ADTRAN, Inc. Reports First Quarter 2006 Results and Declares Quarterly Cash Dividend.HUNTSVILLE Huntsville, town, Canada Huntsville, town (1991 pop. 14,997), SE Ont., Canada, on the Muskoka River. It has lumber mills and a woodworking plant, but it is sustained mainly by its year-round tourist trade. , Ala ALA aminolevulinic acid. Ala alanine. ala (a´lah) pl. a´lae [L.] a winglike process. . -- ADTRAN, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :ADTN ADTN Administrative Data Transmission Network ADTN Administrative Data Telecommunications Network ) reported results for the first quarter of 2006. Sales increased to $108,648,000 for the quarter compared to $104,577,000 for the first quarter of 2005. Non-GAAP net income increased 18% to $17,966,000 for the quarter compared to GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). net income of $15,220,000 for the first quarter of 2005. Non-GAAP earnings per share, assuming dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. , were $0.23 for the quarter compared to GAAP earnings per share, assuming dilution, of $0.20 for the first quarter of 2005. For the quarter, GAAP net income increased to $16,255,000 and GAAP earnings per share, assuming dilution, increased to $0.21, compared to the first quarter of 2005. Non-GAAP net income and non-GAAP earnings per share for the first quarter exclude the effect of stock compensation expense resulting from the application of Statement of Financial Accounting Standards No. 123R, Share-Based Payment ("SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 123R"). SFAS 123R was adopted on a prospective basis effective January January: see month. 1, 2006. See the table below for reconciliation between non-GAAP and GAAP net income and earnings per share. For the quarter, gross margin increased to 59.4% compared to 57.6% for the first quarter of 2005. ADTRAN Chief Executive Officer Tom Stanton Stanton, city (1990 pop. 30,491), Orange co., SW Calif., SW of Anaheim; inc. 1956. The city's population grew rapidly in the late 20th century. Manufactures include electrical and electronic goods, signs, computer equipment, building materials, and plastics. stated, "Although shipments in the first quarter of 2006 were below our original expectations, we saw strong revenue growth in our three primary growth areas: Optical Access, Broadband Access See broadband and wireless broadband. , and NetVanta(R) Routers and Switches. We anticipate this momentum will continue to increase as we progress through the year." The Company also announced that its Board of Directors declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. a cash dividend for the first quarter of 2006. The quarterly cash dividend is $0.09 per common share to be paid to holders of record at the close of business on May 4, 2006. The ex-dividend date Ex-dividend date The first day of trading when the buyer of a stock is no longer entitled to the most recently announced dividend payment ( i.e. the trade will settle the day after the record date, too late for the buyer to appear on the shareholder record and receive the dividend. is May 2, 2006 and the payment date is May 18, 2006. The Company also confirmed that its first quarter conference call will be held Tuesday Tuesday: see week. , April 18 at 9:30 a.m. Central Time. Guidance for the second quarter and year 2006 will be issued during this conference call. This conference call will be web cast live through StreetEvents.com. To listen, simply visit the Investor Relations Investor relations The process by which the corporation communicates with its investors. site at http://www.adtran.com or http://streetevents.com approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 10 minutes prior to the start of the call and click on the conference call link provided. An online replay of the conference call will be available for seven days at http://streetevents.com. In addition, 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 at http://www.adtran.com for at least 12 months following the call. ADTRAN, Inc. is one of the world's most successful network access equipment suppliers, with an 18-year history of profitability and a portfolio of more than 1,400 solutions for use in the last mile of today's telecommunications networks A telecommunications network is a of telecommunications links and nodes arranged so that messages may be passed from one part of the network to another over multiple links and through various nodes. . Widely deployed by carriers and enterprises alike, ADTRAN solutions enable voice, data, video, and Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the communications across copper, fiber, and wireless network infrastructures. ADTRAN solutions are currently in use by every major U.S. service provider and many global ones, as well as by thousands of public, private and governmental organizations worldwide. For more information, contact the company at 800 9ADTRAN (800 923-8726) or via email at info@adtran.com. On the Web, visit www.adtran.com. