    
    
    $
    599.7Income from continuing operations
    
    
    40.4
    
    
    
    55.7Net income
    
    
    38.5
    
    
    
    92.2Income from continuing operations per sharebasic
    
    
    0.35
    
    
    
    0.48Income from continuing operations per sharediluted
    
    
    0.31
    
    
    
    0.43Net income per sharebasic
    
    
    0.33
    
    
    
    0.80Net income per sharediluted
    
    $
    0.30
    
    
    $
    0.71
  Note 4  Discontinued Operations:
 Accounting for
the Impairment or Disposal of Long-Lived Assets.
 SIUK
  Metrica
  9




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##### Table of Contents



Singl.eView
   Three Months Ended
    
    
    Six Months EndedApril 28,
    
    
    April 29,
    
    
    April 28,
    
    
    April 29,2006
    
    
    2005
    
    
    2006
    
    
    2005(In millions)
    
    
    (In millions)Net sales
    
    $
    
    
    
    $
    3.5
    
    
    $
    
    
    
    $
    7.7Income (loss) from discontinued operations
    
    $
    
    
    
    $
    (0.5
    )
    
    $
    
    
    
    $
    1.7Gain (loss) on sale of subsidiaries
    
    
    
    
    
    
    (0.9
    )
    
    
    
    
    
    
    35.3Gain (loss) from discontinued operations
    
    $
    
    
    
    $
    (1.4
    )
    
    $
    
    
    
    $
    37.0
 Note 5  Net Income (Loss) from Continuing Operations Per Share:
  Three Months Ended
    
    
    Six Months EndedApril 28,
    
    
    April 29,
    
    
    April 28,
    
    
    April 29,2006
    
    
    2005
    
    
    2006
    
    
    2005(In millions, except
    
    
    (In millions, exceptper share amounts)
    
    
    per share amounts)Numerator:Net income from continuing operations
    
    
    22.8
    
    
    
    34.8
    
    
    
    20.4
    
    
    
    48.9Interest expense for convertible notes
    
    
    
    
    
    
    2.0
    
    
    
    
    
    
    
    3.9Net income from continuing operations  diluted
    
    $
    22.8
    
    
    $
    36.8
    
    
    $
    20.4
    
    
    $
    52.8Denominator:Weighted average common shares outstanding  basic
    
    
    117.1
    
    
    
    115.7
    
    
    
    116.9
    
    
    
    115.7Convertible bonds converted to common stock
    
    
    
    
    
    
    14.2
    
    
    
    
    
    
    
    14.2Employee options and other
    
    
    0.8
    
    
    
    0.6
    
    
    
    0.7
    
    
    
    0.6Weighted average common shares outstanding  diluted
    
    
    117.9
    
    
    
    130.5
    
    
    
    117.6
    
    
    
    130.5Basic income per share from continuing operations
    
    $
    0.19
    
    
    $
    0.30
    
    
    $
    0.18
    
    
    $
    0.42Diluted income per share from continuing operations
    
    $
    0.19
    
    
    $
    0.28
    
    
    $
    0.18
    
    
    $
    0.40
  10




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##### Table of Contents



Note 6  Inventories:
  April 28,
    
    
    October 31,2006
    
    
    2005(In millions)Purchased materials
    
    $
    65.7
    
    
    $
    66.9Manufactured products
    
    
    109.8
    
    
    
    100.2Work-in-process
    
    
    7.3
    
    
    
    9.1Less: Inventory reserve
    
    
    (36.9
    )
    
    
    (35.7
    )Total inventories, net
    
    $
    145.9
    
    
    $
    140.5
 Note 7  Property & Equipment:
  April 28,
    
    
    October 31,2006
    
    
    2005(In millions)Land and buildings
    
    $
    139.5
    
    
    $
    137.2Machinery and equipment
    
    
    385.0
    
    
    
    372.8Furniture and fixtures
    
    
    41.5
    
    
    
    42.1Less: Accumulated depreciation
    
    
    (368.0
    )
    
    
    (351.2
    )Total
    
    
    198.0
    
    
    
    200.9Construction in progress
    
    
    13.8
    
    
    
    20.2Total property & equipment, net
    
    $
    211.8
    
    
    $
    221.1
 Note 8  Goodwill and Intangible Assets:
   Balance as of October 31, 2005
    
    $
    240.5Purchase accounting adjustments
    
    
    (0.3
    )Balance as of April 28, 2006
    
    $
    240.2
  Note 9  Income Taxes:
 Accounting for Income Taxes
 11




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##### Table of Contents



Note 10  Comprehensive Income:
   Three Months Ended
    
    
    Six Months EndedApril 28,
    
    
    April 29,
    
    
    April 28,
    
    
    April 29,2006
    
    
    2005
    
    
    2006
    
    
    2005(In millions)
    
