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ADTRAN, Inc. Reports Earnings for the Second Quarter 2018 and Declares Quarterly Cash Dividend
[July 17, 2018]

ADTRAN, Inc. Reports Earnings for the Second Quarter 2018 and Declares Quarterly Cash Dividend


ADTRAN, Inc. (NASDAQ: ADTN) reported results for the second quarter 2018. For the quarter, sales were $128.0 million compared to $184.7 million for the second quarter of 2017. Net loss was $7.7 million compared to net income of $12.4 million for the second quarter of 2017. Earnings per share, assuming dilution, were a loss of $0.16 compared to income of $0.26 for the second quarter of 2017. Non-GAAP earnings per share were a loss of $0.10 compared to income of $0.30 for the second quarter of 2017. GAAP earnings per share include the expense of stock-based compensation, acquisition related amortizations and other expenses, and a restructuring program. The reconciliation between GAAP earnings per share, diluted, and non-GAAP earnings per share, diluted, is in the table provided.

ADTRAN Chairman and Chief Executive Officer Tom Stanton stated, "Our second quarter results showed steady improvement from the previous quarter. We are pleased with our quarter-over-quarter growth in revenue and gross margins. Looking ahead, we expect our international business to remain strong through the second half of the year. We are also encouraged by what we are seeing in our North American carrier and cable/MSO business - all of which indicate further momentum as we head into 2019."

The Company also announced that its Board of Directors declared a cash dividend for the second quarter of 2018. The quarterly cash dividend is $0.09 per common share to be paid to holders of record at the close of business on August 1, 2018. The ex-dividend date is July 31, 2018, and the payment date is August 15, 2018.

The Company confirmed that it will hold its second quarter conference call Wednesday, July 18, 2018, at 9:30 a.m. Central Time. ADTRAN will webcast this conference. To listen, simply visit the Investor Relations site at www.investors.adtran.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, as well as the text of the Company's earnings release, will be available on the Investor Relations site approximately 24 hours following the call and will remain available for at least 12 months. For more information, visit www.investors.adtran.com or via email at investor.relations@adtran.com.

ADTRAN, Inc. is the 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. Please visit us at www.adtran.com, LinkedIn and Twitter.

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, 2017. 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,     December 31,
2018 2017
Assets
Cash and cash equivalents $ 100,319 $ 86,433
Short-term investments 6,069 16,129
Accounts receivable, net 76,135 144,150
Other receivables 28,163 26,578
Inventory, net 120,537 122,542
Prepaid expenses and other current assets   9,464   17,282
Total Current Assets 340,687 413,114
 
Property, plant and equipment, net 82,910 85,079
Deferred tax assets, net 35,615 23,428
Goodwill 3,492 3,492
Other assets 32,429 13,725
Long-term investments   144,437   130,256
Total Assets $ 639,570 $ 669,094
 
Liabilities and Stockholders' Equity
Accounts payable $ 60,150 $ 60,632
Unearned revenue 14,307 13,070
Accrued expenses 14,785 13,232
Accrued wages and benefits 14,913 15,948
Income tax payable   11,948   3,936
Total Current Liabilities 116,103 106,818
 
Non-current unearned revenue 3,639 4,556
Other non-current liabilities 34,601 34,209
Bonds payable   25,600   25,600
Total Liabilities 179,943 171,183
 
Stockholders' Equity   459,627   497,911
 
Total Liabilities and Stockholders' Equity $ 639,570 $ 669,094

 
 
 
 
 
 

Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)

 
        Three Months Ended     Six Months Ended
June 30, June 30,
2018     2017 2018     2017
Sales
Products $ 115,063 $ 155,543 $ 220,316 $ 299,140
Services   12,985     29,130     28,538     55,812  
Total Sales 128,048 184,673 248,854 354,952
Cost of Sales
Products 69,629 79,663 138,241 156,327
Services   8,423     20,384     20,884     40,290  
Total Cost of Sales 78,052 100,047 159,125 196,617
Gross Profit 49,996 84,626 89,729 158,335
Selling, general and administrative expenses 32,080 34,706 65,611 69,495
Research and development expenses   30,729     33,557     63,578     65,528  
Operating Income (Loss) (12,813 ) 16,363 (39,460 ) 23,312
Interest and dividend income 913 972 1,779 1,905
Interest expense (132 ) (137 ) (264 ) (278 )
Net realized investment gain 990 1,390 893 1,860
Other expense, net (217 ) (719 ) (274 ) (585 )
Gain on bargain purchase of a business   -     -     11,322     -  
Income (loss) before provision for income taxes (11,259 ) 17,869 (26,004 ) 26,214
(Provision) benefit for income taxes   3,589     (5,468 )   7,520     (7,162 )
Net Income (Loss) $ (7,670 ) $ 12,401   $ (18,484 ) $ 19,052  
 
