ADTRAN INC, 10-Q filed on 5/8/2013
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2013
Apr. 25, 2013
Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Mar. 31, 2013 
 
Document Fiscal Year Focus
2013 
 
Document Fiscal Period Focus
Q1 
 
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
 
59,273,597 
CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2013
Dec. 31, 2012
Current Assets
 
 
Cash and cash equivalents
$ 58,640 
$ 68,457 
Short-term investments
189,236 
160,481 
Accounts receivable, less allowance for doubtful accounts of $21 and $6 at March 31, 2013 and December 31, 2012, respectively
82,102 
81,194 
Other receivables
16,164 
16,253 
Inventory
95,767 
102,583 
Prepaid expenses
4,419 
4,148 
Deferred tax assets, net
12,972 
13,055 
Total Current Assets
459,300 
446,171 
Property, plant and equipment, net
77,781 
80,246 
Deferred tax assets, net
10,680 
10,261 
Goodwill
3,492 
3,492 
Other assets
12,599 
13,482 
Long-term investments
310,484 
332,729 
Total Assets
874,336 
886,381 
Current Liabilities
 
 
Accounts payable
48,933 
42,173 
Unearned revenue
33,563 
38,051 
Accrued expenses
11,117 
10,309 
Accrued wages and benefits
16,479 
15,022 
Income tax payable, net
1,585 
1,211 
Total Current Liabilities
111,677 
106,766 
Non-current unearned revenue
24,990 
23,803 
Other non-current liabilities
18,541 
17,406 
Bonds payable
46,000 
46,000 
Total Liabilities
201,208 
193,975 
Commitments and contingencies (see Note 15)
   
   
Stockholders' Equity
 
 
Common stock, par value $0.01 per share; 200,000 shares authorized; 79,652 shares issued and 61,322 shares outstanding at March 31, 2013 and 79,652 shares issued and 62,310 shares outstanding at December 31, 2012
797 
797 
Additional paid-in capital
226,748 
224,517 
Accumulated other comprehensive income
9,947 
11,268 
Retained earnings
863,456 
861,465 
Less treasury stock at cost: 18,330 and 17,342 shares at March 31, 2013 and December 31, 2012, respectively
(427,820)
(405,641)
Total Stockholders' Equity
673,128 
692,406 
Total Liabilities and Stockholders' Equity
$ 874,336 
$ 886,381 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Thousands, except Per Share data, unless otherwise specified
Mar. 31, 2013
Dec. 31, 2012
Statement Of Financial Position [Abstract]
 
 
Allowance for doubtful accounts
$ 21 
$ 6 
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
61,322 
62,310 
Treasury stock, shares
18,330 
17,342 
CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Income Statement [Abstract]
 
 
Sales
$ 143,013 
$ 134,735 
Cost of sales
73,336 
60,648 
Gross Profit
69,677 
74,087 
Selling, general and administrative expenses
30,603 
33,111 
Research and development expenses
32,511 
24,795 
Operating Income
6,563 
16,181 
Interest and dividend income
1,768 
1,861 
Interest expense
(581)
(588)
Net realized investment gain
3,645 
2,467 
Other income (expense), net
(1,672)
141 
Income before provision for income taxes
9,723 
20,062 
Provision for income taxes
(1,833)
(7,102)
Net Income
$ 7,890 
$ 12,960 
Weighted average shares outstanding - basic
61,847 
63,809 
Weighted average shares outstanding - diluted
62,030 
64,849 
Earnings per common share - basic
$ 0.13 
$ 0.20 
Earnings per common share - diluted
$ 0.13 
$ 0.20 
Dividend per share
$ 0.09 
$ 0.09 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Statement Of Income And Comprehensive Income [Abstract]
 
 
Net income
$ 7,890 
$ 12,960 
Other Comprehensive Income (Loss), net of tax:
 
 
Unrealized gains (losses) on available-for-sale securities
(1,644)
6,757 
Foreign currency translation
323 
153 
Other Comprehensive Income (Loss), net of tax
(1,321)
6,910 
Comprehensive Income, net of tax
$ 6,569 
$ 19,870 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Cash flows from operating activities:
 
 
Net income
$ 7,890 
$ 12,960 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation and amortization
3,663 
3,095 
Amortization of net premium on available-for-sale investments
1,754 
2,171 
Net realized gain on long-term investments
(3,645)
(2,467)
Net (gain) loss on disposal of property, plant and equipment
17 
(214)
Stock-based compensation expense
2,232 
2,221 
Deferred income taxes
715 
(2,030)
Tax benefit from stock option exercises
 
1,492 
Excess tax benefits from stock-based compensation arrangements
 
(1,153)
Changes in operating assets and liabilities:
 
 
Accounts receivable, net
(1,306)
1,334 
Other receivables
(224)
1,706 
Inventory
6,540 
(8,005)
Prepaid expenses and other assets
(217)
(710)
Accounts payable
7,262 
1,831 
Accrued expenses and other liabilities
1,188 
5,287 
Income tax payable, net
379 
7,017 
Net cash provided by operating activities
26,248 
24,535 
Cash flows from investing activities:
 
 
Purchases of property, plant and equipment
(735)
(4,086)
Proceeds from disposals of property, plant and equipment
 
266 
Proceeds from sales and maturities of available-for-sale investments
118,133 
69,364 
Purchases of available-for-sale investments
(125,411)
(95,646)
Net cash used in investing activities
(8,013)
(30,102)
Cash flows from financing activities:
 
 
Proceeds from stock option exercises
55 
3,560 
Purchases of treasury stock
(22,546)
 
Dividend payments
(5,586)
(5,739)
Excess tax benefits from stock-based compensation arrangements
 
1,153 
Net cash used in financing activities
(28,077)
(1,026)
Net decrease in cash and cash equivalents
(9,842)
(6,593)
Effect of exchange rate changes
25 
153 
Cash and cash equivalents, beginning of period
68,457 
42,979 
Cash and cash equivalents, end of period
$ 58,640 
$ 36,539 
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, 2012 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, 2012, filed on February 28, 2013 with the SEC.

Changes in Classifications

Certain changes in classifications have been made to the prior period balances in other comprehensive income to conform to the current period’s presentation as a result of our adoption of Accounting Standards Update No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Comprehensive Income.

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, estimated working capital adjustments under negotiation related to the Nokia Siemens Networks Broadband Access business acquisition, 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 three months ended March 31, 2013, we adopted the following accounting standard, which had no material effect on our consolidated results of operations or financial condition:

In February 2013, the FASB issued Accounting Standards Update No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU 2013-02). ASU 2013-02 requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component either on the face of the financial statements or in the footnotes. ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive income in the financial statements. This update is effective prospectively for reporting periods beginning after December 15, 2012. We adopted this amendment during the first quarter of 2013, and we have provided the disclosures required for the period ended March 31, 2013 in Note 10 of Notes to Consolidated Financial Statements.

Business Combinations
Business Combinations

2. BUSINESS COMBINATIONS

On May 4, 2012, we acquired the Nokia Siemens Networks 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. These revenues are included in the Carrier Networks division in the Broadband Access subcategory.

