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Press Release -- January 18th, 2017
Source: ADTRAN
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ADTRAN, Inc. Reports Results for the Fourth Quarter 2016 and Declares Quarterly Cash Dividend

HUNTSVILLE, Ala.–(BUSINESS WIRE)–Jan. 17, 2017– ADTRAN, Inc. (NASDAQ:ADTN, news, filings) reported results for the fourth quarter 2016. For the quarter, sales were $162,986,000 compared to $139,013,000 for the fourth quarter of 2015. Net income was $7,572,000 compared to $5,718,000 for the fourth quarter of 2015. Earnings per share, assuming dilution, were $0.16 compared to $0.12 for the fourth quarter of 2015. Non-GAAP earnings per share were $0.21 compared to $0.16 for the fourth quarter of 2015. 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 revenue and EPS performance for the quarter exceeded expectations with total revenue increasing 17% over the same period last year. The solid fourth quarter and full year performance was a result of strong growth in our domestic business, driven by our leading market positions in CAF II and ultra-broadband solutions, continued growth in our services business, and the rebound of our international business. Our services and international businesses grew 55% and 46% respectively over the same period last year. Global demand for broadband continued to grow as we bolstered our market positions in the U.S and Europe. We continue to be encouraged by the positive momentum we are experiencing as service providers seek transformation to grow revenue, reduce costs, and accelerate service delivery and deployment.”

The Company also announced that its Board of Directors declared a cash dividend for the fourth quarter of 2016. The quarterly cash dividend is $0.09 per common share to be paid to holders of record at the close of business on February 2, 2017. The ex-dividend date is January 31, 2017, and the payment date is February 16, 2017.

The Company confirmed that its fourth quarter conference call will be held Wednesday, January 18, 2017, 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 endedDecember 31, 2015. 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,
2016

December 31,
2015
Assets
Cash and cash equivalents $ 79,895 $ 84,550
Short-term investments 43,188 34,396
Accounts receivable, net 92,346 71,917
Other receivables 15,137 19,321
Income tax receivable, net 760 –
Inventory 105,117 91,533
Prepaid expenses and other current assets 16,459 10,145
Total Current Assets 352,902 311,862
Property, plant and equipment, net 84,469 73,233
Deferred tax assets, net 38,036 37,015
Goodwill 3,492 3,492
Other assets 12,234 9,276
Long-term investments 176,102 198,026
Total Assets $ 667,235 $ 632,904
Liabilities and Stockholders’ Equity
Accounts payable $ 77,342 $ 48,668
Unearned revenue 16,326 16,615
Accrued expenses 12,434 12,108
Accrued wages and benefits 20,433 12,857
Income tax payable, net – 2,395
Total Current Liabilities 126,535 92,643
Non-current unearned revenue 6,333 7,965
Other non-current liabilities 28,050 24,236
Bonds payable 26,800 27,900
Total Liabilities 187,718 152,744
Stockholders’ Equity 479,517 480,160
Total Liabilities and Stockholders’ Equity $ 667,235 $ 632,904
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2016 2015 2016 2015
Sales
Products $ 126,793 $ 115,699 $ 525,502 $ 527,422
Services 36,193 23,314 111,279 72,642
Total Sales 162,986 139,013 636,781 600,064
Cost of Sales
Products 67,790 62,104 270,695 293,843
Services 24,409 14,470 74,742 39,324
Total Cost of Sales 92,199 76,574 345,437 333,167
Gross Profit 70,787 62,439 291,344 266,897
Selling, general and administrative expenses 34,438 30,339 131,805 123,542
Research and development expenses 32,077 29,300 124,804 129,876
Operating Income 4,272 2,800 34,735 13,479
Interest and dividend income 1,226 1,273 3,918 3,953
Interest expense (142 ) (148 ) (572 ) (596 )
Net realized investment gain 1,769 1,907 5,923 10,337
Other expense, net (273 ) (617 ) (651 ) (1,465 )
Gain on bargain purchase of a business (8 ) – 3,542 –
Income before provision for income taxes 6,844 5,215 46,895 25,708
Provision for income taxes 728 503 (11,666 ) (7,062 )
Net Income $ 7,572 $ 5,718 $ 35,229 $ 18,646
Weighted average shares outstanding – basic 48,383 49,552 48,724 51,145
Weighted average shares outstanding – diluted (1) 48,757 49,643 48,949 51,267
Earnings per common share – basic $ 0.16 $ 0.12 $ 0.72 $ 0.36
Earnings per common share – diluted (1) $ 0.16 $ 0.12 $ 0.72 $ 0.36
(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,
2016 2015 2016 2015
Net Income $ 7,572 $ 5,718 $ 35,229 $ 18,646
Other Comprehensive Income (Loss), net of tax:
Unrealized losses on available-for-sale securities (1,366 ) (455 ) (1,528 ) (7,032 )
Defined benefit plan adjustments (1,225 ) 1,651 (1,122 ) 1,862
Foreign currency translation (1,771 ) 73 (569 ) (3,724 )
Other Comprehensive Income (Loss), net of tax (4,362 ) 1,269 (3,219 ) (8,894 )
Comprehensive Income, net of tax $ 3,210 $ 6,987 $ 32,010 $ 9,752
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Twelve Months Ended
December 31,
2016 2015
Cash flows from operating activities:
Net income $ 35,229 $ 18,646
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 14,407 14,245
Amortization of net premium on available-for-sale investments 643 2,402
Net realized gain on long-term investments (5,923 ) (10,337 )
Net loss on disposal of property, plant and equipment 22 644
Gain on bargain purchase of a business (3,542 ) –
Stock-based compensation expense 6,695 6,712
Deferred income taxes (2,685 ) (692 )
Tax impact from stock option exercises – (40 )
Excess tax benefits from stock-based compensation arrangements (2 ) (3 )
Change in operating assets and liabilities:
Accounts receivable, net (21,302 ) 14,918
Other receivables 4,101 11,704
Inventory (10,887 ) (6,877 )
Prepaid expenses and other assets (7,108 ) (5,070 )
Accounts payable 26,722 (5,826 )
Accrued expenses and other liabilities 8,792 (10,289 )
Income tax payable/receivable, net (3,162 ) (11,590 )
Net cash provided by operating activities 42,000 18,547
Cash flows from investing activities:
Purchases of property, plant and equipment (21,441 ) (11,753 )
Proceeds from disposals of property, plant and equipment – 183
Proceeds from sales and maturities of available-for-sale investments 225,075 280,435
Purchases of available-for-sale investments (209,172 ) (188,921 )
Acquisition of business (943 ) –
Net cash provided by (used in) investing activities (6,481 ) 79,944
Cash flows from financing activities:
Proceeds from stock option exercises 4,717 961
Purchases of treasury stock (25,817 ) (66,160 )
Dividend payments (17,583 ) (18,449 )
Payments on long-term debt (1,100 ) (1,100 )
Excess tax benefits from stock-based compensation arrangements 2 3
Net cash used in financing activities (39,781 ) (84,745 )
Net increase (decrease) in cash and cash equivalents (4,262 ) 13,746
Effect of exchange rate changes (393 ) (2,635 )
Cash and cash equivalents, beginning of period 84,550 73,439
Cash and cash equivalents, end of period $ 79,895 $ 84,550
Supplemental disclosure of non-cash investing activities
Purchases of property, plant and equipment included in accounts payable $ 2,103 $ 598

