adtn-ex991

adtn-ex991_7.htm

EXHIBIT 99.1

ADTRAN, Inc. Reports Earnings for the First Quarter 2019 and Declares Quarterly Cash Dividend

HUNTSVILLE, Ala. -- (BUSINESS WIRE) – April 17, 2019 -- ADTRAN, Inc. (NASDAQ:ADTN) reported results for the first quarter 2019. For the quarter, sales were $143.8 million compared to $120.8 million for the first quarter of 2018. Net income was $0.8 million compared to a net loss of $10.8 million for the first quarter of 2018. Earnings per share, assuming dilution, were $0.02 compared to a loss per share of $0.22 for the first quarter of 2018. Non-GAAP net income was $4.9 million compared to a net loss of $15.8 million for the first quarter of 2018. Non-GAAP earnings per share, assuming dilution, were $0.10 compared to a loss per share of $0.33 for the first quarter of 2018. 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 amortization of pension actuarial losses. The reconciliation between GAAP net income (loss) and earnings (loss) per share to non-GAAP net income (loss) and non-GAAP earnings (loss) per share is in the table provided.

ADTRAN Chairman and Chief Executive Officer Tom Stanton stated, “We are pleased with our progress in the first quarter of 2019. Our revenue was diverse and well balanced with material contributions across the LATAM, EMEA, North America, and Pacific Rim regions. Furthermore, our broad portfolio of next-generation solutions continues to gain market traction with a growing number of customers in an expanding range of market segments. This progress underscores the company’s global strategy of diversification across geographies and markets.”

The Company also announced that its Board of Directors declared a cash dividend for the first quarter of 2019. 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, 2019. The ex-dividend date is May 1, 2019, and the payment date is May 16, 2019.

The Company confirmed that it will hold a conference call to discuss its first quarter results Thursday, April 18, 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, 2018. These risks and uncertainties could cause actual results to differ materially from those in the forward-looking statements included in this press release.

To provide additional transparency, we have disclosed non-GAAP operating income (loss) which has been reconciled to operating income (loss) and non-GAAP net income (loss) and non-GAAP adjusted earnings (loss) per share - basic and diluted which have been reconciled to net income (loss) and earnings (loss) per share - basic and diluted as reported based on Generally Accepted Accounting Principles in the United States (U.S. GAAP). These measures exclude certain items which management believes are not reflective of the ongoing operating performance of the business. We believe this information is useful in providing period-to-period comparisons of the results of our ongoing operations. Additionally, these measures are used by management in our ongoing planning and annual budgeting processes. The presentation of non-GAAP operating income (loss), non-GAAP net income (loss) and non-GAAP earnings (loss) per share- basic and diluted, when combined with the U.S. GAAP presentation of operating income (loss), net income (loss), and net income (loss) per share is beneficial to the overall understanding of ongoing operating performance of the company.

These measures are not in accordance with, or an alternative for, U.S. GAAP and therefore should not be considered in isolation or as a substitution for analysis of our results as reported under U.S. GAAP. Our calculation of non-GAAP operating income (loss), non-GAAP net income (loss) and non-GAAP earnings (loss) per share - basic and diluted may not be comparable to similar measures calculated by other companies.

Condensed Consolidated Balance Sheet

(Unaudited)

(In thousands)

	March 31,		December 31,
	2019		2018
Assets
Cash and cash equivalents	$	109,119	$	105,504
Short-term investments		31,290		3,246
Accounts receivable, net		99,032		99,385
Other receivables		34,583		36,699
Inventory, net		93,609		99,848
Prepaid expenses and other current assets		9,683		10,744
Total Current Assets		377,316		355,426

Property, plant and equipment, net		79,505		80,635
Deferred tax assets, net		36,891		37,187
Goodwill		6,982		7,106
Intangibles, net		31,817		33,183
Other assets		14,885		5,668
Long-term investments		85,227		108,822
Total Assets	$	632,623	$	628,027

Liabilities and Stockholders' Equity
Accounts payable	$	60,116	$	60,054
Bonds payable		25,600		1,000
Unearned revenue		15,230		17,940
Accrued expenses		14,039		11,746
Accrued wages and benefits		15,105		14,752
Income tax payable, net		11,785		12,518
Total Current Liabilities		141,875		118,010

Non-current unearned revenue		4,514		5,296
Other non-current liabilities		42,687		33,842
Bonds payable		—		24,600
Total Liabilities		189,076		181,748

Stockholders' Equity		443,547		446,279

Total Liabilities and Stockholders' Equity	$	632,623	$	628,027

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)

	Three Months Ended
	March 31,
	2019			2018
Sales
Products	$	125,822		$	105,253
Services		17,969			15,553
Total Sales		143,791			120,806
Cost of Sales
Products		70,734			68,612
Services		12,445			12,461
Total Cost of Sales		83,179			81,073
Gross Profit		60,612			39,733
Selling, general and administrative expenses		35,132			33,531
Research and development expenses		31,647			32,849
Operating Loss		(6,167	)		(26,647	)
Interest and dividend income		591			866
Interest expense		(127	)		(132	)
Net investment gain (loss)		5,926			(97	)
Other income (expense), net		855			(57	)
Gain on bargain purchase of a business		—			11,322
Income (Loss) Before Provision for Income Taxes		1,078			(14,745	)
(Provision) benefit for income taxes		(308	)		3,931
Net Income (Loss)	$	770		$	(10,814	)

Weighted average shares outstanding – basic		47,782			48,232
Weighted average shares outstanding – diluted⁽¹⁾		47,853			48,292

Earnings (loss) per common share – basic	$	0.02		$	(0.22	)
Earnings (loss) per common share – diluted⁽¹⁾	$	0.02		$	(0.22	)

