UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

 
FORM 8-K
 
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Date of Report (Date of earliest event reported): October 13, 2003

 
ADTRAN, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware	 	0-24612	 	63-0918200	
(State of Incorporation)	 	(Commission file number)	 	(I.R.S. Employer
Identification Number)	
 
901 Explorer Boulevard, Huntsville, Alabama 35806-2807
(Address of principal executive offices, including zip code)
 
(256) 963-8000
(Registrant’s telephone number, including area code)

 

Item 5. Other Events and Regulations FD Disclosure.
 
On October 13, 2003, ADTRAN, Inc. announced that its Board of Directors declared, effective December 15, 2003, a two-for-one stock split to be effected in the form of a stock dividend of one share of common stock for each outstanding share of common stock for shareholders of record on December 1, 2003.
 
Item 7. Financial Statements and Exhibits
 
(c) Exhibits.
 
The following exhibit is furnished as part of this Current Report on Form 8-K.
 
Exhibit Number
	  	Description
	
99.1	  	Press Release dated October 13, 2003	
 
Item 12. Results of Operations and Financial Condition
 
On October 13, 2003, ADTRAN Inc. announced its financial results for the fiscal quarter ended September 30, 2003 and certain other information. ADTRAN also announced that its Board of Directors declared a quarterly cash dividend of and $0.15 per common share to be paid to holders of record at the close of business on October 31, 2003. The ex-dividend date is October 29, 2003 and the payment date will be November 17, 2003. A copy of ADTRAN’s press release announcing such financial results and other information is attached as Exhibit 99.1 hereto and incorporated by reference herein.

SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on October 13, 2003.
 
ADTRAN, Inc.
(Registrant)	
		
By:	 	/s/    James E. Matthews        	
 		
 	 	James E. Matthews
Senior Vice President – Finance,
Chief Financial Officer and Treasurer	

EXHIBIT INDEX
 
Exhibit Number
	  	Description
	
99.1	  	Press Release dated October 13, 2003	

EXHIBIT 99.1
 
ADTRAN, INC.
DECLARES A TWO-FOR-ONE STOCK SPLIT AND QUARTERLY CASH DIVIDEND AND REPORTS THIRD QUARTER 2003 RESULTS
 
HUNTSVILLE, AL—(BUSINESS WIRE)— October 13, 2003—ADTRAN, Inc. (NASDAQ: ADTN) announced today that its Board of Directors declared a two-for-one stock split, effective December 15, 2003, to be effected in the form of a stock dividend of one share of common stock for each outstanding share of common stock for shareholders of record on December 1, 2003. ADTRAN Chairman and Chief Executive Officer Mark Smith stated, “With an increasing share price, we believe a stock split should improve shareholders’ flexibility in making portfolio decisions and should dampen volatility in the marketplace.”
 
The Company also reported results for the third quarter ended September 30, 2003. Sales increased 20% to $106,201,000 for the quarter compared to $88,180,000 for the third quarter of 2002. Net income increased 411% to $17,165,000 for the quarter compared to $3,358,000 for the third quarter of 2002. Earnings per share, assuming dilution, were $0.42 for the quarter compared to $0.09 for the third quarter of 2002.
 
Net income increased 69% for the quarter compared to pro-forma income of $10,149,000 for the third quarter of 2002. Pro-forma earnings per share were $0.27 per share for the third quarter of 2002. Pro-forma income and pro-forma earnings per share, for the third quarter of 2002, exclude the effect of an impairment charge primarily related to other than temporary declines in the fair value of marketable equity securities and write-downs of private securities. A reconciliation of pro-forma income and pro-forma earnings per share to net income and earnings per share is included in the Condensed Statements of Income attached to this release. Split effected earnings per share and pro-forma earnings per share are also included in the Condensed Statements of Income attached to this release.
 
Gross margins were 55.5% for the quarter compared to 51.6% for the third quarter of 2002.
 
Net cash provided by operating activities for the quarter was $28 million. Cash and marketable securities, net of debt, totaled $278 million at September 30, 2003, after paying special and quarterly cash dividends on August 29, 2003, totaling $83 million.
 
Mr. Smith stated, “Our results for the third quarter and year-to-date speak clearly to our abilities to successfully secure new growth opportunities through new product development initiatives and to aggressively expand market share as the cost leader. We expect these attributes will continue to position us well for future growth, particularly during an improving enterprise spending environment when priorities of low cost, best value and superior service will endure as our customers’ primary focus.”
 
The Company also announced that its Board of Directors declared its second quarterly cash dividend of $0.15 per common share, to be paid to holders of record at the close of business on October 31, 2003. The ex-dividend date is October 29, 2003 and the payment date is November 17, 2003. This quarterly dividend will be paid prior to the stock split.
 
