EX-99.1 2 a5316674ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 ADTRAN, Inc. Reports Fourth Quarter 2006 Results and Declares Quarterly Cash Dividend HUNTSVILLE, Ala.--(BUSINESS WIRE)--Jan. 22, 2007--ADTRAN, Inc. (NASDAQ:ADTN) reported results for the fourth quarter of 2006. Sales were $109,869,000 for the quarter compared to $140,595,000 for the fourth quarter of 2005. For the fourth quarter 2006, GAAP net income was $17,036,000 and GAAP earnings per share, assuming dilution, were $0.24. Non-GAAP net income was $18,992,000 for the quarter and non-GAAP earnings per share, assuming dilution, were $0.26 for the quarter. For the fourth quarter 2005, GAAP net income was $32,196,000 and GAAP earnings per share, assuming dilution, were $0.41. Non-GAAP net income and non-GAAP earnings per share for the fourth quarter of 2006 exclude the effect of stock compensation expense resulting from the application of Statement of Financial Accounting Standards No. 123R, Share-Based Payment ("SFAS 123R"). SFAS 123R was adopted on a modified prospective basis effective January 1, 2006. See the table below for reconciliation between non-GAAP and GAAP net income and earnings per share. ADTRAN Chief Executive Officer Tom Stanton stated, "The fourth quarter proved challenging for many of us in the telecom equipment sector. However, solid execution by our employees allowed us to deliver healthy profitability while continuing to strengthen our market positions in strategic areas. Product introductions and new business wins which occurred in 2006 should provide a solid base for long term growth." The Company also announced that its Board of Directors declared a cash dividend for the fourth 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 February 8, 2007. The ex-dividend date is February 6, 2007 and the payment date is February 22, 2007. The Company also confirmed that its fourth quarter conference call will be held Tuesday, January 23, 2007 at 9:30 a.m. Central Time. This conference call will be web cast live through StreetEvents.com. To listen, simply visit the Investor Relations site at http://www.adtran.com or http://streetevents.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 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. Widely deployed by carriers and enterprises alike, ADTRAN solutions enable voice, data, video, and Internet 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 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 for the year ended December 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 with, or an alternative for, generally accepted accounting principles 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 with the corresponding GAAP measures, provides useful information to management and investors regarding financial and business trends relating to 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 applies 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 December 31, 2006 Unaudited (In thousands) December 31, 2006 ------------ Assets Cash & cash equivalents $ 40,147 Short-term investments 99,700 Accounts receivable (net) 60,014 Other receivables 7,481 Income tax receivables 1,114 Inventory (net) 52,994 Prepaid expenses and other current assets 10,505 ------------ Total current assets 271,955 Equipment (net) 18,101 Land 4,263 Bldg. & land improvements (net) 57,830 Other assets 534 Long-term investments 189,765 ------------ Total long-term assets 270,493 ------------ Total assets $ 542,448 ============ Liabilities and stockholders' equity Accounts payable $ 30,568 Accrued wages and benefits 9,543 Accrued liabilities 12,091 ------------ Total current liabilities 52,202 Deferred tax liabilities 694 Other non-current liabilities 4,667 Long term-debt 48,812 ------------ Total long-term liabilities 54,173 Total liabilities 106,375 Stockholders' equity 436,073 ------------ ------------ Total liabilities and stockholders' equity $ 542,448 ============ Condensed Statements of Income For the three and twelve month periods ended December 31, 2006 and 2005 (In thousands, except per share data) Unaudited Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2006 2005 2006 2005 ------------- ------------ ------------ ------------ Sales $109,869 $140,595 $473,463 $513,215 Cost of Sales 45,823 56,363 193,843 209,895 ------------- ------------ ------------ ------------ Gross Profit 64,046 84,232 279,620 303,320 Selling, general and administrative expenses 26,161 24,154 103,383 96,411 Research and development expenses 17,113 14,857 70,694 62,654 ------------- ------------ ------------ ------------ Profit from operations 20,772 45,221 105,543 144,255 Interest expense (632) (634) (2,532) (2,535) Other income, net 3,693 2,704 15,825 11,654 ------------- ------------ ------------ ------------ Income before provision for income taxes 23,833 47,291 118,836 153,374 Provision for income taxes (6,797) (15,095) (40,523) (52,224) ------------- ------------ ------------ ------------ Net income (1) $17,036 $32,196 $78,313 $101,150 ============= ============ ============ ============ Weighted average shares Basic 70,228 76,295 73,451 75,775 Diluted (2) 71,788 78,840 75,197 77,966 Earnings per common share Basic $0.24 $0.42 $1.07 $1.33 Diluted (2) $0.24 $0.41 $1.04 $1.30 (1) Net income for the three and twelve months ended December 31, 2006 included stock-based compensation expense recognized related to stock options of $2.0 million and $7.3 million, respectively, net of tax, under SFAS 123R. Stock-based compensation expense of $0.3 million, net of tax was recorded under SFAS 123 in the twelve month period ended December 31, 2005 relating to the accelerated vesting of stock options