Company Announcements

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

HUNTSVILLE, Ala.--(BUSINESS WIRE)--Feb. 5, 2020-- ADTRAN, Inc. (NASDAQ:ADTN) (“ADTRAN” or the “Company”) today announced financial results for the fourth quarter 2019. For the quarter, revenue was $115.8 million compared to $140.1 million for the fourth quarter of 2018. Earnings for the fourth quarter of 2019 were a net loss of $12.7 million compared to a net loss of $8.4 million for the fourth quarter of 2018. Earnings per share was a loss of $0.26 per share compared to a loss of $0.18 per share for the fourth quarter of 2018. Non-GAAP earnings were a net loss of $3.2 million compared to a non-GAAP net loss of $5.8 million for the fourth quarter of 2018. Non-GAAP earnings per share was a loss of $0.07 per share compared to a non-GAAP loss of $0.12 per share for the fourth quarter of 2018. Non-GAAP net loss and non-GAAP loss per share exclude stock-based compensation expense, acquisition related amortizations and other expenses, restructuring expenses, amortization of pension actuarial losses, valuation allowance related to our deferred tax assets, asset impairments, gain on bargain purchase of a business and certain other contingencies and the reimbursement from a claim settlement. The reconciliation between GAAP net loss and loss per share to non-GAAP net loss and non-GAAP loss per share is set forth in the table provided below.

ADTRAN Chairman and Chief Executive Officer Tom Stanton stated, “While the U.S. market remains challenging, we saw a solid performance in our international business. We continue to see activity building around our 10G PON and fiber extension solutions across all geographies we serve, most notably in Europe. We believe we are at the beginning of a significant investment cycle for fiber deployment driven by technology advancements, regulatory influences and vendor disruption.”

The Company also announced that its Board of Directors declared a cash dividend for the fourth quarter of 2019. The quarterly cash dividend is $0.09 per common share to be paid to the Company’s stockholders of record as of the close of business on February 20, 2020. The payment date will be March 5, 2020.

The Company confirmed that it will hold a conference call to discuss its fourth quarter results on Thursday, February 6, 2020, at 9:30 a.m. Central Time. ADTRAN will webcast this conference call. To listen, visit the Investor Relations site at www.investors.adtran.com approximately ten 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 conference call, 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 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.com, LinkedIn and Twitter.

This press release contains forward-looking statements, generally identified by the use of words such as “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” “may,” “could” and similar expressions, which forward-looking statements 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 and Form 10-K/A for the year ended December 31, 2018 and our quarterly reports on Form 10-Q for the quarters ended March 31, 2019, June 30, 2019, and September 30, 2019. 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 in the table below non-GAAP operating loss, which has been reconciled to operating loss, and non-GAAP net loss and non-GAAP earnings (loss) per share - basic and diluted, which have been reconciled to net loss and loss per share - basic and diluted, in each case as reported based on Generally Accepted Accounting Principles in the United States (U.S. GAAP). These non-GAAP financial 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 loss, non-GAAP net loss and non-GAAP loss per share – basic and diluted, when combined with the U.S. GAAP presentation of operating loss, net loss, and net loss per share – basic and diluted, is beneficial to the overall understanding of ongoing operating performance of the Company.

These non-GAAP financial measures are not prepared 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. Additionally, our calculation of non-GAAP operating loss, non-GAAP net loss and non-GAAP loss per share - basic and diluted may not be comparable to similar measures calculated by other companies.

 

Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)

 

December 31,

 

 

December 31,

 

 

2019

 

 

2018

 

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

76,215

 

 

$

105,504

 

Short-term investments

 

30,801

 

 

 

3,246

 

Accounts receivable, net

 

90,531

 

 

 

99,385

 

Other receivables

 

16,566

 

 

 

36,699

 

Inventory, net

 

97,987

 

 

 

99,848

 

Prepaid expenses and other current assets

 

7,892

 

 

 

10,744

 

Total Current Assets

 

319,992

 

 

 

355,426

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

73,708

 

 

 

80,635

 

Deferred tax assets, net

 

7,561

 

 

 

37,187

 

Goodwill

 

6,968

 

 

 

7,106

 

Intangibles, net

 

27,821

 

 

 

33,183

 

Other non-current assets

 

14,261

 

 

 

5,668

 

Long-term investments

 

94,489

 

 

 

108,822

 

Total Assets

$

544,800

 

 