 

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, in the second quarter of 2012, subject to customary working capital adjustments between the parties as defined in the purchase agreement. As of March 31, 2013, the parties were in the process of resolving the working capital adjustments. We adjusted the purchase price allocation during the fourth quarter of 2012 to record additional estimated liabilities and an estimated receivable from NSN related to working capital adjustments under negotiation. The bargain purchase gain of $1.8 million 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 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

   $ 9,486   

Inventory

     22,278   

Property, plant and equipment

     5,035   

Accounts payable

     (5,194

Unearned revenue

     (19,413

Accrued expenses

     (1,931

Accrued wages and benefits

     (2,251

Deferred tax liability

     (788

Non-current unearned revenue

     (21,316
  

 

 

 

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 of the acquired NSN BBA business for the three months ended March 31, 2012. These results are not included in our consolidated financial statements.

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, 2012, nor are they indicative of any future results.

 

     Three Months Ended  
     March 31,  
(In thousands)    2012  

Pro forma revenue

   $ 33,906   

Pro forma pre-tax loss

   $ (11,645

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

   1.00/$1.31   

 

For the three months ended March 31, 2013, we incurred acquisition and integration related expenses and amortization of acquired intangibles of $0.9 million related to this acquisition.

Income Taxes
Income Taxes

3. INCOME TAXES

Our effective tax rate decreased from 35.4% in the three months ended March 31, 2012 to 18.9% in the three months ended March 31, 2013. The tax provision rate in the three months ended March 31, 2013 included a benefit for the research tax credit, which was extended for 2012 and 2013 by legislation passed in January 2013. The inclusion of an annual benefit for 2012 and a quarterly benefit for 2013 during the three months ended March 31, 2013 resulted in a 24.5 percentage point decrease in our effective tax rate. This decrease was partially offset by a valuation allowance related to a foreign subsidiary, which resulted in a 6.2 percentage point increase in our effective tax rate, and other miscellaneous items that increased our tax rate 1.8 percentage points for the three months ended March 31, 2013.

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 of $17.0 million as of May 4, 2012. We established a Contribution Trust Arrangement (CTA) to hold the pension assets, and NSN has transferred assets to us equal to the defined benefit obligation.

The following table summarizes the components of net periodic pension cost for the three months ended March 31, 2013:

 

     Three Months Ended  
(In thousands)    March 31, 2013  

Service cost

   $ 300   

Interest cost

     187   

Expected return on plan assets

     (253
  

 

 

 

Net periodic pension cost

   $ 234   
  

 

 

 
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 months ended March 31, 2013 and 2012, which was recognized as follows:

 

     Three Months Ended  
     March 31,  
(In thousands)    2013     2012  

Stock-based compensation expense included in cost of sales

   $ 106      $ 101   
  

 

 

   

 

 

 

Selling, general and administrative expense

     1,063        1,051   

Research and development expense

     1,063        1,069   
  

 

 

   

 

 

 

Stock-based compensation expense included in operating expenses

     2,126        2,120   
  

 

 

   

 

 

 

Total stock-based compensation expense

     2,232        2,221   

Tax benefit for expense associated with non-qualified options

     (307     (301
  

 

 

   

 

 

 

Total stock-based compensation expense, net of tax

   $ 1,925      $ 1,920   
  

 

 

   

 

 

 

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 months ended March 31, 2013 or 2012.

The fair value of our RSUs is calculated using a Monte Carlo Simulation valuation method. There were no RSU grants during the three months ended March 31, 2013 or 2012.

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 three months ended March 31, 2013 or 2012.

Stock-based compensation expense recognized in our Consolidated Statements of Income for the three months ended March 31, 2013 and 2012 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 March 31, 2013, total compensation expense related to non-vested stock options, RSUs and restricted stock not yet recognized was approximately $16.9 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, 2012 and March 31, 2013 and the changes that occurred during the three months ended March 31, 2013:

 

(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, 2012

     6,035      $ 24.81         6.69       $ 5,154   

Options granted

     —        $ —           

Options cancelled/forfeited

     (46   $ 26.33         

Options exercised

     (4   $ 15.29         
  

 

 

   

 

 

       

Options outstanding, March 31, 2013

     5,985      $ 24.80         6.46       $ 5,290   
  

 

 

   

 

 

    

 

 

    

 

 

 

Options exercisable, March 31, 2013

     3,528      $ 24.81         4.95       $ 2,628   
  

 

 

   

 

 

    

 

 

    

 

 

 

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 March 31, 2013. 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 month period ended March 31, 2013 was $21 thousand.

The following table is a summary of our RSUs and restricted stock outstanding as of December 31, 2012 and March 31, 2013 and the changes that occurred during the three months ended March 31, 2013:

 

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

Unvested RSUs and restricted stock outstanding, December 31, 2012

     103       $ 29.25   

RSUs and restricted stock granted

     —         $ —     

RSUs and restricted stock vested

     —         $ —     

RSUs and restricted stock cancelled/forfeited

     —         $ —     
  

 

 

    

 

 

 

Unvested RSUs and restricted stock, March 31, 2013

     103       $ 29.25   
  

 

 

    

 

 

 
Investments
Investments

6. INVESTMENTS

At March 31, 2013, we held the following securities and investments, recorded at either fair value or cost.

 

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

Deferred compensation plan assets

   $ 10,907       $ 1,448       $ (5   $ 12,350   

Corporate bonds

     190,540         783         (18     191,305   

Municipal fixed-rate bonds

     171,282         849         (10     172,121   

Municipal variable rate demand notes

     40,780         —           —          40,780   

Marketable equity securities

     22,226         11,179         (309     33,096   
  

 

 

    

 

 

    

 

 

   

 

 

 

Available-for-sale securities held at fair value

   $ 435,735       $ 14,259       $ (342   $ 449,652   
  

 

 

    

 

 

    

 

 

   

Restricted investment held at cost

             48,250   

Other investments held at cost

             1,818   
          

 

 

 

Total carrying value of available-for-sale investments

           $ 499,720   
          

 

 

 

At December 31, 2012, we held the following securities and investments, recorded at either fair value or cost.

 

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

Deferred compensation plan assets

   $ 10,688       $ 846       $ (7   $ 11,527   

Corporate bonds

     185,464         966         (18     186,412   

Municipal fixed-rate bonds

     174,530         627         (73     175,084   

Municipal variable rate demand notes

     34,375         —           —          34,375   

Fixed income bond fund

     444         12         —          456   

Marketable equity securities

     20,966         14,630         (392     35,204   
  

 

 

    

 

 

    

 

 

   

 

 

 

Available-for-sale securities held at fair value

   $ 426,467       $ 17,081       $ (490   $ 443,058   
  

 

 

    

 

 

    

 

 

   

Restricted investment held at cost

             48,250   

Other investments held at cost

             1,902   
          

 

 

 

Total carrying value of available-for-sale investments

           $ 493,210   
          

 

 

 

As of March 31, 2013, 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

   $ 79,983       $ 64,292   

One to two years

     55,000         30,694   

Two to three years

     53,098         50,405   

Three to five years

     3,224         26,730   
  

 

 

    

 

 

 

Total

   $ 191,305       $ 172,121   
  

 

 

    

 

 

 

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 March 31, 2013, we held a $48.3 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). At March 31, 2013, the estimated fair value of the Bond was approximately $47.9 million, based on a debt security with a comparable interest rate and maturity and a Standard and Poor’s credit rating of A-. For more information on the Bond, see “Debt” under “Liquidity and Capital Resources” in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Item 2 of Part I of this report.

