ADTRAN, Inc. Reports Second Quarter 2008 Results and Declares Quarterly Cash Dividend

ADTRAN Chief Executive Officer Tom Stanton stated, "For the quarter, our growth businesses - Broadband Access, Optical Access and Internetworking - again achieved record revenues, growing 39% year-over-year. Broadband Access achieved its third consecutive record level with 55% year-over-year revenue growth. Optical Access saw 36% year-over-year revenue growth for the quarter and Internetworking achieved its seventh record revenue level within the last eight quarters. Despite a slow enterprise environment and constrained spending by some carrier customers, the Company continued to perform well in executing on existing business and securing new opportunities for future growth."

The Company also reported that the provision for income taxes in the second quarter of 2008 continued to be unusually high due to delays in federal legislation required to extend research tax credits for the 2008 year.

The Company also announced that its Board of Directors declared a cash dividend for the second quarter of 2008. The quarterly cash dividend is $0.09 per common share to be paid to holders of record at the close of business on July 31, 2008. The ex-dividend date is July 29, 2008 and the payment date is August 14, 2008.

The Company also confirmed that its second quarter conference call will be held Tuesday, July 15, 2008 at 9:30 a.m. Central Time. This conference call will be web cast live through StreetEvents.com. To listen, simply visit the Investor Relations site at http://www.adtran.com or http://streetevents.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 will be available for seven days at http://streetevents.com. In addition, 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 at http://www.adtran.com for at least 12 months following the call.

ADTRAN, Inc. is a leading global provider of networking and communications equipment, with a portfolio of more than 1,700 solutions for use in the last mile of today's telecommunications networks. Widely deployed by carriers and enterprises alike, ADTRAN solutions enable voice, data, video, and Internet communications across copper, fiber, and wireless network infrastructures. ADTRAN solutions are currently in use by every major U.S. service provider and many global ones, as well as by thousands of public, private and governmental organizations worldwide.

For more information, contact the company at 800 9ADTRAN (800 923-8726) or via email at info@adtran.com. On the Web, visit www.adtran.com.

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 our annual report on Form 10-K for the year ended December 31, 2007. These 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 Unaudited (In thousands) June 30, December 31, 2008 2007 -------- ------------ Assets Cash and cash equivalents $ 57,854 $ 13,941 Short-term investments 120,915 148,416 Accounts receivable, net 62,688 70,667 Other receivables 2,854 3,085 Inventory, net 49,825 48,546 Prepaid expenses 1,704 2,023 Deferred tax assets, net 8,126 7,659 --------- ------------- Total current assets 303,966 294,337 Property, plant and equipment, net 75,776 75,969 Deferred tax assets, net 3,196 1,113 Other assets 110 505 Long-term investments 123,120 107,296 --------- ------------- Total assets $ 506,168 $ 479,220 ========= ============= Liabilities and Stockholders' Equity Accounts payable $ 24,545 $ 22,200 Unearned revenue 6,265 5,361 Accrued expenses 4,186 3,801 Accrued wages and benefits 10,623 10,497 Income tax payable, net 5,739 1,217 --------- ------------- Total current liabilities 51,358 43,076 Other non-current liabilities 10,028 9,213 Bonds payable 48,500 48,500 --------- ------------- Total liabilities 109,886 100,789 Stockholders' equity 396,282 378,431 --------- ------------- Total liabilities and stockholders' equity $ 506,168 $ 479,220 ========= =============

