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 ADTRAN, Inc. Reports Earnings for the Fourth Quarter 2018 and Declares Quarterly Cash Dividend
   Wednesday, January 23, 2019 8:05:00 PM ET

HUNTSVILLE, Ala.--(BUSINESS WIRE)-- ADTRAN, Inc. (NASDAQ:ADTN) reported results for the fourth quarter 2018. For the quarter, sales were $140.1 million compared to $126.8 million for the fourth quarter of 2017. Net loss was $8.4 million compared to a net loss of $11.1 million for the fourth quarter of 2017. Earnings per share were a loss of $0.18 compared to a loss of $0.23 for the fourth quarter of 2017. Non-GAAP earnings per share were a loss of $0.12 compared to earnings of $0.05 for the fourth quarter of 2017. Net loss and GAAP and non-GAAP earnings per share for the fourth quarter 2018 reflect the effect of a loss in other income of $6.8 million, which resulted primarily from the impact of unrealized losses in our equity investment portfolio arising from U.S. equity market volatility during the quarter. 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 and the impact of the Tax Cuts and Jobs Act in 2017. The reconciliation between GAAP earnings per share and non-GAAP earnings per share is in the table provided.



ADTRAN Chairman and Chief Executive Officer Tom Stanton stated, “Operating results for the final quarter of 2018 came in largely as expected with strong international revenue growth and an increase in U.S. tier 1 sales allowing the company to offset its normal sequential seasonal trend. International revenue contributed 46.6% of the total with strong contributions from the Asia-Pacific and LATAM regions. Our customer engagements increased, centering around our comprehensive portfolio of software-defined access, 10G solutions and G.fast products. During the quarter, we also acquired SmartRG, a leading provider of open-source connected home platforms and cloud services, whose software approach to delivering both hardware-based and virtualized solutions will enable us to extend the value of our open, programmable and web scalable Mosaic Cloud platform. Looking forward, we believe that ADTRAN is well positioned to leverage our customer, geographic and product diversity momentum as service providers look to accelerate service velocity and scale networks in size, scope and service capabilities.”

The Company also announced that its Board of Directors declared a cash dividend for the fourth 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 February 7, 2019. The ex-dividend date is February 6, 2019, and the payment date is February 21, 2019.

The Company confirmed that it will hold a conference call to discuss its fourth quarter results Thursday, January 24, 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 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)

 
 
December 31, December 31,
2018 2017
Assets
Cash and cash equivalents $ 105,504 $ 86,433
Short-term investments 3,246 16,129
Accounts receivable, net 99,385 144,150
Other receivables 36,699 26,578
Inventory, net 99,848 122,542
Prepaid expenses and other current assets   10,744   17,282
Total Current Assets 355,426 413,114
 
Property, plant and equipment, net 80,635 85,079
Other non-current assets (1) 83,144 40,645
Long-term investments   108,822   130,256
Total Assets $ 628,027 $ 669,094
 
Liabilities and Stockholders' Equity
Accounts payable $ 61,054 $ 60,632
Unearned revenue 17,940 13,070
Accrued expenses 11,746 13,232
Accrued wages and benefits 14,752 15,948
Income tax payable, net   12,518   3,936
Total Current Liabilities 118,010 106,818
 
Non-current unearned revenue 5,296 4,556
Other non-current liabilities 33,842 34,209
Bonds payable   24,600   25,600
Total Liabilities 181,748 171,183
 
Stockholders' Equity   446,279   497,911
 
Total Liabilities and Stockholders' Equity $ 628,027 $ 669,094
 
(1) Other non-current assets includes certain identifiable intangible assets as a result of the preliminary purchase accounting for the acquisition of SmartRG Inc, net deferred tax assets, goodwill and other non-current assets. The purchase accounting is still considered preliminary pending management’s final assessment of fair values and therefore is subject to further adjustments. The final valuation is expected to result in goodwill equal to the excess of the purchase price over the identifiable intangible assets.
 
       
 

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)

 
 
Three Months Ended Twelve Months Ended
December 31, December 31,
2018     2017 2018     2017
Sales
Products $ 116,873 $ 95,789 $ 458,232 $ 540,396
Services   23,215     31,047     71,045     126,504  
Total Sales 140,088 126,836 529,277 666,900
Cost of sales
Products 70,745 49,702 278,929 279,563
Services   13,955     18,325     46,783     83,702  
Total Cost of Sales 84,700 68,027 325,712 363,265
Gross Profit 55,388 58,809 203,565 303,635
Selling, general and administrative expenses 28,079 31,412 124,440 135,583
Research and development expenses   31,092     31,550     124,547     130,666  
Operating Income (Loss) (3,783 ) (4,153 ) (45,422 ) 37,386
Interest and dividend income 1,422 1,523 4,026 4,380
Interest expense (135 ) (139 ) (533 ) (556 )
Net investment gain (loss) (9,450 ) 1,816 (4,050 ) 4,685
Other income (expense), net 1,359 219 1,286 (1,208 )
Gain on bargain purchase of a business           11,322      
Income (Loss) before provision for income taxes (10,587 ) (734 ) (33,371 ) 44,687
(Provision) benefit for income taxes   2,140     (10,376 )   14,029     (20,847 )
Net Income (Loss) $ (8,447 ) $ (11,110 ) $ (19,342 ) $ 23,840  
 
