ADC Telecom Profit Tops

Yesterday, after market close, ADC Telecommunications Inc. (ADCT: 6.53 0.00 0.00%) declared financial results for the first quarter of fiscal 2010. Due to a change in the company’s reporting fiscal year, management has compared results for the three month period ended December 31, 2009 with the proforma results of its comparable quarters.
 
On a GAAP basis, net income in the first quarter 2010 was $3.6 million or an income of 4 cents per share compared to a net loss of $48.4 million or a loss of 46 cents per share in the prior-year quarter. However, adjusted net income (excluding $1.7 million of net special charges, net of taxes) in the reported quarter was $1.9 million or an income of 2 cents per share, significantly above the Zacks Consensus Estimate of a loss of 1 cent per share. This was primarily due to an overall effective cost management strategy.
 
Quarterly total revenue was $265.6 million, down 11.4% year-over-year and also down 8.8% sequentially. First quarter revenue of $265.6 million was slightly below the Zacks Consensus Estimate of $267 million. This huge year-over-year decline in revenue is the result of the global economic recession and lack of carrier spending. Sequential decrease is mainly due to weak seasonality.
 
First quarter 2010 gross margin was 34.7% compared to a mere 29.5% in the year-ago quarter and 34.4% in the previous quarter. This reflects the aggressive cost-cutting measures taken by management during the past one year. Quarterly operating expenses were $96.2 million compared to $98.8 million in the prior-year quarter and $110.5 million in the previous quarter.
 
Cash flow from continuing operations, during the reported quarter was $16 million compared to $19.5 million in the year-ago quarter. Free cash flow (cash flow from operation less capital expenditure) in the same quarter was $9.3 million compared to $10.3 million in the year-ago quarter.
 
At the end of the first quarter of 2010, ADC Telecommunications had $609.5 million of cash & marketable securities on its balance sheet compared to $586.6 million at the end of the previous quarter. Total debt was $651.5 million at the end of the same quarter compared to $651.6 million at the end of the previous quarter.
 
Global Connectivity Solutions Segment
 
Quarterly total revenue was $201.5 million, down 14.1% year-over-year and also down 11.6% sequentially. This segment provided 76% of total revenue as a whole. Out of this, Fiber Connectivity accounted for 33%, Copper Connectivity 25%, Enterprise Connectivity 15%, and the rest 3% was provided by Wireline Connectivity products.
 
Network Solutions Segment
 
Quarterly total revenue was $25.2 million, up 9.1% year-over-year and also up 17.2% sequentially.
 
Professional Services Segment
 
Quarterly total revenue was $38.9 million, down 7.2% year-over-year and also down 6.9% sequentially.
 
Future Financial outlook by Management
 
Management has given a guidance that its net sales in the second quarter of fiscal 2010 will be within the range of $260 million - $280 million. EPS, on GAAP basis is expected within the range of a loss of 4 cents to an income of 6 cents, which includes a non-cash amortization expense of 5 cents per share and excludes potential non-cash charges or restructuring charges.
 
In after-market trading on the NASDAQ Monday, the stock price of ADC Telecommunications was up 12 cents (2.2%) to $5.50.