Consolidated Statements of Income (In thousands, except per share data) Unaudited Three Three Six Six Months Months Months Months Ended Ended Ended Ended June June June June 30, 30, 30, 30, 2008 2007 2008 2007 --------- --------- --------- --------- Sales $131,183 $123,674 $251,068 $233,986 Cost of sales 51,789 50,115 101,434 94,637 --------------------------------------- Gross profit 79,394 73,559 149,634 139,349 Selling, general and administrative expenses 25,709 26,155 51,256 52,631 Research and development expenses 20,215 19,546 39,768 37,904 --------------------------------------- Operating income 33,470 27,858 58,610 48,814 Interest and dividend income 2,219 3,006 4,502 5,914 Interest expense (660) (626) (1,279) (1,245) Net realized investment gain (loss) (15) 185 (104) 268 Other income, net 339 199 466 497 Life insurance proceeds - - - 1,000 --------------------------------------- Income before provision for income taxes 35,353 30,622 62,195 55,248 Provision for income taxes (12,939) (10,779) (22,734) (18,477) --------------------------------------- Net income $ 22,414 $ 19,843 $ 39,461 $ 36,771 ======================================= Weighted average shares outstanding Basic 64,239 68,797 64,419 69,073 Diluted (1) 65,340 70,267 65,400 70,583 Earnings per common share Basic $ 0.35 $ 0.29 $ 0.61 $ 0.53 Diluted (1) $ 0.34 $ 0.28 $ 0.60 $ 0.52 (1) Assumes exercise of dilutive stock options calculated under the treasury stock method.

Supplemental Information Stock Based Compensation Expense (In thousands) Three Months Ended Six Months Ended ------------------ ---------------- June 30, June 30, ------------------ ---------------- 2008 2007 2008 2007 --------- ----- ------- ----- Stock-based compensation expense included in cost of sales $ 79 $ 94 $ 158 $ 187 ------------------------------------- Selling, general and administrative expense 889 1,120 1,843 2,199 Research and development expense 992 1,082 1,998 2,149 ------------------------------------- Stock-based compensation expense included in operating expenses 1,881 2,202 3,841 4,348 ------------------------------------- Total stock-based compensation expense 1,960 2,296 3,999 4,535 Tax benefit for expense associated with non-qualified options (196) (230) (404) (416) ------------------------------------- Total stock-based compensation expense, net of tax $ 1,764 $2,066 $ 3,595 $4,119 =====================================

Consolidated Statements of Cash Flow For the Six Months Ended June 30, Unaudited (In thousands) 2008 2007 -------- -------- Cash flows from operating activities: Net income $ 39,461 $ 36,771 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,823 5,336 Amortization of net premium on available-for- sale investments 873 1,153 Net realized loss (gain) on long-term investments 104 (268) Loss (gain) on disposal of property, plant and equipment (15) 70 Stock-based compensation expense 3,999 4,535 Deferred income taxes (1,411) (2,159) Tax benefits from stock option exercises 456 3,787 Excess tax benefits from stock-based compensation arrangements (247) (2,842) Change in operating assets and liabilities: Accounts receivable, net 7,979 (9,653) Other receivables 231 3,130 Income tax receivable, net - 1,446 Inventory, net (1,279) 10,327 Prepaid expenses 714 929 Accounts payable 2,345 (3,095) Accrued expenses and other liabilities 2,230 2,082 Income tax payable, net 4,522 439 ---------- ---------- Net cash provided by operating activities 64,785 51,988 Cash flows from investing activities: Purchases of property, plant and equipment (4,615) (3,816) Proceeds from sales and maturities of available- for-sale investments 120,232 98,980 Purchases of available-for-sale investments (112,590) (116,650) ---------- ---------- Net cash provided by (used in) investing activities 3,027 (21,486) Cash flows from financing activities: Proceeds from stock option exercises 1,724 12,921 Purchases of treasury stock (14,871) (52,289) Dividend payments (11,624) (12,465) Excess tax benefits from stock-based compensation arrangements 247 2,842 ---------- ---------- Net cash used in financing activities (24,524) (48,991) Net increase (decrease) in cash and cash equivalents 43,288 (18,489) Effect of exchange rate changes 625 403 Cash and cash equivalents, beginning of period 13,941 40,147 ---------- ---------- Cash and cash equivalents, end of period $ 57,854 $ 22,061 ========== ==========

SOURCE: ADTRAN, Inc.

ADTRAN, Inc. Jim Matthews, 256-963-8775 Senior Vice President/CFO or INVESTOR SERVICES/ASSISTANCE: Gayle Ellis, 256-963-8220