⁽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,
	2019			2018

Net Income (Loss)	$	770		$	(10,814	)
Other Comprehensive Loss, net of tax
Net unrealized gains (losses) on available-for-sale securities		185			(3,412	)
Defined benefit plan adjustments		121			62
Foreign currency translation		(1,160	)		842
Other Comprehensive Loss, net of tax		(854	)		(2,508	)
Comprehensive Loss, net of tax	$	(84	)	$	(13,322	)

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Three Months Ended
	March 31,
	2019			2018
Cash flows from operating activities:
Net income (loss)	$	770		$	(10,814	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		4,496			3,614
Amortization of net premium on available-for-sale investments		6			42
Net (gain) loss on long-term investments		(5,926	)		97
Net (gain) loss on disposal of property, plant and equipment		(6	)		67
Gain on bargain purchase of a business		—			(11,322	)
Stock-based compensation expense		1,859			1,819
Deferred income taxes		235			(1,877	)
Changes in operating assets and liabilities:
Accounts receivable, net		170			63,904
Other receivables		1,185			(6,598	)
Inventory		5,974			3,368
Prepaid expenses and other assets		(566	)		10,583
Accounts payable		166			(10,233	)
Accrued expenses and other liabilities		(2,355	)		826
Income tax payable		(487	)		2,753
Net cash provided by operating activities		5,521			46,229

Cash flows from investing activities:
Purchases of property, plant and equipment		(1,872	)		(1,950	)
Proceeds from sales and maturities of available-for-sale investments		17,039			49,074
Purchases of available-for-sale investments		(11,127	)		(75,960	)
Acquisition of business		—			(7,806	)
Net cash provided by (used in) investing activities		4,040			(36,642	)

Cash flows from financing activities:
Proceeds from stock option exercises		—			369
Purchases of treasury stock		(184	)		(10,171	)
Dividend payments		(4,301	)		(4,367	)
Net cash used in financing activities		(4,485	)		(14,169	)

Net increase (decrease) in cash and cash equivalents		5,076			(4,582	)
Effect of exchange rate changes		(1,461	)		772
Cash and cash equivalents, beginning of period		105,504			86,433

Cash and cash equivalents, end of period	$	109,119		$	82,623

Supplemental disclosure of non-cash investing activities:
Purchases of property, plant and equipment included in accounts payable	$	273		$	95
Right-of-use asset obtained in exchange for lease obligations	$	10,371		$	—

Supplemental Information

Reconciliation of Operating Loss to Non-GAAP Operating Income (Loss)

(Unaudited)

	Three Months Ended March 31,
	2019				2018
Operating Loss	$	(6,167	)		$	(26,647	)
Acquisition related expenses, amortizations and adjustments		1,497		⁽¹⁾		583		⁽⁵⁾
Stock-based compensation expense		1,859		⁽²⁾		1,819		⁽⁶⁾
Restructuring expenses		2,063		⁽³⁾		5,950		⁽⁷⁾
Deferred compensation investment fluctuations		2,124		⁽⁴⁾		(386	)	⁽⁴⁾
Non-GAAP Operating Income (Loss)	$	1,376			$	(18,681	)

(1) $0.5 million is included in total cost of sales, $0.5 million is included in selling, general and administrative expenses and $0.5 million is included in research and development expenses on the consolidated statements of income.

(2) $0.1 million is included in total cost of sales, $1.1 million is included in selling, general and administrative expenses and $0.7 million is included in research and development expenses on the consolidated statements of income.

(3) $0.6 million is included in total cost of sales, $0.8 million is included in selling, general and administrative expenses and $0.6 million is included in research and development expenses on the consolidated statements of income.

(4) Includes non-cash change in fair value of equity investments held in the ADTRAN, Inc. Deferred Compensation Program for Employees (as amended and restated as of June 1, 2010) per ASU 2016-01, all of which is included in selling, general and administrative expenses on the consolidated statements of income.

(5) $0.3 million is included in selling, general and administrative expenses and $0.3 million is included in research and development expenses on the consolidated statements of income.

(6) $0.1 million is included in total cost of sales, $1.0 million is included in selling, general and administrative expenses and $0.7 million is included in research and development expenses on the consolidated statements of income.

(7) $2.4 million is included in total cost of sales, $1.8 million is included in selling, general and administrative expenses and $1.8 million is included in research and development expenses on the consolidated statements of income.

Reconciliation of Net Income (Loss) and Earnings (Loss) per Share – Basic and Diluted to Non-GAAP

Net Income (Loss) and Non-GAAP Earnings (Loss) per Share – Basic and Diluted

(Unaudited)

	Three Months Ended March 31,
	2019					2018
Net Income (Loss)	$	770				$	(10,814	)
Restructuring expenses		2,063					5,950
Acquisition related expenses, amortizations and adjustments		1,497					583
Stock-based compensation expense		1,859					1,819
Pension expense		203		⁽¹	⁾		64		⁽¹	⁾
Gain on bargain purchase of a business		—					(11,322	)
Tax effect of adjustments to Net Income (Loss)		(1,524	)				(2,107	)
Non-GAAP Net Income (Loss)	$	4,868				$	(15,827	)

Weighted average shares outstanding – basic		47,782					48,232
Weighted average shares outstanding – diluted		47,853					48,292

Earnings (loss) per common share - basic	$	0.02				$	(0.22	)
Earnings (loss) per common share - diluted	$	0.02				$	(0.22	)

Non-GAAP earnings (loss) per common share - basic	$	0.10				$	(0.33	)
Non-GAAP earnings (loss) per common share - diluted	$	0.10				$	(0.33	)

(1) Includes amortization of actuarial losses related to the Company's pension plan for employees in certain foreign countries.