ADC Telecommunications Tops

After the closing bell yesterday, ADC Telecommunications Inc. (ADCT) declared financial results for the second quarter of fiscal 2010. Due to change of the company’s reporting fiscal year, management has compared results for the three month period ended Apr 2, 2010 with the proforma results of its comparable quarters.
 
On a GAAP basis, net loss from continuing operations in the second quarter fiscal 2010 was $12.5 million or a loss of 13 cents per share compared to a net loss of $434 million or a loss of $4.49 per share in the prior-year quarter.
 
However, adjusted net income (excluding special items) in the reported quarter was $9.5 million or 10 cents per share, significantly above the Zacks Consensus Estimate of 6 cents per share. This was primarily due to overall effective cost management strategy.
 
Total revenue for the quarter was $275 million, up 6.8% year over year and was slightly above the Zacks Consensus Estimate of $273 million. The year-over-year increase in revenue is the result improving global economic condition that resulted in higher carrier spending for next-generation networks.
 
Second quarter fiscal 2010 gross margin was 36.5% compared to 32.3% in the year-ago quarter. This reflects the aggressive cost cutting measures taken by management during the past one year. Quarterly adjusted operating expenses were $81.8 million compared to $78.1 million in the prior-year quarter.
 
Cash flow from continuing operations, during the first quarter fiscal 2010 was $16.9 million compared to $25 million in the year-ago quarter. Free cash flow (cash flow from operation less capital expenditure) in the same quarter was $2.8 million compared to $7.3 million in the year-ago quarter.
 
At the end of the second quarter of 2010, ADC Telecommunications had $621.9 million of cash & marketable securities on its balance sheet, compared to $586.6 million at the end of fiscal 2009. Total debt was $651.2 million at the end of the same quarter, compared to $651.6 million at the end of fiscal 2009.
 
Global Connectivity Solutions Segment
 
Total revenue was $214 million, up 3.6% year over year. This segment provided 78% of total revenue as a whole. Out of this, Fiber Connectivity accounted for 35%, Copper Connectivity 24%, Enterprise Connectivity 16%, and the rest 3% was provided by Wireline Connectivity products. Quarterly operating income of this segment was $16.5 million, up 200% year over year.
 
Network Solutions Segment
 
Total revenue was $20.1 million, up 30.5% year over year. Operating loss of this segment was ($5.7) million, down 90.5% year over year.
 
Professional Services Segment
 
Total revenue for the quarter was $39.9 million, up 15.3% year over year. Quarterly operating income of this segment was $2.4 million, up 380% year over year.
 
Future Financial outlook by Management
 
Management has given a guidance that its net sales in the third quarter of fiscal 2010 will be within the range of $290 million–$310 million. On a GAAP basis, EPS is expected within the range of 10 cents to 20 cents, which includes non-cash amortization expense of 5 cents per share and excludes potential non-cash charges or restructuring charges.
 
In the after-market trade in Nasdaq, the stock price of ADC Telecommunications was up 52 cents (6.73%) to $8.25.

Read the full analyst report on ADCT