SUWANEE, Ga., April 29 /PRNewswire-FirstCall/ -- ARRIS Group, Inc.
(Nasdaq: ARRS), a global technology leader in advanced cable telephony &
broadband access equipment, and next generation high-speed data, video, and
operations software solutions, today announced preliminary and unaudited
financial results for the first quarter 2008.
First quarter 2008 revenues of $273.5 million represented an increase of
$38.2 million or 16%, as compared to the first quarter 2007 revenues of $235.3
million, primarily reflecting the acquisition of C-COR. First quarter 2008
gross margin was $85.2 million, or 31.2% as compared to $68.7 million or 29.2%
in the first quarter 2007. Order backlog increased to $147.0 million in the
quarter as compared to $136.7 million at year end 2007. Book-to-bill ratio in
the first quarter was 1.04.
GAAP net income in the first quarter 2008 was $0.04 per diluted share, as
compared to $0.34 per diluted share for the first quarter 2007. Non-GAAP net
income in the first quarter 2008 was $0.12 per diluted share, as compared to
$0.20 per diluted share for the first quarter 2007. Items excluded from
non-GAAP income include: amortization of intangibles, certain acquisition
gains and expenses, certain tax benefits and costs, equity compensation
expense, and adjustments to restructuring accruals. A reconciliation of GAAP
to non-GAAP earnings per share is attached to this release and also can be
found on the Company's website (www.arrisi.com).
In conjunction with the acquisition of C-COR, the Company implemented a
new organizational structure in December 2007. As a result, effective with
fourth quarter 2007 results, ARRIS began reporting financial results in three
reporting segments: Broadband Communications Systems; Access, Transport &
Supplies; and Media & Communications Systems. A summary of the first quarter
revenue and gross margin for each of the segments is attached to this release
and can be found on the Company's website.
The Company ended the first quarter 2008 with $293.0 million of cash and
short-term investments, which compares to $391.8 million at the end of the
fourth quarter 2007. The change in cash balance reflects the repurchase
during the quarter of approximately 13 million shares in the open market for
an aggregate consideration of approximately $76 million. During the quarter,
the Company also redeemed $35 million of convertible debt originally issued by
C-COR and paid approximately $12 million to retire various acquisition
liabilities. The Company generated $30.5 million of cash from operating
activities in the first quarter 2008.
"ARRIS begins 2008 with a sense of strong optimism," said Bob Stanzione,
ARRIS Chairman & CEO. "While the current economic climate is somewhat
challenging, we see significant opportunities for further growth as the year
unfolds. We are investing in our future, and have a strong portfolio of
exciting products which solidify our industry leading position as a provider
of end-to-end data, voice and video solutions for our domestic and
international customers. As evidenced by our recent DOCSIS 3.0 CMTS win in
Japan, our products continue to be selected by leading service providers
worldwide, thereby helping diversify our customer base. We are well positioned
to take advantage of customer and end user demands for high speed data
services, VoIP, on-demand video, ad insertion, OSS solutions and network
upgrades to accommodate increased high definition channel offerings. We will
aggressively pursue these opportunities on a global basis."
"The first quarter was in line with the guidance we provided in February
with EPS coming in at the high end of the range. Notably, our gross margin
for the quarter was 31%," said David Potts, ARRIS EVP & CFO. "We anticipate
continued improvement throughout the year. As a result, we now project that
revenues for the Company in the second quarter 2008 will be in the range of
$288 to $303 million with GAAP net income per diluted share in the range of
$0.04 to $0.08 and non-GAAP net income per diluted share, in the range of
$0.13 to $0.17. I remain confident that we are well-positioned to meet the
insatiable demand for more bandwidth and speed, driven by accelerating
entertainment and information applications."
ARRIS management will conduct a conference call at 5:00pm EDT, today,
Tuesday, April 29, 2008, to discuss these results in detail. You may
participate in this conference call by dialing 888-713-4218 or 617-213-4870
for international calls prior to the start of the call and providing the ARRIS
Group, Inc. name, conference passcode 43173899 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 May 2, 2008 by dialing 888-286-8010 or 617-801-6888 for
international calls and using the passcode 89070320. A replay also will be
made available for a period of 12 months following the conference call on
ARRIS' website at www.arrisi.com .