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December December: see month. 31, 2005. These risks and uncertainties could cause actual results to differ materially from those in the forward-looking statements included in this press release. This release includes non-GAAP net income, non-GAAP earnings per share data, and other non-GAAP line items from the Non-GAAP Information table in this release, including costs of sales, gross profit, selling, general and administrative expenses, research and development expenses, profit from operations, income before provision for income taxes and provision for income taxes. These measures exclude the effect of stock compensation expense for employee stock options associated with the application of SFAS 123R, which ADTRAN adopted effective January 1, 2006. These measures are not in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with, or an alternative for, generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting and may be different from non-GAAP measures used by other companies. ADTRAN believes that the presentation of the non-GAAP measures, when shown in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the corresponding GAAP measures, provides useful information to management and investors regarding financial and business trends relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc its financial condition and results of operations. ADTRAN further believes that where adjustments used in calculating non-GAAP net income and non-GAAP earnings per share are based on specific, identified charges that impact different line items in the statements of income, it is useful to investors to know how these specific line items are affected by these adjustments. In particular, as ADTRAN begins to apply SFAS 123R, it believes that it is useful to investors to understand how the expenses associated with the application of SFAS 123R are reflected in its results of operations. The presentation of these non-GAAP measures permits both investors and management to more readily compare past results, which do not include the impact of SFAS 123R, with future results, and to better understand ADTRAN's performance over the periods presented.
Condensed Balance Sheet
March 31, 2006
Unaudited
(In thousands)
March 31,
2006
-----------
Assets
Cash & cash equivalents $ 110,160
Short-term investments 160,031
Accounts receivable (net) 62,555
Other receivables 3,066
Inventory (net) 48,160
Prepaid expenses and other current assets 8,654
-----------
Total current assets 392,626
Equipment (net) 19,682
Land 4,263
Bldg. & land improvements (net) 59,771
Other assets 498
Long-term investments 185,132
-----------
Total long-term assets 269,346
-----------
Total assets $ 661,972
===========
Liabilities and stockholders' equity
Accounts payable $ 19,334
Accrued wages and benefits 6,982
Accrued liabilities 20,798
-----------
Total current liabilities 47,114
Deferred tax liabilities 3,615
Other non-current liabilities 4,671
Long term-debt 50,000
-----------
Total long-term liabilities 58,286
Total liabilities 105,400
Stockholders' equity 556,572
-----------
-----------
Total liabilities and stockholders' equity $ 661,972
===========
Condensed Statements of Income
For the three month periods ended March 31, 2006 and 2005
(In thousands, except per share data)
Unaudited
Three Months Three Months
Ended Ended
March 31, 2006 March 31, 2005
-------------- --------------
Sales $108,648 $104,577
Cost of Sales 44,140 44,349
-------------- --------------
Gross Profit 64,508 60,228
Selling, general and administrative
expenses 24,766 22,949
Research and development expenses 17,766 16,343
-------------- --------------
Profit from operations 21,976 20,936
Interest expense (634) (583)
Other income, net 4,116 2,848
-------------- --------------
Income before provision for income taxes 25,458 23,201
Provision for income taxes (9,203) (7,981)
-------------- --------------
Net income (1) $16,255 $15,220
============== ==============
Weighted average shares
Basic 76,655 75,755
Diluted (2) 78,909 77,318
Earnings per common share
Basic $0.21 $0.20
Diluted (2) $0.21 $0.20
(1) Net income for the first quarter of fiscal 2006 included stock-
based compensation expense recognized related to employee stock
options, net of tax, of $1.7 million under SFAS 123(R). There was no
stock-based compensation expense related to employee stock options
under SFAS 123 in fiscal 2005 because we did not adopt the
recognition provisions of SFAS 123.
(2) Assumes exercise of dilutive stock options calculated under the
treasury stock method.
