ADTRAN INC, 10-Q filed on 8/3/2012
Quarterly Report
Document and Entity Information
6 Months Ended
Jun. 30, 2012
Jul. 24, 2012
Document and Entity Information [Abstract]
Entity Registrant Name
ADTRAN INC
Entity Central Index Key
0000926282
Document Type
10-Q
Document Period End Date
Jun. 30, 2012
Amendment Flag
false
Document Fiscal Year Focus
2012
Document Fiscal Period Focus
Q2
Current Fiscal Year End Date
--12-31
Entity Filer Category
Large Accelerated Filer
Entity Common Stock, Shares Outstanding
63,271,378
Consolidated Balance Sheets (Unaudited)(USD $)
In Thousands, unless otherwise specified
Jun. 30, 2012
Dec. 31, 2011
Current Assets
Cash and cash equivalents
$36,968
$42,979
Short-term investments
169,449
159,347
Accounts receivable, less allowance for doubtful accounts of $5 and $8 at June 30, 2012 and December 31, 2011, respectively
118,511
76,130
Other receivables
8,124
9,743
Inventory
103,776
87,800
Prepaid expenses
4,670
3,119
Deferred tax assets, net
12,803
12,125
Total Current Assets
454,301
391,243
Property, plant and equipment, net
81,981
75,295
Deferred tax assets, net
8,368
8,345
Goodwill
3,492
3,492
Other assets
14,323
7,131
Long-term investments
348,424
332,008
Total Assets
910,889
817,514
Current Liabilities
Accounts payable
46,978
29,404
Unearned revenue
27,251
9,965
Accrued expenses
12,577
5,876
Accrued wages and benefits
15,709
13,518
Income tax payable, net
10,677
3,169
Total Current Liabilities
113,192
61,932
Non-current unearned revenue
23,009
4,874
Other non-current liabilities
14,908
12,077
Bonds payable
46,500
46,500
Total Liabilities
197,609
125,383
Commitments and contingencies (see Note 14)
  
  
Stockholders' Equity
Common stock, par value $0.01 per share; 200,000 shares authorized; 79,652 shares issued and 63,488 shares outstanding at June 30, 2012 and 79,652 shares issued and 63,703 shares outstanding at December 31, 2011
797
797
Additional paid-in capital
219,693
213,560
Accumulated other comprehensive income
14,681
13,102
Retained earnings
861,428
840,206
Less treasury stock at cost: 16,164 and 15,949 shares at June 30, 2012 and December 31, 2011, respectively
(383,319)
(375,534)
Total Stockholders' Equity
713,280
692,131
Total Liabilities and Stockholders' Equity
$910,889
$817,514
Consolidated Balance Sheets (Unaudited) (Parenthetical)(USD $)
In Thousands, except Per Share data, unless otherwise specified
Jun. 30, 2012
Dec. 31, 2011
Consolidated Balance Sheets [Abstract]
Allowance for doubtful accounts
$5
$8
Common stock, par value
$0.01
$0.01
Common stock, shares authorized
200,000
200,000
Common stock, shares issued
79,652
79,652
Common stock, shares outstanding
63,488
63,703
Treasury stock, shares
16,164
15,949
Consolidated Statements of Income (Unaudited)(USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Jun. 30, 2012
Jun. 30, 2011
Consolidated Statements of Income [Abstract]
Sales
$183,998
$184,227
$318,733
$349,749
Cost of sales
88,797
77,400
149,445
144,127
Gross Profit
95,201
106,827
169,288
205,622
Selling, general and administrative expenses
35,905
30,898
69,017
60,450
Research and development expenses
32,458
24,619
57,252
48,256
Operating Income
26,838
51,310
43,019
96,916
Interest and dividend income
1,926
2,003
3,787
3,792
Interest expense
(581)
(594)
(1,168)
(1,196)
Net realized investment gain
2,356
3,372
4,823
6,139
Other income (expense), net
492
(117)
633
(242)
Gain on bargain purchase of a business
1,753
1,753
Income before provision for income taxes
32,784
55,974
52,847
105,409
Provision for income taxes
(11,714)
(19,031)
(18,816)
(34,208)
Net Income
$21,070
$36,943
$34,031
$71,201
Weighted average shares outstanding - basic
63,619
64,690
63,720
64,441
Weighted average shares outstanding - diluted
64,393
66,135
64,628
66,044
Earnings per common share - basic
$0.33
$0.57
$0.53
$1.10
Earnings per common share - diluted
$0.33
$0.56
$0.53
$1.08
Dividend per share
$0.09
$0.09
$0.18
$0.18
Consolidated Statements of Comprehensive Income (Unaudited)(USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Jun. 30, 2012
Jun. 30, 2011
Consolidated Statements of Comprehensive Income [Abstract]
Net Income
$21,070
$36,943
$34,031
$71,201
Other Comprehensive Income (Loss), net of tax:
Net change in unrealized gains (losses) on marketable securities
(5,054)
(3,140)
1,701
(5,791)
Reclassification adjustments for amounts included in net income
(181)
(236)
(179)
(395)
Foreign currency translation
(96)
369
58
456
Other Comprehensive Income (Loss), net of tax
(5,331)
(3,007)
1,580
(5,730)
Comprehensive Income, net of tax
$15,739
$33,936
$35,611
$65,471
Consolidated Statements of Cash Flows (Unaudited)(USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Cash flows from operating activities:
Net Income
$34,031
$71,201
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
6,615
5,469
Amortization of net premium on available-for-sale investments
4,330
2,992
Net realized gain on long-term investments
(4,823)
(6,139)
Net (gain) loss on disposal of property, plant and equipment
(204)
17
Gain on bargain purchase of a business
(1,753)
Stock-based compensation expense
4,432
4,165
Deferred income taxes
(2,427)
(192)
Tax benefit from stock option exercises
1,701
10,318
Excess tax benefits from stock-based compensation arrangements
(1,346)
(9,180)
Changes in operating assets and liabilities:
Accounts receivable, net
(43,062)
(12,373)
Other receivables
1,997
(6,463)
Income tax receivable, net
1,936
Inventory
5,548
(12,402)
Prepaid expenses and other assets
(1,527)
(176)
Accounts payable
12,877
14,703
Accrued expenses and other liabilities
13,099
1,870
Income tax payable, net
7,508
Net cash provided by operating activities
36,996
65,746
Cash flows from investing activities:
Purchases of property, plant and equipment
(7,787)
(6,287)
Proceeds from disposals of property, plant and equipment
266
Proceeds from sales and maturities of available-for-sale investments
138,307
237,459
Purchases of available-for-sale investments
(161,849)
(335,870)
Acquisition of business
7,496
Net cash used in investing activities
(23,567)
(104,698)
Cash flows from financing activities:
Proceeds from stock option exercises
4,328
33,022
Purchases of treasury stock
(13,432)
Dividend payments
(11,476)
(11,596)
Excess tax benefits from stock-based compensation arrangements
1,346
9,180
Net cash provided by (used in) financing activities
(19,234)
30,606
Net decrease in cash and cash equivalents
(5,805)
(8,346)
Effect of exchange rate changes
(206)
456
Cash and cash equivalents, beginning of period
42,979
31,677
Cash and cash equivalents, end of period
$36,968
$23,787
Summary of Significant Accounting Policies
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, 2011 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 for a fair presentation of these interim statements have been included 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, 2011, filed on February 29, 2012 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 allowance for doubtful accounts, obsolete and excess inventory reserves, warranty reserves, customer rebates, allowance for sales returns, determination of the deferred revenue components of multiple element sales agreements, estimated costs to complete obligations associated with deferred revenues, estimated income tax contingencies, the fair value of stock-based compensation, impairment of goodwill, value and estimated lives of intangible assets, and the evaluation of other-than-temporary declines in the value of investments. Actual amounts could differ significantly from these estimates.

