ADTRAN, Inc. (NASDAQ:ADTN) reported preliminary financial
results for the second quarter 2019.
Preliminary Financial Results
The Company’s reported results for the quarter and year to date
ended June 30, 2019 are preliminary due to the Company’s ongoing
assessment of the reasonableness of its current and previously
reported excess and obsolete inventory reserves (“E&O
reserves”). The Company is working diligently to finalize its
assessment and evaluate the materiality of adjustments to the
reserve, if any, and determine the appropriate method of correction
to its current and previously reported financial results, as
necessary. In addition to assessing the reasonableness of its
E&O reserves, the Company is also assessing inventory related
internal control deficiencies which may result in the
identification of material weaknesses. If material changes to our
preliminary results do occur, an updated press release will be
issued.
Quarterly Results
For the quarter, revenue was $156.4 million compared to $128.0
million for the second quarter of 2018. Net income is estimated to
be $5.1 million compared to a net loss of $7.7 million for the
second quarter of 2018. Earnings per share, assuming dilution, is
estimated to be $0.11 compared to a loss per share of $0.16 for the
second quarter of 2018. Non-GAAP net income is estimated to be $6.9
million compared to a net loss of $4.6 million for the second
quarter of 2018. Non-GAAP earnings per share, assuming dilution, is
estimated to be $0.14 compared to a loss per share of $0.10 for the
second quarter of 2018. Non-GAAP earnings per share exclude
stock-based compensation expense, acquisition related amortizations
and other expenses, restructuring expenses, gain on bargain
purchase of a business or other contingencies, amortization of
pension actuarial losses, and a reimbursement from a claim
settlement. The reconciliation between GAAP net income (loss) and
earnings (loss) per share to non-GAAP net income (loss) and
non-GAAP earnings (loss) per share is in the table provided.
ADTRAN Chairman and Chief Executive Officer Tom Stanton stated,
“We are pleased with our continued progress and solid performance
for the second quarter of 2019. Revenue for the quarter grew 22%
year-over-year and 9% over the previous quarter. Our execution
continues to be strong across North America, LATAM, EMEA, and the
Pacific Rim with diverse and well-balanced material revenue
contributions from each of these regions. This sustained progress
underscores the Company’s global impact as we help our customers
build their best networks.”
The Company also announced that its Board of Directors declared
a cash dividend for the second quarter of 2019. The quarterly cash
dividend is $0.09 per common share to be paid to holders of record
at the close of business on August 1, 2019. The ex-dividend date is
July 31, 2019, and the payment date is August 15, 2019.
The Company confirmed that it will hold a conference call to
discuss its second quarter preliminary results Thursday, July 18,
2019, at 9:30 a.m. Central Time. ADTRAN will webcast this
conference call. 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 of the conference call, as well as the text of
the Company's earnings release, will be available on the Investor
Relations site approximately 24 hours following the call and will
remain available for at least 12 months. For more information,
visit www.investors.adtran.com or via email at
investor.relations@adtran.com.
At ADTRAN, we believe amazing things happen when people connect.
From the cloud edge to the subscriber edge, we help communications
service providers around the world manage and scale services that
connect people, places and things to advance human progress.
Whether rural or urban, domestic or international, telco or cable,
enterprise or residential—ADTRAN solutions optimize existing
technology infrastructures and create new, multi-gigabit platforms
that leverage cloud economics, data analytics, machine learning and
open ecosystems—the future of global networking. Find more at
ADTRAN, LinkedIn and Twitter.
This press release contains forward-looking statements,
generally identified by the use of words such as “believe,”
“expect,” “intend,” “estimate,” “anticipate,” “will,” “may,”
“could” and similar expressions, which forward-looking statements
reflect management’s best judgment based on factors currently
known. However, these statements involve risks and uncertainties,
including the impact of the Company’s assessment of its excess and
obsolete inventory reserve on its current and previously reported
financial results and internal control over financial reporting,
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, 2018. These risks and
uncertainties could cause actual results to differ materially from
those in the forward-looking statements included in this press
release.
To provide additional transparency, we have disclosed non-GAAP
operating income (loss) which has been reconciled to operating
income (loss) and non-GAAP net income (loss) and non-GAAP adjusted
earnings (loss) per share - basic and diluted which have been
reconciled to net income (loss) and earnings (loss) per share -
basic and diluted as reported based on Generally Accepted
Accounting Principles in the United States (U.S. GAAP). These
measures exclude certain items which management believes are not
reflective of the ongoing operating performance of the business. We
believe this information is useful in providing period-to-period
comparisons of the results of our ongoing operations. Additionally,
these measures are used by management in our ongoing planning and
annual budgeting processes. The presentation of non-GAAP operating
income (loss), non-GAAP net income (loss) and non-GAAP earnings
(loss) per share- basic and diluted, when combined with the U.S.
