ADTRAN, Inc. (NASDAQ:ADTN) (“ADTRAN” or the “Company”) reported
financial results for the third quarter 2019. For the quarter,
revenue was $114.1 million compared to $140.3 million for the third
quarter of 2018. Net income was a net loss of $46.1 million
compared to net income of $7.6 million for the third quarter of
2018. Earnings per share was a loss of $0.96 per share compared to
earnings per share, assuming dilution, of $0.16 for the third
quarter of 2018. Non-GAAP net income was a net loss of $2.8 million
compared to non-GAAP net income of $9.9 million for the third
quarter of 2018. Non-GAAP earnings per share was a loss of $0.06
per share compared to non-GAAP income per share, assuming dilution,
of $0.21 for the third quarter of 2018. Earnings per share was
affected by a one-time, non-cash, valuation allowance of $37.1
million, that was recorded to income tax expense in the Company’s
consolidated income statement to reduce the carrying value of the
Company’s deferred tax assets. Non-GAAP earnings per share exclude
stock-based compensation expense, acquisition related amortizations
and other expenses, restructuring expenses, amortization of pension
actuarial losses, valuation allowance related to our deferred tax
assets, asset impairments, gain on bargain purchase of a business
and other contingencies and the 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,
“Our progress in the quarter was overshadowed by a pause in
shipments to a Tier 1 customer in Latin America and a slowdown in
spending by a Tier 1 customer in Europe. With the exception of
these two international customers, our business grew 20% over the
previous period which was largely driven by increased sales in our
GPON fiber access business and strong results in ONT sales. Our
GPON business grew 38% year-to-date as compared to the same period
last year and we continue to gain strong traction globally with our
10G PON and fiber-extension solutions. During the quarter, ADTRAN
introduced a range of new products, services and technology
innovations that we believe will be instrumental in our success
moving forward.”
The Company also announced that its Board of Directors declared
a cash dividend for the third quarter of 2019. The quarterly cash
dividend is $0.09 per common share to be paid to the Company’s
stockholders of record as of the close of business on November 14,
2019. The payment date will be December 2, 2019.
The Company confirmed that it will hold a conference call to
discuss its third quarter results Thursday, October 31, 2019, at
9:30 a.m. Central Time. ADTRAN will webcast this conference call.
To listen, visit the Investor Relations site at
www.investors.adtran.com approximately ten 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 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. For more information,
visit www.investors.adtran.com or 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.com, 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 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 and Form 10-K/A for the year ended December 31,
2018 and our quarterly reports on Form 10-Q for the quarters ended
March 31, 2019 and June 30, 2019. 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 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 –
basic and diluted 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
Sheets
(Unaudited)
(In thousands)
September 30,
December 31,
2019
2018
Assets
Cash and cash equivalents
$
96,407
$
105,504
Short-term investments
28,754
3,246
Accounts receivable, net
90,647
99,385
Other receivables
18,927
36,699
Inventory, net
104,941
99,848
Prepaid expenses and other current
assets
10,327
10,744
Total Current Assets
350,003
355,426
Property, plant and equipment, net
73,384
80,635
Deferred tax assets, net
6,492
37,187
Goodwill
6,968
7,106
Intangibles, net
29,113
33,183
Other assets
23,283
5,668
Long-term investments
90,632
108,822
Total Assets
$
579,875
$
628,027
Liabilities and Stockholders'
Equity
Accounts payable
$
52,842
$
60,054
Bonds payable
25,600
1,000
Unearned revenue
14,022
17,940
Accrued expenses
15,697
11,746
Accrued wages and benefits
16,569
14,752
Income tax payable, net
3,420
12,518
Total Current Liabilities
128,150
118,010
Non-current unearned revenue
4,581
5,296
Other non-current liabilities
52,189
33,842
Bonds payable
—
24,600
Total Liabilities
184,920
181,748
Stockholders' Equity
394,955
446,279
Total Liabilities and Stockholders'
Equity
$
579,875
$
628,027
Condensed Consolidated
Statements of Income (Loss)
(Unaudited)
(In thousands, except per
share data)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2019
2018
2019
2018
Sales
Network Solutions
$
94,018
$
121,043
$
359,007
$
341,359
Services & Support
20,074
19,292
55,267
47,830
Total Sales
114,092
140,335
414,274
389,189
