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GuruFocus has detected 2 Warning Signs with Adtran Inc $ADTN.
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Adtran Inc (NAS:ADTN)
Beneish M-Score
-2.38 (As of Today)

The zones of discrimination for M-Score is as such:

An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.

Adtran Inc has a M-score of -2.38 suggests that the company is not a manipulator.

ADTN' s Beneish M-Score Range Over the Past 10 Years
Min: -14529.48   Max: 14881.24
Current: -2.38

-14529.48
14881.24

During the past 13 years, the highest Beneish M-Score of Adtran Inc was 14881.24. The lowest was -14529.48. And the median was -2.55.


Definition

The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.

The M-Score Variables:

The M-score of Adtran Inc for today is based on a combination of the following eight different indices:

M=-4.84+0.92 * DSRI+0.528 * GMI+0.404 * AQI+0.892 * SGI+0.115 * DEPI
=-4.84+0.92 * 1.1408+0.528 * 0.99+0.404 * 0.9399+0.892 * 1.1091+0.115 * 1.0201
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9932+4.679 * -0.009-0.327 * 1.1865
=-2.38

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Mar17) TTM:Last Year (Mar16) TTM:
Accounts Receivable was $85.4 Mil.
Revenue was 170.279 + 162.986 + 168.89 + 162.701 = $664.9 Mil.
Gross Profit was 73.715 + 70.787 + 75.808 + 78.955 = $299.3 Mil.
Total Current Assets was $354.4 Mil.
Total Assets was $667.2 Mil.
Property, Plant and Equipment(Net PPE) was $83.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $15.4 Mil.
Selling, General & Admin. Expense(SGA) was $135.8 Mil.
Total Current Liabilities was $121.6 Mil.
Long-Term Debt was $26.8 Mil.
Net Income was 6.651 + 7.572 + 12.415 + 10.228 = $36.9 Mil.
Non Operating Income was 0.521 + 1.488 + 4.62 + 0.859 = $7.5 Mil.
Cash Flow from Operations was 9.037 + 14.168 + 7.215 + 4.941 = $35.4 Mil.
Accounts Receivable was $67.5 Mil.
Revenue was 142.204 + 139.013 + 158.078 + 160.138 = $599.4 Mil.
Gross Profit was 65.794 + 62.439 + 70.649 + 68.246 = $267.1 Mil.
Total Current Assets was $320.8 Mil.
Total Assets was $621.5 Mil.
Property, Plant and Equipment(Net PPE) was $73.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $13.9 Mil.
Selling, General & Admin. Expense(SGA) was $123.3 Mil.
Total Current Liabilities was $88.6 Mil.
Long-Term Debt was $27.9 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(85.396 / 664.856) / (67.492 / 599.433)
=0.12844285 / 0.11259307
=1.1408

2. GMI = Gross Margin Index

Measured as the ratio of gross margin in year t-1 to gross margin in year t.

Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(267.128 / 599.433) / (299.265 / 664.856)
=0.44563446 / 0.45012003
=0.99

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (354.4 + 83.514) / 667.178) / (1 - (320.773 + 73.511) / 621.494)
=0.34363243 / 0.3655868
=0.9399

4. SGI = Sales Growth Index

Ratio of sales in year t to sales in year t-1.

Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=664.856 / 599.433
=1.1091

5. DEPI = Depreciation Index

Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.

DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.

DEPI=(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1)) / (Depreciation_t / (Depreciaton_t + PPE_t))
=(13.864 / (13.864 + 73.511)) / (15.383 / (15.383 + 83.514))
=0.15867239 / 0.15554567
=1.0201

6. SGAI = Sales, General and Administrative expenses Index

The ratio of SGA expenses in year t relative to year t-1.

SGA expenses index > 1 means that the company is becoming less efficient in generate sales.

SGAI=(SGA_t / Sales_t) / (SGA_t-1 /Sales_t-1)
=(135.787 / 664.856) / (123.263 / 599.433)
=0.2042352 / 0.20563266
=0.9932

7. LVGI = Leverage Index

The ratio of total debt to total assets in year t relative to yeat t-1.

An LVGI > 1 indicates an increase$sgai= in leverage

LVGI=((LTD_t + CurrentLiabilities_t) / TotalAssets_t) / ((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)
=((26.8 + 121.629) / 667.178) / ((27.9 + 88.634) / 621.494)
=0.22247286 / 0.18750623
=1.1865

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(36.866 - 7.488 - 35.361) / 667.178
=-0.009

An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.

Adtran Inc has a M-score of -2.38 suggests that the company will not be a manipulator.


Related Terms

Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Adtran Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.23420.71081.33390.83290.90681.20951.04161.05050.85321.21
GMI 0.99430.99421.00731.00031.02571.13221.060.9741.1110.9721
AQI 0.64451.34950.94921.30581.12930.94881.03651.00280.92470.8799
SGI 1.00861.05010.96711.25091.18420.86531.0340.98170.95251.0612
DEPI 0.82551.24380.96950.95780.94160.88760.93230.96711.01661.1176
SGAI 0.99430.95190.99560.9220.91941.24490.931.0390.98291.0054
LVGI 1.04870.97650.90690.83230.94171.29231.09681.06430.95181.2066
TATA -0.0309-0.075-0.02620.0159-0.0289-0.0567-0.0274-0.0266-0.0139-0.0234
M-score -2.58-2.87-2.31-2.15-2.44-2.77-2.52-2.62-2.67-2.46

Adtran Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.05050.93270.8340.9250.85320.77551.01641.16661.211.1408
GMI 0.9741.02721.06771.09861.1111.07240.99680.97690.97210.99
AQI 1.00280.85060.80260.82490.92471.01110.96880.90350.87990.9399
SGI 0.98170.96920.92450.93790.95250.95780.98711.01291.06121.1091
DEPI 0.96710.95460.98360.9971.01661.06191.06761.09811.11761.0201
SGAI 1.0391.00371.030.99870.98290.9970.98591.00871.00540.9932
LVGI 1.06431.13951.2021.18480.95180.86790.84350.94381.20661.1865
TATA -0.0266-0.0397-0.0531-0.0391-0.0139-0.01420.00620.0025-0.0234-0.009
M-score -2.62-2.85-3.07-2.87-2.67-2.70-2.40-2.33-2.46-2.38
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