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Press Release -- October 9th, 2012
Source: ADTRAN
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ADTRAN, Inc. Reports Results for the Third Quarter 2012 and Declares Quarterly Cash Dividend

HUNTSVILLE, Ala.–(BUSINESS WIRE)–Oct. 9, 2012– ADTRAN, Inc. (NASDAQ:ADTN, news, filings) reported results for the third quarter 2012. For the quarter, sales were$162,125,000 compared to$192,194,000 for the third quarter of 2011. Net income was$9,272,000 for the quarter compared to$36,213,000 for the third quarter of 2011. Earnings per share, assuming dilution, were$0.15 for the quarter compared to$0.56 for the third quarter of 2011. Non-GAAP earnings per share for the quarter were$0.20 compared to$0.61for the third quarter of 2011. The reconciliation between GAAP earnings per share, diluted, and non-GAAP earnings per share, diluted, is in the table provided.

ADTRANChief Executive OfficerTom Stantonstated, “This quarter’s performance came in line with our revised expectations. Although current market conditions limit near term visibility, we are confident that our market share position and globalization efforts will lead to significantly better performance in the future.”

The Company also announced that its Board of Directors declared a cash dividend for the third quarter of 2012. The quarterly cash dividend is$0.09per common share to be paid to holders of record at the close of business onOctober 25, 2012. The ex-dividend date isOctober 23, 2012and the payment date isNovember 8, 2012.

Non-GAAP earnings per share exclude the effect of acquisition related expenses, amortizations and adjustments, and stock compensation expense.

