<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Transition Period from ______ to ______
Commission File Number 0-24612
ADTRAN, INC.
(Exact name of Registrant as specified in its charter)
Delaware 63-0918200
(State of Incorporation) (I.R.S. Employer
Identification No.)
901 Explorer Boulevard, Huntsville, Alabama 35806-2807
(Address of principal executive offices, including zip code)
(256) 963-8000
(Registrant's telephone number, including area code)
_______________
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
------- ------
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock as of the latest practicable date:
Class Outstanding at October 31, 2000
---------------------------- -------------------------------
Common Stock, $.01 Par Value 38,705,162 shares
Page 1 of 15
<PAGE>
ADTRAN, INC.
For the Quarter Ended September 30, 2000
Table of Contents
-----------------
Item Page
Number PART I. FINANCIAL INFORMATION Number
------ ------
1 Financial Statements (unaudited):
Condensed Consolidated Balance Sheets as of
September 30, 2000 and December 31, 1999 3
Condensed Consolidated Statements of Income for the three
months and nine months ended September 30, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. OTHER INFORMATION
6 Exhibits and Reports on Form 8-K 14
SIGNATURE 15
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ADTRAN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................. $ 6,531,156 $ 37,500,674
Short-term investments..................................... 152,885,674 41,080,776
Accounts receivable, less allowance for
doubtful accounts of $877,409 and $1,018,400
in 2000 and 1999, respectively.......................... 80,177,680 60,036,876
Other receivables.......................................... 11,811,130 4,458,525
Inventory.................................................. 85,331,330 58,568,773
Prepaid expenses........................................... 4,543,284 1,410,286
Deferred income taxes...................................... 4,069,937 4,069,937
------------ ------------
Total current assets............................. 345,350,191 207,125,847
Property, plant and equipment, less accumulated
depreciation of $49,612,672 and $40,416,461
in 2000 and 1999, respectively............................. 122,140,649 104,587,755
Other assets.................................................... 220,000 220,000
Long-term investments........................................... 170,297,426 244,362,579
------------ ------------
$638,008,266 $556,296,181
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................... $ 28,999,280 $ 12,773,848
Accrued wages and benefits................................. 5,691,532 4,860,226
Accrued income taxes....................................... 29,726,721 6,096,459
Accrued liabilities........................................ 2,716,791 2,248,022
------------ ------------
Total current liabilities............................. 67,134,324 25,978,555
Long term liabilities:
Bonds payable.............................................. 50,000,000 50,000,000
Deferred income taxes...................................... 49,382,381 80,265,155
------------ ------------
Total liabilities..................................... 166,516,705 156,243,710
------------ ------------
Minority interest in subsidiary 160,000 --
------------ ------------
Stockholders' equity:
Common stock, par value $.01 per share,
200,000,000 shares authorized: 39,446,664 and
39,446,644 shares issued in 2000 and 1999, respectively. 394,466 394,466
Additional paid-in capital................................. 91,093,057 90,832,913
Accumulated other comprehensive income..................... 68,387,143 116,000,000
Retained earnings.......................................... 327,145,508 214,834,541
Less treasury stock at cost: 744,868 and 1,047,225
shares in 2000 and 1999, respectively.................. (15,688,613) (22,009,449)
------------ ------------
Total stockholders' equity................................. 471,331,561 400,052,471
------------ ------------
$638,008,266 $556,296,181
============ ============
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE>
ADTRAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Sales................................................ $127,276,696 $97,067,399 $341,193,702 $262,736,919
Cost of sales........................................ 61,323,706 46,604,689 159,165,772 129,485,356
------------ ----------- ------------ ------------
Gross profit................................. 65,952,990 50,462,710 182,027,930 133,251,563
Selling, general and administrative expenses......... 22,968,133 18,353,928 63,068,043 52,357,951
Research and development expenses.................... 12,766,314 10,885,778 37,022,104 30,914,252
------------ ----------- ------------ ------------
Income from operations....................... 30,218,543 21,223,004 81,937,783 49,979,360
