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ADTRAN, Inc. Reports Results for the First Quarter 2014 and Declares Quarterly Cash Dividend

ADTRAN, Inc. (NASDAQ:ADTN) reported results for the first quarter 2014. For the quarter, sales were $147,004,000 compared to $143,013,000 for the first quarter of 2013. Operating income was $11,298,000 compared to $6,563,000 for the first quarter of 2013. Net income was $9,607,000 compared to $7,890,000 for the first quarter of 2013. Earnings per share, assuming dilution, were $0.17 compared to $0.13 for the first quarter of 2013. Non-GAAP earnings per share were $0.21 compared to $0.17 for the first quarter of 2013. 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, “Revenue for the quarter came in at $147 million, up 3% over last year. Lower sales in the US were offset by international sales which grew 56% over the same period last year. Operating income increased 72% buoyed by higher gross margins in both our US and international businesses.”

The Company also announced that its Board of Directors declared a cash dividend for the first quarter of 2014. The quarterly cash dividend is $0.09 per common share to be paid to holders of record at the close of business on May 1, 2014. The ex-dividend date is April 29, 2014 and the payment date is May 15, 2014.

The Company confirmed that its first quarter conference call will be held Wednesday, April 16, 2014 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 [email protected]. 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, 2013. 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)

 
March 31,

2014

December 31,
2013
Assets
Cash and cash equivalents $ 52,815 $ 58,298
Short-term investments 89,160 105,760
Accounts receivable, net 100,524 85,814
Other receivables 28,967 18,249
Inventory 87,396 90,111
Prepaid expenses 5,005 4,325
Deferred tax assets, net   15,181   17,083
Total Current Assets 379,048 379,640
 
Property, plant and equipment, net 75,885 76,739
Deferred tax assets, net 11,491 9,622
Goodwill 3,492 3,492
Other assets 11,933 11,180
Long-term investments   309,452   309,225
 
Total Assets $ 791,301 $ 789,898
 
Liabilities and Stockholders' Equity
Accounts payable $ 59,097 $ 48,282
Unearned revenue 27,533 22,205
Accrued expenses 10,683 12,776
Accrued wages and benefits 17,448 14,040
Income tax payable, net   5,272   5,002
Total Current Liabilities 120,033 102,305
 
Non-current unearned revenue 15,116 14,643
Other non-current liabilities 23,476 22,144
Bonds payable   30,000   46,200
Total Liabilities 188,625 185,292
 
Stockholders' Equity   602,676   604,606
 
Total Liabilities and Stockholders' Equity $ 791,301 $ 789,898
     

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)

 
Three Months Ended
March 31,
  2014         2013  
 
Sales $ 147,004 $ 143,013
Cost of sales   69,214     73,336  
 
Gross Profit 77,790 69,677
 
Selling, general and administrative expenses 33,939 30,603
Research and development expenses   32,553     32,511  
 
Operating Income 11,298 6,563
 
Interest and dividend income 1,294 1,768
Interest expense (227 ) (581 )
Net realized investment gain 2,192 3,645
Other income (expense), net   122     (1,672 )
 
Income before provision for income taxes 14,679 9,723
 
Provision for income taxes   (5,072 )   (1,833 )
 
Net Income $ 9,607   $ 7,890  
 
Weighted average shares outstanding - basic 56,751 61,847
Weighted average shares outstanding - diluted (1) 57,368 62,030
 
Earnings per common share - basic $ 0.17 $ 0.13
Earnings per common share - diluted (1) $ 0.17 $ 0.13
 
(1) Assumes exercise of dilutive stock options calculated under the treasury stock method.
   

 

Consolidated Statements of Comprehensive Income

(Unaudited)

(In thousands)

 
Three Months Ended
March 31,
  2014         2013  
 
Net Income $ 9,607   $ 7,890  
 
Other Comprehensive Loss, net of tax:
 
Unrealized losses on available-for-sale securities (921 ) (1,644 )
Foreign currency translation   252     323  
 
Other Comprehensive Loss, net of tax   (669 )   (1,321 )
 