Recent Accounting Pronouncements

During the six months ended June 30, 2012, we adopted the following accounting standards, which had no material effect on our consolidated results of operations or financial condition:

In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2011-05, Presentation of Comprehensive Income (ASU 2011-05). ASU 2011-05 requires companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. While ASU 2011-05 changes the presentation of comprehensive income, it does not change the components that are recognized in net income or comprehensive income under current accounting guidance. This update is effective for fiscal years, and interim periods within those years, ending after December 15, 2011, with early adoption permitted. We adopted this amendment during the first quarter of 2012, and we have provided the disclosures required for the three and six months ended June 30, 2012 and 2011.

In December 2011, the FASB issued Accounting Standards Update No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (ASU 2011-12). ASU 2011-12 defers the effective date for certain presentation requirements that relate to reclassification adjustments and the effect of those reclassification adjustments on the financial statements. This update is effective for fiscal years, and interim periods within those years, ending after December 15, 2011, with early adoption permitted. We adopted this amendment during the first quarter of 2012. The adoption of this amendment had no effect on our consolidated results of operations and financial condition for the three and six months ended June 30, 2012.

 

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU 2011-04). ASU 2011-04 is intended to improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS. The amendments are of two types: (i) those that clarify the Board’s intent about the application of existing fair value measurement and disclosure requirements and (ii) those that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. This update is effective for annual periods beginning after December 15, 2011. We adopted this amendment during the first quarter of 2012. The adoption of this amendment had no effect on our consolidated results of operations and financial condition for the three and six months ended June 30, 2012.

Business Combinations
BUSINESS COMBINATIONS

2. BUSINESS COMBINATIONS

On May 4, 2012, we acquired the Nokia Siemens Networks (NSN) Broadband Access business (NSN BBA business). This acquisition provides us with an established customer base in key markets and complementary, market-focused products and was accounted for as a business combination. We have included the financial results of the NSN BBA business in our consolidated financial statements since the date of acquisition.

We received a cash payment of $7.5 million from NSN and recorded a bargain purchase gain of $1.8 million, net of income taxes, subject to customary working capital adjustments between the parties. The bargain purchase gain represents the excess of the consideration exchanged over the fair value of the assets acquired and liabilities assumed. We have assessed the recognition and measurements of the assets acquired and liabilities assumed based on historical and pro forma data for future periods and have concluded that our valuation procedures and resulting measures were appropriate. The gain is included in the line item “Gain on bargain purchase of a business” in the 2012 Consolidated Statements of Income.

The preliminary allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date is as follows:

 

         
(In Thousands)      

Other receivables

  $ 395  

Inventory

    22,278  

Property, plant and equipment

    5,035  

Accounts payable

    (5,194

Unearned revenue

    (13,579

Accrued expenses

    (1,931

Accrued wages and benefits

    (2,251

Deferred tax liability

    (788

Non-current unearned revenue

    (18,059
   

 

 

 

Net liabilities assumed

    (14,094
   

Customer relationships

    5,162  

Developed technology

    3,176  

Other

    13  

Gain on bargain purchase of a business, net of tax

    (1,753
   

 

 

 

Net consideration received by buyer

  $ (7,496
   

 

 

 

The fair value of the customer relationships acquired was calculated using a discounted cash flow method (excess earnings) and is being amortized using a declining balance method derived from projected customer revenue over an average estimated useful life of 13 years. The fair value of the developed technology acquired was calculated using a discounted cash flow method (relief from royalty) and is being amortized using the straight-line method over an estimated useful life of five years.

 

The following supplemental pro forma information presents the financial results as if the acquisition of the NSN BBA business had occurred on January 1, 2011. This supplemental pro forma information does not purport to be indicative of what would have occurred had the acquisition of the NSN BBA business been completed on January 1, 2011, nor are they indicative of any future results.

The actual revenue and pre-tax income excluding the bargain purchase gain included in our Consolidated Statements of Income from May 4, 2012 to June 30, 2012 was $22.6 million and $(0.4) million, respectively.

 

                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
(In thousands)   2012     2011     2012     2011  

Pro forma revenue

  $ 40,164     $ 46,951     $ 74,070     $ 108,285  

Pro forma pre-tax income

  $ (3,813   $ (14,138   $ (15,458   $ (21,040

Weighted average exchange rate during the period (EURO/USD)

  1.00/$1.29     1.00/$1.44     1.00/$1.30     1.00/$1.40  

For the three and six months ended June 30, 2012, we incurred acquisition and integration related expenses and amortization of acquired intangibles of $3.9 million and $5.5 million, respectively, related to this acquisition.

On August 4, 2011, we acquired all of the outstanding stock of Bluesocket, Inc., a provider of wireless network solutions with virtual control, for $23.7 million in cash. The acquisition provides us with IEEE802.11N enterprise class wireless LAN expertise, technology, and products to address the growing transition within small-medium enterprises and large enterprises to wireless networks and mobile devices. We have included the financial results of Bluesocket in our consolidated financial statements since the date of acquisition. Pro forma results of operations prior to the closing date for the acquisition have not been presented because the effect of the acquisition was not material to our financial results.

The allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date is as follows:

 

         
(In Thousands)      

Cash

  $ 1,027  

Accounts receivable

    298  

Inventory

    792  

Prepaid expenses

    357  

Property, plant and equipment

    173  

Deferred tax assets, net

    12,962  

Accounts payable

    (441

Unearned revenue

    (600

Accrued expenses

    (332
   

 

 

 

Net assets acquired

    14,236  
   

Customer relationships

    1,530  

Developed technology

    3,230  

Intellectual property

    930  

Trade names

    270  

Goodwill

    3,492  
   

 

 

 

Total purchase price

  $ 23,688  
   

 

 

 

During the fourth quarter of 2011, the purchase price and purchase price allocation were adjusted for our final valuations. The adjustments resulted in a decrease to the goodwill recognized in the transaction.

The net deferred tax assets acquired are primarily related to net operating losses and previously capitalized and unamortized research and development expense for tax deduction purposes.

 

The fair value of the customer relationships, developed technology and intellectual property acquired was calculated using an income approach (excess earnings method) and is being amortized using the straight-line method. The customer relationships and intellectual property are being amortized over an estimated useful life of 7 years and the developed technology is being amortized over an average estimated useful life of 4.5 years.

The fair value of the trade names acquired was calculated using an income approach (relief from royalty method) and is being amortized using the straight-line method over the estimate useful life of 4.5 years.

The goodwill of $3.5 million generated from this acquisition is primarily related to expected synergies and was assigned to our Enterprise Networks division. The goodwill will not be deductible for U.S. federal income tax purposes.

For the three and six months ended June 30, 2012, we incurred acquisition and integration related expenses and amortization of acquired intangibles of $0.4 million and $0.9 million, respectively, related to this acquisition.

Income Taxes
INCOME TAXES

3. INCOME TAXES

Our effective tax rate increased from 32.5% in the six months ended June 30, 2011 to 35.6% in the six months ended June 30, 2012. The tax provision rate in the six months ended June 30, 2012 did not include the benefit of the research tax credit, which expired on December 31, 2011. The exclusion of this benefit during the six months ended June 30, 2012 resulted in a 2.2 percentage point increase in our effective tax rate. Also, decreased benefits from a lower volume of stock option exercises in the six months ended June 30, 2012 resulted in a 1.4 percentage point increase in our effective tax rate. Finally, the closure of an audit resulted in a 0.4 percentage point decrease in our effective tax rate for the six months ended June 30, 2012.

During the three months ended June 30, 2012, we acquired the NSN BBA business, which resulted in a bargain purchase gain reported on the income statement. The bargain purchase gain is presented net of tax in the income statement and a deferred tax liability was established in the opening balance sheet for the acquired entity.