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 $4 thousand during the three months ended March 31, 2013 related to one marketable equity security. For the three months ended March 31, 2012, we recorded an other-than-temporary impairment charge of $33 thousand related to seven 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  
     March 31,  
(In thousands)    2013     2012  

Gross realized gains

   $ 3,727      $ 2,669   

Gross realized losses

   $ (82   $ (202

As of March 31, 2013 and 2012, gross unrealized losses related to individual securities that had been 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 March 31, 2013 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

   $ 19,140       $ 19,140       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale securities

           

Deferred compensation plan assets

     12,350         12,350         —           —     

Available-for-sale debt securities

           

Corporate bonds

     191,305         —           191,305         —     

Municipal fixed-rate bonds

     172,121         —           172,121         —     

Municipal variable rate demand notes

     40,780         —           40,780         —     

Available-for-sale marketable equity securities

           

Equity securities – technology industry

     9,307         9,307         —           —     

Equity securities – other

     23,789         23,789         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale securities

     449,652         45,446         404,206         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 468,792       $ 64,586       $ 404,206       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 
     Fair Value Measurements at December 31, 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

   $ 28,071       $ 28,071       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale securities

           

Deferred compensation plan assets

     11,527         11,527         —           —     

Available-for-sale debt securities

           

Corporate bonds

     186,412         —           186,412         —     

Municipal fixed-rate bonds

     175,084         —           175,084         —     

Municipal variable rate demand notes

     34,375         —           34,375         —     

Fixed income bond fund

     456         456         —           —     

Available-for-sale marketable equity securities

           

Equity securities – technology industry

     14,099         14,099         —           —     

Equity securities – other

     21,105         21,105         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale securities

     443,058         47,187         395,871         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 471,129       $ 75,258       $ 395,871       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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.

Derivative Instruments and Hedging Activities
Derivative Instruments and Hedging Activities

7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We have certain international customers who are billed in their local currency. Changes in the monetary exchange rates may adversely affect our results of operations and financial condition. 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 are not designated as hedges, 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 time frame 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 March 31, 2013, we had forward contracts and swaps outstanding with notional amounts totaling €4.9 million ($6.3 million) and €1.8 million ($2.4 million), respectively, which mature through 2013.

The fair values of our derivative instruments recorded in the Consolidated Balance Sheet as of March 31, 2013 were as follows:

 

     March 31, 2013  

(In thousands)

   Balance Sheet
Location
     Fair Value  

Derivatives Not Designated as Hedging Instruments:

     

Foreign exchange contracts – asset derivatives

     Other receivables       $ 25   

Foreign exchange contracts – liability derivatives

     Accounts payable       $ (237

The change in the fair values of our derivative instruments recorded in the Consolidated Statements of Income during the three months ended March 31, 2013 were as follows:

 

(In thousands)    Income Statement Location      Three Months
Ended

March  31, 2013
 

Derivatives Not Designated as Hedging Instruments:

     

Foreign exchange contracts

     Other income (expense)       $ (224
Inventory
Inventory

8. INVENTORY

At March 31, 2013 and December 31, 2012, inventory consisted of the following:

 

     March 31,      December 31,  
(In thousands)    2013      2012  

Raw materials

   $ 46,049       $ 47,054   

Work in process

     5,020         3,262   

Finished goods

     44,698         52,267   
  

 

 

    

 

 

 

Total

   $ 95,767       $ 102,583   
  

 

 

    

 

 

 

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 March 31, 2013 and December 31, 2012, raw materials reserves totaled $14.1 million and $9.9 million, respectively, and finished goods inventory reserves totaled $2.5 million and $2.1 million, respectively.

Goodwill and Intangible Assets
Goodwill and Intangible Assets

9. GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying value of goodwill, all of which is included in our Enterprise Networks division, for the three months ended March 31, 2013 are as follows:

 

(In thousands)       

Balance, December 31, 2012

   $ 3,492   

Acquisitions

     —     

Impairment losses

     —     
  

 

 

 

Balance, March 31, 2013

   $ 3,492   
  

 

 

 

Balance as of March 31, 2013

  

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 recorded during the three months ended March 31, 2013 or 2012.

 

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.

The following table presents our intangible assets as of March 31, 2013 and December 31, 2012:

 

     March 31, 2013      December 31, 2012  
(In thousands)    Gross
Value
     Accumulated
Amortization
    Net
Value
     Gross
Value
     Accumulated
Amortization
    Net
Value
 

Customer relationships

   $ 6,622       $ (939   $ 5,683       $ 6,769       $ (766   $ 6,003   

Developed technology

     6,306         (1,661     4,645         6,397         (1,354     5,043   

Intellectual property

     2,340         (935     1,405         2,340         (851     1,489   

Trade names

     270         (100     170         270         (85     185   

Other

     13         (4     9         13         (3     10   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 15,551       $ (3,639   $ 11,912       $ 15,789       $ (3,059   $ 12,730   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Amortization expense, all of which relates to business acquisitions, was $0.6 million and $0.3 million for the three months ended March 31, 2013 and 2012, respectively.

As of March 31, 2013, the estimated future amortization expense of our intangible assets is as follows:

 

(In thousands)    Amount  

Remainder of 2013

   $ 1,804   

2014

     2,251   

2015

     2,116   

2016

     1,845   

2017

     1,255   

Thereafter

     2,641   
  

 

 

 

Total

   $ 11,912   
  

 

 

 
Stockholders' Equity
Stockholders' Equity

10. STOCKHOLDERS’ EQUITY

A summary of the changes in stockholders’ equity for the three months ended March 31, 2013 is as follows:

 

(In thousands)    Stockholders’
Equity
 

Balance, December 31, 2012

   $ 692,406   

Net income

     7,890   

Dividend payments

     (5,586

Dividends accrued for unvested restricted stock units

     (2

Unrealized gains and losses on available-for-sale securities (net of tax)

     (1,644

Foreign currency translation adjustment

     323   

Proceeds from stock option exercises

     55   

Purchase of treasury stock

     (22,546

Stock-based compensation expense

     2,232   
  

 

 

 

Balance, March 31, 2013

   $ 673,128   
  

 

 

 

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 three months ended March 31, 2013, we repurchased 1.0 million shares of our common stock at an average price of $22.46 per share. We currently have the authority to purchase an additional 3.1 million shares of our common stock under the current plan approved by the Board of Directors.

 

Stock Option Exercises

We issued four thousand shares of treasury stock during the three months ended March 31, 2013 to accommodate employee stock option exercises. The stock options had exercise prices of $15.29. We received proceeds totaling $55 thousand from the exercise of these stock options during the three months ended March 31, 2013.

Dividend Payments

During the three months ended March 31, 2013, we paid cash dividends as follows (in thousands except per share amount):

 

Record Date

   Payment Date      Per Share Amount      Total Dividend Paid  

February 7, 2013

     February 21, 2013       $ 0.09       $ 5,586   

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 and realized gains (losses) on available-for-sale securities, defined benefit plan adjustments and foreign currency translation adjustments.