$

628,027

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Accounts payable

$

44,552

 

 

$

60,054

 

Bonds payable

 

24,600

 

 

 

1,000

 

Unearned revenue

 

11,963

 

 

 

17,940

 

Accrued expenses

 

13,876

 

 

 

11,746

 

Accrued wages and benefits

 

14,929

 

 

 

14,752

 

Income tax payable, net

 

3,512

 

 

 

12,518

 

Total Current Liabilities

 

113,432

 

 

 

118,010

 

 

 

 

 

 

 

 

 

Non-current unearned revenue

 

6,012

 

 

 

5,296

 

Other non-current liabilities

 

45,969

 

 

 

33,842

 

Bonds payable

 

 

 

 

24,600

 

Total Liabilities

 

165,413

 

 

 

181,748

 

 

 

 

 

 

 

 

 

Stockholders' Equity

 

379,387

 

 

 

446,279

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders' Equity

$

544,800

 

 

$

628,027

 

 

Consolidated Statements of Loss
(Unaudited)
(In thousands, except per share data)

 

 

 

Three Months Ended

 

 

Twelve Months Ended

 

 

 

 

December 31,

 

 

December 31,

 

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

96,219

 

 

$

116,873

 

 

$

455,226

 

 

$

458,232

 

 

Services

 

 

19,568

 

 

 

23,215

 

 

 

74,835

 

 

 

71,045

 

 

Total Sales

 

 

115,787

 

 

 

140,088

 

 

 

530,061

 

 

 

529,277

 

 

Cost of sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

 

56,481

 

 

 

70,745

 

 

 

263,834

 

 

 

278,929

 

 

Services

 

 

12,260

 

 

 

13,955

 

 

 

47,223

 

 

 

46,783

 

 

Total Cost of Sales

 

 

68,741

 

 

 

84,700

 

 

 

311,057

 

 

 

325,712

 

 

Gross Profit

 

 

47,046

 

 

 

55,388

 

 

 

219,004

 

 

 

203,565

 

 

Selling, general and administrative expenses

 

 

30,934

 

 

 

28,079

 

 

 

130,597

 

 

 

124,440

 

 

Research and development expenses

 

 

31,221

 

 

 

31,092

 

 

 

126,767

 

 

 

124,547

 

 

Asset impairments

 

 

 

 

 

 

 

 

3,872

 

 

 

 

 

Gain on contingency

 

 

 

 

 

 

 

 

(1,230

)

 

 

 

 

Operating Loss

 

 

(15,109

)

 

 

(3,783

)

 

 

(41,002

)

 

 

(45,422

)

 

Interest and dividend income

 

 

872

 

 

 

1,422

 

 

 

2,765

 

 

 

4,026

 

 

Interest expense

 

 

(129

)

 

 

(135

)

 

 

(511

)

 

 

(533

)

 

Net investment gain (loss)

 

 

3,239

 

 

 

(9,450

)

 

 

11,434

 

 

 

(4,050

)

 

Other income (expense), net

 

 

(768

)

 

 

1,359

 

 

 

1,498

 

 

 

1,286

 

 

Gain on bargain purchase of a business

 

 

 

 

 

 

 

 

 

 

 

11,322

 

 

Loss Before Income Taxes

 

 

(11,895

)

 

 

(10,587

)

 

 

(25,816

)

 

 

(33,371

)

 

Income tax (expense) benefit

 

 

(768

)

 

 

2,140

 

 

 

(28,205

)

 

 

14,029

 

 

Net Loss

 

$

(12,663

)

 

$

(8,447

)

 

$

(54,021

)

 

$

(19,342

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

 

47,936

 

 

 

47,730

 

 

 

47,836

 

 

 

47,880

 

 

Weighted average shares outstanding – diluted

 

 

47,936

 

 

 

47,730

 

 

 

47,836

 

 

 

47,880

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per common share – basic

 

$

(0.26

)

 

$

(0.18

)

 

$

(1.13

)

 

$

(0.40

)

 

Loss per common share – diluted

 

$

(0.26

)

 

$

(0.18

)

 

$

(1.13

)

 

$

(0.40

)

 

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Twelve Months Ended

 

 

 

December 31,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(54,021

)

 

$

(19,342

)

Adjustments to reconcile net income to net cash provided by operating

activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

17,771

 

 

 

15,891

 

Asset impairments

 

 

3,872

 

 

 

 

Amortization of net discount on available-for-sale investments

 