GAAP presentation of operating income (loss), net income (loss),
and net income (loss) per share is beneficial to the overall
understanding of ongoing operating performance of the Company.
These measures are not in accordance with, or an alternative
for, U.S. GAAP and therefore should not be considered in isolation
or as a substitution for analysis of our results as reported under
U.S. GAAP. Our calculation of non-GAAP operating income (loss),
non-GAAP net income (loss) and non-GAAP earnings (loss) per share -
basic and diluted may not be comparable to similar measures
calculated by other companies.
Condensed Consolidated Balance
Sheet
(Unaudited)
(In thousands)
June 30,
December 31,
2019
2018
Assets
Cash and cash equivalents
$
106,817
$
105,504
Short-term investments
30,888
3,246
Accounts receivable, net
116,661
99,385
Other receivables
24,984
36,699
Inventory, net(1)
96,379
99,848
Prepaid expenses and other current
assets
8,909
10,744
Total Current Assets(1)
384,638
355,426
Property, plant and equipment, net
78,813
80,635
Deferred tax assets, net(1)
38,998
37,187
Goodwill
6,968
7,106
Intangibles, net
30,503
33,183
Other assets
13,820
5,668
Long-term investments
87,280
108,822
Total Assets(1)
$
641,020
$
628,027
Liabilities and Stockholders'
Equity
Accounts payable
$
63,827
$
60,054
Bonds payable
25,600
1,000
Unearned revenue
12,910
17,940
Accrued expenses
14,331
11,746
Accrued wages and benefits
19,126
14,752
Income tax payable, net(1)
9,741
12,518
Total Current Liabilities
145,535
118,010
Non-current unearned revenue
4,265
5,296
Other non-current liabilities
44,181
33,842
Bonds payable
—
24,600
Total Liabilities
193,981
181,748
Stockholders' Equity(1)
447,039
446,279
Total Liabilities and Stockholders'
Equity(1)
$
641,020
$
628,027
(1) Results are subject to change based on
the Company’s ongoing assessment of the reasonableness of its
excess and obsolete inventory reserve.
Consolidated Statements of
Income
(Unaudited)
(In thousands, except per
share data)
Three Months Ended
Six Months Ended
June 30,
June 30,
2019
2018
2019
2018
Sales
Products
$
139,167
$
115,063
$
264,989
$
220,316
Services
17,224
12,985
35,193
28,538
Total Sales
156,391
128,048
300,182
248,854
Cost of Sales
Products(1)
78,916
69,629
149,650
138,241
Services
11,201
8,423
23,646
20,884
Total Cost of Sales(1)
90,117
78,052
173,296
159,125
Gross Profit(1)
66,274
49,996
126,886
89,729
Selling, general and administrative
expenses
33,619
32,080
68,751
65,611
Research and development expenses
32,064
30,729
63,711
63,578
Gain on contingency
(1,230
)
—
(1,230
)
—
Operating Income (Loss)(1)
1,821
(12,813
)
(4,346
)
(39,460
)
Interest and dividend income
692
913
1,283
1,779
Interest expense
(127
)
(132
)
(254
)
(264
)
Net investment gain
2,485
990
8,411
893
Other income (expense), net
(205
)
(217
)
650
(274
)
Gain on bargain purchase of a business,
net
—
—
—
11,322
Income (Loss) Before Provision for
Income Taxes(1)
4,666
(11,259
)
5,744
(26,004
)
Benefit for income taxes(1)
385
3,589
77
7,520
Net Income (Loss)(1)
$
5,051
$
(7,670
)
$
5,821
$
(18,484
)
Weighted average shares outstanding –
basic
47,802
47,856
47,792
48,043
Weighted average shares outstanding –
diluted
48,036
(2
)
47,856
47,939
(2
)
48,043
Earnings (loss) per common share –
basic(1)
$
0.11
$
(0.16
)
$
0.12
$
(0.38
)
Earnings (loss) per common share –
diluted(1)
$
0.11
(2
)
$
(0.16
)
$
0.12
(2
)
$
(0.38
)
(1) Results are subject to change based on
the Company’s ongoing assessment of the reasonableness of its
excess and obsolete inventory reserve.
(2) Assumes exercise of dilutive stock
options calculated under the treasury stock method.