The following tables present the details of reclassifications out of accumulated other comprehensive income for the three months ended March 31, 2013 and 2012:

 

(In thousands)   Three Months Ended March 31, 2013  

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:

   

Realized gain on sales of securities

  $ 3,444        Net realized investment gain   

Impairment expense

    (4     Net realized investment gain   
 

 

 

   

Total reclassifications for the period, before tax

    3,440     

Tax (expense) benefit

    (1,342  
 

 

 

   

Total reclassifications for the period, net of tax

  $ 2,098     
 

 

 

   
(In thousands)   Three Months Ended March 31, 2012  

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:

   

Realized gain on sales of securities

  $ 2,406        Net realized investment gain   

Impairment expense

    (33     Net realized investment gain   
 

 

 

   

Total reclassifications for the period, before tax

    2,373     

Tax (expense) benefit

    (925  
 

 

 

   

Total reclassifications for the period, net of tax

  $ 1,448     
 

 

 

   

 

The following tables present changes in accumulated other comprehensive income, net of tax, by component for the three months ended March 31, 2013 and 2012:

 

    Three Months Ended March 31, 2013  
(In thousands)   Unrealized
Gains
(Losses) on
Available-
for-Sale
Securities
    Defined
Benefit Plan
Adjustments
    Foreign
Currency
Adjustments
    Total  

Beginning balance

  $ 10,108      $ (1,952   $ 3,112      $ 11,268   

Other comprehensive income (loss) before reclassifications

    454        —          323        777   

Amounts reclassified from accumulated other comprehensive income

    (2,098     —          —          (2,098
 

 

 

   

 

 

   

 

 

   

 

 

 

Net current period other comprehensive income (loss)

    (1,644     —          323        (1,321
 

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

  $ 8,464      $ (1,952   $ 3,435      $ 9,947   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

     Three Months Ended March 31, 2012  
(In thousands)    Unrealized
Gains
(Losses) on
Available-
for-Sale
Securities
    Foreign
Currency
Adjustments
     Total  

Beginning balance

   $ 10,160      $ 2,942       $ 13,102   

Other comprehensive income (loss) before reclassifications

     8,205        153         8,358   

Amounts reclassified from accumulated other comprehensive income

     (1,448     —           (1,448
  

 

 

   

 

 

    

 

 

 

Net current period other comprehensive income (loss)

     6,757        153         6,910   
  

 

 

   

 

 

    

 

 

 

Ending balance

   $ 16,917      $ 3,095       $ 20,012   
  

 

 

   

 

 

    

 

 

 

The following table presents the tax effects related to the change in each component of other comprehensive income for the three months ended March 31, 2013 and 2012:

 

     Three Months Ended
March 31, 2013
    Three Months Ended
March 31, 2012
 
(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

   $ 744      $ (290   $ 454      $ 13,449      $ (5,244   $ 8,205   

Reclassification adjustment for amounts included in net income

     (3,440     1,342        (2,098     (2,373     925        (1,448

Foreign currency translation adjustment

     323        —          323        153        —          153   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Other Comprehensive Income (Loss)

   $ (2,373   $ 1,052      $ (1,321   $ 11,229      $ (4,319   $ 6,910   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Earnings Per Share
Earnings Per Share

11. EARNINGS PER SHARE

A summary of the calculation of basic and diluted earnings per share for the three months ended March 31, 2013 and 2012 is as follows:

 

     Three Months Ended  
     March 31,  
(In thousands, except per share amounts)    2013      2012  

Numerator

     

Net income

   $ 7,890       $ 12,960   
  

 

 

    

 

 

 

Denominator

     

Weighted average number of shares – basic

     61,847         63,809   

Effect of dilutive securities

     

Stock options

     162         1,008   

Restricted stock and restricted stock units

     21         32   
  

 

 

    

 

 

 

Weighted average number of shares – diluted

     62,030         64,849   
  

 

 

    

 

 

 

Net income per share – basic

   $ 0.13       $ 0.20   

Net income per share – diluted

   $ 0.13       $ 0.20   

Anti-dilutive options to purchase common stock outstanding were excluded from the above calculations. Anti-dilutive options totaled 5.4 million and 1.9 million for the three months ended March 31, 2013 and 2012, respectively.

Segment Information
Segment Information

12. 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 months ended March 31, 2013 and 2012. Asset information by reportable segment is not reported, since we do not produce such information internally.

 

     Three Months Ended  
     March 31, 2013      March 31, 2012  
(In thousands)    Sales      Gross Profit      Sales      Gross Profit  

Carrier Networks

   $ 109,887       $ 51,591       $ 96,654       $ 52,883   

Enterprise Networks

     33,126         18,086         38,081         21,204   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 143,013       $ 69,677       $ 134,735       $ 74,087   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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. This category includes the following product areas and related services:

 

   

Broadband Access

 

   

Total Access® 5000 Multi-Service Access and Aggregation Platform (MSAP)

 

   

hiX family of MSAPs

 

   

Total Access 1100/1200 Series of Fiber to the Node (FTTN) products

 

   

Ultra Broadband Ethernet (UBE)

 

   

Digital Subscriber Line Access Multiplexer (DSLAM) products

 

   

Optical

 

   

Optical Networking Edge (ONE)

 

   

NetVanta 8000 Series

 

   

OPTI and TA 3000 optical products

 

   

Small Form-Factor Pluggable (SFP) products

 

   

TDM systems

 

   

Network Management Solutions

Business Networking products provide access to telecommunication services and facilitate the delivery of cloud connectivity, enterprise communications and virtual mobility to the small and mid-sized enterprise (SME) market. This category includes the following product areas and related services:

 

   

Internetworking products

 

   

Total Access IP Business Gateways

 

   

Optical Network Terminals (ONTs)

 

   

Bluesocket® virtual Wireless LAN (WLAN)

 

   

NetVanta®

 

   

Multiservice Routers

 

   

Managed Ethernet Switches

 

   

IP Business Gateways

 

   

Unified Communications (UC) solutions

 

   

Carrier Ethernet Network Terminating Equipment (NTE)

 

   

Network Management Solutions

 

   

Integrated Access Devices (IADs)

Loop Access products are used by carrier and enterprise customers for access to copper-based telecommunications networks. The Loop Access category includes the following product areas:

 

   

High bit-rate Digital Subscriber Line (HDSL) products

 

   

Digital Data Service (DDS)

 

   

Integrated Services Digital Network (ISDN) products

 

   

T1/E1/T3 Channel Service Units/Data Service Units (CSUs/DSUs)

 

   

TRACER fixed-wireless products

 

The table below presents sales information by product category for the three months ended March 31, 2013 and 2012.

 

     Three Months Ended  
     March 31,  
(In thousands)    2013      2012  

Carrier Systems

   $ 92,804       $ 71,258   

Business Networking

     38,076         43,142   

Loop Access

     12,133         20,335   
  

 

 

    

 

 

 

Total

   $ 143,013       $ 134,735   
  

 

 

    

 

 

 

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). Our legacy products include HDSL products (included in Loop Access) and other products not included in the aforementioned core products.

The table below presents subcategory revenues for the three month ended March 31, 2013 and 2012:

 

     Three Months Ended  
     March 31,  
(In thousands)    2013      2012  

Core Products

     

Broadband Access (included in Carrier Systems)

   $ 72,234       $ 49,482   

Optical (included in Carrier Systems)

     8,874         14,255   

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

     36,912         40,974   
  

 

 

    

 

 

 

Subtotal

     118,020         104,711   

Legacy Products

     

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

     11,407         18,959   

Other products (excluding HDSL)

     13,586         11,065   
  

 

 

    

 

 

 

Subtotal

     24,993         30,024   
  

 

 

    

 

 

 

Total

   $ 143,013       $ 134,735   
  

 

 

    

 

 

 

The following table presents sales information by geographic area for the three months ended March 31, 2013 and 2012. International sales correlate to shipments with a non-U.S. destination.