 

(100

)

 

 

(50

)

Net (gain) loss on long-term investments

 

 

(11,434

)

 

 

4,050

 

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

 

 

67

 

 

 

67

 

Gain on bargain purchase of a business

 

 

 

 

 

(11,322

)

Gain on contingency payment

 

 

(1,230

)

 

 

 

Gain on life insurance proceeds

 

 

(1,000

)

 

 

 

Stock-based compensation expense

 

 

6,962

 

 

 

7,155

 

Deferred income taxes

 

 

30,070

 

 

 

(17,257

)

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

8,282

 

 

 

49,200

 

Other receivables

 

 

20,046

 

 

 

(8,522

)

Inventory, net

 

 

1,571

 

 

 

24,192

 

Prepaid expenses and other assets

 

 

5,180

 

 

 

10,727

 

Accounts payable, net

 

 

(13,813

)

 

 

(3,799

)

Accrued expenses and other liabilities

 

 

(3,559

)

 

 

(3,226

)

Income taxes payable

 

 

(8,705

)

 

 

7,690

 

Net cash provided by (used in) operating activities

 

 

(41

)

 

 

55,454

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(9,494

)

 

 

(8,110

)

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

 

 

47,268

 

 

 

153,649

 

Purchases of available-for-sale investments

 

 

(48,578

)

 

 

(123,209

)

Life insurance proceeds received

 

 

1,000

 

 

 

 

Acquisition of business, net of cash acquired

 

 

13

 

 

 

(22,045

)

Net cash provided by (used in) investing activities

 

 

(9,791

)

 

 

285

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from stock option exercises

 

 

526

 

 

 

1,483

 

Purchases of treasury stock

 

 

(184

)

 

 

(15,532

)

Dividend payments

 

 

(17,212

)

 

 

(17,267

)

Payments on long-term debt

 

 

(1,000

)

 

 

(1,100

)

Net cash used in financing activities

 

 

(17,870

)

 

 

(32,416

)

Net increase (decrease) in cash and cash equivalents

 

 

(27,702

)

 

 

23,323

 

Effect of exchange rate changes

 

 

(1,587

)

 

 

(4,252

)

Cash and cash equivalents, beginning of year

 

 

105,504

 

 

 

86,433

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of year

 

$

76,215

 

 

$

105,504

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Cash paid during the year for interest

 

$

512

 

 

$

534

 

Cash paid during the year for income taxes

 

$

9,357

 

 

$

4,104

 

Supplemental disclosure of non-cash investing activities

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment included in accounts payable

 

$

90

 

 

$

62

 

Contingent payment

 

$

 

 

$

1,230

 

Supplemental Information

Reconciliation of Operating Loss to Non-GAAP Operating Loss

(Unaudited)

 

 

Three Months ended

December 31,

 

 

 

 

 

Twelve Months ended

December 31,

 

 

 

 

 

2019

 

 

 

 

2018

 

 

 

 

 

2019

 

 

 

 

2018

 

 

 

 

Operating Loss

$

(15,109

)

 

 

 

$

(3,783

)

 

 

 

 

$

(41,002

)

 

 

 

$

(45,422

)

 

 

 

Acquisition related expenses, amortizations and adjustments

 

1,357

 

 

(1)

 

 

1,433

 

 

(5

)

 

 

5,703

 

 

(8)

 

 

4,084

 

 

(14

)

Stock-based compensation expense

 

1,778

 

 

(2)

 

 

1,912

 

 

(6

)

 

 

6,962

 

 

(9)

 

 

7,155

 

 

(15

)

Restructuring expenses

 

1,356

 

 

(3)

 

 

25

 

 

(7

)

 

 

6,014

 

 

(10

)

 

7,261

 

 

(16

)

Deferred compensation income (expense)

 

536

 

 

(4)

 

 

(3,739

)

 

(4

)

 

 

2,767

 

 

(4)

 

 

(3,119

)

 

(4)

 

Asset impairments

 

 

 

 

 

 

 

 

 

 

 

 

3,872

 

 

(11

)

 

 

 

 

 

Gain on contingency

 

 

 

 

 

 

 

 

 

 

 

 

(1,230

)

 

(12

)

 

 

 

 

 

Settlement income

 

 

 

 

 

 

 

 

 

 

 

 

(746

)

 

(13

)

 

 

 

 

 

Non-GAAP Operating Loss

$

(10,082

)

 

 

 

$

(4,152

)

 

 

 

 

$

(17,660

)

 

 

 

$

(30,041

)

 

 

 

(1) $0.4 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, $1.0 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.