Cost of Sales
Network Solutions
56,444
69,943
207,353
208,184
Services & Support
11,317
11,944
34,963
32,828
Total Cost of Sales
67,761
81,887
242,316
241,012
Gross Profit
46,331
58,448
171,958
148,177
Selling, general and administrative
expenses
30,912
30,750
99,663
96,361
Research and development expenses
31,835
29,877
95,546
93,455
Asset impairments
3,872
—
3,872
—
Gain on contingency
—
—
(1,230
)
—
Operating Loss
(20,288
)
(2,179
)
(25,893
)
(41,639
)
Interest and dividend income
610
825
1,893
2,604
Interest expense
(128
)
(134
)
(382
)
(398
)
Net investment gain (loss)
(216
)
4,507
8,195
5,400
Other income (expense), net
1,616
201
2,266
(73
)
Gain on bargain purchase of a business,
net
—
—
—
11,322
Income (Loss) Before Income
Taxes
(18,406
)
3,220
(13,921
)
(22,784
)
Income tax (expense) benefit
(27,717
)
4,369
(27,437
)
11,889
Net Income (Loss)
$
(46,123
)
$
7,589
$
(41,358
)
$
(10,895
)
Weighted average shares outstanding –
basic
47,824
47,710
47,803
47,927
Weighted average shares outstanding –
diluted
47,824
47,834
(1)
47,803
47,927
Earnings (loss) per common share –
basic
$
(0.96
)
$
0.16
$
(0.87
)
$
(0.23
)
Earnings (loss) per common share –
diluted
$
(0.96
)
$
0.16
(1)
$
(0.87
)
$
(0.23
)
(1) Assumes exercise of dilutive stock
options calculated under the treasury stock method.
Condensed Consolidated
Statements of Comprehensive Income (Loss)
(Unaudited)
(In thousands)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2019
2018
2019
2018
Net Income (Loss)
$
(46,123
)
$
7,589
$
(41,358
)
$
(10,895
)
Other Comprehensive Loss, net of
tax
Net unrealized gains (losses) on
available-for-sale securities
(15
)
(32
)
277
(3,340
)
Defined benefit plan adjustments
90
37
361
104
Foreign currency translation
(2,486
)
(451
)
(3,113
)
(3,033
)
Other Comprehensive Loss, net of
tax
(2,411
)
(446
)
(2,475
)
(6,269
)
Comprehensive Income (Loss), net of
tax
$
(48,534
)
$
7,143
$
(43,833
)
$
(17,164
)
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended
September 30,
2019
2018
Cash flows from operating
activities:
Net loss
$
(41,358
)
$
(10,895
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
13,315
11,952
Asset impairments
3,872
—
Amortization of net premium (discount) on
available-for-sale investments
(86
)
(14
)
Net gain on long-term investments
(8,195
)
(5,400
)
Net loss on disposal of property, plant
and equipment
58
68
Gain on contingency
(1,230
)
—
Gain on life insurance proceeds
(1,000
)
—
Gain on bargain purchase of a business
—
(11,322
)
Stock-based compensation expense
5,184
5,243
Deferred income taxes
30,421
(20,368
)
Changes in operating assets and
liabilities:
Accounts receivable, net
7,603
41,166
Other receivables
17,645
(1,842
)
Inventory, net
(5,998
)
16,543
Prepaid expenses and other assets
(10,071
)
8,722
Accounts payable, net
(5,569
)
5,223
Accrued expenses and other liabilities
10,564
156
Income tax payable
(5,073
)
9,461
Net cash provided by operating
activities
10,082
48,693
Cash flows from investing
activities:
Purchases of property, plant and
equipment
(6,008
)
(5,695
)
Proceeds from sales and maturities of debt
and equity investments
38,561
116,757
Purchases of debt and equity
investments
(37,223
)
(115,271
)
Life insurance proceeds received
1,000
—
Acquisition of business
13
(7,806
)
Net cash used in investing
activities
(3,657
)
(12,015
)
Cash flows from financing
activities:
Proceeds from stock option exercises
526
1,321
Purchases of treasury stock
(184
)
(14,185
)
Dividend payments
(12,908
)
(12,976
)
Net cash used in financing
activities
(12,566
)
(25,840
)
Net increase (decrease) in cash and cash
equivalents
(6,141
)
10,838
Effect of exchange rate changes
(2,956
)
(3,098
)
Cash and cash equivalents, beginning of
period
105,504
86,433
Cash and cash equivalents, end of
period
$
96,407
$
94,173
Supplemental disclosure of non-cash
investing activities:
Purchases of property, plant and equipment
included in accounts payable
$
135
$
355
Supplemental
Information
Reconciliation of Operating
Loss to Non-GAAP Operating Income (Loss)
(Unaudited)
Three Months ended
September 30,
Nine Months ended
September 30,
2019
2018
2019
2018
Operating Loss
$
(20,288
)
$
(2,179
)
$
(25,893
)
$
(41,639
)
Acquisition related expenses,
amortizations and adjustments
1,343
(1)
926
(6
)
4,346
(9)
2,651
(14
)
Stock-based compensation expense
1,871
(2)
1,640
(7
)
5,184
(10
)
5,243
(15
)
Restructuring expenses
1,195
(3)
261
(8
)
4,658
(11
)
7,236
(16
)
Deferred compensation income (expense)
(576
)
(4)
874
(4
)
2,231
(4)
620
(4)
Asset impairments
3,872
(5)
—
3,872
(5)
—
Gain on contingency
—
—
(1,230
)
(12
)
—
Settlement income
—
—
(746
)
(13
)
—
Non-GAAP Operating Income
(Loss)
$
(12,583
)
$
1,522
$
(7,578
)
$
(25,889
)
(1)
$0.3 million is included in total cost of
sales, $0.5 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.
