ADTRAN, Inc. Reports Second Quarter 2006 Results, Declares Quarterly Cash Dividend and Announces Additional Five Million Share Repurchase Plan.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 second quarter of 2006. Sales increased to $122,296,000 for the quarter compared to $118,873,000 for the second quarter of 2005. Non-GAAP net income increased to $22,619,000 for the quarter compared to GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). net income of $20,719,000 for the second 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 $0.29 for the quarter compared to GAAP earnings per share, assuming dilution, of $0.27 for the second quarter of 2005. For the quarter, GAAP net income was $20,814,000 and GAAP earnings per share, assuming dilution, were $0.27. Non-GAAP net income and non-GAAP earnings per share for the second 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 modified mod·i·fy v. mod·i·fied, mod·i·fy·ing, mod·i·fies v.tr. 1. To change in form or character; alter. 2. 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 59.2% compared to 58.5% for the second 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, "During the quarter, HDSL See DSL. HDSL - High bit-rate Digital Subscriber Line revenues returned to normal levels and we continued to see the results of share gains in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. with our Broadband Access See broadband and wireless broadband. and Optical Access products. Our outlook for the Company remains very positive as we continue to build momentum in our primary growth areas." The Company also announced that its Board of Directors has authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: the repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. of an additional 5,000,000 shares of the Company's common stock to commence upon completion of the repurchase plan announced February February: see month. 11, 2005. During the second quarter of 2006, the Company repurchased 3,355,000 shares of its common stock under the February 2005 plan. There are 1,359,000 shares remaining to be repurchased under the February 2005 plan. Upon completion of the current plan, the new plan will be implemented through open market purchases from time to time as conditions warrant. 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 second 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 August 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 August 2, 2006 and the payment date is August 18, 2006. The Company also confirmed that its second quarter conference call will be held Tuesday Tuesday: see week. , July July: see month. 18 at 9:30 a.m. Central Time. Guidance for the third 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
June 30, 2006
Unaudited
(In thousands)
June 30,
2006
-------------
Assets
Cash & cash equivalents $34,668
Short-term investments 159,605
Accounts receivable (net) 64,687
Other receivables 4,694
Inventory (net) 47,201
Prepaid expenses and other current assets 9,780
-------------
Total current assets 320,635
Equipment (net) 19,691
Land 4,263
Bldg. & land improvements (net) 59,124
Other assets 499
Long-term investments 190,299
-------------
Total long-term assets 273,876
-------------
Total assets $594,511
=============
Liabilities and stockholders' equity
Accounts payable $26,997
Accrued wages and benefits 9,483
Accrued liabilities 13,467
-------------
Total current liabilities 49,947
Deferred tax liabilities 1,576
Other non-current liabilities 4,567
Long term-debt 50,000
-------------
Total long-term liabilities 56,143
Total liabilities 106,090
Stockholders' equity 488,421
-------------
-------------
Total liabilities and stockholders' equity $594,511
=============
Condensed Statements of Income
For the three and six month periods ended June 30, 2006 and 2005
(In thousands, except per share data)
Unaudited
Three Months Ended Year to Date Ended
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
---------- ---------- ---------- ----------
Sales $122,296 $118,873 $230,944 $223,450
Cost of Sales 49,865 49,327 94,005 93,676
---------- ---------- ---------- ----------
Gross Profit 72,431 69,546 136,939 129,774
Selling, general and
administrative expenses 26,444 24,297 51,210 47,246
Research and development
expenses 17,469 16,367 35,235 32,710
---------- ---------- ---------- ----------
Profit from operations 28,518 28,882 50,494 49,818
Interest expense (633) (625) (1,267) (1,208)
Other income, net 4,397 2,995 8,513 5,843
---------- ---------- ---------- ----------
Income before provision for
income taxes 32,282 31,252 57,740 54,453
Provision for income taxes (11,468) (10,533) (20,671) (18,514)
---------- ---------- ---------- ----------
Net income (1) $20,814 $20,719 $37,069 $35,939
========== ========== ========== ==========
Weighted average shares
Basic 75,324 75,341 75,986 75,543
Diluted (2) 77,284 77,495 78,098 77,437
Earnings per common share
Basic $0.28 $0.28 $0.49 $0.48
Diluted (2) $0.27 $0.27 $0.47 $0.46
(1) Net income for the three and six months ended June 30, 2006