Interest expense..................................... (589,000) (582,667) (1,741,667) (1,729,000)
Other income, net.................................... 2,797,520 913,630 5,932,258 3,118,245
Realized investment gains-net........................ 84,040,125 -- 84,040,125 --
------------ ----------- ------------ ------------
Income before income taxes........................... 116,467,188 21,553,967 170,168,499 51,368,605
Provision for income taxes........................... (39,598,846) (7,403,779) (57,857,532) (17,391,683)
------------ ----------- ------------ ------------
Net income................................... $ 76,868,342 $14,150,188 $112,310,967 $ 33,976,922
============ =========== ============ ============
Weighted average shares outstanding.................. 38,690,560 38,332,793 38,633,914 38,324,349
============ =========== ============ ============
Weighted average shares outstanding assuming
dilution(1)......................................... 39,748,566 39,069,099 39,827,843 38,696,373
=========== ============ ============ ============
Earnings per common share - basic.................... $ 1.99 $ .37 $ 2.91 $ .89
============ =========== ============ ============
Earnings per common share assuming dilution(1)....... $ 1.93 $ .36 $ 2.82 $ .88
============ =========== ============ ============
</TABLE>
(1) Assumes exercise of dilutive stock options calculated under the treasury
stock method.
See notes to condensed consolidated financial statements
4
<PAGE>
ADTRAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................... $ 112,310,967 $ 33,976,922
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation............................................... 9,536,588 7,894,392
Provision for losses on accounts receivable................ 5,277 20,532
Provision for losses on inventory.......................... 4,258,428 2,762,383
Gain on sale of property, plant and equipment.............. (830) (5,000)
Loss on sale of short-term investments..................... 134,847 276,977
Gain on sale of long-term investments...................... (85,368,216) (250)
Change in operating assets:
Accounts receivable................................... (20,146,082) (17,352,940)
Inventory............................................. (31,020,905) 1,078,048
Other receivables..................................... (7,355,217) (1,472,804)
Prepaid expenses...................................... (3,132,998) 155,218
Deferred income taxes................................. (333,179) --
Change in operating liabilities:
Accounts payable...................................... 14,209,349 3,075,661
Accrued wages and benefits............................ 831,306 2,493,771
Accrued income taxes.................................. 23,630,263 4,900,808
Accrued liabilities................................... 2,484,773 466,210
------------- ------------
Net cash provided by operating activities..................... 20,044,371 38,270,428
------------- ------------
Cash flows from investing activities:
Expenditures for property, plant and equipment................ (27,089,785) (28,342,791)
Proceeds from the disposition of property, plant and equipment -- 5,000
Proceeds from sales of short-term investments................. 50,907,900 35,605,897
Purchase of short-term investments............................ (162,843,646) (10,245,487)
Proceeds from sales of long-term investments.................. 87,194,072 --
Purchase of long-term investments............................. (5,763,409) (540,079)
------------- ------------
Net cash used in investing activities......................... (57,594,868) (3,517,460)
------------- ------------
Cash flows from financing activities:
Proceeds from issuance of common stock........................ 6,580,979 702,740
Purchase of treasury stock.................................... -- (320,898)
------------- ------------
Net cash provided by financing activities..................... 6,580,979 381,842
------------- ------------
Net increase (decrease) in cash and cash equivalents.......... (30,969,518) 35,134,810
Cash and cash equivalents, beginning of period..................... 37,500,674 10,009,320
------------- ------------
Cash and cash equivalents, end of period........................... $ 6,531,156 $ 45,144,130
============= ============
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE>
ADTRAN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The interim condensed consolidated balance sheet of ADTRAN, Inc. ("ADTRAN") at
December 31, 1999 has been derived from audited financial statements, but does
not include all disclosures required by generally accepted accounting
principles. The accompanying unaudited condensed financial statements of ADTRAN
have been prepared pursuant to the rules and regulations for reporting on Form
10-Q. Accordingly, certain information and notes required by generally accepted
accounting principles for complete financial statements are not included herein.
