Adtran, inc. reports preliminary earnings for the second quarter 2019 and declares quarterly cash dividend
Huntsville, ala.--(business wire)--adtran, inc. (nasdaq:adtn) reported preliminary financial results for the second quarter 2019. preliminary financial results the company’s reported results for the quarter and year to date ended june 30, 2019 are preliminary due to the company’s ongoing assessment of the reasonableness of its current and previously reported excess and obsolete inventory reserves (“e&o reserves”). the company is working diligently to finalize its assessment and evaluate the materiality of adjustments to the reserve, if any, and determine the appropriate method of correction to its current and previously reported financial results, as necessary. in addition to assessing the reasonableness of its e&o reserves, the company is also assessing inventory related internal control deficiencies which may result in the identification of material weaknesses. if material changes to our preliminary results do occur, an updated press release will be issued. quarterly results for the quarter, revenue was $156.4 million compared to $128.0 million for the second quarter of 2018. net income is estimated to be $5.1 million compared to a net loss of $7.7 million for the second quarter of 2018. earnings per share, assuming dilution, is estimated to be $0.11 compared to a loss per share of $0.16 for the second quarter of 2018. non-gaap net income is estimated to be $6.9 million compared to a net loss of $4.6 million for the second quarter of 2018. non-gaap earnings per share, assuming dilution, is estimated to be $0.14 compared to a loss per share of $0.10 for the second 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 or other contingencies, amortization of pension actuarial losses, and a reimbursement from a claim settlement. 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 continued progress and solid performance for the second quarter of 2019. revenue for the quarter grew 22% year-over-year and 9% over the previous quarter. our execution continues to be strong across north america, latam, emea, and the pacific rim with diverse and well-balanced material revenue contributions from each of these regions. this sustained progress underscores the company’s global impact as we help our customers build their best networks.” the company also announced that its board of directors declared a cash dividend for the second 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 august 1, 2019. the ex-dividend date is july 31, 2019, and the payment date is august 15, 2019. the company confirmed that it will hold a conference call to discuss its second quarter preliminary results thursday, july 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, 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 impact of the company’s assessment of its excess and obsolete inventory reserve on its current and previously reported financial results and internal control over financial reporting, 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) june 30, december 31, 2019 2018 assets cash and cash equivalents $ 106,817 $ 105,504 short-term investments 30,888 3,246 accounts receivable, net 116,661 99,385 other receivables 24,984 36,699 inventory, net(1) 96,379 99,848 prepaid expenses and other current assets 8,909 10,744 total current assets(1) 384,638 355,426 property, plant and equipment, net 78,813 80,635 deferred tax assets, net(1) 38,998 37,187 goodwill 6,968 7,106 intangibles, net 30,503 33,183 other assets 13,820 5,668 long-term investments 87,280 108,822 total assets(1) $ 641,020 $ 628,027 liabilities and stockholders' equity accounts payable $ 63,827 $ 60,054 bonds payable 25,600 1,000 unearned revenue 12,910 17,940 accrued expenses 14,331 11,746 accrued wages and benefits 19,126 14,752 income tax payable, net(1) 9,741 12,518 total current liabilities 145,535 118,010 non-current unearned revenue 4,265 5,296 other non-current liabilities 44,181 33,842 bonds payable — 24,600 total liabilities 193,981 181,748 stockholders' equity(1) 447,039 446,279 total liabilities and stockholders' equity(1) $ 641,020 $ 628,027 (1) results are subject to change based on the company’s ongoing assessment of the reasonableness of its excess and obsolete inventory reserve. consolidated