10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2016

OR

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period from to

Commission File Number 0-24612

ADTRAN, Inc.

(Exact name of Registrant as specified in its charter)

Delaware	63-0918200
(State of Incorporation)	(I.R.S. Employer
	Identification No.)

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)

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (232.405 of this chapter) during the preceding 12 months (or for shorter period that the Registrant was required to submit and post such files).    Yes  x    No  o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	x	Accelerated Filer	o
Non accelerated Filer	o	Smaller Reporting Company	o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x

Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date:

Class	Outstanding at July22, 2016
Common Stock, $.01 Par Value	48,398,992 Shares

ADTRAN, Inc.

Quarterly Report on Form 10-Q

For the Three and Six Months Ended June 30, 2016

Table of Contents

Item Number		Page Number
	PART I. FINANCIAL INFORMATION
1	Financial Statements:
	Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015 – (Unaudited)	3
	Consolidated Statements of Income for the three and six months ended June 30, 2016 and 2015 – (Unaudited)	4
	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2016 and 2015 – (Unaudited)	5
	Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015 – (Unaudited)	6
	Notes to Consolidated Financial Statements – (Unaudited)	7
2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
3	Quantitative and Qualitative Disclosures About Market Risk	34
4	Controls and Procedures	35
	PART II. OTHER INFORMATION
1A	Risk Factors	36
2	Unregistered Sales of Equity Securities and Use of Proceeds	36
6	Exhibits	37
	SIGNATURE	38
	EXHIBIT INDEX	39

FORWARD LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of ADTRAN. ADTRAN and its representatives may from time to time make written or oral forward-looking statements, including statements contained in this report, our other filings with the Securities and Exchange Commission (SEC) and other communications with our stockholders. Generally, the words, “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” “may,” “could” and similar expressions identify forward-looking statements. We caution you that any forward-looking statements made by us or on our behalf are subject to uncertainties and other factors that could cause such statements to be wrong. A list of factors that could materially affect our business, financial condition or operating results is included under “Factors that Could Affect Our Future Results” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Item 2 of Part I of this report. They have also been discussed in Item 1A of Part I in our most recent Annual Report on Form 10-K for the year ended December 31, 2015 filed on February 24, 2016 with the SEC. Though we have attempted to list comprehensively these important factors, we caution investors that other factors may prove to be important in the future in affecting our operating results. New factors emerge from time to time, and it is not possible for us to predict all of these factors, nor can we assess the impact each factor or a combination of factors may have on our business.

You are further cautioned not to place undue reliance on these forward-looking statements because they speak only of our views as of the date that the statements were made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ADTRAN, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except per share amounts)

	June 30,			December 31,
	2016			2015
ASSETS
Current Assets
Cash and cash equivalents	$	70,914		$	84,550
Short-term investments		50,867			34,396
Accounts receivable, less allowance for doubtful accounts of $19 at June 30, 2016 and    December 31, 2015		89,386			71,917
Other receivables		11,676			19,321
Income tax receivable, net		2,405			-
Inventory, net		86,936			91,533
Prepaid expenses and other current assets		13,563			10,145
Deferred tax assets, net		18,488			18,924
Total Current Assets		344,235			330,786
Property, plant and equipment, net		74,115			73,233
Deferred tax assets, net		19,127			18,091
Goodwill		3,492			3,492
Other assets		9,340			9,276
Long-term investments		186,249			198,026
Total Assets	$	636,558		$	632,904
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	59,211		$	48,668
Unearned revenue		15,982			16,615
Accrued expenses		12,126			12,108
Accrued wages and benefits		15,702			12,857
Income tax payable, net		-			2,395
Total Current Liabilities		103,021			92,643
Non-current unearned revenue		6,437			7,965
Other non-current liabilities		25,476			24,236
Bonds payable		27,900			27,900
Total Liabilities		162,834			152,744
Commitments and contingencies (see Note 13)
Stockholders’ Equity
Common stock, par value $0.01 per share; 200,000 shares authorized; 79,652 shares     issued and 48,712 shares outstanding at June 30, 2016 and 79,652 shares issued     and 49,558 shares outstanding at December 31, 2015		797			797
Additional paid-in capital		249,851			246,879
Accumulated other comprehensive loss		(8,695	)		(8,969	)
Retained earnings		912,536			906,772
Less treasury stock at cost: 30,940 and 30,094 shares at June 30, 2016 and    December 31, 2015, respectively		(680,765	)		(665,319	)
Total Stockholders’ Equity		473,724			480,160
Total Liabilities and Stockholders’ Equity	$	636,558		$	632,904

See notes to consolidated financial statements

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ADTRAN, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Sales
Products	$	138,549		$	144,098		$	262,432		$	273,603
Services		24,152			16,040			42,473			29,370
Total Sales		162,701			160,138			304,905			302,973
Cost of sales
Products		67,844			84,210			131,917			155,770
Services		15,902			7,682			28,239			13,394
Total Cost of Sales		83,746			91,892			160,156			169,164
Gross Profit		78,955			68,246			144,749			133,809
Selling, general and administrative expenses		32,866			32,123			63,651			63,187
Research and development expenses		31,277			35,479			60,765			68,015
Operating Income		14,812			644			20,333			2,607
Interest and dividend income		927			908			1,782			1,841
Interest expense		(142	)		(149	)		(287	)		(297	)
Net realized investment gain		1,110			3,255			2,838			6,370
Other expense, net		(251	)		(547	)		(132	)		(900	)
Income before provision for income taxes		16,456			4,111			24,534			9,621
Provision for income taxes		(6,228	)		(1,567	)		(9,292	)		(3,760	)
Net Income	$	10,228		$	2,544		$	15,242		$	5,861
Weighted average shares outstanding – basic		48,831			51,822			49,026			52,607
Weighted average shares outstanding – diluted		49,048			51,917			49,218			52,742
Earnings per common share – basic	$	0.21		$	0.05		$	0.31		$	0.11
Earnings per common share – diluted	$	0.21		$	0.05		$	0.31		$	0.11
Dividend per share	$	0.09		$	0.09		$	0.18		$	0.18

See notes to consolidated financial statements

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ADTRAN, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Net Income	$	10,228		$	2,544		$	15,242		$	5,861
Other Comprehensive Income (Loss), net of tax:
Net unrealized losses on available-for-sale securities		(165	)		(1,783	)		(420	)		(2,286	)
Defined benefit plan adjustments		22			72			67			140
Foreign currency translation		(601	)		872			627			(2,446	)
Other Comprehensive Income (Loss), net of tax		(744	)		(839	)		274			(4,592	)
Comprehensive Income, net of tax	$	9,484		$	1,705		$	15,516		$	1,269

See notes to consolidated financial statements

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ADTRAN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Six Months Ended June 30,
	2016			2015
Cash flows from operating activities:
Net income	$	15,242		$	5,861
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		6,689			7,256
Amortization of net premium on available-for-sale investments		376			1,578
Net realized investment gain		(2,838	)		(6,370	)
Net loss on disposal of property, plant and equipment		5			160
Stock-based compensation expense		3,109			3,114
Deferred income taxes		(354	)		(1,743	)
Tax benefit from stock option exercises		-			(23	)
Excess tax benefits from stock-based compensation arrangements		-			38
Changes in operating assets and liabilities:
Accounts receivable, net		(17,192	)		(2,003	)
Other receivables		7,876			(119	)
Inventory		4,938			(14,254	)
Prepaid expenses and other assets		(4,263	)		(1,433	)
Accounts payable		10,354			30,938
Accrued expenses and other liabilities		1,474			2,175
Income tax payable/receivable, net		(4,799	)		(3,961	)
Net cash provided by operating activities		20,617			21,214
Cash flows from investing activities:
Purchases of property, plant and equipment		(6,679	)		(5,392	)
Proceeds from disposals of property, plant and equipment		-			8
Proceeds from sales and maturities of available-for-sale investments		109,993			120,422
Purchases of available-for-sale investments		(112,903	)		(62,626	)
Net cash provided by (used in) investing activities		(9,589	)		52,412
Cash flows from financing activities:
Proceeds from stock option exercises		541			833
Purchases of treasury stock		(16,579	)		(49,307	)
Dividend payments		(8,860	)		(9,509	)
Excess tax benefits from stock-based compensation arrangements		-			(38	)
Net cash used in financing activities		(24,898	)		(58,021	)
Net increase (decrease) in cash and cash equivalents		(13,870	)		15,605
Effect of exchange rate changes		234			(1,829	)
Cash and cash equivalents, beginning of period		84,550			73,439
Cash and cash equivalents, end of period	$	70,914		$	87,215
Supplemental disclosure of non-cash investing activities:
Purchases of property, plant and equipment included in accounts payable	$	554		$	270

See notes to consolidated financial statements

6

ADTRAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except per share amounts)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements of ADTRAN^®, Inc. and its subsidiaries (ADTRAN) have been prepared pursuant to the rules and regulations for reporting on Quarterly Reports on Form 10-Q. Accordingly, certain information and notes required by generally accepted accounting principles for complete financial statements are not included herein. The December 31, 2015 Consolidated Balance Sheet is derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States.

In the opinion of management, all adjustments necessary to fairly state these interim statements have been recorded and are of a normal and recurring nature. The results of operations for an interim period are not necessarily indicative of the results for the full year. The interim statements should be read in conjunction with the financial statements and notes thereto included in ADTRAN’s Annual Report on Form 10-K for the year ended December 31, 2015, filed on February 24, 2016 with the SEC.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Our more significant estimates include the obsolete and excess inventory reserves, warranty reserves, customer rebates, determination of the deferred revenue components of multiple element sales agreements, estimated costs to complete obligations associated with deferred revenues, estimated income tax provision and income tax contingencies, the fair value of stock-based compensation, impairment of goodwill, valuation and estimated lives of intangible assets, estimated pension liability, fair value of investments, and the evaluation of other-than-temporary declines in the value of investments. Actual amounts could differ significantly from these estimates.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09 to fiscal years beginning after December 31, 2017, and interim periods within those fiscal years, with early adoption permitted for reporting periods beginning after December 15, 2016. Subsequently, the FASB issued ASUs in 2016 containing implementation guidance related to ASU 2014-09, including: ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net),which isintended to improve the operability and understandability of the implementation guidance on principal versus agent considerations; ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,which is intended to clarify two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance; and ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,which contains certain provisions and practical expedients in response to identified implementation issues. ASU 2014-09 allows for either full retrospective or modified retrospective adoption. We plan to adopt ASU 2014-09 and the related ASUs on January 1, 2018, and we are currently evaluating the transition method that will be elected and the impact that the adoption of ASU 2014-09 will have on our financial position, results of operations and cash flows.

7

In July 2015, the FASB issued Accounting Standards Update No.  2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (ASU 2015-11). Currently, Topic 330, Inventory, requires an entity to measure inventory at the lower of cost or market. Market could be replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. ASU 2015-11 does not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. ASU 2015-11 requires an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The amendments should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. We do not believe the adoption of ASU 2015-05 will have a material impact on our financial position, results of operations and cash flows.

In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes (ASU 2015-17). ASU 2015-17 amends the existing guidance on income taxes to require the classification of all deferred tax assets and liabilities as non-current on the balance sheet. ASU 2015-17 is effective for fiscal years beginning after December 15, 2016, including interim periods within those years. Early adoption is permitted. The guidance may be applied either prospectively, for all deferred tax assets and liabilities, or retrospectively to all periods presented. We have not selected a transition method or determined whether to early adopt ASU 2015-17 in 2016. Other than the revised balance sheet presentation of current deferred tax assets and liabilities, we do not believe the adoption of ASU 2015-17 will have a material impact on our financial position, results of operations and cash flows.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 requires an entity to recognize lease assets and lease liabilities on the balance sheet and to disclose key information about the entity's leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. A modified retrospective approach is required. We are currently evaluating the impact that the adoption of ASU 2016-02 will have on our financial position, results of operations and cash flows.

In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). ASU 2016-09 simplifies several aspects of accounting for share-based compensation arrangements, including income tax effects, the classification of tax-related cash flows on the statement of cash flows, and accounting for forfeitures. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those years. Early adoption is permitted. We are currently evaluating the impact that the adoption of ASU 2016-09 will have on our financial position, results of operations and cash flows.

During the first quarter of 2016, we adopted the following accounting standards, which had no material effect on our financial position, results of operations or cash flows:

In April 2015, the FASB issued Accounting Standards Update No. 2015-05, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement (ASU 2015-05), which provides guidance on accounting for fees paid by a customer in a cloud computing arrangement. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU 2015-05 is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. The amendments may be applied either prospectively to all arrangements entered into or materially modified after the effective date or retrospectively. We adopted ASU 2015-05 during the first quarter of 2016 and will apply the new standard prospectively. The adoption of ASU 2015-05 did not have a material impact on our financial position, results of operations and cash flows.

2. INCOME TAXES

Our effective tax rate decreased from 39.1% in the six months ended June 30, 2015 to 37.9% in the six months ended June 30, 2016. The decrease in the effective tax rate between the two periods is primarily attributable to the research and development tax credit being made permanent.

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3. PENSION BENEFIT PLAN

We maintain a defined benefit pension plan covering employees in certain foreign countries.

The following table summarizes the components of net periodic pension cost for the three and six months ended June 30, 2016 and 2015:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2016			2015			2016			2015
Service cost	$	310		$	324		$	607		$	664
Interest cost		184			152			360			311
Expected return on plan assets		(271	)		(250	)		(530	)		(511	)
Amortization of actuarial losses		45			100			88			205
Net periodic pension cost	$	268		$	326		$	525		$	669

4. STOCK-BASED COMPENSATION

The following table summarizes the stock-based compensation expense related to stock options, restricted stock units (RSUs) and restricted stock for the three and six months ended June 30, 2016 and 2015, which was recognized as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2016			2015			2016			2015
Stock-based compensation expense included in cost of    sales	$	95		$	53		$	194		$	143
Selling, general and administrative expense		788			723			1,557			1,414
Research and development expense		668			699			1,358			1,557
Stock-based compensation expense included in operating    expenses		1,456			1,422			2,915			2,971
Total stock-based compensation expense		1,551			1,475			3,109			3,114
Tax benefit for expense associated with non-qualified    options		(213	)		(222	)		(425	)		(402	)
Total stock-based compensation expense, net of tax	$	1,338		$	1,253		$	2,684		$	2,712

The fair value of our stock options is estimated using the Black-Scholes model. The determination of the fair value of stock options on the date of grant using the Black-Scholes model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables that may have a significant impact on the fair value estimate.

There were no options granted during the three months ended June 30, 2015. The weighted-average assumptions and value of options granted for the three and six months ended June 30, 2016 and the six months ended June 30, 2015 are as follows:

	Three and Six Months Ended			Six Months Ended
	June 30,			June 30,
	2016			2015
Expected volatility		34.74	%		38.75	%
Risk-free interest rate		1.33	%		1.46	%
Expected dividend yield		1.91	%		1.60	%
Expected life (in years)		6.26			6.47
Weighted-average estimated value	$	5.42		$	7.63

The fair value of our RSUs is calculated using a Monte Carlo Simulation valuation method. No RSUs were granted or vested during the three and six months ended June 30, 2016 and 2015. Twelve thousand RSUs were forfeited during the six months ended June 30, 2015.

The fair value of restricted stock is equal to the closing price of our stock on the date of grant. Two thousand shares of restricted stock were granted during the six months ended June 30, 2016. Two thousand shares of restricted stock vested during the three and six months ended June 30, 2015.

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Stock-based compensation expense recognized in our Consolidated Statements of Income for the three and six months ended June 30, 2016 and 2015 is based on options, RSUs and restricted stock ultimately expected to vest, and has been reduced for estimated forfeitures. Estimated forfeitures for stock options are based upon historical experience and approximate 3.7% annually. We estimated a 0% forfeiture rate for our RSUs and restricted stock due to the limited number of recipients and historical experience for these awards.

As of June 30, 2016, total compensation expense related to non-vested stock options, RSUs and restricted stock not yet recognized was approximately $11.5 million, which is expected to be recognized over an average remaining recognition period of 2.4 years.

The following table is a summary of our stock options outstanding as of December 31, 2015 and June 30, 2016 and the changes that occurred during the six months ended June 30, 2016:

(In thousands, except per share amounts)	Number of Options			Weighted Avg. Exercise Price		Weighted Avg. Remaining Contractual Life In Years		Aggregate Intrinsic Value
Options outstanding, December 31, 2015		7,108		$	21.97		6.42	$	3,284
Options granted		1		$	18.83
Options exercised		(33	)	$	16.58
Options forfeited		(42	)	$	17.88
Options expired		(54	)	$	25.65
Options outstanding, June 30, 2016		6,980		$	22.00		5.93	$	6,522
Options vested and expected to vest, June 30, 2016		6,865		$	22.09		5.88	$	6,260
Options exercisable, June 30, 2016		4,420		$	24.35		4.44	$	2,298

The aggregate intrinsic values in the table above represent the total pre-tax intrinsic value (the difference between the closing price of our stock on the last trading day of the quarter and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on June 30, 2016. The aggregate intrinsic value will change based on the fair market value of our stock.

The total pre-tax intrinsic value of options exercised during the three and six months ended June 30, 2016 was $0.1 million.

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5. INVESTMENTS

At June 30, 2016, we held the following securities and investments, recorded at either fair value or cost.

	Amortized		Gross Unrealized					Carrying
(In thousands)	Cost		Gains		Losses			Value
Deferred compensation plan assets	$	11,516	$	1,628	$	(49	)	$	13,095
Corporate bonds		54,044		149		(61	)		54,132
Municipal fixed-rate bonds		16,889		59		-			16,948
Asset-backed bonds		23,526		53		(6	)		23,573
Mortgage/Agency-backed bonds		19,214		44		(39	)		19,219
U.S. Government bonds		33,498		308		-			33,806
Variable rate demand notes		11,740		-		-			11,740
Marketable equity securities		32,948		1,901		(1,478	)		33,371
Available-for-sale securities held at fair value	$	203,375	$	4,142	$	(1,633	)	$	205,884
Restricted investment held at cost									30,000
Other investments held at cost									1,232
Total carrying value of available-for-sale investments								$	237,116

At December 31, 2015, we held the following securities and investments, recorded at either fair value or cost.

	Amortized		Gross Unrealized					Carrying
(In thousands)	Cost		Gains		Losses			Value
Deferred compensation plan assets	$	11,325	$	1,575	$	(66	)	$	12,834
Corporate bonds		58,328		20		(734	)		57,614
Municipal fixed-rate bonds		26,414		28		(18	)		26,424
Asset-backed bonds		19,281		2		(44	)		19,239
Mortgage/Agency-backed bonds		15,463		1		(91	)		15,373
U.S. Government bonds		35,646		-		(248	)		35,398
Marketable equity securities		31,643		4,301		(1,693	)		34,251
Available-for-sale securities held at fair value	$	198,100	$	5,927	$	(2,894	)	$	201,133
Restricted investment held at cost									30,000
Other investments held at cost									1,289
Total carrying value of available-for-sale investments								$	232,422

As of June 30, 2016, our corporate bonds, municipal fixed-rate bonds, asset-backed bonds, mortgage/agency-backed bonds, and U.S. government bonds had the following contractual maturities:

(In thousands)	Corporate bonds		Municipal fixed-rate bonds		Asset- backed bonds		Mortgage / Agency- backed bonds		U.S. Government bonds
Less than one year	$	20,729	$	10,473	$	-	$	4,972	$	2,953
One to two years		24,884		4,488		822		2,569		7,481
Two to three years		6,099		1,536		9,077		2,058		11,344
Three to five years		2,420		451		10,991		-		12,028
Five to ten years		-		-		2,506		1,036		-
More than ten years		-		-		177		8,584		-
Total	$	54,132	$	16,948	$	23,573	$	19,219	$	33,806

Actual maturities may differ from contractual maturities because some borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

Our investment policy provides limitations for issuer concentration, which limits, at the time of purchase, the concentration in any one issuer to 5% of the market value of our total investment portfolio.

11

At June 30, 2016, we held a $30.0 million restricted certificate of deposit, which is carried at cost. This investment serves as a collateral deposit against the principal amount outstanding under loans made to ADTRAN pursuant to an Alabama State Industrial Development Authority revenue bond (the Bond), which totaled $28.9 million at June 30, 2016 and December 31, 2015. At June 30, 2016, the estimated fair value of the Bond using a level 2 valuation technique was approximately $29.4 million, based on a debt security with a comparable interest rate and maturity and a Standard and Poor’s credit rating of AAA. We have the right to set-off the balance of the Bond with the collateral deposit in order to reduce the balance of the indebtedness. The Bond matures on January 1, 2020, and bears interest at the rate of 2% per annum. In conjunction with this program, we are eligible to receive certain economic incentives from the state of Alabama that reduce the amount of payroll withholdings we are required to remit to the state for those employment positions that qualify under this program. We are required to make payments in the amounts necessary to pay the interest on the amounts currently outstanding. It is our intent to make annual principal payments in addition to the interest amounts that are due.

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. For the three and six months ended June 30, 2016 and 2015, other-than-temporary impairment charges were not significant.

Realized gains and losses on sales of securities are computed under the specific identification method. The following table presents gross realized gains and losses related to our investments.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In thousands)	2016			2015			2016			2015
Gross realized gains	$	1,517		$	3,459		$	3,881		$	6,604
Gross realized losses	$	(407	)	$	(204	)	$	(1,043	)	$	(234	)

As of June 30, 2016 and 2015, gross unrealized losses related to individual securities in a continuous loss position for 12 months or longer were not significant.

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We have categorized our cash equivalents held in money market funds and our investments held at fair value into a three-level fair value hierarchy based on the priority of the inputs to the valuation technique for the cash equivalents and investments as follows:  Level 1 - Values based on unadjusted quoted prices for identical assets or liabilities in an active market; Level 2 - Values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly; Level 3 - Values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs include information supplied by investees.