    
    (In millions)Net income
    
    $
    22.8
    
    
    $
    33.4
    
    
    $
    21.0
    
    
    $
    85.9Change in cumulative translation adjustment (1)
    
    
    (1.4
    )
    
    
    0.8
    
    
    
    0.8
    
    
    
    0.6Unrealized gain (loss) from securities classified as available-for-sale
    
    
    0.4
    
    
    
    (0.3
    )
    
    
    0.7
    
    
    
    (0.4
    )Total comprehensive income
    
    $
    21.8
    
    
    $
    33.9
    
    
    $
    22.5
    
    
    $
    86.1
 
 (1)
    
    The change in cumulative translation adjustment for the three months ended April 28, 2006 is
due to a weakening of the Mexican Peso in relation to the U.S. dollar partially offset by a
general strengthening of other currencies versus the U.S. dollar. Note 11  Pension Benefits
   Three Months Ended
    
    
    Six Months EndedApril 28,
    
    
    April 29,
    
    
    April 28,
    
    
    April 29,2006
    
    
    2005
    
    
    2006
    
    
    2005(In millions)
    
    
    (In millions)Service cost
    
    $
    0.1
    
    
    $
    0.2
    
    
    $
    0.2
    
    
    $
    0.3Interest cost
    
    
    0.7
    
    
    
    0.7
    
    
    
    1.4
    
    
    
    1.5Net periodic benefit cost
    
    $
    0.8
    
    
    $
    0.9
    
    
    $
    1.6
    
    
    $
    1.8
 Note 12  Segment and Geographic Information:
 Segment Information
  12




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##### Table of Contents




    
    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.
     Three Months Ended
    
    
    Six Months EndedApril 28,
    
    
    April 29,
    
    
    April 28,
    
    
    April 29,2006
    
    
    2005
    
    
    2006
    
    
    2005(In millions)
    
    
    (In millions)Broadband Infrastructure and Access:Infrastructure Products (Connectivity)
    
    $
    279.7
    
    
    $
    211.7
    
    
    $
    487.6
    
    
    $
    375.2Access Products (Wireline and Wireless)
    
    
    26.2
    
    
    
    36.7
    
    
    
    46.8
    
    
    
    59.5Divested Entities
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    0.3Total Broadband Infrastructure and Access
    
    
    305.9
    
    
    
    248.7
    
    
    
    534.4
    
    
    
    435.0Professional Services
    
    
    59.7
    
    
    
    64.4
    
    
    
    113.0
    
    
    
    119.1Total
    
    $
    365.6
    
    
    $
    313.1
    
    
    $
    647.4
    
    
    $
    554.1
  BroadbandInfrastructure
    
    
    Professionaland Access
    
    
    Services
    
    
    Consolidated(In millions)Three Months Ended April 28, 2006External sales:Products
    
    $
    305.9
    
    
    $
    14.8
    
    
    $
    320.7Services
    
    
    
    
    
    
    44.9
    
    
    
    44.9Total external sales
    
    
    305.9
    
    
    
    59.7
    
    
    
    365.6Contribution margin
    
    
    79.3
    
    
    
    4.2
    
    
    
    Depreciation and amortization
    
    
    14.9
    
    
    
    2.2
    
    
    
    17.1Operating income (loss)
    
    $
    28.8
    
    
    $
    (6.2
    )
    
    $
    22.6Three Months Ended April 29, 2005External sales:Products
    
    $
    248.7
    
    
    $
    16.1
    
    
    $
    264.8Services
    
    
    
    
    
    
    48.3
    
    
    
    48.3Total external sales
    
    
    248.7
    
    
    
    64.4
    
    
    
    313.1Contribution margin
    
    
    85.9
    
    
    
    5.6
    
    
    
    Depreciation and amortization
    
    
    11.0
    
    
    
    2.4
    
    
    
    13.4Operating income (loss)
    
    $
    37.1
    
    
    $
    (5.3
    )
    
    $
    31.8
 13




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##### Table of Contents



BroadbandInfrastructure
    
    
    Professionaland Access
    
    
    Services
    
    
    Consolidated(In millions)Six Months Ended April 28, 2006External sales:Products
    
    $
    534.4
    
    
    $
    28.4
    
    
    $
    562.8Services
    
    
    
    
    
    
    84.6
    
    
    
    84.6Total external sales
    
    
    534.4
    
    
    
    113.0
    
    
    
    647.4Contribution margin
    
    
    125.6
    
    
    