Pension Benefit Plan
PENSION BENEFIT PLAN

4. PENSION BENEFIT PLAN

As a result of our acquisition of the NSN BBA business, we assumed a defined benefit obligation plan from NSN. As a result, we established a Contribution Trust Arrangement (CTA) as a vehicle to hold the pension assets. NSN has estimated the amount of the defined benefit obligation to be approximately $17.8 million. We are in the process of verifying the estimated defined benefit obligation in order to determine the value of assets to be transferred from NSN to us to fund the pension obligation. We anticipate the assets to be transferred will be equal to the defined benefit obligation as of the date of the acquisition.

The following table summarizes the components of net periodic pension cost for the period May 4, 2012 to June 30, 2012:

 

         
    May 4, 2012 to  
(In thousands)   June 30, 2012  

Service cost

  $ 190  

Interest cost

    127  

Expected return on plan assets

    (165
   

 

 

 

Net periodic pension cost

  $ 152  
   

 

 

 

 

Stock-Based Compensation
STOCK-BASED COMPENSATION

5. 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, 2012 and 2011, which was recognized as follows:

 

                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  

(In thousands)

  2012     2011     2012     2011  

Stock-based compensation expense included in cost of sales

  $ 97     $ 89     $ 198     $ 180  
   

 

 

   

 

 

   

 

 

   

 

 

 

Selling, general and administrative expense

    1,047       999       2,098       2,006  

Research and development expense

    1,067       988       2,136       1,979  
   

 

 

   

 

 

   

 

 

   

 

 

 

Stock-based compensation expense included in operating expenses

    2,114       1,987       4,234       3,985  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total stock-based compensation expense

    2,211       2,076       4,432       4,165  

Tax benefit for expense associated with non-qualified options

    (302     (276     (603     (716
   

 

 

   

 

 

   

 

 

   

 

 

 

Total stock-based compensation expense, net of tax

  $ 1,909     $ 1,800     $ 3,829     $ 3,449  
   

 

 

   

 

 

   

 

 

   

 

 

 

The fair value of our stock options was 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 and six months ended June 30, 2012. The weighted-average assumptions and value of options granted for the three and six months ended June 30, 2011 are summarized as follows:

 

                 
    Three Months     Six Months  
    Ended     Ended  
    June 30,
2011
    June 30,
2011
 

Expected volatility

    37.68     37.68

Risk-free interest rate

    2.18     2.18

Expected dividend yield

    0.86     0.86

Expected life (in years)

    4.94       4.94  

Weighted-average estimated value

  $ 13.93     $ 13.93  

The fair value of our RSUs is calculated using a Monte Carlo Simulation valuation method. There were no RSU grants during the six months ended June 30, 2012 or 2011.

The fair value of restricted stock is equal to the closing price of our stock on the date of grant. There were no restricted stock grants during the six months ended June 30, 2012 or 2011.

Stock-based compensation expense recognized in our Consolidated Statements of Income for the three and six months ended June 30, 2012 and 2011 is based on options, RSUs and restricted stock ultimately expected to vest, and has been reduced for estimated forfeitures. Estimated forfeitures for stock options were based upon historical experience and approximate 1.6% 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, 2012, total compensation expense related to non-vested stock options, RSUs and restricted stock not yet recognized was approximately $17.3 million, which is expected to be recognized over an average remaining recognition period of 2.5 years.

 

The following table is a summary of our stock options outstanding as of December 31, 2011 and June 30, 2012 and the changes that occurred during the six months ended June 30, 2012:

 

                                 
(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, 2011

    5,400     $  25.66       6.78     $  27,270  

Options granted

    —       $ —                    

Options cancelled/forfeited

    (32   $ 26.31                  

Options exercised

    (225   $ 19.25                  
   

 

 

   

 

 

   

 

 

   

 

 

 

Options outstanding, June 30, 2012

    5,143     $ 25.94       6.36     $ 25,607  
   

 

 

   

 

 

   

 

 

   

 

 

 

Options exercisable, June 30, 2012

    2,833     $ 23.83       4.74     $ 19,317  
   

 

 

   

 

 

   

 

 

   

 

 

 

The aggregate intrinsic values in the table above represent the total pre-tax intrinsic value (the difference between ADTRAN’s closing stock price 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, 2012. The aggregate intrinsic value will change based on the fair market value of ADTRAN’s stock.

The total pre-tax intrinsic value of options exercised during the three and six month periods ended June 30, 2012 was $0.6 million and $3.6 million, respectively.

The following table is a summary of our RSUs and restricted stock outstanding as of December 31, 2011 and June 30, 2012 and the changes that occurred during the six months ended June 30, 2012:

 

                 
(In thousands, except per share amounts)   Number
of Shares
    Weighted
Average
Grant Date
Fair Value
 

Unvested RSUs and restricted stock outstanding, December 31, 2011

    90     $  34.21  

RSUs and restricted stock granted

    —       $ —    

RSUs and restricted stock vested

    —       $ —    

RSUs and restricted stock cancelled/forfeited

    —       $ —    
   

 

 

   

 

 

 

Unvested RSUs and restricted stock, June 30, 2012

    90     $ 34.21  
   

 

 

   

 

 

 

 

Investments
INVESTMENTS

6. INVESTMENTS

At June 30, 2012, we held the following securities and investments, recorded at either fair value or cost.

 

                                 
(In thousands)   Amortized
Cost
    Gross Unrealized     Carrying
Value
 
    Gains     Losses    

Deferred compensation plan assets

  $ 10,598     $ 392     $ (190   $ 10,800  

Corporate bonds

    183,282       786       (333     183,735  

Municipal fixed-rate bonds

    188,845       696       (23     189,518  

Municipal variable rate demand notes

    46,790       —         —         46,790  

Fixed income bond fund

    846       —         —         846  

Marketable equity securities

    18,052       18,423       (603     35,872  
   

 

 

   

 

 

   

 

 

   

 

 

 

Available-for-sale securities held at fair value

  $ 448,413     $ 20,297     $ (1,149   $ 467,561  
   

 

 

   

 

 

   

 

 

         

Restricted investment held at cost

                            48,250  

Other investments held at cost

                            2,062  
                           

 

 

 

Total carrying value of available-for-sale investments

                          $ 517,873  
                           

 

 

 

At December 31, 2011, we held the following securities and investments, recorded at either fair value or cost.

 

                                 
(In thousands)   Amortized
Cost
    Gross Unrealized     Carrying
Value
 
    Gains     Losses    

Deferred compensation plan assets

  $ 7,994     $ 119     $ (401   $ 7,712  

Corporate bonds

    159,077       181       (2,505     156,753  

Municipal fixed-rate bonds

    174,300       579       (53     174,826  

Municipal variable rate demand notes

    69,660       —         —         69,660  

Fixed income bond fund

    527       194       —         721  

Marketable equity securities

    12,771       19,098       (559     31,310  
   

 

 

   

 

 

   

 

 

   

 

 

 

Available-for-sale securities held at fair value

  $ 424,329     $ 20,171     $ (3,518   $ 440,982  
   

 

 

   

 

 

   

 

 

         

Restricted investment held at cost

                            48,250  

Other investments held at cost

                            2,123  
                           

 

 

 

Total carrying value of available-for-sale investments

                          $ 491,355  
                           

 

 

 

As of June 30, 2012, our corporate bonds and municipal fixed-rate bonds had the following contractual maturities:

 

                 
(In thousands)   Corporate
bonds
    Municipal
fixed-rate
bonds
 

Less than one year

  $ 39,614     $ 83,045  

One to two years

    114,900       56,268  

Two to three years

    29,221       7,210  

Three to five years

    —         42,995  
   

 

 

   

 

 

 

Total

  $ 183,735     $ 189,518  
   

 

 

   

 

 

 

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 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. As a result of our review, we recorded an other-than-temporary impairment charge of $33 thousand during the six months ended June 30, 2012 related to eight marketable equity securities. For the six months ended June 30, 2011, we recorded an other-than-temporary impairment charge of $12 thousand related to three marketable equity securities.

