8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): October 18, 2016

ADTRAN, Inc.

(Exact name of registrant as specified in its charter)

Delaware	0-24612	63-0918200
(State of Incorporation)	(Commission file number)	(I.R.S. Employer Identification Number)

901 Explorer Boulevard, Huntsville, Alabama 35806-2807

(Address of principal executive offices, including zip code)

(256) 963-8000

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On October 18, 2016, ADTRAN, Inc. announced its financial results for the fiscal quarter ended September 30, 2016 and certain other information.

ADTRAN also announced that its Board of Directors declared a quarterly cash dividend of $0.09 per common share to be paid to shareholders of record at the close of business on November 3, 2016. The ex-dividend date is November 1, 2016 and the payment date is November 17, 2016.

A copy of ADTRAN’s press release announcing such financial results and other information is attached as Exhibit 99.1 hereto and incorporated by reference herein.

In addition, ADTRAN has posted supplemental information regarding revenues by segment and category for the fiscal quarter ended September 30, 2016 on the Investor Relations page of its website, www.adtran.com. A copy of the supplemental information is attached as Exhibit 99.2 hereto and incorporated by reference herein.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

The following exhibits are furnished as part of this Current Report on Form 8-K.

Exhibit Number	Description
99.1	Press Release dated October 18, 2016
99.2	Revenues by segment and category classification

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on October 19, 2016.

ADTRAN, Inc.
(Registrant)
By:	/s/ Roger D. Shannon
Roger D. Shannon
Senior Vice President of Finance,
Chief Financial Officer, Corporate Secretary and Treasurer
(Principal Accounting Officer)

EXHIBIT INDEX

Exhibit Number	Description
99.1	Press Release dated October 18, 2016
99.2	Revenues by segment and category classification

EX-99.1

EXHIBIT 99.1

ADTRAN, Inc.

REPORTS RESULTS for the THIRD QUARTER 2016

and DECLARES QUARTERLY CASH DIVIDEND

HUNTSVILLE, AL.—October 18, 2016—ADTRAN, Inc. (NASDAQ:ADTN) reported results for the third quarter 2016. For the quarter, sales were $168,890,000 compared to $158,078,000 for the third quarter of 2015. Net income was $12,415,000 compared to $7,067,000 for the third quarter of 2015. Earnings per share, assuming dilution, were $0.26 compared to $0.14 for the third quarter of 2015. Non-GAAP earnings per share were $0.26 compared to $0.19 for the third quarter of 2015. The reconciliation between GAAP earnings per share, diluted, and non-GAAP earnings per share, diluted, is in the table provided.

ADTRAN Chief Executive Officer Tom Stanton stated, “Our revenue performance for the quarter exceeded expectations with total revenue increasing 7% over the same period last year. I am particularly pleased to see our international business grow 42 percent over the previous quarter and 7 percent year-over-year, driven by stronger broadband access sales in Europe. I am also pleased with the continued growth in our services business which increased 35 percent over the previous quarter and grew 63 percent year-over-year as we execute on our leading market position in CAF II and vectoring solutions and services. We continue to believe that ADTRAN’s ability to help service providers grow revenue, reduce costs, accelerate buildout and transition to a software-defined access network is proving to be a catalyst for change within the industry.”

The Company also announced that its Board of Directors declared a cash dividend for the third quarter of 2016. The quarterly cash dividend is $0.09 per common share to be paid to holders of record at the close of business on November 3, 2016. The ex-dividend date is November 1, 2016, and the payment date is November 17, 2016.

The Company confirmed that its third quarter conference call will be held Wednesday, October 19, 2016, 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 www.adtran.com or www.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 www.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 www.adtran.com for at least 12 months following the call.

ADTRAN, Inc. is a leading global provider of networking and communications equipment. ADTRAN’s products enable voice, data, video and Internet communications across a variety of network infrastructures. ADTRAN solutions are currently in use by service providers, private enterprises, government organizations, and millions of individual users worldwide. For more information, please visit www.adtran.com.

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, 2015. These risks and uncertainties could cause actual results to differ materially from those in the forward-looking statements included in this press release.

CONTACT: Roger Shannon Senior Vice President & CFO 256-963-8775 INVESTOR SERVICES/ASSISTANCE: Gayle Ellis Investor Services 256-963-8220

Condensed Consolidated Balance Sheet

(Unaudited)

(In thousands)

	September 30, 2016		December 31, 2015
Assets
Cash and cash equivalents	$	66,292	$	84,550
Short-term investments		55,516		34,396
Accounts receivable, net		101,822		71,917
Other receivables		12,159		19,321
Income tax receivable, net		540		—
Inventory		96,034		91,533
Prepaid expenses and other current assets		14,477		10,145
Deferred tax assets, net		17,963		18,924
Total Current Assets		364,803		330,786
Property, plant and equipment, net		78,078		73,233
Deferred tax assets, net		17,263		18,091
Goodwill		3,492		3,492
Other assets		13,548		9,276
Long-term investments		178,379		198,026
Total Assets	$	655,563	$	632,904
Liabilities and Stockholders’ Equity
Accounts payable	$	67,399	$	48,668
Unearned revenue		15,744		16,615
Accrued expenses		16,010		12,108
Accrued wages and benefits		16,468		12,857
Income tax payable, net		—		2,395
Total Current Liabilities		115,621		92,643
Non-current unearned revenue		7,105		7,965
Other non-current liabilities		26,740		24,236
Bonds payable		27,900		27,900
Total Liabilities		177,366		152,744
Stockholders’ Equity		478,197		480,160
Total Liabilities and Stockholders’ Equity	$	655,563	$	632,904