    7.0
    
    
    
    Depreciation and amortization
    
    
    29.1
    
    
    
    4.6
    
    
    
    33.7Operating income (loss)
    
    $
    34.9
    
    
    $
    (16.1
    )
    
    $
    18.8Six Months Ended April 29, 2005External sales:Products
    
    $
    435.0
    
    
    $
    29.9
    
    
    $
    464.9Services
    
    
    
    
    
    
    89.2
    
    
    
    89.2Total external sales
    
    
    435.0
    
    
    
    119.1
    
    
    
    554.1Contribution margin
    
    
    138.2
    
    
    
    9.9
    
    
    
    Depreciation and amortization
    
    
    21.8
    
    
    
    5.5
    
    
    
    27.3Operating income (loss)
    
    $
    43.7
    
    
    $
    (9.0
    )
    
    $
    34.7
 Regional Information
  Three Months Ended
    
    
    Six Months EndedApril 28,
    
    
    April 29,
    
    
    April 28,
    
    
    April 29,2006
    
    
    2005
    
    
    2006
    
    
    2005(In millions)
    
    
    (In millions)Americas (United States, Canada and Central and South America)
    
    $
    22.6
    
    
    $
    27.6
    
    
    $
    21.2
    
    
    $
    30.4EMEA (Europe, Middle East and Africa)
    
    
    (0.3
    )
    
    
    5.8
    
    
    
    (3.2
    )
    
    
    6.7Asia Pacific (China, Korea, Australia, India, Japan and Southeast Asia)
    
    
    2.4
    
    
    
    1.7
    
    
    
    4.3
    
    
    
    4.0Operating income before restructuring costs
    
    
    24.7
    
    
    
    35.1
    
    
    
    22.3
    
    
    
    41.1Restructuring costs
    
    
    (2.1
    )
    
    
    (3.3
    )
    
    
    (3.5
    )
    
    
    (6.4
    )Operating income after restructuring costs
    
    $
    22.6
    
    
    $
    31.8
    
    
    $
    18.8
    
    
    $
    34.7
 Geographic Information
  Geographic Sales Information:
 Three Months Ended
    
    
    Six Months EndedApril 28,
    
    
    April 29,
    
    
    April 28,
    
    
    April 29,2006
    
    
    2005
    
    
    2006
    
    
    2005(In millions)
    
    
    (In millions)Inside the United States
    
    $
    217.8
    
    
    $
    175.8
    
    
    $
    373.1
    
    
    $
    295.4Outside the United States:Asia Pacific (China, Korea, Australia, India, Japan and Southeast Asia)
    
    
    26.5
    
    
    
    25.3
    
    
    
    50.0
    
    
    
    46.9EMEA (Europe (excluding Germany), Middle East and Africa)
    
    
    53.7
    
    
    
    46.9
    
    
    
    100.3
    
    
    
    88.9Germany
    
    
    43.5
    
    
    
    45.5
    
    
    
    80.0
    
    
    
    86.1Americas (Canada, Central and South America)
    
    
    24.1
    
    
    
    19.6
    
    
    
    44.0
    
    
    
    36.8Total
    
    $
    365.6
    
    
    $
    313.1
    
    
    $
    647.4
    
    
    $
    554.1Property and Equipment, Net:Inside the United States
    
    
    
    
    
    
    
    
    
    $
    136.6
    
    
    $
    135.7Outside the United States
    
    
    
    
    
    
    
    
    
    
    75.2
    
    
    
    83.3Total
    
    
    
    
    
    
    
    
    
    $
    211.8
    
    
    $
    219.0
 14




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Note 13  Restructuring and Impairment Charges:
  Three Months Ended
    
    
    Six Months EndedApril 28,
    
    
    April 29,
    
    
    April 28,
    
    
    April 29,2006
    
    
    2005
    
    
    2006
    
    
    2005(In millions)
    
    
    (In millions)Employee severance
    
    $
    1.4
    
    
    $
    2.5
    
    
    $
    2.7
    
    
    $
    4.1Facilities consolidation and lease termination
    
    
    0.1
    
    
    
    0.7
    
    
    
    0.2
    
    
    
    2.2Fixed asset write-downs
    
    
    0.6
    
    
    
    0.1
    
    
    
    0.6
    
    
    
    0.1Total restructuring and impairment charges
    
    $
    2.1
    
    
    $
    3.3
    
    
    $
    3.5
    
    
    $
    6.4
     ContinuingAccrual
    
    
    Operations Net
    
    
    Cash Payments
    
    
    AccrualType of Charge
    
    October 31, 2005
    
    
    Additions
    
    
    Charged to Accrual
    
    
    April 28, 2006(In millions)Employee severance costs
    
    $
    8.7
    
    
    $
    2.7
    
    
    $
    6.3
    
    
    $
    5.1Facilities consolidation
    
    
    24.6
    
    
    
