OREANDA-NEWS. ADTRAN, Inc.reported results for the second quarter 2016. For the quarter, sales were $162,701,000 compared to $160,138,000 for the second quarter of 2015. Net income was $10,228,000 compared to $2,544,000 for the second quarter of 2015. Earnings per share, assuming dilution, were $0.21 compared to $0.05 for the second quarter of 2015. Non-GAAP earnings per share were $0.25 compared to $0.10 for the second 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, “ADTRAN delivered solid revenue and earnings results for the quarter due to strength in our domestic market and gross margin improvement. Growth in the U.S. market was led by our FTTP and 100 megabit portfolios, along with continued growth in our CAF II and Ethernet solutions. Our Services business also continued its strong growth with a 51% revenue increase year-over-year. Customers around the world are increasingly recognizing the benefits of deploying ultra-high speed broadband and are leveraging ADTRAN’s unique domain leadership and expertise in planning, developing and deploying business and residential services.”

The Company also announced that its Board of Directors declared a cash dividend for the second 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 July 28, 2016. The ex-dividend date is July 26, 2016 and the payment date is August 11, 2016.


 

Condensed Consolidated Balance Sheet
(Unaudited)
(In thousands)
               
       

June 30,
2016

    

December 31,
2015
Assets              
Cash and cash equivalents       $ 70,914     $ 84,550
Short-term investments         50,867       34,396
Accounts receivable, net         89,386       71,917
Other receivables         11,676       19,321
Income tax receivable, net         2,405       -
Inventory         86,936       91,533
Prepaid expenses and other current assets         13,563       10,145
Deferred tax assets, net         18,488       18,924
Total Current Assets         344,235       330,786
               
Property, plant and equipment, net         74,115       73,233
Deferred tax assets, net         19,127       18,091
Goodwill         3,492       3,492
Other assets         9,340       9,276
Long-term investments         186,249       198,026
               
Total Assets       $ 636,558     $ 632,904
               
Liabilities and Stockholders' Equity              
Accounts payable       $ 59,211     $ 48,668
Unearned revenue         15,982       16,615
Accrued expenses         12,126       12,108
Accrued wages and benefits         15,702       12,857
Income tax payable, net         -       2,395
Total Current Liabilities         103,021       92,643
               
Non-current unearned revenue         6,437       7,965
Other non-current liabilities         25,476       24,236
Bonds payable         27,900       27,900
Total Liabilities         162,834       152,744
               
Stockholders' Equity         473,724       480,160
               
Total Liabilities and Stockholders' Equity       $ 636,558     $ 632,904
               
 
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
               
        Three Months Ended     Six Months Ended
        June 30,     June 30,
        2016     2015     2016     2015
                           
Sales                          
Products       $ 138,549       $ 144,098       $ 262,432       $ 273,603  
Services         24,152         16,040         42,473         29,370  
                           
Total Sales         162,701         160,138         304,905         302,973  
                           
Cost of Sales                          
Products         67,844         84,210         131,917         155,770  
Services         15,902         7,682         28,239         13,394  
                           
Total Cost of Sales         83,746         91,892         160,156         169,164  
                           
Gross Profit         78,955         68,246         144,749         133,809  
                           
Selling, general and administrative expenses         32,866         32,123         63,651         63,187  
Research and development expenses         31,277         35,479         60,765         68,015  
                           
Operating Income         14,812         644         20,333         2,607  
                           
Interest and dividend income         927         908         1,782         1,841  
Interest expense         (142 )       (149 )       (287 )       (297 )
Net realized investment gain         1,110         3,255         2,838         6,370  
Other expense, net         (251 )       (547 )       (132 )       (900 )
                           
Income before provision for income taxes         16,456         4,111         24,534         9,621  
                           
Provision for income taxes         (6,228 )       (1,567 )       (9,292 )       (3,760 )
                           
Net Income       $ 10,228       $ 2,544       $ 15,242       $ 5,861  
                           
Weighted average shares outstanding - basic         48,831         51,822         49,026         52,607  
Weighted average shares outstanding - diluted (1)         49,048         51,917         49,218         52,742  
                           
Earnings per common share - basic       $ 0.21       $ 0.05       $ 0.31       $ 0.11  
Earnings per common share - diluted (1)       $ 0.21       $ 0.05       $ 0.31       $ 0.11  
 
(1) Assumes exercise of dilutive stock options calculated under the treasury stock method.
 
