UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[X] AMENDMENT TO QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-9692
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TELLABS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 36-3831568
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(State of Incorporation) (I.R.S. Employer Identification No.)
4951 Indiana Avenue, Lisle, Illinois 60532
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (708) 969-8800
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
None N/A
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Securities registered pursuant to Section 12 (g) of the Act:
Common shares, with $ .01 par value
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
YES [X] NO[ ]
On March 29, 1996, 88,919,761 common shares of Tellabs, Inc. were
outstanding.
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TELLABS, INC.
INDEX
Note: This amended Form 10-Q is being refiled due to computer error
with regard to the original Form 10-Q filed by Tellabs, Inc. on
May 9, 1996.
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Comparative
Balance Sheets 3
Condensed Consolidated Comparative
Statements of Earnings 4
Condensed Consolidated Comparative
Statements of Cash Flow 5
Notes to Condensed Consolidated Comparative
Financial Statements 6
Item 2. Management's Discussion and Analysis 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURE 10
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TELLABS, INC.
CONDENSED CONSOLIDATED COMPARATIVE BALANCE SHEETS
(Unaudited)
Mar. 29, Dec. 29,
1996 1995
Assets --------- ---------
Current assets (In thousands)
Cash and cash equivalents $99,812 $92,485
Investments in marketable securities 75,721 69,751
Accounts receivable, less allowance 125,839 127,565
Inventories
Raw materials 29,745 31,302
Work in process 13,124 11,694
Finished goods 23,074 24,719
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65,943 67,715
Other current assets 9,433 8,854
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Total Current Assets 376,748 366,370
Property, plant, and equipment 207,205 201,441
Less accumulated depreciation 87,592 84,419
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119,613 117,022
Goodwill 41,627 44,958
Other assets 22,822 23,701
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$560,810 $552,051
Liabilities ========= =========
Current Liabilities
Accounts payable $28,349 $30,097
Accrued liabilities 30,697 42,183
Income taxes 22,111 26,284
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Total Current Liabilities 81,157 98,564
Long-term debt 2,850 2,850
Other long-term liabilities 7,264 6,179
Deferred income taxes 11,051 11,225
Stockholders' Equity
Preferred stock, with $.01 par value-
5,000,000 shares authorized, no shares issued - -
Common stock, with $.01 par value -
200,000,000 shares authorized 88,919,761
shares issued and outstanding at March 29, 1996
and 88,798,372 at December 29, 1995 889 888
Additional paid-in capital 73,834 72,385
Cumulative foreign currency translation adjustment 1,167 7,842
Unrealized net holding (losses) gains on
available-for-sale securities (599) 48
Retained earnings 383,197 352,070
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Total Stockholders' Equity 458,488 433,233
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$560,810 $552,051
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The accompanying notes are an integral part of these statements.
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TELLABS, INC.
CONDENSED CONSOLIDATED COMPARATIVE STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended
March 29, March 31,
1996 1995
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(In thousands, except
per share data)
Net sales $172,256 $142,212
Cost of sales 74,482 62,943
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Gross Profit 97,774 79,269
Marketing, general & administrative expense 33,613 27,670
Research and development expense 21,602 19,788
Goodwill amortization 611 665
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Total Operating Expense 55,826 48,123
Operating Profit 41,948 31,146
Interest income (1,975) (1,126)
Interest expense 28 31
Other (income) expense, net (572) (70)
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Earnings before income taxes 44,467 32,311
Income taxes 13,340 9,370
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Net Earnings $31,127 $22,941
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Earnings per share * $0.34 $0.25
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Average number of shares of
common stock outstanding * 92,020 91,302
* 1995 share amounts are restated to give effect to the two-for-one
stock split effective May 19, 1995.
The accompanying notes are an integral part of these statements.
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TELLABS, INC.
