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ARRIS Announces Preliminary and Unaudited Third Quarter 2011 Results
SUWANEE, Ga., Oct. 26, 2011 /PRNewswire/ -- ARRIS Group, Inc. (NASDAQ: ARRS),today announced preliminary and unaudited financial results for the third quarter 2011.
Revenues in the third quarter 2011 were $274.4 million as compared to third quarter 2010 revenues of $274.3 million and as compared to second quarter 2011 revenues of $265.8 million. Through the first three quarters of 2011 and 2010, revenues were $807.6 million and $821.3 million, respectively.
Adjusted net income (a non-GAAP measure) in the third quarter 2011 was $0.21 per diluted share, compared to $0.19 per diluted share for the third quarter 2010 and $0.24 per diluted share for the second quarter 2011. Year to date, adjusted net income was $0.60 per diluted share for 2011 as compared to $0.67 per diluted share in 2010.
GAAP net income in the third quarter 2011 was $0.11 per diluted share, as compared to third quarter 2010 GAAP net income of $0.11 per diluted share and second quarter 2011 GAAP net income of $0.13 per diluted share. Year to date, GAAP net income was $0.34 per diluted share in 2011 as compared to GAAP net income of $0.41 per diluted share in 2010. Significant GAAP items that have been excluded in computing adjusted net income and adjusted net income per diluted share include amortization of intangible assets, equity compensation, non-cash interest expense, restructuring charges and acquisition costs, 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 (http://www.arrisi.com).
Gross margin for the third quarter 2011 was 36.5%, which compares to the third quarter 2010 gross margin of 37.2% and the second quarter 2011 gross margin of 40.2%.
The Company ended the third quarter 2011 with $590.6 million of cash resources, which includes $575.0 million of cash, cash equivalents and short-term investments, and $15.6 million of long-term marketable security investments, as compared to $591.5 million, in the aggregate, at the end of the second quarter 2011. During the third quarter 2011, the Company repurchased approximately 1.6 million shares of ARRIS common stock for $17.1 million and also repurchased $5.0 million face amount of Convertible Debt. Year to date, the Company has repurchased 6.7 million shares for $74.7 million, and $5.0 million face amount of Convertible Debt. The Company generated $24.5 million of cash from operating activities during the third quarter 2011 and $52.3 million through the first nine months of 2011, which compares to $12.5 million and $95.9 million generated during the same periods in 2010, respectively.
Order backlog at the end of the third quarter 2011 was $155.3 million as compared to $119.6 million and $154.2 million at the end of the third quarter 2010 and the second quarter 2011, respectively. The Company's book-to-bill ratio in the third quarter 2011 was 1.00 as compared to the third quarter 2010 of 0.80 and the second quarter 2011 of 0.91.
"Our third quarter results were within previous guidance and reflect continuing demand for our market leading products," said Bob Stanzione, ARRIS Chairman & CEO. "We now look forward to completing the acquisition of BigBand Networks and growing our current business to include a strong video product suite. The BigBand portfolio joins a host of new ARRIS products gaining traction in the industry and we believe that we are positioned well for the future."
On October 11, 2011, the Company announced its intention to purchase BigBand Networks and launched a Tender Offer on October 21. The Company anticipates closing the transaction in late November 2011.
The Company will present its Whole Home Solution Media Gateway and Media Player, its Multi-screen On Demand and Advertising solutions and industry-leading family of DOCSIS® 3.0 high density products at the SCTE show in Atlanta in November. These new products enable MSO customers to access their information and entertainment anywhere, anytime and across multiple screens. Also, during the quarter the Company announced that their ServAssure(TM) Advanced Performance Management Software platform now handles IPv4, IPv6 and dual-stack devices for data collection as well as real-time requests. ARRIS ServAssure currently manages over 80 million customer premises devices worldwide, or more than 30% of all existing in-home broadband devices.
"With respect to the fourth quarter 2011, we now project that revenues for the Company will be in the range of $270 to $290 million, with adjusted net income per diluted share in the range of $0.18 to $0.22 and GAAP net income per diluted share in the range of $0.08 to $0.12," said David Potts, ARRIS EVP & CFO. "The guidance excludes the impact of the BigBand acquisition, which is expected to have approximately a $(0.01) to $(0.03) effect in the fourth quarter on a non GAAP basis."