Weighted average shares outstanding - basic 47,856 48,036 48,043 48,232
Weighted average shares outstanding - diluted 47,902 48,413 48,091 48,675
 
Earnings (loss) per common share - basic $ (0.16 ) $ 0.26 $ (0.38 ) $ 0.40
Earnings (loss) per common share - diluted $ (0.16 ) $ 0.26 $ (0.38 ) $ 0.39
 

(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,
2018     2017 2018     2017
 
Net Income (Loss) $ (7,670 ) $ 12,401   $ (18,484 ) $ 19,052  
Other Comprehensive Income (Loss), net of tax
Net unrealized gains (losses) on available-for-sale securities 104 373 (3,308 ) 1,708
Net unrealized losses on cash flow hedges - (417 ) - (338 )
Defined benefit plan adjustments 5 86 67 141
Foreign currency translation   (3,424 )   2,619     (2,582 )   3,861  
Other Comprehensive Income (Loss), net of tax   (3,315 )   2,661     (5,823 )   5,372  
Comprehensive Income (Loss), net of tax $ (10,985 ) $ 15,062   $ (24,307 ) $ 24,424  
 
 
 
 
 
 

Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)

 
        Six Months Ended
June 30,
2018     2017
Cash flows from operating activities:
Net income (loss) $ (18,484 ) $ 19,052
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 7,526 8,377
Amortization of net premium on available-for-sale investments 20 238
Net realized gain on long-term investments (893 ) (1,860 )
Net (gain) loss on disposal of property, plant and equipment 68 (11 )
Gain on bargain purchase of a business (11,322 ) -
Stock-based compensation expense 3,603 3,739
Deferred income taxes (16,384 ) (2,772 )
Changes in operating assets and liabilities:
Accounts receivable, net 66,931 13,911
Other receivables 9 571
Inventory 2,063 (7,547 )
Prepaid expenses and other assets 10,157 (9,853 )
Accounts payable 683 (10,910 )
Accrued expenses and other liabilities 2,008 (2,629 )
Income tax payable   6,945     10,273  
Net cash provided by operating activities   52,930     20,579  
 
Cash flows from investing activities:
Purchases of property, plant and equipment (4,183 ) (7,509 )
Proceeds from disposals of property, plant and equipment - 16
Proceeds from sales and maturities of available-for-sale investments 86,436 81,891
Purchases of available-for-sale investments (89,801 ) (65,140 )
Acquisition of business   (7,806 )   -  
Net cash provided by (used in) investing activities   (15,354 )   9,258  
 
Cash flows from financing activities:
Proceeds from stock option exercises 369 1,722
Purchases of treasury stock (12,774 ) (17,311 )
Dividend payments   (8,679 )   (8,719 )
Net cash used in financing activities   (21,084 )   (24,308 )
 
Net increase in cash and cash equivalents 16,492 5,529
Effect of exchange rate changes (2,606 ) 3,374
Cash and cash equivalents, beginning of period   86,433     79,895  
 
Cash and cash equivalents, end of period $ 100,319   $ 88,798  
 
Supplemental disclosure of non-cash investing activities:
Purchases of property, plant and equipment included in accounts payable $ 209 $ 454
 
 
 
 
 
 

Supplemental Information
Restructuring Expenses
(Unaudited)
(In thousands)

 

Restructuring expense was recorded in the following Consolidated Statements of Income categories for the three and six months ended June 30, 2018 and 2017:

 
      Three Months Ended   Six Months Ended
June 30, June 30,
2018   2017 2018   2017

 

       
Restructuring expense included in cost of sales $ 391   $     - $ 2,761   $     -
 
Selling, general and administrative expense 634 - 2,400 -
Research and development expense   -         -   1,814         -
Restructuring expense included in operating expenses   634         -   4,214         -
 
