ADTN ADTRAN Holdings Inc

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 the 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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ADTRAN, Inc.Gloria Brown, 256-963-8220investor.relations@adtran.com