ADTN ADTRAN Holdings Inc

ADTRAN, Inc. (NASDAQ:ADTN) reported results for the third quarter 2016. For the quarter, sales were $168,890,000 compared to $158,078,000 for the third quarter of 2015. Net income was $12,415,000 compared to $7,067,000 for the third quarter of 2015. Earnings per share, assuming dilution, were $0.26 compared to $0.14 for the third quarter of 2015. Non-GAAP earnings per share were $0.26 compared to $0.19 for the third 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 revenue performance for the quarter exceeded expectations with total revenue increasing 7% over the same period last year. I am particularly pleased to see our international business grow 42 percent over the previous quarter and 7 percent year-over-year, driven by stronger broadband access sales in Europe. I am also pleased with the continued growth in our services business which increased 35 percent over the previous quarter and grew 63 percent year-over-year as we execute on our leading market position in CAF II and vectoring solutions and services. We continue to believe that ADTRAN's ability to help service providers grow revenue, reduce costs, accelerate buildout and transition to a software-defined access network is proving to be a catalyst for change within the industry."

The Company also announced that its Board of Directors declared a cash dividend for the third quarter of 2016. The quarterly cash dividend is $0.09 per common share to be paid to holders of record at the close of business on November 3, 2016. The ex-dividend date is November 1, 2016, and the payment date is November 17, 2016.

The Company confirmed that its third quarter conference call will be held Wednesday, October 19, 2016, 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, 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 30,2016

December 31,2015

Assets Cash and cash equivalents $ 66,292 $ 84,550 Short-term investments 55,516 34,396 Accounts receivable, net 101,822 71,917 Other receivables 12,159 19,321 Income tax receivable, net 540 - Inventory 96,034 91,533 Prepaid expenses and other current assets 14,477 10,145 Deferred tax assets, net   17,963   18,924 Total Current Assets 364,803 330,786   Property, plant and equipment, net 78,078 73,233 Deferred tax assets, net 17,263 18,091 Goodwill 3,492 3,492 Other assets 13,548 9,276 Long-term investments   178,379   198,026   Total Assets $ 655,563 $ 632,904   Liabilities and Stockholders' Equity Accounts payable $ 67,399 $ 48,668 Unearned revenue 15,744 16,615 Accrued expenses 16,010 12,108 Accrued wages and benefits 16,468 12,857 Income tax payable, net   -   2,395 Total Current Liabilities 115,621 92,643   Non-current unearned revenue 7,105 7,965 Other non-current liabilities 26,740 24,236 Bonds payable   27,900   27,900 Total Liabilities 177,366 152,744   Stockholders' Equity   478,197   480,160   Total Liabilities and Stockholders' Equity $ 655,563 $ 632,904          

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)

    Three Months Ended Nine Months Ended September 30, September 30, 2016     2015 2016     2015   Sales Products $ 136,277 $ 138,120 $ 398,709 $ 411,723 Services   32,613     19,958     75,086     49,328     Total Sales 168,890 158,078 473,795 461,051   Cost of Sales Products 70,988 75,969 202,905 231,739 Services   22,094     11,460     50,333     24,854     Total Cost of Sales 93,082 87,429 253,238 256,593   Gross Profit 75,808 70,649 220,557 204,458   Selling, general and administrative expenses 33,716 30,016 97,367 93,203 Research and development expenses   31,962     32,561     92,727     100,576     Operating Income 10,130 8,072 30,463 10,679   Interest and dividend income 910 839 2,692 2,680 Interest expense (143 ) (151 ) (430 ) (448 ) Net realized investment gain 1,316 2,060 4,154 8,430 Other income (expense), net (246 ) 52 (378 ) (848 ) Gain on bargain purchase of a business   3,550     -     3,550     -     Income before provision for income taxes 15,517 10,872 40,051 20,493   Provision for income taxes   (3,102 )   (3,805 )   (12,394 )   (7,565 )   Net Income $ 12,415   $ 7,067   $ 27,657   $ 12,928     Weighted average shares outstanding - basic 48,470 49,862 48,839 51,682 Weighted average shares outstanding - diluted (1) 48,678 49,927 49,036 51,792   Earnings per common share - basic $ 0.26 $ 0.14 $ 0.57 $ 0.25 Earnings per common share - diluted (1) $ 0.26 $ 0.14 $ 0.56 $ 0.25   (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, 2016     2015 2016     2015   Net Income $ 12,415 $ 7,067   $ 27,657   $ 12,928     Other Comprehensive Income (Loss), net of tax:   Unrealized gains (losses) on available-for-sale securities 258 (4,291 ) (162 ) (6,577 ) Defined benefit plan adjustments 36 71 103 211 Foreign currency translation   575   (1,351 )   1,202     (3,797 )   Other Comprehensive Income (Loss), net of tax   869   (5,571 )   1,143     (10,163 )   Comprehensive Income, net of tax $ 13,284 $ 1,496   $ 28,800   $ 2,765        

Consolidated Statements of Cash Flows

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(In thousands)

