Market Overview

ADTRAN, Inc. Reports Results for the First Quarter 2012 and Declares Quarterly Cash Dividend

HUNTSVILLE, Ala.--(BUSINESS WIRE)--

ADTRAN, Inc. (NASDAQ:ADTN) reported results for the first quarter 2012. For the quarter, sales were $134,735,000 compared to $165,522,000 for the first quarter of 2011. Net income was $12,960,000 for the quarter compared to $34,258,000 for the first quarter of 2011. Earnings per share, assuming dilution, were $0.20 for the quarter compared to $0.52 for the first quarter of 2011. Non-GAAP earnings per share for the quarter were $0.25 compared to $0.55 for the first quarter of 2011. Non-GAAP earnings per share exclude the effect of acquisition related expenses, amortizations and adjustments related to the acquisition of Bluesocket, Inc. and the planned acquisition of the NSN Broadband Access business, and stock compensation expense. 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, “As expected, we saw an improvement late in the quarter after a slower than normal start in carrier spending. As a result of this slow start, Broadband Access revenues for the quarter were $49.5 million, in range with the same period last year. Our Internetworking category saw another strong performance with revenues of $41.0 million, an increase of 25% from the same period last year. Revenues for our core product areas in total for the quarter were $104.7 million, basically flat compared to the same period last year. Although the quarter did not meet our initial expectations, we believe the issues relate to timing, not market positioning, and that our strategic areas of focus are well aligned with global market trends and will provide long term growth for our company.”

The Company also announced that its Board of Directors declared a cash dividend for the first quarter of 2012. The quarterly cash dividend is $0.09 per common share to be paid to holders of record at the close of business on April 26, 2012. The ex-dividend date is April 24, 2012 and the payment date is May 10, 2012.

The Company confirmed that its first quarter conference call will be held Wednesday, April 11, 2012 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.

To supplement our consolidated financial statements presented on a GAAP basis, ADTRAN, Inc. uses non-GAAP measures of net income per share, which are adjusted to exclude certain costs and expenses we believe appropriate to enhance an overall understanding of our past financial performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for diluted net income per share prepared in accordance with generally accepted accounting principles in the United States.

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, 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)

   
March 31,
2012
December 31,
2011
Assets
Cash and cash equivalents $ 36,539 $ 42,979
Short-term investments 161,535 159,347
Accounts receivable, net 74,796 76,130
Other receivables 8,037 9,743
Inventory 95,805 87,800
Prepaid expenses 3,861 3,119
Deferred tax assets, net   12,548   12,125
Total Current Assets 393,121 391,243
 
Property, plant and equipment, net 76,502 75,295
Deferred tax assets, net 5,633 8,345
Goodwill 3,492 3,492
Other assets 6,831 7,131
Long-term investments   367,474   332,008
 
Total Assets $ 853,053 $ 817,514
 
Liabilities and Stockholders' Equity
Accounts payable $ 31,235 $ 29,404
Unearned revenue 11,376 9,965
Accrued expenses 6,479 5,876
Accrued wages and benefits 12,158 13,518
Income tax payable, net   10,186   3,169
Total Current Liabilities 71,434 61,932
 
Other non-current liabilities 21,588 16,951
Bonds payable   46,500   46,500
Total Liabilities 139,522 125,383
 
Stockholders' Equity   713,531   692,131
 
Total Liabilities and Stockholders' Equity $ 853,053 $ 817,514

Consolidated Statements of Income

Unaudited

(In thousands, except per share data)

 
Three Months Ended
March 31,
2012   2011
 
Sales $ 134,735 $ 165,522
Cost of sales   60,648     66,727  
 
Gross Profit 74,087 98,795
 
Selling, general and administrative expenses 33,111 29,552
Research and development expenses   24,795     23,637  
 
Operating Income 16,181 45,606
 
Interest and dividend income 1,861 1,789
Interest expense (588 ) (602 )
Net realized investment gain 2,467 2,767
Other income (expense), net   141     (125 )
 
Income before provision for income taxes 20,062 49,435
 
Provision for income taxes   (7,102 )   (15,177 )
 
Net Income $ 12,960   $ 34,258  
 
Weighted average shares outstanding - basic 63,809 64,189
Weighted average shares outstanding - diluted (1) 64,849 65,957
 
Earnings per common share - basic $ 0.20 $ 0.53
Earnings per common share - diluted (1) $ 0.20 $ 0.52
 
(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,
  2012     2011  
 
Net income $ 12,960 $ 34,258  
 
Other comprehensive income, net of tax
 
Net change in unrealized gains (losses) on marketable

securities

6,755 (2,651 )