Weighted average shares outstanding – basic 47,730 48,280 47,880 48,153
Weighted average shares outstanding – diluted 47,730 48,280 47,880 48,699

(1)

 
Earnings (loss) per common share – basic $ (0.18 ) $ (0.23 ) $ (0.40 ) $ 0.50
Earnings (loss) per common share – diluted $ (0.18 ) $ (0.23 ) $ (0.40 ) $ 0.49

(1)

 

(1) Assumes exercise of dilutive stock options calculated under the treasury stock method.

 
       

Consolidated Statements of Comprehensive Income

(Unaudited)

(In thousands)

 
 
Three Months Ended Twelve Months Ended
December 31, December 31,
2018     2017 2018     2017
 
Net Income (Loss) $ (8,447 ) $ (11,110 ) $ (19,342 ) $ 23,840
Other Comprehensive Income (Loss), net of tax
Net unrealized gains (losses) on available-for-sale securities 210 (349 ) (3,130 ) 2,163
Net unrealized gains on cash flow hedges 196
Defined benefit plan adjustments (3,859 ) 517 (3,755 ) 731
Foreign currency translation   (1,203 )   597     (4,236 )   5,999
Other Comprehensive Income (Loss), net of tax   (4,852 )   961     (11,121 )   8,893
Comprehensive Income (Loss), net of tax $ (13,299 ) $ (10,149 ) $ (30,463 ) $ 32,733
 
   
 

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 
 
Twelve Months Ended
December 31,
2018     2017
Cash flows from operating activities
Net income (loss) $ (19,342 ) $ 23,840

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 15,891 15,692
Amortization of net premium (discount) on available-for-sale investments (50 ) 425
Net unrealized (gain) loss on long-term investments 4,050 (4,685 )
Net (gain) loss on disposal of property, plant and equipment 67 (145 )
Gain on bargain purchase of a business (11,322 )
Stock-based compensation expense 7,155 7,433
Deferred income taxes (17,257 ) 14,073
Change in operating assets and liabilities:
Accounts receivable, net 49,200 (49,103 )
Other receivables (8,522 ) (10,222 )
Inventory 24,192 (15,518 )
Prepaid expenses and other assets 10,727 (4,830 )
Accounts payable (2,669 ) (17,742 )
Accrued expenses and other liabilities (3,226 ) (5,455 )
Income taxes payable   7,690     3,858  
Net cash provided by (used in) operating activities   56,584     (42,379 )
 
Cash flows from investing activities
Purchases of property, plant and equipment (8,110 ) (14,720 )
Proceeds from disposals of property, plant and equipment 151
Proceeds from sales and maturities of available-for-sale investments 153,649 173,752
Purchases of available-for-sale investments (123,209 ) (93,141 )
Acquisition of business   (23,275 )    
Net cash provided by (used in) investing activities   (945 )   66,042  
 
Cash flows from financing activities
Proceeds from stock option exercises 1,483 13,412
Purchases of treasury stock (15,532 ) (17,348 )
Dividend payments (17,267 ) (17,368 )
Payments on long-term debt   (1,000 )   (1,100 )
Net cash used in financing activities   (32,316 )   (22,404 )
 
Net increase in cash and cash equivalents 23,323 1,259
Effect of exchange rate changes (4,252 ) 5,279
Cash and cash equivalents, beginning of year   86,433     79,895  
 
Cash and cash equivalents, end of year $ 105,504   $ 86,433  
 
Supplemental disclosure of non-cash investing activities
Purchases of property, plant and equipment included in accounts payable $ 62 $ 408
       
 

Supplemental Information

Restructuring Expenses

(Unaudited)

(In thousands)

 

Restructuring expense was recorded in the following Consolidated Statements of Income categories for the three and twelve months ended December 31, 2018 and 2017:

 
 
Three Months Ended Twelve Months Ended
December 31, December 31,
2018     2017 2018     2017

 

Restructuring expense included in cost of sales $   $   $ 2,761   $  
 
Selling, general and administrative expense 25 59 2,686 152
Research and development expense           1,814     122  
Restructuring expense included in operating expenses   25     59     4,500     274  
 
Total restructuring expense 25 59 7,261 274
Provision for income taxes   (6 )   (23 )   (1,888 )   (107 )
 
