ADTRAN, Inc. Reports Record Results for Third Quarter 2011, Announces Additional Five Million Share Repurchase Plan and Declares Quarterly Cash Dividend

HUNTSVILLE, Ala., Oct 11, 2011 (BUSINESS WIRE) --

ADTRAN, Inc. (NASDAQ:ADTN) reported results for the third quarter of 2011. Sales increased 18% to an all-time record level of $192,194,000 for the quarter, compared to $162,957,000 for the third quarter of 2010. Net income increased to $36,213,000 for the quarter, compared to $32,084,000 for the third quarter of 2010. Earnings per share, assuming dilution, increased to $0.56 for the quarter, compared to $0.50 for the third quarter of 2010.

ADTRAN Chief Executive Officer Tom Stanton stated, "Our Company's strong performance in the quarter included record revenue performances by our three main product areas, Broadband Access, Internetworking and Optical Access. Our Broadband Access category grew a stellar 93% over the third quarter of 2010. Our Internetworking category also showed a strong performance by growing 44%, and our Optical Access category grew 20%. These results allowed the company to achieve its sixth consecutive all-time record revenue quarter. With nearly 80% of our revenues coming from these high growth areas, we feel the Company is well positioned for the future."

The Company reported that stock-based compensation expense for the third quarter of 2011 reduced diluted earnings per share by $0.03 compared to a reduction of $0.03 for the third quarter of 2010.

The Company announced that its Board of Directors has authorized the repurchase of an additional 5,000,000 shares of the Company's common stock to commence upon completion of the repurchase plan announced April 14, 2008. There are 869,425 shares remaining to be repurchased under the April 2008 plan. Upon completion of the current plan, the new plan will be implemented through open market or private purchases from time to time as conditions warrant.

The Company also announced that its Board of Directors declared a cash dividend for the third quarter of 2011. The quarterly cash dividend is $0.09 per common share to be paid to holders of record at the close of business on October 27, 2011. The ex-dividend date is October 25, 2011 and the payment date is November 10, 2011.

The Company confirmed that its third quarter conference call will be held Wednesday, October 12, 2011 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 http://www.adtran.com or http://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 http://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 http://www.adtran.com for at least 12 months following the call.

ADTRAN, Inc. is a leading global provider of networking and communications equipment, with a portfolio of more than 1,700 solutions. 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, 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, 2010 and our quarterly report on Form 10Q for the quarter ended June 30, 2011. 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,

2011

December 31,

2010

Assets
Cash and cash equivalents $ 32,526 $ 31,677
Short-term investments 121,389 157,479
Accounts receivable, net 89,631 70,893
Other receivables 12,487 3,962
Income tax receivable, net - 2,741
Inventory 87,313 74,274
Prepaid expenses 3,337 3,270
Deferred tax assets, net 12,247 10,617
Total Current Assets 358,930 354,913
Property, plant and equipment, net 75,698 73,986
Deferred tax assets, net 5,918 -
Goodwill 4,445 -
Other assets 8,201 1,915
Long-term investments 348,103 261,160
Total Assets $ 801,295 $ 691,974
Liabilities and Stockholders' Equity
Accounts payable $ 33,150 $ 22,785
Unearned revenue 18,708 10,138
Accrued expenses 6,703 4,913
Accrued wages and benefits 14,753 12,125
Income tax payable, net 1,916 -
Total Current Liabilities 75,230 49,961
Deferred tax liabilities, net - 10,350
Other non-current liabilities 14,853 11,841
Bonds payable 46,500 47,500
Total Liabilities 136,583 119,652

Stockholders' Equity 664,712 572,322
Total Liabilities and Stockholders' Equity $ 801,295 $ 691,974

Consolidated Statements of Income

Unaudited

(In thousands, except per share data)

