ADC's Strong First Quarter 2000 Results Exceed Expectations.Business Editors MINNEAPOLIS--(BUSINESS WIRE)--Feb. 17, 2000 Sales of $545 Million, Up 35%; Two-for-One Split-Adjusted EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. of $0.18, Up 50%, Before 1999 Non-recurring Charges ADC (1) See A/D converter. (2) (Apple Display Connector) A peripheral connector from Apple that combines digital video display, USB and power in one cable. (Nasdaq: ADCT ADCT Adaptive Discrete Cosine Transform , www.adc.com) today reported record sales of $545 million for the first quarter ended January 31, 2000, an increase of 35% over the $404 million in the comparable quarter of 1999. With record first quarter sales in all major product groups, the strong growth reflects 52% growth in Broadband Connectivity sales combined with 21% growth in Broadband Access See broadband and wireless broadband. and Transport sales and 21% growth in Integrated Solutions sales. International sales were 21% of total sales in this year's first quarter compared to 26% in the first quarter of 1999. North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. and Europe remained ADC's largest sales regions in the quarter. &uot;This is an exciting time at ADC. We exceeded our expectations in the first quarter and are off to a strong start. The momentum we built in 1999 continues with us in 2000 boosting our sales and profits higher to another record first quarter financial performance,&uot; said William J. Cadogan, chairman and chief executive officer of ADC. &uot;We are even more excited about what lies ahead for ADC. Being in the early stages of the broadband age of communications, ADC faces tremendous global growth opportunities. Our comprehensive 'triple-play' strategy of supplying network equipment, software and integration services is focused on the fastest growing or 'sweet spot' of capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. by communications service providers - building and upgrading the 'last mile/kilometer' of communications networks for broadband, multiservice applications. ADC is well positioned to assist our growing worldwide base of customers in meeting their goals of deploying competitive bundles of Internet/data, video and voice services to consumers and businesses over high-speed network connections.&uot; Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. increased 48% to a record first quarter result in 2000 of $84 million compared to $57 million, before non-recurring charges, in the prior-year first quarter. Net income in 2000 was also a first quarter record of $56 million ($0.18 per split-adjusted, diluted share) increasing 50% in this year's first quarter over $38 million ($0.12 per split-adjusted, diluted share), before non-recurring charges, in the first quarter of 1999. The two-for-one stock split of ADC's common stock became effective for trading on February 16, 2000. Earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
RECOGNITION OF ADC's PERFORMANCE AND POSITION In the first two months of 2000, ADC was recognized numerous times for its performance and position. In February 2000, ADC was named one of America's Most Admired Companies A yearly publication by Fortune Magazine, America's Most Admired Companies consists of corporations that are highly esteemed by the likes of Business Executives, Directors, and Analysts. A survey is taken of close to 3300 professionals who give their opinions on the companies. in FORTUNE Magazine's annual survey. In January 2000, ADC was included in FORBES Magazine's Platinum 400 list of best-performing big corporations and was also selected for the Standard &Poor's PowerPicks 2000 Portfolio, which represents the collective best ideas from S&'s equity research staff. ADC was also included in the January 2000 listing of RED HERRING Red Herring A preliminary registration statement that must be filed with the SEC describing a new issue of stock (IPO) and the prospects of the issuing company. Notes: Magazine's Tech 250: Leading Technology Stocks. STRATEGIC INVESTMENTS APPRECIATE SIGNIFICANTLY In recent months, ADC's strategic investments have appreciated significantly. In November 1999, Siara Systems, in which ADC has approximately a 7.8% ownership interest or 1.9 million shares, agreed to be acquired by Redback Networks Redback Networks is a telecommunications equipment company. History Redback Networks was founded in August, 1996. Redback is an ERICSSON subsidiary since the beginning of 2007 (was previously traded on NASDAQ under the symbol RBAK). (Nasdaq: RBAK RBAK Redback Networks Inc. (stock abbreviation, AMEX) rBAK Remote Backup ) in a stock-for-stock acquisition valued at approximately $4.3 billion at the time of the announcement. Upon consummation of the transaction, ADC's $3.5 million investment in Siara Systems will be carried on the balance sheet at the market value of Redback Networks' shares. ADC's ownership interest of approximately 4% or 2.1 million shares of Efficient Networks (Nasdaq: EFNT) is carried on the balance sheet as of January 31, 2000 at a market value of $165 million, resulting in an unrealized net-of-tax gain of $101 million. Vyyo, a global supplier of broadband wireless See wireless broadband. access systems, filed on February 4, 2000 for an initial public offering of its common stock. As of January 31, 2000, ADC owns approximately 10% or 1.8 million of Vyyo's shares, which are carried on the balance sheet at cost of $5 million. ADC will carry the investment on the balance