 

     Three Months Ended  
(In thousands)    March 31,  
   2013      2012  

United States

   $ 108,106       $ 116,443   

International

     34,907         18,292   
  

 

 

    

 

 

 

Total

   $ 143,013       $ 134,735   
  

 

 

    

 

 

 
Liability for Warranty Returns
Liability for Warranty Returns

13. 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 $8.8 million at March 31, 2013 and $9.7 million at December 31, 2012. 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 months ended March 31, 2013 and 2012 is as follows:

 

Three Months Ended March 31,    2013     2012  
(In thousands)             

Balance at beginning of period

   $ 9,653      $ 4,118   

Plus: Amounts charged to cost and expenses

     397        1,181   

Less: Deductions

     (1,258     (568
  

 

 

   

 

 

 

Balance at end of period

   $ 8,792      $ 4,731   
  

 

 

   

 

 

 
Related Party Transactions
Related Party Transactions

14. 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 month periods ended March 31, 2013 and 2012, we incurred fees of $10 thousand per month for these legal services.

Commitments and Contingencies
Commitments and Contingencies

15. 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 March 31, 2013, of which $7.7 million has been applied to these commitments.

Subsequent Events
Subsequent Events

16. SUBSEQUENT EVENTS

On April 9, 2013, 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 April 25, 2013. The payment date will be May 9, 2013. The quarterly dividend payment will be approximately $5.3 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 second quarter of 2013 and as of May 8, 2013, we repurchased 2.7 million shares of our common stock through open market purchases at an average cost of $21.03 per share. We currently have the authority to purchase an additional 0.3 million shares of our common stock under the current plan approved by the Board of Directors.

On May 1, 2013, we announced that our Board of Directors authorized the repurchase of an additional 5.0 million shares of our common stock to commence upon completion of the repurchase plan announced on October 11, 2011. This new authorization will be implemented through open market or private purchases from time to time as conditions warrant.

 

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, 2012 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, 2012, filed on February 28, 2013 with the SEC.

Changes in Classifications

Certain changes in classifications have been made to the prior period balances in other comprehensive income to conform to the current period’s presentation as a result of our adoption of Accounting Standards Update No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Comprehensive Income.

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, estimated working capital adjustments under negotiation related to the Nokia Siemens Networks Broadband Access business acquisition, 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 three months ended March 31, 2013, we adopted the following accounting standard, which had no material effect on our consolidated results of operations or financial condition:

In February 2013, the FASB issued Accounting Standards Update No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU 2013-02). ASU 2013-02 requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component either on the face of the financial statements or in the footnotes. ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive income in the financial statements. This update is effective prospectively for reporting periods beginning after December 15, 2012. We adopted this amendment during the first quarter of 2013, and we have provided the disclosures required for the period ended March 31, 2013 in Note 10 of Notes to Consolidated Financial Statements.

Business Combinations (Tables)

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

   $ 9,486   

Inventory

     22,278   

Property, plant and equipment

     5,035   

Accounts payable

     (5,194

Unearned revenue

     (19,413

Accrued expenses

     (1,931

Accrued wages and benefits

     (2,251

Deferred tax liability

     (788

Non-current unearned revenue

     (21,316
  

 

 

 

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
  

 

 

 

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, 2012, nor are they indicative of any future results.

 

     Three Months Ended  
     March 31,  
(In thousands)    2012  

Pro forma revenue

   $ 33,906   

Pro forma pre-tax loss

   $ (11,645

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

   1.00/$1.31   
Pension Benefit Plan (Tables)
Summarization of Components of Net Periodic Pension Cost

The following table summarizes the components of net periodic pension cost for the three months ended March 31, 2013:

 

     Three Months Ended  
(In thousands)    March 31, 2013  

Service cost

   $ 300   

Interest cost

     187   

Expected return on plan assets

     (253
  

 

 

 

Net periodic pension cost

   $ 234   
  

 

 

 
Stock-Based Compensation (Tables)

The following table summarizes the stock-based compensation expense related to stock options, restricted stock units (RSUs) and restricted stock for the three months ended March 31, 2013 and 2012, which was recognized as follows:

 

     Three Months Ended  
     March 31,  
(In thousands)    2013     2012  

Stock-based compensation expense included in cost of sales

   $ 106      $ 101   
  

 

 

   

 

 

 

Selling, general and administrative expense

     1,063        1,051   

Research and development expense

     1,063        1,069   
  

 

 

   

 

 

 

Stock-based compensation expense included in operating expenses

     2,126        2,120   
  

 

 

   

 

 

 

Total stock-based compensation expense

     2,232        2,221   

Tax benefit for expense associated with non-qualified options

     (307     (301
  

 

 

   

 

 

 

Total stock-based compensation expense, net of tax

   $ 1,925      $ 1,920   
  

 

 

   

 

 

 

The following table is a summary of our stock options outstanding as of December 31, 2012 and March 31, 2013 and the changes that occurred during the three months ended March 31, 2013:

 

(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, 2012

     6,035      $ 24.81         6.69       $ 5,154   

Options granted

     —        $ —           

Options cancelled/forfeited

     (46   $ 26.33         

Options exercised

     (4   $ 15.29         
  

 

 

   

 

 

    

 

 

    

 

 

 

Options outstanding, March 31, 2013

     5,985      $ 24.80         6.46       $ 5,290   
  

 

 

   

 

 

    

 

 

    

 

 

 

Options exercisable, March 31, 2013

     3,528      $ 24.81         4.95       $ 2,628   
  

 

 

   

 

 

    

 

 

    

 

 

 

The following table is a summary of our RSUs and restricted stock outstanding as of December 31, 2012 and March 31, 2013 and the changes that occurred during the three months ended March 31, 2013:

 

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

Fair Value
 

Unvested RSUs and restricted stock outstanding, December 31, 2012

     103       $
 
 
29.25
  
  

RSUs and restricted stock granted

     —         $ —     

RSUs and restricted stock vested

     —         $ —     

RSUs and restricted stock cancelled/forfeited

     —         $ —     
  

 

 

    

 

 

 

Unvested RSUs and restricted stock, March 31, 2013

     103       $ 29.25   
  

 

 

    

 

 

 
Investments (Tables)

At March 31, 2013, we held the following securities and investments, recorded at either fair value or cost.

 

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

Deferred compensation plan assets

   $ 10,907       $ 1,448       $ (5   $ 12,350   

Corporate bonds

     190,540         783         (18     191,305   

Municipal fixed-rate bonds

     171,282         849         (10     172,121   

Municipal variable rate demand notes

     40,780         —           —          40,780   

Marketable equity securities

     22,226         11,179         (309     33,096   
  

 

 

    

 

 

    

 

 

   

 

 

 

Available-for-sale securities held at fair value

   $ 435,735       $ 14,259       $ (342   $ 449,652   
  

 

 

    

 

 

    

 

 

   

Restricted investment held at cost

             48,250   

Other investments held at cost

             1,818   
          

 

 

 

Total carrying value of available-for-sale investments

           $ 499,720   
          

 

 

 

At December 31, 2012, we held the following securities and investments, recorded at either fair value or cost.

