ADTRAN, Inc. Reports Results for the Third Quarter 2015 and Declares Quarterly Cash Dividend

HUNTSVILLE, Ala.--(BUSINESS WIRE)--Oct. 13, 2015-- ADTRAN, Inc. (NASDAQ:ADTN) reported results for the third quarter 2015. For the quarter, sales were $158,078,000 compared to $160,138,000 for the second quarter of 2015. Net income was $7,067,000 compared to $2,544,000 for the second quarter of 2015. Earnings per share, assuming dilution, were $0.14 compared to $0.05 for the second quarter of 2015. Non-GAAP earnings per share were $0.19 compared to $0.10 for the second quarter of 2015. 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, “Our U.S. revenue in the quarter was up over 20% compared to the same period last year, driven by a substantial increase in broadband sales. Operating income was slightly better than expected driven by improved gross margin and lower operating expenses. Looking ahead, we continue to see signs that momentum is building for 2016 as CAF and competitive pressures refocus carriers’ investment in broadband access infrastructure.”

The Company also announced that its Board of Directors declared a cash dividend for the third quarter of 2015. The quarterly cash dividend is $0.09 per common share to be paid to holders of record at the close of business on October 29, 2015. The ex-dividend date is October 27, 2015 and the payment date is November 12, 2015.

The Company confirmed that its third quarter conference call will be held Wednesday, October 14, 2015 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, 2014 and on Form 10-Q for the quarter ended June 30, 2015. 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, December 31,
2015 2014
Assets
Cash and cash equivalents $ 83,687 $ 73,439
Short-term investments 42,081 46,919
Accounts receivable, net 86,176 88,502
Other receivables 20,858 33,295
Inventory 100,705 86,710
Prepaid expenses 5,935 5,129
Deferred tax assets, net   17,517   17,095
Total Current Assets 356,959 351,089
 
Property, plant and equipment, net 73,656 74,828
Deferred tax assets, net 23,341 17,694
Goodwill 3,492 3,492
Other assets 9,893 10,942
Long-term investments   204,513   280,649
 
Total Assets $ 671,854 $ 738,694
 
Liabilities and Stockholders' Equity
Accounts payable $ 69,372 $ 56,414
Unearned revenue 16,484 22,762
Accrued expenses 13,427 11,077
Accrued wages and benefits 14,842 13,855
Income tax payable, net   12,923   14,901
Total Current Liabilities 127,048 119,009
 
Non-current unearned revenue 8,685 10,948
Other non-current liabilities 29,680 30,924
Bonds payable   28,800   28,800
Total Liabilities 194,213 189,681
 
Stockholders' Equity   477,641   549,013
 
Total Liabilities and Stockholders' Equity $ 671,854 $ 738,694
 
       

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)

 
Three Months Ended Nine Months Ended
September 30, September 30,
2015       2014 2015       2014
 
Sales $ 158,078 $ 162,892 $ 461,051 $ 486,025
Cost of sales   87,429     84,635     256,593     243,181  
 
Gross Profit 70,649 78,257 204,458 242,844
 
Selling, general and administrative expenses 30,016 32,438 93,203 100,165
Research and development expenses   32,561     33,324     100,576     99,547  
 
Operating Income 8,072 12,495 10,679 43,132
 
Interest and dividend income 839 992 2,680 3,340
Interest expense (151 ) (150 ) (448 ) (525 )
Net realized investment gain 2,060 2,687 8,430 7,219
Other income (expense), net   52     (963 )   (848 )   (1,615 )
 
Income before provision for income taxes 10,872 15,061 20,493 51,551
 
Provision for income taxes   (3,805 )   (3,735 )   (7,565 )   (16,223 )
 
Net Income $ 7,067   $ 11,326   $ 12,928   $ 35,328  
 
Weighted average shares outstanding - basic 49,862 54,521 51,682 55,552
Weighted average shares outstanding - diluted (1) 49,927 54,824 51,792 55,976
 
Earnings per common share - basic $ 0.14 $ 0.21 $ 0.25 $ 0.64
Earnings per common share - diluted (1) $ 0.14 $ 0.21 $ 0.25 $ 0.63
 
(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,
2015   2014 2015   2014
 
Net Income $ 7,067   $ 11,326   $ 12,928   $ 35,328  
 
Other Comprehensive Income (Loss), net of tax:
 
Unrealized losses on available-for-sale securities (4,291 ) (3,148 ) (6,577 ) (2,850 )
Defined benefit plan adjustments 71 - 211 -
Foreign currency translation   (1,351 )   (2,568 )   (3,797 )   (2,182 )
 
Other Comprehensive Loss, net of tax   (5,571 )   (5,716 )   (10,163 )   (5,032 )
 
Comprehensive Income, net of tax $ 1,496   $ 5,610   $ 2,765   $ 30,296  
 
 

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 
Nine Months Ended
September 30,
2015   2014
Cash flows from operating activities:
Net income $ 12,928 $ 35,328
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 10,765 11,127
Amortization of net premium on available-for-sale investments 2,085 3,363
Net realized gain on long-term investments (8,430 ) (7,219 )
Net loss on disposal of property, plant and equipment 189 109
Stock-based compensation expense 4,788 6,296
Deferred income taxes (2,332 ) (122 )
Tax benefit from stock option exercises (40 ) 71
Excess tax benefits from stock-based compensation arrangements 38 (53 )
Change in operating assets and liabilities:
Accounts receivable, net 843 (15,807 )
Other receivables 10,532 (10,726 )
Inventory (14,945 ) 2,413
Prepaid expenses and other assets (1,665 ) (4,095 )
Accounts payable 13,687 3,563
Accrued expenses and other liabilities (3,996 ) 7,507
Income tax payable, net   (1,137 )   9,265  
Net cash provided by operating activities   23,310     41,020  
 
