OREANDA-NEWS. ADTRAN, Inc. (NASDAQ:ADTN) reported results for the first quarter 2016. For the quarter, sales were $142,204,000 compared to $142,835,000 for the first quarter of 2015. Net income was $5,014,000 compared to $3,317,000 for the first quarter of 2015. Earnings per share, assuming dilution, were $0.10 compared to $0.06 for the first quarter of 2015. Non-GAAP earnings per share were $0.14 compared to $0.10 for the first 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 a solid performance this quarter resulting in earnings coming in ahead of initial expectations. Compared to the same period last year, Q1 domestic revenue was up over 39% with increases in both our products and services businesses. Improved gross margins and lower operating expenses helped us increase operating income over 181% versus Q1 of 2015. Longer term, we expect further improvement in the carrier environment as customers accelerate investments in upgrading their network infrastructure to meet customer demand.”

The Company also announced that its Board of Directors declared a cash dividend for the first 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 April 28, 2016. The ex-dividend date is April 26, 2016 and the payment date is May 12, 2016.

As was previously announced, ADTRAN has changed its financial reporting segments as of the quarter ended March 31, 2016. The Company will now report its financial performance based on two new reportable segments – Network Solutions and Services & Support.

The Company confirmed that its first quarter conference call will be held Wednesday, April 13, 2016 at 9:30 a.m. Central Time.

             

Condensed Consolidated Balance Sheet

(Unaudited)

(In thousands)
             
     

March 31,
2016

    

December 31,
2015
Assets            
Cash and cash equivalents     $ 91,609     $ 84,550
Short-term investments       29,303       34,396
Accounts receivable, net       67,492       71,917
Other receivables       9,199       19,321
Inventory       92,107       91,533
Prepaid expenses and other current assets       13,096       10,145
Deferred tax assets, net       17,967       18,924
Total Current Assets       320,773       330,786
             
Property, plant and equipment, net       73,511       73,233
Deferred tax assets, net       18,878       18,091
Goodwill       3,492       3,492
Other assets       9,157       9,276
Long-term investments       195,683       198,026
             
Total Assets     $ 621,494     $ 632,904
             
Liabilities and Stockholders' Equity            
Accounts payable     $ 42,635     $ 48,668
Unearned revenue       18,683       16,615
Accrued expenses       13,513       12,108
Accrued wages and benefits       11,064       12,857
Income tax payable, net       2,739       2,395
Total Current Liabilities       88,634       92,643
             
Non-current unearned revenue       7,288       7,965
Other non-current liabilities       25,283       24,236
Bonds payable       27,900       27,900
Total Liabilities       149,105       152,744
             
Stockholders' Equity       472,389       480,160
             
Total Liabilities and Stockholders' Equity     $ 621,494     $ 632,904
             
         

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)
         
        Three Months Ended
        March 31,
        2016     2015
               
  Sales            
  Products     $ 123,883       $ 129,505  
  Services       18,321         13,330  
               
  Total sales       142,204         142,835  
               
  Cost of sales            
  Products       64,073         71,560  
  Services       12,337         5,712  
               
  Total cost of sales       76,410         77,272  
               
  Gross Profit       65,794         65,563  
               
  Selling, general and administrative expenses       30,785         31,064  
  Research and development expenses       29,488         32,536  
               
  Operating Income       5,521         1,963  
               
  Interest and dividend income       855         933  
  Interest expense       (145 )       (148 )
  Net realized investment gain       1,728         3,115  
  Other income (expense), net       119         (353 )
               
  Income before provision for income taxes       8,078         5,510  
               
  Provision for income taxes       (3,064 )       (2,193 )
               
  Net Income     $ 5,014       $ 3,317  
               
  Weighted average shares outstanding - basic       49,220         53,399  
  Weighted average shares outstanding - diluted (1)       49,389         53,634  
               
  Earnings per common share - basic     $ 0.10       $ 0.06  
  Earnings per common share - diluted (1)     $ 0.10       $ 0.06  
               

(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,
      2016   2015
           
Net Income     $ 5,014     $ 3,317  
           
Other Comprehensive Income (Loss), net of tax:          
           
Unrealized losses on available-for-sale securities       (255 )     (503 )
Defined benefit plan adjustments       45       68  
Foreign currency translation       1,228       (3,318 )
           
Other Comprehensive Income (Loss), net of tax       1,018       (3,753 )
           
Comprehensive Income (Loss), net of tax     $ 6,032     $ (436 )
           
       

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)
       
      Three Months Ended
      March 31,
      2016   2015
Cash flows from operating activities:          
Net income     $ 5,014     $ 3,317  
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization       3,347       3,728  
Amortization of net premium on available-for-sale investments       220       910  
Net realized gain on long-term investments       (1,728 )     (3,115 )
Net loss on disposal of property, plant and equipment       3       8  
Stock-based compensation expense       1,558       1,639  
Deferred income taxes       435       (692 )
Tax benefit from stock option exercises       -       8  
Excess tax benefits from stock-based compensation arrangements       -       (9 )
Change in operating assets and liabilities:          
Accounts receivable, net       4,752       (4,571 )
Other receivables       10,200       511  
Inventory       163       (7,261 )
Prepaid expenses and other assets       (3,083 )     (736 )
Accounts payable       (6,520 )     20,084  
Accrued expenses and other liabilities       902       (282 )
Income tax payable, net       413       (524 )
Net cash provided by operating activities       15,676       13,015  
           
Cash flows from investing activities:          
Purchases of property, plant and equipment       (3,166 )     (2,442 )
Proceeds from sales and maturities of available-for-sale investments       60,586       58,075  
Purchases of available-for-sale investments       (52,053 )     (44,584 )
Net cash provided by investing activities       5,367       11,049  
           
Cash flows from financing activities:          
Proceeds from stock option exercises       247       280  
Purchases of treasury stock       (11,003 )     (3,035 )
Dividend payments       (4,453 )     (4,811 )
Excess tax benefits from stock-based compensation arrangements       -       9  
Net cash used in financing activities       (15,209 )     (7,557 )
           
Net increase in cash and cash equivalents       5,834       16,507  
Effect of exchange rate changes       1,225       (2,937 )
Cash and cash equivalents, beginning of period       84,550       73,439  
           
Cash and cash equivalents, end of period     $ 91,609     $ 87,009  
           
Supplemental disclosure of non-cash investing activities          
Purchases of property, plant and equipment included in accounts payable     $ 485     $ 784  
                   
       

Supplemental Information

Stock-based Compensation Expense

(Unaudited)

(In thousands)
       
      Three Months Ended
      March 31,
      2016   2015
           
Stock-based compensation expense included in cost of sales     $ 91     $ 90  
           
Selling, general and administrative expense       810       691  
Research and development expense       657       858  
           
Stock-based compensation expense included in operating expenses       1,467       1,549  
           
Total stock-based compensation expense       1,558       1,639  
Tax benefit for expense associated with non-qualified options       (212 )     (180 )
           
Total stock-based compensation expense, net of tax     $ 1,346     $ 1,459  
           
       

Reconciliation of GAAP net income per share, diluted, to

Non-GAAP net income per share, diluted

(Unaudited)
       
      Three Months Ended
      March 31,
      2016   2015
           
GAAP earnings per common share – diluted     $ 0 .10   $ 0 .06
           
Amortization of acquired intangible assets       0 .01     0 .01
Stock-based compensation expense       0 .03     0 .03
           
Non-GAAP earnings per common share – diluted     $ 0 .14   $ 0 .10