Total restructuring expense 1,025 - 6,975 -
Provision for income taxes   (267 )       -   (1,814 )       -
 
Total restructuring expense, net of tax $ 758   $     - $ 5,161   $     -
 
 
 
 
 
 

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), on September 13, 2016, we closed on the acquisition of CommScope's active fiber business (CommScope), and on March 19, 2018, we closed on the acquisition of Sumitomo Electric Lightwave Corp.'s North American EPON business (Sumitomo). Acquisition related expenses, amortizations and adjustments for the three and six months ended June 30, 2018 and 2017 for all four transactions are as follows:

 
    Three Months Ended   Six Months Ended
June 30, June 30,
2018   2017 2018   2017
Bluesocket, Inc. acquisition
Amortization of acquired intangible assets $ 158   $ 158   $ 316   $ 316  
 
NSN BBA acquisition
Amortization of acquired intangible assets 90 129 182 337
Amortization of other purchase accounting adjustments   1     10     1     38  
Subtotal - NSN BBA acquisition 91 139 183 375
 
CommScope acquisition
Amortization of acquired intangible assets 125 608 250 1,294
Amortization of other purchase accounting adjustments - 31 1 81
Acquisition related professional fees, travel and other expenses   -     -     -     8  
Subtotal - CommScope acquisition   125     639     251     1,383  
 
Sumitomo acquisition
Amortization of acquired intangible assets 662 - 772 -

Amortization of other purchase accounting adjustments

79 - 79 -
Acquisition related professional fees, travel and other expenses   27     -     124     -  
Subtotal - Sumitomo acquisition   768     -     975     -  
 
Total acquisition related expenses, amortizations and adjustments 1,142 936 1,725 2,074
Provision for income taxes   (301 )  

(354

)

 

(457

)

  (779 )
Total acquisition related expenses, amortizations and adjustments, net of tax $ 841   $ 582   $ 1,268   $ 1,295  
 
 

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, 2018 and 2017:

 
Three Months Ended Six Months Ended
June 30, June 30,

2018

2017

2018

2017

 
Cost of goods sold $ 430   $ 31  

$

489

 

$

81

 
 
Selling, general and administrative expenses 319 52 585 114
Research and development expenses   393     853     651     1,879  

Total acquisition related expenses, amortizations and adjustments included in operating expenses

712 905 1,236 1,993
 
Total acquisition related expenses, amortizations and adjustments 1,142 936 1,725 2,074
Provision for income taxes   (301 )  

(354

)

 

(457

)

  (779 )
Total acquisition related expenses, amortizations and adjustments, net of tax $ 841   $ 582  

$

1,268

 

$

1,295

 
 
 
 
 
 
 

 

Supplemental Information
Stock-based Compensation Expense
(Unaudited)
(In thousands)

 
        Three Months Ended     Six Months Ended
June 30, June 30,
2018     2017 2018     2017
 
Stock-based compensation expense included in cost of sales $ 102   $ 93   $ 197   $ 184  
 
Selling, general and administrative expense 995 1,008 2,030 2,024
Research and development expense   687     755     1,376     1,531  
Stock-based compensation expense included in operating expenses   1,682     1,763     3,406     3,555  
 
Total stock-based compensation expense 1,784 1,856 3,603 3,739

Tax benefit for expense associated with non-qualified options, PSUs, RSUs and restricted stock

  (340 )   (433 )   (724 )   (813 )
 
Total stock-based compensation expense, net of tax $ 1,444   $ 1,423   $ 2,879   $ 2,926  
 
 
 
 
 
 

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,
2018     2017 2018     2017
 
GAAP earnings per common share - diluted $ (0.16 ) $ 0.26 $ (0.38 ) $ 0.39
 
Restructuring expense 0.02 - 0.11 -
Acquisition related expenses, amortizations and adjustments 0.02 0.01 0.03 0.03
Stock-based compensation expense 0.03 0.03 0.06 0.06
Gain on bargain purchase of a business   -     -   (0.24 )   -
 
Non-GAAP earnings per common share - diluted(1) $ (0.10 ) $ 0.30 $ (0.43 ) $ 0.48
 

(1) Table may not foot due to rounding

 
 
 
 
 


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