The Company will host a conference call on Tuesday, October 14, 2003 at 10:30 a.m. Eastern Time to discuss its third quarter 2003 financial results. To listen to the webcast of this conference call, visit ADTRAN’s Investor Relations page at http://www.adtran.com approximately 10 minutes before the start of the call and click on the conference call link provided. As indicated in the Company’s press release of October 2, 2003, an online replay of the webcast of the conference call, as well as the text of this release, will be available on the Investor Relations page of the Company’s website for at least 12 months following the date of this release.
 
ADTRAN, Inc. is an established supplier of advanced transmission products that provide users access to today’s expansive telecommunications networks. Widely deployed in carrier, enterprise and global networks worldwide, ADTRAN products support all major digital access technologies. ADTRAN equipment is widely deployed by major Incumbent Local Exchange Carriers, Inter-exchange Carriers, ISPs, Competitive Service Providers, international service providers, public and private enterprises, and original equipment manufacturers.
 
This press release contains forward-looking statements which reflect management’s best judgment based on factors currently known. However, these statements involve risks and uncertainties, including the successful development and market acceptance of new products, the degree of competition in the market for such products, the product and channel mix, component costs, manufacturing efficiencies, and other risks detailed in the Company’s annual report on Form 10-K for the year ended December 31, 2002. Such risks and uncertainties could cause actual results to differ materially from those in the forward-looking statements included in this press release.

Condensed Balance Sheet
September 30, 2003
Unaudited
(Dollars in thousands)
 
 	  	September 30, 2003
	
Assets	  	 	 	
Cash and cash equivalents	  	$	74,922	
Short-term investments	  	$	16,703	
Accounts receivable (net)	  	$	53,855	
Other receivables	  	$	7,569	
Inventory (net)	  	$	38,281	
Prepaid expenses and other current assets	  	$	7,085	

Total current assets	  	$	198,415	
		
Equipment (net)	  	$	28,799	
Land	  	$	4,263	
Bldg. & land improvements (net)	  	$	65,940	
Other assets	  	$	491	
Deferred tax assets	  	$	740	
Long-term investments	  	$	238,845	
		
Total assets	  	$	537,493	

Liabilities and stockholders’ equity	  	 	 	
Accounts payable	  	$	25,585	
Accrued wages and benefits	  	$	9,158	
Accrued income taxes	  	$	207	
Accrued liabilities	  	$	3,301	

Total current liabilities	  	$	38,251	
		
Deferred tax liabilities	  	$	6,504	
Long term debt	  	$	50,000	

Total long term liabilities	  	$	56,504	
		
Total liabilities	  	$	94,755	
		
Stockholders’ equity	  	$	442,738	

Total liabilities and stockholders’ equity	  	$	537,493	

Condensed Statements of Income
For the periods ending 9/30/03 and 9/30/02
(Dollars in thousands, except per share data)
 
 	  	Third Quarter
2003
	 	 	Third Quarter
2002
	 	
Sales	  	$	106,201	 	 	$	88,180	 	
Cost of sales	  	 	47,283	 	 	 	42,655	 	

Gross profit	  	 	58,918	 	 	 	45,525	 	
			
Selling, general and administrative expenses	  	 	20,623	 	 	 	19,587	 	
Research and development expenses	  	 	14,990	 	 	 	14,009	 	

Profit from operations	  	 	23,305	 	 	 	11,929	 	
			
Interest expense	  	 	(632	)	 	 	(646	)	
Net realized investment gain(loss)	  	 	0	 	 	 	(265	)	
Other income (primarily interest)	  	 	3,035	 	 	 	2,608	 	

Income before provision for income taxes, excluding item detailed below	  	 	25,708	 	 	 	13,626	 	
			
Provision for income taxes	  	 	(8,543	)	 	 	(3,477	)	

Income, excluding net investment impairment charge	  	 	17,165	 	 	 	10,149	 	
			
Investment impairment charge, net (1)	  	 	0	 	 	 	(6,791	)	

Net income	  	$	17,165	 	 	$	3,358	 	

Weighted average shares outstanding:	  	 	 	 	 	 	 	 	
Basic	  	 	38,718	 	 	 	37,645	 	
Diluted (2)	  	 	40,720	 	 	 	37,671	 	
			
Earnings per share, excluding net realized investment impairment charge	  	 	 	 	 	 	 	 	
Basic	  	$	0.44	 	 	$	0.27	 	
Diluted (2)	  	$	0.42	 	 	$	0.27	 	
			
Earnings per share	  	 	 	 	 	 	 	 	
Basic	  	$	0.44	 	 	$	0.09	 	
Diluted (2)	  	$	0.42	 	 	$	0.09	 	
			
Weighted average shares outstanding with 2 for 1 split (3)	  	 	 	 	 	 	 	 	
Basic	  	 	77,436	 	 	 	75,290	 	
Diluted (2)	  	 	81,440	 	 	 	75,342	 	
			
Earnings per share, excluding net realized investment impairment charge, 2 for 1 split effected (3)	  	 	 	 	 	 	 	 	
Basic	  	$	0.22	 	 	$	0.13	 	
Diluted (2)	  	$	0.21	 	 	$	0.13	 	
			
Earnings per share, 2 for 1 split effected (3)	  	 	 	 	 	 	 	 	
Basic	  	$	0.22	 	 	$	0.04	 	
Diluted (2)	  	$	0.21	 	 	$	0.04	 	

(1)	Amount is comprised of other-than-temporary declines in the fair value of marketable equity securities and write-downs of private securities.	
 