Non-GAAP Information (1) (2)
For the three month periods ended March 31, 2006 and 2005
(In thousands, except per share data)
Unaudited
Non-GAAP
(excludes
effects
of SFAS
123R) GAAP GAAP
Three Three Three
Months Effects of Months Months
Ended SFAS 123R Ended Ended
March 31, March 31, March 31, March 31,
2006 2006 2006 2005
--------- --------- --------- ---------
Sales $108,648 $0 $108,648 $104,577
Cost of Sales (a) 44,057 83 44,140 44,349
--------- --------- --------- ---------
Gross Profit (a) 64,591 83 64,508 60,228
Selling, general and
administrative expenses (a) 23,809 957 24,766 22,949
Research and development
expenses (a) 16,839 927 17,766 16,343
--------- --------- --------- ---------
Profit from operations (a) 23,943 (1,967) 21,976 20,936
Interest expense (634) 0 (634) (583)
Other income, net 4,116 0 4,116 2,848
--------- --------- --------- ---------
Income before provision for
income taxes (a) 27,425 (1,967) 25,458 23,201
Provision for income taxes (b) (9,459) 256 (9,203) (7,981)
--------- --------- --------- ---------
Net income (a)(b) $17,966 ($1,711) $16,255 $15,220
========= ========= ========= =========
Weighted average shares
Basic 76,655 76,655 76,655 75,755
Diluted (3) 78,909 78,909 78,909 77,318
Earnings per common share
Basic $0.23 ($0.02) $0.21 $0.20
Diluted (3) $0.23 ($0.02) $0.21 $0.20
(1) A reconciliation between net income on a GAAP basis and non-GAAP
net income including items (a) through (b) is provided in the table
below.
(2) There was no stock-based compensation expense recorded in fiscal
2005, as we had adopted the footnote disclosure only provision of
SFAS 123.
(3) Assumes exercise of dilutive stock options calculated under the
treasury stock method.
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME AND EARNINGS PER SHARE
(In thousands)
Quarter Ended Quarter Ended
March 31, 2006 March 31, 2005
GAAP Net Income $16,255 $15,220
(a) Stock-based compensation expense
related to employee stock options (1) 1,967 0
(b) Income tax effect of stock-based
compensation expense (256) 0
-------------- ---------------
Non-GAAP Net Income $17,966 $15,220
============== ===============
GAAP Earnings per common share - diluted $0.21 $0.20
Per share effect of stock-based
compensation expense $0.02 N/A
-------------- ---------------
Non-GAAP Earnings per common share -
diluted $0.23 $0.20
============== ===============
(1) For the first quarter of 2006, stock-based compensation expense
was allocated as follows: $83 to cost of sales expense, $957 to
selling, general and administrative expense, and $927 to research and
development expense.
COMPARISON OF NET INCOME INCLUDING THE EFFECT OF STOCK-BASED
COMPENSATION EXPENSE RELATED TO EMPLOYEE STOCK OPTIONS UNDER SFAS
123(R) and SFAS 123 (1)
(In thousands)
Quarter Ended Quarter Ended
March 31, 2006 March 31, 2005
Net Income - as reported for the prior
period N/A $15,220
Stock-based compensation expense related
to employee stock options $1,967 2,598
Tax benefit (256) (367)
-------------- --------------
Stock-based compensation expense related
to employee stock options, net of tax $1,711 2,231
==============
--------------
Net income, including the effect of
stock-based compensation expense $16,255 $12,989
============== ==============
Diluted net income per share - as
reported for the prior period N/A $0.20
Diluted net income per share, including
the effect of stock-based compensation
expense $0.21 $0.17
(1)Stock-based compensation expense prior to January 1, 2006 is based
on the pro forma application of SFAS 123. Net income and net income
per share prior to January 1, 2006 did not include stock-based
compensation for employee stock options because ADTRAN did not adopt
the recognition provisions of SFAS 123.
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