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ADTRAN, Inc. Reports Earnings for the Fourth Quarter of 2020 and Declares Quarterly Cash Dividend

HUNTSVILLE, Ala.–(BUSINESS WIRE)–ADTRAN, Inc. (NASDAQ: ADTN) (“ADTRAN” or the “Company”) today announced financial results for the fourth quarter of 2020. For the quarter, revenue was $130.1 million. Net income for the fourth quarter of 2020 was $6.1 million and earnings per share, assuming dilution, was $0.13 per share. Non-GAAP net income was $5.2 million and non-GAAP earnings per share, assuming dilution, was $0.11 per share. Non-GAAP net income and non-GAAP earnings per share exclude stock-based compensation expense, acquisition-related expenses and amortizations, restructuring expenses, amortization of pension actuarial losses, valuation allowance related to our deferred tax assets, non-cash deferred compensation, and other one-time adjustments. The reconciliations between GAAP net income and GAAP earnings per share to non-GAAP net income and non-GAAP earnings per share are set forth in the table provided below.

ADTRAN Chairman and Chief Executive Officer Tom Stanton stated, “We saw substantial growth in our Tier-2 and Tier-3 service provider segments in the U.S. and a solid increase in fiber deployments in Europe. We expect that our fiber access solutions will continue to be adopted by customers around the world.”

The Company also announced that its Board of Directors declared a cash dividend for the fourth quarter of 2020. The quarterly cash dividend of $0.09 per common share is to be paid to the Company’s stockholders of record as of the close of business on February 18, 2021. The payment date will be March 4, 2021.

The Company confirmed that it will hold a conference call to discuss its fourth quarter 2020 results on Thursday, February 4, 2021, at 9:30 a.m. Central Time. ADTRAN will webcast this conference call. To listen, simply visit ADTRAN’s Investor Relations site at www.adtran.com/investor approximately 10 minutes prior to the start of the call, click on the event “ADTRAN releases 4th Quarter 2020 Financial Results and Earnings Call,” and click on the Webcast link.

An online replay of the Company’s 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.adtran.com/investor or email 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: (i) those risks and uncertainties related to the continued spread and extent of the impact of the COVID-19 global pandemic, including the speed, depth, geographic reach and duration of the spread, which could lead to a decrease in demand for the Company’s products and services, and which has disrupted, and could lead to further disruptions in, the Company’s supply chain, adversely impacting the operations and financial condition of the Company and its customers; actions that have been taken and that may be taken by the Company, its customers, suppliers and counterparties in response to the pandemic, including the implementation of alternative work arrangements for employees, which may delay the timing of some orders and expected deliveries and which may impact the Company’s ability to mitigate inefficiencies, delays and additional costs in the Company’s product development, sales, marketing and customer service efforts; the legal, regulatory and administrative developments that occur at the federal, state and local levels and in foreign jurisdictions in response to the pandemic, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns; potential disruptions, breaches, or other incidents affecting the proper operation, availability or security of the Company’s or its partners’ information systems; declines in revenues due to declining customer demand and deteriorating macroeconomic conditions; potential increased expenses related to labor, raw materials, freight or other expenditures; the impact of the COVID-19 pandemic on the Company’s liquidity, as well as risks associated with disruptions in the financial markets and the business of financial institutions as a result of the COVID-19 pandemic which could impact the Company from a financial perspective; (ii) those risks and uncertainties related to evolving U.S. and foreign laws and regulations regarding privacy, data protection and other matters, including uncertainty and potential additional compliance obligations arising from the Court of Justice of the European Union’s recent issuance of a decision that invalidated the EU-U.S. Privacy Shield framework as a basis for transfers of personal data from the EU to the U.S.; and (iii) the other risks detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020. 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 tables below non-GAAP operating income (loss), which has been reconciled to operating income (loss), and non-GAAP net income (loss) and non-GAAP earnings (loss) per share – basic and diluted, which have been reconciled to net income (loss) and earnings (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 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 earnings (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, and are not 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 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 Sheets

(Unaudited)

(In thousands)

 

 

December 31,

 

 

December 31,

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

60,161

 

 

$

73,773

 

Restricted cash

 

18

 

 

 

 

Short-term investments

 

3,131

 

 

 

33,243

 

Accounts receivable, net

 