	Fair Value Measurements at June 30, 2016 Using
(In thousands)	Fair Value		Quoted Prices in Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents
Money market funds	$	1,915	$	1,915	$	-	$	-
Commercial Paper		15,996		-		15,996		-
Cash equivalents		17,911		1,915		15,996		-
Available-for-sale securities
Deferred compensation plan assets		13,095		13,095		-		-
Available-for-sale debt securities
Corporate bonds		54,132		-		54,132		-
Municipal fixed-rate bonds		16,948		-		16,948		-
Asset-backed bonds		23,573		-		23,573		-
Mortgage/Agency-backed bonds		19,219		-		19,219		-
U.S. Government bonds		33,806		33,806		-		-
Variable rate demand notes		11,740		-		11,740		-
Available-for-sale marketable equity securities
Marketable equity securities – technology industry		4,386		4,386		-		-
Marketable equity securities – other		28,985		28,985		-		-
Available-for-sale securities		205,884		80,272		125,612		-
Total	$	223,795	$	82,187	$	141,608	$	-

	Fair Value Measurements at December 31, 2015 Using
(In thousands)	Fair Value		Quoted Prices in Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents
Money market funds	$	1,271	$	1,271	$	-	$	-
Commercial Paper		11,696		-		11,696		-
Cash equivalents		12,967		1,271		11,696		-
Available-for-sale securities
Deferred compensation plan assets		12,834		12,834		-		-
Available-for-sale debt securities
Corporate bonds		57,614		-		57,614		-
Municipal fixed-rate bonds		26,424		-		26,424		-
Asset-backed bonds		19,239		-		19,239		-
Mortgage/Agency-backed bonds		15,373		-		15,373		-
U.S. Government bonds		35,398		35,398		-		-
Available-for-sale marketable equity securities
Marketable equity securities – technology industry		5,384		5,384		-		-
Marketable equity securities – other		28,867		28,867		-		-
Available-for-sale securities		201,133		82,483		118,650		-
Total	$	214,100	$	83,754	$	130,346	$	-

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The fair value of our Level 2 securities is calculated using a weighted average market price for each security. Market prices are obtained from a variety of industry standard data providers, security master files from large financial institutions, and other third-party sources. These multiple market prices are used as inputs into a distribution-curve-based algorithm to determine the daily market value of each security.

Our variable rate demand notes have a structure that implies a standard expected market price. The frequent interest rate resets make it reasonable to expect the price to stay at par. These securities are priced at the expected market price.

6. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We have certain customers and suppliers who are invoiced or pay in a non-functional currency. Changes in the monetary exchange rates may adversely affect our results of operations and financial condition, as these are remeasured to the functional currency through profit and loss. When appropriate, we enter into various derivative transactions to enhance our ability to manage the volatility relating to these typical business exposures. We do not hold or issue derivative instruments for trading or other speculative purposes. Our derivative instruments are recorded in the Consolidated Balance Sheets at their fair values. Our derivative instruments do not qualify for hedge accounting, and accordingly, all changes in the fair value of the instruments are recognized as other income (expense) in the Consolidated Statements of Income. The maximum contractual period for our derivatives is currently less than twelve months. Our derivative instruments are not subject to master netting arrangements and are not offset in the Consolidated Balance Sheets.

As of June 30, 2016, we had forward contracts outstanding with notional amounts totaling €6.0 million ($6.7 million), which mature in the third quarter of 2016.

The fair values of our derivative instruments recorded in the Consolidated Balance Sheet as of June 30, 2016 and December 31, 2015 were as follows:

(In thousands)	Balance Sheet Location	June 30, 2016		December 31, 2015
Derivatives Not Designated as Hedging Instruments (Level 2):
Foreign exchange contracts – asset derivatives	Other receivables	$	188	$	-

The change in the fair values of our derivative instruments recorded in the Consolidated Statements of Income during the three and six months ended June 30, 2016 and 2015 were as follows:

		Three Months Ended					Six Months Ended
	Income Statement	June 30,					June 30,
(In thousands)	Location	2016		2015			2016		2015
Derivatives Not Designated as Hedging Instruments:
Foreign exchange contracts	Other income (expense)	$	237	$	(1,299	)	$	190	$	177

7. INVENTORY

At June 30, 2016 and December 31, 2015, inventory consisted of the following:

	June 30,		December 31,
(In thousands)	2016		2015
Raw materials	$	35,761	$	34,223
Work in process		2,322		2,893
Finished goods		48,853		54,417
Total	$	86,936	$	91,533

We establish reserves for estimated excess, obsolete, or unmarketable inventory equal to the difference between the cost of the inventory and the estimated fair value of the inventory based upon assumptions about future demand and market conditions. At June 30, 2016 and December 31, 2015, raw materials reserves totaled $18.0 million and $17.5 million, respectively, and finished goods inventory reserves totaled $9.8 million and $9.2 million, respectively.

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8. GOODWILL AND INTANGIBLE ASSETS

Goodwill, all of which relates to our acquisition of Bluesocket, Inc., was $3.5 million at June 30, 2016 and December 31, 2015, and was previously recorded in our Enterprise Networks reportable segment. As a result of our new reporting structure, which is discussed further in Note 11, we reallocated goodwill from our Enterprise Networks reportable segment to our two, new reportable segments – Network Solutions and Services & Support. As a result, goodwill of $3.1 million and $0.4 million was reallocated to our Network Solutions and Services & Support reportable segments, respectively.

We evaluate the carrying value of goodwill during the fourth quarter of each year and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. We have elected to first assess the qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit to which the goodwill is assigned is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step impairment test. If we determine that it is more likely than not that its fair value is less than its carrying amount, then the two-step impairment test will be performed. Based on the results of our qualitative assessment in 2015, we concluded that it was not necessary to perform the two-step impairment test. There have been no impairment losses recognized since the acquisition in 2011.

Intangible assets are included in other assets in the accompanying Consolidated Balance Sheets and include intangibles acquired in conjunction with our acquisitions of Objectworld Communications Corporation on September 15, 2009, Bluesocket, Inc. on August 4, 2011, and the NSN BBA business on May 4, 2012.

The following table presents our intangible assets as of June 30, 2016 and December 31, 2015:

(In thousands)	June 30, 2016							December 31, 2015
	Gross Value		Accumulated Amortization			Net Value		Gross Value		Accumulated Amortization			Net Value
Customer relationships	$	5,925	$	(2,966	)	$	2,959	$	5,828	$	(2,627	)	$	3,201
Developed technology		5,778		(4,767	)		1,011		5,720		(4,329	)		1,391
Intellectual property		2,340		(2,021	)		319		2,340		(1,854	)		486
Trade names		270		(270	)		-		270		(265	)		5
Total	$	14,313	$	(10,024	)	$	4,289	$	14,158	$	(9,075	)	$	5,083

Amortization expense, all of which relates to business acquisitions, was $0.4 million and $0.5 million for the three months ended June 30, 2016 and 2015, respectively, and $0.9 million and $1.0 million for the six months ended June 30, 2016 and 2015, respectively.

As of June 30, 2016, the estimated future amortization expense of our intangible assets is as follows:

(In thousands)	Amount
Remainder of 2016	$	807
2017		1,162
2018		702
2019		308
2020		285
Thereafter		1,025
Total	$	4,289

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9. STOCKHOLDERS’ EQUITY

A summary of the changes in stockholders’ equity for the six months ended June 30, 2016 is as follows:

(In thousands)	Stockholders’ Equity
Balance, December 31, 2015	$	480,160
Net income		15,242
Dividend payments		(8,860	)
Dividends accrued for unvested restricted stock units		(26	)
Net unrealized losses on available-for-sale securities (net of tax)		(420	)
Defined benefit plan adjustments		67
Foreign currency translation adjustment		627
Proceeds from stock option exercises		541
Purchase of treasury stock		(16,579	)
Income tax effect of stock compensation arrangements		(137	)
Stock-based compensation expense		3,109
Balance, June 30, 2016	$	473,724

Stock Repurchase Program

Since 1997, our Board of Directors has approved multiple share repurchase programs that have authorized open market repurchase transactions of up to 50.0 million shares of our common stock, which will be implemented through open market or private purchases from time to time as conditions warrant. During the six months ended June 30, 2016, we repurchased 0.9 million shares of our common stock at an average price of $18.48 per share. As of June 30, 2016, we have the authority to purchase an additional 4.9 million shares of our common stock under the current plans approved by the Board of Directors.

Stock Option Exercises

We issued 33 thousand shares of treasury stock during the six months ended June 30, 2016 to accommodate employee stock option exercises. The stock options had exercise prices ranging from $15.29 to $18.97. We received proceeds totaling $0.5 million from the exercise of these stock options during the six months ended June 30, 2016.

Dividend Payments

During the six months ended June 30, 2016, we paid cash dividends as follows (in thousands except per share amounts):

Record Date	Payment Date	Per Share Amount		Total Dividend Paid
February 4, 2016	February 18, 2016	$	0.09	$	4,453
April 28, 2016	May 12, 2016	$	0.09	$	4,407

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Other Comprehensive Income

Other comprehensive income consists of unrealized gains (losses) on available-for-sale securities, reclassification adjustments for amounts included in net income related to impairments of available-for-sale securities, realized gains (losses) on available-for-sale securities, and amortization of actuarial gains (losses) related to our defined benefit plan, defined benefit plan adjustments, and foreign currency translation adjustments.

The following tables present changes in accumulated other comprehensive income, net of tax, by component for the three months ended June 30, 2016 and 2015:

	Three Months Ended June 30, 2016
(In thousands)	Unrealized Gains (Losses) on Available- for-Sale Securities			Defined Benefit Plan Adjustments			Foreign Currency Adjustments			Total
Beginning balance	$	1,677		$	(3,850	)	$	(5,778	)	$	(7,951	)
Other comprehensive income (loss) before    reclassifications		481			-			(601	)		(120	)
Amounts reclassified from accumulated other    comprehensive income		(646	)		22			-			(624	)
Net current period other comprehensive income (loss)		(165	)		22			(601	)		(744	)
Ending balance	$	1,512		$	(3,828	)	$	(6,379	)	$	(8,695	)

	Three Months Ended June 30, 2015
(In thousands)	Unrealized Gains (Losses) on Available- for-Sale Securities			Defined Benefit Plan Adjustments			Foreign Currency Adjustments			Total
Beginning balance	$	8,461		$	(5,689	)	$	(6,600	)	$	(3,828	)
Other comprehensive income (loss) before    reclassifications		177			-			872			1,049
Amounts reclassified from accumulated other    comprehensive income		(1,960	)		72			-			(1,888	)
Net current period other comprehensive income (loss)		(1,783	)		72			872			(839	)
Ending balance	$	6,678		$	(5,617	)	$	(5,728	)	$	(4,667	)

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The following tables present changes in accumulated other comprehensive income, net of tax, by component for the six months ended June 30, 2016 and 2015:

	Six Months Ended June 30, 2016
(In thousands)	Unrealized Gains (Losses) on Available- for-Sale Securities			Defined Benefit Plan Adjustments			Foreign Currency Adjustments			Total
Beginning balance	$	1,932		$	(3,895	)	$	(7,006	)	$	(8,969	)
Other comprehensive income (loss) before    reclassifications		1,239			-			627			1,866
Amounts reclassified from accumulated other    comprehensive income		(1,659	)		67			-			(1,592	)
Net current period other comprehensive income (loss)		(420	)		67			627			274
Ending balance	$	1,512		$	(3,828	)	$	(6,379	)	$	(8,695	)

	Six Months Ended June 30, 2015
(In thousands)	Unrealized Gains (Losses) on Available- for-Sale Securities			Defined Benefit Plan Adjustments			Foreign Currency Adjustments			Total
Beginning balance	$	8,964		$	(5,757	)	$	(3,282	)	$	(75	)
Other comprehensive income (loss) before    reclassifications		1,537			-			(2,446	)		(909	)
Amounts reclassified from accumulated other    comprehensive income		(3,823	)		140			-			(3,683	)
Net current period other comprehensive income (loss)		(2,286	)		140			(2,446	)		(4,592	)
Ending balance	$	6,678		$	(5,617	)	$	(5,728	)	$	(4,667	)

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The following tables present the details of reclassifications out of accumulated other comprehensive income for the three months ended June 30, 2016 and 2015:

(In thousands)	Three Months Ended June 30, 2016
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income Is Presented
Unrealized gains (losses) on available-for-    sale securities:
Net realized gain on sales of securities	$	1,354		Net realized investment gain
Impairment expense		(295	)	Net realized investment gain
Defined benefit plan adjustments – actuarial    losses		(33	)	(1)
Total reclassifications for the period, before    tax		1,026
Tax (expense) benefit		(402	)
Total reclassifications for the period, net    of tax	$	624

⁽¹⁾ Included in the computation of net periodic pension cost. See Note 3 of Notes to Consolidated Financial Statements.

(In thousands)	Three Months Ended June 30, 2015
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income Is Presented
Unrealized gains (losses) on available-for-    sale securities:
Net realized gain on sales of securities	$	3,264		Net realized investment gain
Impairment expense		(51	)	Net realized investment gain
Defined benefit plan adjustments – actuarial    losses		(105	)	(1)
Total reclassifications for the period, before    tax		3,108
Tax (expense) benefit		(1,220	)
Total reclassifications for the period, net    of tax	$	1,888

⁽¹⁾ Included in the computation of net periodic pension cost. See Note 3 of Notes to Consolidated Financial Statements.

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The following tables present the details of reclassifications out of accumulated other comprehensive income for the six months ended June 30, 2016 and 2015:

(In thousands)	Six Months Ended June 30, 2016
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income Is Presented
Unrealized gains (losses) on available-for-    sale securities:
Net realized gain on sales of securities	$	3,115		Net realized investment gain
Impairment expense		(395	)	Net realized investment gain
Defined benefit plan adjustments – actuarial    losses		(98	)	(1)
Total reclassifications for the period, before    tax		2,622
Tax (expense) benefit		(1,030	)
Total reclassifications for the period, net    of tax	$	1,592

⁽¹⁾ Included in the computation of net periodic pension cost. See Note 3 of Notes to Consolidated Financial Statements.

(In thousands)	Six Months Ended June 30, 2015
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income Is Presented
Unrealized gains (losses) on available-for-    sale securities:
Net realized gain on sales of securities	$	6,340		Net realized investment gain
Impairment expense		(73	)	Net realized investment gain
Defined benefit plan adjustments – actuarial    losses		(203	)	(1)
Total reclassifications for the period, before    tax		6,064
Tax (expense) benefit		(2,381	)
Total reclassifications for the period, net    of tax	$	3,683

⁽¹⁾ Included in the computation of net periodic pension cost. See Note 3 of Notes to Consolidated Financial Statements.

20

The following table presents the tax effects related to the change in each component of other comprehensive income for the three months ended June 30, 2016 and 2015:

	Three Months Ended June 30, 2016									Three Months Ended June 30, 2015
(In thousands)	Before-Tax Amount			Tax (Expense) Benefit			Net-of-Tax Amount			Before-Tax Amount			Tax (Expense) Benefit			Net-of-Tax Amount
Unrealized gains (losses) on available-for-sale    securities	$	789		$	(308	)	$	481		$	290		$	(113	)	$	177
Reclassification adjustment for amounts related to    available-for-sale investments included in net    income		(1,059	)		413			(646	)		(3,213	)		1,253			(1,960	)
Reclassification adjustment for amounts related to    defined benefit plan adjustments included in net    income		33			(11	)		22			105			(33	)		72
Foreign currency translation adjustment		(601	)		-			(601	)		872			-			872
Total Other Comprehensive Income (Loss)	$	(838	)	$	94		$	(744	)	$	(1,946	)	$	1,107		$	(839	)

The following table presents the tax effects related to the change in each component of other comprehensive income for the six months ended June 30, 2016 and 2015:

	Six Months Ended June 30, 2016									Six Months Ended June 30, 2015
(In thousands)	Before-Tax Amount			Tax (Expense) Benefit			Net-of-Tax Amount			Before-Tax Amount			Tax (Expense) Benefit			Net-of-Tax Amount
Unrealized gains (losses) on available-for-sale    securities	$	2,031		$	(792	)	$	1,239		$	2,520		$	(983	)	$	1,537
Reclassification adjustment for amounts related to    available-for-sale investments included in net    income		(2,720	)		1,061			(1,659	)		(6,267	)		2,444			(3,823	)
Reclassification adjustment for amounts related to    defined benefit plan adjustments included in net    income		98			(31	)		67			203			(63	)		140
Foreign currency translation adjustment		627			-			627			(2,446	)		-			(2,446	)
Total Other Comprehensive Income (Loss)	$	36		$	238		$	274		$	(5,990	)	$	1,398		$	(4,592	)

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10. EARNINGS PER SHARE

A summary of the calculation of basic and diluted earnings per share for the three and six months ended June 30, 2016 and 2015 is as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands, except per share amounts)	2016		2015		2016		2015
Numerator
Net income	$	10,228	$	2,544	$	15,242	$	5,861
Denominator
Weighted average number of shares – basic		48,831		51,822		49,026		52,607
Effect of dilutive securities
Stock options		161		72		138		122
Restricted stock and restricted stock units		56		23		54		13
Weighted average number of shares – diluted		49,048		51,917		49,218		52,742
Net income per share – basic	$	0.21	$	0.05	$	0.31	$	0.11
Net income per share – diluted	$	0.21	$	0.05	$	0.31	$	0.11

Anti-dilutive options to purchase common stock outstanding were excluded from the above calculations. Anti-dilutive options totaled 5.6 million and 6.1 million for the three months ended June 30, 2016 and 2015, respectively, and 5.8 million and 5.7 million for the six months ended June 30, 2016 and 2015, respectively.

11. SEGMENT INFORMATION

In 2015, we began a realignment of our organizational structure to better match our market opportunities, technological development initiatives, and improve efficiencies. During the first quarter of 2016, our chief operating decision maker requested changes in the information that he regularly reviews for purposes of allocating resources and assessing performance. As a result, beginning with the quarter ended March 31, 2016, we began reporting our financial performance based on two, new reportable segments – Network Solutions and Services & Support. Network Solutions includes hardware products and next-generation virtualized solutions used in service provider or business networks, as well as prior-generation products. Services & Support includes our suite of ProCloud^® managed services, network installation, engineering and maintenance services, and fee-based technical support and equipment repair/replacement plans.

We evaluate the performance of our new segments based on gross profit; therefore, selling, general and administrative expenses, research and development expenses, interest and dividend income, interest expense, net realized investment gain/loss, other income/expense and provision for taxes are reported on a company-wide, functional basis only. Historical financial information by reportable segment and category, as discussed below, has been recast to conform to our new reporting structure. There are no inter-segment revenues.

The following table presents information about the reported sales and gross profit of our reportable segments for the three and six months ended June 30, 2016 and 2015. We do not produce asset information by reportable segment; therefore, it is not reported.

	Three Months Ended
	June 30, 2016				June 30, 2015
(In thousands)	Sales		Gross Profit		Sales		Gross Profit
Network Solutions	$	138,549	$	70,705	$	144,098	$	59,888
Services & Support		24,152		8,250		16,040		8,358
Total	$	162,701	$	78,955	$	160,138	$	68,246

	Six Months Ended
	June 30, 2016				June 30, 2015
(In thousands)	Sales		Gross Profit		Sales		Gross Profit
Network Solutions	$	262,432	$	130,515	$	273,603	$	117,833
Services & Support		42,473		14,234		29,370		15,976
Total	$	304,905	$	144,749	$	302,973	$	133,809

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Sales by Category

In addition to our new reporting segments, we will also report revenue for the following three categories – Access & Aggregation, Customer Devices, and Traditional & Other Products.

Access & Aggregation generally includes software and hardware based products and services that communication service providers (CSPs) use to aggregate and/or originate network access technologies. The portfolio of ADTRAN solutions within this category includes a wide array of modular or fixed physical form factors designed to deliver the best technology and economic fit for our customers based on the target subscriber density and environmental conditions.

The Access & Aggregation category includes product and service families such as:

· Total Access^® 5000 Series Fiber to the Premises (FTTP) and Fiber to the Node (FTTN) Multi-Service Access Nodes (MSAN)

· hiX 5600 Series fiber aggregation and Fiber to the Node (FTTN) Multi-Service Access Nodes (MSAN)

· Fiber to the Distribution Point (FTTdp) Optical Network Units (ONU)

· Optical Line Terminals (OLT)

· Optical Networking Edge (ONE) aggregation

· Distribution Point Units (DPUs)

· IP Digital Subscriber Line Access Multiplexers (DSLAMs)

· Cabinet and Outside-Plant (OSP) enclosures and services

· Network Management and Cloud based software platforms and applications

· Pluggable optical transceivers (i.e., SFP, SFP+, XFP, QSFP), cables and other miscellaneous materials

· Other products and services that are generally applicable to Access & Aggregation

Customer Devices generally includes the products and services that provide end users access to the CSP network.  The Customer Devices portfolio includes a comprehensive array of service provider and enterprise hardware and software products and services.

The Customer Devices category includes products and services such as:

· Broadband customer premise solutions, including Passive Optical Network (PON) and point-to-point Ethernet Optical Network Terminals (ONTs)

· Residential and business gateways

· Wi-Fi access points and associated powering and switching infrastructure

· enterprise Session Border Controllers (eSBC)

· Branch office and access routers

· Carrier Ethernet services termination devices

· VoIP media gateways

· ProServices^®

· Planning, engineering, program management, maintenance, installation and commissioning services to implement the customer devices solutions into consumer, small business and enterprise locations

· Other products and services that are generally applicable to customer devices

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Traditional & Other Products generally includes a mix of prior generation technologies’ products and services, as well as other products and services that do not fit within the Access & Aggregation or Customer Devices categories.