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 reliable telephony, demand driven video, next-generation
advertising and high-speed data services. ARRIS products expand and help grow
network capacity with access and outside plant construction equipment,
reliably deliver voice, video and data services and assure optimal service
delivery for end customers. Headquartered in Suwanee, Georgia, USA, ARRIS has
R&D centers in Atlanta, Chicago, Beaverton, State College, Wallingford,
Ireland and China, and operates support and sales offices throughout the
world. Information about ARRIS products and services can be found at
http://www.arrisi.com .
Forward-looking statements:
Statements made in this press release, including those related to:
-
second quarter and 2008 revenues and net income; and
- the general market outlook;
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 2008 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;
- 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, 2007. 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.
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31,
2008
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $243,515
Short-term investments, at fair value 49,513
Total cash, cash equivalents and
short-term investments 293,028
Restricted cash 7,186
Accounts receivable, net 159,881
Other receivables 6,074
Inventories, net 125,105
Prepaids 5,680
Current deferred income tax assets 47,051
Other current assets 8,209
Total current assets 652,214
Property, plant and equipment, net 60,747
Goodwill 453,454
Intangible assets, net 257,029
Investments 10,200
Noncurrent deferred income tax assets -
Other assets 12,624
$1,446,268
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $60,490
Accrued compensation, benefits and
related taxes 14,397
Accrued warranty 13,365
Deferred revenue 19,901
Current portion of long-term debt 310
Other accrued liabilities 27,980
Total current liabilities 136,443
Long-term debt, net of current
portion 276,686
Accrued pension 10,905
Noncurrent income tax payable 6,487
Noncurrent deferred income tax
liability 43,402
Other long-term liabilities 14,258
Total liabilities 488,181
Stockholders' equity:
Preferred stock -
Common stock 1,357
Capital in excess of par value 1,095,716
Treasury stock at cost (76,007)
Unrealized gain (loss) on marketable
securities 151
Unfunded pension liability (3,358)
Accumulated deficit (59,588)
Cumulative translation adjustments (184)
Total stockholders' equity 958,087
$1,446,268
ARRIS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, September 30, June 30, March 31,
2007 2007 2007 2007
(unaudited) (unaudited) (unaudited)
ASSETS
Current assets:
Cash and cash equivalents $323,797 $370,708 $444,020 $441,317
Short-term investments, at
fair value 68,011 217,845 160,315 134,610
Total cash, cash
equivalents and short-
term investments 391,808 588,553 604,335 575,927
Restricted cash 6,977 3,142 3,136 3,128
Accounts receivable, net 166,953 130,216 120,680 125,756
Other receivables 4,330 5,000 6,845 9,888
Inventories, net 131,792 118,227 90,542 78,186
Prepaids 5,856 3,626 3,250 3,500
Current deferred income
tax assets 44,939 19,602 23,239 26,818
Other current assets 4,841 13,703 10,773 4,001
Total current assets 757,496 882,069 862,800 827,204
Property, plant and
equipment, net 59,156 31,251 30,196 28,076
Goodwill 455,352 150,569 150,569 150,569
Intangible assets, net 269,893 115 172 230
Investments 6,412 8,916 3,151 3,569
Noncurrent deferred income
tax assets - 16,238 17,294 18,639
Other assets 10,181 9,084 7,517 7,790
$1,558,490 $1,098,242 $1,071,699 $1,036,077
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $58,852 $35,540 $46,015 $41,337
Accrued compensation,
benefits and related
taxes 26,177 18,857 14,631 9,991
Accrued warranty 14,370 7,346 7,829 7,968
Deferred revenue 8,474 6,273 7,195 5,488
Current portion of long-
term debt 35,305 - - -
Other accrued liabilities 42,121 20,854 20,806 26,923
Total current liabilities 185,299 88,870 96,476 91,707
Long-term debt, net of
