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ARRIS Announces Preliminary and Unaudited First Quarter 2010 Results

SUWANEE, Ga., April 27, 2010 /PRNewswire via COMTEX/ --ARRIS Group, Inc. (Nasdaq: ARRS),a global technology leader in the development of advanced cable telephony, next generation high-speed data, demand driven video solutions, operations software and broadband access equipment, today announced preliminary and unaudited financial results for the first quarter 2010.

Revenues in the first quarter 2010 were $266.7 million, up 5.2% as compared to first quarter 2009 revenues of $253.5 million, but down 11.1% as compared to fourth quarter 2009 revenues of $300.0 million.

Adjusted net income (a non-GAAP measure) for the first quarter 2010 was $0.24 per diluted share, compared to $0.18 per diluted share for the first quarter 2009 and $0.32 per diluted share for the fourth quarter of 2009.

GAAP net income for the first quarter 2010 was $0.15 per diluted share, as compared to first quarter 2009 GAAP net income of $0.10 per diluted share and the fourth quarter 2009 GAAP net income of $0.26 per diluted share. Significant GAAP items that have been excluded in computing adjusted net income and adjusted earnings per share include amortization of intangible assets, equity compensation, non-cash interest expense, restructuring charges, and certain discrete tax items. A reconciliation of adjusted net income to GAAP net income per share is attached to this release and also can be found on the Company's website (www.arrisi.com).

Gross margin for the first quarter 2010 was 42.2%, which compares to the first quarter 2009 gross margin of 37.7% and the fourth quarter 2009 gross margin of 44.8%.

The Company ended the first quarter 2010 with $661.1 million of cash resources (cash and short-term investments), up in the aggregate by approximately $236.6 million from the end of the first quarter 2009 and up $35.5 million from the end of the fourth quarter 2009, as a result of both strong earnings and effective working capital management. The Company generated $48.2 million of cash from operating activities during the first quarter 2010, which compares to $13.8 million in the first quarter 2009 and $69.8 million in the fourth quarter 2009. Order backlog at the end of the first quarter 2010 was $195.1 million as compared to $155.0 million and $144.4 million at the end of the first quarter 2009 and the fourth quarter 2009, respectively. The Company's book-to-bill ratio in the first quarter 2010 was 1.19 as compared to the first quarter 2009 of 1.16 and the fourth quarter 2009 of 0.92.

"The first quarter results and in particular, customer diversification, cause me to continue to be optimistic about full year 2010," said Bob Stanzione, ARRIS Chairman & CEO. "Increasing amounts of data and Internet TV traffic, and the proliferation of Internet ready HD televisions coupled with the industry trends towards converged platforms for voice, data and video, present opportunity and demand for existing and new ARRIS products." During the quarter the Company hosted a well-attended analyst and investor conference at its corporate headquarters in Suwanee, GA. Slides from this conference may be found on the ARRIS website and provide the content from all presentations. Also during the quarter, at the Korean Cable Show, the Company demonstrated its C4 CMTS broadband access capabilities that deliver data speeds in excess of 320 Mb/s downstream and 100 Mb/s upstream.

"We started 2010 as expected, and look forward to increasing business momentum as the year unfolds," said David Potts, ARRIS EVP & CFO. "As a result, we now project that second quarter 2010 revenues for the Company will be in the range of $275 to $295 million, with adjusted net income per diluted share in the range of $0.22 to $0.26 and GAAP net income per diluted share, in the range of $0.14 to $0.18."

ARRIS management will conduct a conference call at 5:00 pm EDT, today, Tuesday, April 27, 2010, to discuss these results in detail. You may participate in this conference call by dialing 888-680-0893 or 617-213-4859 for international calls prior to the start of the call and providing the ARRIS Group, Inc. name, conference pass code 72619457 and Jim Bauer as the moderator. Please note that ARRIS will not accept any calls related to this earnings release until after the conclusion of the 5:00pm EDT conference call. A replay of the conference call can be accessed approximately two hours after the call through Saturday, May 1, 2010 by dialing 888-286-8010 or 617-801-6888 for international calls and using the pass code 17182291. A replay also will be made available for a period of 12 months following the conference call on ARRIS' website at www.arrisi.com.

