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ADTRAN Inc. Reports Operating Results (10-Q)

July 29, 2010 | About:
10qk

10qk

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ADTRAN Inc. (ADTN) filed Quarterly Report for the period ended 2010-06-30.

Adtran Inc. has a market cap of $1.98 billion; its shares were traded at around $31.78 with a P/E ratio of 23.3 and P/S ratio of 4.1. The dividend yield of Adtran Inc. stocks is 1.1%. Adtran Inc. had an annual average earning growth of 16.1% over the past 10 years.ADTN is in the portfolios of John Hussman of Hussman Economtrics Advisors, Inc., Chuck Royce of Royce& Associates, John Buckingham of Al Frank Asset Management, Inc., John Keeley of Keeley Fund Management, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

Sales were $150.4 million and $277.4 million for the three and six months ended June 30, 2010 compared to $121.5 million and $231.9 million for the three and six months ended June 30, 2009. Product revenues for our three primary growth areas, Broadband Access, Optical Access and Internetworking, were $89.0 million and $158.8 million for the three and six months ended June 30, 2010 compared to $65.3 million and $113.5 million for the three and six months ended June 30, 2009. Our gross margin increased for the three months ended June 30, 2010 to 59.4% from 59.0% for the three months ended June 30, 2009, while decreasing for the six months ended June 30, 2010 to 59.4% from 60.0% for the six months ended June 30, 2009. Our operating margin increased to 25.7% and 23.1% for the three and six months ended June 30, 2010 from 21.5% and 21.1% for the three and six months ended June 30, 2009. Net income was $27.8 million and $45.9 million for the three and six months ended June 30, 2010 compared to $18.8 million and $34.0 million for the three and six months ended June 30, 2009. Our effective tax rate increased to 33.9% and 34.6% for the three and six months ended June 30, 2010 from 33.8% and 30.7% for the three and six months ended June 30, 2009. Earnings per share, assuming dilution, were $0.44 and $0.73 for the three and six months ended June 30, 2010 compared to $0.30 and $0.54 for the three and six months ended June 30, 2009.

As a result of the above factors, net income increased $8.9 million from $18.8 million in the three months ended June 30, 2009 to $27.8 million in the three months ended June 30, 2010 and increased $11.9 million from $34.0 million in the six months ended June 30, 2009 to $45.9 million in the six months ended June 30, 2010.

At June 30, 2010, cash on hand was $29.5 million and short-term investments were $150.4 million, which resulted in available short-term liquidity of $179.9 million. At December 31, 2009, our cash on hand of $24.1 million and short-term investments of $172.5 million resulted in available short-term liquidity of $196.6 million. The decrease in liquidity from December 31, 2009 to June 30, 2010 primarily reflects a realignment of our investment portfolio from short-term to long-term, which increased long-term investments by $48.2 million in the first six months of 2010 compared to December 31, 2009.

Our working capital, which consists of current assets less current liabilities, decreased 5.7% from $278.0 million as of December 31, 2009 to $262.3 million as of June 30, 2010. The quick ratio, defined as cash and cash equivalents, short-term investments, and net accounts receivable, divided by current liabilities, decreased from 5.54 as of December 31, 2009 to 3.40 as of June 30, 2010. The current ratio, defined as current assets divided by current liabilities, decreased from 6.82 as of December 31, 2009 to 4.55 as of June 30, 2010. Our working capital, the quick ratio, and the current ratio decreased due to a realignment of our investment portfolio from short-term to long-term, which increased long-term investments by $48.2 million, and an increase in current liabilities of $26.1 million, primarily due to increases of $18.5 million in accounts payable and $4.8 million in accrued wages and benefits at June 30, 2010.

Net accounts receivable increased from $68.0 million at December 31, 2009 to $71.6 million at June 30, 2010. Our allowance for doubtful accounts was $0.1 million at December 31, 2009 and $0.2 million at June 30, 2010. Quarterly accounts receivable days sales outstanding (DSO) decreased from 50 days as of December 31, 2009 to 43 days as of June 30, 2010. Generally, the change in net accounts receivable and DSO is due to the timing of sales and collections during the quarter. Other receivables increased from $4.1 million at December 31, 2009 to $8.0 million at June 30, 2010. The increase in other receivables at June 30, 2010 reflects increased materials supplied to our contract manufacturers to support current production levels. Additionally, other receivables may fluctuate due to the timing of collections for materials supplied to our contract manufacturers.

Our long-term investments increased 29.7% from $162.2 million at December 31, 2009 to $210.4 million at June 30, 2010. The primary reason for the increase in our long-term investments was the realignment of our investment portfolio. Long-term investments at June 30, 2010 and December 31, 2009 included an investment in a restricted certificate of deposit of $48.3 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 $10.4 million and $9.8 million, and with a fair value of $32.3 million and $33.5 million, at June 30, 2010 and December 31, 2009, respectively, including a single equity security, of which we held 1.8 million shares and 2.1 million shares, carried at $21.6 million and $22.4 million of fair value at June 30, 2010 and December 31, 2009, respectively. The single security traded approximately 1.3 million shares per day in the first half of 2010 in an active market on a European stock exchange. Of the gross unrealized gains included in the fair value of our marketable securities at June 30, 2010, this single security comprised $21.0 million of the unrealized gain. Long-term investments at June 30, 2010 also include $3.5 million related to our deferred compensation plan; $2.3 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 $0.7 million of a fixed income bond fund.

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