 

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

Deferred compensation plan assets

   $ 10,688       $ 846       $ (7   $ 11,527   

Corporate bonds

     185,464         966         (18     186,412   

Municipal fixed-rate bonds

     174,530         627         (73     175,084   

Municipal variable rate demand notes

     34,375         —           —          34,375   

Fixed income bond fund

     444         12         —          456   

Marketable equity securities

     20,966         14,630         (392     35,204   
  

 

 

    

 

 

    

 

 

   

 

 

 

Available-for-sale securities held at fair value

   $ 426,467       $ 17,081       $ (490   $ 443,058   
  

 

 

    

 

 

    

 

 

   

Restricted investment held at cost

             48,250   

Other investments held at cost

             1,902   
          

 

 

 

Total carrying value of available-for-sale investments

           $ 493,210   
          

 

 

 

As of March 31, 2013, 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

   $ 79,983       $ 64,292   

One to two years

     55,000         30,694   

Two to three years

     53,098         50,405   

Three to five years

     3,224         26,730   
  

 

 

    

 

 

 

Total

   $ 191,305       $ 172,121   
  

 

 

    

 

 

 

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

 

     Three Months Ended  
     March 31,  
(In thousands)    2013     2012  

Gross realized gains

   $ 3,727      $ 2,669   

Gross realized losses

   $ (82   $ (202

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 March 31, 2013 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

   $ 19,140       $ 19,140       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale securities

           

Deferred compensation plan assets

     12,350         12,350         —           —     

Available-for-sale debt securities

           

Corporate bonds

     191,305         —           191,305         —     

Municipal fixed-rate bonds

     172,121         —           172,121         —     

Municipal variable rate demand notes

     40,780         —           40,780         —     

Available-for-sale marketable equity securities

           

Equity securities – technology industry

     9,307         9,307         —           —     

Equity securities – other

     23,789         23,789         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale securities

     449,652         45,446         404,206         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 468,792       $ 64,586       $ 404,206       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 
     Fair Value Measurements at December 31, 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

   $ 28,071       $ 28,071       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale securities

           

Deferred compensation plan assets

     11,527         11,527         —           —     

Available-for-sale debt securities

           

Corporate bonds

     186,412         —           186,412         —     

Municipal fixed-rate bonds

     175,084         —           175,084         —     

Municipal variable rate demand notes

     34,375         —           34,375         —     

Fixed income bond fund

     456         456         —           —     

Available-for-sale marketable equity securities

           

Equity securities – technology industry

     14,099         14,099         —           —     

Equity securities – other

     21,105         21,105         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale securities

     443,058         47,187         395,871         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 471,129       $ 75,258       $ 395,871       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 
Derivative Instruments and Hedging Activities (Tables)

The fair values of our derivative instruments recorded in the Consolidated Balance Sheet as of March 31, 2013 were as follows:

 

     March 31, 2013  

(In thousands)

   Balance Sheet
Location
     Fair Value  

Derivatives Not Designated as Hedging Instruments:

     

Foreign exchange contracts – asset derivatives

     Other receivables       $ 25   

Foreign exchange contracts – liability derivatives

     Accounts payable       $ (237

The change in the fair values of our derivative instruments recorded in the Consolidated Statements of Income during the three months ended March 31, 2013 were as follows:

 

(In thousands)    Income Statement Location      Three Months
Ended

March  31, 2013
 

Derivatives Not Designated as Hedging Instruments:

     

Foreign exchange contracts

     Other income (expense)       $ (224
Inventory (Tables)
Inventory

At March 31, 2013 and December 31, 2012, inventory consisted of the following:

 

     March 31,      December 31,  
(In thousands)    2013      2012  

Raw materials

   $ 46,049       $ 47,054   

Work in process

     5,020         3,262   

Finished goods

     44,698         52,267   
  

 

 

    

 

 

 

Total

   $ 95,767       $ 102,583   
  

 

 

    

 

 

 
Goodwill and Intangible Assets (Tables)

The changes in the carrying value of goodwill, all of which is included in our Enterprise Networks division, for the three months ended March 31, 2013 are as follows:

 

(In thousands)       

Balance, December 31, 2012

   $ 3,492   

Acquisitions

     —     

Impairment losses

     —     
  

 

 

 

Balance, March 31, 2013

   $ 3,492   
  

 

 

 

Balance as of March 31, 2013

  

Goodwill

   $ 3,492   

Accumulated impairment losses

     —     
  

 

 

 

Total goodwill

   $ 3,492   
  

 

 

 

The following table presents our intangible assets as of March 31, 2013 and December 31, 2012:

 

     March 31, 2013      December 31, 2012  
(In thousands)    Gross
Value
     Accumulated
Amortization
    Net
Value
     Gross
Value
     Accumulated
Amortization
    Net
Value
 

Customer relationships

   $ 6,622       $ (939   $ 5,683       $ 6,769       $ (766   $ 6,003   

Developed technology

     6,306         (1,661     4,645         6,397         (1,354     5,043   

Intellectual property

     2,340         (935     1,405         2,340         (851     1,489   

Trade names

     270         (100     170         270         (85     185   

Other

     13         (4     9         13         (3     10   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 15,551       $ (3,639   $ 11,912       $ 15,789       $ (3,059   $ 12,730   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

As of March 31, 2013, the estimated future amortization expense of our intangible assets is as follows:

 

(In thousands)    Amount  

Remainder of 2013

   $ 1,804   

2014

     2,251   

2015

     2,116   

2016

     1,845   

2017

     1,255   

Thereafter

     2,641   
  

 

 

 

Total

   $ 11,912   
  

 

 

 
Stockholders' Equity (Tables)

A summary of the changes in stockholders’ equity for the three months ended March 31, 2013 is as follows:

 

(In thousands)    Stockholders’
Equity
 

Balance, December 31, 2012

   $ 692,406   

Net income

     7,890   

Dividend payments

     (5,586

Dividends accrued for unvested restricted stock units

     (2

Unrealized gains and losses on available-for-sale securities (net of tax)

     (1,644

Foreign currency translation adjustment

     323   

Proceeds from stock option exercises

     55   

Purchase of treasury stock

     (22,546

Stock-based compensation expense

     2,232   
  

 

 

 

Balance, March 31, 2013

   $ 673,128   
  

 

 

 

During the three months ended March 31, 2013, we paid cash dividends as follows (in thousands except per share amount):

 

Record Date

   Payment Date      Per Share Amount      Total Dividend Paid  

February 7, 2013

     February 21, 2013       $ 0.09       $ 5,586   

The following tables present the details of reclassifications out of accumulated other comprehensive income for the three months ended March 31, 2013 and 2012:

 

(In thousands)   Three Months Ended March 31, 2013  

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:

   

Realized gain on sales of securities

  $ 3,444        Net realized investment gain   

Impairment expense

    (4     Net realized investment gain   
 

 

 

   

Total reclassifications for the period, before tax

    3,440     

Tax (expense) benefit

    (1,342  
 

 

 

   

Total reclassifications for the period, net of tax

  $ 2,098     
 

 

 

   
(In thousands)   Three Months Ended March 31, 2012  

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:

   

Realized gain on sales of securities

  $ 2,406        Net realized investment gain   

Impairment expense

    (33     Net realized investment gain   
 

 

 

   

Total reclassifications for the period, before tax

    2,373     

Tax (expense) benefit

    (925  
 

 

 

   

Total reclassifications for the period, net of tax

  $ 1,448     
 

 

 

   

The following tables present changes in accumulated other comprehensive income, net of tax, by component for the three months ended March 31, 2013 and 2012:

 