About ARRIS

ARRIS is a global communications technology company specializing in the design, engineering and supply of technology supporting triple- and quad-play broadband services for residential and business customers around the world. The company supplies broadband operators with the tools and platforms they need to deliver carrier-grade telephony, demand driven video, next-generation advertising, network and workforce management solutions, access and transport architectures and ultra high-speed data services. Headquartered in Suwanee, Georgia, USA, ARRIS has R&D centers in Suwanee, GA; Beaverton, OR; Chicago, IL; Kirkland, WA; State College, PA; Wallingford, CT; Waltham, MA; Cork, Ireland; and Shenzhen, China, and operates support and sales offices throughout the world. Information about ARRIS products and services can be found at www.arrisi.com.

Forward-looking statements:

Statements made in this press release, including those related to:

  • growth expectations and business prospects;
  • second quarter and 2010 revenues and net income;
  • expected sales levels and acceptance of new ARRIS products; and
  • the general market outlook and industry trends

are forward-looking statements. These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. Among other things,

  • projected results for the second quarter as well as the general outlook for 2010 and beyond are based on preliminary estimates, assumptions and projections that management believes to be reasonable at this time, but are beyond management's control;
  • ARRIS' customers operate in a capital intensive consumer based industry, and the current volatility in the capital markets or changes in customer spending may adversely impact their ability or willingness to purchase the products that the Company offers; and
  • because the market in which ARRIS operates is volatile, actions taken and contemplated may not achieve the desired impact relative to changing market conditions and the success of these strategies will be dependent on the effective implementation of those plans while minimizing organizational disruption.

In addition to the factors set forth elsewhere in this release, other factors that could cause results to differ from current expectations include: the uncertain current economic climate and its impact on our customers' plans and access to capital; the impact of rapidly changing technologies; the impact of competition on product development and pricing; the ability of ARRIS to react to changes in general industry and market conditions including regulatory developments; rights to intellectual property, market trends and the adoption of industry standards; and consolidations within the telecommunications industry of both the customer and supplier base. These factors are not intended to be an all-encompassing list of risks and uncertainties that may affect the Company's business. Additional information regarding these and other factors can be found in ARRIS' reports filed with the Securities and Exchange Commission, including its Form 10-K for the year ended December 31, 2009. In providing forward-looking statements, the Company expressly disclaims any obligation to update publicly or otherwise these statements, whether as a result of new information, future events or otherwise.


                ARRIS GROUP, INC.
     PRELIMINARY CONSOLIDATED BALANCE SHEETS
                 (in thousands)
                   (unaudited)



                                                                   September
                                         March 31,   December 31,     30,
                                               2010          2009        2009
                                               ----          ----        ----

    ASSETS

    Current assets:
      Cash and cash equivalents            $500,044      $500,565    $461,795
      Short-term investments, at fair
       value                                161,012       125,031      99,917
                                            -------       -------      ------
                                            661,056       625,596     561,712

      Restricted cash                         4,476         4,475       4,473
      Accounts receivable, net              139,207       143,708     119,125
      Other receivables                       3,057         6,113       2,235
      Inventories, net                       79,907        95,851     100,024
      Prepaids                               10,546        11,675      10,764
      Income taxes recoverable                    -         3,106       4,212
      Current deferred income tax assets     37,324        35,994      32,883
      Other current assets                   14,328        15,790      12,981
                                             ------        ------      ------
        Total current assets                949,901       942,308     848,409

    Property, plant and equipment, net       56,223        57,195      58,339
    Goodwill                                235,256       235,388     234,416
    Intangible assets, net                  195,551       204,572     201,351
    Investments                              25,435        20,618      30,574
    Noncurrent deferred income tax
     assets                                   6,298         6,759       3,593
    Other assets                              8,050         8,776       7,648
                                              -----         -----       -----
                                         $1,476,714    $1,475,616  $1,384,330
                                         ==========    ==========  ==========