 
Consolidated Statements of Comprehensive Income
(Unaudited)
(In thousands)
               
        Three Months Ended     Six Months Ended
        June 30,     June 30,
        2016     2015     2016     2015
                           
Net Income       $ 10,228       $ 2,544       $ 15,242       $ 5,861  
                           
Other Comprehensive Income (Loss), net of tax:                          
                           
Unrealized losses on available-for-sale securities         (165 )       (1,783 )       (420 )       (2,286 )
Defined benefit plan adjustments         22         72         67         140  
Foreign currency translation         (601 )       872         627         (2,446 )
                           
Other Comprehensive Income (Loss), net of tax         (744 )       (839 )       274         (4,592 )
                           
Comprehensive Income, net of tax       $ 9,484       $ 1,705       $ 15,516       $ 1,269  
                           
 
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
         
        Six Months Ended
        June 30,
        2016     2015
Cash flows from operating activities:              
Net income       $ 15,242       $ 5,861  
Adjustments to reconcile net income to net cash provided by operating activities:              
Depreciation and amortization         6,689         7,256  
Amortization of net premium on available-for-sale investments         376         1,578  
Net realized gain on long-term investments         (2,838 )       (6,370 )
Net loss on disposal of property, plant and equipment         5         160  
Stock-based compensation expense         3,109         3,114  
Deferred income taxes         (354 )       (1,743 )
Tax impact from stock option exercises         -         (23 )
Excess tax benefits from stock-based compensation arrangements         -         38  
Change in operating assets and liabilities:              
Accounts receivable, net         (17,192 )       (2,003 )
Other receivables         7,876         (119 )
Inventory         4,938         (14,254 )
Prepaid expenses and other assets         (4,263 )       (1,433 )
Accounts payable         10,354         30,938  
Accrued expenses and other liabilities         1,474         2,175  
Income tax payable/receivable, net         (4,799 )       (3,961 )
Net cash provided by operating activities         20,617         21,214  
               
Cash flows from investing activities:              
Purchases of property, plant and equipment         (6,679 )       (5,392 )
Proceeds from disposals of property, plant and equipment         -         8  
Proceeds from sales and maturities of available-for-sale investments         109,993         120,422  
Purchases of available-for-sale investments         (112,903 )       (62,626 )
Net cash provided by (used in) investing activities         (9,589 )       52,412  
               
Cash flows from financing activities:              
Proceeds from stock option exercises         541         833  
Purchases of treasury stock         (16,579 )       (49,307 )
Dividend payments         (8,860 )       (9,509 )
Excess tax benefits from stock-based compensation arrangements         -         (38 )
Net cash used in financing activities         (24,898 )       (58,021 )
               
Net increase (decrease) in cash and cash equivalents         (13,870 )       15,605  
Effect of exchange rate changes         234         (1,829 )
Cash and cash equivalents, beginning of period         84,550         73,439  
               
Cash and cash equivalents, end of period       $ 70,914       $ 87,215  
               
Supplemental disclosure of non-cash investing activities              
Purchases of property, plant and equipment included in accounts payable       $ 554       $ 270  
               

Supplemental Information
Restructuring Expenses
(Unaudited)
(In thousands)

Restructuring expenses were recorded in the following Consolidated Statements of Income categories for the three and six months ended June 30, 2016 and 2015:

         
        Three and Six Months Ended
        June 30,
        2016     2015
               
Restructuring expense included in cost of sales       $ -     $ 98  
               
Selling, general and administrative expense         -       644  
Research and development expense         -       1,383  
               