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)   2012     2011     2012     2011  

Gross realized gains

  $ 2,631     $ 3,505     $ 5,300     $ 6,369  

Gross realized losses

  $ (275   $ (133   $ (477   $ (230

As of June 30, 2012 and 2011, gross unrealized losses related to individual securities that had been in a continuous loss position for 12 months or longer were not significant.

In accordance with the Fair Value Measurements and Disclosures Topic of the FASB ASC, 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, 2012 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

  $ 9,250     $ 9,250     $ —       $ —    
   

 

 

   

 

 

   

 

 

   

 

 

 

Available-for-sale securities

                               

Deferred compensation plan assets

    10,800       10,800       —         —    

Available-for-sale debt securities

                               

Corporate bonds

    183,735       —         183,735       —    

Municipal fixed-rate bonds

    189,518       —         189,518       —    

Municipal variable rate demand notes

    46,790       —         46,790       —    

Fixed income bond fund

    846       846       —         —    

Available-for-sale marketable equity securities

                               

Equity securities – technology industry

    18,053       18,053       —         —    

Equity securities – other

    17,819       17,819       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

 

Available-for-sale securities

    467,561       47,518       420,043       —    
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 476,811     $ 56,768     $ 420,043     $ —    
   

 

 

   

 

 

   

 

 

   

 

 

 

 

                                 
    Fair Value Measurements at December 31, 2011 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

  $ 13,696     $ 13,696     $ —       $ —    
   

 

 

   

 

 

   

 

 

   

 

 

 

Available-for-sale securities

                               

Deferred compensation plan assets

    7,712       7,712       —         —    

Available-for-sale debt securities

                               

Corporate bonds

    156,753       —         156,753       —    

Municipal fixed-rate bonds

    174,826       —         174,826       —    

Municipal variable rate demand notes

    69,660       —         69,660       —    

Fixed income bond fund

    721       721       —         —    

Available-for-sale marketable equity securities

                               

Equity securities – technology industry

    18,743       18,743       —         —    

Equity securities – other

    12,567       12,567       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

 

Available-for-sale securities

    440,982       39,743       401,239       —    
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 454,678     $ 53,439     $ 401,239     $ —    
   

 

 

   

 

 

   

 

 

   

 

 

 

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 municipal 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.

Inventory
INVENTORY

7. INVENTORY

At June 30, 2012 and December 31, 2011, inventory consisted of the following:

 

                 
    June 30,     December 31,  
(In thousands)   2012     2011  

Raw materials

  $ 49,669     $ 44,588  

Work in process

    4,272       3,954  

Finished goods

    49,835       39,258  
   

 

 

   

 

 

 

Total

  $ 103,776     $ 87,800  
   

 

 

   

 

 

 

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, 2012 and December 31, 2011, raw materials reserves totaled $8.6 million and $7.9 million, respectively, and finished goods inventory reserves totaled $1.6 million and $1.5 million, respectively.

Goodwill and Intangible Assets
GOODWILL AND INTANGIBLE ASSETS

8. GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying value of goodwill, all of which is included in our Enterprise Networks division, for the six months ended June 30, 2012 are as follows:

 

         
(In thousands)      

Balance, December 31, 2011

  $  3,492  

Acquisitions

    —    

Impairment losses

    —    
   

 

 

 

Balance, June 30, 2012

  $ 3,492  
   

 

 

 

Balance as of June 30, 2012

       

Goodwill

  $ 3,492  

Accumulated impairment losses

    —    
   

 

 

 

Total goodwill

  $ 3,492  
   

 

 

 

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. When evaluating whether goodwill is impaired, we first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. If we determine that the two-step quantitative test is necessary, then we compare the fair value of the reporting unit to which the goodwill is assigned to the reporting unit’s carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, then the amount of the impairment loss is measured. There were no impairment losses during the six months ended June 30, 2012.

 

The following table presents our intangible assets as of June 30, 2012 and December 31, 2011. Intangible assets are included in other assets in the accompanying Consolidated Balance Sheets and include intangibles acquired in conjunction with our acquisition of Objectworld Communications Corporation on September 15, 2009, Bluesocket, Inc. on August 4, 2011, and the NSN BBA business on May 4, 2012.

 

                                                 
    June 30, 2012     December 31, 2011  
(In thousands)   Gross
Value
    Accumulated
Amortization
    Net Value     Gross
Value
    Accumulated
Amortization
    Net Value  

Customer relationships

  $ 6,559     $ (361   $ 6,198     $ 1,623     $ (194   $ 1,429  

Developed technology

    6,267       (704     5,563       3,230       (303     2,927  

Intellectual property

    2,340       (684     1,656       2,340       (525     1,815  

Trade names

    270       (55     215       270       (28     242  

Other

    13       (1     12       —         —         —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 15,449     $ (1,805   $ 13,644     $ 7,463     $ (1,050   $ 6,413  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Amortization expense was $0.5 million and $0.1 million for the three months ended June 30, 2012 and 2011, respectively, and $0.8 million and $0.1 million for the six months ended June 30, 2012 and 2011, respectively.

As of June 30, 2012, the estimated future amortization expense of our intangible assets is as follows:

 

         
(In thousands)   Amount  

Remainder of 2012

  $ 1,145  

2013

    2,291  

2014

    2,141  

2015

    2,036  

2016

    1,796  

Thereafter

    4,235  
   

 

 

 

Total

  $ 13,644  
   

 

 

 
Stockholders' Equity
STOCKHOLDERS' EQUITY

9. STOCKHOLDERS’ EQUITY

A summary of the changes in stockholders’ equity for the six months ended June 30, 2012 is as follows:

 

         
(In thousands)   Stockholders’ Equity  

Balance, December 31, 2011

  $  692,131  

Net income

    34,031  

Dividend payments

    (11,476

Dividends accrued for unvested restricted stock units

    (15

Net change in unrealized gains and losses on marketable securities (net of deferred taxes)

    1,701  

Reclassification adjustment for amounts included in net income (net of deferred taxes)

    (179

Foreign currency translation adjustment

    58  

Proceeds from stock option exercises

    4,328  

Purchase of treasury stock

    (13,432

Tax benefits from stock option exercises

    1,701  

Stock-based compensation expense

    4,432  
   

 

 

 

Balance, June 30, 2012

  $ 713,280  
   

 

 

 

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 35 million shares of our common stock. During the six months ended June 30, 2012, we repurchased 0.5 million shares of our common stock at an average price of $29.51 per share. We have the authority to purchase an additional 5.4 million shares of our common stock under plans approved by the Board of Directors on April 14, 2008 and October 11, 2011.

 

Stock Option Exercises

We issued 0.2 million shares of treasury stock during the six months ended June 30, 2012 to accommodate employee stock option exercises. The stock options had exercise prices ranging from $8.70 to $33.70. We received proceeds totaling $4.3 million from the exercise of these stock options during the six months ended June 30, 2012.

Dividend Payments

During the six months ended June 30, 2012, we paid cash dividends as follows (in thousands except per share amount):

 

                     

Record Date

  Payment Date   Per Share Amount     Total Dividend Paid  

February 2, 2012

  February 16, 2012   $ 0.09     $ 5,739  

April 26, 2012

  May 10, 2012   $ 0.09     $ 5,737  

Other Comprehensive Income

Other comprehensive income consists of the net change in unrealized gains and losses on marketable securities, reclassification adjustments for amounts included in net income related to realized gains on previously impaired marketable securities and foreign currency translation adjustments.