    LIABILITIES AND STOCKHOLDERS'
     EQUITY

    Current liabilities:
      Accounts payable                      $44,523       $53,979     $42,659
      Accrued compensation, benefits and
       related taxes                         23,639        36,936      27,054
      Accrued warranty                        3,632         4,265       5,292
      Deferred revenue                       53,024        47,044      35,423
      Current portion of long-term debt          87           124         148
      Current deferred income tax
       liability                                  -             -         250
      Other accrued liabilities              42,978        46,203      34,979
                                             ------        ------      ------
        Total current liabilities           167,883       188,551     145,805
    Long-term debt, net of current
     portion                                214,131       211,248     208,433
    Accrued pension                          16,733        16,408      18,914
    Noncurrent income tax payable            16,248        14,815      10,632
    Noncurrent deferred income tax
     liability                               33,577        37,203      35,188
    Other noncurrent liabilities             16,871        16,021      15,301
                                             ------        ------      ------
         Total liabilities                  465,443       484,246     434,273

    Stockholders' equity:
      Preferred stock                             -             -           -
      Common stock                            1,402         1,388       1,385
      Capital in excess of par value      1,187,854     1,183,872   1,177,958
      Treasury stock at cost                (79,019)      (75,960)    (75,960)
      Unrealized gain (loss) on
       marketable securities                      2            28         (60)
      Unfunded pension liability             (6,041)       (6,041)     (8,070)
      Accumulated deficit                   (92,743)     (111,733)   (145,012)
      Cumulative translation adjustments       (184)         (184)       (184)
                                               ----          ----        ----
        Total stockholders' equity        1,011,271       991,370     950,057
                                          ---------       -------     -------
                                         $1,476,714    $1,475,616  $1,384,330
                                         ==========    ==========  ==========

                                                  -             -           -



                                             June 30,    March 31,
                                                   2009        2009
                                                   ----        ----

    ASSETS

    Current assets:
      Cash and cash equivalents                $476,846    $398,938
      Short-term investments, at fair value      47,195      25,494
                                                 ------      ------
                                                524,041     424,432

      Restricted cash                             4,552       4,550
      Accounts receivable, net                  128,482     155,792
      Other receivables                           5,904       6,636
      Inventories, net                          115,944     120,774
      Prepaids                                    7,700       6,994
      Income taxes recoverable                      366       3,232
      Current deferred income tax assets         41,166      49,027
      Other current assets                       11,995      15,083
                                                 ------      ------
        Total current assets                    840,150     786,520

    Property, plant and equipment, net           60,048      59,438
    Goodwill                                    231,684     231,684
    Intangible assets, net                      208,822     218,085
    Investments                                  10,317      14,593
    Noncurrent deferred income tax assets         3,870       3,771
    Other assets                                  6,251       5,483
                                                  -----       -----
                                             $1,361,142  $1,319,574
                                             ==========  ==========


    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:
      Accounts payable                          $48,859     $44,422
      Accrued compensation, benefits and
       related taxes                             20,753      15,583
      Accrued warranty                            5,185       5,306
      Deferred revenue                           43,727      44,006
      Current portion of long-term debt             148         147
      Current deferred income tax liability         248         241
      Other accrued liabilities                  35,852      31,922
                                                 ------      ------
        Total current liabilities               154,772     141,627
    Long-term debt, net of current portion      205,710     203,080
    Accrued pension                              19,665      19,289
    Noncurrent income tax payable                12,386      12,441
    Noncurrent deferred income tax liability     33,999      42,530
    Other noncurrent liabilities                 15,094      14,391
                                                 ------      ------
         Total liabilities                      441,626     433,358

    Stockholders' equity:
      Preferred stock                                 -           -
      Common stock                                1,379       1,368
      Capital in excess of par value          1,169,223   1,159,054
      Treasury stock at cost                    (75,960)    (75,960)
      Unrealized gain (loss) on marketable
       securities                                  (161)       (372)
      Unfunded pension liability                 (8,070)     (8,070)
      Accumulated deficit                      (166,711)   (189,620)
      Cumulative translation adjustments           (184)       (184)
                                                   ----        ----
        Total stockholders' equity              919,516     886,216
                                                -------     -------
                                             $1,361,142  $1,319,574
                                             ==========  ==========

                                                      -           -


                              ARRIS GROUP, INC.
              PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share data)