Restructuring expense included in operating expenses         -       2,027  
               
Total restructuring expense         -       2,125  
Provision for income taxes         -       (829 )
               
Total restructuring expense, net of tax       $ -     $ 1,296  
               
 
Supplemental Information
Acquisition Related Expenses, Amortizations and Adjustments
(Unaudited)
(In thousands)
 

On August 4, 2011, we closed on the acquisition of Bluesocket, Inc. and on May 4, 2012, we closed on the acquisition of the Nokia Siemens Networks Broadband Access business (NSN BBA). Acquisition related expenses, amortizations and adjustments for the three and six months ended June 30, 2016 and 2015 for both transactions are as follows:
               
        Three Months Ended     Six Months Ended
        June 30,     June 30,
        2016     2015     2016     2015
Bluesocket, Inc. acquisition                          
Amortization of acquired intangible assets and other purchase accounting adjustments       $ 173       $ 226       $ 346       $ 452  
                           
NSN BBA acquisition                          
Amortization of acquired intangible assets         228         229         455         470  
Amortization of other purchase accounting adjustments         44         140         80         294  
Acquisition related professional fees, travel and other expenses         -         35         -         41  
                           
Subtotal         272         404         535         805  
                           
Total acquisition related expenses, amortizations and adjustments         445         630         881         1,257  
Provision for income taxes         (152 )       (213 )       (301 )       (426 )
                           
Total acquisition related expenses, amortizations and adjustments, net of tax       $ 293       $ 417       $ 580       $ 831  
                           
 

The acquisition related expenses, amortizations and adjustments above were recorded in the following Consolidated Statements of Income categories for the three and six months ended June 30, 2016 and 2015:
               
        Three Months Ended     Six Months Ended
        June 30,     June 30,
        2016     2015     2016     2015
                           
Revenue (adjustments to deferred revenue recognized in the period)       $ -       $ 64       $ -       $ 131  
Cost of goods sold         13         33         20         45  
                           
Subtotal         13         97         20         176  
                           
Selling, general and administrative expenses         4         39         7         51  
Research and development expenses         428         494         854         1,030  
                           
Subtotal         432         533         861         1,081  
                           
Total acquisition related expenses, amortizations and adjustments         445         630         881         1,257  
Provision for income taxes         (152 )       (213 )       (301 )       (426 )
                           
Total acquisition related expenses, amortizations and adjustments, net of tax       $ 293       $ 417       $ 580       $ 831  
                                           
 
Supplemental Information
Stock-based Compensation Expense
(Unaudited)
(In thousands)
               
        Three Months Ended     Six Months Ended
        June 30,     June 30,
        2016     2015     2016     2015
                           
Stock-based compensation expense included in cost of sales       $ 95       $ 53       $ 194       $ 143  
                           
Selling, general and administrative expense         788         723         1,557         1,414  
Research and development expense         668         699         1,358         1,557  
                           
Stock-based compensation expense included in operating expenses         1,456         1,422         2,915         2,971  
                           
Total stock-based compensation expense         1,551         1,475         3,109         3,114  
Tax benefit for expense associated with non-qualified options         (213 )       (222 )       (425 )       (402 )
                           
Total stock-based compensation expense, net of tax       $ 1,338       $ 1,253       $ 2,684       $ 2,712  
                           
 
Reconciliation of GAAP net income per share, diluted, to
Non-GAAP net income per share, diluted
(Unaudited)
               
        Three Months Ended     Six Months Ended
        June 30,     June 30,
        2016     2015     2016     2015
                           
GAAP earnings per common share – diluted       $ 0.21     $ 0.05     $ 0.31     $ 0.11
                           
Restructuring expense         -       0.02       -       0.02
Acquisition related expenses, amortizations and adjustments         0.01       0.01       0.01       0.02
Stock-based compensation expense         0.03       0.02       0.05       0.05
                           
Non-GAAP earnings per common share – diluted       $ 0.25     $ 0.10     $ 0.37     $ 0.20