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 9, 2019
 
ADTRAN, Inc.
(Exact name of Registrant as Specified in Its Charter)

Delaware	000-24612	63-0918200	
(State or Other Jurisdiction
of Incorporation)	(Commission File Number)	(IRS Employer
Identification No.)	
 	 	 	
901 Explorer Boulevard
Huntsville, Alabama	 	35806-2807	
(Address of Principal Executive Offices)	 	(Zip Code)	
Registrant’s Telephone Number, Including Area Code: (256) 963-8000
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class	 	Trading Symbol	 	Name of exchange on which registered	
Common Stock, Par Value $0.01	 	ADTN	 	The NASDAQ Global Select Market	
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 
Item 2.02Results of Operations and Financial Condition.
 
On October 9, 2019, ADTRAN, Inc. issued a press release announcing preliminary revenue and earnings estimates for the fiscal quarter ended September 30, 2019.
 
A copy of the press release announcing such expected results is attached as Exhibit 99.1 hereto and incorporated by reference herein.
 
Item 9.01Financial Statements and Exhibits.

Exhibit Number	Description	
99.1	Press Release dated October 9, 2019	
104	Cover Page Interactive Data File – the cover page iXBRL tags are embedded within the Inline XBRL document	

 

 

 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Date: October 9, 2019                                            ADTRAN, Inc.
By: /s/ Michael Foliano
Michael Foliano
Senior Vice President of Finance and
Chief Financial Officer

EXHIBIT 99.1
ADTRAN, INC. ANNOUNCES PRELIMINARY THIRD QUARTER 2019 REVENUE AND EARNINGS ESTIMATES
October 9, 2019
HUNTSVILLE, ALABAMA - ADTRAN, Inc. (NASDAQ: ADTN) (“ADTRAN” or the “Company”) announced today preliminary estimates of certain financial results for the third quarter ended September 30, 2019. Based upon preliminary information, revenue for the quarter is expected to be approximately $114 million. Earnings per share for the quarter, assuming dilution, is expected to be a loss of approximately $0.96. Non-GAAP earnings per share for the quarter, assuming dilution, is expected to be a loss of approximately $0.06. Earnings per share is expected to be affected by a one-time, non-cash, valuation allowance of approximately $37 million, that will be recorded to income tax expense in the Company’s consolidated income statement to reduce the carrying value of the Company’s deferred tax assets.
ADTRAN Chief Executive Officer Tom Stanton stated, “Our revenue this quarter has been significantly impacted by a pause in shipments to a Tier 1 customer in Latin America and the continued slowdown in the spending at an international Tier 1 customer. With the exception of these two large customers, revenues generated from the rest of our business grew 20% over the previous quarter. Although we expect our Latin American customer sales to rebound, our current visibility regarding timing is limited. For the international Tier 1 customer, we expect that sales should resume with the new capital cycle in 2020.”
Our current expectation for revenue for the fourth quarter of 2019, is that it will be flat to slightly down from the third quarter. Additionally, we plan for our non-GAAP operating expenses during the fourth quarter to be approximately 10% below our second quarter non-GAAP expense rate.
In connection with our confirmation at the end of the third quarter of the extent of the decline in revenue during the quarter (which fell below our expectations) and management’s current expectations for revenue in the fourth quarter of 2019, we are establishing a valuation allowance against our deferred tax assets. The deferred tax assets represent timing differences in the recognition of certain tax benefits for accounting and income tax purposes, including the expected value of future tax savings that will be available to offset future taxable income through the Company’s net operating loss carryforwards. In future periods, the Company may be able to reduce some or all of the valuation allowance upon a determination that it will be able to realize such tax savings, thereby reducing its future tax liability and recognizing an income tax benefit within the consolidated income statement.
Non-GAAP earnings per share excludes the effect of the valuation allowance, restructuring expenses, stock-based compensation expenses, asset impairments, amortization of losses related to the Company’s pension plan, and acquisition-related expenses, amortizations and adjustments.
The Company confirmed that it will hold a conference call to discuss its third quarter results Thursday, October 31, 2019, at 9:30 a.m. Central Time. ADTRAN will webcast this conference call. To listen, simply visit the Investor Relations site at www.investors.adtran.com approximately 10 minutes prior to the start of the call and click on the conference call link provided.
An online replay of the conference call, as well as the text of the Company's earnings release, will be available on the Investor Relations site approximately 24 hours following the call and will remain available for at least 12 months. For more information, visit www.investors.adtran.com or via email at investor.relations@adtran.com.
At ADTRAN, we believe amazing things happen when people connect. From the cloud edge to the subscriber edge, we help communications service providers around the world manage and scale services that connect people, places and things to advance human progress. Whether rural or urban, domestic or international, telco or cable, enterprise or residential—ADTRAN solutions optimize existing technology infrastructures and create new, multi-gigabit platforms that leverage cloud economics, data analytics, machine learning and open ecosystems—the future of global networking. Find more at ADTRAN, LinkedIn and Twitter.