for retiring personnel. (2) Assumes exercise of dilutive stock options calculated under the treasury stock method. Non-GAAP Information (1) (2) For the three and twelve month periods ended December 31, 2006 and 2005 (In thousands, except per share data) Unaudited Non-GAAP (excludes effects of Effects of SFAS 123R) SFAS 123R GAAP GAAP Three Three Three Three Months Months Months Months Ended Ended Ended Ended December 31, December 31, December 31, December 31, 2006 2006 2006 2005 ------------- ------------ ------------ ------------ Sales $109,869 $0 $109,869 $140,595 Cost of Sales (a) 45,683 140 45,823 56,363 ------------- ------------ ------------ ------------ Gross Profit (a) 64,186 140 64,046 84,232 Selling, general and administrative expenses (a) 25,025 1,136 26,161 24,154 Research and development expenses (a) 16,207 906 17,113 14,857 ------------- ------------ ------------ ------------ Profit from operations (a) 22,954 2,182 20,772 45,221 Interest expense (632) 0 (632) (634) Other income, net 3,693 0 3,693 2,704 ------------- ------------ ------------ ------------ Income before provision for income taxes (a) 26,015 2,182 23,833 47,291 Provision for income taxes (b) (7,023) (226) (6,797) (15,095) ------------- ------------ ------------ ------------ Net income (a)(b) $18,992 $1,956 $17,036 $32,196 ============= ============ ============ ============ Weighted average shares Basic 70,228 70,228 70,228 76,295 Diluted (3) 71,802 71,788 71,788 78,840 Earnings per common share Basic $0.27 ($0.03) $0.24 $0.42 Diluted (3) $0.26 ($0.02) $0.24 $0.41 Non-GAAP (excludes effects of Effects of SFAS 123R) SFAS 123R GAAP GAAP Twelve Twelve Twelve Twelve Months Months Months Months Ended Ended Ended Ended December 31, December 31, December 31, December 31, 2006 2006 2006 2005 ------------- ------------ ------------ ------------ Sales $473,463 $0 $473,463 $513,215 Cost of Sales (a) 193,443 400 193,843 209,895 ------------- ------------ ------------ ------------ Gross Profit (a) 280,020 400 279,620 303,320 Selling, general and administrative expenses (a) 99,295 4,088 103,383 96,411 Research and development expenses (a) 66,906 3,788 70,694 62,654 ------------- ------------ ------------ ------------ Profit from operations (a) 113,819 8,276 105,543 144,255 Interest expense (2,532) 0 (2,532) (2,535) Other income, net 15,825 0 15,825 11,654 ------------- ------------ ------------ ------------ Income before provision for income taxes (a) 127,112 8,276 118,836 153,374 Provision for income taxes (b) (41,523) (1,000) (40,523) (52,224) ------------- ------------ ------------ ------------ Net income (a)(b) $85,589 $7,276 $78,313 $101,150 ============= ============ ============ ============ Weighted average shares Basic 73,451 73,451 73,451 75,775 Diluted (3) 75,276 75,197 75,197 77,966 Earnings per common share Basic $1.17 ($0.10) $1.07 $1.33 Diluted (3) $1.14 ($0.10) $1.04 $1.30 (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) Stock-based compensation expense of $0.3 million, net of tax was recorded under SFAS 123 in the twelve month period ended December 31, 2005 relating to the accelerated vesting of stock options for retiring personnel. (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) Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2006 2005 2006 2005 GAAP Net Income $17,036 $32,196 $78,313 $101,150 (a) Stock-based compensation expense related to stock options (1) 2,182 0 8,276 0 (b) Income tax effect of stock- based compensation expense (226) 0 (1,000) 0 ------------ ------------ ------------ ------------ Non-GAAP Net Income $18,992 $32,196 $85,589 $101,150 ============ ============ ============ ============ GAAP Earnings per common share - diluted $0.24 $0.41 $1.04 $1.30 Per share effect of stock-based compensation expense $0.02 N/A $0.10 N/A ------------ ------------ ------------ ------------ Non-GAAP Earnings per common share - diluted $0.26 $0.41 $1.14 $1.30 ============ ============ ============ ============ (1) For the three months ended December 31, 2006, stock-based compensation expense was allocated as follows: $140 to cost of sales expense, $1,136 to selling, general and administrative expense, and $906 to research and development expense. For the twelve months ended December 31, 2006, stock-based compensation expense was allocated as follows: $400 to cost of sales expense, $4,088 to selling, general and administrative expense, and $3,788 to research and development expense. COMPARISON OF NET INCOME INCLUDING THE EFFECT OF STOCK-BASED COMPENSATION EXPENSE RELATED TO EMPLOYEE STOCK OPTIONS UNDER SFAS 123R and SFAS 123 (1) (In thousands) Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2006 2005 2006 2005 Net Income as reported $17,036 $32,196 $78,313 $101,150 Plus: total stock- based compensation included in the determination of reported net income, net of tax 1,956 12 7,276 278 Less: total stock- based compensation expense determined under fair value based method for all awards, net of tax (1,956) (2,932) (7,276) (8,627) ------------ ------------ ------------ ------------ Non-GAAP net income for calculation of diluted earnings per share $17,036 $29,276 $78,313 $92,801 ============ ============ ============ ============ Earnings per share Diluted - as reported $0.24 $0.41 $1.04 $1.30 Diluted - non- GAAP n/a $0.37 n/a $1.19 (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 includes stock-based compensation recorded under SFAS 123 of $0.3 million, net of tax relating to the accelerated vesting of stock options for retiring personnel. CONTACT: ADTRAN, Inc., Huntsville Jim Matthews, 256-963-8775 Senior Vice President/CFO or Investor Services/Assistance: Gayle Ellis, 256-963-8220