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Press Release -- July 10th, 2013
Source: ADTRAN
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ADTRAN, Inc. Reports Results for the Second Quarter 2013 and Declares Quarterly Cash Dividend

HUNTSVILLE, Ala.--(BUSINESS WIRE)--Jul. 9, 2013-- ADTRAN, Inc. (NASDAQ:ADTN, news, filings) reported results for the second quarter 2013. For the quarter, sales were $162,233,000 compared to$183,998,000 for the second quarter of 2012. Net income was $9,859,000 for the quarter compared to $21,070,000 for the second quarter of 2012. Earnings per share, assuming dilution, were $0.17for the quarter compared to $0.33 for the second quarter of 2012. Non-GAAP earnings per share for the quarter were $0.21 compared to $0.38 for the second quarter of 2012. 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, “Continuing improvement in our Internetworking and Broadband Access product areas led revenues which exceeded estimates for the quarter. During the quarter we benefited from market share gains, the geographic expansion we began last year and an improved spending environment.”

The Company also announced that its Board of Directors declared a cash dividend for the second quarter of 2013. The quarterly cash dividend is $0.09 per common share to be paid to holders of record at the close of business on July 25, 2013. The ex-dividend date is July 23, 2013 and the payment date is August 8, 2013.

The Company confirmed that its second quarter conference call will be held Wednesday, July 10, 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.comapproximately 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 atinfo@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, 2012 and on Form 10-Q for the quarter ended March 31, 2013. 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 30,2013 December 31,
2012
Assets
Cash and cash equivalents $ 37,559 $ 68,457
Short-term investments 152,581 160,481
Accounts receivable, net 103,516 81,194
Other receivables 18,820 16,253
Inventory 87,773 102,583
Prepaid expenses 4,926 4,148
Deferred tax assets, net 13,114 13,055
Total Current Assets 418,289 446,171
Property, plant and equipment, net 77,670 80,246
Deferred tax assets, net 12,171 10,261
Goodwill 3,492 3,492
Other assets 12,046 13,482
Long-term investments 292,660 332,729
Total Assets $ 816,328 $ 886,381
Liabilities and Stockholders' Equity
Accounts payable $ 62,097 $ 42,173
Unearned revenue 25,808 38,051
Accrued expenses 12,020 10,309
Accrued wages and benefits 14,093 15,022
Income tax payable, net 2,317 1,211
Total Current Liabilities 116,335 106,766
Non-current unearned revenue 25,266 23,803
Other non-current liabilities 19,042 17,406
Bonds payable 46,000 46,000
Total Liabilities 206,643 193,975
Stockholders' Equity 609,685 692,406
Total Liabilities and Stockholders' Equity $ 816,328 $ 886,381
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2013 2012 2013 2012
Sales $ 162,233 $ 183,998 $ 305,246 $ 318,733
Cost of sales 82,435 88,797 155,771 149,445
Gross Profit 79,798 95,201 149,475 169,288
Selling, general and administrative expenses 32,685 35,905 63,288 69,017
Research and development expenses 33,060 32,458 65,571 57,252
Operating Income 14,053 26,838 20,616 43,019
Interest and dividend income 1,674 1,926 3,442 3,787
Interest expense (575 ) (581 ) (1,156 ) (1,168 )
Net realized investment gain 1,553 2,356 5,198 4,823
Other income (expense), net 129 492 (1,543 ) 633
Gain on bargain purchase of a business - 1,753 - 1,753
Income before provision for income taxes 16,834 32,784 26,557 52,847
Provision for income taxes (6,975 ) (11,714 ) (8,808 ) (18,816 )
Net Income $ 9,859 $ 21,070 $ 17,749 $ 34,031
Weighted average shares outstanding - basic 59,056 63,619 60,443 63,720
Weighted average shares outstanding - diluted (1) 59,311 64,393 60,660 64,628
Earnings per common share - basic $ 0.17 $ 0.33 $ 0.29 $ 0.53
Earnings per common share - diluted (1) $ 0.17 $ 0.33 $ 0.29 $ 0.53
(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,
2013 2012 2013 2012
Net Income $ 9,859 $ 21,070 $ 17,749 $ 34,031
Other Comprehensive Income (Loss), net of tax:
Unrealized gains (losses) on available-for-sale securities (1,698 ) (5,235 ) (3,342 ) 1,522
Foreign currency translation (1,713 ) (96 ) (1,390 ) 58
Other Comprehensive Income (Loss), net of tax (3,411 ) (5,331 ) (4,732 ) 1,580
Comprehensive Income (Loss), net of tax $ 6,448 $ 15,739 $ 13,017 $ 35,611
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Six Months Ended
June 30,
2013 2012
Cash flows from operating activities:
Net income $ 17,749 $ 34,031
