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

ADTRAN, Inc. (NASDAQ:ADTN) reported results for the second quarter 2014. For the quarter, sales were $176,129,000 compared to $162,233,000 for the second quarter of 2013. Operating income was $19,339,000 compared to $14,053,000 for the second quarter of 2013. Net income was $14,395,000 compared to $9,859,000 for the second quarter of 2013. Earnings per share, assuming dilution, were $0.26 compared to $0.17 for the second quarter of 2013. Non-GAAP earnings per share were $0.30 compared to $0.21 for the second 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, “Our long stated goal of geographic diversification continued to pay dividends in the second quarter as international revenues reached a record $79 million. This strength drove our Broadband Access category to achieve record revenues, growing 33% over the same period last year. Operating income increased 38% over the same period last year.”

The Company also announced that its Board of Directors declared a cash dividend for the second 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 July 31, 2014. The ex-dividend date is July 29, 2014 and the payment date is August 14, 2014.

The Company confirmed that its second quarter conference call will be held Wednesday, July 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 and on Form 10-Q for the quarter ended March 31, 2014. 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,

2014

December 31,
2013
Assets
Cash and cash equivalents $ 58,903 $ 58,298
Short-term investments 45,930 105,760
Accounts receivable, net 115,538 85,814
Other receivables 23,841 18,249
Inventory 89,239 90,111
Prepaid expenses 5,295 4,325
Deferred tax assets, net   15,054   17,083
Total Current Assets 353,800 379,640
 
Property, plant and equipment, net 75,265 76,739
Deferred tax assets, net 11,092 9,622
Goodwill 3,492 3,492
Other assets 12,087 11,180
Long-term investments   311,622   309,225
 
Total Assets $ 767,358 $ 789,898
 
Liabilities and Stockholders' Equity
Accounts payable $ 62,103 $ 48,282
Unearned revenue 26,364 22,205
Accrued expenses 11,865 12,776
Accrued wages and benefits 15,930 14,040
Income tax payable, net   9,400   5,002
Total Current Liabilities 125,662 102,305
 
Non-current unearned revenue 15,213 14,643
Other non-current liabilities 24,424 22,144
Bonds payable   30,000   46,200
Total Liabilities 195,299 185,292
 
Stockholders' Equity   572,059   604,606
 
Total Liabilities and Stockholders' Equity $ 767,358 $ 789,898
         

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)

 
Three Months Ended Six Months Ended
June 30, June 30,
  2014           2013     2014           2013  
 
Sales $ 176,129 $ 162,233 $ 323,133 $ 305,246
Cost of sales   89,332     82,435     158,546     155,771  
 
Gross Profit 86,797 79,798 164,587 149,475
 
Selling, general and administrative expenses 33,788 32,685 67,727 63,288
Research and development expenses   33,670     33,060     66,223     65,571  
 
Operating Income 19,339 14,053 30,637 20,616
 
Interest and dividend income 1,054 1,674 2,348 3,442
Interest expense (148 ) (575 ) (375 ) (1,156 )
Net realized investment gain 2,340 1,553 4,532 5,198
Other income (expense), net   (774 )   129     (652 )   (1,543 )
 
Income before provision for income taxes 21,811 16,834 36,490 26,557
 
Provision for income taxes   (7,416 )   (6,975 )   (12,488 )   (8,808 )
 
Net Income $ 14,395   $ 9,859   $ 24,002   $ 17,749  
 
Weighted average shares outstanding - basic 55,409 59,056 56,077 60,443
Weighted average shares outstanding - diluted (1) 55,729 59,311 56,559 60,660
 
Earnings per common share - basic $ 0.26 $ 0.17 $ 0.43 $ 0.29
Earnings per common share - diluted (1) $ 0.26 $ 0.17 $ 0.42 $ 0.29
 
(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,
  2014         2013     2014         2013  
 
Net Income $ 14,395 $ 9,859   $ 24,002 $ 17,749  
 
Other Comprehensive Income (Loss), net of tax:
 
Unrealized gains (losses) on available-for-sale securities 1,219 (1,698 ) 298 (3,342 )
Foreign currency translation   134   (1,713 )   386   (1,390 )
 
Other Comprehensive Income (Loss), net of tax   1,353   (3,411 )   684   (4,732 )
 