The Traditional & Other Products category includes products and services such as:

· Time Division Multiplexed (TDM) and Asynchronous Transfer Mode (ATM) based aggregation systems and customer devices

· HDSL, ADSL and other mature technologies used to deliver business and residential services over the CSP access and customer networks

· Other products and services that do not fit within the Access & Aggregation and Customer Devices categories

The table below presents sales information by category for the three and six months ended June 30, 2016 and 2015:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2016		2015		2016		2015
Access & Aggregation	$	102,232	$	112,732	$	196,087	$	205,583
Customer Devices		40,876		30,042		73,229		61,746
Traditional & Other Products		19,593		17,364		35,589		35,644
Total	$	162,701	$	160,138	$	304,905	$	302,973

12. LIABILITY FOR WARRANTY RETURNS

Our products generally include warranties of 90 days to ten years for product defects. We accrue for warranty returns at the time revenue is recognized based on our estimate of the cost to repair or replace the defective products. We engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers. Our products continue to become more complex in both size and functionality as many of our product offerings migrate from line card applications to total systems. The increasing complexity of our products will cause warranty incidences, when they arise, to be more costly. Our estimates regarding future warranty obligations may change due to product failure rates, material usage, and other rework costs incurred in correcting a product failure. In addition, from time to time, specific warranty accruals may be recorded if unforeseen problems arise. Should our actual experience relative to these factors be worse than our estimates, we will be required to record additional warranty expense. Alternatively, if we provide for more reserves than we require, we will reverse a portion of such provisions in future periods. The liability for warranty obligations totaled $8.9 million and $8.7 million at June 30, 2016 and December 31, 2015, respectively. These liabilities are included in accrued expenses in the accompanying Consolidated Balance Sheets.

A summary of warranty expense and write-off activity for the three and six months ended June 30, 2016 and 2015 is as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In thousands)	2016			2015			2016			2015
Balance at beginning of period	$	9,042		$	8,684		$	8,739		$	8,415
Plus:Amounts charged to cost and expenses		1,431			667			2,329			1,128
Less:Deductions		(1,538	)		(418	)		(2,133	)		(610	)
Balance at end of period	$	8,935		$	8,933		$	8,935		$	8,933

13. COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, we may be subject to various legal proceedings and claims, including employment disputes, patent claims, disputes over contract agreements and other commercial disputes. In some cases, claimants seek damages or other relief, such as royalty payments related to patents, which, if granted, could require significant expenditures. Although the outcome of any claim or litigation can never be certain, it is our opinion that the outcome of all contingencies of which we are currently aware will not materially affect our business, operations, financial condition or cash flows.

We have committed to invest up to an aggregate of $7.9 million in two private equity funds, and we have contributed $8.4 million as of June 30, 2016, of which $7.7 million has been applied to these commitments.

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14. SUBSEQUENT EVENTS

On July 12, 2016, we announced that our Board of Directors declared a quarterly cash dividend of $0.09 per common share to be paid to stockholders of record at the close of business on July 28, 2016. The payment date will be August 11, 2016. The quarterly dividend payment will be approximately $4.3 million. In July 2003, our Board of Directors elected to begin declaring quarterly dividends on our common stock considering the tax treatment of dividends and adequate levels of Company liquidity.

During the third quarter and as of August 5, 2016, we have repurchased 0.3 million shares of our common stock through open market purchases at an average cost of $17.99 per share. We currently have the authority to purchase an additional 4.6 million shares of our common stock under the current plan approved by the Board of Directors.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Consolidated Financial Statements and the related notes that appear elsewhere in this document.

OVERVIEW

ADTRAN, Inc. is a leading global provider of networking and communications equipment. Our solutions enable voice, data, video and Internet communications across a variety of network infrastructures. These solutions are deployed by many of the United States’ and the world’s largest service providers, distributed enterprises and small and medium-sized businesses, public and private enterprises, and millions of individual users worldwide.

Our success depends upon our ability to increase unit volume and market share through the introduction of new products and succeeding generations of products having lower selling prices and increased functionality as compared to both the prior generation of a product and to the products of competitors. An important part of our strategy is to reduce the cost of each succeeding product generation and then lower the product’s selling price based on the cost savings achieved in order to gain market share and/or improve gross margins. As a part of this strategy, we seek in most instances to be a high-quality, low-cost provider of products in our markets. Our success to date is attributable in large measure to our ability to design our products initially with a view to their subsequent redesign, allowing both increased functionality and reduced manufacturing costs in each succeeding product generation. This strategy enables us to sell succeeding generations of products to existing customers, while increasing our market share by selling these enhanced products to new customers.

We report revenue for the following three categories – Access & Aggregation, Customer Devices, and Traditional & Other Products.

Access & Aggregation generally includes software and hardware based products and services that communication service providers (CSPs) use to aggregate and/or originate network access technologies. The portfolio of ADTRAN solutions within this category includes a wide array of modular or fixed physical form factors designed to deliver the best technology and economic fit for our customers based on the target subscriber density and environmental conditions.

The Access & Aggregation category includes product and service families such as:

· Total Access^® 5000 Series Fiber to the Premises (FTTP) and Fiber to the Node (FTTN) Multi-Service Access Nodes (MSAN)

· hiX 5600 Series fiber aggregation and Fiber to the Node (FTTN) Multi-Service Access Nodes (MSAN)

· Fiber to the Distribution Point (FTTdp) Optical Network Units (ONU)

· Optical Line Terminals (OLT)

· Optical Networking Edge (ONE) aggregation

· Distribution Point Units (DPUs)

· IP Digital Subscriber Line Access Multiplexers (DSLAMs)

· Cabinet and Outside-Plant (OSP) enclosures and services

· Network Management and Cloud based software platforms and applications

· Pluggable optical transceivers (i.e., SFP, SFP+, XFP, QSFP), cables and other miscellaneous materials

· Other products and services that are generally applicable to Access & Aggregation

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Customer Devices generally includes the products and services that provide end users access to the CSP network.  The Customer Devices portfolio includes a comprehensive array of service provider and enterprise hardware and software products and services.

The Customer Devices category includes products and services such as:

· Broadband customer premise solutions, including Passive Optical Network (PON) and point-to-point Ethernet Optical Network Terminals (ONTs)

· Residential and business gateways

· Wi-Fi access points and associated powering and switching infrastructure

· enterprise Session Border Controllers (eSBC)

· Branch office and access routers

· Carrier Ethernet services termination devices

· VoIP media gateways

· ProServices

· Planning, engineering, program management, maintenance, installation and commissioning services to implement the customer devices solutions into consumer, small business and enterprise locations

· Other products and services that are generally applicable to customer devices

Traditional & Other Products generally includes a mix of prior generation technologies’ products and services, as well as other products and services that do not fit within the Access & Aggregation or Customer Devices categories.

The Traditional & Other Products category includes products and services such as:

· Time Division Multiplexed (TDM) and Asynchronous Transfer Mode (ATM) based aggregation systems and customer devices

· HDSL, ADSL and other mature technologies used to deliver business and residential services over the CSP access and customer networks

· Other products and services that do not fit within the Access & Aggregation and Customer Devices categories

See Note 11 of Notes to Consolidated Financial Statements in this report for further information regarding these product categories.

Sales were $162.7 million and $304.9 million for the three and six months ended June 30, 2016 compared to $160.1 million and $303.0 million for the three and six months ended June 30, 2015. Our gross margin increased to 48.5% and 47.5% for the three and six months ended June 30, 2016 from 42.6% and 44.2% for the three and six months ended June 30, 2015. Our operating income margin increased to 9.1% and 6.7% for the three and six months ended June 30, 2016 from 0.4% and 0.9% for the three and six months ended June 30, 2015. Net income was $10.2 million and $15.2 million for the three and six months ended June 30, 2016 compared to $2.5 million and $5.9 million for the three and six months ended June 30, 2015. Our effective tax rate decreased to 37.8% and 37.9% for the three and six months ended June 30, 2016 from 38.1% and 39.1% for the three and six months ended June 30, 2015.  Earnings per share, assuming dilution, were $0.21 and $0.31 for the three and six months ended June 30, 2016 compared to $0.05 and $0.11 for the three and six months ended June 30, 2015.

Our operating results have fluctuated on a quarterly basis in the past, and may vary significantly in future periods due to a number of factors, including customer order activity and backlog. Backlog levels vary because of seasonal trends, the timing of customer projects and other factors that affect customer order lead times. Many of our customers require prompt delivery of products. This requires us to maintain sufficient inventory levels to satisfy anticipated customer demand. If near-term demand for our products declines, or if potential sales in any quarter do not occur as anticipated, our financial results could be adversely affected. Operating expenses are relatively fixed in the short term; therefore, a shortfall in quarterly revenues could significantly impact our financial results in a given quarter.

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Our operating results may also fluctuate as a result of a number of other factors, including a decline in general economic and market conditions, foreign currency exchange rate movements, increased competition, customer order patterns, changes in product and services mix, timing differences between price decreases and product cost reductions, product warranty returns, expediting costs and announcements of new products by us or our competitors. Additionally, maintaining sufficient inventory levels to assure prompt delivery of our products increases the amount of inventory that may become obsolete and increases the risk that the obsolescence of this inventory may have an adverse effect on our business and operating results. Also, not maintaining sufficient inventory levels to assure prompt delivery of our products may cause us to incur expediting costs to meet customer delivery requirements, which may negatively impact our operating results in a given quarter.

Accordingly, our historical financial performance is not necessarily a meaningful indicator of future results, and, in general, management expects that our financial results may vary from period to period. A list of factors that could materially affect our business, financial condition or operating results is included under “Factors That Could Affect Our Future Results” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Item 2 of Part I of this report. These factors have also been discussed in more detail in Item 1A of Part I in our most recent Annual Report on Form 10-K for the year ended December 31, 2015, filed on February 24, 2016 with the SEC.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our critical accounting policies and estimates have not changed significantly from those detailed in our most recent Annual Report on Form 10-K for the year ended December 31, 2015, filed on February 24, 2016 with the SEC.

EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS

See Note 1 of Notes to Consolidated Financial Statements in Item 1 of this Form 10-Q for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on results of operations and financial condition, which is incorporated herein by reference.

RESULTS OF OPERATIONS – THREE AND SIX MONTHS ENDED JUNE 30, 2016 COMPARED TO THREE AND SIX MONTHS ENDED JUNE 30, 2015

SALES

Our sales increased 1.6% from $160.1 million in the three months ended June 30, 2015 to $162.7 million in the three months ended June 30, 2016, and increased 0.6% from $303.0 million in the six months ended June 30, 2015 to $304.9 million in the six months ended June 30, 2016. The increase in sales for the three months ended June 30, 2016 is primarily attributable to a $10.8 million increase in sales of our Customer Devices products, a $2.2 million increase in sales of our Traditional & Other products, partially offset by a $10.5 million decrease in sales of our Access & Aggregation products. The increase in sales for the six months ended June 30, 2016 is primarily attributable to a $11.5 million increase in sales of our Customer Devices products, partially offset by a $9.5 million decrease in sales of our Access & Aggregation products.

Network Solutions sales decreased 3.9% from $144.1 million in the three months ended June 30, 2015 to $138.5 million in the three months ended June 30, 2016, and decreased 4.1% from $273.6 million in the six months ended June 30, 2015 to $262.4 million in the six months ended June 30, 2016. The decrease in sales for the three and six months ended June 30, 2016 is primarily attributable to a decrease in sales of Access and Aggregation products, partially offset by an increase in Customer Devices products. The decrease in sales of our Access and Aggregation products is primarily attributable to a decrease in international hiX product sales, partially offset by an increase in U.S. Total Access 5000 product sales. The increase in sales of our Customer Devices products is primarily attributable to increased sales of our FTTP ONT products and Ethernet products.

Services & Support sales increased 50.6% from $16.0 million in the three months ended June 30, 2015 to $24.2 million in the three months ended June 30, 2016, and increased 44.6% from $29.4 million in the six months ended June 30, 2015 to $42.5 million in the six months ended June 30, 2016. The increase in sales for the three and six months ended June 30, 2016 is primarily attributable to an increase in network installation services for access and aggregation products.

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International sales, which are included in the Network Solutions and Services & Support amounts discussed above, decreased 47.8% from $55.7 million in the three months ended June 30, 2015 to $29.1 million in the three months ended June 30, 2016, and decreased 52.3% from $115.1 million in the six months ended June 30, 2015 to $54.9 million in the six months ended June 30, 2016. International sales, as a percentage of total sales, decreased from 34.8% and 38.0% for the three and six months ended June 30, 2015 to 17.9% and 18.0% for the three and six months ended June 30, 2016. The decrease in international sales for the three and six months ended June 30, 2016 is primarily attributable to the return to more seasonally normal buying patterns in Europe and also, relating to the decrease in international sales as a percentage of revenue, growing momentum in the U.S. broadband market.

COST OF SALES

As a percentage of sales, cost of sales decreased from 57.4% in the three months ended June 30, 2015 to 51.5% in the three months ended June 30, 2016, and decreased from 55.8% in the six months ended June 30, 2015 to 52.5% in the six months ended June 30, 2016. The decrease in cost of sales for the three and six months ended June 30, 2016 is primarily attributable to a regional revenue shift and a change in product and services mix.

Network Solutions cost of sales, as a percent of that segment’s sales, decreased from 58.4% in the three months ended June 30, 2015 to 49.0% in the three months ended June 30, 2016, and decreased from 56.9% in the six months ended June 30, 2015 to 50.3% in the six months ended June 30, 2016. The decrease in cost of sales for the three and six months ended June 30, 2016 is primarily attributable to a regional revenue shift and customer and product mix.

Services & Support cost of sales, as a percent of that segment’s sales, increased from 47.9% in the three months ended June 30, 2015 to 65.8% in the three months ended June 30, 2016, and increased from 45.6% in the six months ended June 30, 2015 to 66.5% in the six months ended June 30, 2016. The increase in cost of sales for the three and six months ended June 30, 2016 is primarily attributable to an increase in network installation services, which have higher costs, versus a greater mix of maintenance and support services in the prior periods.

An important part of our strategy is to reduce the product cost of each succeeding product generation and then to lower the product’s price based on the cost savings achieved. This may cause variations in our gross profit percentage due to timing differences between the recognition of cost reductions and the lowering of product selling prices.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses increased 2.3% from $32.1 million in the three months ended June 30, 2015 to $32.9 million in the three months ended June 30, 2016, and increased 0.7% from $63.2 million in the six months ended June 30, 2015 to $63.7 million in the six months ended June 30, 2016. The increase in selling, general and administrative expenses for the three and six months ended June 30, 2016 is primarily attributable to an increase in compensation expense, partially offset by a decrease in professional services.

As a percentage of sales, selling, general and administrative expenses increased from 20.1% in the three months ended June 30, 2015 to 20.2% in the three months ended June 30, 2016, and was consistent at 20.9% in the six months ended June 30, 2015 and 2016. Selling, general and administrative expenses as a percentage of sales may fluctuate whenever there is a significant fluctuation in revenues for the periods being compared.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses decreased 11.8% from $35.5 million in the three months ended June 30, 2015 to $31.3 million in the three months ended June 30, 2016, and decreased 10.7% from $68.0 million in the six months ended June 30, 2015 to $60.8 million in the six months ended June 30, 2016. The decrease in research and development expenses for the three months ended June 30, 2016 is primarily attributable to a decrease in compensation expense and testing expense. The decrease in research and development expenses for the six months ended June 30, 2016 is primarily attributable to a decrease in compensation expense and testing expense, partially offset by an increase in contract services. The decrease is compensation expense for the three and six months ended June 30, 2016 was primary attributable to the consolidation of engineering resources that occurred in the second quarter of 2015.

As a percentage of sales, research and development expenses decreased from 22.2% in the three months ended June 30, 2015 to 19.2% in the three months ended June 30, 2016, and decreased from 22.4% in the six months ended June 30, 2015 to 19.9% in the six months ended June 30, 2016. Research and development expenses as a percentage of sales will fluctuate whenever there are incremental product development activities or a significant fluctuation in revenues for the periods being compared.

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We expect to continue to incur research and development expenses in connection with our new and existing products and our expansion into international markets. We continually evaluate new product opportunities and engage in intensive research and product development efforts which provides for new product development, enhancement of existing products and product cost reductions. We may incur significant research and development expenses prior to the receipt of revenues from a major new product group.

INTEREST AND DIVIDEND INCOME

Interest and dividend income increased 2.1%, or $19 thousand from the three months ended June 30, 2015 to the three months ended June 30, 2016, and decreased 3.2%, or $0.1 million from the six months ended June 30, 2015 to the six months ended June 30, 2016. The increase in interest and dividend income for the three months ended June 30, 2016, is primarily attributable to an increase in interest rates. The decrease in interest and dividend income for the six months ended June 30, 2016 is primarily attributable to a reduction in investment principal, partially offset by a small increase in interest rates.

INTEREST EXPENSE

Interest expense, which is primarily related to our taxable revenue bond, remained constant at $0.1 million in the three months ended June 30, 2015 and 2016, and $0.3 million in the six months ended June 30, 2015 and 2016, as we had no substantial change in our fixed-rate borrowing. See “Liquidity and Capital Resources” below for additional information on our revenue bond.

NET REALIZED INVESTMENT GAIN

Net realized investment gains decreased 65.9% from $3.3 million in the three months ended June 30, 2015 to $1.1 million in the three months ended June 30, 2016, and decreased 55.4% from $6.4 million in the six months ended June 30, 2015 to $2.8 million in the six months ended June 30, 2016. The decrease in realized investment gains for the three and six months ended June 30, 2016 is primarily attributable to decreased gains from the sale of equity securities. See “Investing Activities” in “Liquidity and Capital Resources” below for additional information.

OTHER INCOME (EXPENSE), NET

Other income (expense), net, comprised primarily of miscellaneous income, gains and losses on foreign currency transactions, investment account management fees, and scrap raw material sales, changed from $0.5 million of expense in the three months ended June 30, 2015 to $0.3 million of expense in the three months ended June 30, 2016, and changed from $0.9 million of expense in the six months ended June 30, 2015 to $0.1 million of expense in the six months ended June 30, 2016. The change for the three and six months ended June 30, 2016 is primarily attributable to reduced losses on foreign currency transactions.

INCOME TAXES

Our effective tax rate decreased from 39.1% in the six months ended June 30, 2015 to 37.9% in the six months ended June 30, 2016. The decrease in the effective tax rate between the two periods is primarily attributable to the research and development tax credit being made permanent.

NET INCOME

As a result of the above factors, net income increased $7.7 million from $2.5 million in the three months ended June 30, 2015 to $10.2 million in the three months ended June 30, 2016, and increased $9.4 million from $5.9 million in the six months ended June 30, 2015 to $15.2 million in the six months ended June 30, 2016.

As a percentage of sales, net income increased from 1.6% in the three months ended June 30, 2015 to 6.3% in the three months ended June 30, 2016, and increased from 1.9% in the six months ended June 30, 2015 to 5.0% in the six months ended June 30, 2016.

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LIQUIDITY AND CAPITAL RESOURCES

Liquidity

We intend to finance our operations with cash flow from operations. We have used, and expect to continue to use, the cash generated from operations for working capital, purchases of treasury stock, shareholder dividends, and other general corporate purposes, including (i) product development activities to enhance our existing products and develop new products and (ii) expansion of sales and marketing activities. We believe our cash and cash equivalents, investments and cash generated from operations to be adequate to meet our operating and capital needs for at least the next 12 months.

At June 30, 2016, cash on hand was $70.9 million and short-term investments were $50.9 million, which resulted in available short-term liquidity of $121.8 million, of which $34.2 million was held by our foreign subsidiaries. At December 31, 2015, cash on hand was $84.6 million and short-term investments were $34.4 million, which resulted in available short-term liquidity of $118.9 million, of which $38.9 million was held by our foreign subsidiaries. The increase in short-term liquidity from December 31, 2015 to June 30, 2016 is primarily attributable to shifts among available investment option tenures to provide funds for our short-term cash needs.

Operating Activities

Our working capital, which consists of current assets less current liabilities, increased 1.3% from $238.1 million as of December 31, 2015 to $241.2 million as of June 30, 2016. The increase in our working capital is primarily attributable to an increase in accounts receivable, partially offset by a decrease in other receivables and inventory, and an increase in accounts payable. The quick ratio, defined as cash, cash equivalents, short-term investments, and net accounts receivable, divided by current liabilities, remained consistent at 2.06 as of December 31, 2015 and 2.05 as of June 30, 2016. The current ratio, defined as current assets divided by current liabilities, decreased from 3.57 as of December 31, 2015 to 3.34 as of June 30, 2016. The decrease in the current ratio is primarily attributable to an increase in accounts payable, accrued wages and benefits, and a decrease in inventory, partially offset by an increase in accounts receivable.

Net accounts receivable increased 24.3% from $71.9 million at December 31, 2015 to $89.4 million at June 30, 2016. Our allowance for doubtful accounts was $19 thousand at December 31, 2015 and June 30, 2016. Quarterly accounts receivable days sales outstanding (DSO) increased from 48 days as of December 31, 2015 to 50 days as of June 30, 2016. The change in net accounts receivable is due to changes in customer mix and the timing of sales and collections during the quarter. Certain international customers can have longer payment terms than U.S. customers. Other receivables decreased from $19.3 million at December 31, 2015 to $11.7 million at June 30, 2016. The decrease in other receivables is primarily attributable to the timing of filing returns and collections of VAT receivables in our international subsidiaries. Other receivables will also fluctuate due to the timing of shipments and collections for materials supplied to our contract manufacturers during the quarter.

Quarterly inventory turnover increased from 3.3 turns as of December 31, 2015 to 3.7 turns at June 30, 2016. Inventory decreased 5.0% from December 31, 2015 to June 30, 2016. We expect inventory levels to fluctuate as we attempt to maintain sufficient inventory in response to services activity and seasonal cycles of our business, ensuring competitive lead times while managing the risk of inventory obsolescence that may occur due to rapidly changing technology and customer demand.

Accounts payable increased 21.7% from $48.7 million at December 31, 2015 to $59.2 million at June 30, 2016. Accounts payable will fluctuate due to variations in the timing of the receipt of supplies, inventory and services and our subsequent payments for these purchases.

Investing Activities

Capital expenditures totaled approximately $6.7 million and $5.4 million for the six months ended June 30, 2016 and 2015, respectively. These expenditures were primarily used to purchase computer hardware, software, manufacturing and test equipment, and building improvements.

Our combined short-term and long-term investments increased $4.7 million from $232.4 million at December 31, 2015 to $237.1 million at June 30, 2016. This increase reflects the impact of our cash needs for capital expenditures, purchases of treasury stock, and shareholder dividends, as well as net realized and unrealized losses and amortization of net premiums on our combined investments, partially offset by additional funds available for investment provided by our operating activities and stock option exercises by our employees.