statements of income (unaudited) (in thousands, except per share data) three months ended six months ended june 30, june 30, 2019 2018 2019 2018 sales products $ 139,167 $ 115,063 $ 264,989 $ 220,316 services 17,224 12,985 35,193 28,538 total sales 156,391 128,048 300,182 248,854 cost of sales products(1) 78,916 69,629 149,650 138,241 services 11,201 8,423 23,646 20,884 total cost of sales(1) 90,117 78,052 173,296 159,125 gross profit(1) 66,274 49,996 126,886 89,729 selling, general and administrative expenses 33,619 32,080 68,751 65,611 research and development expenses 32,064 30,729 63,711 63,578 gain on contingency (1,230 ) — (1,230 ) — operating income (loss)(1) 1,821 (12,813 ) (4,346 ) (39,460 ) interest and dividend income 692 913 1,283 1,779 interest expense (127 ) (132 ) (254 ) (264 ) net investment gain 2,485 990 8,411 893 other income (expense), net (205 ) (217 ) 650 (274 ) gain on bargain purchase of a business, net — — — 11,322 income (loss) before provision for income taxes(1) 4,666 (11,259 ) 5,744 (26,004 ) benefit for income taxes(1) 385 3,589 77 7,520 net income (loss)(1) $ 5,051 $ (7,670 ) $ 5,821 $ (18,484 ) weighted average shares outstanding – basic 47,802 47,856 47,792 48,043 weighted average shares outstanding – diluted 48,036 (2 ) 47,856 47,939 (2 ) 48,043 earnings (loss) per common share – basic(1) $ 0.11 $ (0.16 ) $ 0.12 $ (0.38 ) earnings (loss) per common share – diluted(1) $ 0.11 (2 ) $ (0.16 ) $ 0.12 (2 ) $ (0.38 ) (1) results are subject to change based on the company’s ongoing assessment of the reasonableness of its excess and obsolete inventory reserve. (2) assumes exercise of dilutive stock options calculated under the treasury stock method. consolidated statements of comprehensive income (loss) (unaudited) (in thousands) three months ended six months ended june 30, june 30, 2019 2018 2019 2018 net income (loss)(1) $ 5,051 $ (7,670 ) $ 5,821 $ (18,484 ) other comprehensive income (loss), net of tax net unrealized gains (losses) on available-for-sale securities 107 104 292 (3,308 ) defined benefit plan adjustments 150 5 271 67 foreign currency translation 540 (3,424 ) (620 ) (2,582 ) other comprehensive income (loss), net of tax 797 (3,315 ) (57 ) (5,823 ) comprehensive income (loss), net of tax(1) $ 5,848 $ (10,985 ) $ 5,764 $ (24,307 ) consolidated statements of cash flows (unaudited) (in thousands) six months ended june 30, 2019 2018 cash flows from operating activities: net income (loss)(1) $ 5,821 $ (18,484 ) adjustments to reconcile net income (loss) to net cash provided by operating activities: depreciation and amortization 8,912 7,526 amortization of net premium on available-for-sale investments (57 ) 20 net gain on long-term investments (8,411 ) (893 ) net loss on disposal of property, plant and equipment 58 68 gain on contingency (1,230 ) — gain on bargain purchase of a business — (11,322 ) stock-based compensation expense 3,313 3,603 deferred income taxes(1) (1,844 ) (16,384 ) changes in operating assets and liabilities: accounts receivable, net (17,282 ) 66,931 other receivables 11,679 9 inventory, net(1) 3,346 2,063 prepaid expenses and other assets 4,714 10,157 accounts payable, net 5,017 683 accrued expenses and other liabilities 637 2,008 income tax payable(1) (2,658 ) 6,945 net cash provided by operating activities(1) 12,015 52,930 cash flows from investing activities: purchases of property, plant and equipment (4,306 ) (4,183 ) proceeds from sales and maturities of debt and equity investments 24,306 86,436 purchases of debt and equity investments (21,544 ) (89,801 ) acquisition of business 13 (7,806 ) net cash used in investing activities (1,531 ) (15,354 ) cash flows from financing activities: proceeds from stock option exercises 526 369 purchases of treasury stock (184 ) (12,774 ) dividend payments (8,604 ) (8,679 ) net cash used in financing activities (8,262 ) (21,084 ) net increase in cash and cash equivalents 2,222 16,492 effect of exchange rate changes (909 ) (2,606 ) cash and cash equivalents, beginning of period 105,504 86,433 cash and cash equivalents, end of period $ 106,817 $ 100,319 supplemental disclosure of non-cash investing activities: purchases of property, plant and equipment included in accounts payable $ 205 $ 209 (1) results are subject to change based on the company’s ongoing assessment of