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

January 20, 2015

HUNTSVILLE, Ala.--(BUSINESS WIRE)--Jan. 20, 2015-- ADTRAN, Inc. (NASDAQ:ADTN) reported results for the fourth quarter 2014. For the quarter, sales were $143,982,000 compared to $159,094,000 for the fourth quarter of 2013. Net income was $9,292,000 compared to $11,840,000 for the fourth quarter of 2013. Earnings per share, assuming dilution, were $0.17 compared to $0.20 for the fourth quarter of 2013. Non-GAAP earnings per share were $0.19 compared to $0.25 for the fourth 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 Company had a solid performance this quarter with most segments meeting or slightly exceeding our expectations. We continue to see positive trends as we enter 2015 and believe our geographic presence, market share gains and new product introductions position us well for the future.”

The Company also announced that its Board of Directors declared a cash dividend for the fourth 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 February 5, 2015. The ex-dividend date is February 3, 2015 and the payment date is February 19, 2015.

The Company confirmed that its fourth quarter conference call will be held Wednesday, January 21, 2015 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, 2013 and on Form 10-Q for the quarter ended September 30, 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)
 
December 31,

2014

December 31,

2013

Assets
Cash and cash equivalents $ 73,439 $ 58,298
Short-term investments 46,919 105,760
Accounts receivable, net 86,158 85,814
Other receivables 35,639 18,249
Inventory 86,710 90,111
Prepaid expenses 5,129 4,325
Deferred tax assets, net   17,095   17,083
Total Current Assets 351,089 379,640
 
Property, plant and equipment, net 74,828 76,739
Deferred tax assets, net 17,694 9,622
Goodwill 3,492 3,492
Other assets 10,942 11,180
Long-term investments   280,649   309,225
 
Total Assets $ 738,694 $ 789,898
 
Liabilities and Stockholders' Equity
Accounts payable $ 56,414 $ 48,282
Unearned revenue 22,762 22,205
Accrued expenses 11,077 12,776
Accrued wages and benefits 13,855 14,040
Income tax payable, net   14,901   5,002
Total Current Liabilities 119,009 102,305
 
Non-current unearned revenue 10,948 14,643
Other non-current liabilities 30,924 22,144
Bonds payable   28,800   46,200
Total Liabilities 189,681 185,292
 
Stockholders' Equity   549,013   604,606
 
Total Liabilities and Stockholders' Equity $ 738,694 $ 789,898
 
   
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
 
Three Months Ended Twelve Months Ended
December 31, December 31,
2014   2013 2014   2013
 
Sales $ 143,982 $ 159,094 $ 630,007 $ 641,744
Cost of sales   75,499     82,230     318,680     332,858  
 
Gross Profit 68,483 76,864 311,327 308,886
 
Selling, general and administrative expenses 31,793 33,284 131,958 129,366
Research and development expenses   32,711     32,941     132,258     131,055  
 
Operating Income 3,979 10,639 47,111 48,465
 
Interest and dividend income 1,679 1,991 5,019 7,012
Interest expense (152 ) (588 ) (677 ) (2,325 )
Net realized investment gain 59 1,665 7,278 8,614

Other income (expense), net (1)

  2,790     610     1,175     (911 )
 
Income before provision for income taxes 8,355 14,317 59,906 60,855
 
Provision for income taxes   937     (2,477 )   (15,286 )   (15,061 )
 
Net Income $ 9,292   $ 11,840   $ 44,620   $ 45,794  
 
Weighted average shares outstanding - basic 53,835 57,178 55,120 59,001

Weighted average shares outstanding - diluted (2)

54,085 57,777 55,482 59,424
 
Earnings per common share - basic $ 0.17 $ 0.21 $ 0.81 $ 0.78

Earnings per common share - diluted (2)

$ 0.17 $ 0.20 $ 0.80 $ 0.77
 

(1)

Results for the three and twelve months ended December 31, 2014 include a $2.4 million gain related to the settlement of working capital items from an acquisition transaction that closed in 2012.

 

(2)

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,
2014   2013 2014   2013
 
Net Income $ 9,292   $ 11,840   $ 44,620   $ 45,794  
 
Other Comprehensive Income (Loss), net of tax:
 
Unrealized gains (losses) on available-for-sale securities 1,077 1,409 (1,773 ) 629
Defined benefit plan adjustments (4,866 ) 1,061 (4,866 ) 1,061
Foreign currency translation   (2,007 )   (707 )   (4,189 )   (2,205 )
 
Other Comprehensive Income (Loss), net of tax   (5,796 )   1,763     (10,828 )   (515 )
 