Comprehensive Income, net of tax $ 15,748 $ 6,448   $ 24,686 $ 13,017  
   

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 
Six Months Ended
June 30,
  2014           2013  
Cash flows from operating activities:
Net income $ 24,002 $ 17,749
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 7,467 7,373
Amortization of net premium on available-for-sale investments 2,272 3,315
Net realized gain on long-term investments (4,532 ) (5,198 )
Net loss on disposal of property, plant and equipment 37 17
Stock-based compensation expense 4,149 4,340
Deferred income taxes 377 150
Tax benefit from stock option exercises 67 21
Excess tax benefits from stock-based compensation arrangements (58 ) (21 )
Change in operating assets and liabilities:
Accounts receivable, net (29,949 ) (23,018 )
Other receivables (5,706 ) (2,727 )
Inventory 841 13,336
Prepaid expenses and other assets (3,103 ) (665 )
Accounts payable 14,425 19,786
Accrued expenses and other liabilities 8,248 (6,587 )
Income tax payable, net   4,442     1,094  
Net cash provided by operating activities   22,979     28,965  
 
Cash flows from investing activities:
Purchases of property, plant and equipment (4,919 ) (3,201 )
Proceeds from disposals of property, plant and equipment 1 -
Proceeds from sales and maturities of available-for-sale investments 166,518 224,163
Purchases of available-for-sale investments   (106,406 )   (179,730 )
Net cash provided by investing activities   55,194     41,232  
 
Cash flows from financing activities:
Proceeds from stock option exercises 1,781 819
Purchases of treasury stock (53,091 ) (89,917 )
Dividend payments (10,137 ) (10,982 )
Payments on long-term debt (16,500 ) -
Excess tax benefits from stock-based compensation arrangements   58     21  
Net cash used in financing activities   (77,889 )   (100,059 )
 
Net increase (decrease) in cash and cash equivalents 284 (29,862 )
Effect of exchange rate changes 321 (1,036 )
Cash and cash equivalents, beginning of period   58,298     68,457  
 
Cash and cash equivalents, end of period $ 58,903   $ 37,559  
 
Supplemental disclosure of non-cash investing activities
Purchases of property, plant and equipment included in accounts payable $ 423 $ 574
         

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 six months ended June 30, 2014 and 2013 for both transactions are as follows:

 
Three Months Ended Six Months Ended
June 30, June 30,
  2014           2013     2014           2013  
Bluesocket, Inc. acquisition
Amortization of acquired intangible assets and other purchase accounting adjustments $ 226   $ 287   $ 472   $ 580  
 
NSN BBA acquisition
Amortization of acquired intangible assets 295 288 597 582
Amortization of other purchase accounting adjustments 294 342 655 752
Acquisition related professional fees, travel and other expenses   17     82     65     236  
 
Subtotal   606     712     1,317     1,570  
 
Total acquisition related expenses, amortizations and adjustments 832 999 1,789 2,150
Provision for income taxes   (276 )   (333 )   (592 )   (713 )
 
Total acquisition related expenses, amortizations and adjustments, net of tax $ 556   $ 666   $ 1,197   $ 1,437  
 

 

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, 2014 and 2013:

 
Three Months Ended Six Months Ended
June 30, June 30,
  2014     2013     2014     2013  
 
Revenue (adjustments to deferred revenue recognized in the period) $ 180 $ 235 $ 423 $ 497
Cost of goods sold   23     64     57     151  
 
Subtotal   203     299     480     648  
 
Selling, general and administrative expenses 24 113 79 274
Research and development expenses   605     587     1,230     1,228  
 
Subtotal   629     700     1,309     1,502  
 
Total acquisition related expenses, amortizations and adjustments 832 999 1,789 2,150
Provision for income taxes   (276 )   (333 )   (592 )   (713 )
 
Total acquisition related expenses, amortizations and adjustments, net of tax $ 556   $ 666   $ 1,197   $ 1,437  
         

Supplemental Information

Stock-based Compensation Expense

(Unaudited)

(In thousands)

 
Three Months Ended Six Months Ended
June 30, June 30,
  2014           2013     2014           2013  
 
Stock-based compensation expense included in cost of sales $ 119   $ 110   $ 235   $ 216  
 
Selling, general and administrative expense 1,015 1,042 2,041 2,105
Research and development expense   958     956     1,873     2,019  
 
Stock-based compensation expense included in operating expenses   1,973     1,998     3,914     4,124  
 
Total stock-based compensation expense 2,092 2,108 4,149 4,340
Tax benefit for expense associated with non-qualified options   (296 )   (310 )   (580 )   (617 )
 
Total stock-based compensation expense, net of tax $ 1,796   $ 1,798   $ 3,569   $ 3,723  
         

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,
  2014         2013   2014         2013
 
GAAP earnings per common share – diluted $ 0.26 $ 0.17 $ 0.42 $ 0.29
 
Acquisition related expenses, amortizations and adjustments 0.01 0.01 0.02 0.02
Stock-based compensation expense   0.03   0.03   0.06   0.06
 
Non-GAAP earnings per common share – diluted $ 0.30 $ 0.21 $ 0.50 $ 0.37

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