98,827

 

 

 

90,531

 

Other receivables

 

21,531

 

 

 

16,566

 

Inventory, net

 

118,715

 

 

 

98,305

 

Prepaid expenses and other current assets

 

8,293

 

 

 

7,892

 

Total Current Assets

 

310,676

 

 

 

320,310

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

62,399

 

 

 

68,086

 

Deferred tax assets, net

 

9,869

 

 

 

7,561

 

Goodwill

 

6,968

 

 

 

6,968

 

Intangibles, net

 

23,470

 

 

 

27,821

 

Other non-current assets

 

25,425

 

 

 

19,883

 

Long-term investments

 

80,130

 

 

 

94,489

 

Total Assets

$

518,937

 

 

$

545,118

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Accounts payable

$

43,187

 

 

$

44,870

 

Bonds payable

 

 

 

 

24,600

 

Unearned revenue

 

14,092

 

 

 

11,963

 

Accrued expenses and other liabilities

 

13,609

 

 

 

13,876

 

Accrued wages and benefits

 

15,262

 

 

 

13,890

 

Income tax payable, net

 

1,301

 

 

 

3,512

 

Total Current Liabilities

 

87,451

 

 

 

112,711

 

 

 

 

 

 

 

 

 

Non-current unearned revenue

 

6,888

 

 

 

6,012

 

Pension liability

 

18,664

 

 

 

15,886

 

Deferred compensation liability

 

25,866

 

 

 

21,698

 

Other non-current liabilities

 

7,124

 

 

 

8,385

 

Total Liabilities

 

145,993

 

 

 

164,692

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

372,944

 

 

 

380,426

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders’ Equity

$

518,937

 

 

$

545,118

 

Consolidated Statements of Income (Loss)

(Unaudited)

(In thousands, except per share data)

 

 

 

Three Months Ended

 

 

Twelve Months Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Network Solutions

 

$

114,091

 

 

$

96,219

 

 

$

438,015

 

 

$

455,226

 

Services & Support

 

 

16,038

 

 

 

19,568

 

 

 

68,495

 

 

 

74,835

 

Total Sales

 

 

130,129

 

 

 

115,787

 

 

 

506,510

 

 

 

530,061

 

Cost of Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Network Solutions

 

 

65,734

 

 

 

56,324

 

 

 

244,226

 

 

 

263,677

 

Services & Support

 

 

10,878

 

 

 

12,254

 

 

 

44,733

 

 

 

47,217

 

Total Cost of Sales

 

 

76,612

 

 

 

68,578

 

 

 

288,959

 

 

 

310,894

 

Gross Profit

 

 

53,517

 

 

 

47,209

 

 

 

217,551

 

 

 

219,167

 

Selling, general and administrative expenses

 

 

29,348

 

 

 

30,625

 

 

 

113,972

 

 

 

130,288

 

Research and development expenses

 

 

27,493

 

 

 

30,654

 

 

 

113,287

 

 

 

126,200

 

Asset impairments

 

 

 

 

 

 

 

 

65

 

 

 

3,872

 

Gain on contingency

 

 

 

 

 

 

 

 

 

 

 

(1,230

)

Operating Loss

 

 

(3,324

)

 

 

(14,070

)

 

 

(9,773

)

 

 

(39,963

)

Interest and dividend income

 

 

905

 

 

 

872

 

 

 

1,936

 

 

 

2,765

 

Interest expense

 

 

(4

)

 

 

(129

)

 

 

(5

)

 

 

(511

)

Net investment gain

 

 

3,031

 

 

 

3,239

 

 

 

4,850

 

 

 

11,434

 

Other income (expense), net

 

 

(947

)

 

 

(768

)

 

 

(3,254

)

 

 

1,498

 

Loss Before Income Taxes

 

 

(339

)

 

 

(10,856

)

 

 

(6,246

)

 

 

(24,777

)

Income tax (expense) benefit

 

 

6,453

 

 

 

(768

)

 

 

8,624

 

 

 

(28,205

)

Net Income (Loss)

 

$

6,114

 

 

$

(11,624

)

 

$

2,378

 

 

$

(52,982

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

 

48,111

 

 

 

47,936

 

 

 

47,996

 

 

 

47,836

 

Weighted average shares outstanding – diluted

 

 

48,532

 

(1)

 

47,936

 

 

 

48,288

 

(1)

 

47,836

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share – basic

 

$

0.13

 

 

$

(0.24

)

 

$

0.05

 

 

$

(1.11

)

Earnings (loss) per common share – diluted

 

$

0.13

 

(1)

$

(0.24

)

 

$

0.05

 

(1)

$

(1.11

)

 

(1) Assumes exercise of dilutive stock options calculated under the treasury stock method.