Comprehensive Income, net of tax $ 8,938   $ 6,569  
   

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 
Three Months Ended
March 31,
  2014         2013  
Cash flows from operating activities:
Net income $ 9,607 $ 7,890
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 3,580 3,663
Amortization of net premium on available-for-sale investments 1,135 1,754
Net realized gain on long-term investments (2,192 ) (3,645 )
Net (gain) loss on disposal of property, plant and equipment (3 ) 17
Stock-based compensation expense 2,057 2,232
Deferred income taxes 627 715
Tax benefit from stock option exercises 57 -
Excess tax benefits from stock-based compensation arrangements (55 ) -
Change in operating assets and liabilities:
Accounts receivable, net (14,668 ) (1,306 )
Other receivables (10,710 ) (224 )
Inventory 2,739 6,540
Prepaid expenses and other assets (2,024 ) (217 )
Accounts payable 11,043 7,170
Accrued expenses and other liabilities 8,431 1,188
Income tax payable, net   275     379  
Net cash provided by operating activities   9,899     26,156  
 
Cash flows from investing activities:
Purchases of property, plant and equipment (2,042 ) (643 )
Proceeds from disposals of property, plant and equipment 1 -
Proceeds from sales and maturities of available-for-sale investments 85,072 118,133
Purchases of available-for-sale investments   (69,182 )   (125,411 )
Net cash provided by (used in) investing activities   13,849     (7,921 )
 
Cash flows from financing activities:
Proceeds from stock option exercises 1,541 55
Purchases of treasury stock (9,427 ) (22,546 )
Dividend payments (5,102 ) (5,586 )
Payments on long-term debt (16,500 ) -
Excess tax benefits from stock-based compensation arrangements   55     -  
Net cash used in financing activities   (29,433 )   (28,077 )
 
Net decrease in cash and cash equivalents (5,685 ) (9,842 )
Effect of exchange rate changes 202 25
Cash and cash equivalents, beginning of period   58,298     68,457  
 
Cash and cash equivalents, end of period $ 52,815   $ 58,640  
 
Supplemental disclosure of non-cash investing activities
Purchases of property, plant and equipment included in accounts payable $ 85 $ 92
 

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 months ended March 31, 2014 and 2013 for both transactions are as follows:

 
Three Months Ended
March 31,
  2014       2013  
Bluesocket, Inc. acquisition
Amortization of acquired intangible assets and other purchase accounting adjustments $ 246   $ 293  
 
NSN BBA acquisition
Amortization of acquired intangible assets 302 294
Amortization of other purchase accounting adjustments 361 410
Acquisition related professional fees, travel and other expenses   48     154  
 
Subtotal   711     858  
 
Total acquisition related expenses, amortizations and adjustments 957 1,151
Provision for income taxes   (316 )   (380 )
 
Total acquisition related expenses, amortizations and adjustments, net of tax $ 641   $ 771  
 

 

The acquisition related expenses, amortizations and adjustments above were recorded in the following Consolidated Statements of Income categories for the three months ended March 31, 2014 and 2013:

 

 
Three Months Ended
March 31,
  2014     2013  
 
Revenue (adjustments to deferred revenue recognized in the period) $ 243 $ 262
Cost of goods sold   34     87  
 
Subtotal   277     349  
 
Selling, general and administrative expenses 55 161
Research and development expenses   625     641  
 
Subtotal   680     802  
 
Total acquisition related expenses, amortizations and adjustments 957 1,151
Provision for income taxes   (316 )   (380 )
 
Total acquisition related expenses, amortizations and adjustments, net of tax $ 641   $ 771  
   

Supplemental Information

Stock-based Compensation Expense

(Unaudited)

(In thousands)

 
Three Months Ended
March 31,
  2014       2013  
 
Stock-based compensation expense included in cost of sales $ 116   $ 106  
 
Selling, general and administrative expense 1,026 1,063
Research and development expense   915     1,063  
 
Stock-based compensation expense included in operating expenses   1,941     2,126  
 
Total stock-based compensation expense 2,057 2,232
Tax benefit for expense associated with non-qualified options   (284 )   (307 )
 
Total stock-based compensation expense, net of tax $ 1,773   $ 1,925  
   

Reconciliation of GAAP net income per share, diluted, to

Non-GAAP net income per share, diluted

(Unaudited)

 
Three Months Ended
March 31,
  2014     2013
 
GAAP earnings per common share – diluted $ 0.17 $ 0.13
 
Acquisition related expenses, amortizations and adjustments 0.01 0.01
Stock-based compensation expense   0.03   0.03
 
Non-GAAP earnings per common share – diluted $ 0.21 $ 0.17

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