sheet at market value after Vyyo's shares begin trading on The Nasdaq Stock Market Nasdaq stock market The first electronic stock market listing over 5000 companies. The Nasdaq stock market comprises two separate markets, namely the Nasdaq National Market, which trades large, active securities and the Nasdaq Smallcap Market that trades emerging growth companies. . ADC has investments in nine other privately held companies privately held company A firm whose shares are held within a relatively small circle of owners and are not traded publicly. , including Optical Networks, Mind CTI  This article or section is written like an .Please help [ rewrite this article] from a neutral point of view. Mark blatant advertising for , using . , Tdsoft, G-Connect and Ensemble, carried on the balance sheet at cost. REVIEW OF PRODUCT GROUPS A review of ADC's performance by its three product groups - Broadband Connectivity, Broadband Access and Transport, and Integrated Solutions - follows. Broadband Connectivity Broadband Connectivity sales in the first quarter of 2000 increased 52% to $267 million from $175 million in the comparable prior-year quarter. In 2000, record first quarter sales were recorded for both fiber- and copper-connectivity systems. Sales were broad based across all types of Internet/data, video and voice service providers - incumbent and new entrants - around the globe. Strong worldwide growth in broadband connectivity systems continues as a result of growth in Internet/data traffic and digital services, which is creating demand for broader bandwidth connections, and the growth of new service providers, which is creating demand for connectivity to new and existing communication networks. ADC's market-leading broadband connectivity products connect a substantial portion of the communications networks carrying Internet traffic Internet traffic is the flow of data around the Internet. It includes web traffic, which is the amount of that data that is related to the World Wide Web, along with the traffic from other major uses of the Internet, such as electronic mail and peer-to-peer networks. . In January 2000, ADC completed the 2,000-hour requirements testing for its 980nm pump laser A laser used as the pump for an optical amplifier or other laser. See EDFA and laser. diode and module products with all performance parameters exceeding the specification requirements. The products are ready for sale. 980nm pump laser diodes and modules are used in the amplification of optical signals. ADC acquired NVision in December 1999 to further enhance Broadband Connectivity's market leadership in supplying digital signal management products to broadcast production and post-production customers. NVision is a technology leader in digital audio signal management and large-scale digital video routing and distribution for a full range of data rates, including HDTV (High Definition TV) A set of digital television (DTV) standards that offer the highest resolution and sharpest picture. Although some HDTV sets are available in standard (rather square) screen sizes, the overwhelming majority of sets are wide screen, which eliminates at 1.5 Gbps. During the quarter, ADC announced the release of its D17 Tools(TM), an advanced software package used in the design and construction of increasingly complex communications networks in buildings. The software is offered through ADC's Enteraprise(TM) line of structured connectivity systems. Broadband Access and Transport Broadband Access and Transport sales increased 21% to $169 million in the first quarter of 2000 compared to $140 million in the comparable prior-year quarter. Sales in the first quarter of 2000 increased from the prior-year first quarter primarily as a result of strong sales growth of major product systems - record first quarter sales of telephone transport and access systems increased 35%, record first quarter sales of cable television systems increased 25% and near-record first quarter sales of broadband wireless systems increased 38%. As expected, the sales of international digital loop carrier In telephone communications, a technology that increases the number of channels in the local loop by converting analog signals to digital and multiplexing them back to the end office. systems in the quarter, when compared to the near-record high sales in the first quarter of 1999, partially offset Broadband Access and Transport's strong growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. . Sales of Cellworx(R) Service Transport Nodes (STN (SuperTwisted Nematic) A passive matrix LCD technology that provides better contrast than twisted nematic (TN) by twisting the molecules from 180 to 270 degrees. See DSTN. ) continued to grow in the first quarter of 2000. To date, more than 200 Cellworx STNs have been deployed in a broad range of customer applications, including Iowa Communications Network The Iowa Communications Network (ICN) is a state-administered fiber optics network designed to provide equal access to Iowans with modern telecommunication resources. for its statewide distance learning network; Midcontinent Communications Midcontinent Communications is a provider of cable TV, internet, and general telephony services for home and business, largely serving the Dakota states, but also some communities in Minnesota and few in Nebraska. (the company is headquartered in Sioux Falls). for Internet access See how to access the Internet. and private line services; China's Beijing PTT (1) (Postal, Telegraph & Telephone) The governmental agency responsible for combined postal, telegraph and telephone services in many European countries. (2) See push-to-talk. PTT - Post, Telephone and Telegraph administration for voice, frame relay A high-speed packet switching protocol used in wide area networks (WANs). Providing a granular service of up to DS3 speed (45 Mbps), it has become popular for LAN to LAN connections across remote distances, and services are offered by most major carriers. and ATM transport services The collective functions of layers 1 through 4 of the OSI model. ; a major service provider for broadband switch port consolidation and DSLAM (DSL Access Multiplexor) A central office (CO) device for ADSL service that intermixes voice traffic and DSL traffic onto a customer's DSL line. It also separates incoming phone and data signals and directs them onto the appropriate carrier's network. See DSL. aggregation; U.S. military bases for data, voice and telemetry telemetry Highly automated communications process by which data are collected from instruments located at remote or inaccessible points and transmitted to receiving equipment for measurement, monitoring, display, and recording. networks; and international distributors for lab and demo equipment to sell Cellworx in their countries. Recently, Cellworx was selected by a major service provider for ATM Virtual Path transport and has been in the labs of two other major service providers for technical evaluations. ADC received its first orders and recognized initial sales of the Soneplex(R) HDSL See DSL. HDSL - High bit-rate Digital Subscriber Line 2 system during the quarter. In January 2000, ADC also was the first supplier to introduce the availability of an HDSL2 repeater allowing deployment of T1 (1.544 Mbps) service up to 24,000 feet from the central serving office over a single copper wire compared to HDSL2's initial reach of 12,000 feet. By doubling the reach, service providers can serve the majority of their applications with HDSL2 technology. HDSL2 technology also doubles the service lines available for service providers to deliver full T1 performance as HDSL2 uses a single twisted-pair copper cable while providing the same reach, robustness and spectral compatibility of HDSL, which requires two twisted-pair copper cables. Sales of Homeworx(TM) products increased 43% in the quarter over the prior-year first quarter as shipments continued to support MediaOne's deployments of cable telephony See cable telephone. services in Atlanta, Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. and Detroit, as well as Seren Innovations' deployments in Minnesota and California. In December 1999, BellSouth announced a trial using ADC's CellSpan(TM) Broadband Wireless Access System for high-speed wireless Internet access. ADC will provide the CellSpan system and its systems integration services for the trial. CellSpan enables communications service providers to offer wireless Internet/data, video and voice services to businesses, small offices/home offices and residences rather than accessing physical wireline networks. Three competitive access providers in North America currently deploy CellSpan. During the quarter, ADC was selected by Irish Multichannel Using two or more paths for transmission or processing. It can refer to a variety of architectures including (1) multiple I/O channels between the CPU and peripheral devices, (2) multiple wires in a cable, (3) multiple "logical" channels within a single wire or fiber or (4) multiple to supply multipoint multichannel distribution service (MMDS (Multichannel Multipoint Distribution Service or Microwave Multipoint Distribution Service) A digital wireless transmission system that works in the 2.2-2.4 GHz range. ) systems for a large-scale digital wireless video network and was chosen by Rapid Broadcasting to supply ADC's Visionary(TM) high-power UHF (Ultra High Frequency) The range of electromagnetic frequencies from 300 MHz to 3 GHz. In the U.S., analog television has used UHF channels 52 to 69 in the 700 MHz band. television transmitter systems. ADC is a leading supplier of transmitters for MMDS, UHF and VHF (Very High Frequency) The range of electromagnetic frequencies from 30 MHz to 300 MHz. , with a complete line of DTV/HDTV transmission systems. ADC was awarded, during the quarter, a contract extension with Turk Telecom of Turkey for the supply of its BroadAccess(TM) Multiservice Access Platform for an additional 11,000 subscriber lines over the previous contract for 40,000 subscriber lines. BroadAccess is deployed in more than 50 countries worldwide. In December 1999, ADC acquired Comtec Electronica S.R.L., an Argentina-based manufacturer of video transmission products used in cable television networks. Comtec's customers include Cablevision and Multicanal, Argentina's two major cable television service providers. Integrated Solutions Integrated Solutions sales in the first quarter of 2000 grew 21% to $108 million over $89 million in the comparable 1999 quarter. Record first quarter sales in 2000 increased from the prior-year first quarter as a result of first quarter sales of systems integration services, growing 24% over the first quarter of 1999, along with the 18% year-over-year sales growth of software systems. Growth in systems integration services continues to be driven by a broad range of incumbent and new communications service providers that select ADC for consulting, engineering, installation, software and system support, and