Reclassification adjustment for amounts included in net income

2 (159 )
Foreign currency translation   153   87  
 
Other comprehensive income (loss), net of tax   6,910   (2,723 )
 
Comprehensive income $ 19,870 $ 31,535  

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 December 12, 2011, we announced the planned acquisition of the Nokia Siemens Networks Broadband Access business (NSN BBA). Acquisition related expenses, amortizations and adjustments for the three months ended March 31, 2012 for both transactions are as follows:

  Three

Months Ended March 31, 2012

Bluesocket, Inc. acquisition
Amortization of acquired intangible assets $ 218
Amortization and adjustments of other acquisition related non-cash items   266  
 
Subtotal $ 484  
 
Planned NSN BBA acquisition
Acquisition related professional fees, travel and other expenses   1,580  
 
Total acquisition related expenses, amortizations and adjustments $ 2,064
Tax effect   (803 )
 
Total acquisition related expenses, amortizations and adjustments, net of tax $ 1,261  

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, 2012:

Revenue (adjustments to deferred revenue recognized in the period)   $ 146
Cost of goods sold   137  
 
Subtotal $ 283  
 
Selling, general and administrative expenses 1,561
Research and development expenses   220  
 
Subtotal $ 1,781  
 
Total acquisition related expenses, amortizations and adjustments $ 2,064
Tax effect   (803 )
 
Total acquisition related expenses, amortizations and adjustments, net of tax $ 1,261  

Supplemental Information

Stock-based Compensation Expense

Unaudited

(In thousands)

 
Three Months Ended
March 31,
2012   2011
 
Stock-based compensation expense included in cost of sales $ 101   $ 91  
 
Selling, general and administrative expense 1,051 1,007
Research and development expense   1,069     991  
 
Stock-based compensation expense included in operating expenses   2,120     1,998  
 
Total stock-based compensation expense 2,221 2,089
Tax benefit for expense associated with non-qualified options   (301 )   (440 )
 
Total stock-based compensation expense, net of tax $ 1,920   $ 1,649  

Reconciliation of GAAP net income per share, diluted, to

Non-GAAP net income per share, diluted

(Unaudited)

 
Three Months Ended
March, 31,
2012   2011
 
GAAP earnings per common share - diluted $ 0.20 $ 0.52
Acquisition-related costs 0.02 -
Stock-based compensation expense   0.03   0.03
 
Non-GAAP earnings per common share - diluted $ 0 .25 $ 0.55

Consolidated Statements of Cash Flows

Unaudited

(In thousands)

 
Three Months Ended
March 31,
2012   2011
Cash flows from operating activities:
Net income $ 12,960 $ 34,258
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 3,095 2,724
Amortization of net premium on available-for-sale investments 2,171 1,299
Net realized gain on long-term investments (2,467 ) (2,767 )
Net (gain) loss on disposal of property, plant and equipment (214 ) 12
Stock-based compensation expense 2,221 2,089
Deferred income taxes (2,030 ) 877
Tax benefit from stock option exercises 1,492 9,942
Excess tax benefits from stock-based compensation arrangements (1,153 ) (8,847 )
Change in operating assets and liabilities:
Accounts receivable, net 1,334 (13,562 )
Other receivables 1,706 (8,725 )
Income tax receivable, net - 2,741
Inventory (8,005 ) (4,760 )
Prepaid expenses and other assets (710 ) (216 )
Accounts payable 1,831 10,117
Accrued expenses and other liabilities 5,287 9,606
Income tax payable, net   7,017     1,699  
Net cash provided by operating activities 24,535 36,487
 
Cash flows from investing activities:
Purchases of property, plant and equipment (4,086 ) (3,045 )
Proceeds from disposals of property, plant and equipment 266 -
Proceeds from sales and maturities of available-for-sale investments 69,364 161,687
Purchases of available-for-sale investments   (95,646 )   (224,459 )
Net cash used in investing activities (30,102 ) (65,817 )
 
Cash flows from financing activities:
Proceeds from stock option exercises 3,560 31,815
Dividend payments (5,739 ) (5,775 )
Excess tax benefits from stock-based compensation arrangements   1,153     8,847  
Net cash provided by (used in) financing activities (1,026 ) 34,887
 
Net increase (decrease) in cash and cash equivalents (6,593 ) 5,557
Effect of exchange rate changes 153 87
Cash and cash equivalents, beginning of period   42,979     31,677  
 
Cash and cash equivalents, end of period $ 36,539   $ 37,321  

ADTRAN, Inc.
Jim Matthews, 256-963-8775
Senior Vice President/CFO
or
INVESTOR SERVICES/ASSISTANCE:
Gayle Ellis, 256-963-8220

 

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