The components of other comprehensive income for the three months ended June 30, 2012 and 2011 are as follows:

 

                                                 
    Three Months Ended June 30, 2012     Three Months Ended June 30, 2011  
(In thousands)   Before-Tax
Amount
    Tax
(Expense)
Benefit
    Net-of-Tax
Amount
    Before-Tax
Amount
    Tax
(Expense)
Benefit
    Net-of-Tax
Amount
 

Net change in unrealized gains (losses) related to marketable securities

  $ (8,285   $ 3,231     $ (5,054   $ (5,169   $ 2,029     $ (3,140

Reclassification adjustment for amounts included in net income

    (297     116       (181     (382     146       (236

Foreign currency translation adjustment

    (96     —         (96     369       —         369  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Other Comprehensive Income (Loss)

  $ (8,678   $ 3,347     $ (5,331   $ (5,182   $ 2,175     $ (3,007
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The components of other comprehensive income for the six months ended June 30, 2012 and 2011 are as follows:

 

                                                 
    Six Months Ended June 30, 2012     Six Months Ended June 30, 2011  
(In thousands)   Before-Tax
Amount
    Tax
(Expense)
Benefit
    Net-of-Tax
Amount
    Before-Tax
Amount
    Tax
(Expense)
Benefit
    Net-of-Tax
Amount
 

Net change in unrealized gains (losses) related to marketable securities

  $ 2,789     $ (1,088   $ 1,701     $ (8,493   $ 2,702     $ (5,791

Reclassification adjustment for amounts included in net income

    (294     115       (179     (581     186       (395

Foreign currency translation adjustment

    58       —         58       456       —         456  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Other Comprehensive Income (Loss)

  $ 2,553     $ (973   $ 1,580     $ (8,618   $ 2,888     $ (5,730
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Earnings Per Share
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, 2012 and 2011 is as follows:

 

                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
(In thousands, except per share amounts)   2012     2011     2012     2011  

Numerator

                               

Net income

  $ 21,070     $ 36,943     $ 34,031     $ 71,201  
   

 

 

   

 

 

   

 

 

   

 

 

 

Denominator

                               

Weighted average number of shares – basic

    63,619       64,690       63,720       64,441  

Effect of dilutive securities

                               

Stock options

    720       1,387       865       1,547  

Restricted stock and restricted stock units

    54       58       43       56  
   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of shares – diluted

    64,393       66,135       64,628       66,044  
   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share – basic

  $ 0.33     $ 0.57     $ 0.53     $ 1.10  

Net income per share – diluted

  $ 0.33     $ 0.56     $ 0.53     $ 1.08  

Anti-dilutive options to purchase common stock outstanding were excluded from the above calculations. Anti-dilutive options totaled 2.5 million and 0.9 million for the three months ended June 30, 2012 and 2011, respectively, and 2.1 million and 0.9 million for the six months ended June 30, 2012 and 2011, respectively.

Segment Information
SEGMENT INFORMATION

11. SEGMENT INFORMATION

We operate in two reportable segments: (1) the Carrier Networks Division and (2) the Enterprise Networks Division. We evaluate the performance of our segments based on gross profit; therefore, selling, general and administrative expense, research and development expenses, interest income and dividend income, interest expense, net realized investment gain/loss, other income/expense and provision for taxes are reported on an entity-wide basis only. 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, 2012 and 2011. Asset information by reportable segment is not reported, since we do not produce such information internally.

 

                                 
    Three Months Ended  
    June 30, 2012     June 30, 2011  
(In thousands)   Sales     Gross Profit     Sales     Gross Profit  

Carrier Networks

  $ 152,707     $ 78,738     $ 150,492     $ 87,465  

Enterprise Networks

    31,291       16,463       33,735       19,362  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 183,998     $ 95,201     $ 184,227     $ 106,827  
   

 

 

   

 

 

   

 

 

   

 

 

 
   
    Six Months Ended  
    June 30, 2012     June 30, 2011  
(In thousands)   Sales     Gross Profit     Sales     Gross Profit  

Carrier Networks

  $ 249,361     $ 131,621     $ 282,852     $ 166,963  

Enterprise Networks

    69,372       37,667       66,897       38,659  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 318,733     $ 169,288     $ 349,749     $ 205,622  
   

 

 

   

 

 

   

 

 

   

 

 

 

 

Sales by Product

Our three major product categories are Carrier Systems, Business Networking and Loop Access.

Carrier Systems products are used by communications service providers to provide data, voice and video services to consumers and enterprises. The Carrier Systems category includes our broadband access products comprised of Total Access® 5000 multi-service access and aggregation platform products, Total Access 1100/1200 Series Fiber-To-The-Node (FTTN) products, hiX 5600 Series Multi-Service Access Node (MSAN), Ultra Broadband Ethernet (UBE) and Digital Subscriber Line Access Multiplexer (DSLAM) products. Our broadband access products are used by service providers around the world to deliver high-speed Internet access, Plain Old Telephone Service (POTS), Voice over Internet Protocol (VoIP), IP Television (IPTV), and/or Ethernet services from the central office or remote terminal locations to customer premises. The Carrier Systems category also includes our optical products. These products consist of optical multiplexers and transceivers including those used in our Optical Networking Edge (ONE) products, NetVanta 8000 series products, and our family of OPTI products. Optical products are used to deliver higher bandwidth services, aggregate large numbers of low bandwidth services, or transport wavelength services across a fiber optic infrastructure. Total Access 1500 products, 303 concentrator products, M13 multiplexer products, and a number of mobile backhaul products are also included in the Carrier Systems product category.

Business Networking products provide access to telecommunication services, facilitating the delivery of converged services and Unified Communications to the small and mid-sized enterprises (SME) market. The Business Networking category includes Internetworking products and Integrated Access Devices (IADs). Internetworking products consist of our Total Access IP Business Gateways, Optical Network Terminals (ONTs), Virtual Wireless LAN products and NetVanta product lines. NetVanta products include multi-service routers, managed Ethernet switches, IP Private Branch Exchange (PBX) products, IP phone products, Unified Communications solutions, Unified Threat Management (UTM) solutions, and Carrier Ethernet Network Terminating Equipment (NTE). IAD products consist of our Total Access 600 Series and the Total Access 850.

Loop Access products are used by carrier and enterprise customers for access to copper-based telecommunications networks. The Loop Access category includes products such as: Digital Data Service (DDS) and Integrated Services Digital Network (Total Reach) products, High bit-rate Digital Subscriber Line (HDSL) products including Total Access 3000 HDSL and Time Division Multiplexed-Symmetrical HDSL (TDM-SHDSL) products, T1/E1/T3, Channel Service Units/Data Service Units, and TRACER fixed wireless products.

The table below presents sales information by product category for the three and six months ended June 30, 2012 and 2011.

 

                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
(In thousands)   2012     2011     2012     2011  

Carrier Systems

  $ 126,755     $ 112,289     $ 198,013     $ 199,039  

Business Networking

    36,590       35,699       79,732       72,062  

Loop Access

    20,653       36,239       40,988       78,648  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 183,998     $ 184,227     $ 318,733     $ 349,749  
   

 

 

   

 

 

   

 

 

   

 

 

 

In addition, we identify subcategories of product revenues, which we divide into our core products and legacy products. Our core products consist of Broadband Access and Optical products (included in Carrier Systems) and Internetworking products (included in Business Networking) and our legacy products include HDSL products (included in Loop Access) and other products not included in the aforementioned core products.

 

Subcategory revenues included in the above are as follows:

 

                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
(In thousands)   2012     2011     2012     2011  

Core Products

                               

Broadband Access (included in Carrier Systems)

  $ 106,042     $ 77,062     $ 155,524     $ 128,844  

Optical (included in Carrier Systems)

    14,003       22,008       28,258       42,924  

Internetworking (NetVanta & Multi-service Access Gateways) (included in Business Networking)

    34,935       33,029       75,909       65,912  
   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

    154,980       132,099       259,691       237,680  
         

Legacy Products

                               

HDSL (does not include T1) (included in Loop Access)

    19,465       34,049       38,424       74,994  

Other products (excluding HDSL)

    9,553       18,079       20,618       37,075  
   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

    29,018       52,128       59,042       112,069  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 183,998     $ 184,227     $ 318,733     $ 349,749  
   

 

 

   

 

 

   

 

 

   

 

 

 

Sales by Geographic Region

The table below presents sales information by geographic area for the three and six months ended June 30, 2012 and 2011. International sales correlate to shipments with a non-U.S. destination.