Consolidated Statements of
Comprehensive Income (Loss)
(Unaudited)
(In thousands)
Three Months Ended
Six Months Ended
June 30,
June 30,
2019
2018
2019
2018
Net Income (Loss)(1)
$
5,051
$
(7,670
)
$
5,821
$
(18,484
)
Other Comprehensive Income (Loss), net
of tax
Net unrealized gains (losses) on
available-for-sale securities
107
104
292
(3,308
)
Defined benefit plan adjustments
150
5
271
67
Foreign currency translation
540
(3,424
)
(620
)
(2,582
)
Other Comprehensive Income (Loss), net
of tax
797
(3,315
)
(57
)
(5,823
)
Comprehensive Income (Loss), net of
tax(1)
$
5,848
$
(10,985
)
$
5,764
$
(24,307
)
(1) Results are subject to change based on the Company’s ongoing
assessment of the reasonableness of its excess and obsolete
inventory reserve.
Consolidated Statements of
Cash Flows
(Unaudited)
(In thousands)
Six Months Ended
June 30,
2019
2018
Cash flows from operating
activities:
Net income (loss)(1)
$
5,821
$
(18,484
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
8,912
7,526
Amortization of net premium on
available-for-sale investments
(57
)
20
Net gain on long-term investments
(8,411
)
(893
)
Net loss on disposal of property, plant
and equipment
58
68
Gain on contingency
(1,230
)
—
Gain on bargain purchase of a business
—
(11,322
)
Stock-based compensation expense
3,313
3,603
Deferred income taxes(1)
(1,844
)
(16,384
)
Changes in operating assets and
liabilities:
Accounts receivable, net
(17,282
)
66,931
Other receivables
11,679
9
Inventory, net(1)
3,346
2,063
Prepaid expenses and other assets
4,714
10,157
Accounts payable, net
5,017
683
Accrued expenses and other liabilities
637
2,008
Income tax payable(1)
(2,658
)
6,945
Net cash provided by operating
activities(1)
12,015
52,930
Cash flows from investing
activities:
Purchases of property, plant and
equipment
(4,306
)
(4,183
)
Proceeds from sales and maturities of debt
and equity investments
24,306
86,436
Purchases of debt and equity
investments
(21,544
)
(89,801
)
Acquisition of business
13
(7,806
)
Net cash used in investing
activities
(1,531
)
(15,354
)
Cash flows from financing
activities:
Proceeds from stock option exercises
526
369
Purchases of treasury stock
(184
)
(12,774
)
Dividend payments
(8,604
)
(8,679
)
Net cash used in financing
activities
(8,262
)
(21,084
)
Net increase in cash and cash
equivalents
2,222
16,492
Effect of exchange rate changes
(909
)
(2,606
)
Cash and cash equivalents, beginning of
period
105,504
86,433
Cash and cash equivalents, end of
period
$
106,817
$
100,319
Supplemental disclosure of non-cash
investing activities:
Purchases of property, plant and equipment
included in accounts payable
$
205
$
209
(1) Results are subject to change based on
the Company’s ongoing assessment of the reasonableness of its
excess and obsolete inventory reserve.
Supplemental
Information
Reconciliation of Operating
Income (Loss) to Non-GAAP Operating Income (Loss)
(Unaudited)
Three Months ended
June 30,
Six Months ended
June 30,
2019
2018
2019
2018
Operating Income (Loss)(1)
$
1,821
$
(12,813
)
$
(4,346
)
$
(39,460
)
Acquisition related expenses,
amortizations and adjustments
1,506
(2)
1,142
(8)
3,003
(11)
1,725
(14)
Stock-based compensation expense
1,454
(3)
1,784
(9)
3,313
(12)
3,603
(15)
Restructuring expenses
1,400
(4)
1,025
(10)
3,463
(13)
6,975
(16)
Deferred compensation income (expense)
683
(5)
132
(5)
2,807
(5)
(254
)
(5)
Gain on contingency
(1,230
)
(6)
—
(1,230
)
(6)
—
Settlement income
(746
)
(7)
—
(746
)
(7)
—
Non-GAAP Operating Income
(Loss)(1)
$
4,888
$
(8,730
)
$
6,264
$
(27,411
)
(1) Results are subject to change based on
the Company’s ongoing assessment of the reasonableness of its
excess and obsolete inventory reserve.
(2) $0.4 million is included in total cost
of sales, $0.6 million is included in selling, general and
administrative expenses and $0.5 million is included in research
and development expenses on the consolidated statements of
income.