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We invest all available cash not required for immediate use in operations primarily in securities that we believe bear minimal risk of loss. At June 30, 2016 these investments included corporate bonds of $54.1 million, municipal fixed-rate bonds of $16.9 million, asset-backed bonds of $23.6 million, mortgage/agency-backed bonds of $19.2 million, U.S. government bonds of $33.8 million, and variable rate demand notes of $11.7 million. At December31, 2015, these investments included corporate bonds of $57.6million, municipal fixed-rate bonds of $26.4million, asset-backed bonds of $19.2million, mortgage/agency-backed bonds of $15.4million, and U.S. government bonds of $35.4million. As of June30, 2016, our corporate bonds, municipal fixed-rate bonds, asset-backed bonds, mortgage/agency-backed bonds, U.S. government bonds, and variable rate demand notes were classified as available-for-sale and had a combined duration of 0.96 years with an average Standard & Poor’s credit rating of AA-. Because our bond portfolio has a high quality rating and contractual maturities of a short duration, we are able to obtain prices for these bonds derived from observable market inputs, or for similar securities traded in an active market, on a daily basis.

Our long-term investments decreased 5.9% from $198.0 million at December 31, 2015 to $186.2 million at June 30, 2016. Long-term investments at June 30, 2016 and December 31, 2015 included an investment in a certificate of deposit of $30.0 million, which serves as collateral for our revenue bond. See “Debt” below for additional information. We have various equity investments included in long-term investments at a cost of $32.9 million and $31.6 million, and with a fair value of $33.4 million and $34.3 million, at June 30, 2016 and December 31, 2015, respectively.

Long-term investments at June 30, 2016 and December 31, 2015 also included $13.1 million and $12.8 million, respectively, related to our deferred compensation plans, and $1.2 million and $1.3 million, respectively, of other investments carried at cost, consisting of interests in two private equity funds and an investment in a privately held telecommunications equipment manufacturer.

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. For the three and six months ended June 30, 2016 and 2015, other-than-temporary impairment charges were not significant.

Financing Activities

Dividends

In July 2003, our Board of Directors elected to begin declaring quarterly dividends on our common stock considering the tax treatment of dividends and adequate levels of Company liquidity. During the six months ended June 30, 2016, we paid dividends totaling $8.9 million.

Debt

We have amounts outstanding under loans made pursuant to an Alabama State Industrial Development Authority revenue bond (the Bond) which totaled $28.9 million at June 30, 2016 and December 31, 2015. At June 30, 2016, the estimated fair value of the Bond was approximately $29.4 million, based on a debt security with a comparable interest rate and maturity and a Standard & Poor’s credit rating of AAA. Included in long-term investments are restricted funds in the amount of $30.0 million at June 30, 2016 and December 31, 2015, which is a collateral deposit against the principal amount of the Bond. We have the right to set-off the balance of the Bond with the collateral deposit in order to reduce the balance of the indebtedness. The Bond matures on January 1, 2020, and bears interest at the rate of 2% per annum. In conjunction with this program, we are eligible to receive certain economic incentives from the state of Alabama that reduce the amount of payroll withholdings we are required to remit to the state for those employment positions that qualify under this program. We are required to make payments in the amounts necessary to pay the interest on the amounts currently outstanding. It is our intent to make annual principal payments in addition to the interest amounts that are due. In connection with this decision, $1.0 million of the Bond has been classified as a current liability in accounts payable in the Consolidated Balance Sheet at June 30, 2016.

Stock Repurchase Program

Since 1997, our Board of Directors has approved multiple share repurchase programs that have authorized open market repurchase transactions of up to 50.0 million shares of our common stock, which will be implemented through open market or private purchases from time to time as conditions warrant. During the six months ended June 30, 2016, we repurchased 0.9 million shares of our common stock at an average price of $18.48 per share. As of June 30, 2016, we have the authority to purchase an additional 4.9 million shares of our common stock under the current plans approved by the Board of Directors.

32

Stock Option Exercises

We issued 33 thousand shares of treasury stock during the six months ended June 30, 2016 to accommodate employee stock option exercises. The stock options had exercise prices ranging from $15.29 to $18.97. We received proceeds totaling $0.5 million from the exercise of these stock options during the six months ended June 30, 2016.

Off-Balance Sheet Arrangements and Contractual Obligations

We do not have off-balance sheet financing arrangements and have not engaged in any related party transactions or arrangements with unconsolidated entities or other persons that are reasonably likely to materially affect liquidity or the availability of or requirements for capital resources. During the six months ended June 30, 2016, there have been no material changes in contractual obligations and commercial commitments from those discussed in our most recent Annual Report on Form 10-K for the year ended December 31, 2015 filed on February 24, 2016 with the SEC.

We have committed to invest up to an aggregate of $7.9 million in two private equity funds, and we have contributed $8.4 million as of June 30, 2016, of which $7.7 million has been applied to these commitments.

33

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to financial market risks, including changes in interest rates, foreign currency rates and prices of marketable equity and fixed-income securities. The primary objective of the large majority of our investment activities is to preserve principal while at the same time achieving appropriate yields without significantly increasing risk. To achieve this objective, a majority of our marketable securities are investment grade, municipal fixed-rate bonds, variable rate demand notes and municipal money market instruments denominated in U.S. dollars. Our investment policy provides limitations for issuer concentration, which limits, at the time of purchase, the concentration in any one issuer to 5% of the market value of our total investment portfolio.

We maintain depository investments with certain financial institutions. Although these depository investments may exceed government insured depository limits, we have evaluated the credit worthiness of these financial institutions, and determined the risk of material financial loss due to exposure of such credit risk to be minimal. As of June 30, 2016, $68.3 million of our cash and cash equivalents, primarily certain domestic money market funds and foreign depository accounts, were in excess of government provided insured depository limits.

As of June 30, 2016, approximately $166.1 million of our cash and investments may be directly affected by changes in interest rates. We have performed a hypothetical sensitivity analysis assuming market interest rates increase or decrease by 50 basis points (bps) for an entire year, while all other variables remain constant. At June 30, 2016, we held $70.4 million of cash and variable-rate investments where a change in interest rates would impact our interest income. A hypothetical 50 bps decline in interest rates as of June 30, 2016 would reduce annualized interest income on our cash and investments by approximately $0.3 million. In addition, we held $95.7 million of fixed-rate bonds whose fair values may be directly affected by a change in interest rates. A hypothetical 50 bps increase in interest rates as of June 30, 2016 would reduce the fair value of our fixed-rate bonds by approximately $0.5 million.

As of June 30, 2015, approximately $201.9 million of our cash and investments was subject to being directly affected by changes in interest rates. We have performed a hypothetical sensitivity analysis assuming market interest rates increase or decrease by 50 bps for the entire year, while all other variables remain constant. A hypothetical 50 bps decline in interest rates as of June 30, 2015 would have reduced annualized interest income on our cash, money market instruments and variable rate demand notes by approximately $0.4 million. In addition, a hypothetical 50 bps increase in interest rates as of June 30, 2015 would have reduced the fair value of our municipal fixed-rate bonds and corporate bonds by approximately $0.9 million.

We are exposed to changes in foreign currency exchange rates to the extent that such changes affect our revenue and gross margin on revenue derived from some international customers, expenses, and assets and liabilities held in non-functional currencies related to our foreign subsidiaries. Our primary exposures to foreign currency exchange rates are with our Mexican subsidiary, whose functional currency is the United States dollar, our German subsidiary, whose functional currency is the Euro, and our Australian subsidiary, whose functional currency is the Australian dollar. We are exposed to changes in foreign currency exchange rates to the extent of our German subsidiary’s use of contract manufacturers and raw material suppliers whom we predominately pay in U.S. dollars. As a result, changes in currency exchange rates could cause variations in gross margin in the products that we sell in the EMEA region.

We have certain international customers who are invoiced or pay in a non-functional currency. Changes in the monetary exchange rates used to invoice such customers versus the functional currency of the entity billing such customers may adversely affect our results of operations and financial condition. To manage the volatility relating to these typical business exposures, we may enter into various derivative transactions, when appropriate. We do not hold or issue derivative instruments for trading or other speculative purposes. All non-functional currencies billed would result in a combined hypothetical gain or loss of $0.1 million if the U.S. dollar weakened or strengthened 10% against the billing currencies. Any gain or loss would be partially mitigated by the forward contracts discussed in the following paragraph.

As of June 30, 2016, we had no material contracts, other than accounts receivable, accounts payable, and loans to a subsidiary, denominated in foreign currencies. As of June 30, 2016, we had forward contracts outstanding with notional amounts totaling €6.0 million ($6.7 million), which mature in the third quarter of 2016. The fair value of these forward contracts was a net asset of approximately $0.2 million as of June 30, 2016.

For further information about the fair value of our available-for-sale investments and our derivative and hedging activities as of June 30, 2016, see Notes 5 and 6 of Notes to Consolidated Financial Statements.

34

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures. Our Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) for ADTRAN. Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report, have concluded that our disclosure controls and procedures are effective.

(b) Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

35

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

A list of factors that could materially affect our business, financial condition or operating results is described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015. There have been no material changes to our risk factors since our Annual Report on Form 10-K for the year ended December 31, 2015.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table sets forth repurchases of our common stock for the months indicated:

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
April 1, 2016 – April 30, 2016		30,222		18.64		30,222		5,197,343
May 1, 2016 – May 31, 2016		268,391		18.68		268,391		4,928,952
June 1, 2016 – June 30, 2016		-		-		-		4,928,952
Total		298,613				298,613

On July 14, 2015, our Board of Directors authorized the repurchase of an additional 5.0 million shares of our common stock (bringing the total shares authorized for repurchase to 50.0 million). This authorization will be implemented through open market or private purchases from time to time as conditions warrant.

36

ITEM 6.EXHIBITS

Exhibits.

Exhibit No.	Description
31	Rule 13a-14(a)/15d-14(a) Certifications
32	Section 1350 Certifications
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document

* Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

37

SIGNATURE

Pursuant to the requirements 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.

	ADTRAN, Inc. (Registrant)
Date:  August 5, 2016	/s/ Roger D. Shannon
	Roger D. Shannon
	Senior Vice President of Finance,
	Chief Financial Officer,
	Corporate Treasurer and Secretary
	(Principal Financial Officer)

38

EXHIBIT INDEX

Exhibit No.	Description
31	Rule 13a-14(a)/15d-14(a) Certifications
32	Section 1350 Certifications
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document

* Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

39

EX-31

Exhibit 31

CERTIFICATIONS

I, Thomas R. Stanton, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ADTRAN, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2016

/s/ Thomas R. Stanton

Thomas R. Stanton

Chief Executive Officer and Chairman of the Board

CERTIFICATIONS

I, Roger D. Shannon, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ADTRAN, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 5, 2016

/s/ Roger D. Shannon

Roger D. Shannon

Senior Vice President of Finance,

Chief Financial Officer,

Corporate Treasurer and Secretary

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of ADTRAN, Inc. (the "Company") on Form 10-Q for the quarter ending June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Thomas R. Stanton, Chief Executive Officer and Chairman of the Board of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Thomas R. Stanton

Thomas R. Stanton

Chief Executive Officer and Chairman of the Board

August 5, 2016

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of ADTRAN, Inc. (the "Company") on Form 10-Q for the quarter ending June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Roger D. Shannon, Senior Vice President of Finance, Chief Financial Officer, Corporate Secretary and Treasurer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Roger D. Shannon

Roger D. Shannon

Senior Vice President of Finance,

Chief Financial Officer,

Corporate Secretary and Treasurer

August 5, 2016

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Jul. 22, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Trading Symbol	ADTN
Entity Registrant Name	ADTRAN INC
Entity Central Index Key	0000926282
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		48,398,992

XML

Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Current Assets
Cash and cash equivalents	$ 70,914	$ 84,550
Short-term investments	50,867	34,396
Accounts receivable, less allowance for doubtful accounts of $19 at June 30, 2016 and December 31, 2015	89,386	71,917
Other receivables	11,676	19,321
Income tax receivable, net	2,405
Inventory, net	86,936	91,533
Prepaid expenses and other current assets	13,563	10,145
Deferred tax assets, net	18,488	18,924
Total Current Assets	344,235	330,786
Property, plant and equipment, net	74,115	73,233
Deferred tax assets, net	19,127	18,091
Goodwill	3,492	3,492
Other assets	9,340	9,276
Long-term investments	186,249	198,026
Total Assets	636,558	632,904
Current Liabilities
Accounts payable	59,211	48,668
Unearned revenue	15,982	16,615
Accrued expenses	12,126	12,108
Accrued wages and benefits	15,702	12,857
Income tax payable, net		2,395
Total Current Liabilities	103,021	92,643
Non-current unearned revenue	6,437	7,965
Other non-current liabilities	25,476	24,236
Bonds payable	27,900	27,900
Total Liabilities	162,834	152,744
Commitments and contingencies (see Note 13)
Stockholders’ Equity
Common stock, par value $0.01 per share; 200,000 shares authorized; 79,652 shares issued and 48,712 shares outstanding at June 30, 2016 and 79,652 shares issued and 49,558 shares outstanding at December 31, 2015	797	797
Additional paid-in capital	249,851	246,879
Accumulated other comprehensive loss	(8,695)	(8,969)
Retained earnings	912,536	906,772
Less treasury stock at cost: 30,940 and 30,094 shares at June 30, 2016 and December 31, 2015, respectively	(680,765)	(665,319)
Total Stockholders’ Equity	473,724	480,160
Total Liabilities and Stockholders’ Equity	$ 636,558	$ 632,904

XML

Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Statement Of Financial Position [Abstract]
Allowance for doubtful accounts	$ 19	$ 19
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	79,652,000	79,652,000
Common stock, shares outstanding	48,712,000	49,558,000
Treasury stock, shares	30,940,000	30,094,000

XML

Consolidated Statements of Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Sales
Products	$ 138,549	$ 144,098	$ 262,432	$ 273,603
Services	24,152	16,040	42,473	29,370
Total Sales	162,701	160,138	304,905	302,973
Cost of sales
Products	67,844	84,210	131,917	155,770
Services	15,902	7,682	28,239	13,394
Total Cost of Sales	83,746	91,892	160,156	169,164
Gross Profit	78,955	68,246	144,749	133,809
Selling, general and administrative expenses	32,866	32,123	63,651	63,187
Research and development expenses	31,277	35,479	60,765	68,015
Operating Income	14,812	644	20,333	2,607
Interest and dividend income	927	908	1,782	1,841
Interest expense	(142)	(149)	(287)	(297)
Net realized investment gain	1,110	3,255	2,838	6,370
Other expense, net	(251)	(547)	(132)	(900)
Income before provision for income taxes	16,456	4,111	24,534	9,621
Provision for income taxes	(6,228)	(1,567)	(9,292)	(3,760)
Net Income	$ 10,228	$ 2,544	$ 15,242	$ 5,861
Weighted average shares outstanding – basic	48,831	51,822	49,026	52,607
Weighted average shares outstanding – diluted	49,048	51,917	49,218	52,742
Earnings per common share – basic	$ 0.21	$ 0.05	$ 0.31	$ 0.11
Earnings per common share – diluted	0.21	0.05	0.31	0.11
Dividend per share	$ 0.09	$ 0.09	$ 0.18	$ 0.18

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 10,228	$ 2,544	$ 15,242	$ 5,861
Other Comprehensive Income (Loss), net of tax:
Net unrealized losses on available-for-sale securities	(165)	(1,783)	(420)	(2,286)
Defined benefit plan adjustments	22	72	67	140
Foreign currency translation	(601)	872	627	(2,446)
Other Comprehensive Income (Loss), net of tax	(744)	(839)	274	(4,592)
Comprehensive Income, net of tax	$ 9,484	$ 1,705	$ 15,516	$ 1,269

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Cash flows from operating activities:
Net income	$ 15,242	$ 5,861
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	6,689	7,256
Amortization of net premium on available-for-sale investments	376	1,578
Net realized investment gain	(2,838)	(6,370)
Net loss on disposal of property, plant and equipment	5	160
Stock-based compensation expense	3,109	3,114
Deferred income taxes	(354)	(1,743)
Tax benefit from stock option exercises		(23)
Excess tax benefits from stock-based compensation arrangements		38
Changes in operating assets and liabilities:
Accounts receivable, net	(17,192)	(2,003)
Other receivables	7,876	(119)
Inventory	4,938	(14,254)
Prepaid expenses and other assets	(4,263)	(1,433)
Accounts payable	10,354	30,938
Accrued expenses and other liabilities	1,474	2,175
Income tax payable/receivable, net	(4,799)	(3,961)
Net cash provided by operating activities	20,617	21,214
Cash flows from investing activities:
Purchases of property, plant and equipment	(6,679)	(5,392)
Proceeds from disposals of property, plant and equipment		8
Proceeds from sales and maturities of available-for-sale investments	109,993	120,422
Purchases of available-for-sale investments	(112,903)	(62,626)
Net cash provided by (used in) investing activities	(9,589)	52,412
Cash flows from financing activities:
Proceeds from stock option exercises	541	833
Purchases of treasury stock	(16,579)	(49,307)
Dividend payments	(8,860)	(9,509)
Excess tax benefits from stock-based compensation arrangements		(38)
Net cash used in financing activities	(24,898)	(58,021)
Net increase (decrease) in cash and cash equivalents	(13,870)	15,605
Effect of exchange rate changes	234	(1,829)
Cash and cash equivalents, beginning of period	84,550	73,439
Cash and cash equivalents, end of period	70,914	87,215
Supplemental disclosure of non-cash investing activities:
Purchases of property, plant and equipment included in accounts payable	$ 554	$ 270

XML

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements of ADTRAN^®, Inc. and its subsidiaries (ADTRAN) have been prepared pursuant to the rules and regulations for reporting on Quarterly Reports on Form 10-Q. Accordingly, certain information and notes required by generally accepted accounting principles for complete financial statements are not included herein. The December 31, 2015 Consolidated Balance Sheet is derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States.

In the opinion of management, all adjustments necessary to fairly state these interim statements have been recorded and are of a normal and recurring nature. The results of operations for an interim period are not necessarily indicative of the results for the full year. The interim statements should be read in conjunction with the financial statements and notes thereto included in ADTRAN’s Annual Report on Form 10-K for the year ended December 31, 2015, filed on February 24, 2016 with the SEC.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Our more significant estimates include the obsolete and excess inventory reserves, warranty reserves, customer rebates, determination of the deferred revenue components of multiple element sales agreements, estimated costs to complete obligations associated with deferred revenues, estimated income tax provision and income tax contingencies, the fair value of stock-based compensation, impairment of goodwill, valuation and estimated lives of intangible assets, estimated pension liability, fair value of investments, and the evaluation of other-than-temporary declines in the value of investments. Actual amounts could differ significantly from these estimates.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09 to fiscal years beginning after December 31, 2017, and interim periods within those fiscal years, with early adoption permitted for reporting periods beginning after December 15, 2016. Subsequently, the FASB issued ASUs in 2016 containing implementation guidance related to ASU 2014-09, including: ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net),which isintended to improve the operability and understandability of the implementation guidance on principal versus agent considerations; ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,which is intended to clarify two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance; and ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,which contains certain provisions and practical expedients in response to identified implementation issues. ASU 2014-09 allows for either full retrospective or modified retrospective adoption. We plan to adopt ASU 2014-09 and the related ASUs on January 1, 2018, and we are currently evaluating the transition method that will be elected and the impact that the adoption of ASU 2014-09 will have on our financial position, results of operations and cash flows.

In July 2015, the FASB issued Accounting Standards Update No.  2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (ASU 2015-11). Currently, Topic 330, Inventory, requires an entity to measure inventory at the lower of cost or market. Market could be replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. ASU 2015-11 does not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. ASU 2015-11 requires an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The amendments should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. We do not believe the adoption of ASU 2015-05 will have a material impact on our financial position, results of operations and cash flows.

In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes (ASU 2015-17). ASU 2015-17 amends the existing guidance on income taxes to require the classification of all deferred tax assets and liabilities as non-current on the balance sheet. ASU 2015-17 is effective for fiscal years beginning after December 15, 2016, including interim periods within those years. Early adoption is permitted. The guidance may be applied either prospectively, for all deferred tax assets and liabilities, or retrospectively to all periods presented. We have not selected a transition method or determined whether to early adopt ASU 2015-17 in 2016. Other than the revised balance sheet presentation of current deferred tax assets and liabilities, we do not believe the adoption of ASU 2015-17 will have a material impact on our financial position, results of operations and cash flows.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 requires an entity to recognize lease assets and lease liabilities on the balance sheet and to disclose key information about the entity's leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. A modified retrospective approach is required. We are currently evaluating the impact that the adoption of ASU 2016-02 will have on our financial position, results of operations and cash flows.

In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). ASU 2016-09 simplifies several aspects of accounting for share-based compensation arrangements, including income tax effects, the classification of tax-related cash flows on the statement of cash flows, and accounting for forfeitures. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those years. Early adoption is permitted. We are currently evaluating the impact that the adoption of ASU 2016-09 will have on our financial position, results of operations and cash flows.

During the first quarter of 2016, we adopted the following accounting standards, which had no material effect on our financial position, results of operations or cash flows:

In April 2015, the FASB issued Accounting Standards Update No. 2015-05, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement (ASU 2015-05), which provides guidance on accounting for fees paid by a customer in a cloud computing arrangement. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU 2015-05 is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. The amendments may be applied either prospectively to all arrangements entered into or materially modified after the effective date or retrospectively. We adopted ASU 2015-05 during the first quarter of 2016 and will apply the new standard prospectively. The adoption of ASU 2015-05 did not have a material impact on our financial position, results of operations and cash flows.

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Income Taxes

6 Months Ended

Jun. 30, 2016

Income Tax Disclosure [Abstract]

Income Taxes

2. INCOME TAXES

Our effective tax rate decreased from 39.1% in the six months ended June 30, 2015 to 37.9% in the six months ended June 30, 2016. The decrease in the effective tax rate between the two periods is primarily attributable to the research and development tax credit being made permanent.