 

                                 
    Three Months Ended     Six Months Ended  
(In thousands)   June 30,     June 30,  
  2012     2011     2012     2011  

United States

  $ 130,389     $ 160,804     $ 246,832     $ 313,917  

International

    53,609       23,423       71,901       35,832  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 183,998     $ 184,227     $ 318,733     $ 349,749  
   

 

 

   

 

 

   

 

 

   

 

 

 
Liability for Warranty Returns
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 systems products. 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 $7.2 million at June 30, 2012 and $4.1 million at December 31, 2011. These liabilities are included in accrued expenses in the accompanying Consolidated Balance Sheets.

A summary of warranty expense and write-off activity for the six months ended June 30, 2012 and 2011 is as follows:

 

                 

Six Months Ended June 30,

(In thousands)

  2012     2011  

Balance at beginning of period

  $ 4,118     $ 3,304  

Plus: Amounts charged to cost and expenses

    3,313       1,525  

Amounts assumed on acquisition

    1,932       —    

Less: Deductions

    (2,137     (1,183
   

 

 

   

 

 

 

Balance at end of period

  $ 7,226     $ 3,646  
   

 

 

   

 

 

 

 

Related Party Transactions
RELATED PARTY TRANSACTIONS

13. RELATED PARTY TRANSACTIONS

We employ the law firm of our director emeritus for legal services. All bills for services rendered by this firm are reviewed and approved by our Chief Financial Officer. We believe that the fees for such services are comparable to those charged by other firms for services rendered to us. For the three and six month periods ended June 30, 2012 and 2011, we incurred fees of $10 thousand per month for these legal services.

Commitments and Contingencies
COMMITMENTS AND CONTINGENCIES

14. 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, 2012, of which $7.7 million has been applied to these commitments.

Subsequent Events
SUBSEQUENT EVENTS

15. SUBSEQUENT EVENTS

On July 10, 2012, 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 26, 2012. The payment date will be August 9, 2012. The quarterly dividend payment will be approximately $5.7 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 of 2012 and as of August 3, 2012, we repurchased 0.5 million shares of our common stock through open market purchases at an average cost of $21.08 per share. We have the authority to purchase an additional 4.9 million shares of our common stock under plans approved by the Board of Directors on April 14, 2008 and October 11, 2011.

Summary of Significant Accounting Policies (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, 2011 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 for a fair presentation of these interim statements have been included 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, 2011, filed on February 29, 2012 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 allowance for doubtful accounts, obsolete and excess inventory reserves, warranty reserves, customer rebates, allowance for sales returns, determination of the deferred revenue components of multiple element sales agreements, estimated costs to complete obligations associated with deferred revenues, estimated income tax contingencies, the fair value of stock-based compensation, impairment of goodwill, value and estimated lives of intangible assets, and the evaluation of other-than-temporary declines in the value of investments. Actual amounts could differ significantly from these estimates.

In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2011-05, Presentation of Comprehensive Income (ASU 2011-05). ASU 2011-05 requires companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. While ASU 2011-05 changes the presentation of comprehensive income, it does not change the components that are recognized in net income or comprehensive income under current accounting guidance. This update is effective for fiscal years, and interim periods within those years, ending after December 15, 2011, with early adoption permitted. We adopted this amendment during the first quarter of 2012, and we have provided the disclosures required for the three and six months ended June 30, 2012 and 2011.

In December 2011, the FASB issued Accounting Standards Update No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (ASU 2011-12). ASU 2011-12 defers the effective date for certain presentation requirements that relate to reclassification adjustments and the effect of those reclassification adjustments on the financial statements. This update is effective for fiscal years, and interim periods within those years, ending after December 15, 2011, with early adoption permitted. We adopted this amendment during the first quarter of 2012. The adoption of this amendment had no effect on our consolidated results of operations and financial condition for the three and six months ended June 30, 2012.

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU 2011-04). ASU 2011-04 is intended to improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS. The amendments are of two types: (i) those that clarify the Board’s intent about the application of existing fair value measurement and disclosure requirements and (ii) those that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. This update is effective for annual periods beginning after December 15, 2011. We adopted this amendment during the first quarter of 2012. The adoption of this amendment had no effect on our consolidated results of operations and financial condition for the three and six months ended June 30, 2012.

Business Combinations (Tables)
         
(In Thousands)      

Other receivables

  $ 395  

Inventory

    22,278  

Property, plant and equipment

    5,035  

Accounts payable

    (5,194

Unearned revenue

    (13,579

Accrued expenses

    (1,931

Accrued wages and benefits

    (2,251

Deferred tax liability

    (788

Non-current unearned revenue

    (18,059
   

 

 

 

Net liabilities assumed

    (14,094
   

Customer relationships

    5,162  

Developed technology

    3,176  

Other

    13  

Gain on bargain purchase of a business, net of tax

    (1,753
   

 

 

 

Net consideration received by buyer

  $ (7,496
   

 

 

 
         
(In Thousands)      

Cash

  $ 1,027  

Accounts receivable

    298  

Inventory

    792  

Prepaid expenses

    357  

Property, plant and equipment

    173  

Deferred tax assets, net

    12,962  

Accounts payable

    (441

Unearned revenue

    (600

Accrued expenses

    (332
   

 

 

 

Net assets acquired

    14,236  
   

Customer relationships

    1,530  

Developed technology

    3,230  

Intellectual property

    930  

Trade names

    270  

Goodwill

    3,492  
   

 

 

 

Total purchase price

  $ 23,688  
   

 

 

 
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
(In thousands)   2012     2011     2012     2011  

Pro forma revenue

  $ 40,164     $ 46,951     $ 74,070     $ 108,285  

Pro forma pre-tax income

  $ (3,813   $ (14,138   $ (15,458   $ (21,040

Weighted average exchange rate during the period (EURO/USD)

  1.00/$1.29     1.00/$1.44     1.00/$1.30     1.00/$1.40  
Pension Benefit Plan (Tables)
Summarization of the components of net periodic pension cost
         
    May 4, 2012 to  
(In thousands)   June 30, 2012  

Service cost

  $ 190  

Interest cost

    127  

Expected return on plan assets

    (165
   

 

 

 

Net periodic pension cost

  $ 152  
   

 

 

 
Stock-Based Compensation (Tables)
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  

(In thousands)

  2012     2011     2012     2011  

Stock-based compensation expense included in cost of sales

  $ 97     $ 89     $ 198     $ 180  
   

 

 

   

 

 

   

 

 

   

 

 

 

Selling, general and administrative expense

    1,047       999       2,098       2,006  

Research and development expense

    1,067       988       2,136       1,979  
   

 

 

   

 

 

   

 

 

   

 

 

 

Stock-based compensation expense included in operating expenses

    2,114       1,987       4,234       3,985  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total stock-based compensation expense

    2,211       2,076       4,432       4,165  

Tax benefit for expense associated with non-qualified options

    (302     (276     (603     (716
   

 

 

   

 

 

   

 

 

   

 

 

 

Total stock-based compensation expense, net of tax

  $ 1,909     $ 1,800     $ 3,829     $ 3,449  
   

 

 

   

 

 

   

 

 

   

 

 

 
                 
    Three Months     Six Months  
    Ended     Ended  
    June 30,
2011
    June 30,
2011
 

Expected volatility

    37.68     37.68

Risk-free interest rate

    2.18     2.18

Expected dividend yield

    0.86     0.86

Expected life (in years)

    4.94       4.94  

Weighted-average estimated value

  $ 13.93     $ 13.93  
                                 
(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, 2011

    5,400     $  25.66       6.78     $  27,270  

Options granted

    —       $ —                    

Options cancelled/forfeited

    (32   $ 26.31                  

Options exercised

    (225   $ 19.25                  
   

 