(2)
$0.1 million is included in total cost of
sales, $1.1 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.
(3)
$0.1 million is included in total cost of
sales, $0.5 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.
(4)
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.
(5)
Includes abandonment of certain
information technology
projects.
(6)
$0.3 million is included in total cost of
sales, $0.3 million is included in selling, general and
administrative expenses and $0.3 million is included in research
and development expenses on the consolidated statements of
income.
(7)
$0.9 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.
(8)
$0.3 million is included in selling,
general and administrative expenses on the consolidated statements
of income.
(9)
$1.3 million is included in total cost of
sales, $1.6 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.
(10)
$0.3 million is included in total cost of
sales, $2.9 million is included in selling, general and
administrative expenses and $2.0 million is included in research
and development expenses on the consolidated statements of
income.
(11)
$0.8 million is included in total cost of
sales, $2.1 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.
(12)
Includes gain related to unearned
contingent liabilities recognized upon the acquisition of a
business in November
2018.
(13)
Includes income related to certain freight
forwarder claim settlements which were received during the nine
months ended September 30, 2019, all of which is included in total
cost of sales on the consolidated statements of
income.
(14)
$0.8 million is included in total cost of
sales, $0.9 million is included in selling, general and
administrative expenses and $0.9 million is included in research
and development expenses on the consolidated statements of
income.
(15)
$0.3 million is included in total cost of
sales, $2.9 million is included in selling, general and
administrative expenses and $2.0 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, $2.6 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
September 30,
Nine Months ended
September 30,
2019
2018
2019
2018
Net Income (Loss)
$
(46,123
)
$
7,589
$
(41,358
)
$
(10,895
)
Acquisition related expenses,
amortizations and adjustments
1,343
926
4,346
2,651
Stock-based compensation expense
1,871
1,640
5,184
5,243
Restructuring expenses
1,195
261
4,658
7,236
Pension expense(1)
198
61
600
188
Asset impairments
3,872
—
3,872
—
Valuation allowance
37,055
—
37,055
—
Gain on contingency
—
—
(1,230
)
—
Settlement income
—
—
(746
)
—
Gain on bargain purchase of a business
—
—
—
(11,322
)
Tax effect of adjustments to net income
(loss)
(2,186
)
(624
)
(4,424
)
(3,658
)
Non-GAAP Net Income (Loss)
$
(2,775
)
$
9,853
$
7,957
$
(10,557
)
Weighted average shares outstanding –
basic
47,824
47,710
47,803
47,927
Weighted average shares outstanding –
diluted
47,824
47,834
47,803
47,927
Earnings (loss) per common share -
basic
$
(0.96
)
$
0.16
$
(0.87
)
$
(0.23
)
Earnings (loss) per common share -
diluted
$
(0.96
)
$
0.16
$
(0.87
)
$
(0.23
)
Non-GAAP earnings (loss) per common
share - basic
$
(0.06
)
$
0.21
$
0.17
$
(0.22
)
Non-GAAP earnings (loss) per common
share - diluted
$
(0.06
)
$
0.21
$
0.17
$
(0.22
)
1) 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/20191030006191/en/
ADTRAN, Inc. Rhonda Lambert 256-963-7450 Investor Relations
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