The Company confirmed that its third quarter conference call will be held Wednesday, October 10, 2012at 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. ADTRANsolutions 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 endedDecember 31, 2011and our quarterly report on Form 10-Q for the quarter endedJune 30, 2012. 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)
September 30, 2012 December 31, 2011
Assets
Cash and cash equivalents $ 43,535 $ 42,979
Short-term investments 190,333 159,347
Accounts receivable, net 102,693 76,130
Other receivables 8,260 9,743
Inventory 107,183 87,800
Prepaid expenses 4,354 3,119
Deferred tax assets, net 12,729 12,125
Total Current Assets 469,087 391,243
Property, plant and equipment, net 81,905 75,295
Deferred tax assets, net 6,843 8,345
Goodwill 3,492 3,492
Other assets 13,825 7,131
Long-term investments 327,106 332,008
Total Assets $ 902,258 $ 817,514
Liabilities and Stockholders’ Equity
Accounts payable $ 52,285 $ 29,404
Unearned revenue 31,672 9,965
Accrued expenses 10,310 5,876
Accrued wages and benefits 16,894 13,518
Income tax payable, net 4,186 3,169
Total Current Liabilities 115,347 61,932
Non-current unearned revenue 19,085 4,874
Other non-current liabilities 15,882 12,077
Bonds payable 46,500 46,500
Total Liabilities 196,814 125,383
Stockholders’ Equity 705,444 692,131
Total Liabilities and Stockholders’ Equity $ 902,258 $ 817,514
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Sales $ 162,125 $ 192,194 $ 480,858 $ 541,943
Cost of sales 82,153 82,718 231,598 226,845
Gross Profit 79,972 109,476 249,260 315,098
Selling, general and administrative expenses 34,114 31,475 103,130 91,925
Research and development expenses 35,582 26,894 92,835 75,150
Operating Income 10,276 51,107 53,295 148,023
Interest and dividend income 1,864 2,037 5,651 5,829
Interest expense (587 ) (599 ) (1,756 ) (1,795 )
Net realized investment gain 2,530 2,982 7,353 9,121
Other income (expense), net (368 ) (155 ) 265 (397 )
Gain on bargain purchase of a business 1,753
Income before provision for income taxes 13,715 55,372 66,561 160,781
Provision for income taxes (4,443 ) (19,159 ) (23,259 ) (53,367 )
Net Income $ 9,272 $ 36,213 $ 43,302 $ 107,414
Weighted average shares outstanding – basic 63,066 64,023 63,495 64,300
Weighted average shares outstanding – diluted (1) 63,304 64,961 64,139 65,697
Earnings per common share – basic $ 0.15 $ 0.57 $ 0.68 $ 1.67
Earnings per common share – diluted (1) $ 0.15 $ 0.56 $ 0.68 $ 1.63
(1) Assumes exercise of dilutive stock options calculated under the treasury stock method.
Consolidated Statements of Comprehensive Income
(Unaudited)
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Net Income $ 9,272 $ 36,213 $ 43,302 $ 107,414
Other Comprehensive Income (Loss), net of tax:
Net change in unrealized gains (losses) on marketable securities 154 (5,468 ) 1,855 (11,259 )
Reclassification adjustments for amounts included in net income 343 (287 ) 164 (682 )
Foreign currency translation 134 (1,487 ) 191 (1,031 )
Other Comprehensive Income (Loss), net of tax 631 (7,242 ) 2,210 (12,972 )
Comprehensive Income, net of tax $ 9,903 $ 28,971 $ 45,512 $ 94,442
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended
September 30,
2012   2011
Cash flows from operating activities:
Net income $ 43,302 $ 107,414
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 10,366 8,435
Amortization of net premium on available-for-sale investments 6,343 4,697
Net realized gain on long-term investments (7,352 ) (9,121 )
Net (gain) loss on disposal of property, plant and equipment (213 ) 14
Gain on bargain purchase of a business (1,753 )
Stock-based compensation expense 6,783 6,455
Deferred income taxes (1,156 ) 128
Tax benefit from stock option exercises 1,813 10,457
Excess tax benefits from stock-based compensation arrangements (1,412 ) (9,311 )
Change in operating assets and liabilities:
Accounts receivable, net (26,178 ) (18,440 )
Other receivables 1,866 (8,525 )
Income tax receivable, net 2,741
Inventory 2,142 (12,247 )
Prepaid expenses and other assets (1,193 ) 207
Accounts payable 17,607 8,924
Accrued expenses and other liabilities 12,769 15,047
Income tax payable, net 1,022 1,916
Net cash provided by operating activities 64,756 108,791
Cash flows from investing activities:
Purchases of property, plant and equipment (10,759 ) (9,531 )
Proceeds from disposals of property, plant and equipment 266
Proceeds from sales and maturities of available-for-sale investments 198,566 378,288
Purchases of available-for-sale investments (220,355 ) (443,275 )
Acquisition of business 7,496 (22,762 )
Net cash used in investing activities (24,786 ) (97,280 )
Cash flows from financing activities:
Proceeds from stock option exercises 4,932 33,631
Purchases of treasury stock (28,578 ) (35,178 )
Dividend payments (17,173 ) (17,395 )
Excess tax benefits from stock-based compensation arrangements 1,412 9,311
Net cash used in financing activities (39,407 ) (9,631 )
Net increase in cash and cash equivalents 563 1,880
Effect of exchange rate changes (7 ) (1,031 )
Cash and cash equivalents, beginning of period 42,979 31,677
Cash and cash equivalents, end of period $ 43,535 $ 32,526
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 nine months ended September 30, 2012 and 2011 for both transactions are as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Bluesocket, Inc. acquisition
Amortization of acquired intangible assets $ 268 $ 198 $ 753 $ 198
Amortization of other purchase accounting adjustments 37 217 414 217
Acquisition related professional fees, travel and other expenses 630 630
Subtotal 305 1,045 1,167 1,045
NSN BBA acquisition
Amortization of acquired intangible assets 300 472
Amortization of other purchase accounting adjustments 666 1,718
Acquisition related professional fees, travel and other expenses 252 931 4,537 992
Subtotal 1,218 931 6,727 992
Total acquisition related expenses, amortizations and adjustments 1,523 1,976 7,894 2,037
Tax effect (496 ) (751 ) (2,660 ) (776 )
Total acquisition related expenses, amortizations and adjustments, net of tax $ 1,027 $ 1,225 $ 5,234 $ 1,261
The acquisition related expenses, amortizations and adjustments above were recorded in the following Consolidated Statements of Income categories for the three and nine months ended September 30, 2012 and 2011:
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Revenue (adjustments to deferred revenue recognized in the period) $ 497 $ 155 $ 1,151 $ 155
Cost of goods sold 126 66 932 66
Subtotal 623 221 2,083 221
Selling, general and administrative expenses 258 1,374 4,180 1,424
Research and development expenses 642 381 1,631 392
Subtotal 900 1,755 5,811 1,816
Total acquisition related expenses, amortizations and adjustments 1,523 1,976 7,894 2,037
Tax effect (496 ) (751 ) (2,660 ) (776 )
Total acquisition related expenses, amortizations and adjustments, net of tax $ 1,027 $ 1,225 $ 5,234 $ 1,261
Supplemental Information
Stock-based Compensation Expense
(Unaudited)
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Stock-based compensation expense included in cost of sales $ 106 $ 100 $ 304 $ 280
Selling, general and administrative expense 1,107 1,090 3,205 3,096
Research and development expense 1,138 1,100 3,274 3,079
Stock-based compensation expense included in operating expenses 2,245 2,190 6,479 6,175
Total stock-based compensation expense 2,351 2,290 6,783 6,455
Tax benefit for expense associated with non-qualified options (313 ) (302 ) (916 ) (1,018 )
Total stock-based compensation expense, net of tax $ 2,038 $ 1,988 $ 5,867 $ 5,437
Reconciliation of GAAP net income per share, diluted, to
Non-GAAP net income per share, diluted
(Unaudited)
  Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
GAAP earnings per common share – diluted $ 0.15 $ 0.56 $ 0.68 $ 1.63
Acquisition related expenses, amortizations and adjustments 0.02 0.02 0.08 0.02
Stock-based compensation expense 0.03 0.03 0.09 0.08
Bargain purchase gain – NSN BBA acquisition (0.03 )
Non-GAAP earnings per common share – diluted $ 0.20 $ 0.61 $ 0.82 $ 1.73

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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