included stock-based compensation expense recognized related to
stock options, net of tax, of $1.8 million and $3.5 million,
respectively, under SFAS 123(R). There was no stock-based
compensation expense related to stock options under SFAS 123 in
the three and six month period ended June 30, 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 and six month periods ended June 30, 2006 and 2005
(In thousands, except per share data)
Unaudited
Non-GAAP
(excludes
effects of Effects of
SFAS 123R) SFAS 123R GAAP GAAP
Three Months Three Months Three Months Three Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2006 2006 2006 2005
------------ ------------ ------------ ------------
Sales $122,296 $0 $122,296 $118,873
Cost of Sales (a) 49,778 87 49,865 49,327
------------ ------------ ------------ ------------
Gross Profit (a) 72,518 87 72,431 69,546
Selling, general
and administrative
expenses (a) 25,441 1,003 26,444 24,297
Research and
development
expenses (a) 16,497 972 17,469 16,367
------------ ------------ ------------ ------------
Profit from
operations (a) 30,580 2,062 28,518 28,882
Interest expense (633) 0 (633) (625)
Other income, net 4,397 0 4,397 2,995
------------ ------------ ------------ ------------
Income before
provision for
income taxes (a) 34,344 2,062 32,282 31,252
Provision for
income taxes (b) (11,725) (257) (11,468) (10,533)
------------ ------------ ------------ ------------
Net income (a)(b) $22,619 $1,805 $20,814 $20,719
============ ============ ============ ============
Weighted average
shares
Basic 75,324 75,324 75,324 75,341
Diluted (3) 77,161 77,284 77,284 77,495
Earnings per common
share
Basic $0.30 ($0.02) $0.28 $0.28
Diluted (3) $0.29 ($0.02) $0.27 $0.27
Non-GAAP
(excludes
effects of Effects of
SFAS 123R) SFAS 123R GAAP GAAP
Six Months Six Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2006 2006 2006 2005
------------ ------------ ------------ ------------
Sales $230,944 $0 $230,944 $223,450
Cost of Sales (a) 93,835 170 94,005 93,676
------------ ------------ ------------ ------------
Gross Profit (a) 137,109 170 136,939 129,774
Selling, general
and administrative
expenses (a) 49,250 1,960 51,210 47,246
Research and
development
expenses (a) 33,336 1,899 35,235 32,710
------------ ------------ ------------ ------------
Profit from
operations (a) 54,523 4,029 50,494 49,818
Interest expense (1,267) 0 (1,267) (1,208)
Other income, net 8,513 0 8,513 5,843
------------ ------------ ------------ ------------
Income before
provision for
income taxes (a) 61,769 4,029 57,740 54,453
Provision for
income taxes (b) (21,184) (513) (20,671) (18,514)
------------ ------------ ------------ ------------
Net income (a)(b) $40,585 $3,516 $37,069 $35,939
============ ============ ============ ============
Weighted average
shares
Basic 75,986 75,986 75,986 75,543
Diluted (3) 78,026 78,098 78,098 77,437
Earnings per common
share
Basic $0.53 ($0.04) $0.49 $0.48
Diluted (3) $0.52 ($0.05) $0.47 $0.46
(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 Quarter Year to Year to
Ended Ended Date Date
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
GAAP Net Income $20,814 $20,719 $37,069 $35,939
(a) Stock-based compensation
expense related to stock
options (1) 2,062 0 4,029 0
(b) Income tax effect of stock-
based compensation expense (257) 0 (513) 0
-------- -------- -------- --------
Non-GAAP Net Income $22,619 $20,719 $40,585 $35,939
======== ======== ======== ========
GAAP Earnings per common share -
diluted $0.27 $0.27 $0.47 $0.46
Per share effect of stock-based
compensation expense $0.02 N/A $0.05 N/A
-------- -------- -------- --------
Non-GAAP Earnings per common share
- diluted $0.29 $0.27 $0.52 $0.46
======== ======== ======== ========
(1) For the three months ended June 30, 2006, stock-based compensation
expense was allocated as follows: $87 to cost of sales expense,
$1,003 to selling, general and administrative expense, and $972 to
research and development expense.
For the six months ended June 30, 2006, stock-based compensation
expense was allocated as follows: $170 to cost of sales expense,
$1,960 to selling, general and administrative expense, and $1,899
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 Year to Date
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
Net Income as reported $20,814 $20,719 $37,069 $35,939
Plus: total stock-based
compensation included in the
determination of reported 1,805 - 3,516 -
net income, net of tax
Less: total stock-based
compensation expense determined
under fair value based
method for all awards, net of tax (1,805) (2,039) (3,516) (4,270)
-------- -------- -----------------
Non-GAAP net income for
calculation of diluted earnings
per share $20,814 $18,680 $37,069 $31,669
======== ======== =================
Earnings per share
Diluted - as reported $0.27 $0.27 $0.47 $0.46
Diluted - non-GAAP n/a $0.24 n/a $0.41
(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 stock options because ADTRAN did not
adopt the recognition provisions of SFAS 123.
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