    0.2
    
    
    
    7.1
    
    
    
    17.7Total
    
    $
    33.3
    
    
    $
    2.9
    
    
    $
    13.4
    
    
    $
    22.8
   15




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##### Table of Contents



Note 14  Other Income, Net:
  Three months ended
    
    
    Six months endedApril 28,
    
    
    April 29,
    
    
    April 28,
    
    
    April 29,2006
    
    
    2005
    
    
    2006
    
    
    2005(In millions)
    
    
    (In millions)Interest income on short-term investments
    
    $
    4.9
    
    
    $
    3.9
    
    
    $
    9.5
    
    
    $
    7.6Interest expense
    
    
    (3.6
    )
    
    
    (2.4
    )
    
    
    (6.9
    )
    
    
    (5.2
    )Interest income, net
    
    
    1.3
    
    
    
    1.5
    
    
    
    2.6
    
    
    
    2.4Foreign exchange income
    
    
    0.9
    
    
    
    
    
    
    
    1.6
    
    
    
    1.0Gain on sale of note receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.0Gain (loss) on sale of fixed assets
    
    
    (0.2
    )
    
    
    3.8
    
    
    
    (0.8
    )
    
    
    4.3Other
    
    
    0.8
    
    
    
    
    
    
    
    2.1
    
    
    
    0.8Non-operating income, net
    
    
    1.5
    
    
    
    3.8
    
    
    
    2.9
    
    
    
    15.1Total other income, net
    
    $
    2.8
    
    
    $
    5.3
    
    
    $
    5.5
    
    
    $
    17.5
  Note 15  Commitments and Contingencies:
 Legal Contingencies In Re ADC Telecommunications, Inc. ERISA
Litigation
  Income Tax Contingencies
  Other Contingencies
 Change of Control
 Note 16  Subsequent Event
  16




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17




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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
    18




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##### Table of Contents




    
    new product offerings, such as our OmniReach FTTX solutions being deployed by several communications service providers;
    
    opportunities to cross-sell products among ADCs traditional customer base and the traditional customer base of KRONE; and
    
    increasing our market share in certain areas as we have done recently with respect to some product lines.
        19




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##### Table of Contents



Results of Operations
 Net Sales
  Three Months EndedApril 28, 2006
    
    
    April 29, 2005Net Sales
    
    
    %
    
    
    Net Sales
    
    
    %(In millions)
    
    
    
    
    
    
    (In millions)Broadband Infrastructure and Access
    
    $
    305.9
    
    
    
    83.7
    %
    
    $
    248.7
    
    
    
    79.4
    %Professional Services:Product
    
    
    14.8
    
    
    
    4.0
    
    
    
    16.1
    
    
    
    5.2Service
    
    
    44.9
    
    
    
    12.3
    
    
    
    48.3
    
    
    
    15.4Total Professional Services
    
    
    59.7
    
    
    
    16.3
    
    
    
    64.4
    
    
    
    20.6Total
    
    $
    365.6
    
    
    
    100.0
    %
    
    $
    313.1
    
    
    
    100.0
    %
 Six Months EndedApril 28, 2006
    
    
    April 29, 2005Net Sales
    
    
    %
    
    
    Net Sales
    
    
    %(In millions)
    
    
    
    
    
    
    (In millions)Broadband Infrastructure and Access
    
    $
    534.4
    
    
    
    82.5
    %
    
    $
    435.0
    
    
    
    78.5
    %Professional Services:Product
    
    
    28.4
    
    
    
    4.4
    
    
    
    29.9
    
    
    
    5.4Service
    
    
    84.6
    
    
    
    13.1
    
    
    
    89.2
    
    
    
    16.1Total Professional Services
    
    
    113.0
    
    
    
    17.5
    
    
    
    119.1
    
    
    
    21.5Total
    
    $
    647.4
    
    
    
    100.0
    %
    
    $
    554.1
    
    
    
    100.0
    %
      20




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Gross Profit
  Operating Expenses
     21




---



##### Table of Contents



Other Income, Net
  Three months ended
    
    
    Six months endedApril 28,
    
    
    April 29,
    
    
    April 28,
    
    
    April 29,2006
    
    
    2005
    
    
    2006
    
    
    2005(In millions)
    
    
    (In millions)Interest income on short-term investments
    
    $
    4.9
    
    
    $
    3.9
    
    
    $
    9.5
    
    
    $
    7.6Interest expense
    
    
    (3.6
    )
    