    Nine Months Ended September 30, 2016     2015 Cash flows from operating activities: Net income $ 27,657 $ 12,928 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,260 10,765 Amortization of net premium on available-for-sale investments 489 2,085 Net realized gain on long-term investments (4,154 ) (8,430 ) Net loss on disposal of property, plant and equipment 21 189 Gain on bargain purchase of a business (3,550 ) - Stock-based compensation expense 4,601 4,788 Deferred income taxes (447 ) (2,332 ) Tax impact from stock option exercises (16 ) (40 ) Excess tax benefits from stock-based compensation arrangements - (3 ) Change in operating assets and liabilities: Accounts receivable, net (29,370 ) 843 Other receivables 7,475 10,532 Inventory (683 ) (14,945 ) Prepaid expenses and other assets (5,180 ) (1,665 ) Accounts payable 16,363 13,687 Accrued expenses and other liabilities 7,307 (3,996 ) Income tax payable/receivable, net   (2,941 )   (1,137 ) Net cash provided by operating activities   27,832     23,269     Cash flows from investing activities: Purchases of property, plant and equipment (12,684 ) (7,843 ) Proceeds from disposals of property, plant and equipment - 122 Proceeds from sales and maturities of available-for-sale investments 141,103 189,728 Purchases of available-for-sale investments (139,181 ) (113,227 ) Acquisition of business   (943 )   -   Net cash provided by (used in) investing activities   (11,705 )   68,780     Cash flows from financing activities: Proceeds from stock option exercises 1,076 907 Purchases of treasury stock (22,917 ) (65,808 ) Dividend payments (13,230 ) (13,989 ) Excess tax benefits from stock-based compensation arrangements   -     3   Net cash used in financing activities   (35,071 )   (78,887 )   Net increase (decrease) in cash and cash equivalents (18,944 ) 13,162 Effect of exchange rate changes 686 (2,914 ) Cash and cash equivalents, beginning of period   84,550     73,439     Cash and cash equivalents, end of period $ 66,292   $ 83,687     Supplemental disclosure of non-cash investing activities Purchases of property, plant and equipment included in accounts payable $ 1,174 $ 1,303          

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, 2016 and 2015:

    Three Months Ended Nine Months Ended September 30, September 30, 2016   2015 2016     2015   Restructuring expense included in cost of sales $ 1,307   $ 9   $ 1,307   $ 107     Selling, general and administrative expense 637 194 637 838 Research and development expense   -     712     -     2,095     Restructuring expense included in operating expenses   637     906     637     2,933     Total restructuring expense 1,944 915 1,944 3,040 Provision for income taxes   (603 )   (357 )   (603 )   (1,186 )   Total restructuring expense, net of tax $ 1,341   $ 558   $ 1,341   $ 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., 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 nine months ended September 30, 2016 and 2015 for all three transactions are as follows:

  Three Months Ended Nine Months Ended September 30, September 30, 2016   2015 2016     2015 Bluesocket, Inc. acquisition Amortization of acquired intangible assets $ 158   $ 191   $ 504   $ 643     NSN BBA acquisition Amortization of acquired intangible assets 225 231 680 701 Amortization of other purchase accounting adjustments 114 101 194 395 Acquisition related professional fees, travel and other expenses   -     20     -     61   Subtotal NSN BBA acquisition   339     352     874     1,157     CommScope acquisition Amortization of acquired intangible assets 112 - 112 - Amortization of other purchase accounting adjustments 84 ﷐ - 84 - Acquisition related professional fees, travel and other expenses   45     -     45     -   Subtotal CommScope acquisition   241     -     241     -     Total acquisition related expenses, amortizations and adjustments 738 543 1,619 1,800 Provision for income taxes   (261 )   (183 )   (562 )   (609 )   Total acquisition related expenses, amortizations and adjustments, net of tax $ 477   $ 360   $ 1,057   $ 1,191    

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, 2016 and 2015:

  Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015   Revenue (adjustments to deferred revenue recognized in the period) $ - $ 65 $ - $ 196 Cost of goods sold   169     7     189     52   Subtotal   169     72     189     248     Selling, general and administrative expenses 54 23 61 74 Research and development expenses   515     448     1,369     1,478   Subtotal   569     471     1,430     1,552     Total acquisition related expenses, amortizations and adjustments 738 543 1,619 1,800 Provision for income taxes   (261 )   (183 )   (562 )   (609 )   Total acquisition related expenses, amortizations and adjustments, net of tax $ 477   $ 360   $ 1,057   $ 1,191            

Supplemental Information

Stock-based Compensation Expense

(Unaudited)

(In thousands)

    Three Months Ended Nine Months Ended September 30, September 30, 2016     2015 2016     2015   Stock-based compensation expense included in cost of sales $ 88   $ 59   $ 282   $ 202     Selling, general and administrative expense 765 812 2,322 2,226 Research and development expense   639     803     1,997     2,360     Stock-based compensation expense included in operating expenses   1,404     1,615     4,319     4,586     Total stock-based compensation expense 1,492 1,674 4,601 4,788 Tax benefit for expense associated with non-qualified options   (218 )   (218 )   (643 )   (620 )   Total stock-based compensation expense, net of tax $ 1,274   $ 1,456   $ 3,958   $ 4,168            

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, 2016     2015 2016     2015   GAAP earnings per common share – diluted $ 0.26 $ 0.14 $ 0.56 $ 0.25   Restructuring expense 0.03 0.01 0.03 0.04 Acquisition related expenses, amortizations and adjustments 0.01 0.01 0.02 0.02 Stock-based compensation expense 0.03 0.03 0.08 0.08 Gain on bargain purchase of a business   (0.07 )   -   (0.07 )   -   Non-GAAP earnings per common share – diluted $ 0.26   $ 0.19 $ 0.62   $ 0.39  

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ADTRAN, Inc.Roger Shannon, 256-963-8775Senior Vice President & CFOorInvestor Services/Assistance:Gayle Ellis, 256-963-8220Investor Services