activation of broadband, multiservice communication networks for growth, flexibility and rapid deployment. Demand from new competitive service providers resulted in record first quarter sales for Saville software. ADC signed new customers for a variety of applications including its CBP CBP competitive protein binding. (R) (Convergent Billing Platform), IBP IBP (Fraunhofer) Institut für Bauphysik (Stuttgart, Germany) IBP Interactive Business Planner IBP Integrated Bar of the Philippines IBP International Buyer Program (R) (Interconnect Billing Platform), SavilleExpress(TM) CLEC (Competitive Local Exchange Carrier) An organization offering local telephone service that is not one of the traditional telephone companies. The Telecommunications Act of 1996 allowed competition to the incumbent telcos (ILECs), enabling new companies (CLECs) and SavilleCare(TM) products and services. The first sale of SavilleCare in North America also occurred in the quarter when Network Telephone selected ADC's SavilleExpress CLEC next-generation convergent billing system and SavilleCare comprehensive customer relationship management system to better compete against incumbent and other communications service providers throughout the southeastern U.S. CBP provides complete billing and account management for a variety of wireline and wireless services and provides a single customer bill and point of contact across multiple levels, service offerings, languages, currencies and locations. IBP is an interconnect billing system for cross-carrier traffic. SavilleExpress CLEC is a next-generation customer care and billing application targeted to new communication service providers, who require rapid deployment and maximum flexibility. SavilleCare is a customer relationship management application designed for close integration with CBP and SavilleExpress CLEC systems. In the quarter, ADC's Metrica(R)/NPR network performance management software was successfully deployed at StarHub. The Metrica/NPR system interfaces to a broad range of wireline and wireless telephony telephony without wires, usually employing electric waves of high frequency emitted from an oscillator or generator, as in wireless telegraphy. A telephone transmitter causes fluctuations in these waves, it being the fluctuations only which affect the receiver. See also: Wireless equipment including switching, GSM, SDH (Synchronous Digital Hierarchy) The European counterpart to SONET. See SONET. SDH - Synchronous Digital Hierarchy , ATM and frame relay systems. Metrica/NPR software provides StarHub with real-time performance information so that any customer-affecting problems are detected and dealt with as early as possible. StarHub is Singapore's new telephony operator, whose shareowners include British Telecom and Nippon Telegraph and Telephone Nippon Telegraph and Telephone Corporation (日本電信電話株式会社 . ADC's Metrica software is deployed in over 150 networks in 55 countries. In first quarter of 2000, Cellular One purchased ADC's NewNet OTAserver(TM) for over-the-air activation and the NewNet SMserver(TM) for short message services for its U.S. wireless network. Also in the quarter, Global Telecom purchased the NewNet SMserver for short message services in its Brazilian wireless network. ADC continued to receive orders for its NewNet CALEAserver (TM) software, and closed customer contracts for its NewNet IP CALEAserver solution, and NewNet CDCmanager(TM) system, which enables carriers to centralize their CALEA CALEA Commission on Accreditation for Law Enforcement Agencies, Inc. (Fairfax, Virginia) CALEA Communications Assistance for Law Enforcement Act of 1994 CALEA Communication Assistance to Low Enforcement Act surveillance operations in a more controlled, cost-effective and secure way. ADC's CALEAserver software is one of the first products on the market that complies with requirements under the Communications Assistance to Law Enforcement Act (CALEA), enabling communications service providers to meet the CALEA compliance date of June 30, 2000 for circuit-switched networks and September 30, 2001 for packet-switched networks. The CALEA law orders all communications service providers to upgrade their wireline and wireless networks to meet law enforcement agencies' wiretap wiretap n. using an electronic device to listen in on telephone lines, which is illegal unless allowed by court order based upon a showing by law enforcement of "probable cause" to believe the communications are part of criminal activities. capacity and capability requirements or be subject to fines for each day not in compliance. ADC's NewNet product line of short messaging and over-the-air service provisioning solutions, as well as, comprehensive SS7, SS7-IP gateways and CALEA solutions are deployed in over 40 countries. About ADC ADC Telecommunications, Inc. is a leading global supplier of network equipment, software and integration services for broadband, multiservice networks that deliver data, video and voice communications over telephone, cable television, Internet, broadcast, wireless and enterprise networks. ADC's broadband, multiservice network solutions enable local access, high-speed transmission and software management of communications services from service providers to consumers and businesses over fiber-optic, copper, coaxial and wireless media. Headquartered in Minneapolis, Minnesota, ADC has approximately 14,400 employees around the world and annual sales of $2.1 billion. ADC's stock is included in the Standard &Poor's 500 Index.