Total restructuring expense, net of tax $ 19   $ 36   $ 5,373   $ 167  
 
       
 

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), on March 19, 2018, we closed on the acquisition of Sumitomo Electric Lightwave Corp.’s North American EPON business (Sumitomo), and on November 30, 2018, we closed on the acquisition of SmartRG Inc. (SmartRG). Acquisition related expenses, amortizations and adjustments for the three and twelve months ended December 31, 2018 and 2017 for all five transactions are as follows:

 
 
Three Months Ended Twelve Months Ended
December 31, December 31,
2018     2017 2018     2017
Bluesocket, Inc. acquisition
Amortization of acquired intangible assets $   $ 158   $ 369   $ 632  
 
NSN BBA acquisition
Amortization of acquired intangible assets 85 95 355 527
Amortization of other purchase accounting adjustments   2         3     39  
Subtotal - NSN BBA acquisition   87     95     358     566  
 
CommScope acquisition
Amortization of acquired intangible assets 110 219 483 1,732
Amortization of other purchase accounting adjustments 3 3 4 88
Acquisition related professional fees, travel and other expenses               8  
Subtotal - CommScope acquisition   113     222     487     1,828  
 
Sumitomo acquisition
Amortization of acquired intangible assets 663 2,097
Amortization of other purchase accounting adjustments 7 86
Acquisition related professional fees, travel and other expenses   (1 )       123      
Subtotal - Sumitomo acquisition   669         2,306      
 
SmartRG acquisition
Amortization of acquired intangible assets 150 150
Amortization of other purchase accounting adjustments 181 181
Acquisition related professional fees, travel and other expenses   233         233      
Subtotal - SmartRG acquisition   564         564      
 
Total acquisition related expenses, amortizations and

adjustments

1,433 475 4,084 3,026
Provision for income taxes   (378 )   (178 )   (1,080 )   (1,135 )
Total acquisition related expenses, amortizations and

adjustments, net of tax

$ 1,055   $ 297   $ 3,004   $ 1,891  
 
       
 

The acquisition related expenses, amortizations and adjustments above were recorded in the following Consolidated Statements of Income categories for the three and twelve months ended December 31, 2018 and 2017:

 
 
Three Months Ended Twelve Months Ended
December 31, December 31,
2018     2017 2018     2017
 
Cost of goods sold $ 542   $ 2   $ 1,381   $ 88  
 
Selling, general and administrative expenses 583 51 1,457 215
Research and development expenses   308     422     1,246     2,723  
Total acquisition related expenses, amortizations and

adjustments included in operating expenses

891 473 2,703 2,938
 
Total acquisition related expenses, amortizations and

adjustments

1,433 475 4,084 3,026
Provision for income taxes   (378 )   (178 )   (1,080 )   (1,135 )
Total acquisition related expenses, amortizations and

adjustments, net of tax

$ 1,055   $ 297   $ 3,004   $ 1,891  
 
       
 

Supplemental Information

Stock-based Compensation Expense

(Unaudited)

(In thousands)

 
 
Three Months Ended Twelve Months Ended
December 31, December 31,
2018     2017 2018     2017
 
Stock-based compensation expense included in cost of sales $ 120   $ 98   $ 418   $ 379  
 
Selling, general and administrative expense 1,065 1,045 3,989 4,063
Research and development expense   727     717     2,748     2,991  
Stock-based compensation expense included in operating expenses   1,792     1,762     6,737     7,054  
 
Total stock-based compensation expense 1,912 1,860 7,155 7,433
Tax benefit for expense associated with non-qualified options, PSUs,

RSUs and restricted stock

  (416 )   (484 )   (1,432 )   (1,699 )
 
Total stock-based compensation expense, net of tax $ 1,496   $ 1,376   $ 5,723   $ 5,734  
 
       
 

Reconciliation of GAAP earnings (loss) per share, diluted, to

Non-GAAP earnings (loss) per common share, diluted

(Unaudited)

 
 
Three Months Ended Twelve Months Ended
December 31, December 31,
2018     2017 2018     2017
 
GAAP earnings (loss) per common share - diluted $ (0.18 ) $ (0.23 ) $ (0.40 ) $ 0.49
 
Restructuring expense 0.11
Acquisition related expenses, amortizations and adjustments 0.02 0.01 0.06 0.04
Stock-based compensation expense 0.03 0.03 0.12 0.12
Impact of the Tax Cuts and Jobs Act 0.24 0.24
Gain on bargain purchase of a business           (0.24 )  
 
Non-GAAP earnings (loss) per common share - diluted (1) $ (0.12 ) $ 0.05   $ (0.35 ) $ 0.89
 

(1) Table may not foot due to rounding

 

ADTRAN, Inc.
Investor Services/Assistance:
Cathy Hoffman-Young, 256-963-7054
investor@adtran.com

Source: ADTRAN, Inc.



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