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Pension Benefit Plan

6 Months Ended

Jun. 30, 2016

Compensation And Retirement Disclosure [Abstract]

Pension Benefit Plan

3. PENSION BENEFIT PLAN

We maintain a defined benefit pension plan covering employees in certain foreign countries.

The following table summarizes the components of net periodic pension cost for the three and six months ended June 30, 2016 and 2015:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2016			2015			2016			2015
Service cost	$	310		$	324		$	607		$	664
Interest cost		184			152			360			311
Expected return on plan assets		(271	)		(250	)		(530	)		(511	)
Amortization of actuarial losses		45			100			88			205
Net periodic pension cost	$	268		$	326		$	525		$	669

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2016

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

4. STOCK-BASED COMPENSATION

The following table summarizes the stock-based compensation expense related to stock options, restricted stock units (RSUs) and restricted stock for the three and six months ended June 30, 2016 and 2015, which was recognized as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2016			2015			2016			2015
Stock-based compensation expense included in cost of    sales	$	95		$	53		$	194		$	143
Selling, general and administrative expense		788			723			1,557			1,414
Research and development expense		668			699			1,358			1,557
Stock-based compensation expense included in operating    expenses		1,456			1,422			2,915			2,971
Total stock-based compensation expense		1,551			1,475			3,109			3,114
Tax benefit for expense associated with non-qualified    options		(213	)		(222	)		(425	)		(402	)
Total stock-based compensation expense, net of tax	$	1,338		$	1,253		$	2,684		$	2,712

The fair value of our stock options is estimated using the Black-Scholes model. The determination of the fair value of stock options on the date of grant using the Black-Scholes model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables that may have a significant impact on the fair value estimate.

There were no options granted during the three months ended June 30, 2015. The weighted-average assumptions and value of options granted for the three and six months ended June 30, 2016 and the six months ended June 30, 2015 are as follows:

	Three and Six Months Ended			Six Months Ended
	June 30,			June 30,
	2016			2015
Expected volatility		34.74	%		38.75	%
Risk-free interest rate		1.33	%		1.46	%
Expected dividend yield		1.91	%		1.60	%
Expected life (in years)		6.26			6.47
Weighted-average estimated value	$	5.42		$	7.63

The fair value of our RSUs is calculated using a Monte Carlo Simulation valuation method. No RSUs were granted or vested during the three and six months ended June 30, 2016 and 2015. Twelve thousand RSUs were forfeited during the six months ended June 30, 2015.

The fair value of restricted stock is equal to the closing price of our stock on the date of grant. Two thousand shares of restricted stock were granted during the six months ended June 30, 2016. Two thousand shares of restricted stock vested during the three and six months ended June 30, 2015.

Stock-based compensation expense recognized in our Consolidated Statements of Income for the three and six months ended June 30, 2016 and 2015 is based on options, RSUs and restricted stock ultimately expected to vest, and has been reduced for estimated forfeitures. Estimated forfeitures for stock options are based upon historical experience and approximate 3.7% annually. We estimated a 0% forfeiture rate for our RSUs and restricted stock due to the limited number of recipients and historical experience for these awards.

As of June 30, 2016, total compensation expense related to non-vested stock options, RSUs and restricted stock not yet recognized was approximately $11.5 million, which is expected to be recognized over an average remaining recognition period of 2.4 years.

The following table is a summary of our stock options outstanding as of December 31, 2015 and June 30, 2016 and the changes that occurred during the six months ended June 30, 2016:

(In thousands, except per share amounts)	Number of Options			Weighted Avg. Exercise Price		Weighted Avg. Remaining Contractual Life In Years		Aggregate Intrinsic Value
Options outstanding, December 31, 2015		7,108		$	21.97		6.42	$	3,284
Options granted		1		$	18.83
Options exercised		(33	)	$	16.58
Options forfeited		(42	)	$	17.88
Options expired		(54	)	$	25.65
Options outstanding, June 30, 2016		6,980		$	22.00		5.93	$	6,522
Options vested and expected to vest, June 30, 2016		6,865		$	22.09		5.88	$	6,260
Options exercisable, June 30, 2016		4,420		$	24.35		4.44	$	2,298

The aggregate intrinsic values in the table above represent the total pre-tax intrinsic value (the difference between the closing price of our stock on the last trading day of the quarter and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on June 30, 2016. The aggregate intrinsic value will change based on the fair market value of our stock.

The total pre-tax intrinsic value of options exercised during the three and six months ended June 30, 2016 was $0.1 million.

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Investments

6 Months Ended

Jun. 30, 2016

Investments Debt And Equity Securities [Abstract]

Investments

5. INVESTMENTS

At June 30, 2016, we held the following securities and investments, recorded at either fair value or cost.

	Amortized		Gross Unrealized					Carrying
(In thousands)	Cost		Gains		Losses			Value
Deferred compensation plan assets	$	11,516	$	1,628	$	(49	)	$	13,095
Corporate bonds		54,044		149		(61	)		54,132
Municipal fixed-rate bonds		16,889		59		-			16,948
Asset-backed bonds		23,526		53		(6	)		23,573
Mortgage/Agency-backed bonds		19,214		44		(39	)		19,219
U.S. Government bonds		33,498		308		-			33,806
Variable rate demand notes		11,740		-		-			11,740
Marketable equity securities		32,948		1,901		(1,478	)		33,371
Available-for-sale securities held at fair value	$	203,375	$	4,142	$	(1,633	)	$	205,884
Restricted investment held at cost									30,000
Other investments held at cost									1,232
Total carrying value of available-for-sale investments								$	237,116

At December 31, 2015, we held the following securities and investments, recorded at either fair value or cost.

	Amortized		Gross Unrealized					Carrying
(In thousands)	Cost		Gains		Losses			Value
Deferred compensation plan assets	$	11,325	$	1,575	$	(66	)	$	12,834
Corporate bonds		58,328		20		(734	)		57,614
Municipal fixed-rate bonds		26,414		28		(18	)		26,424
Asset-backed bonds		19,281		2		(44	)		19,239
Mortgage/Agency-backed bonds		15,463		1		(91	)		15,373
U.S. Government bonds		35,646		-		(248	)		35,398
Marketable equity securities		31,643		4,301		(1,693	)		34,251
Available-for-sale securities held at fair value	$	198,100	$	5,927	$	(2,894	)	$	201,133
Restricted investment held at cost									30,000
Other investments held at cost									1,289
Total carrying value of available-for-sale investments								$	232,422

As of June 30, 2016, our corporate bonds, municipal fixed-rate bonds, asset-backed bonds, mortgage/agency-backed bonds, and U.S. government bonds had the following contractual maturities:

(In thousands)	Corporate bonds		Municipal fixed-rate bonds		Asset- backed bonds		Mortgage / Agency- backed bonds		U.S. Government bonds
Less than one year	$	20,729	$	10,473	$	-	$	4,972	$	2,953
One to two years		24,884		4,488		822		2,569		7,481
Two to three years		6,099		1,536		9,077		2,058		11,344
Three to five years		2,420		451		10,991		-		12,028
Five to ten years		-		-		2,506		1,036		-
More than ten years		-		-		177		8,584		-
Total	$	54,132	$	16,948	$	23,573	$	19,219	$	33,806

Actual maturities may differ from contractual maturities because some borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

Our investment policy provides limitations for issuer concentration, which limits, at the time of purchase, the concentration in any one issuer to 5% of the market value of our total investment portfolio.

At June 30, 2016, we held a $30.0 million restricted certificate of deposit, which is carried at cost. This investment serves as a collateral deposit against the principal amount outstanding under loans made to ADTRAN pursuant to an Alabama State Industrial Development Authority revenue bond (the Bond), which totaled $28.9 million at June 30, 2016 and December 31, 2015. At June 30, 2016, the estimated fair value of the Bond using a level 2 valuation technique was approximately $29.4 million, based on a debt security with a comparable interest rate and maturity and a Standard and Poor’s credit rating of AAA. We have the right to set-off the balance of the Bond with the collateral deposit in order to reduce the balance of the indebtedness. The Bond matures on January 1, 2020, and bears interest at the rate of 2% per annum. In conjunction with this program, we are eligible to receive certain economic incentives from the state of Alabama that reduce the amount of payroll withholdings we are required to remit to the state for those employment positions that qualify under this program. We are required to make payments in the amounts necessary to pay the interest on the amounts currently outstanding. It is our intent to make annual principal payments in addition to the interest amounts that are due.

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. For the three and six months ended June 30, 2016 and 2015, other-than-temporary impairment charges were not significant.

Realized gains and losses on sales of securities are computed under the specific identification method. The following table presents gross realized gains and losses related to our investments.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In thousands)	2016			2015			2016			2015
Gross realized gains	$	1,517		$	3,459		$	3,881		$	6,604
Gross realized losses	$	(407	)	$	(204	)	$	(1,043	)	$	(234	)

As of June 30, 2016 and 2015, gross unrealized losses related to individual securities in a continuous loss position for 12 months or longer were not significant.

We have categorized our cash equivalents held in money market funds and our investments held at fair value into a three-level fair value hierarchy based on the priority of the inputs to the valuation technique for the cash equivalents and investments as follows:  Level 1 - Values based on unadjusted quoted prices for identical assets or liabilities in an active market; Level 2 - Values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly; Level 3 - Values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs include information supplied by investees.

	Fair Value Measurements at June 30, 2016 Using
(In thousands)	Fair Value		Quoted Prices in Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents
Money market funds	$	1,915	$	1,915	$	-	$	-
Commercial Paper		15,996		-		15,996		-
Cash equivalents		17,911		1,915		15,996		-
Available-for-sale securities
Deferred compensation plan assets		13,095		13,095		-		-
Available-for-sale debt securities
Corporate bonds		54,132		-		54,132		-
Municipal fixed-rate bonds		16,948		-		16,948		-
Asset-backed bonds		23,573		-		23,573		-
Mortgage/Agency-backed bonds		19,219		-		19,219		-
U.S. Government bonds		33,806		33,806		-		-
Variable rate demand notes		11,740		-		11,740		-
Available-for-sale marketable equity securities
Marketable equity securities – technology industry		4,386		4,386		-		-
Marketable equity securities – other		28,985		28,985		-		-
Available-for-sale securities		205,884		80,272		125,612		-
Total	$	223,795	$	82,187	$	141,608	$	-

	Fair Value Measurements at December 31, 2015 Using
(In thousands)	Fair Value		Quoted Prices in Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents
Money market funds	$	1,271	$	1,271	$	-	$	-
Commercial Paper		11,696		-		11,696		-
Cash equivalents		12,967		1,271		11,696		-
Available-for-sale securities
Deferred compensation plan assets		12,834		12,834		-		-
Available-for-sale debt securities
Corporate bonds		57,614		-		57,614		-
Municipal fixed-rate bonds		26,424		-		26,424		-
Asset-backed bonds		19,239		-		19,239		-
Mortgage/Agency-backed bonds		15,373		-		15,373		-
U.S. Government bonds		35,398		35,398		-		-
Available-for-sale marketable equity securities
Marketable equity securities – technology industry		5,384		5,384		-		-
Marketable equity securities – other		28,867		28,867		-		-
Available-for-sale securities		201,133		82,483		118,650		-
Total	$	214,100	$	83,754	$	130,346	$	-

The fair value of our Level 2 securities is calculated using a weighted average market price for each security. Market prices are obtained from a variety of industry standard data providers, security master files from large financial institutions, and other third-party sources. These multiple market prices are used as inputs into a distribution-curve-based algorithm to determine the daily market value of each security.

Our variable rate demand notes have a structure that implies a standard expected market price. The frequent interest rate resets make it reasonable to expect the price to stay at par. These securities are priced at the expected market price.

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Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2016

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

6. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We have certain customers and suppliers who are invoiced or pay in a non-functional currency. Changes in the monetary exchange rates may adversely affect our results of operations and financial condition, as these are remeasured to the functional currency through profit and loss. When appropriate, we enter into various derivative transactions to enhance our ability to manage the volatility relating to these typical business exposures. We do not hold or issue derivative instruments for trading or other speculative purposes. Our derivative instruments are recorded in the Consolidated Balance Sheets at their fair values. Our derivative instruments do not qualify for hedge accounting, and accordingly, all changes in the fair value of the instruments are recognized as other income (expense) in the Consolidated Statements of Income. The maximum contractual period for our derivatives is currently less than twelve months. Our derivative instruments are not subject to master netting arrangements and are not offset in the Consolidated Balance Sheets.

As of June 30, 2016, we had forward contracts outstanding with notional amounts totaling €6.0 million ($6.7 million), which mature in the third quarter of 2016.

The fair values of our derivative instruments recorded in the Consolidated Balance Sheet as of June 30, 2016 and December 31, 2015 were as follows:

(In thousands)	Balance Sheet Location	June 30, 2016		December 31, 2015
Derivatives Not Designated as Hedging Instruments (Level 2):
Foreign exchange contracts – asset derivatives	Other receivables	$	188	$	-

The change in the fair values of our derivative instruments recorded in the Consolidated Statements of Income during the three and six months ended June 30, 2016 and 2015 were as follows:

		Three Months Ended					Six Months Ended
	Income Statement	June 30,					June 30,
(In thousands)	Location	2016		2015			2016		2015
Derivatives Not Designated as Hedging Instruments:
Foreign exchange contracts	Other income (expense)	$	237	$	(1,299	)	$	190	$	177

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Inventory

6 Months Ended

Jun. 30, 2016

Inventory Disclosure [Abstract]

Inventory

7. INVENTORY

At June 30, 2016 and December 31, 2015, inventory consisted of the following:

	June 30,		December 31,
(In thousands)	2016		2015
Raw materials	$	35,761	$	34,223
Work in process		2,322		2,893
Finished goods		48,853		54,417
Total	$	86,936	$	91,533

We establish reserves for estimated excess, obsolete, or unmarketable inventory equal to the difference between the cost of the inventory and the estimated fair value of the inventory based upon assumptions about future demand and market conditions. At June 30, 2016 and December 31, 2015, raw materials reserves totaled $18.0 million and $17.5 million, respectively, and finished goods inventory reserves totaled $9.8 million and $9.2 million, respectively.

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Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2016

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

8. GOODWILL AND INTANGIBLE ASSETS

Goodwill, all of which relates to our acquisition of Bluesocket, Inc., was $3.5 million at June 30, 2016 and December 31, 2015, and was previously recorded in our Enterprise Networks reportable segment. As a result of our new reporting structure, which is discussed further in Note 11, we reallocated goodwill from our Enterprise Networks reportable segment to our two, new reportable segments – Network Solutions and Services & Support. As a result, goodwill of $3.1 million and $0.4 million was reallocated to our Network Solutions and Services & Support reportable segments, respectively.

We evaluate the carrying value of goodwill during the fourth quarter of each year and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. We have elected to first assess the qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit to which the goodwill is assigned is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step impairment test. If we determine that it is more likely than not that its fair value is less than its carrying amount, then the two-step impairment test will be performed. Based on the results of our qualitative assessment in 2015, we concluded that it was not necessary to perform the two-step impairment test. There have been no impairment losses recognized since the acquisition in 2011.

Intangible assets are included in other assets in the accompanying Consolidated Balance Sheets and include intangibles acquired in conjunction with our acquisitions of Objectworld Communications Corporation on September 15, 2009, Bluesocket, Inc. on August 4, 2011, and the NSN BBA business on May 4, 2012.

The following table presents our intangible assets as of June 30, 2016 and December 31, 2015:

(In thousands)	June 30, 2016							December 31, 2015
	Gross Value		Accumulated Amortization			Net Value		Gross Value		Accumulated Amortization			Net Value
Customer relationships	$	5,925	$	(2,966	)	$	2,959	$	5,828	$	(2,627	)	$	3,201
Developed technology		5,778		(4,767	)		1,011		5,720		(4,329	)		1,391
Intellectual property		2,340		(2,021	)		319		2,340		(1,854	)		486
Trade names		270		(270	)		-		270		(265	)		5
Total	$	14,313	$	(10,024	)	$	4,289	$	14,158	$	(9,075	)	$	5,083

Amortization expense, all of which relates to business acquisitions, was $0.4 million and $0.5 million for the three months ended June 30, 2016 and 2015, respectively, and $0.9 million and $1.0 million for the six months ended June 30, 2016 and 2015, respectively.

As of June 30, 2016, the estimated future amortization expense of our intangible assets is as follows:

(In thousands)	Amount
Remainder of 2016	$	807
2017		1,162
2018		702
2019		308
2020		285
Thereafter		1,025
Total	$	4,289

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Stockholders' Equity

6 Months Ended

Jun. 30, 2016

Equity [Abstract]

Stockholders' Equity

9. STOCKHOLDERS’ EQUITY

A summary of the changes in stockholders’ equity for the six months ended June 30, 2016 is as follows:

(In thousands)	Stockholders’ Equity
Balance, December 31, 2015	$	480,160
Net income		15,242
Dividend payments		(8,860	)
Dividends accrued for unvested restricted stock units		(26	)
Net unrealized losses on available-for-sale securities (net of tax)		(420	)
Defined benefit plan adjustments		67
Foreign currency translation adjustment		627
Proceeds from stock option exercises		541
Purchase of treasury stock		(16,579	)
Income tax effect of stock compensation arrangements		(137	)
Stock-based compensation expense		3,109
Balance, June 30, 2016	$	473,724

Stock Repurchase Program

Since 1997, our Board of Directors has approved multiple share repurchase programs that have authorized open market repurchase transactions of up to 50.0 million shares of our common stock, which will be implemented through open market or private purchases from time to time as conditions warrant. During the six months ended June 30, 2016, we repurchased 0.9 million shares of our common stock at an average price of $18.48 per share. As of June 30, 2016, we have the authority to purchase an additional 4.9 million shares of our common stock under the current plans approved by the Board of Directors.

Stock Option Exercises

We issued 33 thousand shares of treasury stock during the six months ended June 30, 2016 to accommodate employee stock option exercises. The stock options had exercise prices ranging from $15.29 to $18.97. We received proceeds totaling $0.5 million from the exercise of these stock options during the six months ended June 30, 2016.

Dividend Payments

During the six months ended June 30, 2016, we paid cash dividends as follows (in thousands except per share amounts):

Record Date	Payment Date	Per Share Amount		Total Dividend Paid
February 4, 2016	February 18, 2016	$	0.09	$	4,453
April 28, 2016	May 12, 2016	$	0.09	$	4,407

Other Comprehensive Income

Other comprehensive income consists of unrealized gains (losses) on available-for-sale securities, reclassification adjustments for amounts included in net income related to impairments of available-for-sale securities, realized gains (losses) on available-for-sale securities, and amortization of actuarial gains (losses) related to our defined benefit plan, defined benefit plan adjustments, and foreign currency translation adjustments.

The following tables present changes in accumulated other comprehensive income, net of tax, by component for the three months ended June 30, 2016 and 2015:

	Three Months Ended June 30, 2016
(In thousands)	Unrealized Gains (Losses) on Available- for-Sale Securities			Defined Benefit Plan Adjustments			Foreign Currency Adjustments			Total
Beginning balance	$	1,677		$	(3,850	)	$	(5,778	)	$	(7,951	)
Other comprehensive income (loss) before    reclassifications		481			-			(601	)		(120	)
Amounts reclassified from accumulated other    comprehensive income		(646	)		22			-			(624	)
Net current period other comprehensive income (loss)		(165	)		22			(601	)		(744	)
Ending balance	$	1,512		$	(3,828	)	$	(6,379	)	$	(8,695	)

	Three Months Ended June 30, 2015
(In thousands)	Unrealized Gains (Losses) on Available- for-Sale Securities			Defined Benefit Plan Adjustments			Foreign Currency Adjustments			Total
Beginning balance	$	8,461		$	(5,689	)	$	(6,600	)	$	(3,828	)
Other comprehensive income (loss) before    reclassifications		177			-			872			1,049
Amounts reclassified from accumulated other    comprehensive income		(1,960	)		72			-			(1,888	)
Net current period other comprehensive income (loss)		(1,783	)		72			872			(839	)
Ending balance	$	6,678		$	(5,617	)	$	(5,728	)	$	(4,667	)

The following tables present changes in accumulated other comprehensive income, net of tax, by component for the six months ended June 30, 2016 and 2015:

	Six Months Ended June 30, 2016
(In thousands)	Unrealized Gains (Losses) on Available- for-Sale Securities			Defined Benefit Plan Adjustments			Foreign Currency Adjustments			Total
Beginning balance	$	1,932		$	(3,895	)	$	(7,006	)	$	(8,969	)
Other comprehensive income (loss) before    reclassifications		1,239			-			627			1,866
Amounts reclassified from accumulated other    comprehensive income		(1,659	)		67			-			(1,592	)
Net current period other comprehensive income (loss)		(420	)		67			627			274
Ending balance	$	1,512		$	(3,828	)	$	(6,379	)	$	(8,695	)

	Six Months Ended June 30, 2015
(In thousands)	Unrealized Gains (Losses) on Available- for-Sale Securities			Defined Benefit Plan Adjustments			Foreign Currency Adjustments			Total
Beginning balance	$	8,964		$	(5,757	)	$	(3,282	)	$	(75	)
Other comprehensive income (loss) before    reclassifications		1,537			-			(2,446	)		(909	)
Amounts reclassified from accumulated other    comprehensive income		(3,823	)		140			-			(3,683	)
Net current period other comprehensive income (loss)		(2,286	)		140			(2,446	)		(4,592	)
Ending balance	$	6,678		$	(5,617	)	$	(5,728	)	$	(4,667	)

The following tables present the details of reclassifications out of accumulated other comprehensive income for the three months ended June 30, 2016 and 2015:

(In thousands)	Three Months Ended June 30, 2016
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income Is Presented
Unrealized gains (losses) on available-for-    sale securities:
Net realized gain on sales of securities	$	1,354		Net realized investment gain
Impairment expense		(295	)	Net realized investment gain
Defined benefit plan adjustments – actuarial    losses		(33	)	(1)
Total reclassifications for the period, before    tax		1,026
Tax (expense) benefit		(402	)
Total reclassifications for the period, net    of tax	$	624

⁽¹⁾ Included in the computation of net periodic pension cost. See Note 3 of Notes to Consolidated Financial Statements.