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 degree to which sales to the Latin American Tier 1 customer and international Tier 1 customer rebound and the timing thereof, whether we will be able to reduce some or all of the valuation allowance against our deferred tax assets in future periods, the successful development and market acceptance of new products, the degree of competition in the market for such products, the product and channel mix, component costs, manufacturing efficiencies, and other risks detailed in our annual report on Form 10-K and Form 10-K/A for the year ended December 31, 2018 and our quarterly reports on Form 10-Q for the quarters ended March 31 and June 30, 2019. These risks and uncertainties could cause actual results to differ materially from those in the forward-looking statements included in this press release. We do not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this release.
Additionally, the financial measures presented herein are preliminary estimates and are subject to risks and uncertainties, including, among others, changes in connection with quarter end adjustments. Any variation between the Company’s actual results and the preliminary financial information set forth herein may be material.
To provide additional transparency, we have disclosed estimated non-GAAP net income (loss) and earnings (loss) per share - diluted, which has been reconciled to estimated net income (loss) and earnings (loss) per share - diluted as reported based on Generally Accepted Accounting Principles in the United States (U.S. GAAP). This non-GAAP measure excludes certain items which management believes are not reflective of the ongoing operating performance of the business. We believe this information is useful in providing period-to-period comparisons of the results of our ongoing operations. Additionally, this measure is used by management in our ongoing planning and annual budgeting processes. The presentation of non-GAAP net income (loss) and non-GAAP earnings (loss) per share- diluted, when combined with the U.S. GAAP presentation of net income (loss) and earnings (loss) per share- diluted is beneficial to the overall understanding of the ongoing operating performance of the Company.
This measure is not in accordance with, or an alternative for, U.S. GAAP and therefore should not be considered in isolation or as a substitution for analysis of our results as reported under U.S. GAAP. Our calculation of non-GAAP net income (loss) and non-GAAP earnings (loss) per share - diluted may not be comparable to similar measures calculated by other companies.

 

Supplemental Information
Reconciliation of Net Income (Loss) and Earnings (Loss) per Common Share – Basic and Diluted to Non-GAAP
Net Income (Loss) and Non-GAAP Earnings (Loss) per Common Share – Basic and Diluted
(Unaudited)
 
 	 	Three Months Ended
September 30,	 	 	 	Nine Months Ended
September 30,	 	
 	 	2019	 	 	2018	 	 	 	2019	 	 	2018	 	
Net Income (Loss)	 	$	(46,027	)	 	$	7,589	 	 	 	$	(41,262	)	 	$	(10,895	)	
Acquisition related expenses, amortizations and adjustments	 	 	1,343	 	 	 	926	 	 	 	 	4,346	 	 	 	2,651	 	
Stock-based compensation expense	 	 	1,871	 	 	 	1,640	 	 	 	 	5,184	 	 	 	5,243	 	
Restructuring expenses	 	 	1,195	 	 	 	261	 	 	 	 	4,658	 	 	 	7,236	 	
Pension expense(1)	 	 	198	 	 	 	61	 	 	 	 	600	 	 	 	187	 	
Asset impairment	 	 	3,872	 	 	 	—	 	 	 	 	3,872	 	 	 	—	 	
Valuation allowance	 	 	37,055	 	 	 	—	 	 	 	 	37,055	 	 	 	—	 	
Gain on contingency	 	 	—	 	 	 	—	 	 	 	 	(1,230	)	 	 	—	 	
Settlement income	 	 	—	 	 	 	—	 	 	 	 	(746	)	 	 	—	 	
Gain on bargain purchase of a business	 	 	—	 	 	 	—	 	 	 	 	—	 	 	 	(11,322	)	
Tax effect of adjustments to net income (loss)	 	 	(2,228	)	 	 	(624	)	 	 	 	(4,466	)	 	 	(3,657	)	
Non-GAAP Net Income (Loss)	 	$	(2,721	)	 	$	9,853	 	 	 	$	8,011	 	 	$	(10,557	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average shares outstanding – basic	 	 	47,824	 	 	 	47,810	 	 	 	 	47,803	 	 	 	47,927	 	
Weighted average shares outstanding – diluted	 	 	47,824	 	 	 	47,834	 	 	 	 	47,803	 	 	 	47,927	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) per common share - basic	 	$	(0.96	)	 	$	0.16	 	 	 	$	(0.86	)	 	$	(0.23	)	
Earnings (loss) per common share - diluted	 	$	(0.96	)	 	$	0.16	 	 	 	$	(0.86	)	 	$	(0.23	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP earnings (loss) per common share - basic	 	$	(0.06	)	 	$	0.21	 	 	 	$	0.17	 	 	$	(0.22	)	
Non-GAAP earnings (loss) per common share - diluted	 	$	(0.06	)	 	$	0.21	 	 	 	$	0.17	 	 	$	(0.22	)	
 
(1) Includes amortization of actuarial losses related to the Company's pension plan for employees in certain foreign countries.