ADTRAN, Inc. reports results for the fourth quarter 2012 and declares quarterly cash dividend

Condensed Consolidated Balance Sheet

(Unaudited)

(In thousands)

December 31,
2012

December 31,
2011

Assets

Cash and cash equivalents

$

68,457

$

42,979

Short-term investments

160,481

159,347

Accounts receivable, net

81,194

76,130

Other receivables

16,253

9,743

Inventory

102,583

87,800

Prepaid expenses

4,148

3,119

Deferred tax assets, net

13,055

12,125

Total Current Assets

446,171

391,243

Property, plant and equipment, net

80,246

75,295

Deferred tax assets, net

10,261

8,345

Goodwill

3,492

3,492

Other assets

13,482

7,131

Long-term investments

332,729

332,008

Total Assets

$

886,381

$

817,514

Liabilities and Stockholders' Equity

Accounts payable

$

42,173

$

29,404

Unearned revenue

38,051

9,965

Accrued expenses

10,309

5,876

Accrued wages and benefits

15,022

13,518

Income tax payable, net

1,211

3,169

Total Current Liabilities

106,766

61,932

Non-current unearned revenue

23,803

4,874

Other non-current liabilities

17,406

12,077

Bonds payable

46,000

46,500

Total Liabilities

193,975

125,383

Stockholders' Equity

692,406

692,131

Total Liabilities and Stockholders' Equity

$

886,381

$

817,514

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2012

2011

2012

2011

Sales

$

139,756

$

175,286

$

620,614

$

717,229

Cost of sales

72,373

76,066

303,971

302,911

Gross Profit

67,383

99,220

316,643

414,318

Selling, general and administrative expenses

31,393

32,954

134,523

124,879

Research and development expenses

33,116

25,151

125,951

100,301

Operating Income

2,874

41,115

56,169

189,138

Interest and dividend income

2,006

1,813

7,657

7,642

Interest expense

(591

)

(603

)

(2,347

)

(2,398

)

Net realized investment gain

2,197

3,333

9,550

12,454

Other income (expense), net

(82

)

(297

)

183

(694

)

Gain on bargain purchase of a business

-

-

1,753

-

Income before provision for income taxes

6,404

45,361

72,965

206,142

Provision for income taxes

(2,443

)

(14,198

)

(25,702

)

(67,565

)

Net Income

$

3,961

$

31,163

$

47,263

$

138,577

Weighted average shares outstanding - basic

62,542

63,685

63,259

64,145

Weighted average shares outstanding - diluted ⁽¹⁾

62,690

64,586

63,774

65,416

Earnings per common share - basic

$

0.06

$

0.49

$

0.75

$

2.16

Earnings per common share - diluted ⁽¹⁾

$

0.06

$

0.48

$

0.74

$

2.12

⁽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,

2012

2011

2012

2011

Net Income

$

3,961

$

31,163

$

47,263

$

138,577

Other Comprehensive Income (Loss), net of tax:

Net change in unrealized gains (losses) on marketable securities

(2,042

)

(1,745

)

(187

)

(13,004

)

Reclassification adjustments for amounts included in net income

(29

)

(6

)

135

(688

)

Defined benefit plan adjustments

(1,952

)

-

(1,952

)

-

Foreign currency translation

(21

)

877

170

(154

)

Other Comprehensive Income (Loss), net of tax

(4,044

)

(874

)

(1,834

)

(13,846

)

Comprehensive Income (Loss), net of tax

$

(83

)

$

30,289

$

45,429

$

124,731

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

Twelve Months Ended

December 31,

2012

2011

Cash flows from operating activities:

Net income

$

47,263

$

138,577

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

Depreciation and amortization

14,079

11,499

Amortization of net premium on available-for-sale investments

8,257

6,617

Net realized gain on long-term investments

(9,550

)

(12,454

)

Net (gain) loss on disposal of property, plant and equipment

(214

)

6

Gain on bargain purchase of a business

(1,753

)

-

Stock-based compensation expense

9,264

9,169

Deferred income taxes

(3,785

)

575

Tax benefit from stock option exercises

1,905

10,525

Excess tax benefits from stock-based compensation arrangements

(1,456

)

(9,373

)

Change in operating assets and liabilities:

Accounts receivable, net

(4,365

)

(4,939

)

Other receivables

2,977

(5,781

)