Supplemental Information
Restructuring Expenses
(Unaudited)
(In thousands)

Restructuring expenses were recorded in the following Consolidated Statements of Income categories for the three and twelve months ended December 31, 2016 and 2015:

Three Months Ended Twelve Months Ended
December 31, December 31,
2016 2015 2016 2015
Restructuring expense included in cost of sales $ 14 $ 5 $ 1,321 $ 112
Selling, general and administrative expense – 8 637 846
Research and development expense – 13 – 2,108
Restructuring expense included in operating expenses – 21 637 2,954
Total restructuring expense 14 26 1,958 3,066
Provision for income taxes (4 ) (10 ) (607 ) (1,196 )
Total restructuring expense, net of tax $ 10 $ 16 $ 1,351 $ 1,870

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), and on September 13, 2016, we closed on the acquisition of CommScope’s active fiber business (CommScope). Acquisition related expenses, amortizations and adjustments for the three and twelve months ended December 31, 2016 and 2015 for all three transactions are as follows:

Three Months Ended Twelve Months Ended
December 31, December 31,
2016 2015 2016 2015
Bluesocket, Inc. acquisition
Amortization of acquired intangible assets $ 158 $ 174 $ 662 $ 817
NSN BBA acquisition
Amortization of acquired intangible assets 221 227 901 928
Amortization of other purchase accounting adjustments 30 48 224 443
Acquisition related professional fees, travel and other expenses – 14 – 75
Subtotal NSN BBA acquisition 251 289 1,125 1,446
CommScope acquisition
Amortization of acquired intangible assets 673 – 785 –
Amortization of other purchase accounting adjustments 42 – 126 –
Acquisition related professional fees, travel and other expenses 29 – 74 –
Subtotal CommScope acquisition 744 – 985 –
Total acquisition related expenses, amortizations and adjustments 1,153 463 2,772 2,263
Provision for income taxes (429 ) (158 ) (991 ) (767 )
Total acquisition related expenses, amortizations and adjustments, net of tax $ 724 $ 305 $ 1,781 $ 1,496

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, 2016 and 2015:

Three Months Ended Twelve Months Ended
December 31, December 31,
2016 2015 2016 2015
Revenue (adjustments to deferred revenue recognized in the period) $ – $ 16 $ – $ 212
Cost of goods sold 43 3 232 55
Subtotal 43 19 232 267
Selling, general and administrative expenses 70 18 131 92
Research and development expenses 1,040 426 2,409 1,904
Subtotal 1,110 444 2,540 1,996
Total acquisition related expenses, amortizations and adjustments 1,153 463 2,772 2,263
Provision for income taxes (429 ) (158 ) (991 ) (767 )
Total acquisition related expenses, amortizations and adjustments, net of tax $ 724 $ 305 $ 1,781 $ 1,496
Supplemental Information
Stock-based Compensation Expense
(Unaudited)
(In thousands)
Three Months Ended Twelve Months Ended
December 31, December 31,
2016 2015 2016 2015
Stock-based compensation expense included in cost of sales $ 107 $ 78 $ 389 $ 280
Selling, general and administrative expense 1,019 1,035 3,341 3,261
Research and development expense 968 811 2,965 3,171
Stock-based compensation expense included in operating expenses 1,987 1,846 6,306 6,432
Total stock-based compensation expense 2,094 1,924 6,695 6,712
Tax benefit for expense associated with non-qualified options (320 ) (242 ) (963 ) (862 )
Total stock-based compensation expense, net of tax $ 1,774 $ 1,682 $ 5,732 $ 5,850
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,
2016 2015 2016 2015
GAAP earnings per common share – diluted $ 0.16 $ 0.12 $ 0.72 $ 0.36
Restructuring expense – – 0.03 0.04
Acquisition related expenses, amortizations and adjustments 0.01 0.01 0.04 0.03
Stock-based compensation expense 0.04 0.03 0.12 0.11
Gain on bargain purchase of a business – – (0.07 ) –
Non-GAAP earnings per common share – diluted $ 0.21 $ 0.16 $ 0.84 $ 0.54

Source: ADTRAN, Inc.

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

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