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ADTRAN, Inc. Reports Results For The Third Quarter 2013 And Declares Quarterly Cash Dividend

ADTRAN, Inc. (NASDAQ: ADTN) reported results for the third quarter 2013. For the quarter, sales were $177,404,000 compared to $162,125,000 for the third quarter of 2012. Net income was $16,205,000 for the quarter compared to $9,272,000 for the third quarter of 2012. Earnings per share, assuming dilution, were $0.28 for the quarter compared to $0.15 for the third quarter of 2012. Non-GAAP earnings per share for the quarter were $0.32 compared to $0.20 for the third quarter of 2012. The reconciliation between GAAP earnings per share, diluted, and non-GAAP earnings per share, diluted, is in the table provided.

ADTRAN Chief Executive Officer Tom Stanton stated, “The performance for the quarter was driven by lower operating expenses combined with a strong performance by both our Carrier and Enterprise businesses. The results were positively impacted by our international business which achieved a record revenue level.”

The Company also announced that its Board of Directors declared a cash dividend for the third quarter of 2013. The quarterly cash dividend is $0.09 per common share to be paid to holders of record at the close of business on October 24, 2013. The ex-dividend date is October 22, 2013 and the payment date is November 7, 2013.

The Company confirmed that its third quarter conference call will be held Wednesday, October 9, 2013 at 9:30 a.m. Central Time. This conference call will be web cast live through StreetEvents.com. To listen, simply visit the Investor Relations site at www.adtran.com or www.streetevents.com approximately 10 minutes prior to the start of the call and click on the conference call link provided.

An online replay of the conference call will be available for seven days at www.streetevents.com. In addition, an online replay of the conference call, as well as the text of the Company's earnings release, will be available on the Investor Relations site at www.adtran.com for at least 12 months following the call.

ADTRAN, Inc. is a leading global provider of networking and communications equipment. ADTRAN’s products enable voice, data, video and Internet communications across a variety of network infrastructures. ADTRAN solutions are currently in use by service providers, private enterprises, government organizations, and millions of individual users worldwide. For more information, please visit www.adtran.com.

For more information, contact the company at 800 9ADTRAN (800 923-8726) or via email at info@adtran.com. On the Web, visit www.adtran.com.

This press release contains forward-looking statements which reflect management’s best judgment based on factors currently known. However, these statements involve risks and uncertainties, including the successful development and market acceptance of new products, the degree of competition in the market for such products, the product and channel mix, component costs, manufacturing efficiencies, and other risks detailed in our annual report on Form 10-K for the year ended December 31, 2012 and on Form 10-Q for the quarter ended June 30, 2013. These risks and uncertainties could cause actual results to differ materially from those in the forward-looking statements included in this press release.

       

Condensed Consolidated Balance Sheet

(Unaudited)

(In thousands)

 

September 30, 2013

December 31, 2012
Assets
Cash and cash equivalents $ 54,311 $ 68,457
Short-term investments 136,640 160,481
Accounts receivable, net 108,018 81,194
Other receivables 20,268 16,253
Inventory 92,972 102,583
Prepaid expenses 4,693 4,148
Deferred tax assets, net   13,494   13,055
Total Current Assets 430,396 446,171
 
Property, plant and equipment, net 77,658 80,246
Deferred tax assets, net 11,605 10,261
Goodwill 3,492 3,492
Other assets 11,711 13,482
Long-term investments   298,122   332,729
 
Total Assets $ 832,984 $ 886,381
 
Liabilities and Stockholders' Equity
Accounts payable $ 74,172 $ 42,173
Unearned revenue 19,658 38,051
Accrued expenses 16,527 10,309
Accrued wages and benefits 16,594 15,022
Income tax payable, net   548   1,211
Total Current Liabilities 127,499 106,766
 
Non-current unearned revenue 26,373 23,803
Other non-current liabilities 20,459 17,406
Bonds payable   46,000   46,000
Total Liabilities 220,331 193,975
 
Stockholders' Equity   612,653   692,406
 
Total Liabilities and Stockholders' Equity $ 832,984 $ 886,381
 

   