(3) $0.3 million is included in selling, general and administrative expenses and $1.1 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 statement of income.

(5) $0.5 million is included in total cost of sales, $0.6 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, $1.1 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.

(7) $0.1 million is included in selling, general and administrative expenses on the consolidated statements of income.

(8) $1.7 million is included in total cost of sales, $2.1 million is included in selling, general and administrative expenses and $1.9 million is included in research and development expenses on the consolidated statements of income.

(9) $0.4 million is included in total cost of sales, $3.9 million is included in selling, general and administrative expenses and $2.7 million is included in research and development expenses on the consolidated statements of income.

(10) $0.8 million is included in total cost of sales, $2.3 million is included in selling, general and administrative expenses and $2.9 million is included in research and development expenses on the consolidated statements of income.

(11) Includes abandonment of certain information technology projects.

(12) Includes gain related to unearned contingent liabilities recognized upon the acquisition of a business in November 2018.

(13) Includes income related to certain freight forwarder claim settlements which were received during the three months ended June 30, 2019, all of which is included in total cost of sales on the consolidated statements of income.

(14) $1.4 million is included in total cost of sales, $1.5 million is included in selling, general and administrative expenses and $1.2 million is included in research and development expenses on the consolidated statements of income.

(15) $0.4 million is included in total cost of sales, $4.0 million is included in selling, general and administrative expenses and $2.8 million is included in research and development expenses on the consolidated statements of income.

(16) $2.8 million is included in total cost of sales, $2.7 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.

Supplemental Information

Reconciliation of Net Loss and Loss per Common Share – Basic and Diluted to Non-GAAP

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

(Unaudited)

 

 

 

Three Months ended

December 31,

 

 

 

Twelve Months ended

December 31,

 

 

 

2019

 

 

2018

 

 

 

2019

 

 

2018

 

Net Loss

 

$

(12,663

)

 

$

(8,447

)

 

 

$

(54,021

)

 

$

(19,342

)

Acquisition related expenses, amortizations and adjustments

 

 

1,357

 

 

 

1,433

 

 

 

 

5,703

 

 

 

4,084

 

Stock-based compensation expense

 

 

1,778

 

 

 

1,912

 

 

 

 

6,962

 

 

 

7,155

 

Restructuring expenses

 

 

1,356

 

 

 

25

 

 

 

 

6,014

 

 

 

7,261

 

Pension expense(1)

 

 

195

 

 

 

59

 

 

 

 

795

 

 

 

247

 

Valuation allowance

 

 

5,993

 

 

 

 

 

 

 

43,048

 

 

 

 

Asset impairments

 

 

 

 

 

 

 

 

 

3,872

 

 

 

 

Gain on contingency

 

 

 

 

 

 

 

 

 

(1,230

)

 

 

 

Settlement income

 

 

 

 

 

 

 

 

 

(746

)

 

 

 

Gain on bargain purchase of a business

 

 

 

 

 

 

 

 

 

 

 

 

(11,322

)

Tax effect of adjustments to net income (loss)

 

 

(1,252

)

 

 

(818

)

 

 

 

(5,674

)

 

 

(4,476

)

Non-GAAP Net Income (Loss)

 

$

(3,236

)

 

$

(5,836

)

 

 

$

4,723

 

 

$

(16,393

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

 

47,936

 

 

 

47,730

 

 

 

 

47,836

 

 

 

47,880

 

Weighted average shares outstanding – diluted

 

 

47,936

 

 

 

47,730

 

 

 

 

47,836

 

 

 

47,880

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per common share - basic

 

$

(0.26

)

 

$

(0.18

)

 

 

$

(1.13

)

 

$

(0.40

)

Loss per common share - diluted

 

$

(0.26

)

 

$

(0.18

)

 

 

$

(1.13

)

 

$

(0.40

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP earnings (loss) per common share - basic

 

$

(0.07

)

 

$

(0.12

)

 

 

$

0.10

 

 

$

(0.34

)

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

 

$

(0.07

)

 

$

(0.12

)

 

 

$

0.10

 

 

$

(0.34

)

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

 

Source: ADTRAN, Inc.

ADTRAN, Inc.
Rhonda Lambert, 256-963-7450
Investor Relations