    Three Months Ended March 31, 2013  
(In thousands)   Unrealized
Gains
(Losses) on
Available-
for-Sale
Securities
    Defined
Benefit Plan
Adjustments
    Foreign
Currency
Adjustments
    Total  

Beginning balance

  $ 10,108      $ (1,952   $ 3,112      $ 11,268   

Other comprehensive income (loss) before reclassifications

    454        —          323        777   

Amounts reclassified from accumulated other comprehensive income

    (2,098     —          —          (2,098
 

 

 

   

 

 

   

 

 

   

 

 

 

Net current period other comprehensive income (loss)

    (1,644     —          323        (1,321
 

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

  $ 8,464      $ (1,952   $ 3,435      $ 9,947   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

     Three Months Ended March 31, 2012  
(In thousands)    Unrealized
Gains
(Losses) on
Available-
for-Sale
Securities
    Foreign
Currency
Adjustments
     Total  

Beginning balance

   $ 10,160      $ 2,942       $ 13,102   

Other comprehensive income (loss) before reclassifications

     8,205        153         8,358   

Amounts reclassified from accumulated other comprehensive income

     (1,448     —           (1,448
  

 

 

   

 

 

    

 

 

 

Net current period other comprehensive income (loss)

     6,757        153         6,910   
  

 

 

   

 

 

    

 

 

 

Ending balance

   $ 16,917      $ 3,095       $ 20,012   
  

 

 

   

 

 

    

 

 

 

The following table presents the tax effects related to the change in each component of other comprehensive income for the three months ended March 31, 2013 and 2012:

 

     Three Months Ended
March 31, 2013
    Three Months Ended
March 31, 2012
 
(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

   $ 744      $ (290   $ 454      $ 13,449      $ (5,244   $ 8,205   

Reclassification adjustment for amounts included in net income

     (3,440     1,342        (2,098     (2,373     925        (1,448

Foreign currency translation adjustment

     323        —          323        153        —          153   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Other Comprehensive Income (Loss)

   $ (2,373   $ 1,052      $ (1,321   $ 11,229      $ (4,319   $ 6,910   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Earnings Per Share (Tables)
Earnings Per Share

A summary of the calculation of basic and diluted earnings per share for the three months ended March 31, 2013 and 2012 is as follows:

 

     Three Months Ended  
     March 31,  
(In thousands, except per share amounts)    2013      2012  

Numerator

     

Net income

   $ 7,890       $ 12,960   
  

 

 

    

 

 

 

Denominator

     

Weighted average number of shares – basic

     61,847         63,809   

Effect of dilutive securities

     

Stock options

     162         1,008   

Restricted stock and restricted stock units

     21         32   
  

 

 

    

 

 

 

Weighted average number of shares – diluted

     62,030         64,849   
  

 

 

    

 

 

 

Net income per share – basic

   $ 0.13       $ 0.20   

Net income per share – diluted

   $ 0.13       $ 0.20   
Segment Information (Tables)

The following table presents information about the reported sales and gross profit of our reportable segments for the three months ended March 31, 2013 and 2012. Asset information by reportable segment is not reported, since we do not produce such information internally.

 

     Three Months Ended  
     March 31, 2013      March 31, 2012  
(In thousands)    Sales      Gross Profit      Sales      Gross Profit  

Carrier Networks

   $ 109,887       $ 51,591       $ 96,654       $ 52,883   

Enterprise Networks

     33,126         18,086         38,081         21,204   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 143,013       $ 69,677       $ 134,735       $ 74,087   
  

 

 

    

 

 

    

 

 

    

 

 

 

The table below presents sales information by product category for the three months ended March 31, 2013 and 2012.

 

     Three Months Ended  
     March 31,  
(In thousands)    2013      2012  

Carrier Systems

   $ 92,804       $ 71,258   

Business Networking

     38,076         43,142   

Loop Access

     12,133         20,335   
  

 

 

    

 

 

 

Total

   $ 143,013       $ 134,735   
  

 

 

    

 

 

 

The table below presents subcategory revenues for the three month ended March 31, 2013 and 2012:

 

     Three Months Ended  
     March 31,  
(In thousands)    2013      2012  

Core Products

     

Broadband Access (included in Carrier Systems)

   $ 72,234       $ 49,482   

Optical (included in Carrier Systems)

     8,874         14,255   

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

     36,912         40,974   
  

 

 

    

 

 

 

Subtotal

     118,020         104,711   

Legacy Products

     

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

     11,407         18,959   

Other products (excluding HDSL)

     13,586         11,065   
  

 

 

    

 

 

 

Subtotal

     24,993         30,024   
  

 

 

    

 

 

 

Total

   $ 143,013       $ 134,735   
  

 

 

    

 

 

 

The following table presents sales information by geographic area for the three months ended March 31, 2013 and 2012. International sales correlate to shipments with a non-U.S. destination.

 

     Three Months Ended  
(In thousands)    March 31,  
   2013      2012  

United States

   $ 108,106       $ 116,443   

International

     34,907         18,292   
  

 

 

    

 

 

 

Total

   $ 143,013       $ 134,735   
  

 

 

    

 

 

 
Liability for Warranty Returns (Tables)
Summary of Warranty Expense and Write-off Activity

A summary of warranty expense and write-off activity for the three months ended March 31, 2013 and 2012 is as follows:

 

Three Months Ended March 31,    2013     2012  
(In thousands)             

Balance at beginning of period

   $ 9,653      $ 4,118   

Plus: Amounts charged to cost and expenses

     397        1,181   

Less: Deductions

     (1,258     (568
  

 

 

   

 

 

 

Balance at end of period

   $ 8,792      $ 4,731   
  

 

 

   

 

 

 
Business Combinations - Additional Information (Detail) (Nokia Siemens Networks [Member], USD $)
3 Months Ended
Mar. 31, 2013
May 4, 2012
Business Acquisition [Line Items]
 
 
Purchase price, net of consideration
 
$ (7,496,000)
Bargain purchase gain, net of tax
1,800,000 
 
Acquisition and integration related expenses and amortization of acquired intangibles
$ 900,000 
 
Customer relationships [Member]
 
 
Business Acquisition [Line Items]
 
 
Average estimated useful life
13 years 
 
Developed technology [Member]
 
 
Business Acquisition [Line Items]
 
 
Average estimated useful life
5 years 
 
Business Combinations - Allocation of Purchase Price to Estimated Fair Value of Assets Acquired and Liabilities Assumed at Acquisition Date (Detail) (Nokia Siemens Networks [Member], USD $)
In Thousands, unless otherwise specified
May 4, 2012
Business Acquisition [Line Items]
 
Other receivables
$ 9,486 
Inventory
22,278 
Property, plant and equipment
5,035 
Accounts payable
(5,194)
Unearned revenue
(19,413)
Accrued expenses
(1,931)
Accrued wages and benefits
(2,251)
Deferred tax liability
(788)
Non-current unearned revenue
(21,316)
Net liabilities assumed
(14,094)
Gain on bargain purchase of a business, net of tax
(1,753)
Net consideration received by buyer
(7,496)
Customer relationships [Member]
 
Business Acquisition [Line Items]
 
Intangible assets
5,162 
Developed technology [Member]
 
Business Acquisition [Line Items]
 
Intangible assets
3,176 
Other [Member]
 
Business Acquisition [Line Items]
 
Intangible assets
$ 13 
Business Combinations - Supplemental Pro Forma Information (Detail)
3 Months Ended
Mar. 31, 2012
USD ($)
Mar. 31, 2012
EUR (€)
Business Combinations [Abstract]
 
