ADTRAN

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ADTRAN, Inc. Reports Results for the Fourth Quarter 2016 and Declares Quarterly Cash Dividend

January 17, 2017

HUNTSVILLE, Ala.--(BUSINESS WIRE)--Jan. 17, 2017-- ADTRAN, Inc. (NASDAQ:ADTN) reported results for the fourth quarter 2016. For the quarter, sales were $162,986,000 compared to $139,013,000 for the fourth quarter of 2015. Net income was $7,572,000 compared to $5,718,000 for the fourth quarter of 2015. Earnings per share, assuming dilution, were $0.16 compared to $0.12 for the fourth quarter of 2015. Non-GAAP earnings per share were $0.21 compared to $0.16 for the fourth 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 and EPS performance for the quarter exceeded expectations with total revenue increasing 17% over the same period last year. The solid fourth quarter and full year performance was a result of strong growth in our domestic business, driven by our leading market positions in CAF II and ultra-broadband solutions, continued growth in our services business, and the rebound of our international business. Our services and international businesses grew 55% and 46% respectively over the same period last year. Global demand for broadband continued to grow as we bolstered our market positions in the U.S and Europe. We continue to be encouraged by the positive momentum we are experiencing as service providers seek transformation to grow revenue, reduce costs, and accelerate service delivery and deployment.”

The Company also announced that its Board of Directors declared a cash dividend for the fourth 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 February 2, 2017. The ex-dividend date is January 31, 2017, and the payment date is February 16, 2017.

The Company confirmed that its fourth quarter conference call will be held Wednesday, January 18, 2017, 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)

         

December 31,
2016

December 31,
2015

Assets
Cash and cash equivalents $ 79,895 $ 84,550
Short-term investments 43,188 34,396
Accounts receivable, net 92,346 71,917
Other receivables 15,137 19,321
Income tax receivable, net 760 -
Inventory 105,117 91,533
Prepaid expenses and other current assets   16,459   10,145
Total Current Assets 352,902 311,862
 
Property, plant and equipment, net 84,469 73,233
Deferred tax assets, net 38,036 37,015
Goodwill 3,492 3,492
Other assets 12,234 9,276
Long-term investments   176,102   198,026
 
Total Assets $ 667,235 $ 632,904
 
Liabilities and Stockholders' Equity
Accounts payable $ 77,342 $ 48,668
Unearned revenue 16,326 16,615
Accrued expenses 12,434 12,108
Accrued wages and benefits 20,433 12,857
Income tax payable, net   -   2,395
Total Current Liabilities 126,535 92,643
 
Non-current unearned revenue 6,333 7,965
Other non-current liabilities 28,050 24,236
Bonds payable   26,800   27,900
Total Liabilities 187,718 152,744
 
Stockholders' Equity   479,517   480,160
 
Total Liabilities and Stockholders' Equity $ 667,235 $ 632,904
 
 
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
         
Three Months Ended Twelve Months Ended
December 31, December 31,
2016     2015 2016     2015
 
Sales
Products $ 126,793 $ 115,699 $ 525,502 $ 527,422
Services   36,193     23,314     111,279     72,642  
 
Total Sales 162,986 139,013 636,781 600,064
 
Cost of Sales
Products 67,790 62,104 270,695 293,843
Services   24,409     14,470     74,742     39,324  
 
Total Cost of Sales 92,199 76,574 345,437 333,167
 
Gross Profit 70,787 62,439 291,344 266,897
 
Selling, general and administrative expenses 34,438 30,339 131,805 123,542
Research and development expenses   32,077     29,300     124,804     129,876  
 
Operating Income 4,272 2,800 34,735 13,479
 
Interest and dividend income 1,226 1,273 3,918 3,953
Interest expense (142 ) (148 ) (572 ) (596 )
Net realized investment gain 1,769 1,907 5,923 10,337
Other expense, net (273 ) (617 ) (651 ) (1,465 )
Gain on bargain purchase of a business   (8 )   -     3,542     -  
 
Income before provision for income taxes 6,844 5,215 46,895 25,708
 
Provision for income taxes   728     503     (11,666 )   (7,062 )
 
Net Income $ 7,572   $ 5,718   $ 35,229   $ 18,646  
 
Weighted average shares outstanding - basic 48,383 49,552 48,724 51,145
Weighted average shares outstanding - diluted (1) 48,757 49,643 48,949 51,267
 
Earnings per common share - basic $ 0.16 $ 0.12 $ 0.72 $ 0.36
Earnings per common share - diluted (1) $ 0.16 $ 0.12 $ 0.72 $ 0.36
 
(1) Assumes exercise of dilutive stock options calculated under the treasury stock method.
 