Investment impairment charge before tax	  	$	0	  	($	10,290	)	
Income tax effect (using statutory rate)	  	$	0	  	$	3,499	 	
 	  			  				
Net investment impairment charge	  	$	0	  	($	6,791	)	

(2)	Assumes exercise of dilutive stock options calculated under the treasury stock method	
 
(3)	Adtran’s board of directors voted to split the shares of common stock on a 2 for 1 basis to be effected in the form of a stock dividend to stockholders of record on December 1, 2003, with distribution on December 15, 2003.	
 
Management believes a pro-forma presentation provides investors with additional insight into the Company’s financial results. The pro-forma presentation segregates the financial effect of impairment charges of marketable equity securities and write-downs of private securities from transactional based investment activity, reflected in net realized investment gain (loss), during the reporting period.
 
Condensed Statements of Income
For the periods ending 9/30/03 and 9/30/02
(Dollars in thousands, except per share data)
 
 	  	Nine Months Ended
2003
	 	 	Nine Months Ended
2002
	 	
Sales	  	$	282,860	 	 	$	257,307	 	
Cost of sales	  	 	127,170	 	 	 	130,800	 	

Gross profit	  	 	155,690	 	 	 	126,507	 	
			
Selling, general and administrative expenses	  	 	61,121	 	 	 	60,653	 	
Research and development expenses	  	 	42,899	 	 	 	42,480	 	

Profit from operations	  	 	51,670	 	 	 	23,374	 	
			
Interest expense	  	 	(1,951	)	 	 	(1,961	)	
Net Realized investment gain(loss)	  	 	226	 	 	 	108	 	
Other income (primarily interest)	  	 	8,570	 	 	 	6,657	 	

Income before provision for income taxes, excluding item detailed below	  	 	58,515	 	 	 	28,178	 	
			
Provision for income taxes	  	 	(18,432	)	 	 	(7,575	)	

Income, excluding net investment impairment charge	  	 	40,083	 	 	 	20,603	 	
			
Investment impairment charge, net (1)	  	 	0	 	 	 	(7,938	)	
 	  				 				
Net income	  	$	40,083	 	 	$	12,665	 	

Weighted average shares outstanding:	  	 	 	 	 	 	 	 	
Basic	  	 	38,115	 	 	 	38,235	 	
Diluted (2)	  	 	40,006	 	 	 	38,304	 	
			
Earnings per share, excluding net realized investment impairment charge	  	 	 	 	 	 	 	 	
Basic	  	$	1.05	 	 	$	0.54	 	
Diluted (2)	  	$	1.00	 	 	$	0.54	 	

Earnings per share	  	 	 	  	 	 	
Basic	  	$	1.05	  	$	0.33	
Diluted (2)	  	$	1.00	  	$	0.33	
			
Weighted average shares outstanding with 2 for 1 split (3)	  	 	 	  	 	 	
Basic	  	 	76,230	  	 	76,470	
Diluted (2)	  	 	80,012	  	 	76,608	
			
Earnings per share, excluding net realized investment impairment charge, 2 for 1 split effected (3)	  	 	 	  	 	 	
Basic	  	$	0.53	  	$	0.27	
Diluted (2)	  	$	0.50	  	$	0.27	
			
Earnings per share, 2 for 1 split effected (3)	  	 	 	  	 	 	
Basic	  	$	0.53	  	$	0.17	
Diluted (2)	  	$	0.50	  	$	0.17	
 
(1)	Amount is composed of other-than-temporary declines in the fair value of marketable equity securities and write-downs of private securities.	
 
Investment impairment charge before tax	  	$	0	    	($	12,027	)	
Income tax effect (using statutory rate)	  	$	0	    	$	4,089	 	
 	  			    				
Net investment impairment charge	  	$	0	    	($	7,938	)	

(2)	Assumes exercise of dilutive stock options calculated under the treasury stock method.	
 
(3)	Adtran’s board of directors voted to split the shares of common stock on a 2 for 1 basis to be effected in the form of a stock dividend to stockholders of record on December 1, 2003, with distribution on December 15, 2003.	
 
Management believes a pro-forma presentation provides investors with additional insight into the Company’s financial results. The pro-forma presentation segregates the financial effect of impairment charges of marketable equity securities and write-downs of private securities from transactional based investment activity, reflected in net realized investment gain (loss), during the reporting period.
 
CONTACT:
Jim Matthews
Senior Vice President – Finance
Chief Financial Officer
256-963-8775
 
INVESTOR SERVICES/ASSISTANCE:
Charlene Little
256-963-8611
Cathy Bartels
256-963-8220