                                                    For the Three Months
                                                       Ended March 31,
                                                       ---------------
                                                      2010              2009
                                              (unaudited)       (unaudited)
                                              -----------       -----------

    Net sales                                     $266,697          $253,518
    Cost of sales                                  154,186           158,008
                                                   -------           -------
      Gross margin                                 112,511            95,510
    Gross margin %                                   42.2%             37.7%
    Operating expenses:
      Selling, general, and administrative
       expenses                                     35,117            35,342
      Research and development expenses             34,365            28,395
      Restructuring charges                             52               120
      Amortization of intangible assets              9,022             9,263
                                                    78,556            73,120
                                                    ------            ------
    Operating income                                33,955            22,390
    Other expense (income):
      Interest expense                               4,430             4,487
      Loss (gain) on investments                      (146)              297
      Loss (gain) on foreign currency                 (268)              959
      Interest income                                 (374)             (385)
      Gain on debt retirement                            -            (4,152)
      Other (income) expense, net                      (42)             (103)
                                                       ---              ----
    Income from continuing operations before
     income taxes                                   30,355            21,287
      Income tax expense                            11,364             8,404
                                                                       -----
        Net income                                 $18,991           $12,883
                                                   =======           =======

    Net income per common share
      Basic                                          $0.15             $0.10
                                                     =====             =====
      Diluted                                        $0.15             $0.10
                                                     =====             =====

    Weighted average common shares:
      Basic                                        126,013           123,281
                                                   =======           =======
      Diluted                                      129,975           124,920
                                                   =======           =======


                                 ARRIS GROUP, INC.
                 PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (in thousands)

                                                   For the Three Months
                                                      Ended March 31,
                                                      ---------------
                                                       2010              2009
                                                (unaudited)       (unaudited)
                                                -----------       -----------

    Operating Activities:
      Net income                                    $18,991           $12,882
        Depreciation                                  5,359             4,827
        Amortization of intangible assets             9,021             9,263
        Stock compensation expense                    4,521             3,401
        Deferred income tax provision                (4,495)            4,689
        Amortization of deferred finance fees           180               189
        Provision for doubtful accounts                 295                 6
        Loss (gain) on investments                     (146)              297
        Loss on disposal of fixed assets                 11                 -
        Non-cash interest expense                     2,883             2,818
        Gain on debt retirement                           -            (4,152)
        Excess income tax benefits from stock-
         based compensation plans                    (2,486)             (431)
      Changes in operating assets &
       liabilities, net of effects of
       acquisitions and disposals:
        Accounts receivable                           4,206             3,645
        Other receivables                             2,420            (2,032)
        Inventory                                    15,944             8,978
        Income taxes payable/recoverable              9,167            (1,123)
        Accounts payable and accrued
         liabilities                                (24,935)          (35,616)
        Other, net                                    7,274             6,204
                                                      -----             -----
          Net cash provided by operating
           activities                                48,210            13,845

    Investing Activities:
      Purchases of property, plant, and
       equipment                                     (4,654)           (5,066)
      Cash paid for acquisition, net of cash
       acquired                                           -              (200)
      Cash proceeds from sale of property,
       plant & equipment                                240                 -
      Purchases of short-term investments           (42,436)          (23,870)
      Disposals of short-term investments             2,100            15,806
                                                      -----            ------
          Net cash used in investing activities     (44,750)          (13,330)

    Financing Activities:
      Payment of debt and capital lease
       obligations                                      (37)          (10,592)
      Repurchase of common stock                     (3,059)                -
      Excess income tax benefits from stock-
       based compensation plans                       2,486               431
      Repurchase of shares to satisfy
       employee tax withholdings                     (5,993)           (1,807)
      Proceeds from issuance of common stock          2,622               497
                                                      -----               ---
          Net cash used in financing activities      (3,981)          (11,471)

          Net increase in cash and cash
           equivalents                                 (521)          (10,956)
    Cash and cash equivalents at beginning
     of period                                      500,565           409,894
                                                    -------           -------
    Cash and cash equivalents at end of
     period                                        $500,044          $398,938
                                                   ========          ========