current portion 276,765 276,000 276,000 276,000
Accrued pension 10,455 11,810 12,778 12,420
Noncurrent income tax
payable 6,322 5,262 4,334 4,334
Noncurrent deferred income
tax liability 41,796 - - -
Other long-term
liabilities 12,086 5,143 5,288 5,606
Total liabilities 532,723 387,085 394,876 390,067
Stockholders' equity:
Preferred stock - - - -
Common stock 1,356 1,104 1,102 1,096
Capital in excess of par
value 1,093,498 789,348 782,717 773,839
Treasury stock at cost (572) - - -
Unrealized gain (loss) on
marketable securities 20 (151) - 1,345
Unfunded pension liability (3,358) (4,462) (4,462) (4,462)
Accumulated deficit (64,993) (74,498) (102,350) (125,624)
Cumulative translation
adjustments (184) (184) (184) (184)
Total stockholders'
equity 1,025,767 711,157 676,823 646,010
$1,558,490 $1,098,242 $1,071,699 $1,036,077
ARRIS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
For the Three Months
Ended March 31,
2008 2007
(unaudited) (unaudited)
Net sales $273,506 $235,253
Cost of sales 188,258 166,506
Gross margin 85,248 68,747
Gross margin % 31.2% 29.2%
Operating expenses:
Selling, general, and administrative
expenses 36,982 24,175
Research and development expenses 28,122 18,096
Restructuring and impairment charges 405 421
Amortization of intangible assets 13,254 58
78,763 42,750
Operating income 6,485 25,997
Other expense (income):
Interest expense 1,504 1,668
Loss on investments and notes
receivable 2 19
(Gain) loss on foreign currency (990) 322
Interest income (2,685) (6,483)
Gain related to terminated
acquisition, net of expenses - (22,835)
Other (income) expense, net (36) 65
Income from continuing operations
before income taxes 8,690 53,241
Income tax expense 3,285 15,597
Net income $5,405 $37,644
Net income per common share:
Basic $0.04 $0.35
Diluted $0.04 $0.34
Weighted average common shares:
Basic 130,763 108,467
Diluted 131,981 110,988
ARRIS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Three Months
Ended March 31,
2008 2007
(unaudited) (unaudited)
Operating Activities:
Net income $5,405 $37,644
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation 4,963 2,497
Amortization of intangible
assets 13,254 58
Stock compensation expense 2,551 2,656
Deferred income tax provision
(benefit) (506) 4,702
Amortization of deferred
finance fees 279 279
Provision for doubtful accounts 205 371
Gain related to previously
written off receivables - (377)
Loss on investments 2 19
Gain related to terminated
acquisition, net of expenses - (22,835)
Excess tax benefits from stock-
based compensation plans - (4,855)
Changes in operating assets &
liabilities, net of effects of
acquisitions and disposals:
Accounts receivable 7,502 (10,823)
Other receivables (1,744) (7,332)
Inventory 7,501 16,040
Income taxes payable 81 1,293
Accounts payable and accrued
liabilities (10,294) (24,842)
Other, net 1,316 1,470
Net cash provided by (used
in) operating activities 30,515 (4,035)
Investing Activities:
Purchases of property, plant, and
equipment (6,429) (2,287)
Cash proceeds related to
terminated acquisition, net of
expenses - 10,881
Cash paid for hedge related to
terminated acquisition - (26,469)
Cash proceeds from hedge related
to terminated acquisition - 38,750
Cash paid for acquisition, net of
cash acquired (4,192) -
Cash proceeds from sale of
property, plant & equipment 224 -
Purchases of short-term
investments (16,887) (128,135)
Disposals of short-term
investments 30,500 81,100
Net cash provided by (used
in) investing activities 3,216 (26,160)
Financing Activities:
Payment of debt and capital lease
obligations (35,097) -
Treasury stock repurchase (75,960) -
Excess tax benefits from stock-
based compensation plans - 4,855
Repurchase of shares to satisfy
minimum tax withholdings (239) -
Fees and proceeds from issuance
of common stock, net (2,717) 5,039
Net cash (used in) provided
by financing activities (114,013) 9,894
Net decrease in cash and cash
equivalents (80,282) (20,301)
Cash and cash equivalents at
beginning of period 323,797 461,618
Cash and cash equivalents at end of
period $243,515 $441,317
ARRIS GROUP, INC.