(In thousands)	Three Months Ended June 30, 2015
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income Is Presented
Unrealized gains (losses) on available-for-    sale securities:
Net realized gain on sales of securities	$	3,264		Net realized investment gain
Impairment expense		(51	)	Net realized investment gain
Defined benefit plan adjustments – actuarial    losses		(105	)	(1)
Total reclassifications for the period, before    tax		3,108
Tax (expense) benefit		(1,220	)
Total reclassifications for the period, net    of tax	$	1,888

⁽¹⁾ Included in the computation of net periodic pension cost. See Note 3 of Notes to Consolidated Financial Statements.

The following tables present the details of reclassifications out of accumulated other comprehensive income for the six months ended June 30, 2016 and 2015:

(In thousands)	Six Months Ended June 30, 2016
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income Is Presented
Unrealized gains (losses) on available-for-    sale securities:
Net realized gain on sales of securities	$	3,115		Net realized investment gain
Impairment expense		(395	)	Net realized investment gain
Defined benefit plan adjustments – actuarial    losses		(98	)	(1)
Total reclassifications for the period, before    tax		2,622
Tax (expense) benefit		(1,030	)
Total reclassifications for the period, net    of tax	$	1,592

⁽¹⁾ Included in the computation of net periodic pension cost. See Note 3 of Notes to Consolidated Financial Statements.

(In thousands)	Six Months Ended June 30, 2015
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income Is Presented
Unrealized gains (losses) on available-for-    sale securities:
Net realized gain on sales of securities	$	6,340		Net realized investment gain
Impairment expense		(73	)	Net realized investment gain
Defined benefit plan adjustments – actuarial    losses		(203	)	(1)
Total reclassifications for the period, before    tax		6,064
Tax (expense) benefit		(2,381	)
Total reclassifications for the period, net    of tax	$	3,683

⁽¹⁾ Included in the computation of net periodic pension cost. See Note 3 of Notes to Consolidated Financial Statements.

The following table presents the tax effects related to the change in each component of other comprehensive income for the three months ended June 30, 2016 and 2015:

	Three Months Ended June 30, 2016									Three Months Ended June 30, 2015
(In thousands)	Before-Tax Amount			Tax (Expense) Benefit			Net-of-Tax Amount			Before-Tax Amount			Tax (Expense) Benefit			Net-of-Tax Amount
Unrealized gains (losses) on available-for-sale    securities	$	789		$	(308	)	$	481		$	290		$	(113	)	$	177
Reclassification adjustment for amounts related to    available-for-sale investments included in net    income		(1,059	)		413			(646	)		(3,213	)		1,253			(1,960	)
Reclassification adjustment for amounts related to    defined benefit plan adjustments included in net    income		33			(11	)		22			105			(33	)		72
Foreign currency translation adjustment		(601	)		-			(601	)		872			-			872
Total Other Comprehensive Income (Loss)	$	(838	)	$	94		$	(744	)	$	(1,946	)	$	1,107		$	(839	)

The following table presents the tax effects related to the change in each component of other comprehensive income for the six months ended June 30, 2016 and 2015:

	Six Months Ended June 30, 2016									Six Months Ended June 30, 2015
(In thousands)	Before-Tax Amount			Tax (Expense) Benefit			Net-of-Tax Amount			Before-Tax Amount			Tax (Expense) Benefit			Net-of-Tax Amount
Unrealized gains (losses) on available-for-sale    securities	$	2,031		$	(792	)	$	1,239		$	2,520		$	(983	)	$	1,537
Reclassification adjustment for amounts related to    available-for-sale investments included in net    income		(2,720	)		1,061			(1,659	)		(6,267	)		2,444			(3,823	)
Reclassification adjustment for amounts related to    defined benefit plan adjustments included in net    income		98			(31	)		67			203			(63	)		140
Foreign currency translation adjustment		627			-			627			(2,446	)		-			(2,446	)
Total Other Comprehensive Income (Loss)	$	36		$	238		$	274		$	(5,990	)	$	1,398		$	(4,592	)

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Earnings per Share

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Earnings per Share

10. EARNINGS PER SHARE

A summary of the calculation of basic and diluted earnings per share for the three and six months ended June 30, 2016 and 2015 is as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands, except per share amounts)	2016		2015		2016		2015
Numerator
Net income	$	10,228	$	2,544	$	15,242	$	5,861
Denominator
Weighted average number of shares – basic		48,831		51,822		49,026		52,607
Effect of dilutive securities
Stock options		161		72		138		122
Restricted stock and restricted stock units		56		23		54		13
Weighted average number of shares – diluted		49,048		51,917		49,218		52,742
Net income per share – basic	$	0.21	$	0.05	$	0.31	$	0.11
Net income per share – diluted	$	0.21	$	0.05	$	0.31	$	0.11

Anti-dilutive options to purchase common stock outstanding were excluded from the above calculations. Anti-dilutive options totaled 5.6 million and 6.1 million for the three months ended June 30, 2016 and 2015, respectively, and 5.8 million and 5.7 million for the six months ended June 30, 2016 and 2015, respectively.

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Segment Information

6 Months Ended

Jun. 30, 2016

Segment Reporting [Abstract]

Segment Information

11. SEGMENT INFORMATION

In 2015, we began a realignment of our organizational structure to better match our market opportunities, technological development initiatives, and improve efficiencies. During the first quarter of 2016, our chief operating decision maker requested changes in the information that he regularly reviews for purposes of allocating resources and assessing performance. As a result, beginning with the quarter ended March 31, 2016, we began reporting our financial performance based on two, new reportable segments – Network Solutions and Services & Support. Network Solutions includes hardware products and next-generation virtualized solutions used in service provider or business networks, as well as prior-generation products. Services & Support includes our suite of ProCloud^® managed services, network installation, engineering and maintenance services, and fee-based technical support and equipment repair/replacement plans.

We evaluate the performance of our new segments based on gross profit; therefore, selling, general and administrative expenses, research and development expenses, interest and dividend income, interest expense, net realized investment gain/loss, other income/expense and provision for taxes are reported on a company-wide, functional basis only. Historical financial information by reportable segment and category, as discussed below, has been recast to conform to our new reporting structure. There are no inter-segment revenues.

The following table presents information about the reported sales and gross profit of our reportable segments for the three and six months ended June 30, 2016 and 2015. We do not produce asset information by reportable segment; therefore, it is not reported.

	Three Months Ended
	June 30, 2016				June 30, 2015
(In thousands)	Sales		Gross Profit		Sales		Gross Profit
Network Solutions	$	138,549	$	70,705	$	144,098	$	59,888
Services & Support		24,152		8,250		16,040		8,358
Total	$	162,701	$	78,955	$	160,138	$	68,246

	Six Months Ended
	June 30, 2016				June 30, 2015
(In thousands)	Sales		Gross Profit		Sales		Gross Profit
Network Solutions	$	262,432	$	130,515	$	273,603	$	117,833
Services & Support		42,473		14,234		29,370		15,976
Total	$	304,905	$	144,749	$	302,973	$	133,809

Sales by Category

In addition to our new reporting segments, we will also report revenue for the following three categories – Access & Aggregation, Customer Devices, and Traditional & Other Products.

Access & Aggregation generally includes software and hardware based products and services that communication service providers (CSPs) use to aggregate and/or originate network access technologies. The portfolio of ADTRAN solutions within this category includes a wide array of modular or fixed physical form factors designed to deliver the best technology and economic fit for our customers based on the target subscriber density and environmental conditions.

The Access & Aggregation category includes product and service families such as:

· Total Access^® 5000 Series Fiber to the Premises (FTTP) and Fiber to the Node (FTTN) Multi-Service Access Nodes (MSAN)

· hiX 5600 Series fiber aggregation and Fiber to the Node (FTTN) Multi-Service Access Nodes (MSAN)

· Fiber to the Distribution Point (FTTdp) Optical Network Units (ONU)

· Optical Line Terminals (OLT)

· Optical Networking Edge (ONE) aggregation

· Distribution Point Units (DPUs)

· IP Digital Subscriber Line Access Multiplexers (DSLAMs)

· Cabinet and Outside-Plant (OSP) enclosures and services

· Network Management and Cloud based software platforms and applications

· Pluggable optical transceivers (i.e., SFP, SFP+, XFP, QSFP), cables and other miscellaneous materials

· Other products and services that are generally applicable to Access & Aggregation

Customer Devices generally includes the products and services that provide end users access to the CSP network.  The Customer Devices portfolio includes a comprehensive array of service provider and enterprise hardware and software products and services.

The Customer Devices category includes products and services such as:

· Broadband customer premise solutions, including Passive Optical Network (PON) and point-to-point Ethernet Optical Network Terminals (ONTs)

· Residential and business gateways

· Wi-Fi access points and associated powering and switching infrastructure

· enterprise Session Border Controllers (eSBC)

· Branch office and access routers

· Carrier Ethernet services termination devices

· VoIP media gateways

· ProServices^®

· Planning, engineering, program management, maintenance, installation and commissioning services to implement the customer devices solutions into consumer, small business and enterprise locations

· Other products and services that are generally applicable to customer devices

Traditional & Other Products generally includes a mix of prior generation technologies’ products and services, as well as other products and services that do not fit within the Access & Aggregation or Customer Devices categories.

The Traditional & Other Products category includes products and services such as:

· Time Division Multiplexed (TDM) and Asynchronous Transfer Mode (ATM) based aggregation systems and customer devices

· HDSL, ADSL and other mature technologies used to deliver business and residential services over the CSP access and customer networks

· Other products and services that do not fit within the Access & Aggregation and Customer Devices categories

The table below presents sales information by category for the three and six months ended June 30, 2016 and 2015:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2016		2015		2016		2015
Access & Aggregation	$	102,232	$	112,732	$	196,087	$	205,583
Customer Devices		40,876		30,042		73,229		61,746
Traditional & Other Products		19,593		17,364		35,589		35,644
Total	$	162,701	$	160,138	$	304,905	$	302,973

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Liability for Warranty Returns

6 Months Ended

Jun. 30, 2016

Product Warranties Disclosures [Abstract]

Liability for Warranty Returns

12. LIABILITY FOR WARRANTY RETURNS

Our products generally include warranties of 90 days to ten years for product defects. We accrue for warranty returns at the time revenue is recognized based on our estimate of the cost to repair or replace the defective products. We engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers. Our products continue to become more complex in both size and functionality as many of our product offerings migrate from line card applications to total systems. The increasing complexity of our products will cause warranty incidences, when they arise, to be more costly. Our estimates regarding future warranty obligations may change due to product failure rates, material usage, and other rework costs incurred in correcting a product failure. In addition, from time to time, specific warranty accruals may be recorded if unforeseen problems arise. Should our actual experience relative to these factors be worse than our estimates, we will be required to record additional warranty expense. Alternatively, if we provide for more reserves than we require, we will reverse a portion of such provisions in future periods. The liability for warranty obligations totaled $8.9 million and $8.7 million at June 30, 2016 and December 31, 2015, respectively. These liabilities are included in accrued expenses in the accompanying Consolidated Balance Sheets.

A summary of warranty expense and write-off activity for the three and six months ended June 30, 2016 and 2015 is as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In thousands)	2016			2015			2016			2015
Balance at beginning of period	$	9,042		$	8,684		$	8,739		$	8,415
Plus:Amounts charged to cost and expenses		1,431			667			2,329			1,128
Less:Deductions		(1,538	)		(418	)		(2,133	)		(610	)
Balance at end of period	$	8,935		$	8,933		$	8,935		$	8,933

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2016

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

13. COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, we may be subject to various legal proceedings and claims, including employment disputes, patent claims, disputes over contract agreements and other commercial disputes. In some cases, claimants seek damages or other relief, such as royalty payments related to patents, which, if granted, could require significant expenditures. Although the outcome of any claim or litigation can never be certain, it is our opinion that the outcome of all contingencies of which we are currently aware will not materially affect our business, operations, financial condition or cash flows.

We have committed to invest up to an aggregate of $7.9 million in two private equity funds, and we have contributed $8.4 million as of June 30, 2016, of which $7.7 million has been applied to these commitments.

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Subsequent Events

6 Months Ended

Jun. 30, 2016

Subsequent Events [Abstract]

Subsequent Events

14. SUBSEQUENT EVENTS

On July 12, 2016, we announced that our Board of Directors declared a quarterly cash dividend of $0.09 per common share to be paid to stockholders of record at the close of business on July 28, 2016. The payment date will be August 11, 2016. The quarterly dividend payment will be approximately $4.3 million. In July 2003, our Board of Directors elected to begin declaring quarterly dividends on our common stock considering the tax treatment of dividends and adequate levels of Company liquidity.

During the third quarter and as of August 5, 2016, we have repurchased 0.3 million shares of our common stock through open market purchases at an average cost of $17.99 per share. We currently have the authority to purchase an additional 4.6 million shares of our common stock under the current plan approved by the Board of Directors.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited consolidated financial statements of ADTRAN^®, Inc. and its subsidiaries (ADTRAN) have been prepared pursuant to the rules and regulations for reporting on Quarterly Reports on Form 10-Q. Accordingly, certain information and notes required by generally accepted accounting principles for complete financial statements are not included herein. The December 31, 2015 Consolidated Balance Sheet is derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States.

In the opinion of management, all adjustments necessary to fairly state these interim statements have been recorded and are of a normal and recurring nature. The results of operations for an interim period are not necessarily indicative of the results for the full year. The interim statements should be read in conjunction with the financial statements and notes thereto included in ADTRAN’s Annual Report on Form 10-K for the year ended December 31, 2015, filed on February 24, 2016 with the SEC.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Our more significant estimates include the obsolete and excess inventory reserves, warranty reserves, customer rebates, determination of the deferred revenue components of multiple element sales agreements, estimated costs to complete obligations associated with deferred revenues, estimated income tax provision and income tax contingencies, the fair value of stock-based compensation, impairment of goodwill, valuation and estimated lives of intangible assets, estimated pension liability, fair value of investments, and the evaluation of other-than-temporary declines in the value of investments. Actual amounts could differ significantly from these estimates.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09 to fiscal years beginning after December 31, 2017, and interim periods within those fiscal years, with early adoption permitted for reporting periods beginning after December 15, 2016. Subsequently, the FASB issued ASUs in 2016 containing implementation guidance related to ASU 2014-09, including: ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net),which isintended to improve the operability and understandability of the implementation guidance on principal versus agent considerations; ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,which is intended to clarify two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance; and ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,which contains certain provisions and practical expedients in response to identified implementation issues. ASU 2014-09 allows for either full retrospective or modified retrospective adoption. We plan to adopt ASU 2014-09 and the related ASUs on January 1, 2018, and we are currently evaluating the transition method that will be elected and the impact that the adoption of ASU 2014-09 will have on our financial position, results of operations and cash flows.

In July 2015, the FASB issued Accounting Standards Update No.  2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (ASU 2015-11). Currently, Topic 330, Inventory, requires an entity to measure inventory at the lower of cost or market. Market could be replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. ASU 2015-11 does not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. ASU 2015-11 requires an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The amendments should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. We do not believe the adoption of ASU 2015-05 will have a material impact on our financial position, results of operations and cash flows.

In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes (ASU 2015-17). ASU 2015-17 amends the existing guidance on income taxes to require the classification of all deferred tax assets and liabilities as non-current on the balance sheet. ASU 2015-17 is effective for fiscal years beginning after December 15, 2016, including interim periods within those years. Early adoption is permitted. The guidance may be applied either prospectively, for all deferred tax assets and liabilities, or retrospectively to all periods presented. We have not selected a transition method or determined whether to early adopt ASU 2015-17 in 2016. Other than the revised balance sheet presentation of current deferred tax assets and liabilities, we do not believe the adoption of ASU 2015-17 will have a material impact on our financial position, results of operations and cash flows.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 requires an entity to recognize lease assets and lease liabilities on the balance sheet and to disclose key information about the entity's leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. A modified retrospective approach is required. We are currently evaluating the impact that the adoption of ASU 2016-02 will have on our financial position, results of operations and cash flows.

In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). ASU 2016-09 simplifies several aspects of accounting for share-based compensation arrangements, including income tax effects, the classification of tax-related cash flows on the statement of cash flows, and accounting for forfeitures. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those years. Early adoption is permitted. We are currently evaluating the impact that the adoption of ASU 2016-09 will have on our financial position, results of operations and cash flows.

During the first quarter of 2016, we adopted the following accounting standards, which had no material effect on our financial position, results of operations or cash flows:

In April 2015, the FASB issued Accounting Standards Update No. 2015-05, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement (ASU 2015-05), which provides guidance on accounting for fees paid by a customer in a cloud computing arrangement. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU 2015-05 is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. The amendments may be applied either prospectively to all arrangements entered into or materially modified after the effective date or retrospectively. We adopted ASU 2015-05 during the first quarter of 2016 and will apply the new standard prospectively. The adoption of ASU 2015-05 did not have a material impact on our financial position, results of operations and cash flows.

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Pension Benefit Plan (Tables)

6 Months Ended

Jun. 30, 2016

Compensation And Retirement Disclosure [Abstract]

Summarization of Components of Net Periodic Pension Cost

The following table summarizes the components of net periodic pension cost for the three and six months ended June 30, 2016 and 2015:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2016			2015			2016			2015
Service cost	$	310		$	324		$	607		$	664
Interest cost		184			152			360			311
Expected return on plan assets		(271	)		(250	)		(530	)		(511	)
Amortization of actuarial losses		45			100			88			205
Net periodic pension cost	$	268		$	326		$	525		$	669

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2016

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation Expense Related to Stock Options, Restricted Stock Units (RSUs) and Restricted Stock

The following table summarizes the stock-based compensation expense related to stock options, restricted stock units (RSUs) and restricted stock for the three and six months ended June 30, 2016 and 2015, which was recognized as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2016			2015			2016			2015
Stock-based compensation expense included in cost of    sales	$	95		$	53		$	194		$	143
Selling, general and administrative expense		788			723			1,557			1,414
Research and development expense		668			699			1,358			1,557
Stock-based compensation expense included in operating    expenses		1,456			1,422			2,915			2,971
Total stock-based compensation expense		1,551			1,475			3,109			3,114
Tax benefit for expense associated with non-qualified    options		(213	)		(222	)		(425	)		(402	)
Total stock-based compensation expense, net of tax	$	1,338		$	1,253		$	2,684		$	2,712

Summary of Weighted-Average Assumptions and Value of Options Granted

There were no options granted during the three months ended June 30, 2015. The weighted-average assumptions and value of options granted for the three and six months ended June 30, 2016 and the six months ended June 30, 2015 are as follows:

	Three and Six Months Ended			Six Months Ended
	June 30,			June 30,
	2016			2015
Expected volatility		34.74	%		38.75	%
Risk-free interest rate		1.33	%		1.46	%
Expected dividend yield		1.91	%		1.60	%
Expected life (in years)		6.26			6.47
Weighted-average estimated value	$	5.42		$	7.63

Summary of Stock Options Outstanding

The following table is a summary of our stock options outstanding as of December 31, 2015 and June 30, 2016 and the changes that occurred during the six months ended June 30, 2016:

(In thousands, except per share amounts)	Number of Options			Weighted Avg. Exercise Price		Weighted Avg. Remaining Contractual Life In Years		Aggregate Intrinsic Value
Options outstanding, December 31, 2015		7,108		$	21.97		6.42	$	3,284
Options granted		1		$	18.83
Options exercised		(33	)	$	16.58
Options forfeited		(42	)	$	17.88
Options expired		(54	)	$	25.65
Options outstanding, June 30, 2016		6,980		$	22.00		5.93	$	6,522
Options vested and expected to vest, June 30, 2016		6,865		$	22.09		5.88	$	6,260
Options exercisable, June 30, 2016		4,420		$	24.35		4.44	$	2,298

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Investments (Tables)

6 Months Ended

Jun. 30, 2016

Investments Debt And Equity Securities [Abstract]

Securities and Investments, Recorded at Either Fair Value or Cost

At June 30, 2016, we held the following securities and investments, recorded at either fair value or cost.

	Amortized		Gross Unrealized					Carrying
(In thousands)	Cost		Gains		Losses			Value
Deferred compensation plan assets	$	11,516	$	1,628	$	(49	)	$	13,095
Corporate bonds		54,044		149		(61	)		54,132
Municipal fixed-rate bonds		16,889		59		-			16,948
Asset-backed bonds		23,526		53		(6	)		23,573
Mortgage/Agency-backed bonds		19,214		44		(39	)		19,219
U.S. Government bonds		33,498		308		-			33,806
Variable rate demand notes		11,740		-		-			11,740
Marketable equity securities		32,948		1,901		(1,478	)		33,371
Available-for-sale securities held at fair value	$	203,375	$	4,142	$	(1,633	)	$	205,884
Restricted investment held at cost									30,000
Other investments held at cost									1,232
Total carrying value of available-for-sale investments								$	237,116

At December 31, 2015, we held the following securities and investments, recorded at either fair value or cost.

