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Press Release -- January 15th, 2013
Source: ADTRAN
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ADTRAN, Inc. Reports Results for the Fourth Quarter 2012 and Declares Quarterly Cash Dividend

HUNTSVILLE, Ala.--(BUSINESS WIRE)--Jan. 15, 2013-- ADTRAN, Inc. (NASDAQ:ADTN, news, filings) reported results for the fourth quarter 2012. For the quarter, sales were $139,756,000 compared to $175,286,000 for the fourth quarter of 2011. Net income was $3,961,000 for the quarter compared to $31,163,000 for the fourth quarter of 2011. Earnings per share, assuming dilution, were $0.06 for the quarter compared to $0.48 for the fourth quarter of 2011. Non-GAAP earnings per share for the quarter were $0.11 compared to $0.54 for the fourth quarter of 2011. 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 fourth quarter results came in largely as expected with both our carrier and enterprise divisions performing to forecast. Our focus remains on capitalizing on the significant network upgrades that lie ahead of us while maintaining tight cost control as we navigate through the current environment.”

The Company also announced that its Board of Directors declared a cash dividend for the fourth 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 February 7, 2013. The ex-dividend date is February 5, 2013 and the payment date is February 21, 2013.

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

The Company confirmed that its fourth quarter conference call will be held Wednesday, January 16, 2013 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, 2011 and on Form 10-Q for the quarter ended September 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)

December 31,
2012
December 31,
2011
Assets
Cash and cash equivalents $ 68,457 $ 42,979
Short-term investments 160,481 159,347
Accounts receivable, net 81,194 76,130
Other receivables 16,253 9,743
Inventory 102,583 87,800
Prepaid expenses 4,148 3,119
Deferred tax assets, net 13,055 12,125
Total Current Assets 446,171 391,243
Property, plant and equipment, net 80,246 75,295
Deferred tax assets, net 10,261 8,345
Goodwill 3,492 3,492
Other assets 13,482 7,131
Long-term investments 332,729 332,008
Total Assets $ 886,381 $ 817,514
Liabilities and Stockholders' Equity
Accounts payable $ 42,173 $ 29,404
Unearned revenue 38,051 9,965
Accrued expenses 10,309 5,876
Accrued wages and benefits 15,022 13,518
Income tax payable, net 1,211 3,169
Total Current Liabilities 106,766 61,932
Non-current unearned revenue 23,803 4,874
Other non-current liabilities 17,406 12,077
Bonds payable 46,000 46,500
Total Liabilities 193,975 125,383
Stockholders' Equity 692,406 692,131
Total Liabilities and Stockholders' Equity $ 886,381 $ 817,514
Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)

Three Months Ended Twelve Months Ended
December 31, December 31,
2012 2011 2012 2011
Sales $ 139,756 $ 175,286 $ 620,614 $ 717,229
Cost of sales 72,373 76,066 303,971 302,911
Gross Profit 67,383 99,220 316,643 414,318
Selling, general and administrative expenses 31,393 32,954 134,523 124,879
Research and development expenses 33,116 25,151 125,951 100,301
Operating Income 2,874 41,115 56,169 189,138
Interest and dividend income 2,006 1,813 7,657 7,642
Interest expense (591 ) (603 ) (2,347 ) (2,398 )
Net realized investment gain 2,197 3,333 9,550 12,454
Other income (expense), net (82 ) (297 ) 183 (694 )
Gain on bargain purchase of a business - - 1,753 -
Income before provision for income taxes 6,404 45,361 72,965 206,142
Provision for income taxes (2,443 ) (14,198 ) (25,702 ) (67,565 )
Net Income $ 3,961 $ 31,163 $ 47,263 $ 138,577
Weighted average shares outstanding - basic 62,542 63,685 63,259 64,145
Weighted average shares outstanding - diluted (1) 62,690 64,586 63,774 65,416
Earnings per common share - basic $ 0.06 $ 0.49 $ 0.75 $ 2.16
Earnings per common share - diluted (1) $ 0.06 $ 0.48 $ 0.74 $ 2.12
(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,
2012 2011 2012 2011
Net Income $ 3,961 $ 31,163 $ 47,263 $ 138,577
Other Comprehensive Income (Loss), net of tax:
Net change in unrealized gains (losses) on marketable securities (2,042 ) (1,745 ) (187 ) (13,004 )
Reclassification adjustments for amounts included in net income (29 ) (6 ) 135 (688 )
Defined benefit plan adjustments (1,952 ) - (1,952 ) -
Foreign currency translation (21 ) 877 170 (154 )
Other Comprehensive Income (Loss), net of tax (4,044 ) (874 ) (1,834 ) (13,846 )
Comprehensive Income (Loss), net of tax $ (83 ) $ 30,289 $ 45,429 $ 124,731
Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