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. Operating results for the nine months ended September 30, 2000 are not
necessarily indicative of the results that may be expected to occur for the year
ending December 31, 2000. The interim statements should be read in conjunction
with the financial statements and notes thereto included in ADTRAN's latest
Annual Report on Form 10-K.
2. INVENTORY
At September 30, 2000 and December 31, 1999, inventory consisted of the
following:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
Raw materials $54,131,623 $30,143,435
Work in progress 16,906,671 15,763,155
Finished goods 14,293,036 12,662,183
----------- -----------
$85,331,330 $58,568,773
=========== ===========
</TABLE>
3. COMPREHENSIVE INCOME
Comprehensive income consists of net income and unrealized gains and losses on
marketable securities, net of deferred taxes. The reduction in accumulated other
comprehensive income is a result of the net realized gain on the sale of
marketable equity securities and the reduction in the fair value of the
investments.
6
<PAGE>
4. EARNINGS PER SHARE
The company reported a realized investment gain during the three months ended
September 30, 2000 from the sale of certain marketable equity securities
resulting in a gain of $55,410,000 ($1.39 per share assuming dilution). Earnings
per share before the realized investment gain, assuming dilution, for the three
months ended September 30, 2000 was $.54 compared to earnings per share of $.36
for the three months ended September 30, 1999, and $1.43 for the nine months
ended September 30, 2000 compared to $.88 for the nine months ended September
30, 1999.
A summary of the calculation of basic and diluted earnings per share (EPS) for
the three months and nine months ended September 30, 2000 and 1999 is as
follows:
<TABLE>
<CAPTION>
For the Three Months Ended September 30, 2000
----------------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Basic EPS
Income available to common stockholders $ 76,868,342 38,690,560 $1.99
Effect of Dilutive Securities
Stock Options 1,058,006
Diluted EPS
Income available to common stockholders
plus assumed conversions $ 76,868,342 39,748,566 $1.93
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended September 30, 2000
------------------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Basic EPS
Income available to common stockholders $112,310,967 38,633,914 $2.91
Effect of Dilutive Securities
Stock Options 1,193,929
Diluted EPS
Income available to common stockholders
plus assumed conversions $112,310,967 39,827,843 $2.82
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Earnings Per Share (continued)
For the Three Months Ended September 30, 1999
-----------------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Basic EPS
Income available to common stockholders $14,150,188 38,332,793 $0.37
Effect of Dilutive Securities
Stock Options 736,306
Diluted EPS
Income available to common stockholders
plus assumed conversions $14,150,188 39,069,099 $0.36
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended September 30, 1999
------------------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Basic EPS
Income available to common stockholders $33,976,922 38,324,349 $0.89
Effect of Dilutive Securities
Stock Options 372,024
Diluted EPS
Income available to common stockholders
plus assumed conversions $33,976,922 38,696,373 $0.88
</TABLE>
5. Segment Information
ADTRAN operates two reportable segments - (1) the Carrier Network Division
(formerly Telco) and (2) the Enterprise Network Division (formerly Customer
Premise Equipment). ADTRAN evaluates the performance of its segments based on
gross profit; therefore, selling, general and administrative costs, as well as
research and development, interest income/expense, and the provision for income
taxes are reported on an entity wide basis only. There are no intersegment
revenues.