 

   

 

 

   

 

 

   

 

 

 

Options outstanding, June 30, 2012

    5,143     $ 25.94       6.36     $ 25,607  
   

 

 

   

 

 

   

 

 

   

 

 

 

Options exercisable, June 30, 2012

    2,833     $ 23.83       4.74     $ 19,317  
   

 

 

   

 

 

   

 

 

   

 

 

 
                 
(In thousands, except per share amounts)   Number
of Shares
    Weighted
Average
Grant Date
Fair Value
 

Unvested RSUs and restricted stock outstanding, December 31, 2011

    90     $  34.21  

RSUs and restricted stock granted

    —       $ —    

RSUs and restricted stock vested

    —       $ —    

RSUs and restricted stock cancelled/forfeited

    —       $ —    
   

 

 

   

 

 

 

Unvested RSUs and restricted stock, June 30, 2012

    90     $ 34.21  
   

 

 

   

 

 

 
Investments (Tables)
                                 
(In thousands)   Amortized
Cost
    Gross Unrealized     Carrying
Value
 
    Gains     Losses    

Deferred compensation plan assets

  $ 10,598     $ 392     $ (190   $ 10,800  

Corporate bonds

    183,282       786       (333     183,735  

Municipal fixed-rate bonds

    188,845       696       (23     189,518  

Municipal variable rate demand notes

    46,790       —         —         46,790  

Fixed income bond fund

    846       —         —         846  

Marketable equity securities

    18,052       18,423       (603     35,872  
   

 

 

   

 

 

   

 

 

   

 

 

 

Available-for-sale securities held at fair value

  $ 448,413     $ 20,297     $ (1,149   $ 467,561  
   

 

 

   

 

 

   

 

 

         

Restricted investment held at cost

                            48,250  

Other investments held at cost

                            2,062  
                           

 

 

 

Total carrying value of available-for-sale investments

                          $ 517,873  
                           

 

 

 

At December 31, 2011, we held the following securities and investments, recorded at either fair value or cost.

 

                                 
(In thousands)   Amortized
Cost
    Gross Unrealized     Carrying
Value
 
    Gains     Losses    

Deferred compensation plan assets

  $ 7,994     $ 119     $ (401   $ 7,712  

Corporate bonds

    159,077       181       (2,505     156,753  

Municipal fixed-rate bonds

    174,300       579       (53     174,826  

Municipal variable rate demand notes

    69,660       —         —         69,660  

Fixed income bond fund

    527       194       —         721  

Marketable equity securities

    12,771       19,098       (559     31,310  
   

 

 

   

 

 

   

 

 

   

 

 

 

Available-for-sale securities held at fair value

  $ 424,329     $ 20,171     $ (3,518   $ 440,982  
   

 

 

   

 

 

   

 

 

         

Restricted investment held at cost

                            48,250  

Other investments held at cost

                            2,123  
                           

 

 

 

Total carrying value of available-for-sale investments

                          $ 491,355  
                           

 

 

 
                 
(In thousands)   Corporate
bonds
    Municipal
fixed-rate
bonds
 

Less than one year

  $ 39,614     $ 83,045  

One to two years

    114,900       56,268  

Two to three years

    29,221       7,210  

Three to five years

    —         42,995  
   

 

 

   

 

 

 

Total

  $ 183,735     $ 189,518  
   

 

 

   

 

 

 
                                 
     Three Months Ended     Six Months Ended  
    June 30,     June 30,  
(In thousands)   2012     2011     2012     2011  

Gross realized gains

  $ 2,631     $ 3,505     $ 5,300     $ 6,369  

Gross realized losses

  $ (275   $ (133   $ (477   $ (230
                                 
    Fair Value Measurements at June 30, 2012 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

  $ 9,250     $ 9,250     $ —       $ —    
   

 

 

   

 

 

   

 

 

   

 

 

 

Available-for-sale securities

                               

Deferred compensation plan assets

    10,800       10,800       —         —    

Available-for-sale debt securities

                               

Corporate bonds

    183,735       —         183,735       —    

Municipal fixed-rate bonds

    189,518       —         189,518       —    

Municipal variable rate demand notes

    46,790       —         46,790       —    

Fixed income bond fund

    846       846       —         —    

Available-for-sale marketable equity securities

                               

Equity securities – technology industry

    18,053       18,053       —         —    

Equity securities – other

    17,819       17,819       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

 

Available-for-sale securities

    467,561       47,518       420,043       —    
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 476,811     $ 56,768     $ 420,043     $ —    
   

 

 

   

 

 

   

 

 

   

 

 

 

 

                                 
    Fair Value Measurements at December 31, 2011 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

  $ 13,696     $ 13,696     $ —       $ —    
   

 

 

   

 

 

   

 

 

   

 

 

 

Available-for-sale securities

                               

Deferred compensation plan assets

    7,712       7,712       —         —    

Available-for-sale debt securities

                               

Corporate bonds

    156,753       —         156,753       —    

Municipal fixed-rate bonds

    174,826       —         174,826       —    

Municipal variable rate demand notes

    69,660       —         69,660       —    

Fixed income bond fund

    721       721       —         —    

Available-for-sale marketable equity securities

                               

Equity securities – technology industry

    18,743       18,743       —         —    

Equity securities – other

    12,567       12,567       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

 

Available-for-sale securities

    440,982       39,743       401,239       —    
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 454,678     $ 53,439     $ 401,239     $ —    
   

 

 

   

 

 

   

 

 

   

 

 

 
Inventory (Tables)
Inventory
                 
    June 30,     December 31,  
(In thousands)   2012     2011  

Raw materials

  $ 49,669     $ 44,588  

Work in process

    4,272       3,954  

Finished goods

    49,835       39,258  
   

 

 

   

 

 

 

Total

  $ 103,776     $ 87,800  
   

 

 

   

 

 

 
Goodwill and Intangible Assets (Tables)
         
(In thousands)      

Balance, December 31, 2011

  $  3,492  

Acquisitions

    —    

Impairment losses

    —    
   

 

 

 

Balance, June 30, 2012

  $ 3,492  
   

 

 

 

Balance as of June 30, 2012

       

Goodwill

  $ 3,492  

Accumulated impairment losses

    —    
   

 

 

 

Total goodwill

  $ 3,492  
   

 

 

 
                                                 
    June 30, 2012     December 31, 2011  
(In thousands)   Gross
Value
    Accumulated
Amortization
    Net Value     Gross
Value
    Accumulated
Amortization
    Net Value  

Customer relationships

  $ 6,559     $ (361   $ 6,198     $ 1,623     $ (194   $ 1,429  

Developed technology

    6,267       (704     5,563       3,230       (303     2,927  

Intellectual property

    2,340       (684     1,656       2,340       (525     1,815  

Trade names

    270       (55     215       270       (28     242  

Other

    13       (1     12       —         —         —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 15,449     $ (1,805   $ 13,644     $ 7,463     $ (1,050   $ 6,413  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
         
(In thousands)   Amount  

Remainder of 2012

  $ 1,145  

2013

    2,291  

2014

    2,141  

2015

    2,036  

2016

    1,796  

Thereafter

    4,235  
Stockholders' Equity (Tables)
         
(In thousands)   Stockholders’ Equity  

Balance, December 31, 2011

  $  692,131  

Net income

    34,031  

Dividend payments

    (11,476

Dividends accrued for unvested restricted stock units

    (15

Net change in unrealized gains and losses on marketable securities (net of deferred taxes)

    1,701  

Reclassification adjustment for amounts included in net income (net of deferred taxes)

    (179

Foreign currency translation adjustment

    58  

Proceeds from stock option exercises

    4,328  

Purchase of treasury stock

    (13,432

Tax benefits from stock option exercises

    1,701  

Stock-based compensation expense

    4,432  
   

 

