ADTRAN Inc. (ADTN) filed Quarterly Report for the period ended 2009-09-30.
Adtran Inc. is a leading global provider of networking & communications equipment with an eighteen year history of profitability & a portfolio of more than one thousand four hundred solutions for use in the last mile of today's telecommunications networks. Widely deployed by both carriers & small & midsize businesses Adtran solutions enable voice data video and Internet communications across copper fiber & wireless network infrastructures. ADTRAN solutions are currently in use by every major U.S. service provider & many global ones as well as by thousands of public private and governmental organizations worldwide. It's product portfolio consists of different high-speed network access devices. In both service provider & enterprise networks these products are used primarily in the last mile or local loop of the network & in local area networks on the customer premises. The last mile is that segment of the network that connects end-user subscribers to a service provi Adtran Inc. has a market cap of $1.46 billion; its shares were traded at around $23.19 with a P/E ratio of 19.8 and P/S ratio of 2.9. The dividend yield of Adtran Inc. stocks is 1.6%. Adtran Inc. had an annual average earning growth of 9% over the past 10 years.
Highlight of Business Operations:
Sales were $128.1 million and $360.0 million for the three and nine months ended September 30, 2009 compared to $137.2 million and $388.3 million for the three and nine months ended September 30, 2008. Product revenues for our three primary growth areas, Broadband Access, Optical Access and Internetworking, were $70.9 million and $184.4 million for the three and nine months ended September 30, 2009 compared to $58.9 million and $174.2 million for the three and nine months ended September 30, 2008. Our gross margin decreased for the three and nine months ended September 30, 2009 to 58.1% and 59.3% respectively, compared to 59.5% and 59.6% for the three and nine months ended September 30, 2008. Our operating margin decreased to 22.6% and 21.7% for the three and nine months ended September 30, 2009 from 24.5% and 23.8% for the three and nine months ended September 30, 2008. Net income was $21.6 million and $55.6 million for the three and nine months ended September 30, 2009 compared to $22.4 million and $61.9 million for the three and nine months ended September 30, 2008. Our effective tax rate decreased from 36.8% and 36.6% for the three and nine months ended September 30, 2008 to 30.4% and 30.6% for the three and nine months ended September 30, 2009.
As a result of the above factors, net income decreased $0.8 million from $22.4 million in the three months ended September 30, 2008 to $21.6 million in the three months ended September 30, 2009 and decreased $6.3 million from $61.9 million in the nine months ended September 30, 2008 to $55.6 million in the nine months ended September 30, 2009.
At September 30, 2009, cash on hand was $25.2 million and short-term investments were $169.5 million, which resulted in available short-term liquidity of $194.7 million. At December 31, 2008, our cash on hand of $41.9 million and short-term investments of $96.3 million resulted in available short-term liquidity of $138.2 million. The increase in liquidity from December 31, 2008 to September 30, 2009 primarily reflects an increase in investments of variable rate demand notes purchased as a result of cash generated from operations.
We invest all available cash not required for immediate use in operations primarily in securities that we believe bear minimal risk of loss. At September 30, 2009, these investments included municipal variable rate demand notes of $88.0 million, municipal fixed-rate bonds of $141.0 million and corporate bonds of $20.5 million that are guaranteed by the Federal Deposit Insurance Corporation (FDIC) and issued by various banks. At December 31, 2008, these investments included municipal variable rate demand notes of $52.6 million, municipal fixed-rate bonds of $116.9 million and a government agency security of $2.0 million.
Our long-term investments increased 12.5% from $141.2 million at December 31, 2008 to $158.9 million at September 30, 2009. The primary reason for the increase in our long-term investments during the first nine months of 2009 was a 453% increase in fair value of a single equity security. Long-term investments at September 30, 2009 and December 31, 2008 included an investment in a certificate of deposit of $48.8 million which serves as collateral for our revenue bonds, as discussed below. We have various equity investments included in long-term investments at a cost of $8.8 million and $12.0 million, and with a fair value of $23.5 million and $11.6 million, at September 30, 2009 and December 31, 2008, respectively, including a single equity security, of which we held 2.0 million shares, carried at $13.8 million at September 30, 2009 and 2.5 million shares carried at $2.5 million of fair value December 31, 2008. We sold 470 thousand shares of this security during the nine months ended September 30, 2009. The sales resulted in proceeds of $1.7 million and a realized gain of $1.5 million. The single security traded approximately 245 thousand shares per day in the first nine months of 2009, in an active market on a European stock exchange. Of the gross unrealized gains included in the fair value of our marketable securities at September 30, 2009, this single security carried $13.1 million of this unrealized gain. Long-term investments at September 30, 2009 also include $3.2 million related to our deferred compensation plan; $2.2 million of other investments carried at cost, consisting of interests in two private equity funds and an investment in a privately held telecommunications equipment manufacturer; and a $1.1 million investment in a fixed income bond fund.
We review our investment portfolio for potential “other-than-temporary” declines in value on an individual investment basis. We assess, on a quarterly basis, significant declines in value which may be considered other-than-temporary and, if necessary, recognize and record the appropriate charge to write-down the carrying value of such investments. In making this assessment, we take into consideration qualitative and quantitative information, including but not limited to the following: the magnitude and duration of historical declines in market prices, credit rating activity, assessments of liquidity, public filings, and statements made by the issuer. We generally begin our identification of potential other-than-temporary impairments by reviewing any security with a fair value that has declined from its original or adjusted cost basis by 25% or more for six or more consecutive months. We then evaluate the individual security based on the previously identified factors to determine the amount of the write-down, if any. Because of the strained credit markets and deterioration in the equity markets experienced beginning in the fourth quarter of 2008, we expanded the impairment review of our investments to assess the impact of these factors on our ability to recover our cost of every security whose value had declined from its original or adjusted cost by more than 25%, regardless of the historical duration of the decline. We then evaluated individual securities to determine the amount of the write-down, if any. As a result of our review, we recorded an other-than-temporary impairment charge of $40 thousand during the third quarter of 2009 related to ten marketable equity securities and $2.0 million during the first nine months of 2009 related to 117 marketable equity securities. In addition to the impairment charge we recorded on our marketable equity securities, we recorded an impairment of $0.4 million related to our investment in a fixed income bond fund and $0.5 million related to our deferred compensation plan during the nine months ending September 30, 2009 as a result of similar reviews. There were no such charges during the three months ended September 30, 2009 related to the fixed income bond fund or deferred compensation plan assets. As long as current market conditions continue to exist, we will continue to complete a similar review of individual securities for impairment each quarter. For the nine months ended September 30, 2008, we had a charge of $0.6 million related to the impairment of 29 publicly traded equity securities.
ADTN is in the portfolios of John Hussman of Hussman Economtrics Advisors, Inc..
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