(3) $0.1 million is included in total cost
of sales, $0.7 million is included in selling, general and
administrative expenses and $0.7 million is included in research
and development expenses on the consolidated statements of
income.
(4) $0.1 million is included in total cost
of sales, $0.7 million is included in selling, general and
administrative expenses and $0.6 million is included in research
and development expenses on the consolidated statements of
income.
(5) Includes non-cash change in fair value
of equity investments held in the ADTRAN, Inc. Deferred
Compensation Program for Employees (as amended and restated as of
June 1, 2010) per ASU 2016-01, all of which is included in selling,
general and administrative expenses on the consolidated statement
of income.
(6) Includes gain related to unearned
contingent liabilities recognized upon the acquisition of a
business in November 2018.
(7) Includes income related to certain
freight forwarder claim settlements which were received during the
three months ended June 30, 2019, all of which is included in total
cost of sales on the consolidated statements of income.
(8) $0.4 million is included in total cost
of sales, $0.3 million is included in selling, general and
administrative expenses and $0.4 million is included in research
and development expenses on the consolidated statements of
income.
(9) $0.1 million is included in total cost
of sales, $1.0 million is included in selling, general and
administrative expenses and $0.7 million is included in research
and development expenses on the consolidated statements of
income.
(10) $0.4 million is included in total
cost of sales and $0.6 million is included in selling, general and
administrative expenses on the consolidated statements of
income.
(11) $0.9 million is included in total
cost of sales, $1.1 million is included in selling, general and
administrative expenses and $1.0 is included in research and
development expenses on the consolidated statements of income.
(12) $0.2 million is included in total
cost of sales, $1.7 million is included in selling, general and
administrative expenses and $1.4 million is included in research
and development expenses on the consolidated statements of
income.
(13) $0.7 million is included in total
cost of sales, $1.5 million is included in selling, general and
administrative expenses and $1.2 million is included in research
and development expenses on the consolidated statements of
income.
(14) $0.5 million is included in total
cost of sales, $0.6 million is included in selling, general and
administrative expenses and $0.7 million is included in research
and development expenses on the consolidated statements of
income.
(15) $0.2 million is included in total
cost of sales, $2.0 million is included in selling, general and
administrative expenses and $1.4 million is included in research
and development expenses on the consolidated statements of
income.
(16) $2.8 million is included in
total cost of sales, $2.4 million is included in selling, general
and administrative expenses and $1.8 million is included in
research and development expenses on the consolidated statements of
income.
Supplemental
Information
Reconciliation of Net Income
(Loss) and Earnings (Loss) per Common Share – Basic and Diluted to
Non-GAAP
Net Income (Loss) and Non-GAAP
Earnings (Loss) per Common Share – Basic and Diluted
(Unaudited)
Three Months Ended
June 30,
Six Months ended
June 30,
2019
2018
2019
2018
Net Income (Loss)(1)
$
5,051
$
(7,670
)
$
5,821
$
(18,484
)
Acquisition related expenses,
amortizations and adjustments
1,506
1,142
3,003
1,725
Stock-based compensation expense
1,454
1,784
3,313
3,603
Restructuring expenses
1,400
1,025
3,463
6,975
Pension expense(2)
199
62
402
126
Gain on contingency
(1,230
)
—
(1,230
)
—
Settlement income
(746
)
—
(746
)
—
Gain on bargain purchase of a business
—
—
—
(11,322
)
Tax effect of adjustments to net income
(loss)
(714
)
(927
)
(2,238
)
(3,033
)
Non-GAAP Net Income (Loss)(1)
$
6,920
$
(4,584
)
$
11,788
$
(20,410
)
Weighted average shares outstanding –
basic
47,782
48,232
47,792
48,043
Weighted average shares outstanding –
diluted
47,853
48,292
47,939
48,043
Earnings (loss) per common share -
basic(1)
$
0.11
$
(0.16
)
$
0.12
$
(0.38
)
Earnings (loss) per common share -
diluted(1)
$
0.11
$
(0.16
)
$
0.12
$
(0.38
)
Non-GAAP earnings (loss) per common
share - basic(1)
$
0.14
$
(0.10
)
$
0.25
$
(0.42
)
Non-GAAP earnings (loss) per common
share - diluted(1)
$
0.14
$
(0.09
)
$
0.25
$
(0.42
)
(1) Results are preliminary and subject to
change based on the Company’s final calculation of its excess and
obsolete inventory reserve.
(2) Includes amortization of actuarial
losses related to the Company's pension plan for employees in
certain foreign countries.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190717005825/en/
Investor Relations Rhonda Lambert 256-963-7054
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