 
Consolidated Statements of Comprehensive Income
(Unaudited)
(In thousands)
         
Three Months Ended Twelve Months Ended
December 31, December 31,
2016     2015 2016     2015
 
Net Income $ 7,572   $ 5,718   $ 35,229   $ 18,646  
 
Other Comprehensive Income (Loss), net of tax:
 
Unrealized losses on available-for-sale securities (1,366 ) (455 ) (1,528 ) (7,032 )
Defined benefit plan adjustments (1,225 ) 1,651 (1,122 ) 1,862
Foreign currency translation   (1,771 )   73     (569 )   (3,724 )
 
Other Comprehensive Income (Loss), net of tax   (4,362 )   1,269     (3,219 )   (8,894 )
 
Comprehensive Income, net of tax $ 3,210   $ 6,987   $ 32,010   $ 9,752  
 
 
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
     
Twelve Months Ended
December 31,
2016     2015
Cash flows from operating activities:
Net income $ 35,229 $ 18,646
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 14,407 14,245
Amortization of net premium on available-for-sale investments 643 2,402
Net realized gain on long-term investments (5,923 ) (10,337 )
Net loss on disposal of property, plant and equipment 22 644
Gain on bargain purchase of a business (3,542 ) -
Stock-based compensation expense 6,695 6,712
Deferred income taxes (2,685 ) (692 )
Tax impact from stock option exercises - (40 )
Excess tax benefits from stock-based compensation arrangements (2 ) (3 )
Change in operating assets and liabilities:
Accounts receivable, net (21,302 ) 14,918
Other receivables 4,101 11,704
Inventory (10,887 ) (6,877 )
Prepaid expenses and other assets (7,108 ) (5,070 )
Accounts payable 26,722 (5,826 )
Accrued expenses and other liabilities 8,792 (10,289 )
Income tax payable/receivable, net   (3,162 )   (11,590 )
Net cash provided by operating activities   42,000     18,547  
 
Cash flows from investing activities:
Purchases of property, plant and equipment (21,441 ) (11,753 )
Proceeds from disposals of property, plant and equipment - 183
Proceeds from sales and maturities of available-for-sale investments 225,075 280,435
Purchases of available-for-sale investments (209,172 ) (188,921 )
Acquisition of business   (943 )   -  
Net cash provided by (used in) investing activities   (6,481 )   79,944  
 
Cash flows from financing activities:
Proceeds from stock option exercises 4,717 961
Purchases of treasury stock (25,817 ) (66,160 )
Dividend payments (17,583 ) (18,449 )
Payments on long-term debt (1,100 ) (1,100 )
Excess tax benefits from stock-based compensation arrangements   2     3  
Net cash used in financing activities   (39,781 )   (84,745 )
 
Net increase (decrease) in cash and cash equivalents (4,262 ) 13,746
Effect of exchange rate changes (393 ) (2,635 )
Cash and cash equivalents, beginning of period   84,550     73,439  
 
Cash and cash equivalents, end of period $ 79,895   $ 84,550  
 
Supplemental disclosure of non-cash investing activities
Purchases of property, plant and equipment included in accounts payable $ 2,103 $ 598
 

Supplemental Information
Restructuring Expenses
(Unaudited)
(In thousands)

Restructuring expenses were recorded in the following Consolidated Statements of Income categories for the three and twelve months ended December 31, 2016 and 2015:

         
Three Months Ended Twelve Months Ended
December 31, December 31,
2016     2015 2016     2015
 