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Twelve Months Ended

 

 

 

December 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

2,378

 

 

$

(52,982

)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

16,627

 

 

 

17,771

 

Asset impairments

 

 

65

 

 

 

3,872

 

Gain on investments

 

 

(5,802

)

 

 

(11,434

)

Stock-based compensation expense

 

 

6,834

 

 

 

6,962

 

Deferred income taxes

 

 

(1,356

)

 

 

30,070

 

Gain on contingency payment

 

 

 

 

 

(1,230

)

Gain on life insurance proceeds

 

 

 

 

 

(1,000

)

Other

 

 

216

 

 

 

(33

)

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(7,269

)

 

 

8,282

 

Other receivables

 

 

(4,732

)

 

 

20,046

 

Inventory, net

 

 

(18,840

)

 

 

1,252

 

Prepaid expenses and other assets

 

 

(5,239

)

 

 

2,749

 

Accounts payable, net

 

 

(2,199

)

 

 

(13,494

)

Accrued expenses and other liabilities

 

 

5,093

 

 

 

(4,598

)

Income taxes payable

 

 

(2,294

)

 

 

(8,705

)

Net cash used in operating activities

 

 

(16,518

)

 

 

(2,472

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(6,413

)

 

 

(9,494

)

Proceeds from disposals of property, plant and equipment

 

 

2

 

 

 

 

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

 

 

105,100

 

 

 

47,268

 

Purchases of available-for-sale investments

 

 

(56,767

)

 

 

(48,578

)

Acquisition of note receivable

 

 

(523

)

 

 

 

Life insurance proceeds received

 

 

 

 

 

1,000

 

Acquisition of business

 

 

 

 

 

13

 

Net cash provided by (used in) investing activities

 

 

41,399

 

 

 

(9,791

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Dividend payments

 

 

(17,334

)

 

 

(17,212

)

Repayment of bonds payable

 

 

(24,600

)

 

 

 

Tax withholdings related to stock-based compensation settlements

 

 

(1,043

)

 

 

 

Proceeds from stock option exercises

 

 

 

 

 

526

 

Purchases of treasury stock

 

 

 

 

 

(184

)

Payments on long-term debt

 

 

 

 

 

(1,000

)

Net cash used in financing activities

 

 

(42,977

)

 

 

(17,870

)

Net decrease in cash and cash equivalents

 

 

(18,096

)

 

 

(30,133

)

Effect of exchange rate changes

 

 

4,502

 

 

 

(1,598

)

Cash, cash equivalents and restricted cash, beginning of year

 

 

73,773

 

 

 

105,504

 

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash, end of year

 

$

60,179

 

 

$

73,773

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Cash paid during the year for interest

 

$

24

 

 

$

512

 

Cash paid during the year for income taxes

 

$

7,609

 

 

$

9,357

 

Supplemental disclosure of non-cash investing activities

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment included in accounts payable

 

$

108

 

 

$

90

 

Supplemental Information

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

(Unaudited)

 

 

Three Months ended

December 31,

 

 

 

Twelve Months ended

December 31,

 

 

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

 

Operating Loss

$

(3,324

)

 

 

$

(14,070

)

 

 

$

(9,773

)

 

 

$

(39,963

)

 

Acquisition related expenses, amortizations and adjustments

 

1,051

 

(1)

 

 

1,357

 

(5)

 

 

4,550

 

(8)

 

 

5,703

 

(13)

Stock-based compensation expense

 

1,778

 

(2)

 

 

1,778

 

(6)

 

 

6,834

 

(9)

 

 

6,962

 

(14)

Restructuring expenses

 

2,581

 

(3)

 

 

1,356

 

(7)

 

 

6,229

 

(10)

 

 

6,014

 

(15)

Deferred compensation adjustments

 

2,172

 

(4)

 

 

536

 

(4)

 

 

2,937

 

(4)

 

 

2,767

 

(4)

Asset impairments

 

 

 

 

 

 

 

 

 

65

 

(11)

 

 

3,872

 

(11)

Settlement income

 

 

 

 

 

 

 

 

 

(28

)

(12)

 

 

(746

)

(12)

Gain on contingency

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,230

)

(16)

Non-GAAP Operating Income (Loss)

$

4,258

 

 

 

$

(9,043

)

 

 

$

10,814

 

 

 

$

(16,621

)

 

     

(1) $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.