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Sales
Products	$	136,277		$	138,120		$	398,709		$	411,723
Services		32,613			19,958			75,086			49,328
Total Sales		168,890			158,078			473,795			461,051
Cost of Sales
Products		70,988			75,969			202,905			231,739
Services		22,094			11,460			50,333			24,854
Total Cost of Sales		93,082			87,429			253,238			256,593
Gross Profit		75,808			70,649			220,557			204,458
Selling, general and administrative expenses		33,716			30,016			97,367			93,203
Research and development expenses		31,962			32,561			92,727			100,576
Operating Income		10,130			8,072			30,463			10,679
Interest and dividend income		910			839			2,692			2,680
Interest expense		(143	)		(151	)		(430	)		(448	)
Net realized investment gain		1,316			2,060			4,154			8,430
Other income (expense), net		(246	)		52			(378	)		(848	)
Gain on bargain purchase of a business		3,550			—			3,550			—
Income before provision for income taxes		15,517			10,872			40,051			20,493
Provision for income taxes		(3,102	)		(3,805	)		(12,394	)		(7,565	)
Net Income	$	12,415		$	7,067		$	27,657		$	12,928
Weighted average shares outstanding—basic		48,470			49,862			48,839			51,682
Weighted average shares outstanding—diluted (1)		48,678			49,927			49,036			51,792
Earnings per common share—basic	$	0.26		$	0.14		$	0.57		$	0.25
Earnings per common share—diluted (1)	$	0.26		$	0.14		$	0.56		$	0.25

⁽¹⁾ Assumes exercise of dilutive stock options calculated under the treasury stock method.

Consolidated Statements of Comprehensive Income

(Unaudited)

(In thousands)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2016		2015			2016			2015
Net Income	$	12,415	$	7,067		$	27,657		$	12,928
Other Comprehensive Income (Loss), net of tax:
Unrealized gains (losses) on available-for-sale securities		258		(4,291	)		(162	)		(6,577	)
Defined benefit plan adjustments		36		71			103			211
Foreign currency translation		575		(1,351	)		1,202			(3,797	)
Other Comprehensive Income (Loss), net of tax		869		(5,571	)		1,143			(10,163	)
Comprehensive Income, net of tax	$	13,284	$	1,496		$	28,800		$	2,765

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Nine Months Ended September 30,
	2016			2015
Cash flows from operating activities:
Net income	$	27,657		$	12,928
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		10,260			10,765
Amortization of net premium on available-for-sale investments		489			2,085
Net realized gain on long-term investments		(4,154	)		(8,430	)
Net loss on disposal of property, plant and equipment		21			189
Gain on bargain purchase of a business		(3,550	)		—
Stock-based compensation expense		4,601			4,788
Deferred income taxes		(447	)		(2,332	)
Tax impact from stock option exercises		(16	)		(40	)
Excess tax benefits from stock-based compensation arrangements		—			(3	)
Change in operating assets and liabilities:
Accounts receivable, net		(29,370	)		843
Other receivables		7,475			10,532
Inventory		(683	)		(14,945	)
Prepaid expenses and other assets		(5,180	)		(1,665	)
Accounts payable		16,363			13,687
Accrued expenses and other liabilities		7,307			(3,996	)
Income tax payable/receivable, net		(2,941	)		(1,137	)
Net cash provided by operating activities		27,832			23,269
Cash flows from investing activities:
Purchases of property, plant and equipment		(12,684	)		(7,843	)
Proceeds from disposals of property, plant and equipment		—			122
Proceeds from sales and maturities of available-for-sale investments		141,103			189,728
Purchases of available-for-sale investments		(139,181	)		(113,227	)
Acquisition of business		(943	)		—
Net cash provided by (used in) investing activities		(11,705	)		68,780
Cash flows from financing activities:
Proceeds from stock option exercises		1,076			907
Purchases of treasury stock		(22,917	)		(65,808	)
Dividend payments		(13,230	)		(13,989	)
Excess tax benefits from stock-based compensation arrangements		—			3
Net cash used in financing activities		(35,071	)		(78,887	)
Net increase (decrease) in cash and cash equivalents		(18,944	)		13,162
Effect of exchange rate changes		686			(2,914	)
Cash and cash equivalents, beginning of period		84,550			73,439
Cash and cash equivalents, end of period	$	66,292		$	83,687
Supplemental disclosure of non-cash investing activities
Purchases of property, plant and equipment included in accounts payable	$	1,174		$	1,303