 
Pro forma revenue
$ 33,906,000 
 
Pro forma pre-tax loss
(11,645,000)
 
Weighted average exchange rate during the period (EURO/USD)
$ 1.31 
€ 1.00 
Income Taxes - Additional Information (Detail)
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Income Tax Disclosure [Abstract]
 
 
Effective tax rate
18.90% 
35.40% 
Decrease in effective tax rate
24.50% 
 
Increase in effective tax rate due to partial offset by valuation allowance related to foreign subsidiary
6.20% 
 
Increased in tax rate due to other miscellaneous items
1.80% 
 
Pension Benefit Plan - Additional Information (Detail) (Nokia Siemens Networks [Member], USD $)
In Millions, unless otherwise specified
May 4, 2012
Nokia Siemens Networks [Member]
 
Defined Benefit Plan Disclosure [Line Items]
 
Amount of the defined benefit obligation
$ 17.0 
Pension Benefit Plan - Summarization of Components of Net Periodic Pension Cost (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Compensation And Retirement Disclosure [Abstract]
 
Service cost
$ 300 
Interest cost
187 
Expected return on plan assets
(253)
Net periodic pension cost
$ 234 
Stock-Based Compensation - Additional Information (Detail) (USD $)
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Number of RSUs and restricted stock granted
   
 
Estimated forfeitures for stock options
1.60% 
1.60% 
Forfeiture rate for RSUs and restricted stock
0.00% 
0.00% 
Unamortized compensation cost
$ 16,900,000 
 
Recognition period of non-vested compensation cost
2 years 4 months 24 days 
 
Total pre-tax intrinsic value of options exercised
$ 21,000 
 
Restricted stock units (RSUs) [Member]
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Number of RSUs and restricted stock granted
Restricted stock [Member]
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Number of RSUs and restricted stock granted
Stock-Based Compensation - Summary of Stock Options Outstanding (Detail) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Mar. 31, 2013
Dec. 31, 2012
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
 
 
Number of Options, outstanding, Beginning Balance
6,035 
 
Number of Options, granted
   
 
Number of Options, cancelled/forfeited
(46)
 
Number of Options, exercised
(4)
 
Number of Options, outstanding, Ending Balance
5,985 
6,035 
Number of Options, Options exercisable
3,528 
 
Weighted Average Exercise Price, outstanding, Beginning Balance
$ 24.81 
 
Weighted Average Exercise Price, granted
   
 
Weighted Average Exercise Price, cancelled/forfeited
$ 26.33 
 
Weighted Average Exercise Price, exercised
$ 15.29 
 
Weighted Average Exercise Price, outstanding, Ending Balance
$ 24.80 
$ 24.81 
Weighted Average Exercise Price, Options exercisable
$ 24.81 
 
Weighted Average Remaining Contractual Life In Years, Options outstanding
6 years 5 months 16 days 
6 years 8 months 9 days 
Weighted Average Remaining Contractual Life In Years, Options exercisable
4 years 11 months 12 days 
 
Aggregate Intrinsic Value, Options outstanding, Beginning Balance
$ 5,154 
 
Aggregate Intrinsic Value, Options outstanding, Ending Balance
5,290 
5,154 
Aggregate Intrinsic Value, Options exercisable
$ 2,628 
 
Stock-Based Compensation - Summary of RSUs and Restricted Stock Outstanding (Detail) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
 
Number of Unvested RSUs and restricted stock outstanding, beginning balance
103 
Number of RSUs and restricted stock granted
   
Number of RSUs and restricted stock vested
   
Number of RSUs and restricted stock cancelled/forfeited
   
Number of Unvested RSUs and restricted stock outstanding, ending balance
103 
Weighted Average Grant Date Fair Value, Unvested RSUs and restricted stock outstanding, Beginning balance
$ 29.25 
Weighted Average Grant Date Fair Value, RSUs and restricted stock granted
   
Weighted Average Grant Date Fair Value, RSUs and restricted stock vested
   
Weighted Average Grant Date Fair Value, RSUs and restricted stock cancelled/forfeited
   
Weighted Average Grant Date Fair Value, Unvested RSUs and restricted stock, Ending balance
$ 29.25 
Investments - Securities and Investments, Recorded at Either Fair Value or Cost (Detail) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2013
Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
 
 
Restricted investment held at cost
$ 48,250 
$ 48,250 
Other investments held at cost
1,818 
1,902 
Total carrying value of available-for-sale investments
499,720 
493,210 
Amortized Cost
435,735 
426,467 
Gross Unrealized Gains
14,259 
17,081 
Gross Unrealized Losses
(342)
(490)
Available-for-sale-securities, carrying value
449,652 
443,058 
Deferred compensation plan assets [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized Cost
10,907 
10,688 
Gross Unrealized Gains
1,448 
846 
Gross Unrealized Losses
(5)
(7)
Available-for-sale-securities, carrying value
12,350 
11,527 
Corporate bonds [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized Cost
190,540 
185,464 
Gross Unrealized Gains
783 
966 
Gross Unrealized Losses
(18)
(18)
Available-for-sale-securities, carrying value
191,305 
186,412 
Municipal fixed-rate bonds [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized Cost
171,282 
174,530 
Gross Unrealized Gains
849 
627 
Gross Unrealized Losses
(10)
(73)
Available-for-sale-securities, carrying value
172,121 
175,084 
Municipal variable rate demand notes [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized Cost
40,780 
34,375 
Available-for-sale-securities, carrying value
40,780 
34,375 
Marketable equity securities [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized Cost
22,226 
20,966 
Gross Unrealized Gains
11,179 
14,630 
Gross Unrealized Losses
(309)
(392)
Available-for-sale-securities, carrying value
33,096 
35,204 
Fixed income bond fund [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized Cost
 
444 
Gross Unrealized Gains
 
12 
Available-for-sale-securities, carrying value
 
$ 456 
Investments - Contractual Maturities of Corporate and Municipal Fixed-Rate Bonds (Detail) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2013
Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
 
 
Available-for-sale-securities, carrying value
$ 449,652 
$ 443,058 
Corporate bonds [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Less than one year
79,983 
 
One to two years
55,000 
 
Two to three years
53,098 
 
Three to five years
3,224 
 
Available-for-sale-securities, carrying value
191,305 
186,412 
Municipal fixed-rate bonds [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Less than one year
64,292 
 
One to two years
30,694 
 
Two to three years
50,405 
 
Three to five years
26,730 
 
Available-for-sale-securities, carrying value
$ 172,121 
$ 175,084 
Investments - Additional Information (Detail) (USD $)
3 Months Ended
Mar. 31, 2013
Securities
Mar. 31, 2012
Securities
Dec. 31, 2012
Schedule of Investments [Line Items]
 
 
 
Restricted certificate of deposit held
$ 48,250,000 
 
$ 48,250,000 
Estimated fair value of bond
47,900,000 
 
 
Identification of potential other-than-temporary impairments
25.00% 
 
 
Number of marketable equity securities
 
Investment [Member]
 
 
 
Schedule of Investments [Line Items]
 
 
 
Investment concentration risk percentage
5.00% 
 
 
Marketable equity securities [Member]
 
 
 
Schedule of Investments [Line Items]
 
 
 
Impairment of investments
$ 4,000 
$ 33,000 
 
Investments - Realized Gains and Losses on Sales of Securities (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2013