    
    (2.4
    )
    
    
    (6.9
    )
    
    
    (5.2
    )Interest income, net
    
    
    1.3
    
    
    
    1.5
    
    
    
    2.6
    
    
    
    2.4Foreign exchange income
    
    
    0.9
    
    
    
    
    
    
    
    1.6
    
    
    
    1.0Gain on sale of note receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.0Gain (loss) on sale of fixed assets
    
    
    (0.2
    )
    
    
    3.8
    
    
    
    (0.8
    )
    
    
    4.3Other
    
    
    0.8
    
    
    
    
    
    
    
    2.1
    
    
    
    0.8Non-operating income, net
    
    
    1.5
    
    
    
    3.8
    
    
    
    2.9
    
    
    
    15.1Total other income, net
    
    $
    2.8
    
    
    $
    5.3
    
    
    $
    5.5
    
    
    $
    17.5
  Income Taxes
  Income from Continuing Operations
  Acquisitions
  Discontinued Operations
 Accounting for the Impairment or Disposal of Long-Lived Assets
 22




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Share-Based Compensation
    Three Months
    
    
    Six MonthsEnded
    
    
    EndedApril 28, 2006
    
    
    April 28, 2006(In millions, except
    
    
    (In millions, exceptper share amounts)
    
    
    per share amounts)Effect on Income Before Tax
    
    $
    (2.3
    )
    
    $
    (5.1
    )Effect on Income From Continuing Operations
    
    
    (2.3
    )
    
    
    (5.1
    )Cumulative Effect of Change in Accounting Principle
    
    
    
    
    
    
    0.6Net Income
    
    $
    (2.3
    )
    
    $
    (4.5
    )Basic and Diluted Earnings Per Share
    
    $
    (0.02
    )
    
    $
    (0.04
    )
 Subsequent
Event
  Application of Critical Accounting Policies and Estimates
  Share-Based Compensation:
 Recoverability of Long-Lived Assets
  23




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##### Table of Contents



Liquidity and Capital Resources
 Liquidity
   Operating Activities
   Investing Activities
   Financing Activities
  24




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##### Table of Contents



Unsecured Debt
  Financing Arrangements
  Off-Balance-Sheet Arrangements and Contractual Obligations
  Working Capital and Liquidity Outlook
  
    
    $5.1 million for employee severance will be paid by the end of the second quarter of fiscal
2007;
 
    
    $6.1 million for facilities consolidation costs, which relate principally to excess leased
facilities, will be paid by the end of second quarter of fiscal 2007; and
 
    
    the remainder of $11.6 million, which also relates to excess leased facilities, will be
paid over the respective lease terms ending through 2015.
    25




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##### Table of Contents



Cautionary Statement Regarding Forward Looking Information
  
 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
  26




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 In Re ADC Telecommunications, Inc. ERISA Litigation
  
 ITEM 1A. RISK FACTORS
  Risks Relating to the Proposed Merger with Andrew Corporation Announced on May 31, 2006
 The announcement of our potential merger with Andrew Corporation has caused increased volatility in
our stock, which may continue for the foreseeable future.
   If the proposed merger is not completed, ADCs financial results and operations and the trading
price of ADC common stock may be adversely affected.
   ADC and Andrew may be required to comply with material restrictions or conditions in order to
obtain the regulatory approvals to complete the merger and any delays in obtaining regulatory
approvals will delay and may possibly prevent the merger.
  27




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##### Table of Contents



Each of ADC and Andrew is subject to certain restrictions on the conduct of its business under the
terms of the merger agreement.
   28




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##### Table of Contents



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
  For
        
    WithholdJohn A. Blanchard III
    
    
    103,535,954
    
    
    
    3,006,351Lois M. Martin
    
    
    104,722,639
    
    
    
    1,819,665John E. Rehfeld
    
    
    104,702,798
    
    
    
    1,839,506Jean-Pierre Rosso
    
    
    103,509,812
    
    
    
    3,032,492
  Votes For
    
    Votes Against
    
    Abstentions105,005,697
    
    841,735
    
    694,871
 
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  29




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##### Table of Contents



SIGNATURES
  Dated: June 5, 2006

    ADC TELECOMMUNICATIONS, INC.By:
    /s/ Gokul V. HemmadyGokul V. HemmadyVice President, Chief Financial Officer
(Principal Financial Officer and Duly Authorized Officer) 30




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##### Table of Contents



ADC TELECOMMUNICATIONS, INC.
EXHIBIT INDEX TO FORM 10-Q
FOR THE THREE MONTHS ENDED APRIL 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.)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
 31