Comprehensive Income, net of tax $ 3,496   $ 13,603   $ 33,792   $ 45,279  
 
 
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
Twelve Months Ended
December 31,
2014   2013
Cash flows from operating activities:
Net income $ 44,620 $ 45,794
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 14,845 14,628
Amortization of net premium on available-for-sale investments 4,360 5,956
Net realized gain on long-term investments (7,278 ) (8,614 )
Net loss on disposal of property, plant and equipment 142 3
Stock-based compensation expense 8,563 9,073
Deferred income taxes (5,526 ) (4,058 )
Tax benefit from stock option exercises 81 169
Excess tax benefits from stock-based compensation arrangements (63 ) (158 )
Change in operating assets and liabilities:
Accounts receivable, net (2,769 ) (5,541 )
Other receivables (20,439 ) (1,549 )
Inventory 1,953 10,265
Prepaid expenses and other assets (3,627 ) (11 )
Accounts payable 9,973 5,206
Accrued expenses and other liabilities (166 ) (15,146 )
Income tax payable, net   11,168     3,747  
Net cash provided by operating activities   55,837     59,764  
 
Cash flows from investing activities:
Purchases of property, plant and equipment (11,256 ) (8,173 )
Proceeds from disposals of property, plant and equipment 1 -
Proceeds from sales and maturities of available-for-sale investments 230,019 343,567
Purchases of available-for-sale investments   (142,695 )   (261,625 )
Net cash provided by investing activities   76,069     73,769  
 
Cash flows from financing activities:
Proceeds from stock option exercises 2,839 3,629
Purchases of treasury stock (80,576 ) (124,267 )
Dividend payments (19,947 ) (21,412 )
Payments on long-term debt (16,500 ) -
Excess tax benefits from stock-based compensation arrangements   63     158  
Net cash used in financing activities   (114,121 )   (141,892 )
 
Net increase (decrease) in cash and cash equivalents 17,785 (8,359 )
Effect of exchange rate changes (2,644 ) (1,800 )
Cash and cash equivalents, beginning of period   58,298     68,457  
 
Cash and cash equivalents, end of period $ 73,439   $ 58,298  
 
Supplemental disclosure of non-cash investing activities
Purchases of property, plant and equipment included in accounts payable $ 467 $ 444
 
   
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 twelve months ended December 31, 2014 and 2013 for both transactions are as follows:

 
Three Months Ended Twelve Months Ended
December 31, December 31,
2014   2013 2014   2013
Bluesocket, Inc. acquisition
Amortization of acquired intangible assets and other purchase accounting adjustments $ 226   $ 279   $ 925   $ 1,142  
 
NSN BBA acquisition
Amortization of acquired intangible assets 269 301 1,153 1,174
Amortization of other purchase accounting adjustments 222 391 1,117 1,378
Acquisition related professional fees, travel and other expenses   193     16     282     345  
 
Subtotal   684     708     2,552     2,897  
 
Total acquisition related expenses, amortizations and adjustments 910 987 3,477 4,039
Provision for income taxes   (300 )   (328 )   (1,151 )   (1,343 )
 
Total acquisition related expenses, amortizations and adjustments, net of tax $ 610   $ 659   $ 2,326   $ 2,696  
 
   

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, 2014 and 2013:

 
Three Months Ended Twelve Months Ended
December 31, December 31,
2014   2013 2014   2013
 
Revenue (adjustments to deferred revenue recognized in the period) $ 73 $ 211 $ 601 $ 929
Cost of goods sold   67     102     171     196  
 
Subtotal   140     313     772     1,125  
 
Selling, general and administrative expenses 200 24 310 399
Research and development expenses   570     650     2,395     2,515  
 
Subtotal   770     674     2,705     2,914  
 
Total acquisition related expenses, amortizations and adjustments 910 987 3,477 4,039
Provision for income taxes   (300 )   (328 )   (1,151 )   (1,343 )
 
Total acquisition related expenses, amortizations and adjustments, net of tax $ 610   $ 659   $ 2,326   $ 2,696  
 
   
Supplemental Information
Stock-based Compensation Expense
(Unaudited)
(In thousands)
 
Three Months Ended Twelve Months Ended
December 31, December 31,
2014   2013 2014   2013
 
Stock-based compensation expense included in cost of sales $ 120   $ 131   $ 479   $ 465  
 
Selling, general and administrative expense 1,096 1,314 4,185 4,443
Research and development expense   1,051     1,112     3,899     4,165  
 
Stock-based compensation expense included in operating expenses   2,147     2,426     8,084     8,608  
 
Total stock-based compensation expense 2,267 2,557 8,563 9,073
Tax benefit for expense associated with non-qualified options   (279 )   (374 )   (1,157 )   (1,298 )
 
Total stock-based compensation expense, net of tax $ 1,988   $ 2,183   $ 7,406   $ 7,775  
 
   
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,
2014   2013 2014   2013
 
GAAP earnings per common share – diluted $ 0.17 $ 0.20 $ 0.80 $ 0.77
 
Acquisition related expenses, amortizations and adjustments 0.01 0.01 0.04 0.05
Settlement of acquisition related working capital items (0.03 ) - (0.03 ) -
Stock-based compensation expense   0.04     0.04   0.13     0.13
 
Non-GAAP earnings per common share – diluted $ 0.19   $ 0.25 $ 0.94   $ 0.95

Source: ADTRAN, Inc.

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

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