(2) $0.1 million is included in total cost of sales, $1.1 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.

(3) $0.2 million is included in total cost of sales, $0.2 million is included in selling, general and administrative expenses and $2.2 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 per ASU 2016-01, all of which is included in selling, general and administrative expenses on the consolidated statements of income.

(5) $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.

(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) $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.

(8) $0.3 million is included in total cost of sales, $2.3 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, $4.0 million is included in selling, general and administrative expenses and $2.4 million is included in research and development expenses on the consolidated statements of income.

(10) $0.5 million is included in total cost of sales, $1.8 million is included in selling, general and administrative expenses and $3.9 million is included in research and development expenses on the consolidated statements of income.

(11) Includes abandonment of certain information technology projects.

(12) Includes income related to certain freight forwarder claim settlements, all of which is included in total cost of sales on the consolidated statements of income.

(13) $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.

(14) $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.

(15) $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.

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

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

December 31,

 

 

Twelve Months ended

December 31,

 

 

2020

 

 

 

2019

 

 

2020

 

 

 

2019

 

Net Income (Loss)

$

6,114

 

 

 

$

(11,624

)

 

$

2,378

 

 

 

$

(52,982

)

Acquisition related expenses, amortizations and adjustments

 

1,051

 

 

 

 

1,357

 

 

 

4,550

 

 

 

 

5,703

 

Stock-based compensation expense

 

1,778

 

 

 

 

1,778

 

 

 

6,834

 

 

 

 

6,962

 

Restructuring expenses

 

2,581

 

 

 

 

1,356

 

 

 

6,229

 

 

 

 

6,014

 

Pension expense(1)

 

250

 

 

 

 

195

 

 

 

970

 

 

 

 

795

 

Valuation allowance

 

(5,420

)

 

 

 

5,723

 

 

 

(2,798

)

 

 

 

42,778

 

Deferred compensation adjustments

 

601

 

(2)

 

 

 

 

 

(831

)

(2) (3)

 

 

 

Asset impairments

 

 

 

 

 

 

 

 

65

 

 

 

 

3,872

 

Settlement income

 

 

 

 

 

 

 

 

(28

)

 

 

 

(746

)

Gain on contingency

 

 

 

 

 

 

 

 

 

 

 

 

(1,230

)

Tax effect of adjustments to net income (loss)

 

(1,716

)

 

 

 

(1,251

)

 

 

(4,805

)

 

 

 

(5,675

)

Non-GAAP Net Income (Loss)

$

5,239

 

 

 

$

(2,466

)

 

$

12,564

 

 

 

$

5,491

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

48,111

 

 

 

 

47,936

 

 

 

47,996

 

 

 

 

47,836

 

Weighted average shares outstanding – diluted

 

48,532

 

 

 

 

47,936

 

 

 

48,288

 

 

 

 

47,836

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share – basic

$

0.13

 

 

 

$

(0.24

)

 

$

0.05

 

 

 

$

(1.11

)

Earnings (loss) per common share – diluted

$

0.13

 

 

 

$

(0.24

)

 

$

0.05

 

 

 

$

(1.11

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

$

0.11

 

 

 

$

(0.05

)

 

$

0.26

 

 

 

$

0.11

 

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

$

0.11

 

 

 

$

(0.05

)

 

$

0.26

 

 

 

$

0.11

 

       

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

(2) Includes non-cash change in fair value of equity investments held in deferred compensation plans offered to certain employees.

(3) Includes net investment gain of $1.5 million related to the out of period remeasurement to historical cost basis of certain long-term investments held in the Company’s stock as part of one of the Company’s deferred compensation plans.

 

Contacts

Investor Services/Assistance:

Rhonda Lambert/256-963-7450

investor.relations@adtran.com

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