CONDENSED CONSOLIDATED COMPARATIVE STATEMENTS OF CASH FLOW
(Unaudited)
For The Three Months Ended
March 29, March 31,
1996 1995
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(In thousands)
Cash Flows from Operating Activities:
Net earnings $31,127 $22,941
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 6,461 5,548
Provision for doubtful receivables 390 289
Deferred income taxes (457) 2,632
Gain on sale of long-term investment ---- (929)
Net (increase) decrease in current assets:
Accounts receivable (467) 2,389
Inventories 536 (7,488)
Other current assets 36 1,185
Net decrease in current liabilities:
Accounts payable (1,527) (1,336)
Accrued liabilities (10,945) (4,114)
Income taxes (3,527) (1,452)
Net increase in other assets (325) (1,784)
Net increase in other liabilities 1,125 623
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Net Cash Provided by Operating Activities 22,427 18,504
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment, net (9,371) (7,627)
Payments for purchases of marketable securities (39,622) (25,597)
Proceeds from sales of marketable securities 33,005 1,364
Proceeds from sale of long-term investment ---- 3,429
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Net Cash Used by Investing Activities (15,988) (28,431)
Cash Flows from Financing Activities:
Common stock sold through stock-option plans 1,450 3,943
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Net Cash Provided by Financing Activities 1,450 3,943
Effect of exchange rate changes on cash (562) 1,795
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Net increase (decrease) in cash and cash equivalents 7,327 (4,189)
Beginning of period cash and cash equivalents 92,485 51,460
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End of period cash and cash equivalents $99,812 $47,271
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Supplemental Disclosures:
Interest paid $32 $26
Income taxes paid $17,550 $4,844
The accompanying notes are an integral part of these statements.
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TELLABS, INC.
NOTES TO CONDENSED CONSOLIDATED COMPARATIVE FINANCIAL STATEMENTS
1. Financial Information:
The unaudited financial information reflects all adjustments (consisting
only of normal recurring accruals) which are, in the opinion of
management, necessary for a fair presentation of the statements
contained herein. Certain reclassifications have been made in the 1995
financial statements to conform to the 1996 presentation.
2. Basis of Presentation:
These financial statements are presented in accordance with the
requirements of Form 10-Q and consequently may not include all
disclosures normally required by generally accepted accounting
principles or those normally reflected in the Company's Annual Report on
Form 10-K. Accordingly, the financial statements and notes herein
should be read in conjunction with the financial statements and related
notes in the Company's Form 10-K for the year ended December 29, 1995.
3. Subsequent Event:
On April 17, 1996, Tellabs Operations, Inc., a wholly owned subsidiary
of Tellabs, Inc. (the "Company") acquired all of the outstanding
shares of Steinbrecher Corporation ("Steinbrecher") located in
Burlington, Massachusetts pursuant to a Merger Agreement entered into on
March 11, 1996. Steinbrecher supplies wideband base station products
for digital cellular and wireless data applications. Effective April
19, 1996, Steinbrecher's name was changed to "Tellabs Wireless, Inc."
("Tellabs Wireless") which will operate within the Tellabs Wireless
Systems division, a division of Tellabs International, Inc. The Company
intends to continue the Tellabs Wireless business and to coordinate the
development and marketing of its products with those of the Tellabs
Wireless Systems division.
The consideration paid for the purchase of all of the outstanding shares
of Steinbrecher was approximately $76 million in cash and was determined
through arms-length negotiations. The purchase price was paid with $40
million obtained through a bank loan from Bank of America and the remainder
from the Company's existing cash and cash equivalent balances.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1996, the Company's cash, cash equivalents
and marketable securities portfolio increased $13,297,000 to an all-time
high of $175,533,000. The Company's record first quarter earnings of
$31,127,000 were the primary contributor, partially offset by payments
of $11,486,000 to reduce accrued liabilities. Accrued liabilities
decreased from the December 29, 1995 balance due primarily to payments
made during the first quarter for year-end obligations related to
employee compensation programs.
The Company invested the cash provided by operating activities in higher
yielding marketable securities and in property, plant, and equipment.
Investments in property, plant, and equipment (net of disposals and
translation adjustments) totalled approximately $9,400,000. Additions
were made to increase manufacturing capacity at the Company's Texas
facility, with a 41,000 square foot addition and accompanying equipment,
along with worldwide investments in research and development equipment.
The Company currently expects total capital expenditures for 1996 to be
approximately $50,000,000. This amount includes approximately
$10,000,000 of the $33,000,000 planned for the expansion of the
Company's Bolingbrook, Illinois manufacturing and research and
development facility. Construction of the addition is expected to begin
in the second quarter of 1996 with completion scheduled for mid-1997.
The remaining 1996 expenditures are expected to be for manufacturing
capacity and research and development equipment in Finland and Texas.
Net working capital at March 29, 1996 was $295,591,000, compared with
working capital of $267,806,000 at December 29, 1995. The Company's
current ratio at the end of the first quarter was 4.6 to 1. This
increase in working capital was primarily due to the cash generated by
operating activities offset by payments of year end accruals.
