Adtran Inc ADTN
Q4 2012 Earnings Call Transcript

Transcript Call Date 01/16/2013

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the ADTRAN's Fourth Quarter 2012 Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer period.

During the course of the conference call, ADTRAN representatives expect to make 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 core 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 for the year ended December 31, 2011 and Form 10-Q for the quarter ended September 30, 2012. These risks and uncertainties could cause actual results to differ materially from those in forward-looking statements, which may be made during this call.

It is now my pleasure to turn the call over to Mr. Tom Stanton, Chief Executive Officer of ADTRAN. Please go ahead, sir.

Thomas R. Stanton - CEO and Chairman: Thank you, Wendy. Good morning, everyone. Thank you for joining us for our fourth quarter 2012 conference call. With me this morning is Jim Matthews, Senior Vice President and Chief Financial Officer.

I'd like to begin this morning by discussing the details behind our Q4 results before we move on to our view of 2012 and I'll end with some comments on this year. We will then open the call up for questions.

As stated in our press release, revenues for the quarter were $139.8 million, meeting our expectations and reflecting a spending environment which remained difficult during the quarter. Our domestic Tier 1 customers showed some signs of stability in the quarter with all three carriers overcoming normal seasonal trends ending either flat or up for the third quarter – compared to the third quarter. The Tier 2 and Tier 3 U.S. carrier market came in as expected showing a normal sequential decline from the third quarter.

International revenues for the quarter were sequentially down as expected and enterprise division revenues came essentially flat for the quarter at $29 million versus $30 million in the third quarter.

Getting into more specifics; in our carrier business, the impact of HDSL on a sequential basis was immaterial, although the year-over-year decline was 42% driven overwhelmingly by a single Tier 1 customer who has instituted an aggressive reuse program. As mentioned previously, sales to Tier 2 accounts, which are predominantly Broadband Access customers saw an expected sequential decline in the fourth quarter. However, on a year-over-year basis, sales to these accounts were up over 100%.

Enterprise division revenues came in at $29 million with sequential increases in routers, switches and wireless LAN products overcoming continued softness in IP Gateway sales. As expected, we continue to experience softness in our incumbent and competitive carrier channels. However, these sequential declines were largely offset by growth in our dealer channel.

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