8
<PAGE>
The table below presents information about the reported sales and gross profit
of ADTRAN for the three months and nine months ended September 30, 2000 and
1999, respectively. Asset information by reportable segment is not reported,
since ADTRAN does not produce such information internally.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 2000 September 30, 2000
Sales Gross Profit Sales Gross Profit
--------------------- --------------------- ----------------------- -----------------
<S> <C> <C> <C> <C>
Carrier Network $ 79,911,989 $38,846,847 $224,501,259 $115,269,078
Enterprise Network 47,364,707 27,106,143 116,692,443 66,758,852
------------ ----------- ------------ ------------
Total $127,276,696 $65,952,990 $341,193,702 $182,027,930
------------ ----------- ------------ ------------
Three Months Ended Nine Months Ended
September 30, 1999 September 30, 1999
Sales Gross Profit Sales Gross Profit
--------------------- --------------------- ----------------------- -----------------
Carrier Network $ 61,359,332 $28,859,624 $165,635,435 $ 76,206,569
Enterprise Network 35,708,067 21,603,086 97,101,484 57,044,994
------------ ----------- ------------ ------------
Total $ 97,067,399 $50,462,710 $262,736,919 $133,251,563
------------ ----------- ------------ ------------
</TABLE>
The following table presents sales information by geographic area for the three
months and nine months ended September 30, 2000 and 1999, respectively.
<TABLE>
<CAPTION>
Sales Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
United States $123,061,429 $94,701,128 $331,772,796 $255,789,104
Foreign 4,215,267 2,366,271 9,420,906 6,947,815
------------ ----------- ------------ ------------
Total $127,276,696 $97,067,399 $341,193,702 $262,736,919
------------ ----------- ------------ ------------
</TABLE>
9
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
Overview
ADTRAN, Inc. ("ADTRAN") designs, develops, manufactures, markets and services a
broad range of high speed digital transmission products utilized by telephone
companies ("Telcos") and corporate end-users to implement advanced digital data
services over existing telephone networks. We currently sell our products to
Telcos including all Regional Bell Operating Companies (through what is now
referred to as our Carrier Network Division), and to private end-users through
our Enterprise Network Division (formerly known as the Customer Premises
Equipment or CPE Division).
ADTRAN's sales have increased each year due primarily to increases in the number
of units sold to both new and existing customers. These annual sales increases
reflect our strategy of increasing unit volume and market share through the
introduction of succeeding generations of products having lower selling prices
and increased functionality as compared to the prior generation of a product and
to the products of competitors. An important part of ADTRAN's strategy is to
engineer the reduction of the product cost of each succeeding product generation
and then to lower the product's price based on the cost savings achieved. As a
part of this strategy, we seek in most instances to be a low-cost, high-quality
provider of products in our markets. ADTRAN's success to date is attributable in
large measure to our ability to initially design our products with a view to
their subsequent re-design, allowing efficient enhancements of the product in
each succeeding product generation. This strategy enables ADTRAN to sell
succeeding generations of products to existing customers while increasing our
market share by selling these enhanced products to new customers.
ADTRAN intends to retain all earnings for use in the development of our business
and does not anticipate paying any cash dividends in the foreseeable future.
When used in this Form 10-Q, the words "believe," "anticipate," "think,"
"intend," "will be," and similar expressions identify forward-looking
statements. Such statements are subject to certain risks and uncertainties
which could cause actual results to differ materially from those projected.
Readers are cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date hereof. Readers are also urged to
carefully review and consider the various disclosures made by ADTRAN which
attempt to advise interested parties of the factors which affect our business,
including the disclosures made in other periodic reports on Forms 10-K, 10-Q and
8-K filed with the Securities and Exchange Commission.
10
<PAGE>
RESULTS OF OPERATIONS - THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2000
COMPARED TO THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1999
SALES
ADTRAN's sales increased 31.1% from $97,067,399 in the three months ended
September 30, 1999 to $127,276,696 in the three months ended September 30, 2000.