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)

 
Three Months Ended Nine Months Ended
September 30, September 30,
2013   2012 2013   2012
 
Sales $ 177,404 $ 162,125 $ 482,650 $ 480,858
Cost of sales   94,857     82,153     250,628     231,598  
 
Gross Profit 82,547 79,972 232,022 249,260
 
Selling, general and administrative expenses 32,794 34,114 96,082 103,130
Research and development expenses   32,543     35,582     98,114     92,835  
 
Operating Income 17,210 10,276 37,826 53,295
 
Interest and dividend income 1,579 1,864 5,021 5,651
Interest expense (581 ) (587 ) (1,737 ) (1,756 )
Net realized investment gain 1,751 2,530 6,949 7,353
Other income (expense), net 22 (368 ) (1,521 ) 265
Gain on bargain purchase of a business   -     -     -     1,753  
 
Income before provision for income taxes 19,981 13,715 46,538 66,561
 
Provision for income taxes   (3,776 )   (4,443 )   (12,584 )   (23,259 )
 
Net Income $ 16,205   $ 9,272   $ 33,954   $ 43,302  
 
Weighted average shares outstanding - basic 57,947 63,066 59,561 63,495
Weighted average shares outstanding - diluted (1) 58,617 63,304 59,929 64,139
 
Earnings per common share - basic $ 0.28 $ 0.15 $ 0.57 $ 0.68
Earnings per common share - diluted (1) $ 0.28 $ 0.15 $ 0.57 $ 0.68
 
(1) Assumes exercise of dilutive stock options calculated under the treasury stock method.

   

Consolidated Statements of Comprehensive Income

(Unaudited)

(In thousands)

 
Three Months Ended Nine Months Ended
September 30, September 30,
2013   2012 2013   2012
 
Net Income $ 16,205   $ 9,272 $ 33,954   $ 43,302
 
Other Comprehensive Income (Loss), net of tax:
 
Unrealized gains (losses) on available-for-sale securities 2,562 497 (780 ) 2,019
Foreign currency translation   (108 )   134   (1,498 )   191
 
Other Comprehensive Income (Loss), net of tax   2,454     631   (2,278 )   2,210
 
Comprehensive Income, net of tax $ 18,659   $ 9,903 $ 31,676   $ 45,512

 

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 
Nine Months Ended
September 30,
2013   2012
Cash flows from operating activities:
Net income $ 33,954 $ 43,302
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 11,021 10,366
Amortization of net premium on available-for-sale investments 4,688 6,343
Net realized gain on long-term investments (6,949 ) (7,353 )
Net (gain) loss on disposal of property, plant and equipment 6 (213 )
Gain on bargain purchase of a business - (1,753 )
Stock-based compensation expense 6,516 6,783
Deferred income taxes (1,296 ) (1,156 )
Tax benefit from stock option exercises 113 1,813
Excess tax benefits from stock-based compensation arrangements (106 ) (1,412 )
Change in operating assets and liabilities:
Accounts receivable, net (25,844 ) (26,178 )
Other receivables (3,724 ) 1,866
Inventory 8,584 2,142
Prepaid expenses and other assets (417 ) (1,193 )
Accounts payable 30,960 17,607
Accrued expenses and other liabilities (4,839 ) 12,769
Income tax payable, net   (678 )   1,022  
Net cash provided by operating activities 51,989 64,755
 
Cash flows from investing activities:
Purchases of property, plant and equipment (6,510 ) (10,759 )
Proceeds from disposals of property, plant and equipment - 266
Proceeds from sales and maturities of available-for-sale investments 275,581 198,566
Purchases of available-for-sale investments (216,129 ) (220,355 )
Acquisition of business   -     7,496  
Net cash provided by (used in) investing activities 52,942 (24,786 )
 
Cash flows from financing activities:
Proceeds from stock option exercises 2,332 4,932
Purchases of treasury stock (104,147 ) (28,578 )
Dividend payments (16,220 ) (17,173 )
Excess tax benefits from stock-based compensation arrangements   106     1,412  
Net cash used in financing activities (117,929 ) (39,407 )
 
