ADTRAN, Inc. Reports Results for the Third Quarter 2012 and Declares Quarterly Cash Dividend

Tue Oct 9, 2012 8:45pm EDT

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ADTRAN, Inc. Reports Results for the Third Quarter 2012 and Declares Quarterly Cash Dividend

ADTRAN, Inc. (NASDAQ:ADTN) reported results for the third quarter 2012. For the quarter, sales were $162,125,000 compared to $192,194,000 for the third quarter of 2011. Net income was $9,272,000 for the quarter compared to $36,213,000 for the third quarter of 2011. Earnings per share, assuming dilution, were $0.15 for the quarter compared to $0.56 for the third quarter of 2011. Non-GAAP earnings per share for the quarter were $0.20 compared to $0.61 for the third quarter of 2011. 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, “This quarter’s performance came in line with our revised expectations. Although current market conditions limit near term visibility, we are confident that our market share position and globalization efforts will lead to significantly better performance in the future.”

The Company also announced that its Board of Directors declared a cash dividend for the third quarter of 2012. The quarterly cash dividend is $0.09 per common share to be paid to holders of record at the close of business on October 25, 2012. The ex-dividend date is October 23, 2012 and the payment date is November 8, 2012.

Non-GAAP earnings per share exclude the effect of acquisition related expenses, amortizations and adjustments, and stock compensation expense.

The Company confirmed that its third quarter conference call will be held Wednesday, October 10, 2012 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, 2011 and our quarterly report on Form 10-Q for the quarter ended June 30, 2012. 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,
2012
      December 31,
2011

Assets

Cash and cash equivalents $ 43,535 $ 42,979
Short-term investments 190,333 159,347
Accounts receivable, net 102,693 76,130
Other receivables 8,260 9,743
Inventory 107,183 87,800
Prepaid expenses 4,354 3,119
Deferred tax assets, net   12,729   12,125

Total Current Assets

469,087

391,243
 
Property, plant and equipment, net 81,905 75,295
Deferred tax assets, net 6,843 8,345
Goodwill 3,492 3,492
Other assets 13,825 7,131
Long-term investments   327,106   332,008
 

Total Assets

$ 902,258 $ 817,514
 

Liabilities and Stockholders' Equity

Accounts payable $ 52,285 $ 29,404
Unearned revenue 31,672 9,965
Accrued expenses 10,310 5,876
Accrued wages and benefits 16,894 13,518
Income tax payable, net   4,186   3,169

Total Current Liabilities

115,347 61,932
 
Non-current unearned revenue 19,085 4,874
Other non-current liabilities 15,882 12,077
Bonds payable   46,500   46,500

Total Liabilities

196,814 125,383
 
Stockholders' Equity   705,444   692,131
 

Total Liabilities and Stockholders' Equity

$ 902,258 $ 817,514
 

 
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
 
      Three Months Ended     Nine Months Ended
September 30, September 30,
2012       2011 2012       2011
 
Sales $ 162,125 $ 192,194 $ 480,858 $ 541,943
Cost of sales   82,153     82,718     231,598     226,845  
 
Gross Profit 79,972 109,476 249,260 315,098
 
Selling, general and administrative expenses 34,114 31,475 103,130 91,925
Research and development expenses   35,582     26,894     92,835     75,150  
 
Operating Income 10,276 51,107 53,295 148,023
 
Interest and dividend income 1,864 2,037 5,651 5,829
Interest expense (587 ) (599 ) (1,756 ) (1,795 )
Net realized investment gain 2,530 2,982 7,353 9,121
Other income (expense), net (368 ) (155 ) 265 (397 )
Gain on bargain purchase of a business   -     -     1,753     -  
 
Income before provision for income taxes 13,715 55,372 66,561 160,781
 
Provision for income taxes   (4,443 )   (19,159 )   (23,259 )   (53,367 )
 
Net Income $ 9,272   $ 36,213   $ 43,302   $ 107,414  
 
Weighted average shares outstanding - basic 63,066 64,023 63,495 64,300
Weighted average shares outstanding - diluted (1) 63,304 64,961 64,139 65,697
 
Earnings per common share - basic $ 0.15 $ 0.57 $ 0.68 $ 1.67
Earnings per common share - diluted (1) $ 0.15 $ 0.56 $ 0.68 $ 1.63
 
(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,
2012       2011 2012       2011
 
Net Income

$

9,272 $ 36,213   $ 43,302 $ 107,414  
 
Other Comprehensive Income (Loss), net of tax:
 

Net change in unrealized gains (losses) on marketable securities

154 (5,468 ) 1,855 (11,259 )

Reclassification adjustments for amounts included in net income

343 (287 ) 164 (682 )
Foreign currency translation   134   (1,487 )   191   (1,031 )
 
Other Comprehensive Income (Loss), net of tax   631   (7,242 )   2,210   (12,972 )
 
Comprehensive Income, net of tax $ 9,903 $ 28,971   $ 45,512 $ 94,442  
 

 
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
      Nine Months Ended
September 30,
  2012

 