	Amortized		Gross Unrealized					Carrying
(In thousands)	Cost		Gains		Losses			Value
Deferred compensation plan assets	$	11,325	$	1,575	$	(66	)	$	12,834
Corporate bonds		58,328		20		(734	)		57,614
Municipal fixed-rate bonds		26,414		28		(18	)		26,424
Asset-backed bonds		19,281		2		(44	)		19,239
Mortgage/Agency-backed bonds		15,463		1		(91	)		15,373
U.S. Government bonds		35,646		-		(248	)		35,398
Marketable equity securities		31,643		4,301		(1,693	)		34,251
Available-for-sale securities held at fair value	$	198,100	$	5,927	$	(2,894	)	$	201,133
Restricted investment held at cost									30,000
Other investments held at cost									1,289
Total carrying value of available-for-sale investments								$	232,422

Contractual Maturities of Corporate,Municipal Fixed-Rate, asset-backed, mortgage/agency-backed and U.S. government bonds Bonds

As of June 30, 2016, our corporate bonds, municipal fixed-rate bonds, asset-backed bonds, mortgage/agency-backed bonds, and U.S. government bonds had the following contractual maturities:

(In thousands)	Corporate bonds		Municipal fixed-rate bonds		Asset- backed bonds		Mortgage / Agency- backed bonds		U.S. Government bonds
Less than one year	$	20,729	$	10,473	$	-	$	4,972	$	2,953
One to two years		24,884		4,488		822		2,569		7,481
Two to three years		6,099		1,536		9,077		2,058		11,344
Three to five years		2,420		451		10,991		-		12,028
Five to ten years		-		-		2,506		1,036		-
More than ten years		-		-		177		8,584		-
Total	$	54,132	$	16,948	$	23,573	$	19,219	$	33,806

Gross Realized Gains and Losses on Sale of Securities

The following table presents gross realized gains and losses related to our investments.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In thousands)	2016			2015			2016			2015
Gross realized gains	$	1,517		$	3,459		$	3,881		$	6,604
Gross realized losses	$	(407	)	$	(204	)	$	(1,043	)	$	(234	)

Fair Value Measurements of Cash Equivalents Held in Money Market Funds and Investments

We have categorized our cash equivalents held in money market funds and our investments held at fair value into a three-level fair value hierarchy based on the priority of the inputs to the valuation technique for the cash equivalents and investments as follows:  Level 1 - Values based on unadjusted quoted prices for identical assets or liabilities in an active market; Level 2 - Values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly; Level 3 - Values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs include information supplied by investees.

	Fair Value Measurements at June 30, 2016 Using
(In thousands)	Fair Value		Quoted Prices in Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents
Money market funds	$	1,915	$	1,915	$	-	$	-
Commercial Paper		15,996		-		15,996		-
Cash equivalents		17,911		1,915		15,996		-
Available-for-sale securities
Deferred compensation plan assets		13,095		13,095		-		-
Available-for-sale debt securities
Corporate bonds		54,132		-		54,132		-
Municipal fixed-rate bonds		16,948		-		16,948		-
Asset-backed bonds		23,573		-		23,573		-
Mortgage/Agency-backed bonds		19,219		-		19,219		-
U.S. Government bonds		33,806		33,806		-		-
Variable rate demand notes		11,740		-		11,740		-
Available-for-sale marketable equity securities
Marketable equity securities – technology industry		4,386		4,386		-		-
Marketable equity securities – other		28,985		28,985		-		-
Available-for-sale securities		205,884		80,272		125,612		-
Total	$	223,795	$	82,187	$	141,608	$	-

	Fair Value Measurements at December 31, 2015 Using
(In thousands)	Fair Value		Quoted Prices in Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents
Money market funds	$	1,271	$	1,271	$	-	$	-
Commercial Paper		11,696		-		11,696		-
Cash equivalents		12,967		1,271		11,696		-
Available-for-sale securities
Deferred compensation plan assets		12,834		12,834		-		-
Available-for-sale debt securities
Corporate bonds		57,614		-		57,614		-
Municipal fixed-rate bonds		26,424		-		26,424		-
Asset-backed bonds		19,239		-		19,239		-
Mortgage/Agency-backed bonds		15,373		-		15,373		-
U.S. Government bonds		35,398		35,398		-		-
Available-for-sale marketable equity securities
Marketable equity securities – technology industry		5,384		5,384		-		-
Marketable equity securities – other		28,867		28,867		-		-
Available-for-sale securities		201,133		82,483		118,650		-
Total	$	214,100	$	83,754	$	130,346	$	-

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Derivative Instruments and Hedging Activities (Tables)

6 Months Ended

Jun. 30, 2016

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Schedule of Fair Values of Hedging Instruments Recorded in Consolidated Balance Sheet

The fair values of our derivative instruments recorded in the Consolidated Balance Sheet as of June 30, 2016 and December 31, 2015 were as follows:

(In thousands)	Balance Sheet Location	June 30, 2016		December 31, 2015
Derivatives Not Designated as Hedging Instruments (Level 2):
Foreign exchange contracts – asset derivatives	Other receivables	$	188	$	-

Schedule of Change in Fair Values of Derivative Instruments Recorded in Consolidated Statements of Income

The change in the fair values of our derivative instruments recorded in the Consolidated Statements of Income during the three and six months ended June 30, 2016 and 2015 were as follows:

		Three Months Ended					Six Months Ended
	Income Statement	June 30,					June 30,
(In thousands)	Location	2016		2015			2016		2015
Derivatives Not Designated as Hedging Instruments:
Foreign exchange contracts	Other income (expense)	$	237	$	(1,299	)	$	190	$	177

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Inventory (Tables)

6 Months Ended

Jun. 30, 2016

Inventory Disclosure [Abstract]

Components of Inventory

At June 30, 2016 and December 31, 2015, inventory consisted of the following:

	June 30,		December 31,
(In thousands)	2016		2015
Raw materials	$	35,761	$	34,223
Work in process		2,322		2,893
Finished goods		48,853		54,417
Total	$	86,936	$	91,533

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Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2016

Goodwill And Intangible Assets Disclosure [Abstract]

Summary of Intangible Assets

The following table presents our intangible assets as of June 30, 2016 and December 31, 2015:

(In thousands)	June 30, 2016							December 31, 2015
	Gross Value		Accumulated Amortization			Net Value		Gross Value		Accumulated Amortization			Net Value
Customer relationships	$	5,925	$	(2,966	)	$	2,959	$	5,828	$	(2,627	)	$	3,201
Developed technology		5,778		(4,767	)		1,011		5,720		(4,329	)		1,391
Intellectual property		2,340		(2,021	)		319		2,340		(1,854	)		486
Trade names		270		(270	)		-		270		(265	)		5
Total	$	14,313	$	(10,024	)	$	4,289	$	14,158	$	(9,075	)	$	5,083

Estimated Future Amortization Expense Related to Intangible Assets

As of June 30, 2016, the estimated future amortization expense of our intangible assets is as follows:

(In thousands)	Amount
Remainder of 2016	$	807
2017		1,162
2018		702
2019		308
2020		285
Thereafter		1,025
Total	$	4,289

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2016

Equity [Abstract]

Summary of Changes in Stockholders' Equity

A summary of the changes in stockholders’ equity for the six months ended June 30, 2016 is as follows:

(In thousands)	Stockholders’ Equity
Balance, December 31, 2015	$	480,160
Net income		15,242
Dividend payments		(8,860	)
Dividends accrued for unvested restricted stock units		(26	)
Net unrealized losses on available-for-sale securities (net of tax)		(420	)
Defined benefit plan adjustments		67
Foreign currency translation adjustment		627
Proceeds from stock option exercises		541
Purchase of treasury stock		(16,579	)
Income tax effect of stock compensation arrangements		(137	)
Stock-based compensation expense		3,109
Balance, June 30, 2016	$	473,724

Cash Dividends

During the six months ended June 30, 2016, we paid cash dividends as follows (in thousands except per share amounts):

Record Date	Payment Date	Per Share Amount		Total Dividend Paid
February 4, 2016	February 18, 2016	$	0.09	$	4,453
April 28, 2016	May 12, 2016	$	0.09	$	4,407

Changes in Accumulated Other Comprehensive Income, Net of Tax by Component

The following tables present changes in accumulated other comprehensive income, net of tax, by component for the three months ended June 30, 2016 and 2015:

	Three Months Ended June 30, 2016
(In thousands)	Unrealized Gains (Losses) on Available- for-Sale Securities			Defined Benefit Plan Adjustments			Foreign Currency Adjustments			Total
Beginning balance	$	1,677		$	(3,850	)	$	(5,778	)	$	(7,951	)
Other comprehensive income (loss) before    reclassifications		481			-			(601	)		(120	)
Amounts reclassified from accumulated other    comprehensive income		(646	)		22			-			(624	)
Net current period other comprehensive income (loss)		(165	)		22			(601	)		(744	)
Ending balance	$	1,512		$	(3,828	)	$	(6,379	)	$	(8,695	)

	Three Months Ended June 30, 2015
(In thousands)	Unrealized Gains (Losses) on Available- for-Sale Securities			Defined Benefit Plan Adjustments			Foreign Currency Adjustments			Total
Beginning balance	$	8,461		$	(5,689	)	$	(6,600	)	$	(3,828	)
Other comprehensive income (loss) before    reclassifications		177			-			872			1,049
Amounts reclassified from accumulated other    comprehensive income		(1,960	)		72			-			(1,888	)
Net current period other comprehensive income (loss)		(1,783	)		72			872			(839	)
Ending balance	$	6,678		$	(5,617	)	$	(5,728	)	$	(4,667	)

The following tables present changes in accumulated other comprehensive income, net of tax, by component for the six months ended June 30, 2016 and 2015:

	Six Months Ended June 30, 2016
(In thousands)	Unrealized Gains (Losses) on Available- for-Sale Securities			Defined Benefit Plan Adjustments			Foreign Currency Adjustments			Total
Beginning balance	$	1,932		$	(3,895	)	$	(7,006	)	$	(8,969	)
Other comprehensive income (loss) before    reclassifications		1,239			-			627			1,866
Amounts reclassified from accumulated other    comprehensive income		(1,659	)		67			-			(1,592	)
Net current period other comprehensive income (loss)		(420	)		67			627			274
Ending balance	$	1,512		$	(3,828	)	$	(6,379	)	$	(8,695	)

	Six Months Ended June 30, 2015
(In thousands)	Unrealized Gains (Losses) on Available- for-Sale Securities			Defined Benefit Plan Adjustments			Foreign Currency Adjustments			Total
Beginning balance	$	8,964		$	(5,757	)	$	(3,282	)	$	(75	)
Other comprehensive income (loss) before    reclassifications		1,537			-			(2,446	)		(909	)
Amounts reclassified from accumulated other    comprehensive income		(3,823	)		140			-			(3,683	)
Net current period other comprehensive income (loss)		(2,286	)		140			(2,446	)		(4,592	)
Ending balance	$	6,678		$	(5,617	)	$	(5,728	)	$	(4,667	)

Reclassifications Out of Accumulated Other Comprehensive Income

The following tables present the details of reclassifications out of accumulated other comprehensive income for the three months ended June 30, 2016 and 2015:

(In thousands)	Three Months Ended June 30, 2016
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income Is Presented
Unrealized gains (losses) on available-for-    sale securities:
Net realized gain on sales of securities	$	1,354		Net realized investment gain
Impairment expense		(295	)	Net realized investment gain
Defined benefit plan adjustments – actuarial    losses		(33	)	(1)
Total reclassifications for the period, before    tax		1,026
Tax (expense) benefit		(402	)
Total reclassifications for the period, net    of tax	$	624

⁽¹⁾ Included in the computation of net periodic pension cost. See Note 3 of Notes to Consolidated Financial Statements.

(In thousands)	Three Months Ended June 30, 2015
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income Is Presented
Unrealized gains (losses) on available-for-    sale securities:
Net realized gain on sales of securities	$	3,264		Net realized investment gain
Impairment expense		(51	)	Net realized investment gain
Defined benefit plan adjustments – actuarial    losses		(105	)	(1)
Total reclassifications for the period, before    tax		3,108
Tax (expense) benefit		(1,220	)
Total reclassifications for the period, net    of tax	$	1,888

⁽¹⁾ Included in the computation of net periodic pension cost. See Note 3 of Notes to Consolidated Financial Statements.

The following tables present the details of reclassifications out of accumulated other comprehensive income for the six months ended June 30, 2016 and 2015:

(In thousands)	Six Months Ended June 30, 2016
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income Is Presented
Unrealized gains (losses) on available-for-    sale securities:
Net realized gain on sales of securities	$	3,115		Net realized investment gain
Impairment expense		(395	)	Net realized investment gain
Defined benefit plan adjustments – actuarial    losses		(98	)	(1)
Total reclassifications for the period, before    tax		2,622
Tax (expense) benefit		(1,030	)
Total reclassifications for the period, net    of tax	$	1,592

⁽¹⁾ Included in the computation of net periodic pension cost. See Note 3 of Notes to Consolidated Financial Statements.

(In thousands)	Six Months Ended June 30, 2015
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income Is Presented
Unrealized gains (losses) on available-for-    sale securities:
Net realized gain on sales of securities	$	6,340		Net realized investment gain
Impairment expense		(73	)	Net realized investment gain
Defined benefit plan adjustments – actuarial    losses		(203	)	(1)
Total reclassifications for the period, before    tax		6,064
Tax (expense) benefit		(2,381	)
Total reclassifications for the period, net    of tax	$	3,683

⁽¹⁾ Included in the computation of net periodic pension cost. See Note 3 of Notes to Consolidated Financial Statements.

Other Comprehensive Income

The following table presents the tax effects related to the change in each component of other comprehensive income for the three months ended June 30, 2016 and 2015:

	Three Months Ended June 30, 2016									Three Months Ended June 30, 2015
(In thousands)	Before-Tax Amount			Tax (Expense) Benefit			Net-of-Tax Amount			Before-Tax Amount			Tax (Expense) Benefit			Net-of-Tax Amount
Unrealized gains (losses) on available-for-sale    securities	$	789		$	(308	)	$	481		$	290		$	(113	)	$	177
Reclassification adjustment for amounts related to    available-for-sale investments included in net    income		(1,059	)		413			(646	)		(3,213	)		1,253			(1,960	)
Reclassification adjustment for amounts related to    defined benefit plan adjustments included in net    income		33			(11	)		22			105			(33	)		72
Foreign currency translation adjustment		(601	)		-			(601	)		872			-			872
Total Other Comprehensive Income (Loss)	$	(838	)	$	94		$	(744	)	$	(1,946	)	$	1,107		$	(839	)

The following table presents the tax effects related to the change in each component of other comprehensive income for the six months ended June 30, 2016 and 2015:

	Six Months Ended June 30, 2016									Six Months Ended June 30, 2015
(In thousands)	Before-Tax Amount			Tax (Expense) Benefit			Net-of-Tax Amount			Before-Tax Amount			Tax (Expense) Benefit			Net-of-Tax Amount
Unrealized gains (losses) on available-for-sale    securities	$	2,031		$	(792	)	$	1,239		$	2,520		$	(983	)	$	1,537
Reclassification adjustment for amounts related to    available-for-sale investments included in net    income		(2,720	)		1,061			(1,659	)		(6,267	)		2,444			(3,823	)
Reclassification adjustment for amounts related to    defined benefit plan adjustments included in net    income		98			(31	)		67			203			(63	)		140
Foreign currency translation adjustment		627			-			627			(2,446	)		-			(2,446	)
Total Other Comprehensive Income (Loss)	$	36		$	238		$	274		$	(5,990	)	$	1,398		$	(4,592	)

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Earnings per Share (Tables)

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Summary of Calculation of Basic and Diluted Earnings Per Share

A summary of the calculation of basic and diluted earnings per share for the three and six months ended June 30, 2016 and 2015 is as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands, except per share amounts)	2016		2015		2016		2015
Numerator
Net income	$	10,228	$	2,544	$	15,242	$	5,861
Denominator
Weighted average number of shares – basic		48,831		51,822		49,026		52,607
Effect of dilutive securities
Stock options		161		72		138		122
Restricted stock and restricted stock units		56		23		54		13
Weighted average number of shares – diluted		49,048		51,917		49,218		52,742
Net income per share – basic	$	0.21	$	0.05	$	0.31	$	0.11
Net income per share – diluted	$	0.21	$	0.05	$	0.31	$	0.11

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2016

Segment Reporting [Abstract]

Sales and Gross Profit of Reportable Segments

The following table presents information about the reported sales and gross profit of our reportable segments for the three and six months ended June 30, 2016 and 2015. We do not produce asset information by reportable segment; therefore, it is not reported.

	Three Months Ended
	June 30, 2016				June 30, 2015
(In thousands)	Sales		Gross Profit		Sales		Gross Profit
Network Solutions	$	138,549	$	70,705	$	144,098	$	59,888
Services & Support		24,152		8,250		16,040		8,358
Total	$	162,701	$	78,955	$	160,138	$	68,246

	Six Months Ended
	June 30, 2016				June 30, 2015
(In thousands)	Sales		Gross Profit		Sales		Gross Profit
Network Solutions	$	262,432	$	130,515	$	273,603	$	117,833
Services & Support		42,473		14,234		29,370		15,976
Total	$	304,905	$	144,749	$	302,973	$	133,809

Sales Information by Category

The table below presents sales information by category for the three and six months ended June 30, 2016 and 2015:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2016		2015		2016		2015
Access & Aggregation	$	102,232	$	112,732	$	196,087	$	205,583
Customer Devices		40,876		30,042		73,229		61,746
Traditional & Other Products		19,593		17,364		35,589		35,644
Total	$	162,701	$	160,138	$	304,905	$	302,973

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Liability for Warranty Returns (Tables)

6 Months Ended

Jun. 30, 2016

Product Warranties Disclosures [Abstract]

Summary of Warranty Expense and Write-Off Activity

A summary of warranty expense and write-off activity for the three and six months ended June 30, 2016 and 2015 is as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In thousands)	2016			2015			2016			2015
Balance at beginning of period	$	9,042		$	8,684		$	8,739		$	8,415
Plus:Amounts charged to cost and expenses		1,431			667			2,329			1,128
Less:Deductions		(1,538	)		(418	)		(2,133	)		(610	)
Balance at end of period	$	8,935		$	8,933		$	8,935		$	8,933

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Income Taxes - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Income Tax Disclosure [Abstract]
Effective tax rate	37.90%	39.10%

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Pension Benefit Plan - Summarization of Components of Net Periodic Pension Cost (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Compensation And Retirement Disclosure [Abstract]
Service cost	$ 310	$ 324	$ 607	$ 664
Interest cost	184	152	360	311
Expected return on plan assets	(271)	(250)	(530)	(511)
Amortization of actuarial losses	45	100	88	205
Net periodic pension cost	$ 268	$ 326	$ 525	$ 669

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Stock-Based Compensation - Stock-Based Compensation Expense Related to Stock Options, Restricted Stock Units (RSUs) and Restricted Stock (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	$ 1,551	$ 1,475	$ 3,109	$ 3,114
Tax benefit for expense associated with non-qualified options	(213)	(222)	(425)	(402)
Total stock-based compensation expense, net of tax	1,338	1,253	2,684	2,712
Cost of Sales [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	95	53	194	143
Selling, General and Administrative Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	788	723	1,557	1,414
Research and Development Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	668	699	1,358	1,557
Operating Expenses [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	$ 1,456	$ 1,422	$ 2,915	$ 2,971

XML

Stock-Based Compensation - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Options, granted		0	1,000
Estimated forfeitures for stock options			3.70%
Total pre-tax intrinsic value of options exercised	$ 0.1		$ 0.1
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of RSUs and restricted stock grants in period	0	0	0	0
Number of RSUs and restricted stock vesting in period	0	0	0	0
Number of RSUs and restricted stock forfeitures in period				12,000
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of RSUs and restricted stock grants in period			2,000
Number of RSUs and restricted stock vesting in period		2,000		2,000
Recognition period of non-vested compensation cost			2 years 4 months 24 days
RSUs and Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Forfeiture rate for RSUs and restricted stock			0.00%
Compensation cost related to non-vested stock options not yet recognized	$ 11.5		$ 11.5

XML

Stock-Based Compensation - Summary of Weighted-Average Assumptions and Value of Options Granted (Detail) - Stock Options [Member] - $ / shares	3 Months Ended	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2016	Jun. 30, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	34.74%	34.74%	38.75%
Risk-free interest rate	1.33%	1.33%	1.46%
Expected dividend yield	1.91%	1.91%	1.60%
Expected life (in years)	6 years 3 months 4 days	6 years 3 months 4 days	6 years 5 months 19 days
Weighted-average estimated value	$ 5.42	$ 5.42	$ 7.63

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Stock-Based Compensation - Summary of Stock Options Outstanding (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Jun. 30, 2016	Dec. 31, 2015
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Number of Options, outstanding, Beginning Balance		7,108
Number of Options, granted	0	1
Number of Options, exercised		(33)
Number of Options, forfeited		(42)
Number of Options, expired		(54)
Number of Options, outstanding, Ending Balance		6,980	7,108
Number of Options, vested and expected to vest, Ending Balance		6,865
Number of Options, Options exercisable		4,420
Weighted Average Exercise Price, outstanding, Beginning Balance		$ 21.97
Weighted Average Exercise Price, granted		18.83
Weighted Average Exercise Price, exercised		16.58
Weighted Average Exercise Price, forfeited		17.88
Weighted Average Exercise Price, expired		25.65
Weighted Average Exercise Price, outstanding, Ending Balance		22.00	$ 21.97
Weighted Average Exercise Price, vested and expected to vest, Ending Balance		22.09
Weighted Average Exercise Price, Options exercisable		$ 24.35
Weighted Average Remaining Contractual Life In Years, Options outstanding		5 years 11 months 5 days	6 years 5 months 1 day
Weighted Average Remaining Contractual Life In Years, Options vested and expected to vest		5 years 10 months 17 days
Weighted Average Remaining Contractual Life In Years, Options exercisable		4 years 5 months 9 days
Aggregate Intrinsic Value, Options outstanding, Beginning Balance		$ 3,284
Aggregate Intrinsic Value, Options outstanding, Ending Balance		6,522	$ 3,284
Aggregate Intrinsic Value, Options vested and expected to vest		6,260
Aggregate Intrinsic Value, Options exercisable		$ 2,298

