UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from _______ to _______
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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 12 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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 7, 2023, the registrant had
1
ADTRAN Holdings, Inc.
Quarterly Report on Form 10-Q
For the Three and Six Months Ended June 30, 2023
Table of Contents
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1 |
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Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 – (Unaudited) |
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Notes to Condensed Consolidated Financial Statements – (Unaudited) |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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2
GLOSSARY OF SELECTED TERMS
Below are certain acronyms, concepts and defined terms commonly used in our industry and in this Quarterly Report on Form 10-Q, along with their meanings:
Acronym/Concept/ |
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Defined Term |
Meaning |
BEAD |
Broadband Equity, Access and Deployment Program |
CPE |
Customer-Premises Equipment |
DPLTA |
Domination and Profit and Loss Transfer Agreement |
DSO |
Days Sales Outstanding |
E.U. |
European Union |
EURIBOR |
Euro Interbank Offered Rate |
IPCEI ME/CT |
Important Project of Common European Interest - Microelectronics and Communication Technologies |
MSO |
Multiple System Operator |
ODM |
Original Design Manufacturing |
OLT |
Optical Line Terminal |
RNCI |
Redeemable Non-Controlling Interest |
SaaS |
Software as a Service |
SEC |
Securities and Exchange Commission |
Service Provider |
Entity that provides voice, data or video services to consumers and businesses |
SI |
Person or company that specializes in bringing together component subsystems into a whole and ensuring that those subsystems function together |
SLA |
Service Level Agreement |
SMB |
Small and Mid-Sized Business |
SOFR |
Secured Overnight Financing Rate |
U.S. |
United States of America |
VAR |
Value-Added Reseller |
3
GENERAL
Unless the context otherwise indicates or requires, references in this Quarterly Report on Form 10-Q to “ADTRAN,” the “Company,” “we,” “us” and “our” refer to ADTRAN, Inc. and its consolidated subsidiaries prior to the merger of Acorn MergeCo, Inc., a subsidiary of ADTRAN Holdings, Inc., with and into ADTRAN, Inc., on July 8, 2022, after which ADTRAN, Inc. became a wholly-owned direct subsidiary of ADTRAN Holdings, Inc. (the “Merger”), and to ADTRAN Holdings, Inc. and its consolidated subsidiaries following the Merger.
On May 24, 2023, at the annual general meeting of the shareholders of ADVA Optical Networking SE, a subsidiary of the Company ("ADVA"), the shareholders of ADVA approved the proposed change of its name to Adtran Networks SE ("Adtran Networks"), which was registered in the commercial register of the local court of Jena, Germany on June 8, 2023. Unless the context otherwise indicates or requires, references in this Quarterly Report on Form 10-Q to “Adtran Networks” refer to Adtran Networks SE (formerly ADVA Optical Networking SE).
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of ADTRAN. ADTRAN and its representatives may from time to time make written or oral forward-looking statements, including statements contained in this report, our other filings with the Securities and Exchange Commission (the “SEC”) and other communications with our stockholders. Any statement that does not directly relate to a historical or current fact is a forward-looking statement. Generally, the words “believe”, “expect”, “intend”, “estimate”, “anticipate”, “would”, “will”, “may”, “might”, “could”, “should”, “can”, “future”, “assume”, “plan”, “seek”, “predict”, “potential”, “objective”, “expect”, “target”, “project”, “outlook”, “forecast” and similar expressions identify forward-looking statements. We caution you that any forward-looking statements made by us or on our behalf are subject to uncertainties and other factors that could affect the accuracy of such statements. Forward-looking statements are based on management’s current expectations, as well as certain assumptions and estimates made by, and information available to, management at the time the statements are made. Those statements are based on general assumptions and are subject to various risks, and because they also relate to the future, they are likewise subject to inherent uncertainties and other factors that may cause actual results to differ materially from the views, beliefs and projections expressed in such statements. The following are some of the risks that could affect our financial performance or could cause actual results to differ materially from those expressed or implied in our forward-looking statements:
Risks related to the Business Combination and DPLTA
Risks related to our financial results and Company success
4
Risks related to our control environment
Risks related to the telecommunications industry
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Risks related to the Company's stock price
Risks related to the regulatory environments in which we do business
The foregoing list of risks is not exclusive. For a more detailed description of the risk factors associated with our business, see Part I, Item 1A of Amendment No. 1 to the Company's Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC August 14, 2023, as well as the risk factors set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q. We caution investors that other factors may prove to be important in the future in affecting our operating results. New factors emerge from time to time, and it is not possible for us to predict all of these factors, nor can we assess the impact each factor, or a combination of factors, may have on our business.