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 7,373 6,615
Amortization of net premium on available-for-sale investments 3,315 4,330
Net realized gain on long-term investments (5,198 ) (4,823 )
Net (gain) loss on disposal of property, plant and equipment 17 (204 )
Gain on bargain purchase of a business - (1,753 )
Stock-based compensation expense 4,340 4,432
Deferred income taxes 150 (2,427 )
Tax benefit from stock option exercises 21 1,701
Excess tax benefits from stock-based compensation arrangements (21 ) (1,346 )
Change in operating assets and liabilities:
Accounts receivable, net (23,018 ) (43,062 )
Other receivables (2,727 ) 1,997
Inventory 13,336 5,548
Prepaid expenses and other assets (665 ) (1,527 )
Accounts payable 20,252 12,877
Accrued expenses and other liabilities (6,587 ) 13,099
Income tax payable, net 1,094 7,508
Net cash provided by operating activities 29,431 36,996
Cash flows from investing activities:
Purchases of property, plant and equipment (3,667 ) (7,787 )
Proceeds from disposals of property, plant and equipment - 266
Proceeds from sales and maturities of available-for-sale investments 224,163 138,307
Purchases of available-for-sale investments (179,730 ) (161,849 )
Acquisition of business - 7,496
Net cash provided by (used in) investing activities 40,766 (23,567 )
Cash flows from financing activities:
Proceeds from stock option exercises 819 4,328
Purchases of treasury stock (89,917 ) (13,432 )
Dividend payments (10,982 ) (11,476 )
Excess tax benefits from stock-based compensation arrangements 21 1,346
Net cash used in financing activities (100,059 ) (19,234 )
Net decrease in cash and cash equivalents (29,862 ) (5,805 )
Effect of exchange rate changes (1,036 ) (206 )
Cash and cash equivalents, beginning of period 68,457 42,979
Cash and cash equivalents, end of period $ 37,559 $ 36,968
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 six months ended June 30, 2013 and 2012 for both transactions are as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2013 2012 2013 2012
Bluesocket, Inc. acquisition
Amortization of acquired intangible assets and other purchase accounting adjustments $ 287 $ 378 $ 580 $ 862
NSN BBA acquisition
Amortization of acquired intangible assets 288 172 582 172
Amortization of other purchase accounting adjustments 342 1,052 752 1,052
Acquisition related professional fees, travel and other expenses 82 2,705 236 4,285
Subtotal 712 3,929 1,570 5,509
Total acquisition related expenses, amortizations and adjustments 999 4,307 2,150 6,371
Provision for income taxes (333 ) (1,361 ) (713 ) (2,039 )
Total acquisition related expenses, amortizations and adjustments, net of tax $ 666 $ 2,946 $ 1,437 $ 4,332
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, 2013 and 2012:
Three Months Ended Six Months Ended
June 30, June 30,
2013 2012 2013 2012
Revenue (adjustments to deferred revenue recognized in the period) $ 235 $ 508 $ 497 $ 654
Cost of goods sold 64 669 151 806
Subtotal 299 1,177 648 1,460
Selling, general and administrative expenses 113 2,361 274 3,922
Research and development expenses 587 769 1,228 989
Subtotal 700 3,130 1,502 4,911
Total acquisition related expenses, amortizations and adjustments 999 4,307 2,150 6,371
Provision for income taxes (333 ) (1,361 ) (713 ) (2,039 )
Total acquisition related expenses, amortizations and adjustments, net of tax $ 666 $ 2,946 $ 1,437 $ 4,332
Supplemental Information
Stock-based Compensation Expense
(Unaudited)
(In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2013 2012 2013 2012
Stock-based compensation expense included in cost of sales $ 110 $ 97 $ 216 $ 198
Selling, general and administrative expense 1,042 1,047 2,105 2,098
Research and development expense 956 1,067 2,019 2,136
Stock-based compensation expense included in operating expenses 1,998 2,114 4,124 4,234
Total stock-based compensation expense 2,108 2,211 4,340 4,432
Tax benefit for expense associated with non-qualified options (310 ) (302 ) (617 ) (603 )
Total stock-based compensation expense, net of tax $ 1,798 $ 1,909 $ 3,723 $ 3,829
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,
2013 2012 2013 2012
GAAP earnings per common share – diluted $ 0.17 $ 0.33 $ 0.29 $ 0.53
Acquisition related expenses, amortizations and adjustments 0.01 0.05 0.02 0.07
Stock-based compensation expense 0.03 0.03 0.06 0.06
Gain on bargain purchase of business - (0.03 ) - (0.03 )
Non-GAAP earnings per common share – diluted $ 0.21 $ 0.38 $ 0.37 $ 0.63

Source: ADTRAN, Inc.

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

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