ADTRAN INC - FORM 8-K - EX-99.1

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EX-99.2 - EX-99.2 - ADTRAN INC	adtn-ex992_6.htm
8-K - 8-K - ADTRAN INC	adtn-8k_20180331.htm

EXHIBIT 99.1

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

HUNTSVILLE, Ala.--(BUSINESS WIRE)—April 17, 2018-- ADTRAN, Inc. (NASDAQ:ADTN) reported results for the first quarter 2018. For the quarter, sales were $120.8 million compared to $170.3 million for the first quarter of 2017. Net loss was $9.1 million compared to net income of $6.7 million for the first quarter of 2017. Earnings per share, assuming dilution, were a loss of $0.19 compared to income of $0.14 for the first quarter of 2017. Non-GAAP earnings per share were a loss of $0.29 compared to income of $0.18 for the first quarter of 2017. GAAP earnings per share include the benefit of an acquisition-related bargain purchase gain, as well as the expense of 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, “As we expected, our performance this quarter continued to be impacted by a merger-related review and slowdown in the spending at a domestic Tier 1 customer. While our international Tier 1 revenue exceeded expectations, lower overall product volumes resulting from the domestic slowdown, coupled with restructuring expenses and lower international gross margins, negatively affected our profit margins for the quarter and further hampered our results. Looking ahead, we expect continued strength in our European business in the second quarter and a rebound in our North American business in the second half. Our level of engagement with domestic and international Tier 1 customers remains at all-time highs, and our recent acquisition of the market leadership in EPON for the North American cable/MSO market positions us for further growth moving forward.”

The Company also announced that its Board of Directors declared a cash dividend for the first 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 May 2, 2018. The ex-dividend date is May 1, 2018, and the payment date is May 16, 2018.

The Company confirmed that its first quarter conference call will be held Wednesday, April 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 and transcript of the conference call will be available on the Investor Relations site approximately 24 hours following the call and will remain available for at least 12 months.

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. For more information, please visit us at www.adtran.com, LinkedIn and Twitter.

For more information, contact the company at 256-963-8220 or via email at investor.relations@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, 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)

	March 31,		December 31,
	2018		2017
Assets
Cash and cash equivalents	$	82,623	$	86,433
Short-term investments		16,402		16,129
Accounts receivable, net		80,883		144,150
Other receivables		34,690		26,578
Inventory, net		120,021		122,542
Prepaid expenses and other current assets		9,693		17,282
Total Current Assets		344,312		413,114

Property, plant and equipment, net		83,875		85,079
Deferred tax assets, net		21,661		23,428
Goodwill		3,492		3,492
Other assets		32,635		13,725
Long-term investments		156,472		130,256
Total Assets	$	642,447	$	669,094

Liabilities and Stockholders' Equity
Accounts payable	$	50,653	$	60,632
Unearned revenue		13,948		13,070
Accrued expenses		13,826		13,232
Accrued wages and benefits		15,863		15,948
Income tax payable		7,708		3,936
Total Current Liabilities		101,998		106,818

Non-current unearned revenue		4,154		4,556
Other non-current liabilities		34,590		34,209
Bonds payable		25,600		25,600
Total Liabilities		166,342		171,183

Stockholders' Equity		476,105		497,911

Total Liabilities and Stockholders' Equity	$	642,447	$	669,094

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)

	Three Months Ended
	March 31,
	2018			2017
Sales
Products	$	105,253		$	143,597
Services		15,553			26,682
Total Sales		120,806			170,279
Cost of Sales
Products		68,612			76,664
Services		12,461			19,906
Total Cost of Sales		81,073			96,570
Gross Profit		39,733			73,709
Selling, general and administrative expenses		33,531			34,789
Research and development expenses		32,849			31,971
Operating Income (Loss)		(26,647	)		6,949
Interest and dividend income		866			933
Interest expense		(132	)		(141	)
Net realized investment gain		1,991			470
Other income (expense), net		(57	)		134
Gain on bargain purchase of a business		11,322			—
Income (loss) before provision for income taxes		(12,657	)		8,345
Provision for income taxes		3,521			(1,694	)
Net Income (Loss)	$	(9,136	)	$	6,651

Weighted average shares outstanding – basic		48,232			48,430
Weighted average shares outstanding – diluted		48,292			48,939

Earnings per common share – basic	$	(0.19	)	$	0.14
Earnings per common share – diluted	$	(0.19	)	$	0.14

⁽¹⁾ Assumes exercise of dilutive stock options calculated under the treasury stock method.