Sales increased 29.9% from $262,736,919 in the nine months ended September 30,
1999 to $341,193,702 in the nine months ended September 30, 2000. The increased
sales resulted from an increase in sales volume to existing customers and from
increased market penetration. Carrier Network sales increased from $61,359,332
in the three months ended September 30, 1999 to $79,911,989 in the three months
ended September 30, 2000 and increased from $165,635,435 in the nine months
ended September 30, 1999 to $224,501,259 in the nine months ended September 30,
2000. Carrier Network sales for the 2000 period increased primarily from
continued success of our Systems products and strong sequential growth in our
Total Reach products. Carrier Network sales as a percentage of total sales
decreased from 63.2% in the three months ended September 30, 1999 to 62.8% in
the three months ended September 30, 2000 and increased from 63.0% in the nine
months ended September 30, 1999 to 65.8% in the nine months ended September 30,
2000. Sales of Enterprise Network products increased from $35,708,067 in the
three months ended September 30, 1999 to $47,364,707 in the three months ended
September 30, 2000. The increase was also due to strong growth in our Systems
products. Sales of Enterprise Network products increased 20.2% from $97,101,484
in the nine months ended September 30,1999 to $116,692,443 in the nine months
ended September 30, 2000. As a percentage of sales, Enterprise Network sales
increased from 36.8% in the three months ended September 30, 1999 to 37.2% in
the three months ended September 30, 2000 and decreased from 37.0% in the nine
months ended September 30, 1999 to 34.2% in the nine months ended September 30,
2000. The financial effect of the increase in overall unit volume was offset
somewhat by lower unit selling prices for many of ADTRAN's products.
COST OF SALES
Cost of sales increased 31.6% from $46,604,689 in the three months ended
September 30, 1999 to $61,323,706 in the three months ended September 30, 2000
and increased 22.9% from $129,485,356 in the nine months ended September 30,
1999 to $159,165,772 in the nine months ended September 30, 2000. As a
percentage of sales, cost of sales remained relatively unchanged from 48.0% in
the three months ended September 30, 1999 to 48.2% in the three months ended
September 30, 2000 and decreased from 49.3% in the nine months ended September
30, 1999 to 46.6% in the nine months ended September 30, 2000. An important part
of ADTRAN's strategy is to reduce the product cost of each succeeding product
generation and then to lower the product's price based on the cost savings
achieved. This strategy sometimes results in variations in ADTRAN's gross profit
margin due to timing differences between the recognition of cost reductions and
the lowering of product selling prices. In view of the rapid pace of new product
introductions by ADTRAN, this strategy may result in variations in gross profit
margins that, for any particular financial period, can be difficult to predict.
11
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased 25.1% from $18,353,928 in
the three months ended September 30, 1999 to $22,968,133 in the three months
ended September 30, 2000 and increased 20.5% from $52,357,951 in the nine months
ended September 30, 1999 to $63,068,043 in the nine months ended September 30,
2000. The increase was due to additional sales and support expenditures
necessary as a result of our expanded sales base. Selling, general and
administrative expenses as a percentage of sales decreased from 18.9% in the
three months ended September 30, 1999 to 18.0% in the three months ended
September 30, 2000 and decreased from 19.9% in the nine months ended September
30, 1999 to 18.5% in the nine months ended September 30, 2000. Sales and support
organization expansion, which resulted in increased costs during the quarter,
will continue because they are necessary to position ADTRAN to accumulate market
share and maintain growth over the long-term.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased 17.3% from $10,885,778 in the three
months ended September 30, 1999 to $12,766,314 in the three months ended
September 30, 2000 and increased 19.8% from $30,914,252 in the nine months ended
September 30, 1999 to $37,022,104 in the nine months ended September 30, 2000.
The increase was due to increased investment in product development and cost
reduction through engineering. As a percentage of sales, research and
development expenses decreased from 11.2% in the three months ended September
30, 1999 to 10.0% in the three months ended September 30, 2000 and decreased
from 11.8% in the nine months ended September 30, 1999 to 10.9% in the nine
months ended September 30, 2000. ADTRAN will continue to invest in these product
development activities because they are necessary to position us to accumulate
market share and maintain growth over the long-term.
INTEREST EXPENSE
Interest expense remained relatively unchanged from $582,667 for the three
months ended September 30, 1999 to $589,000 in the three months ended September
30, 2000 and remained relatively unchanged from $1,729,000 in the nine months
ended September 30, 1999 to $1,741,667 in the nine months ended September 30,
2000.