Income tax receivable, net

-

2,741

Inventory

7,163

(12,734

)

Prepaid expenses and other assets

(1,045

)

522

Accounts payable

7,265

6,178

Accrued expenses and other liabilities

11,583

6,309

Income tax payable, net

(1,960

)

3,169

Net cash provided by operating activities

85,628

150,606

Cash flows from investing activities:

Purchases of property, plant and equipment

(12,075

)

(11,912

)

Proceeds from disposals of property, plant and equipment

266

-

Proceeds from sales and maturities of available-for-sale investments

282,039

466,243

Purchases of available-for-sale investments

(282,740

)

(554,629

)

Acquisition of business

7,496

(22,661

)

Net cash used in investing activities

(5,014

)

(122,959

)

Cash flows from financing activities:

Proceeds from stock option exercises

6,049

34,125

Purchases of treasury stock

(39,362

)

(35,565

)

Dividend payments

(22,813

)

(23,124

)

Payments on long-term debt

(500

)

(1,000

)

Excess tax benefits from stock-based compensation arrangements

1,456

9,373

Net cash used in financing activities

(55,170

)

(16,191

)

Net increase in cash and cash equivalents

25,444

11,456

Effect of exchange rate changes

34

(154

)

Cash and cash equivalents, beginning of period

42,979

31,677

Cash and cash equivalents, end of period

$

68,457

$

42,979

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 twelve months ended December 31, 2012 and 2011 for both transactions are as follows:

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2012

2011

2012

2011

Bluesocket, Inc. acquisition

Amortization of acquired intangible assets

$

267

$

297

$

1,020

$

495

Amortization of other purchase accounting adjustments

29

304

443

521

Acquisition related professional fees, travel and other expenses

-

100

-

730

Subtotal

296

701

1,463

1,746

NSN BBA acquisition

Amortization of acquired intangible assets

290

-

762

-

Amortization of other purchase accounting adjustments

587

-

2,305

-

Acquisition related professional fees, travel and other expenses

323

1,035

4,860

2,027

Subtotal

1,200

1,035

7,927

2,027

Total acquisition related expenses, amortizations and adjustments

1,496

1,736

9,390

3,773

Tax effect

(488

)

(658

)

(3,148

)

(1,434

)

Total acquisition related expenses, amortizations and adjustments, net of tax

$

1,008

$

1,078

$

6,242

$

2,339

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, 2012 and 2011:

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2012

2011

2012

2011

Revenue (adjustments to deferred revenue recognized in the period)

$

377

$

207

$

1,528

$

362

Cost of goods sold

154

99

1,086

165

Subtotal

531

306

2,614

527

Selling, general and administrative expenses

330

1,133

4,510

2,557

Research and development expenses

635

297

2,266

689

Subtotal

965

1,430

6,776

3,246

Total acquisition related expenses, amortizations and adjustments

1,496

1,736

9,390

3,773

Tax effect

(488

)

(658

)

(3,148

)

(1,434

)

Total acquisition related expenses, amortizations and adjustments, net of tax

$

1,008

$

1,078

$

6,242

$

2,339

Supplemental Information

Stock-based Compensation Expense

(Unaudited)

(In thousands)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2012

2011

2012

2011

Stock-based compensation expense included in cost of sales

$

118

$

132

$

422

$

412

Selling, general and administrative expense

1,146

1,220

4,351

4,316

Research and development expense

1,217

1,362

4,491

4,441

Stock-based compensation expense included in operating expenses

2,363

2,582

8,842

8,757

Total stock-based compensation expense

2,481

2,714

9,264

9,169

Tax benefit for expense associated with non-qualified options

(318

)

(303

)

(1,234

)

(1,321

)

Total stock-based compensation expense, net of tax

$

2,163

$

2,411

$

8,030

$

7,848

Reconciliation of GAAP net income per share, diluted, to

Non-GAAP net income per share, diluted

(Unaudited)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2012

2011

2012

2011

GAAP earnings per common share – diluted

$

0.06

$

0.48

$

0.74

$

2.12

Acquisition related expenses, amortizations and adjustments

0.02

0.02

0.10

0.04

Stock-based compensation expense

0.03

0.04

0.13

0.12

Bargain purchase gain – NSN BBA acquisition

-

-

(0.03

)

-

Non-GAAP earnings per common share – diluted

$

0.11

$

0.54

$

0.94

$

2.28