Cash flows from investing activities:
Purchases of property, plant and equipment (7,843 ) (8,162 )
Proceeds from disposals of property, plant and equipment 122 1
Proceeds from sales and maturities of available-for-sale investments 189,728 187,013
Purchases of available-for-sale investments   (113,227 )   (127,074 )
Net cash provided by investing activities   68,780     51,778  
 
Cash flows from financing activities:
Proceeds from stock option exercises 907 2,311
Purchases of treasury stock (65,808 ) (62,144 )
Dividend payments (13,989 ) (15,060 )
Payments on long-term debt - (16,500 )
Excess tax benefits from stock-based compensation arrangements   (38 )   53  
Net cash used in financing activities   (78,928 )   (91,340 )
 
Net increase in cash and cash equivalents 13,162 1,458
Effect of exchange rate changes (2,914 ) (1,341 )
Cash and cash equivalents, beginning of period   73,439     58,298  
 
Cash and cash equivalents, end of period $ 83,687   $ 58,415  
 
Supplemental disclosure of non-cash investing activities
Purchases of property, plant and equipment included in accounts payable $ 1,303 $ 598
 

Supplemental Information
Restructuring Expenses
(Unaudited)
(In thousands)

Restructuring expenses were recorded in the following Consolidated Statements of Income categories for the three and nine months ended September 30, 2015 and 2014:

   
Three Months Ended Nine Months Ended
September 30, September 30,
2015   2014 2015   2014
 
Restructuring expense included in cost of sales $ 9   $       - $ 107   $         -
 
Selling, general and administrative expense 194       - 838         -
Research and development expense   712           -   2,095             -
 
Restructuring expense included in operating expenses   906           -   2,933             -
 
Total restructuring expense 915 - 3,040 -
Provision for income taxes   (357 )         -   (1,186 )           -
 
Total restructuring expense, net of tax $ 558   $       - $ 1,854   $         -
 

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, 2015 and 2014 for both transactions are as follows:

 

  Three Months Ended   Nine Months Ended
September 30, September 30,
2015   2014   2015   2014
Bluesocket, Inc. acquisition
Amortization of acquired intangible assets and other purchase accounting adjustments $ 191   $ 227   $ 643   $ 699  
 
NSN BBA acquisition
Amortization of acquired intangible assets 231 287 701 884
Amortization of other purchase accounting adjustments 101 240 395 895
Acquisition related professional fees, travel and other expenses   20     24     61     89  
 
Subtotal   352     551     1,157     1,868  
 
Total acquisition related expenses, amortizations and adjustments 543 778 1,800 2,567
Provision for income taxes   (183 )   (259 )   (609 )   (851 )
 
Total acquisition related expenses, amortizations and adjustments, net of tax $ 360   $ 519   $ 1,191   $ 1,716  
 

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, 2015 and 2014:

   
Three Months Ended Nine Months Ended
September 30, September 30,
2015   2014 2015   2014
 
Revenue (adjustments to deferred revenue recognized in the period) $ 65 $ 105 $ 196 $ 528
Cost of goods sold   7     47     52     104  
 
Subtotal   72     152     248     632  
 
Selling, general and administrative expenses 23 31 74 110
Research and development expenses   448     595     1,478     1,825  
 
Subtotal   471     626     1,552     1,935  
 
Total acquisition related expenses, amortizations and adjustments 543 778 1,800 2,567
Provision for income taxes   (183 )   (259 )   (609 )   (851 )
 
Total acquisition related expenses, amortizations and adjustments, net of tax $ 360   $ 519   $ 1,191   $ 1,716  
 
 

Supplemental Information

Stock-based Compensation Expense

(Unaudited)

(In thousands)

   
 
Three Months Ended Nine Months Ended
September 30, September 30,
2015   2014 2015   2014
 
Stock-based compensation expense included in cost of sales $ 59   $ 124   $ 202   $ 359  
 
Selling, general and administrative expense 812 1,048 2,226 3,089
Research and development expense   803     975     2,360     2,848  
 
Stock-based compensation expense included in operating expenses   1,615     2,023     4,586     5,937  
 
Total stock-based compensation expense 1,674 2,147 4,788 6,296
Tax benefit for expense associated with non-qualified options   (218 )   (298 )   (620 )   (878 )
 
Total stock-based compensation expense, net of tax $ 1,456   $ 1,849   $ 4,168   $ 5,418  
 

 

   

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,
2015   2014 2015   2014
 
GAAP earnings per common share – diluted $ 0.14 $ 0.21 $ 0.25 $ 0.63
 
Restructuring expense 0.01 - 0.04 -
Acquisition related expenses, amortizations and adjustments 0.01 0.01 0.02 0.03
Stock-based compensation expense   0.03   0.03   0.08   0.10
 
Non-GAAP earnings per common share – diluted $ 0.19 $ 0.25 $ 0.39 $ 0.76
 

Source: ADTRAN, Inc.

ADTRAN, Inc.
Michael Foliano, 256-963-8885
Senior Vice President & Interim CFO
or
INVESTOR SERVICES/ASSISTANCE:
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