Supplemental Information

Restructuring Expenses

(Unaudited)

(In thousands)

Restructuring expenses were recorded in the following Consolidated Statements of Income categories for the three and nine months ended September 30, 2016 and 2015:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Restructuring expense included in cost of sales	$	1,307		$	9		$	1,307		$	107
Selling, general and administrative expense		637			194			637			838
Research and development expense		—			712			—			2,095
Restructuring expense included in operating expenses		637			906			637			2,933
Total restructuring expense		1,944			915			1,944			3,040
Provision for income taxes		(603	)		(357	)		(603	)		(1,186	)
Total restructuring expense, net of tax	$	1,341		$	558		$	1,341		$	1,854

Supplemental Information

Acquisition Related Expenses, Amortizations and Adjustments

(Unaudited)

(In thousands)

On August 4, 2011, we closed on the acquisition of Bluesocket, Inc., on May 4, 2012, we closed on the acquisition of the Nokia Siemens Networks Broadband Access business (NSN BBA), and on September 13, 2016, we closed on the acquisition of CommScope’s active fiber business (CommScope). Acquisition related expenses, amortizations and adjustments for the three and nine months ended September 30, 2016 and 2015 for all three transactions are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Bluesocket, Inc. acquisition
Amortization of acquired intangible assets	$	158		$	191		$	504		$	643
NSN BBA acquisition
Amortization of acquired intangible assets		225			231			680			701
Amortization of other purchase accounting adjustments		114			101			194			395
Acquisition related professional fees, travel and other expenses		—			20			—			61
Subtotal NSN BBA acquisition		339			352			874			1,157
CommScope acquisition
Amortization of acquired intangible assets		112			—			112			—
Amortization of other purchase accounting adjustments		84			—			84			—
Acquisition related professional fees, travel and other expenses		45			—			45			—
Subtotal CommScope acquisition		241			—			241			—
Total acquisition related expenses, amortizations and adjustments		738			543			1,619			1,800
Provision for income taxes		(261	)		(183	)		(512	)		(609	)
Total acquisition related expenses, amortizations and adjustments, net of tax	$	477		$	360		$	1,057		$	1,191

The acquisition related expenses, amortizations and adjustments above were recorded in the following Consolidated Statements of Income categories for the three and nine months ended September 30, 2016 and 2015:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Revenue (adjustments to deferred revenue recognized in the period)	$	—		$	65		$	—		$	196
Cost of goods sold		169			7			189			52
Subtotal		169			72			189			248
Selling, general and administrative expenses		54			23			61			74
Research and development expenses		515			448			1,369			1,478
Subtotal		569			471			1,430			1,552
Total acquisition related expenses, amortizations and adjustments		738			543			1,619			1,800
Provision for income taxes		(261	)		(183	)		(562	)		(609	)
Total acquisition related expenses, amortizations and adjustments, net of tax	$	477		$	360		$	1,057		$	1,191

Supplemental Information

Stock-based Compensation Expense

(Unaudited)

(In thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Stock-based compensation expense included in cost of sales	$	88		$	59		$	282		$	202
Selling, general and administrative expense		765			812			2,322			2,226
Research and development expense		639			803			1,997			2,360
Stock-based compensation expense included in operating expenses		1,404			1,615			4,319			4,586
Total stock-based compensation expense		1,492			1,674			4,601			4,788
Tax benefit for expense associated with non-qualified options		(218	)		(218	)		(643	)		(620	)
Total stock-based compensation expense, net of tax	$	1,274		$	1,456		$	3,958		$	4,168

Reconciliation of GAAP net income per share, diluted, to

Non-GAAP net income per share, diluted

(Unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2016			2015		2016			2015
GAAP earnings per common share – diluted	$	0.26		$	0.14	$	0.56		$	0.25
Restructuring expense		0.03			0.01		0.03			0.04
Acquisition related expenses, amortizations and adjustments		0.01			0.01		0.02			0.02
Stock-based compensation expense		0.03			0.03		0.08			0.08
Gain on bargain purchase of a business		(0.07	)		—		(0.07	)		—
Non-GAAP earnings per common share – diluted	$	0.26		$	0.19	$	0.62		$	0.39

EX-99.2

EXHIBIT 99.2

Product and Segment Revenues

(New Reporting Structure)

(Unaudited)

(In thousands)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Segment Revenues:
Network Solutions	$	136,277	$	138,120	$	398,709	$	411,723
Services & Support		32,613		19,958		75,086		49,328
Total	$	168,890	$	158,078	$	473,795	$	461,051
Category Revenues:
Access & Aggregation	$	120,618	$	103,431	$	316,705	$	309,014
Customer Devices		32,984		35,545		106,213		97,291
Traditional & Other Products		15,288		19,102		50,877		54,746
Total	$	168,890	$	158,078	$	473,795	$	461,051
Sales by Geographic Region:
United States	$	127,667	$	119,476	$	377,635	$	307,344
International		41,223		38,602		96,160		153,707
Total	$	168,890	$	158,078	$	473,795	$	461,051