ADTRAN, Inc. Reports Record Results for the Second Quarter 2017 and Declares Quarterly Cash Dividend

HUNTSVILLE, Ala.--(BUSINESS WIRE)--Jul. 18, 2017-- ADTRAN, Inc. (NASDAQ:ADTN) reported results for the second quarter 2017. For the quarter, sales were $184.7 million compared to $162.7 million for the second quarter of 2016. Net income was $12.4 million compared to $10.2 million for the second quarter of 2016. Earnings per share, assuming dilution, were $0.26 compared to $0.21 for the second quarter of 2016. Non-GAAP earnings per share were $0.30 compared to $0.25 for the second quarter of 2016. The reconciliation between GAAP earnings per share, diluted, and non-GAAP earnings per share, diluted, is in the table provided.

ADTRAN Chairman and Chief Executive Officer Tom Stanton stated, “The company’s performance continues on pace with record sales for the second quarter and the first half of 2017. Our record revenue was driven by increasing momentum with our ultra-broadband solutions, where we saw significant year-over-year growth both in the US and Europe. We continue to be at the forefront of several inflection points of innovation in the market, including next generation optical access, services transformation and Software Defined Access (SD-Access). Our services combined with market leading access and software solutions have enabled us to expand our range and reach into new opportunities that show promise for both short and long-term growth. We are pleased with our progress and the market reception to ADTRAN Mosaic and our SD-Access portfolio as Tier 1 operators around the world prepare for the transition to SDN. With our focus on software innovation and domain expertise, ADTRAN is uniquely positioned to enable internet service providers of all types to meet increasing customer demand and decrease their time to market for next generation services.”

The Company also announced that its Board of Directors declared a cash dividend for the second quarter of 2017. The quarterly cash dividend is $0.09 per common share to be paid to holders of record at the close of business on August 3, 2017. The ex-dividend date is August 1, 2017, and the payment date is August 17, 2017.

The Company confirmed that its second quarter conference call will be held Wednesday, July 19, 2017, at 9:30 a.m. Central Time. This conference call will be web cast live through the Q4 Inc. webcasting service. To listen, simply visit the Investor Relations site at www.adtran.com/investor 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, as well as the text of the Company's earnings release, will be available on the Investor Relations site 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, 2016. 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)
 
June 30, December 31,
2017   2016
Assets
Cash and cash equivalents $ 88,798 $ 79,895
Short-term investments 47,331 43,188
Accounts receivable, net 79,891 92,346
Other receivables 14,561 15,137
Income tax receivable, net 760
Inventory, net 113,995 105,117
Prepaid expenses and other current assets   23,556   16,459
Total Current Assets 368,132 352,902
 
Property, plant and equipment, net 84,122 84,469
Deferred tax assets, net 40,296 38,036
Goodwill 3,492 3,492
Other assets 13,305 12,234
Long-term investments   159,634   176,102
Total Assets $ 668,981 $ 667,235
 
Liabilities and Stockholders' Equity
Accounts payable $ 66,161 $ 77,342
Unearned revenue 15,449 16,326
Accrued expenses 13,433 12,434
Accrued wages and benefits 16,303 20,433
Income tax payable, net   9,594  
Total Current Liabilities 120,940 126,535
 
Non-current unearned revenue 5,351 6,333
Other non-current liabilities 32,527 28,050
Bonds payable   26,800   26,800
Total Liabilities 185,618 187,718
 
Stockholders' Equity   483,363   479,517
 
Total Liabilities and Stockholders' Equity $ 668,981 $ 667,235
 
   
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
 
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017   2016
Sales  
Products $ 155,543 $ 138,549 $ 299,140 $ 262,432
Services   29,130   24,152   55,812   42,473
Total Sales 184,673 162,701 354,952 304,905
 
Cost of Sales
Products 79,658 67,844 156,317 131,917
Services   20,383   15,902   40,288   28,239
Total Cost of Sales 100,041 83,746 196,605 160,156
 