Restructuring expense included in cost of sales $ 14   $ 5   $ 1,321   $ 112  
 
Selling, general and administrative expense - 8 637 846
Research and development expense   -     13     -     2,108  
 
Restructuring expense included in operating expenses   -     21     637     2,954  
 
Total restructuring expense 14 26 1,958 3,066
Provision for income taxes   (4 )   (10 )   (607 )   (1,196 )
 
Total restructuring expense, net of tax $ 10   $ 16   $ 1,351   $ 1,870  
 

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 twelve months ended December 31, 2016 and 2015 for all three transactions are as follows:

 
      Three Months Ended     Twelve Months Ended
December 31, December 31,
2016     2015 2016     2015
Bluesocket, Inc. acquisition
Amortization of acquired intangible assets $ 158   $ 174   $ 662   $ 817  
 
NSN BBA acquisition
Amortization of acquired intangible assets 221 227 901 928
Amortization of other purchase accounting adjustments 30 48 224 443
Acquisition related professional fees, travel and other expenses   -     14     -     75  
Subtotal NSN BBA acquisition   251     289     1,125     1,446  
 
CommScope acquisition
Amortization of acquired intangible assets 673 - 785 -
Amortization of other purchase accounting adjustments 42 - 126 -
Acquisition related professional fees, travel and other expenses   29     -     74     -  
Subtotal CommScope acquisition   744     -     985     -  
 
Total acquisition related expenses, amortizations and adjustments 1,153 463 2,772 2,263
Provision for income taxes   (429 )   (158 )   (991 )   (767 )
 
Total acquisition related expenses, amortizations and adjustments, net of tax $ 724   $ 305   $ 1,781   $ 1,496  
 

The acquisition related expenses, amortizations and adjustments above were recorded in the following Consolidated Statements of Income categories for the three and twelve months ended December 31, 2016 and 2015:

         
Three Months Ended Twelve Months Ended
December 31, December 31,
2016     2015 2016     2015
 
Revenue (adjustments to deferred revenue recognized in the period) $ - $ 16 $ - $ 212
Cost of goods sold   43     3     232     55  
Subtotal   43     19     232     267  
 
Selling, general and administrative expenses 70 18 131 92
Research and development expenses   1,040     426     2,409     1,904  
Subtotal   1,110     444     2,540     1,996  
 
Total acquisition related expenses, amortizations and adjustments 1,153 463 2,772 2,263
Provision for income taxes   (429 )   (158 )   (991 )   (767 )
 
Total acquisition related expenses, amortizations and adjustments, net of tax $ 724   $ 305   $ 1,781   $ 1,496  
 
 
Supplemental Information
Stock-based Compensation Expense
(Unaudited)
(In thousands)
         
Three Months Ended Twelve Months Ended
December 31, December 31,
2016     2015 2016     2015
 
Stock-based compensation expense included in cost of sales $ 107   $ 78   $ 389   $ 280  
 
Selling, general and administrative expense 1,019 1,035 3,341 3,261
Research and development expense   968     811     2,965     3,171  
 
Stock-based compensation expense included in operating expenses   1,987     1,846     6,306     6,432  
 
Total stock-based compensation expense 2,094 1,924 6,695 6,712
Tax benefit for expense associated with non-qualified options   (320 )   (242 )   (963 )   (862 )
 
Total stock-based compensation expense, net of tax $ 1,774   $ 1,682   $ 5,732   $ 5,850  
 
 
Reconciliation of GAAP net income per share, diluted, to
Non-GAAP net income per share, diluted
(Unaudited)
         
Three Months Ended Twelve Months Ended
December 31, December 31,
2016     2015 2016     2015
 
GAAP earnings per common share – diluted $ 0.16 $ 0.12 $ 0.72 $ 0.36
 
Restructuring expense - - 0.03 0.04
Acquisition related expenses, amortizations and adjustments 0.01 0.01 0.04 0.03
Stock-based compensation expense 0.04 0.03 0.12 0.11
Gain on bargain purchase of a business   -   -   (0.07 )   -
 
Non-GAAP earnings per common share – diluted $ 0.21 $ 0.16 $ 0.84   $ 0.54
 

Source: ADTRAN, Inc.

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

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