Management believes that the existing level of working capital will be
adequate for the Company's liquidity needs related to normal operations
both currently and in the foreseeable future. On April 17, 1996, the
Company obtained bank financing of $40,000,000 to finance a portion of
the acquisition of Steinbrecher and associated expenses. The Company
believes that sufficient resources continue to be available to support
the Company's growth either through currently available cash, through
cash generated from future operations, or through additional short-term
or long-term financing.
RESULTS OF OPERATIONS
Sales for the first quarter of 1996 were a record $172,256,000, up 21.1
percent from the previous first quarter record of $142,212,000 set in
1995. Sales growth during the first quarter of 1996 was driven
primarily by a 66 percent increase in sales of the SONET-based TITAN
(a registered trademark of Tellabs Operations, Inc.) 5500 digital
cross-connect system. Martis DXX (a trademark of Martis Oy) system
sales reached an all time quarterly high.
Net earnings for the first quarter of 1996 were $31,127,000, up 35.7
percent from $22,941,000 a year earlier. Earnings per share for the
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current quarter were 34 cents compared with 25 cents for the first
quarter of 1995. The 1995 earnings per share amount has been restated
to give effect to the two-for-one stock split effective May 19, 1995.
The increase in earnings for the first quarter of 1996 was primarily the
result of the aforementioned sales growth, a decrease in operating
expenses as a percentage of sales, and an increas in the gross profit
margin. Total operating expenses of $55,826,000 for the first quarter
of 1996 were 32.4 percent of sales compared to $48,123,000, or 33.8
percent of sales, for the same period in 1995. Increased headcount and
the related expenses necessary to support and service domestic and
international products were the primary reasons for this increase in
operating expenses. The increase in gross profit margin from 55.7
percent for the first quarter of 1995 to 56.8 percent in the first
quarter of 1996 was realized through continued efficiencies in
manufacturing operations and sales of higher margin products, as volumes
increased.
Interest income contributed $1,975,000 to pre-tax income in the first
quarter of 1996, up 75.4 percent from $1,126,000 in the first quarter of
1995. This increase was due to significantly higher average cash
balances and higher market interest rates. Interest expense was $28,000
for the first quarter of 1996 compared to $31,000 for the first quarter
of 1995. Interest expense for the remainder of 1996 will increase due
to the increase in outstanding debt during the second quarter to
support the acquisition of Steinbrecher.
Other non-operating income was $572,000 for the first quarter of 1996
compared to $70,000 for the first quarter of 1995. Foreign exchange
gains of $411,000 were the primary contributor to 1996's first quarter
other non-operating income. The foreign exchange gains were the
result of the weakness of the Finnish markka against the Swedish krona
and the U.S. dollar. Other non-operating income for the first quarter
of 1995 was primarily the result of a gain on the sale of stock held as
a long-term investment being partially offset by foreign exchange
losses.
The effective tax rate was approximately 30 percent for the first
quarter of 1996 and 29 percent for the first quarter of 1995. The
increase in the effective tax rate for 1996 is reflective of the
increase in TITAN 5500 system sales to the domestic market, where the
tax rate is significantly higher than at our Ireland and Finland
subsidiaries. The 1996 effective tax rate reflects adjustments from the
Federal statutory rate primarily attributable to foreign tax rate
benefits.
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PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(A) Exhibits:
Exhibit 10.12 - Bank of America Promissory Note
Exhibit 10.13 - Stock Bonus Plan
Exhibit 11 - Calculation of Per Share Earnings.
Exhibit 27 - Financial Data Schedule.
(B) Reports on Form 8-K
The Registrant filed a report on Form 8-K on March 11,
1996, to announce its intention to acquire Steinbrecher
Corporation.
The Registrant filed a report on Form 8-K on
May 1, 1996, prior to the filing of this quarterly
report of From 10-Q, with respect to the acquisition of
Steinbrecher Corporation which included financial
statements of Steinbrecher Corporation and pro forma
financial statements of Tellabs, Inc. and subsidiaries as
required by Item 7 of Form 8-K and Rule 3-05(b) of
Regulation S-X.
The Registrant also filed a report on Form 8-K/A on
May 2, 1996. This amended Form 8-K was filed due to a
computer error with regard to the original Form 8-K filed
by the Registrant on May 1, 1996.
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TELLABS, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
TELLABS, INC.
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(Registrant)
s\ J. Peter Johnson
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J. Peter Johnson
Vice President/Controller
& Chief Accounting Officer
May 10, 1996
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(Date)
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