        2011  
Cash flows from operating activities:
Net income $ 43,302 $ 107,414
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 10,366 8,435
Amortization of net premium on available-for-sale investments 6,343 4,697
Net realized gain on long-term investments (7,352 ) (9,121 )
Net (gain) loss on disposal of property, plant and equipment (213 ) 14
Gain on bargain purchase of a business (1,753 ) -
Stock-based compensation expense 6,783 6,455
Deferred income taxes (1,156 ) 128
Tax benefit from stock option exercises 1,813 10,457
Excess tax benefits from stock-based compensation arrangements (1,412 ) (9,311 )
Change in operating assets and liabilities:
Accounts receivable, net (26,178 ) (18,440 )
Other receivables 1,866 (8,525 )
Income tax receivable, net - 2,741
Inventory 2,142 (12,247 )
Prepaid expenses and other assets (1,193 ) 207
Accounts payable 17,607 8,924
Accrued expenses and other liabilities 12,769 15,047
Income tax payable, net   1,022     1,916  
Net cash provided by operating activities 64,756 108,791
 
Cash flows from investing activities:
Purchases of property, plant and equipment (10,759 ) (9,531 )
Proceeds from disposals of property, plant and equipment 266 -
Proceeds from sales and maturities of available-for-sale investments 198,566 378,288
Purchases of available-for-sale investments (220,355 ) (443,275 )
Acquisition of business   7,496     (22,762 )
Net cash used in investing activities (24,786 ) (97,280 )
 
Cash flows from financing activities:
Proceeds from stock option exercises 4,932 33,631
Purchases of treasury stock (28,578 ) (35,178 )
Dividend payments (17,173 ) (17,395 )
Excess tax benefits from stock-based compensation arrangements   1,412     9,311  
Net cash used in financing activities (39,407 ) (9,631 )
 
Net increase in cash and cash equivalents 563 1,880
Effect of exchange rate changes (7 ) (1,031 )
Cash and cash equivalents, beginning of period   42,979     31,677  
 
Cash and cash equivalents, end of period $ 43,535   $ 32,526  
 

 
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, 2012 and 2011 for both transactions are as follows:

 
      Three Months Ended       Nine Months Ended
September 30, September 30,
  2012           2011     2012           2011  

Bluesocket, Inc. acquisition

Amortization of acquired intangible assets $ 268 $ 198 $ 753 $ 198
Amortization of other purchase accounting adjustments 37 217 414 217
Acquisition related professional fees, travel and other expenses   -     630     -     630  
 
Subtotal   305     1,045     1,167     1,045  
 
NSN BBA acquisition
Amortization of acquired intangible assets 300 - 472 -
Amortization of other purchase accounting adjustments 666 - 1,718 -
Acquisition related professional fees, travel and other expenses   252     931     4,537     992  
 
Subtotal   1,218     931     6,727     992  
 
Total acquisition related expenses, amortizations and adjustments 1,523 1,976 7,894 2,037
Tax effect   (496 )   (751 )   (2,660 )   (776 )
 
Total acquisition related expenses, amortizations and adjustments, net of tax $ 1,027   $ 1,225   $ 5,234   $ 1,261  
 

 

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, 2012 and 2011:

 
      Three Months Ended       Nine Months Ended
September 30, September 30,
  2012           2011     2012           2011  
 
Revenue (adjustments to deferred revenue recognized in the period) $ 497 $ 155 $ 1,151 $ 155
Cost of goods sold   126     66     932     66  
 
Subtotal   623     221     2,083     221  
 
Selling, general and administrative expenses 258 1,374 4,180 1,424
Research and development expenses   642     381     1,631     392  
 
Subtotal   900     1,755     5,811     1,816  
 
Total acquisition related expenses, amortizations and adjustments 1,523 1,976 7,894 2,037
Tax effect   (496 )   (751 )   (2,660 )   (776 )
 
Total acquisition related expenses, amortizations and adjustments, net of tax $ 1,027   $ 1,225   $ 5,234   $ 1,261  
 

 
Supplemental Information
Stock-based Compensation Expense
(Unaudited)
(In thousands)
 
      Three Months Ended       Nine Months Ended
September 30, September 30,
  2012           2011     2012           2011  
 
Stock-based compensation expense included in cost of sales $ 106   $ 100   $ 304   $ 280  
 
Selling, general and administrative expense 1,107 1,090 3,205 3,096
Research and development expense   1,138     1,100     3,274     3,079  
 
Stock-based compensation expense included in operating expenses   2,245     2,190     6,479     6,175  
 
Total stock-based compensation expense 2,351 2,290 6,783 6,455
Tax benefit for expense associated with non-qualified options   (313 )   (302 )   (916 )   (1,018 )
 
Total stock-based compensation expense, net of tax $ 2,038   $ 1,988   $ 5,867   $ 5,437  
 

 
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,
  2012         2011   2012           2011
 
GAAP earnings per common share – diluted $ 0.15 $ 0.56 $ 0.68 $ 1.63
 
Acquisition related expenses, amortizations and adjustments 0.02 0.02 0.08 0.02
Stock-based compensation expense 0.03 0.03 0.09 0.08
Bargain purchase gain – NSN BBA acquisition

-

-

  (0.03 )

-

 
Non-GAAP earnings per common share – diluted $ 0.20 $ 0.61 $ 0.82   $ 1.73
 

ADTRAN, Inc.
Jim Matthews, 256-963-8775
Senior Vice President/CFO
or
Investor Services/Assistance:
Gayle Ellis, 256-963-8220

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