For more information on ADC, visit our Investor Relations web site
(Click on Investor at www.adc.com) or
call (888) 329-9823 to receive ADC's press releases by fax on demand.
Cautionary Statement Under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 Any forward-looking statements contained herein reflect management's current expectations or beliefs. ADC Telecommunications cautions readers that future actual results could differ materially from those in forward-looking statements depending on the outcome of certain factors, including the risks and uncertainties identified in Exhibit 99-a to ADC's Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended October 31, 1999. ADC supports the National Association of Investors Corporation's &uot;Own Your Share of America&uot; campaign, which encourages individuals to invest in stocks.
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(In Thousands, Except Per Share Amounts)
For the Quarters Ended
January 31,
2000 1999
------------ ------------
NET SALES $ 544,634 $ 404,294
COST OF PRODUCT SOLD 283,057 212,310
------------ ------------
GROSS PROFIT 261,577 191,984
------------ ------------
Gross profit percentage 48.0% 47.5%
------------ ------------
EXPENSES:
Research and development 57,950 45,744
Selling and administration 113,965 84,227
Goodwill amortization 5,567 5,097
Non-recurring charges -- 60,327
------------ ------------
Total expenses 177,482 195,395
------------ ------------
OPERATING INCOME 84,095 (3,411)
OTHER INCOME (EXPENSE), NET:
Interest 2,195 370
Other (944) (1,208)
INCOME BEFORE INCOME TAXES 85,346 (4,249)
PROVISION FOR INCOME TAXES 29,018 5,433
============ ============
NET $ 56,328 $ (9,682) (a)
INCOME
============ ============
AVERAGE COMMON
SHARES OUTSTANDING (BASIC) 302,120 (b) 298,212 (b)
============ ============
EARNINGS PER SHARE (BASIC) $ 0.19 (b) $ (0.03)(a)(b)
============ ============
AVERAGE COMMON SHARES
OUTSTANDING (DILUTED) 314,518 (b) 298,212 (b)
============ ============
EARNINGS PER SHARE (DILUTED) $ 0.18 (b) $ (0.03)(a)(b)
============ ============
(a) Excluding $47 million of net-of-tax charges, net income would
have been $38 million or $0.13 and $0.12 per basic and diluted shares,
respectively. These charges relate principally to purchased in-process
research and development expenses associated with acquisitions and the
restructuring of the former Wireless Systems Group.
(b) Earnings per share and average common shares outstanding, for
both Basic and Diluted, have been adjusted for the two-for-one stock
split effective February 15, 2000.
ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - UNAUDITED
(In Thousands)
ASSETS
January 31, October 31,
2000 1999
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 164,661 $ 143,523
Marketable securities and
short-term investments 199,654 150,493
Accounts receivable 439,574 436,751
Inventories 281,438 243,882
Prepaid income taxes
and other assets 52,085 54,789
------------ ------------
Total current assets 1,137,412 1,029,438
PROPERTY AND EQUIPMENT, net 343,277 312,066
OTHER ASSETS,
principally goodwill 333,830 331,025
------------ ------------
$ 1,814,519 $ 1,672,529
============ ============
LIABILITIES AND SHAREOWNERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable $ 103,291 $ 119,212
Accrued liabilities 216,088 216,671
Accrued income taxes 73,971 41,919
Note payable and current
maturities of long-term debt 12,048 35,152
------------ ------------
Total current liabilities 405,398 412,954
LONG-TERM DEBT, less
current maturities 13,116 11,024
------------ ------------
Total liabilities 418,514 423,978
SHAREOWNERS' INVESTMENT
(303,372 and 300,346 shares
outstanding, respectively) 1,396,005 1,248,551
------------ ------------
$ 1,814,519 $ 1,672,529
============ ============
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