the reasonableness of its excess and obsolete inventory reserve. supplemental information reconciliation of operating income (loss) to non-gaap operating income (loss) (unaudited) three months ended june 30, six months ended june 30, 2019 2018 2019 2018 operating income (loss)(1) $ 1,821 $ (12,813 ) $ (4,346 ) $ (39,460 ) acquisition related expenses, amortizations and adjustments 1,506 (2) 1,142 (8) 3,003 (11) 1,725 (14) stock-based compensation expense 1,454 (3) 1,784 (9) 3,313 (12) 3,603 (15) restructuring expenses 1,400 (4) 1,025 (10) 3,463 (13) 6,975 (16) deferred compensation income (expense) 683 (5) 132 (5) 2,807 (5) (254 ) (5) gain on contingency (1,230 ) (6) — (1,230 ) (6) — settlement income (746 ) (7) — (746 ) (7) — non-gaap operating income (loss)(1) $ 4,888 $ (8,730 ) $ 6,264 $ (27,411 ) (1) results are subject to change based on the company’s ongoing assessment of the reasonableness of its excess and obsolete inventory reserve. (2) $0.4 million is included in total cost of sales, $0.6 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. (3) $0.1 million is included in total cost of sales, $0.7 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. (4) $0.1 million is included in total cost of sales, $0.7 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. (5) 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. (6) includes gain related to unearned contingent liabilities recognized upon the acquisition of a business in november 2018. (7) 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. (8) $0.4 million is included in total cost of sales, $0.3 million is included in selling, general and administrative expenses and $0.4 million is included in research and development expenses on the consolidated statements of income. (9) $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. (10) $0.4 million is included in total cost of sales and $0.6 million is included in selling, general and administrative expenses on the consolidated statements of income. (11) $0.9 million is included in total cost of sales, $1.1 million is included in selling, general and administrative expenses and $1.0 is included in research and development expenses on the consolidated statements of income. (12) $0.2 million is included in total cost of sales, $1.7 million is included in selling, general and administrative expenses and $1.4 million is included in research and development expenses on the consolidated statements of income. (13) $0.7 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. (14) $0.5 million is included in total cost of sales, $0.6 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. (15) $0.2 million is included in total cost of sales, $2.0 million is included in selling, general and administrative expenses and $1.4 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, $2.4 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 income (loss) and earnings (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 june 30, six months ended june 30, 2019 2018 2019 2018 net income (loss)(1) $ 5,051 $ (7,670 ) $ 5,821 $ (18,484 ) acquisition related expenses, amortizations and adjustments 1,506 1,142 3,003 1,725 stock-based compensation expense 1,454 1,784 3,313 3,603 restructuring expenses 1,400 1,025 3,463 6,975 pension expense(2) 199 62 402 126 gain on contingency (1,230 ) — (1,230 ) — settlement income (746 ) — (746 ) — gain on bargain purchase of a business — — — (11,322 ) tax effect of adjustments to net income (loss) (714 ) (927 ) (2,238 ) (3,033 ) non-gaap net income (loss)(1) $ 6,920 $ (4,584 ) $ 11,788 $ (20,410 ) weighted average shares outstanding – basic 47,782 48,232 47,792 48,043 weighted average shares outstanding – diluted 47,853 48,292 47,939 48,043 earnings (loss) per common share - basic(1) $ 0.11 $ (0.16 ) $ 0.12 $ (0.38 ) earnings (loss) per common share - diluted(1) $ 0.11 $ (0.16 ) $ 0.12 $ (0.38 ) non-gaap earnings (loss) per common share - basic(1) $ 0.14 $ (0.10 ) $ 0.25 $ (0.42 ) non-gaap earnings (loss) per common share - diluted(1) $ 0.14 $ (0.09 ) $ 0.25 $ (0.42 ) (1) results are preliminary and subject to change based on the company’s final calculation of its excess and obsolete inventory reserve. (2) includes amortization of actuarial losses related to the company's pension plan for employees in certain foreign countries.