XML

Investments - Securities and Investments, Recorded at Either Fair Value or Cost (Detail) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 203,375	$ 198,100
Gross Unrealized Gains	4,142	5,927
Gross Unrealized Losses	(1,633)	(2,894)
Available-for-sale-securities, Carrying Value	205,884	201,133
Restricted investment held at cost	30,000	30,000
Other investments held at cost	1,232	1,289
Total carrying value of available-for-sale investments	237,116	232,422
Deferred Compensation Plan Assets [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	11,516	11,325
Gross Unrealized Gains	1,628	1,575
Gross Unrealized Losses	(49)	(66)
Available-for-sale-securities, Carrying Value	13,095	12,834
Corporate Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	54,044	58,328
Gross Unrealized Gains	149	20
Gross Unrealized Losses	(61)	(734)
Available-for-sale-securities, Carrying Value	54,132	57,614
Municipal Fixed-Rate Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	16,889	26,414
Gross Unrealized Gains	59	28
Gross Unrealized Losses		(18)
Available-for-sale-securities, Carrying Value	16,948	26,424
Asset-Backed Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	23,526	19,281
Gross Unrealized Gains	53	2
Gross Unrealized Losses	(6)	(44)
Available-for-sale-securities, Carrying Value	23,573	19,239
Mortgage/Agency-Backed Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	19,214	15,463
Gross Unrealized Gains	44	1
Gross Unrealized Losses	(39)	(91)
Available-for-sale-securities, Carrying Value	19,219	15,373
U.S. Government Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	33,498	35,646
Gross Unrealized Gains	308
Gross Unrealized Losses		(248)
Available-for-sale-securities, Carrying Value	33,806	35,398
Variable Rate Demand Notes [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	11,740
Available-for-sale-securities, Carrying Value	11,740
Marketable Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	32,948	31,643
Gross Unrealized Gains	1,901	4,301
Gross Unrealized Losses	(1,478)	(1,693)
Available-for-sale-securities, Carrying Value	$ 33,371	$ 34,251

XML

Investments - Contractual Maturities of Corporate Bonds, Municipal Fixed-Rate Bonds, Asset-Backed Bonds, Mortgage/Agency-Backed Bonds and U.S. Government Bonds (Detail) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale-securities, Fair Value/Carrying Value	$ 205,884	$ 201,133
Corporate Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than one year	20,729
One to two years	24,884
Two to three years	6,099
Three to five years	2,420
Available-for-sale-securities, Fair Value/Carrying Value	54,132	57,614
Municipal Fixed-Rate Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than one year	10,473
One to two years	4,488
Two to three years	1,536
Three to five years	451
Available-for-sale-securities, Fair Value/Carrying Value	16,948	26,424
Asset-Backed Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
One to two years	822
Two to three years	9,077
Three to five years	10,991
Five to ten years	2,506
More than ten years	177
Available-for-sale-securities, Fair Value/Carrying Value	23,573	19,239
Mortgage/Agency-Backed Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than one year	4,972
One to two years	2,569
Two to three years	2,058
Five to ten years	1,036
More than ten years	8,584
Available-for-sale-securities, Fair Value/Carrying Value	19,219	15,373
U.S. Government Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than one year	2,953
One to two years	7,481
Two to three years	11,344
Three to five years	12,028
Available-for-sale-securities, Fair Value/Carrying Value	$ 33,806	$ 35,398

XML

Investments - Additional Information (Detail) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Schedule of Investments [Line Items]
Restricted certificate of deposit held	$ 30,000	$ 30,000
Identification of potential other-than-temporary impairments	25.00%
Alabama State Industrial Development Authority [Member]
Schedule of Investments [Line Items]
Maturity date of bond	Jan. 01, 2020
Percentage of interest on bond	2.00%
Alabama State Industrial Development Authority [Member] | Taxable Revenue Bond [Member]
Schedule of Investments [Line Items]
Collateral deposit against outstanding principal amount	$ 28,900	$ 28,900
Alabama State Industrial Development Authority [Member] | Taxable Revenue Bond [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of Investments [Line Items]
Estimated fair value of bond	$ 29,400
Investment [Member] | Issuer Concentration [Member] | Market Value of Total Investment Portfolio [Member]
Schedule of Investments [Line Items]
Investment concentration risk percentage	5.00%

XML

Investments - Gross Realized Gains and Losses on Sale of Securities (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Investments Debt And Equity Securities [Abstract]
Gross realized gains	$ 1,517	$ 3,459	$ 3,881	$ 6,604
Gross realized losses	$ (407)	$ (204)	$ (1,043)	$ (234)

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Investments - Fair Value Measurements of Cash Equivalents Held in Money Market Funds and Investments (Detail) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	$ 205,884	$ 201,133
Deferred Compensation Plan Assets [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	13,095	12,834
Corporate Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	54,132	57,614
Municipal Fixed-Rate Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	16,948	26,424
Asset-Backed Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	23,573	19,239
Mortgage/Agency-Backed Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	19,219	15,373
U.S. Government Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	33,806	35,398
Variable Rate Demand Notes [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	11,740
Fair Value, Measurements [Member]
Schedule of Available-for-sale Securities [Line Items]
Cash equivalents	17,911	12,967
Available-for-sale securities	205,884	201,133
Total	223,795	214,100
Fair Value, Measurements [Member] | Quoted Prices in Active Market for Identical Assets (Level 1) [Member]
Schedule of Available-for-sale Securities [Line Items]
Cash equivalents	1,915	1,271
Available-for-sale securities	80,272	82,483
Total	82,187	83,754
Fair Value, Measurements [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of Available-for-sale Securities [Line Items]
Cash equivalents	15,996	11,696
Available-for-sale securities	125,612	118,650
Total	141,608	130,346
Fair Value, Measurements [Member] | Money Market Funds [Member]
Schedule of Available-for-sale Securities [Line Items]
Cash equivalents	1,915	1,271
Fair Value, Measurements [Member] | Money Market Funds [Member] | Quoted Prices in Active Market for Identical Assets (Level 1) [Member]
Schedule of Available-for-sale Securities [Line Items]
Cash equivalents	1,915	1,271
Fair Value, Measurements [Member] | Commercial Paper [Member]
Schedule of Available-for-sale Securities [Line Items]
Cash equivalents	15,996	11,696
Fair Value, Measurements [Member] | Commercial Paper [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of Available-for-sale Securities [Line Items]
Cash equivalents	15,996	11,696
Fair Value, Measurements [Member] | Deferred Compensation Plan Assets [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	13,095	12,834
Fair Value, Measurements [Member] | Deferred Compensation Plan Assets [Member] | Quoted Prices in Active Market for Identical Assets (Level 1) [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	13,095	12,834
Fair Value, Measurements [Member] | Corporate Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	54,132	57,614
Fair Value, Measurements [Member] | Corporate Bonds [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	54,132	57,614
Fair Value, Measurements [Member] | Municipal Fixed-Rate Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	16,948	26,424
Fair Value, Measurements [Member] | Municipal Fixed-Rate Bonds [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	16,948	26,424
Fair Value, Measurements [Member] | Asset-Backed Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	23,573	19,239
Fair Value, Measurements [Member] | Asset-Backed Bonds [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	23,573	19,239
Fair Value, Measurements [Member] | Mortgage/Agency-Backed Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	19,219	15,373
Fair Value, Measurements [Member] | Mortgage/Agency-Backed Bonds [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	19,219	15,373
Fair Value, Measurements [Member] | U.S. Government Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	33,806	35,398
Fair Value, Measurements [Member] | U.S. Government Bonds [Member] | Quoted Prices in Active Market for Identical Assets (Level 1) [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	33,806	35,398
Fair Value, Measurements [Member] | Variable Rate Demand Notes [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	11,740
Fair Value, Measurements [Member] | Variable Rate Demand Notes [Member] | Significant Other Observable Inputs (Level 2) [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	11,740
Fair Value, Measurements [Member] | Marketable Equity Securities - Technology Industry [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	4,386	5,384
Fair Value, Measurements [Member] | Marketable Equity Securities - Technology Industry [Member] | Quoted Prices in Active Market for Identical Assets (Level 1) [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	4,386	5,384
Fair Value, Measurements [Member] | Marketable Equity Securities - Other [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	28,985	28,867
Fair Value, Measurements [Member] | Marketable Equity Securities - Other [Member] | Quoted Prices in Active Market for Identical Assets (Level 1) [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	$ 28,985	$ 28,867

XML

Derivative Instruments and Hedging Activities - Additional Information (Detail) - 6 months ended Jun. 30, 2016	USD ($)	EUR (€)
Derivative [Line Items]
Maximum contractual period for derivatives	12 months
Forward Contracts [Member]
Derivative [Line Items]
Derivative, notional amount	$ 6,700,000	€ 6,000,000
Derivative maturity year	2016

XML

Derivative Instruments and Hedging Activities - Schedule of Fair Values of Hedging Instruments Recorded in Consolidated Balance Sheet (Detail) $ in Thousands	Jun. 30, 2016 USD ($)
Significant Other Observable Inputs (Level 2) [Member] | Foreign Exchange Contracts [Member] | Other Receivables [Member]
Derivatives Not Designated as Hedging Instruments (Level 2):
Derivatives asset, fair value	$ 188

XML

Derivative Instruments and Hedging Activities - Schedule of Change in Fair Values of Derivative Instruments Recorded in Consolidated Statements of Income (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Foreign Exchange Contracts [Member] | Other Income (Expense) [Member]
Derivatives Not Designated as Hedging Instruments:
Derivative instrument, gain or loss	$ 237	$ (1,299)	$ 190	$ 177

XML

Inventory - Components of Inventory (Detail) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Inventory Disclosure [Abstract]
Raw materials	$ 35,761	$ 34,223
Work in process	2,322	2,893
Finished goods	48,853	54,417
Total	$ 86,936	$ 91,533

XML

Inventory - Additional Information (Detail) - USD ($) $ in Millions	Jun. 30, 2016	Dec. 31, 2015
Raw Materials [Member]
Inventory [Line Items]
Inventory valuation reserves	$ 18.0	$ 17.5
Finished Goods [Member]
Inventory [Line Items]
Inventory valuation reserves	$ 9.8	$ 9.2

XML

Goodwill and Intangible Assets - Additional Information (Detail)	3 Months Ended			6 Months Ended		12 Months Ended
	Jun. 30, 2016 USD ($)	Mar. 31, 2016 Segment	Jun. 30, 2015 USD ($)	Jun. 30, 2016 USD ($) Segment	Jun. 30, 2015 USD ($)	Dec. 31, 2015 USD ($)
Goodwill [Line Items]
Goodwill, relates to acquisition				$ 3,500,000		$ 3,500,000
Number of reportable segments | Segment		2		2
Impairment losses				$ 0
Amortization expense	$ 400,000		$ 500,000	900,000	$ 1,000,000
Network Solutions [Member]
Goodwill [Line Items]
Goodwill, relates to acquisition				3,100,000
Services & Support [Member]
Goodwill [Line Items]
Goodwill, relates to acquisition				$ 400,000

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Goodwill and Intangible Assets - Summary of Intangible Assets (Detail) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Goodwill [Line Items]
Gross Value	$ 14,313	$ 14,158
Accumulated Amortization	(10,024)	(9,075)
Net Value	4,289	5,083
Customer Relationships [Member]
Goodwill [Line Items]
Gross Value	5,925	5,828
Accumulated Amortization	(2,966)	(2,627)
Net Value	2,959	3,201
Developed Technology [Member]
Goodwill [Line Items]
Gross Value	5,778	5,720
Accumulated Amortization	(4,767)	(4,329)
Net Value	1,011	1,391
Intellectual Property [Member]
Goodwill [Line Items]
Gross Value	2,340	2,340
Accumulated Amortization	(2,021)	(1,854)
Net Value	319	486
Trade Names [Member]
Goodwill [Line Items]
Gross Value	270	270
Accumulated Amortization	$ (270)	(265)
Net Value		$ 5

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Goodwill and Intangible Assets - Estimated Future Amortization Expense Related to Intangible Assets (Detail) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Goodwill And Intangible Assets Disclosure [Abstract]
Remainder of 2016	$ 807
2017	1,162
2018	702
2019	308
2020	285
Thereafter	1,025
Net Value	$ 4,289	$ 5,083

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Stockholders' Equity - Summary of Changes in Stockholders' Equity (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Equity [Abstract]
Beginning Balance			$ 480,160
Net income	$ 10,228	$ 2,544	15,242	$ 5,861
Dividend payments			(8,860)
Dividends accrued for unvested restricted stock units			(26)
Net unrealized losses on available-for-sale securities (net of tax)	(165)	(1,783)	(420)	(2,286)
Defined benefit plan adjustments			67
Foreign currency translation adjustment	(601)	$ 872	627	(2,446)
Proceeds from stock option exercises			541	$ 833
Purchase of treasury stock			(16,579)
Income tax effect of stock compensation arrangements			(137)
Stock-based compensation expense			3,109
Ending Balance	$ 473,724		$ 473,724

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Stockholders' Equity - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Equity [Abstract]
Maximum shares authorized for repurchase, prior and new announcements and total after new announcement	50,000,000
Stock repurchased, shares	900,000
Shares repurchased, average price per share	$ 18.48
Additional shares authorized for purchase	4,900,000
Number of Options, exercised	33,000
Exercise price of stock options, lower range limit	$ 15.29
Exercise price of stock options, upper range limit	$ 18.97
Proceeds from stock option exercises	$ 541	$ 833

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Stockholders' Equity - Cash Dividends (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Dividends Payable [Line Items]
Record Date			Jul. 28, 2016
Payment Date			Aug. 11, 2016
Per Share Amount	$ 0.09	$ 0.09	$ 0.18	$ 0.18
Total Dividend Paid			$ 8,860	$ 9,509
Cash Dividends Paid in February [Member]
Dividends Payable [Line Items]
Record Date			Feb. 04, 2016
Payment Date			Feb. 18, 2016
Per Share Amount			$ 0.09
Total Dividend Paid			$ 4,453
Cash Dividends Paid in May [Member]
Dividends Payable [Line Items]
Record Date			Apr. 28, 2016
Payment Date			May 12, 2016
Per Share Amount			$ 0.09
Total Dividend Paid			$ 4,407

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Stockholders' Equity - Changes in Accumulated Other Comprehensive Income, Net of Tax by Component (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	$ (7,951)	$ (3,828)	$ (8,969)	$ (75)
Other comprehensive income (loss) before reclassifications	(120)	1,049	1,866	(909)
Amounts reclassified from accumulated other comprehensive income	(624)	(1,888)	(1,592)	(3,683)
Other Comprehensive Income (Loss), net of tax	(744)	(839)	274	(4,592)
Ending balance	(8,695)	(4,667)	(8,695)	(4,667)
Unrealized Gains (Losses) on Available-for-Sale Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	1,677	8,461	1,932	8,964
Other comprehensive income (loss) before reclassifications	481	177	1,239	1,537
Amounts reclassified from accumulated other comprehensive income	(646)	(1,960)	(1,659)	(3,823)
Other Comprehensive Income (Loss), net of tax	(165)	(1,783)	(420)	(2,286)
Ending balance	1,512	6,678	1,512	6,678
Defined Benefit Plan Adjustments [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(3,850)	(5,689)	(3,895)	(5,757)
Amounts reclassified from accumulated other comprehensive income	22	72	67	140
Other Comprehensive Income (Loss), net of tax	22	72	67	140
Ending balance	(3,828)	(5,617)	(3,828)	(5,617)
Foreign Currency Adjustments [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(5,778)	(6,600)	(7,006)	(3,282)
Other comprehensive income (loss) before reclassifications	(601)	872	627	(2,446)
Other Comprehensive Income (Loss), net of tax	(601)	872	627	(2,446)
Ending balance	$ (6,379)	$ (5,728)	$ (6,379)	$ (5,728)

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Stockholders' Equity - Reclassifications Out of Accumulated Other Comprehensive Income (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Reclassification Adjustment Out of Accumulated Other Comprehensive Income [Line Items]
Income before provision for income taxes	$ 16,456	$ 4,111	$ 24,534	$ 9,621
Tax (expense) benefit	(6,228)	(1,567)	(9,292)	(3,760)
Total reclassifications for the period, net of tax	10,228	2,544	15,242	5,861
Reclassification Out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment Out of Accumulated Other Comprehensive Income [Line Items]
Defined benefit plan adjustments – actuarial losses	(33)	(105)	(98)	(203)
Income before provision for income taxes	1,026	3,108	2,622	6,064
Tax (expense) benefit	(402)	(1,220)	(1,030)	(2,381)
Total reclassifications for the period, net of tax	624	1,888	1,592	3,683
Unrealized Gains (Losses) on Available-for-Sale Securities [Member] | Reclassification Out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment Out of Accumulated Other Comprehensive Income [Line Items]
Net realized investment gain	1,354	3,264	3,115	6,340
Impairment Expense [Member] | Reclassification Out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment Out of Accumulated Other Comprehensive Income [Line Items]
Net realized investment gain	$ (295)	$ (51)	$ (395)	$ (73)

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Stockholders' Equity - Other Comprehensive Income (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Equity [Abstract]
Unrealized gains (losses) on available-for-sale securities, Before-Tax Amount	$ 789	$ 290	$ 2,031	$ 2,520
Reclassification adjustment for amounts related to available-for-sale investments included in net income, Before-Tax Amount	(1,059)	(3,213)	(2,720)	(6,267)
Reclassification adjustment for amounts related to defined benefit plan adjustments included in net income, Before-Tax Amount	33	105	98	203
Foreign currency translation adjustment, Before-Tax Amount	(601)	872	627	(2,446)
Total Other Comprehensive Income (Loss), Before-Tax Amount	(838)	(1,946)	36	(5,990)
Unrealized gains (losses) on available-for-sale securities, Tax (Expense) Benefit	(308)	(113)	(792)	(983)
Reclassification adjustment for amounts related to available-for-sale investments included in net income, Tax (Expense) Benefit	413	1,253	1,061	2,444
Reclassification adjustment for amounts related to defined benefit plan adjustments included in net income, Tax (Expense) Benefit	(11)	(33)	(31)	(63)
Total Other Comprehensive Income (Loss), Tax (Expense) Benefit	94	1,107	238	1,398
Unrealized gains (losses) on available-for-sale securities, Net-of-Tax Amount	481	177	1,239	1,537
Reclassification adjustment for amounts related to available-for-sale investments included in net income, Net-of-Tax Amount	(646)	(1,960)	(1,659)	(3,823)
Reclassification adjustment for amounts related to defined benefit plan adjustments included in net income, Net-of-Tax Amount	22	72	67	140
Foreign currency translation adjustment, Net-of-Tax Amount	(601)	872	627	(2,446)
Other Comprehensive Income (Loss), net of tax	$ (744)	$ (839)	$ 274	$ (4,592)

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Earnings Per Share - Summary of Calculation of Basic and Diluted Earnings Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Numerator
Net income	$ 10,228	$ 2,544	$ 15,242	$ 5,861
Denominator
Weighted average number of shares – basic	48,831	51,822	49,026	52,607
Effect of dilutive securities
Stock options	161	72	138	122
Restricted stock and restricted stock units	56	23	54	13
Weighted average number of shares – diluted	49,048	51,917	49,218	52,742
Net income per share – basic	$ 0.21	$ 0.05	$ 0.31	$ 0.11
Net income per share – diluted	$ 0.21	$ 0.05	$ 0.31	$ 0.11

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Earnings Per Share - Additional Information (Detail) - shares shares in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Earnings Per Share [Abstract]
Anti-dilutive options, Total	5.6	6.1	5.8	5.7

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Segment Information - Additional Information (Detail)	3 Months Ended	6 Months Ended
	Mar. 31, 2016 Segment	Jun. 30, 2016 Segment Category
Segment Reporting [Abstract]
Number of reportable segments | Segment	2	2
Number of categories | Category		3

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Segment Information - Sales and Gross Profit of Reportable Segments (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Segment Reporting Information [Line Items]
Sales	$ 162,701	$ 160,138	$ 304,905	$ 302,973
Gross Profit	78,955	68,246	144,749	133,809
Network Solutions [Member]
Segment Reporting Information [Line Items]
Sales	138,549	144,098	262,432	273,603
Gross Profit	70,705	59,888	130,515	117,833
Services & Support [Member]
Segment Reporting Information [Line Items]
Sales	24,152	16,040	42,473	29,370
Gross Profit	$ 8,250	$ 8,358	$ 14,234	$ 15,976

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Segment Information - Sales Information by Category (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenue from External Customer [Line Items]
Sales	$ 162,701	$ 160,138	$ 304,905	$ 302,973
Access & Aggregation [Member]
Revenue from External Customer [Line Items]
Sales	102,232	112,732	196,087	205,583
Customer Devices [Member]
Revenue from External Customer [Line Items]
Sales	40,876	30,042	73,229	61,746
Traditional & Other Products [Member]
Revenue from External Customer [Line Items]
Sales	$ 19,593	$ 17,364	$ 35,589	$ 35,644

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Liability for Warranty Returns - Additional Information (Detail) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014
Product Warranties Disclosures [Abstract]
Period of warranty for product defects	90 days to ten years
Liability for warranty obligations	$ 8,935	$ 9,042	$ 8,739	$ 8,933	$ 8,684	$ 8,415

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Liability for Warranty Returns - Summary of Warranty Expense and Write-Off Activity (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Product Warranties Disclosures [Abstract]
Balance at beginning of period	$ 9,042	$ 8,684	$ 8,739	$ 8,415
Plus:Amounts charged to cost and expenses	1,431	667	2,329	1,128
Less:Deductions	(1,538)	(418)	(2,133)	(610)
Balance at end of period	$ 8,935	$ 8,933	$ 8,935	$ 8,933

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Commitments and Contingencies - Additional Information (Detail) $ in Millions	Jun. 30, 2016 USD ($) EquityUnit
Contingencies And Commitments [Line Items]
Number of private equity funds | EquityUnit	2
Commitments towards private equity funds	$ 7.7
Investment Commitments [Member]
Contingencies And Commitments [Line Items]
Aggregate investment committed in private equity funds	7.9
Private Equity Funds [Member]
Contingencies And Commitments [Line Items]
Contribution to private equity funds	$ 8.4

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Subsequent Events - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions			6 Months Ended
	Aug. 05, 2016	Jul. 12, 2016	Jun. 30, 2016	Aug. 11, 2016
Subsequent Event [Line Items]
Dividend declaration date			Jul. 12, 2016
Dividend record date			Jul. 28, 2016
Dividend payment date			Aug. 11, 2016
Stock repurchased, shares			900,000
Shares repurchased, average price per share			$ 18.48
Additional shares authorized for purchase			4,900,000
Subsequent Events [Member]
Subsequent Event [Line Items]
Common stock dividends per share declared		$ 0.09
Quarterly dividend payable subsequent to balance sheet date				$ 4.3
Stock repurchased, shares	300,000
Shares repurchased, average price per share	$ 17.99
Additional shares authorized for purchase	4,600,000