Gross Profit 84,632 78,955 158,347 144,749
 
Selling, general and administrative expenses 34,683 32,866 69,450 63,651
Research and development expenses   33,501   31,277   65,417   60,765
 
Operating Income 16,448 14,812 23,480 20,333
 
Interest and dividend income 972 927 1,905 1,782
Interest expense (137 ) (142 ) (278 ) (287 )
Net realized investment gain 1,390 1,110 1,860 2,838
Other expense, net   (804 )   (251 )   (753 )   (132 )
Income before provision for income taxes 17,869 16,456 26,214 24,534
 
Provision for income taxes   (5,468 )   (6,228 )   (7,162 )   (9,292 )
 
Net Income $ 12,401 $ 10,228 $ 19,052 $ 15,242
 
Weighted average shares outstanding - basic 48,036 48,831 48,232 49,026
Weighted average shares outstanding - diluted (1) 48,413 49,048 48,675 49,218
 
Earnings per common share - basic $ 0.26 $ 0.21 $ 0.40 $ 0.31
Earnings per common share - diluted (1) $ 0.26 $ 0.21 $ 0.39 $ 0.31
 

(1) Assumes exercise of dilutive stock options calculated under the treasury stock method.

 
   
Consolidated Statements of Comprehensive Income
(Unaudited)
(In thousands)
 
Three Months Ended Six Months Ended
June 30, June 30,
2017   2016 2017   2016
Net Income $ 12,401 $ 10,228 $ 19,052 $ 15,242
Other Comprehensive Income (Loss), net of tax:
Net unrealized gains (losses) on available-for-sale securities 373 (165 ) 1,708 (420 )
Net unrealized losses on cash flow hedges (417 ) (338 )
Defined benefit plan adjustments 86 22 141 67
Foreign currency translation   2,619   (601 )   3,861   627
Other Comprehensive Income (Loss), net of tax   2,661   (744 )   5,372   274
Comprehensive Income, net of tax $ 15,062 $ 9,484 $ 24,424 $ 15,516
 
 
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
Six Months Ended
June 30,
2017   2016
Cash flows from operating activities:
Net income $ 19,052 $ 15,242
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 5,156 6,689
Amortization of net premium on available-for-sale investments 238 376
Net realized gain on long-term investments (1,860 ) (2,838 )
Net (gain) loss on disposal of property, plant and equipment (11 ) 5
Stock-based compensation expense 3,739 3,109
Deferred income taxes (2,772 ) (354 )
Changes in operating assets and liabilities:
Accounts receivable, net 13,911 (17,192 )
Other receivables 571 7,876
Inventory (7,547 ) 4,938
Prepaid expenses and other assets (6,632 ) (4,263 )
Accounts payable (10,910 ) 10,354
Accrued expenses and other liabilities (2,629 ) 1,474
Income tax payable/receivable, net   10,273   (4,799 )
Net cash provided by operating activities 20,579 20,617
 
Cash flows from investing activities:
Purchases of property, plant and equipment (7,509 ) (6,679 )
Proceeds from disposals of property, plant and equipment 16
Proceeds from sales and maturities of available-for-sale investments 81,891 109,993
Purchases of available-for-sale investments   (65,140 )   (112,903 )
Net cash provided by (used in) investing activities 9,258 (9,589 )
 
Cash flows from financing activities:
Proceeds from stock option exercises 1,722 541
Purchases of treasury stock (17,311 ) (16,579 )
Dividend payments   (8,719 )   (8,860 )
Net cash used in financing activities (24,308 ) (24,898 )
 
Net increase (decrease) in cash and cash equivalents 5,529 (13,870 )
Effect of exchange rate changes 3,374 234
Cash and cash equivalents, beginning of period   79,895   84,550
 