                                      ARRIS GROUP, INC.
                  PRELIMINARY SUPPLEMENTAL NET INCOME (LOSS) RECONCILIATION
                            (in thousands, except per share data)
                                         (unaudited)

                                       Q1 2010              Q1 2009
                                       -------              -------
                                                Per                Per
                                             Diluted            Diluted
                                    Amount    Share    Amount    Share
                                    ------    -----    ------    -----
     Net income                     $18,991     $0.15  $12,882     $0.10

     Highlighted items:
       Impacting gross margin:
         Stock compensation expense     433         -      303         -

       Impacting operating
        expenses:
         Acquisition costs,
          restructuring and other        52         -      120         -
         Amortization of intangible
          assets                      9,022      0.07    9,263      0.07
         Stock compensation expense   4,088      0.03    3,098      0.02

       Impacting other (income) /
        expense:
         Non-cash interest expense    2,883      0.02    2,818      0.02
         Gain on repurchase of debt       -         -   (4,152)    (0.03)

       Impacting income tax
        expense:

         Adjustments of income tax
          valuation allowances and
          research & development
          credits and other           1,222      0.01    1,455      0.01
       Tax related to highlighted
        items above                  (5,505)    (0.04)  (3,646)    (0.03)

     Total highlighted items         12,195      0.09    9,259      0.07
                                     ------      ----    -----      ----
     Net income excluding
      highlighted items             $31,186     $0.24  $22,141     $0.18
                                    =======     =====  =======     =====

     Weighted average common
      shares -diluted                         129,975            124,920
                                              -------            -------



    With respect to stock compensation expense,  ARRIS records non-cash
    compensation expense related to grants of options and restricted
    stock.  Depending upon the size, timing and the terms of the grants,
    this non-cash compensation expense may vary significantly.  With
    respect to amortization of intangibles, the intangibles being
    amortized relate to our acquisitions.  The acquisition costs,
    restructuring, and other reflect items that, although they or
    similar items might recur, are of a nature and magnitude that
    identifying them separately provides investors with a greater
    ability to project ARRIS'  future performance.    With respect to
    the convertible debt non-cash interest, ARRIS records non-cash
    interest expense related to the 2013 convertible debt.   Disclosing
    the non-cash piece provides investors with the information
    regarding interest that will not be paid out in cash.     In the
    first quarters of 2010 and 2009,  income tax expense adjustments
    were recorded for state valuation allowances and research and
    development tax credits.  During the first quarter of 2009,  ARRIS
    repurchased a portion of their convertible debt and recognized a
    gain of approximately $4.2 million.

    In assessing operating performance and preparing budgets and
    forecasts, ARRIS' management considers performance after making
    these adjustments and believes that providing investors with the
    same information provides greater transparency and insight into
    management's analysis.

                      ARRIS GROUP, INC.
            Net Income Reconciliation (unaudited)
                     Q2 2010 EPS Guidance

    Estimated GAAP EPS - diluted                 $0.14 - $0.18
    Reconciling Items:
        Amortization of intangibles, after tax            0.05
        Stock compensation expense, after tax             0.02
      Non-cash interest expense, after tax                0.01
          Subtotal                                        0.08
                                                          ----
    Estimated adjusted (non-GAAP) EPS -
     diluted                                     $0.22 - $0.26
                                                 =============



    See the Supplemental Net Income (Loss) Reconciliation for a
    discussion regarding these adjustments and management's reasoning
    for providing this adjusted financial measure

                               ARRIS GROUP, INC.
           PRELIMINARY SUPPLEMENTAL OPERATING INCOME RECONCILIATIONS
                                  (unaudited)

    (in thousands)                                        Q1 2010   Q1 2009


      Operating Income as reported                         $33,955   $22,390
      Operating Income as a % of sales                        12.7%      8.8%
      Highlighted Items:
        Stock compensation expense                           4,521     3,401
        Acquisition costs, restructuring and other              52       120
        Amortization of intangible assets                    9,022     9,263
                                                             -----     -----
      Operating Income excluding highlighted items          47,550    35,174
      Operating Income excluding highlighted items as a %
       of sales                                               17.8%     13.9%



SOURCE ARRIS Group, Inc.