Divestitures of nonstrategic product lines in 2001 accounted for $112 million of the year-over-year sales decline. From an historical perspective, ADC’s results in the fourth quarter of 2000 were an all-time high for sales (which grew 63% year-over-year), pro forma operating income (which grew 121% year-over-year) and pro forma net income (which grew 94% year-over-year).
In the quarter, Broadband Infrastructure and Access (BIA) sales were $261 million compared to $862 million in the fourth quarter of 2000. All of the above-mentioned sales decline from divestitures was in BIA. Integrated Solutions (IS) sales were $131 million in the quarter compared to $170 million in the comparable prior-year period. International sales were $114 million or 29% of total sales in this year’s fourth quarter compared to 22% of total sales in the fourth quarter of 2000. North America and Europe remained ADC’s largest sales regions in the quarter.
Pro forma operating loss was $96 million in the fourth quarter of 2001 compared to pro forma operating income of $206 million in the prior-year fourth quarter, while pro forma net loss in this year’s fourth quarter was $55 million ($0.07 loss per diluted share) compared to pro forma net income of $138 million ($0.18 earnings per diluted share) in the fourth quarter of 2000. On a financial reporting basis, which includes the impact of all expenses, charges and credits, net loss was $177 million ($0.22 loss per diluted share) in the fourth quarter of 2001 compared to net income of $87 million ($0.11 earnings per diluted share) in the fourth quarter of 2000.
We are pleased that we have substantially completed the strategic restructuring and related aggressive cost reductions at the new ADC by October 31, the deadline we set this past spring. ADC is now well positioned to accelerate earnings growth when telecommunications capital spending rebounds, said Richard R. Roscitt, Chairman and CEO of ADC. We enter 2002 focused on our goals of increasing cash flow and achieving profitability by taking market share and growing our strategic businesses, while managing a lower cost structure. Our long-term growth fundamentals for building and upgrading broadband networks remain intact. The three C’s of Broadband – Content, Commerce and Communications – are the major drivers for increasing broadband traffic in the future while broadband penetration in the last mile/kilometer of the network is only 10-15% today. Based on these fundamentals, we expect strong growth potential ahead.
ADC is also entering our new fiscal year with financial strength. In the fourth quarter of 2001, ADC continued to increase free cash flow (total cash from operating activities less capital expenditures) to a positive $62 million in the fourth quarter of 2001, a sequential increase of 133% compared to the third quarter of 2001 and up 40% from the fourth quarter of 2000, said Robert E. Switz, Executive Vice President and CFO of ADC. Through the significant expense savings from our aggressive cost reduction actions and cash obtained through the sale of nonstrategic product lines, ADC ended the fiscal year with $422 million in cash and marketable securities and $5 million of debt.
Roscitt added, We are taking advantage of the chaos in the market to firmly establish ADC as a strategic supplier of choice for many broadband communications providers around the world. Since the last mile/kilometer of broadband networks is where ADC has proven experience and is strategically focused, our customers view us as a trusted partner who understands the complexities and challenges of increasing the low penetration rate of broadband services to consumers and businesses worldwide. The proof of our vision and strategic transformation is in our recent market wins with strategic products like our Cuda(TM) 12000 IP Access Switch, Avidia(R) Multiservice DSLAM, Digivance(TM) RF Transport Solution, FastFlow(R) Service Fulfillment software, Singl.eView(TM) Customer Management and Convergent Billing software and Metrica(TM) Service Assurance software, in addition to market wins in our established broadband connectivity and systems integration businesses.