Cash and cash equivalents, end of period $ 88,798 $ 70,914
 
Supplemental disclosure of non-cash investing activities:
Purchases of property, plant and equipment included in accounts payable $ 454 $ 554
 

Supplemental Information
Acquisition Related Expenses, Amortizations and Adjustments
(Unaudited)
(In thousands)

On August 4, 2011, we closed on the acquisition of Bluesocket, Inc., on May 4, 2012, we closed on the acquisition of the Nokia Siemens Networks Broadband Access business (NSN BBA), and on September 13, 2016, we closed on the acquisition of CommScope’s active fiber business (CommScope). Acquisition related expenses, amortizations and adjustments for the three and six months ended June 30, 2017 and 2016 for all three transactions are as follows:

 
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017   2016
Bluesocket, Inc. acquisition
Amortization of acquired intangible assets $ 158 $ 173 $ 316 $ 346
 
NSN BBA acquisition
Amortization of acquired intangible assets 129 228 337 455

Amortization of other purchase accounting adjustments

  10   44   38   80
Subtotal - NSN BBA acquisition 139 272 375 535
 
CommScope acquisition
Amortization of acquired intangible assets 608 1,294

Amortization of other purchase accounting adjustments

31 81

Acquisition related professional fees, travel and other expenses

      8  

Subtotal - CommScope acquisition

  639     1,383  
 

Total acquisition related expenses, amortizations and adjustments

936 445 2,074 881
Provision for income taxes   (354 )   (152 )   (779 )   (301 )

Total acquisition related expenses, amortizations and adjustments, net of tax

$ 582 $ 293 $ 1,295 $ 580
 

The acquisition related expenses, amortizations and adjustments above were recorded in the following Consolidated Statements of Income categories for the three and six months ended June 30, 2017 and 2016:

 
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016   2017 2016
Cost of goods sold $ 31 $ 13

$

81

$

20
 
Selling, general and administrative expenses 52 4 114 7
Research and development expenses   853   428   1,879 854

Total acquisition related expenses, amortizations and adjustments included in operating expenses

905 432 1,993 861
 

Total acquisition related expenses, amortizations and adjustments

936 445 2,074 881
Provision for income taxes   (354 )   (152

)

 

(779 ) (301 )

Total acquisition related expenses, amortizations and adjustments, net of tax

$ 582 $ 293  

$

1,295

$

580
 
   
Supplemental Information
Stock-based Compensation Expense
(Unaudited)
(In thousands)
 
Three Months Ended Six Months Ended
June 30, June 30,
2017   2016 2017   2016
Stock-based compensation expense included in cost of sales $ 93   $ 95 $ 184 $ 194
 
Selling, general and administrative expense 1,008 788 2,024 1,557
Research and development expense   755   668   1,531   1,358
Stock-based compensation expense included in operating expenses   1,763   1,456   3,555   2,915
 
Total stock-based compensation expense 1,856 1,551 3,739 3,109

Tax benefit for expense associated with non-qualified options, PSUs, RSUs and restricted stock

  (433 )   (213 )   (813 )   (425 )
 
Total stock-based compensation expense, net of tax $ 1,423 $ 1,338 $ 2,926 $ 2,684
 
     
Reconciliation of GAAP net income per share, diluted, to
Non-GAAP net income per share, diluted
(Unaudited)
 
Three Months Ended Six Months Ended
June 30, June 30,
2017     2016 2017     2016
GAAP earnings per common share - diluted $ 0.26   $ 0.21 $ 0.39   $ 0.31
 
Acquisition related expenses, amortizations and adjustments 0.01 0.01 0.03 0.01
Stock-based compensation expense   0.03   0.03   0.06   0.05
 
Non-GAAP earnings per common share - diluted $ 0.30 $ 0.25 $ 0.48 $ 0.37
 

Source: ADTRAN, Inc.

ADTRAN, Inc.
Investor Services/Assistance:
Gloria Brown, 256-963-8220
investor@adtran.com