 

 

Balance, June 30, 2012

  $ 713,280  
   

 

 

 
                     

Record Date

  Payment Date   Per Share Amount     Total Dividend Paid  

February 2, 2012

  February 16, 2012   $ 0.09     $ 5,739  

April 26, 2012

  May 10, 2012   $ 0.09     $ 5,737  
                                                 
    Three Months Ended June 30, 2012     Three Months Ended June 30, 2011  
(In thousands)   Before-Tax
Amount
    Tax
(Expense)
Benefit
    Net-of-Tax
Amount
    Before-Tax
Amount
    Tax
(Expense)
Benefit
    Net-of-Tax
Amount
 

Net change in unrealized gains (losses) related to marketable securities

  $ (8,285   $ 3,231     $ (5,054   $ (5,169   $ 2,029     $ (3,140

Reclassification adjustment for amounts included in net income

    (297     116       (181     (382     146       (236

Foreign currency translation adjustment

    (96     —         (96     369       —         369  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Other Comprehensive Income (Loss)

  $ (8,678   $ 3,347     $ (5,331   $ (5,182   $ 2,175     $ (3,007
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The components of other comprehensive income for the six months ended June 30, 2012 and 2011 are as follows:

 

                                                 
    Six Months Ended June 30, 2012     Six Months Ended June 30, 2011  
(In thousands)   Before-Tax
Amount
    Tax
(Expense)
Benefit
    Net-of-Tax
Amount
    Before-Tax
Amount
    Tax
(Expense)
Benefit
    Net-of-Tax
Amount
 

Net change in unrealized gains (losses) related to marketable securities

  $ 2,789     $ (1,088   $ 1,701     $ (8,493   $ 2,702     $ (5,791

Reclassification adjustment for amounts included in net income

    (294     115       (179     (581     186       (395

Foreign currency translation adjustment

    58       —         58       456       —         456  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Other Comprehensive Income (Loss)

  $ 2,553     $ (973   $ 1,580     $ (8,618   $ 2,888     $ (5,730
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Earnings Per Share (Tables)
Earnings per share
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
(In thousands, except per share amounts)   2012     2011     2012     2011  

Numerator

                               

Net income

  $ 21,070     $ 36,943     $ 34,031     $ 71,201  
   

 

 

   

 

 

   

 

 

   

 

 

 

Denominator

                               

Weighted average number of shares – basic

    63,619       64,690       63,720       64,441  

Effect of dilutive securities

                               

Stock options

    720       1,387       865       1,547  

Restricted stock and restricted stock units

    54       58       43       56  
   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of shares – diluted

    64,393       66,135       64,628       66,044  
   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share – basic

  $ 0.33     $ 0.57     $ 0.53     $ 1.10  

Net income per share – diluted

  $ 0.33     $ 0.56     $ 0.53     $ 1.08  
Segment Information (Tables)
                                 
    Three Months Ended  
    June 30, 2012     June 30, 2011  
(In thousands)   Sales     Gross Profit     Sales     Gross Profit  

Carrier Networks

  $ 152,707     $ 78,738     $ 150,492     $ 87,465  

Enterprise Networks

    31,291       16,463       33,735       19,362  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 183,998     $ 95,201     $ 184,227     $ 106,827  
   

 

 

   

 

 

   

 

 

   

 

 

 
   
    Six Months Ended  
    June 30, 2012     June 30, 2011  
(In thousands)   Sales     Gross Profit     Sales     Gross Profit  

Carrier Networks

  $ 249,361     $ 131,621     $ 282,852     $ 166,963  

Enterprise Networks

    69,372       37,667       66,897       38,659  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 318,733     $ 169,288     $ 349,749     $ 205,622  
   

 

 

   

 

 

   

 

 

   

 

 

 
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
(In thousands)   2012     2011     2012     2011  

Carrier Systems

  $ 126,755     $ 112,289     $ 198,013     $ 199,039  

Business Networking

    36,590       35,699       79,732       72,062  

Loop Access

    20,653       36,239       40,988       78,648  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 183,998     $ 184,227     $ 318,733     $ 349,749  
   

 

 

   

 

 

   

 

 

   

 

 

 
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
(In thousands)   2012     2011     2012     2011  

Core Products

                               

Broadband Access (included in Carrier Systems)

  $ 106,042     $ 77,062     $ 155,524     $ 128,844  

Optical (included in Carrier Systems)

    14,003       22,008       28,258       42,924  

Internetworking (NetVanta & Multi-service Access Gateways) (included in Business Networking)

    34,935       33,029       75,909       65,912  
   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

    154,980       132,099       259,691       237,680  
         

Legacy Products

                               

HDSL (does not include T1) (included in Loop Access)

    19,465       34,049       38,424       74,994  

Other products (excluding HDSL)

    9,553       18,079       20,618       37,075  
   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

    29,018       52,128       59,042       112,069  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 183,998     $ 184,227     $ 318,733     $ 349,749  
   

 

 

   

 

 

   

 

 

   

 

 

 
                                 
    Three Months Ended     Six Months Ended  
(In thousands)   June 30,     June 30,  
  2012     2011     2012     2011  

United States

  $ 130,389     $ 160,804     $ 246,832     $ 313,917  

International

    53,609       23,423       71,901       35,832  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 183,998     $ 184,227     $ 318,733     $ 349,749  
   

 

 

   

 

 

   

 

 

   

 

 

 
Liability For Warranty Returns (Tables)
Summary of warranty expense and write-off activity
                 

Six Months Ended June 30,

(In thousands)

  2012     2011  

Balance at beginning of period

  $ 4,118     $ 3,304  

Plus: Amounts charged to cost and expenses

    3,313       1,525  

Amounts assumed on acquisition

    1,932       —    

Less: Deductions

    (2,137     (1,183
   

 

 

   

 

 

 

Balance at end of period

  $ 7,226     $ 3,646  
   

 

 

   

 

 

 
Business Combinations (Details)(USD $)
In Thousands, unless otherwise specified
Jun. 30, 2012
Aug. 4, 2011
Nokia Siemens Networks [Member]
Allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date
Other receivables/Accounts receivable
$395
Inventory
22,278
Property, plant and equipment
5,035
Accounts payable
(5,194)
Unearned revenue
(13,579)
Accrued expenses
(1,931)
Accrued wages and benefits
(2,251)
Deferred tax assets (liabilities), net
(788)
Non-current unearned revenue
(18,059)
Net assets acquired (liabilities assumed)
(14,094)
Gain on bargain purchase of a business, net of tax
(1,753)
Total purchase price
(7,496)
Nokia Siemens Networks [Member] |
Customer relationships [Member]
Allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date
Intangible assets
5,162
Nokia Siemens Networks [Member] |
Developed Technology [Member]
Allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date
Intangible assets
3,176
Nokia Siemens Networks [Member] |
Other [Member]
Allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date
Intangible assets
13
Bluesocket [Member]
Allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date
Cash
1,027
Other receivables/Accounts receivable
298
Inventory
792
Prepaid expenses
357
Property, plant and equipment
173
Accounts payable
(441)
Unearned revenue
(600)
Accrued expenses
(332)
Deferred tax assets (liabilities), net
12,962
Net assets acquired (liabilities assumed)
14,236
Goodwill
3,500
3,492
Total purchase price
23,688
Bluesocket [Member] |
Customer relationships [Member]
Allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date
Intangible assets
1,530
Bluesocket [Member] |
Developed Technology [Member]
Allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date
Intangible assets
3,230
Bluesocket [Member] |
Intellectual property [Member]
Allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date
Intangible assets
930
Bluesocket [Member] |
Trade names [Member]
Allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date
Intangible assets
$270
Business Combinations (Details 1) (Nokia Siemens Networks [Member])
3 Months Ended 6 Months Ended
Jun. 30, 2012
USD ($)
Jun. 30, 2012
EUR ()
Jun. 30, 2011
USD ($)