Twelve Months Ended
December 31,
2012 2011
Cash flows from operating activities:
Net income $ 47,263 $ 138,577
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 14,079 11,499
Amortization of net premium on available-for-sale investments 8,257 6,617
Net realized gain on long-term investments (9,550 ) (12,454 )
Net (gain) loss on disposal of property, plant and equipment (214 ) 6
Gain on bargain purchase of a business (1,753 ) -
Stock-based compensation expense 9,264 9,169
Deferred income taxes (3,785 ) 575
Tax benefit from stock option exercises 1,905 10,525
Excess tax benefits from stock-based compensation arrangements (1,456 ) (9,373 )
Change in operating assets and liabilities:
Accounts receivable, net (4,365 ) (4,939 )
Other receivables 2,977 (5,781 )
Income tax receivable, net - 2,741
Inventory 7,163 (12,734 )
Prepaid expenses and other assets (1,045 ) 522
Accounts payable 7,265 6,178
Accrued expenses and other liabilities 11,583 6,309
Income tax payable, net (1,960 ) 3,169
Net cash provided by operating activities 85,628 150,606
Cash flows from investing activities:
Purchases of property, plant and equipment (12,075 ) (11,912 )
Proceeds from disposals of property, plant and equipment 266 -
Proceeds from sales and maturities of available-for-sale investments 282,039 466,243
Purchases of available-for-sale investments (282,740 ) (554,629 )
Acquisition of business 7,496 (22,661 )
Net cash used in investing activities (5,014 ) (122,959 )
Cash flows from financing activities:
Proceeds from stock option exercises 6,049 34,125
Purchases of treasury stock (39,362 ) (35,565 )
Dividend payments (22,813 ) (23,124 )
Payments on long-term debt (500 ) (1,000 )
Excess tax benefits from stock-based compensation arrangements 1,456 9,373
Net cash used in financing activities (55,170 ) (16,191 )
Net increase in cash and cash equivalents 25,444 11,456
Effect of exchange rate changes 34 (154 )
Cash and cash equivalents, beginning of period 42,979 31,677
Cash and cash equivalents, end of period $ 68,457 $ 42,979
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, 2012 and 2011 for both transactions are as follows:
Three Months Ended Twelve Months Ended
December 31, December 31,
2012 2011 2012 2011
Bluesocket, Inc. acquisition
Amortization of acquired intangible assets $ 267 $ 297 $ 1,020 $ 495
Amortization of other purchase accounting adjustments 29 304 443 521
Acquisition related professional fees, travel and other expenses - 100 - 730
Subtotal 296 701 1,463 1,746
NSN BBA acquisition
Amortization of acquired intangible assets 290 - 762 -
Amortization of other purchase accounting adjustments 587 - 2,305 -
Acquisition related professional fees, travel and other expenses 323 1,035 4,860 2,027
Subtotal 1,200 1,035 7,927 2,027
Total acquisition related expenses, amortizations and adjustments 1,496 1,736 9,390 3,773
Tax effect (488 ) (658 ) (3,148 ) (1,434 )
Total acquisition related expenses, amortizations and adjustments, net of tax $ 1,008 $ 1,078 $ 6,242 $ 2,339
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, 2012 and 2011:
Three Months Ended Twelve Months Ended
December 31, December 31,
2012 2011 2012 2011
Revenue (adjustments to deferred revenue recognized in the period) $ 377 $ 207 $ 1,528 $ 362
Cost of goods sold 154 99 1,086 165
Subtotal 531 306 2,614 527
Selling, general and administrative expenses 330 1,133 4,510 2,557
Research and development expenses 635 297 2,266 689
Subtotal 965 1,430 6,776 3,246
Total acquisition related expenses, amortizations and adjustments 1,496 1,736 9,390 3,773
Tax effect (488 ) (658 ) (3,148 ) (1,434 )
Total acquisition related expenses, amortizations and adjustments, net of tax $ 1,008 $ 1,078 $ 6,242 $ 2,339
Supplemental Information

Stock-based Compensation Expense

(Unaudited)

(In thousands)

Three Months Ended Twelve Months Ended
December 31, December 31,
2012 2011 2012 2011
Stock-based compensation expense included in cost of sales $ 118 $ 132 $ 422 $ 412
Selling, general and administrative expense 1,146 1,220 4,351 4,316
Research and development expense 1,217 1,362 4,491 4,441
Stock-based compensation expense included in operating expenses 2,363 2,582 8,842 8,757
Total stock-based compensation expense 2,481 2,714 9,264 9,169
Tax benefit for expense associated with non-qualified options (318 ) (303 ) (1,234 ) (1,321 )
Total stock-based compensation expense, net of tax $ 2,163 $ 2,411 $ 8,030 $ 7,848
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,
2012 2011 2012 2011
GAAP earnings per common share – diluted $ 0.06 $ 0.48 $ 0.74 $ 2.12
Acquisition related expenses, amortizations and adjustments 0.02 0.02 0.10 0.04
Stock-based compensation expense 0.03 0.04 0.13 0.12
Bargain purchase gain – NSN BBA acquisition - - (0.03 ) -
Non-GAAP earnings per common share – diluted $ 0.11 $ 0.54 $ 0.94 $ 2.28

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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