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ADTRAN Inc. Reports Operating Results (10-Q)

November 02, 2010 | About:
10qk

10qk

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ADTRAN Inc. (ADTN) filed Quarterly Report for the period ended 2010-09-30.

Adtran Inc. has a market cap of $1.97 billion; its shares were traded at around $32.53 with a P/E ratio of 20.7 and P/S ratio of 4. 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 Chuck Royce of Royce& Associates, John Hussman of Hussman Economtrics Advisors, Inc., John Buckingham of Al Frank Asset Management, Inc., Steven Cohen of SAC Capital Advisors, John Keeley of Keeley Fund Management.

Highlight of Business Operations:

Sales were $163.0 million and $440.3 million for the three and nine months ended September 30, 2010 compared to $128.1 million and $360.0 million for the three and nine months ended September 30, 2009. Product revenues for our three primary growth areas, Broadband Access, Optical Access and Internetworking, were $93.2 million and $252.0 million for the three and nine months ended September 30, 2010 compared to $70.9 million and $184.4 million for the three and nine months ended September 30, 2009. Our gross margin increased for the three and nine months ended September 30, 2010 to 59.7% and 59.5%, respectively, compared to 58.1% and 59.3% for the three and nine months ended September 30, 2009. Our operating margin increased to 27.6% and 24.8% for the three and nine months ended September 30, 2010 from 22.6% and 21.7% for the three and nine months ended September 30, 2009. Net income was $32.1 million and $78.0 million for the three and nine months ended September 30, 2010 compared to $21.6 million and $55.6 million for the three and nine months ended September 30, 2009. Our effective tax rate increased to 34.7% and 34.6% for the three and nine months ended September 30, 2010 from 30.4% and 30.6% for the three and nine months ended September 30, 2009. Earnings per share, assuming dilution, were $0.50 and $1.23 for the three and nine months ended September 30, 2010 compared to $0.34 and $0.88 for the three and nine months ended September 30, 2009.

Net realized investment gain/loss increased from a $0.8 million gain in the three months ended September 30, 2009 to a $3.4 million gain in the three months ended September 30, 2010 and changed from a $1.4 million loss in the nine months ended September 30, 2009 to an $8.1 million gain in the nine months ended September 30, 2010. This change is primarily a result of the other-than-temporary impairments of $2.0 million related to our marketable equity securities, $0.4 million related to our investment in a fixed income bond fund, and $0.5 million related to our deferred compensation assets in 2009 and the realized gain of $6.0 million on the sale of one security in 2010. See Investing Activities in Liquidity and Capital Resources below for additional information.

As a result of the above factors, net income increased $10.5 million from $21.6 million in the three months ended September 30, 2009 to $32.1 million in the three months ended September 30, 2010 and increased $22.4 million from $55.6 million in the nine months ended September 30, 2009 to $78.0 million in the nine months ended September 30, 2010.

At September 30, 2010, cash on hand was $26.1 million and short-term investments were $156.9 million, which resulted in available short-term liquidity of $183.0 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 September 30, 2010 primarily reflects a partial realignment of our investment portfolio from short-term to long-term, which increased long-term investments by $76.2 million in the first nine months of 2010 compared to December 31, 2009.

Our working capital, which consists of current assets less current liabilities, increased 3.3% from $278.0 million as of December 31, 2009 to $287.3 million as of September 30, 2010, due to an increase in inventory of $24.3 million, which was partially offset by a decrease in short-term investments of $15.6 million and an increase in accrued wages and benefits of $5.6 million. Inventory increased during the second and third quarters to support increasing customer demand and to mitigate component supply constraints broadly affecting the industry. The decrease in short-term investments was due to a partial realignment of our investment portfolio from short-term to long-term. 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 4.52 as of September 30, 2010. The current ratio, defined as current assets divided by current liabilities, decreased from 6.82 as of December 31, 2009 to 6.14 as of September 30, 2010. Our quick ratio and current ratio decreased due to a decrease in short-term investments of $15.6 million and an increase in accrued wages and benefits of $5.6 million.

Our long-term investments increased 47.0% from $162.2 million at December 31, 2009 to $238.4 million at September 30, 2010. The primary reason for the increase in our long-term investments was the partial realignment of our investment portfolio. Long-term investments at September 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 $10.3 million and $9.8 million, and with a fair value of $38.6 million and $33.5 million, at September 30, 2010 and December 31, 2009, respectively, including a single equity security, of which we held 1.6 million shares and 2.1 million shares, carried at $26.6 million and $22.4 million of fair value at September 30, 2010 and December 31, 2009, respectively. The single security traded approximately 1.1 million shares per day in the first nine months 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 September 30, 2010, this single security comprised $26.1 million of the unrealized gain. Long-term investments at September 30, 2010 also include $3.9 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 $0.7 million of a fixed income bond fund.

Read the The complete Report

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10qk
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