NET INCOME
As a result of the above factors, income before realized investment gains (net
of income taxes) increased 51.3% from $14,150,188 in the three months ended
September 30, 1999 to $21,401,862 in the three months ended September 30, 2000
and increased 67.3% from $33,976,922 in the nine months ended September 30, 1999
to $56,844,727 in the nine months ended September 30, 2000. As a percentage of
sales, income before realized investment gains increased from 14.6% in the three
months ended September 30, 1999 to 16.8% in the three months ended September 30,
2000 and increased from 12.9% in the nine months ended September 30, 1999 to
16.7% in the nine months ended September 30, 2000.
Liquidity and Capital Resources
ADTRAN committed to spend approximately an additional $2,500,000 for completing
the construction of Phase IV of our corporate headquarters in Huntsville,
Alabama, which was completed in October 2000. Over the next several years, we
expect to spend approximately an additional $35,000,000 to equip Phase IV. Fifty
million dollars of ADTRAN's Phase III expansion was approved for participation
in an incentive program
12
<PAGE>
offered by the Alabama State Industrial Development Authority (the "Authority").
The incentive program enables participating companies to generate Alabama
corporate income tax credits that can be used to reduce the amount of Alabama
corporate income taxes that would otherwise be payable. There can be no
assurance that the State of Alabama will continue to make these corporate income
tax credits available in the future, and therefore, ADTRAN may not realize the
full benefit of these incentives. Through December 31, 1999, the Authority had
issued $50,000,000 of its taxable revenue bonds pursuant to the incentive
program and loaned the proceeds from the sale of the bonds to ADTRAN. ADTRAN is
required to make payments to the Authority in the amounts necessary to pay the
principal of and interest on the Authority's Taxable Revenue Bond, Series 1995,
as amended, currently outstanding in the aggregate principal amount of
$50,000,000. The bond matures on January 1, 2020, and bears interest at the rate
of 45 basis points over the money market rate of First Union National Bank of
Tennessee.
ADTRAN's working capital position increased from $181,147,292 as of December 31,
1999 to $278,215,867 as of September 30, 2000 due to cash generated from
operations and the sale of certain marketable equity securities, as discussed
below. ADTRAN has used, and expects to continue to use, the cash generated from
operations for working capital and other general corporate purposes, including
(i) product development activities to enhance its existing products and develop
new products and (ii) expansion of sales and marketing activities. Inventory
increased 45.7% from December 31, 1999 to September 30, 2000. The increase is
attributable to two factors, (i) our expectations of increased shipments to
existing customers and (ii) increasing quantities of certain commodities in
anticipation of market wide allocations.
On March 31, 1997, the Board of Directors authorized ADTRAN to re-purchase up to
1,000,000 shares of our outstanding common stock. In October 1998, the Board
approved the re-purchase of an additional 2,000,000 shares. As of September 30,
2000, we had re-purchased 1,121,017 shares of our common stock at a total cost
of $23,595,265.
Capital expenditures totaling $36,236,622 for the year ended December 31, 1999
and $27,089,785 in the first nine months of 2000 were used to expand our
headquarters and to purchase equipment.
At September 30, 2000, ADTRAN's cash on hand of $6,531,156 and short-term
investments of $152,885,674 placed our potential cash availability at
$159,416,830, of which a portion is being used to expand ADTRAN's facilities
under the incentive program described above.
During July 2000, ADTRAN sold certain marketable equity securities (included in
long-term investments in the accompanying condensed consolidated balance sheet)
for $91,899,742 net of transaction costs of $4,705,670, resulting in a realized
gain of $85,368,216.
We intend to finance our operations in the future with cash flow from operations
and remaining borrowed taxable revenue bond proceeds. We believe these available
sources of funds to be adequate to meet our operating and capital needs for the
foreseeable future.
13
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are being filed with this report.
27 - Financial Data Schedule
(b) No Reports on Form 8-K were filed during the quarter ended
September 30, 2000.
14
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ADTRAN, INC.
(Registrant)
Date: November 14, 2000 /s/ John R. Cooper
------------------
John R. Cooper
Vice President - Finance and
Chief Financial Officer
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