Three Months Ended Nine Months Ended
September 30, September 30,
2011 2010 2011 2010
Sales $ 192,194 $ 162,957 $ 541,943 $ 440,345
Cost of sales 82,718 65,658 226,845 178,389
Gross Profit 109,476 97,299 315,098 261,956
Selling, general and administrative expenses 31,475 29,452 91,925 85,111
Research and development expenses 26,894 22,802 75,150 67,838
Operating Income 51,107 45,045 148,023 109,007
Interest and dividend income 2,037 1,622 5,829 4,803
Interest expense (599 ) (630 ) (1,795 ) (1,828 )
Net realized investment gain 2,982 3,399 9,121 8,055
Other expense, net (155 ) (266 ) (397 ) (641 )
Income before provision for income taxes 55,372 49,170 160,781 119,396
Provision for income taxes (19,159 ) (17,086 ) (53,367 ) (41,367 )
Net Income $ 36,213 $ 32,084 $ 107,414 $ 78,029
Weighted average shares outstanding - basic 64,023 62,771 64,300 62,316

Weighted average shares outstanding - diluted(1)

64,961 64,300 65,697 63,638
Earnings per common share - basic $ 0.57 $ 0.51 $ 1.67 $ 1.25

Earnings per common share - diluted(1)

$ 0.56 $ 0.50 $ 1.63 $ 1.23
(1) Assumes exercise of dilutive stock options calculated under the treasury stock method.

Supplemental Information

Acquisition Related Expenses

Unaudited

(In thousands)

On August 4, 2011, we closed on the acquisition of Bluesocket, Inc., a provider of virtual wireless network solutions. For the three months ended September 30, 2011, acquisition related expenses were as follows:

Acquisition related professional fees and travel expenses $ 630
Amortization of acquired intangible assets 198
Other non-cash items

217

Total $

1,045

Supplemental Information

Stock-based Compensation Expense

Unaudited

(In thousands)

Three Months Ended Nine Months Ended
September 30, September 30,
2011 2010 2011 2010
Stock-based compensation expense included in cost of sales $ 100 $ 69 $ 280 $ 210
Selling, general and administrative expense 1,090 775 3,096 2,360
Research and development expense 1,100 886 3,079 2,657
Stock-based compensation expense included in operating expenses 2,190 1,661 6,175 5,017
Total stock-based compensation expense 2,290 1,730 6,455 5,227
Tax benefit for expense associated with non-qualified options (302 ) (43 ) (1,018 ) (415 )
Total stock-based compensation expense, net of tax $ 1,988 $ 1,687 $ 5,437 $ 4,812

Consolidated Statements of Cash Flows

Unaudited

(In thousands)

Nine Months Ended
September 30,
2011 2010
Cash flows from operating activities:
Net income $ 107,414 $ 78,029
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 8,435 7,842
Amortization of net premium on available-for-sale investments 4,697 3,267
Net realized gain on long-term investments (9,121 ) (8,055 )
Net loss on disposal of property, plant and equipment 14 9
Stock-based compensation expense 6,455 5,227
Deferred income taxes 128 (1,624 )
Tax benefit from stock option exercises 10,457 4,459
Excess tax benefits from stock-based compensation arrangements (9,311 ) (3,986 )
Change in operating assets and liabilities:
Accounts receivable, net (18,440 ) (1,351 )
Other receivables (8,525 ) (3,256 )
Income tax receivable, net 2,741 -
Inventory (12,247 ) (24,278 )
Prepaid expenses and other assets 207 (829 )
Accounts payable 8,924 1,188
Accrued expenses and other liabilities 15,047 7,525
Income tax payable, net 1,916 (1,121 )
Net cash provided by operating activities 108,791 63,046
Cash flows from investing activities:
Purchases of property, plant and equipment (9,531 ) (7,375 )
Proceeds from sales and maturities of available-for-sale investments 378,288 221,173
Purchases of available-for-sale investments (443,275 ) (272,383 )
Acquisition of business, net of cash acquired (22,762 ) -
Net cash used in investing activities (97,280 ) (58,585 )
Cash flows from financing activities:
Proceeds from stock option exercises 33,631 19,769
Purchases of treasury stock (35,178 ) (10,330 )
Dividend payments (17,395 ) (16,822 )
Excess tax benefits from stock-based compensation arrangements 9,311 3,986
Net cash used in financing activities (9,631 ) (3,397 )
Net increase in cash and cash equivalents 1,880 1,064
Effect of exchange rate changes (1,031 ) 863
Cash and cash equivalents, beginning of period 31,677 24,135
Cash and cash equivalents, end of period $ 32,526 $ 26,062

SOURCE: ADTRAN, Inc.

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