Consolidated Statements of Comprehensive Income

(Unaudited)

(In thousands)

	Three Months Ended
	March 31,
	2018			2017

Net Income (Loss)	$	(9,136	)	$	6,651
Other Comprehensive Income (Loss), net of tax
Net unrealized gains (losses) on available-for-sale securities		(1,500	)		1,335
Net unrealized gains (losses) on cash flow hedges		—			79
Defined benefit plan adjustments		62			55
Foreign currency translation		842			1,242
Other Comprehensive Income (Loss), net of tax		(596	)		2,711
Comprehensive Income (Loss), net of tax	$	(9,732	)	$	9,362

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Three Months Ended
	March 31,
	2018			2017
Cash flows from operating activities:
Net income (loss)	$	(9,136	)	$	6,651
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,614			4,323
Amortization of net premium on available-for-sale investments		42			124
Net realized gain on long-term investments		(1,991	)		(470	)
Net (gain) loss on disposal of property, plant and equipment		67			(16	)
Gain on bargain purchase of a business		(11,322	)		—
Stock-based compensation expense		1,819			1,883
Deferred income taxes		(1,332	)		(1,947	)
Changes in operating assets and liabilities:
Accounts receivable, net		63,904			7,247
Other receivables		(6,164	)		1,884
Inventory		3,368			(7,399	)
Prepaid expenses and other assets		10,583			(2,413	)
Accounts payable		(10,233	)		(1,713	)
Accrued expenses and other liabilities		826			(3,166	)
Income tax payable		2,184			4,049
Net cash provided by operating activities		46,229			9,037

Cash flows from investing activities:
Purchases of property, plant and equipment		(1,950	)		(3,872	)
Proceeds from disposals of property, plant and equipment		—			16
Proceeds from sales and maturities of available-for-sale investments		49,074			24,471
Purchases of available-for-sale investments		(75,960	)		(29,517	)
Acquisition of business		(7,806	)		—
Net cash used in investing activities		(36,642	)		(8,902	)

Cash flows from financing activities:
Proceeds from stock option exercises		369			1,377
Purchases of treasury stock		(10,171	)		(5,559	)
Dividend payments		(4,367	)		(4,369	)
Net cash used in financing activities		(14,169	)		(8,551	)

Net decrease in cash and cash equivalents		(4,582	)		(8,416	)
Effect of exchange rate changes		772			1,079
Cash and cash equivalents, beginning of period		86,433			79,895

Cash and cash equivalents, end of period	$	82,623		$	72,558

Supplemental disclosure of non-cash investing activities:
Purchases of property, plant and equipment included in accounts payable	$	95		$	509

Supplemental Information

Restructuring Expenses

(Unaudited)

(In thousands)

Restructuring expense was recorded in the following Consolidated Statements of Income categories for three months ended March 31, 2018 and 2017:

	Three Months Ended
	March 31,
	2018			2017

Restructuring expense included in cost of sales	$	2,370		$	—

Selling, general and administrative expense		1,766			—
Research and development expense		1,814			—
Restructuring expense included in operating expenses		3,580			—

Total restructuring expense		5,950			—
Provision for income taxes		(1,547	)		—

Total restructuring expense, net of tax	$	4,403		$	—

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 months ended March 31, 2018 and 2017 for all four transactions are as follows:

	Three Months Ended
	March 31,
	2018			2017
Bluesocket, Inc. acquisition
Amortization of acquired intangible assets	$	158		$	158

NSN BBA acquisition
Amortization of acquired intangible assets		92			208
Amortization of other purchase accounting adjustments		—			28
Subtotal - NSN BBA acquisition		92			236

CommScope acquisition
Amortization of acquired intangible assets		125			686
Amortization of other purchase accounting adjustments		1			50
Acquisition related professional fees, travel and other expenses		—			8
Subtotal - CommScope acquisition		126			744

Sumitomo acquisition
Amortization of acquired intangible assets		110			—
Acquisition related professional fees, travel and other expenses		97			—
Subtotal - Sumitomo acquisition		207			—

Total acquisition related expenses, amortizations and adjustments		583			1,138
Provision for income taxes		(156	)		(425	)
Total acquisition related expenses, amortizations and adjustments, net of tax	$	427		$	713

The acquisition related expenses, amortizations and adjustments above were recorded in the following Consolidated Statements of Income categories for the three months ended March 31, 2018 and 2017:

	Three Months Ended
	March 31,
	2018			2017
Cost of goods sold	$	59		$	50

Selling, general and administrative expenses		266			62
Research and development expenses		258			1,026
Total acquisition related expenses, amortizations and adjustments included in operating expenses		524			1,088

Total acquisition related expenses, amortizations and adjustments		583			1,138
Provision for income taxes		(156	)		(425	)
Total acquisition related expenses, amortizations and adjustments, net of tax	$	427		$	713

Supplemental Information

Stock-based Compensation Expense

(Unaudited)

(In thousands)

	Three Months Ended
	March 31,
	2018			2017

Stock-based compensation expense included in cost of sales	$	95		$	91

Selling, general and administrative expense		1,035			1,016
Research and development expense		689			776
Stock-based compensation expense included in operating expenses		1,724			1,792

Total stock-based compensation expense		1,819			1,883
Tax benefit for expense associated with non-qualified options, PSUs, RSUs and restricted stock		(384	)		(380	)

Total stock-based compensation expense, net of tax	$	1,435		$	1,503

Reconciliation of GAAP net income per share, diluted, to

Non-GAAP net income per share, diluted

(Unaudited)

	Three Months Ended
	March 31,
	2018			2017

GAAP earnings per common share - diluted	$	(0.19	)	0.14

Restructuring expense		0.09		—
Acquisition related expenses, amortizations and adjustments		0.01		0.01
Stock-based compensation expense		0.03		0.03
Gain on bargain purchase of a business		(0.23	)	—

Non-GAAP earnings per common share - diluted	$	(0.29	)	0.18

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