SUPPLEMENTAL NET INCOME RECONCILIATION
(in thousands, except per share data)
(unaudited)
Q1 2008 Q1 2007
Per Per
Diluted Diluted
Amount Share Amount Share
Net income $5,405 $0.04 $37,644 $0.34
Highlighted items:
Impacting gross margin:
Stock compensation expense 201 - 165 -
Impacting operating expenses:
Gains related to previously
written off receivables - - (377) -
Integration costs 427 - - -
Restructuring charges - adjustments
to existing accruals 405 - 421 -
Amortization of intangible
assets 13,254 0.10 58 -
Stock compensation expense 2,350 0.02 2,491 0.02
Impacting net income from
continuing operations:
Gains related to terminated
acquisition, net of expenses - - (22,835) (0.21)
Impacting income tax expense:
Adjustments of income tax valuation
allowances and research &
development credits and other - - (3,246) (0.03)
Tax related to highlighted items
above (6,294) (0.05) 7,754 0.07
Total highlighted items 10,343 0.08 (15,569) (0.14)
Net income excluding highlighted
items $15,748 $0.12 $22,075 $0.20
Weighted average common shares -
diluted 131,981 110,988
ARRIS believes that presenting net income and related per share amounts
adjusted for the items detailed above provides meaningful information that
will allow investors to more easily understand ARRIS' financial performance
and compare its period-to-period results. 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. In
prior periods, ARRIS highlighted significant losses related to bad debt
expense associated with certain customers. ARRIS recognized a gain in Q1 of
2007 associated with these previously written off receivables. With respect to
amortization of intangibles, the intangibles being amortized relate to our
recent acquisition of C-COR. The restructuring charge adjustments 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. During the first quarter of
2007, ARRIS announced that it entered into a transaction agreement with
TANDBERG Television ASA, in which ARRIS was to buy all the outstanding shares
of TANDBERG. ARRIS was subsequently outbid by another buyer and the
transaction agreement was terminated during the first quarter 2007. ARRIS
recorded gains, net before tax, of $22.8 million related to the termination of
the transaction (termination fee, foreign exchange gains, and expenses). The
net termination fee resulted in a capital gain which provided greater access
to prior tax capital losses that had previously been viewed as more likely
than not unrealizable. As a result, net income tax valuation allowances
totaling $3.2 million were reversed in the first quarter 2007. During the
first quarter of 2008, ARRIS recorded incremental costs of $0.4 million as a
result of the C-COR integration.
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 expects to
continue providing similar information in the future with schedules
reconciling the differences between GAAP and non-GAAP financial measures.
ARRIS GROUP, INC
SUPPLEMENTAL SALES AND GROSS MARGIN INFORMATION
(in thousands, except gross margin percentages)
(unaudited)
Q1 2007 incl
Q1 2008 Q1 2007 C-COR (1,2)
Broadband Communications Systems
Sales 189,637 199,000 199,000
Gross Margin 57,991 62,451 62,451
Gross Margin % 30.6% 31.4% 31.4%
Access, Transport & Supplies
Sales 72,894 36,006 93,490
Gross Margin 21,876 6,426 30,215
Gross Margin % 30.0% 17.8% 32.3%
Media & Communications Systems
Sales 10,975 247 15,783
Gross Margin 5,381 (130) 8,826
Gross Margin % 49.0% -52.6% 55.9%
Total
Sales 273,506 235,253 308,273
Gross Margin 85,248 68,747 101,492
Gross Margin % 31.2% 29.2% 32.9%
(1) Sum of Arris and C-Cor reported sales and gross margins, unaudited
(2) C-COR gross margin has been adjusted to conform to ARRIS accounting
policies with respect to freight billed to customers.
ARRIS GROUP, INC.
Supplemental Second Quarter
Net Income Reconciliation (unaudited)
Q2 EPS 2008 Guidance
Estimated GAAP EPS - diluted $0.04 - $0.08
Reconciling Items
Amortization of Intangibles,
after tax 0.07
Stock Compensation Expense,
after tax 0.02
Subtotal 0.09
Estimated Non GAAP EPS - diluted $0.13 - $0.17
See the GAAP to Non-GAAP EPS reconciliation for a discussion regarding
management's reasoning for providing this non-GAAP financial measure
SOURCE ARRIS Group, Inc.
04/29/2008
CONTACT: Jim Bauer, Investor Relations of ARRIS Group, Inc.
+1-678-473-2647, jim.bauer@arrisi.com
/Web site: http://www.arrisi.com
(ARRS)