You are further cautioned not to place undue reliance on these forward-looking statements because they speak only of our views as of the date that the statements were made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
6
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ADTRAN Holdings, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share amounts)
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June 30, |
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December 31, |
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2023 |
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2022 |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
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$ |
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Accounts receivable, less allowance for credit losses of $ |
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Other receivables |
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Inventory, net |
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Prepaid expenses and other current assets |
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Total Current Assets |
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Property, plant and equipment, net |
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Deferred tax assets |
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Goodwill |
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Intangibles, net |
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Other non-current assets |
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Long-term investments (includes $ |
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Total Assets |
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$ |
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$ |
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LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND EQUITY |
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Current Liabilities |
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Accounts payable |
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$ |
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Revolving credit agreements outstanding |
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Notes payable |
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Unearned revenue |
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Accrued expenses and other liabilities |
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Accrued wages and benefits |
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Income tax payable, net |
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Total Current Liabilities |
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Non-current revolving credit agreement outstanding |
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Deferred tax liabilities |
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Non-current unearned revenue |
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Pension liability |
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Deferred compensation liability |
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Non-current lease obligations |
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Other non-current liabilities |
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Total Liabilities |
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Redeemable Non-Controlling Interest |
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Equity |
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Common stock, par value $ |
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Retained (deficit) earnings |
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Treasury stock at cost: |
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Non-controlling interest |
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— |
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Total Equity |
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Total Liabilities, Redeemable Non-Controlling Interest and Equity |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
7
ADTRAN Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(Unaudited)
(In thousands, except per share amounts)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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2022 |
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Revenue |
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Network Solutions |
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$ |
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$ |
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Services & Support |
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Total Revenue |
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Cost of Revenue |
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Network Solutions |
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Services & Support |
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Total Cost of Revenue |
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Gross Profit |
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Selling, general and administrative expenses |
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Research and development expenses |
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Operating (Loss) Income |
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Interest and dividend income |
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Interest expense |
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Net investment gain (loss) |
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Other income, net |
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(Loss) Income Before Income Taxes |
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Income tax benefit (expense) |
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Net (Loss) Income |
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$ |
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$ |
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$ |
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Less: Net Loss attributable to non-controlling interest(1) |
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— |
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Net (Loss) Income attributable to ADTRAN Holdings, Inc. |
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$ |
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$ |
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$ |
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$ |
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Weighted average shares outstanding – basic |
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Weighted average shares outstanding – diluted |
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(Loss) earnings per common share attributable to ADTRAN Holdings, Inc. – basic |
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$ |
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$ |
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$ |
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$ |
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(Loss) earnings per common share attributable to ADTRAN Holdings, Inc. – diluted |
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$ |
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$ |
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$ |
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$ |
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(1)For the three and six months ended June 30, 2023, we have recognized $
See accompanying notes to condensed consolidated financial statements.
8
ADTRAN Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
(In thousands)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2022 |
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2022 |
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Net (Loss) Income |
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$ |
( |
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$ |
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$ |
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$ |
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Other Comprehensive Income (Loss), net of tax |
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Net unrealized (loss) gain on available-for-sale securities |
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Defined benefit plan adjustments |
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Foreign currency translation gain (loss) |
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Other Comprehensive Income (Loss), net of tax |
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Less: Comprehensive Income attributable to non-controlling interest, net of tax |
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— |
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— |
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— |
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Comprehensive Loss attributable to ADTRAN Holdings, Inc., net of tax |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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See accompanying notes to condensed consolidated financial statements.
9
ADTRAN Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
(In thousands, except per share amounts)
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Common |
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Common |
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Additional |
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Retained |
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Treasury |
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Accumulated Other Comprehensive Income |
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Non-controlling interest |
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Total |
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Balance as of December 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Reclassification and remeasurement from equity to mezzanine equity for non-controlling interests in Adtran Networks |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
) |
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( |
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Other comprehensive income, net of tax |
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— |
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— |