Net increase (decrease) in cash and cash equivalents (12,998 ) 562
Effect of exchange rate changes (1,148 ) (6 )
Cash and cash equivalents, beginning of period   68,457     42,979  
 
Cash and cash equivalents, end of period $ 54,311   $ 43,535  

   

Supplemental Information

Acquisition Related Expenses, Amortizations and Adjustments

(Unaudited)

(In thousands)

 

On August 4, 2011, we closed on the acquisition of Bluesocket, Inc. and on May 4, 2012, we closed on the acquisition of the Nokia Siemens Networks Broadband Access business (NSN BBA).  Acquisition related expenses, amortizations and adjustments for the three and nine months ended September 30, 2013 and 2012 for both transactions are as follows:

 
Three Months Ended Nine Months Ended
September 30, September 30,
2013   2012 2013   2012
Bluesocket, Inc. acquisition
Amortization of acquired intangible assets and other purchase accounting adjustments $ 283   $ 305   $ 863   $ 1,167  
 
NSN BBA acquisition
Amortization of acquired intangible assets 291 300 873 472
Amortization of other purchase accounting adjustments 235 666 987 1,718
Acquisition related professional fees, travel and other expenses   93     252     329     4,537  
 
Subtotal   619     1,218     2,189     6,727  
 
Total acquisition related expenses, amortizations and adjustments 902 1,523 3,052 7,894
Provision for income taxes   (302 )   (496 )   (1,015 )   (2,660 )
 
Total acquisition related expenses, amortizations and adjustments, net of tax $ 600   $ 1,027   $ 2,037   $ 5,234  
 

The acquisition related expenses, amortizations and adjustments above were recorded in the following Consolidated Statements of Income categories for the three and nine months ended September 30, 2013 and 2012:

 
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
 
Revenue (adjustments to deferred revenue recognized in the period) $ 221 $ 497 $ 718 $ 1,151
Cost of goods sold   (57 )   126     94     932  
 
Subtotal   164     623     812     2,083  
 
Selling, general and administrative expenses 101 258 375 4,180
Research and development expenses   637     642     1,865     1,631  
 
Subtotal   738     900     2,240     5,811  
 
Total acquisition related expenses, amortizations and adjustments 902 1,523 3,052 7,894
Provision for income taxes   (302 )   (496 )   (1,015 )   (2,660 )
 
Total acquisition related expenses, amortizations and adjustments, net of tax $ 600   $ 1,027   $ 2,037   $ 5,234  

   

Supplemental Information

Stock-based Compensation Expense

(Unaudited)

(In thousands)

 
Three Months Ended Nine Months Ended
September 30, September 30,
2013   2012 2013   2012
 
Stock-based compensation expense included in cost of sales $ 118   $ 106   $ 334   $ 304  
 
Selling, general and administrative expense 1,024 1,107 3,129 3,205
Research and development expense   1,034     1,138     3,053     3,274  
 
Stock-based compensation expense included in operating expenses   2,058     2,245     6,182     6,479  
 
Total stock-based compensation expense 2,176 2,351 6,516 6,783
Tax benefit for expense associated with non-qualified options   (307 )   (313 )   (924 )   (916 )
 
Total stock-based compensation expense, net of tax $ 1,869   $ 2,038   $ 5,592   $ 5,867  

   

Reconciliation of GAAP net income per share, diluted, to

Non-GAAP net income per share, diluted

(Unaudited)

 
Three Months Ended Nine Months Ended
September 30, September 30,
2013   2012 2013   2012
 
GAAP earnings per common share – diluted $ 0.28 $ 0.15 $ 0.57 $ 0.68
 
Acquisition related expenses, amortizations and adjustments 0.01 0.02 0.03 0.08
Stock-based compensation expense 0.03 0.03 0.09 0.09
Gain on bargain purchase of business

-

-

-

  (0.03 )
 
Non-GAAP earnings per common share – diluted $ 0.32 $ 0.20 $ 0.69 $ 0.82  
 




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