ARRIS management will conduct a conference call at 5:00 pm EDT, today, Wednesday, October 26, 2011, to discuss these results in detail. You may participate in this conference call by dialing 888-713-4216 or 617-213-4868 for international calls prior to the start of the call and providing the ARRIS Group, Inc. name, conference pass code 77404552 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 conference call. A replay of the conference call can be accessed approximately two hours after the call through October 31, 2011 by dialing 888-286-8010 or 617-801-6888 for international calls and using the pass code 24855789. A replay also will be made available for a period of 12 months following the conference call on ARRIS' website at http://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 converged IP video solutions, 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, GA, USA, ARRIS has R&D centers in Suwanee, GA; Beaverton, OR; Lisle, 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 http://www.arrisi.com.
Forward-looking statements:
Statements made in this press release, including those related to:
-- growth expectations and business prospects;
-- revenues and net income for the fourth quarter 2011, full year 2011 and
beyond;
-- the impact of the BigBand Networks acquisition
-- 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 fourth quarter 2011 as well as the general
outlook for 2011 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;
-- the acquisition of BigBand is subject to a number of factors including a
minimum tender requirement, shareholder approval, the fulfillment of
closing conditions and the absence of litigation preventing the closing;
in addition, all acquisitions involve integration and similar risks
relating to their ultimate performance; 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 June 30, 2011 Form 10-Q. 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 December September
30, June 30, 31, 31, 30,
2011 2011 2011 2010 2010
---- ---- ---- ---- ----
ASSETS
Current
assets:
Cash
and
cash
equivalents $354,659 $360,281 $358,747 $353,121 $351,894
Short-
term
investments,
at
fair
value 220,318 231,254 260,862 266,981 288,463
------- ------- ------- ------- -------
Total
cash,
cash
equivalents
and
short
term
investments 574,977 591,535 619,609 620,102 640,357
Restricted
cash 3,647 3,646 4,176 4,937 4,480
Accounts
receivable,
net 165,821 152,436 149,976 125,933 133,915
Other
receivables 5,296 406 5,275 6,528 2,654
Inventories,
net 116,769 113,020 105,787 101,763 89,203
Prepaids 10,692 10,272 12,115 9,237 8,934
Current
deferred
income
tax
assets 24,239 22,681 20,450 19,819 28,585
Other
current
assets 21,695 25,216 33,535 33,054 28,347
------ ------ ------ ------ ------
Total
current
assets 923,136 919,212 950,923 921,373 936,475
Property,
plant
and
equipment,
net 57,619 57,100 56,617 56,306 56,816
Goodwill 233,430 233,440 233,471 234,964 235,109
Intangible
assets,
net 141,784 150,728 159,672 168,616 177,560
Investments 47,221 34,237 32,787 31,015 29,591
Noncurrent
deferred
income
tax
assets 9,637 9,839 10,183 6,293 6,560
Other
assets 5,400 5,878 5,798 5,520 6,129
----- ----- ----- ----- -----
$1,418,227 $1,410,434 $1,449,451 $1,424,087 $1,448,240
========== ========== ========== ========== ==========
LIABILITIES
AND
STOCKHOLDERS'
EQUITY
Current
liabilities:
Accounts
payable $38,918 $27,825 $35,796 $50,736 $52,011
Accrued
compensation,
benefits
and
related
taxes 25,320 20,832 26,278 28,778 25,913
Accrued
warranty 2,933 3,300 2,931 2,945 3,504
Deferred
revenue 39,094 47,166 43,019 31,625 36,029
Current
portion
of
long-
term
debt - - - - 12
Other
accrued
liabilities 19,653 17,805 17,594 18,847 25,891
------ ------ ------ ------ ------
Total
current
liabilities 125,918 116,928 125,618 132,931 143,360
Long-
term
debt,
net
of
current
portion 206,825 208,336 205,447 202,615 204,053
Accrued
pension 17,989 17,730 17,472 17,213 17,383
Noncurrent
income
taxes
payable 22,471 21,844 21,844 17,702 16,509
Noncurrent
deferred
income
tax
liabilities 21,117 24,808 25,827 29,151 32,193
Other
noncurrent
liabilities 16,253 17,367 18,271 15,406 14,926
------ ------ ------ ------ ------
Total
liabilities 410,573 407,013 414,479 415,018 428,424
Stockholders'
equity:
Preferred
stock - - - - -
Common
stock 1,446 1,443 1,438 1,409 1,406
Capital
in
excess
of
par
value 1,237,852 1,228,729 1,219,615 1,206,157 1,199,184
Treasury
stock
at
cost (220,034) (202,933) (145,286) (145,286) (115,248)
Unrealized
gain
(loss)
on
marketable
securities 26 1,530 1,244 392 (374)
Unfunded
pension
liability (5,813) (5,813) (5,813) (5,813) (6,041)
Accumulated
deficit (5,639) (19,351) (36,042) (47,606) (58,927)
Cumulative
translation
adjustments (184) (184) (184) (184) (184)
---- ---- ---- ---- ----
Total
stockholders'
equity 1,007,654 1,003,421 1,034,972 1,009,069 1,019,816
--------- --------- --------- --------- ---------
$1,418,227 $1,410,434 $1,449,451 $1,424,087 $1,448,240
========== ========== ========== ========== ==========
ARRIS GROUP, INC.
PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
For the Three
Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
2011 2010 2011 2010
---- ---- ---- ----
Net sales $274,374 $274,286 $807,609 $821,338
Cost of sales 174,250 172,299 503,641 493,562
------- ------- ------- -------
Gross margin 100,124 101,987 303,968 327,776
Operating
expenses:
Selling,
general, and
administrative
expenses 35,695 33,913 108,401 103,489
Research and
development
expenses 36,065 35,138 108,734 105,041
Restructuring
charges 969 - 969 73
Amortization
of intangible
assets 8,944 8,970 26,832 27,013
81,673 78,021 244,936 235,616
------ ------ ------- -------
Operating
income 18,451 23,966 59,032 92,160
Other expense
(income):
Interest
expense 4,277 4,533 12,682 13,728
Loss (gain) on
investments 253 (369) (504) (401)
Loss (gain) on
foreign
currency (841) 94 126 283
Interest
income (775) (399) (2,439) (1,468)
Loss (gain) on
debt
redemption 19 (263) 19 (378)
Other (income)
expense, net (150) 280 (682) 107
---- --- ---- ---
Income from
continuing
operations
before income
taxes 15,668 20,090 49,830 80,289
Income tax
expense 1,955 6,048 7,863 27,482
----- ------
Net income $13,713 $14,042 $41,967 $52,807
======= ======= ======= =======
Net income per
common share:
Basic $0.11 $0.11 $0.35 $0.42
===== ===== ===== =====
Diluted $0.11 $0.11 $0.34 $0.41
===== ===== ===== =====
Weighted
average
common
shares:
Basic 119,283 125,237 121,115 125,927
======= ======= ======= =======
Diluted 121,237 127,638 123,549 129,103
======= ======= ======= =======
ARRIS GROUP, INC.
PRELIMINARY CONSOLIDATED STATEMENTS OF CASH
FLOWS
(in thousands)
(unaudited)
For the Three For the Nine
Months Months
Ended September Ended September
30, 30,
---------------- ----------------
2011 2010 2011 2010
---- ---- ---- ----
Operating
Activities:
Net
income $13,713 $14,042 $41,967 $52,807
Depreciation 5,882 5,837 17,550 16,893
Amortization
of
intangible
assets 8,944 8,969 26,832 27,013
Amortization
of
deferred
finance
fees 161 170 487 527
Non-
cash
interest
expense 2,883 2,781 8,604 8,548
Deferred
income
tax
provision
(benefit) (4,084) 4,939 (15,487) 2,598
Stock
compensation
expense 5,738 5,785 16,947 16,058
Provision
for
doubtful
accounts (1) (209) (1) 83
Loss
(gain)
on
debt
retirement 19 (263) 19 (378)
Loss
(gain)
on
disposal
of
fixed
assets (27) 337 6 369
Loss
(gain)
on
investments 253 (370) (504) (401)
Excess
tax
benefits
from
stock-
based
compensation
plans 258 (36) (2,989) (2,683)
Changes
in
operating
assets
&
liabilities,
net of
effects
of
acquisitions
and
disposals:
Accounts
receivable (13,384) 5,967 (39,887) 9,710
Other
receivables (6,134) 3,930 (17) 2,760
Inventory (3,749) (10,373) (15,006) 6,648
Income
taxes
payable/
recoverable 5,362 (11,165) 17,953 (14,173)
Accounts
payable
and
accrued
liabilities 9,148 (22,603) (6,332) (42,226)
Other,
net (520) 4,796 2,129 11,788
---- ----- ----- ------
Net
cash
provided
by
operating
activities 24,462 12,534 52,271 95,941
Investing
Activities:
Purchases
of
investments (85,263) (100,461) (228,104) (331,547)
Disposals
of
investments 80,796 104,760 260,227 159,914
Purchases
of
property
&
equipment,
net (6,401) (6,862) (18,948) (17,127)
Cash
proceeds
from
sale
of
property
&
equipment 27 - 70 243
--- --- --- ---
Net
cash
provided
by
(used
in)
investing
activities (10,841) (2,563) 13,245 (188,517)
Financing
Activities:
Payment
of debt
obligations - (38) - (112)
Early
redemption
of
long-
term
debt (4,984) (13,531) (4,984) (18,331)
Repurchase
of
common
stock (17,101) (15,603) (74,748) (39,288)
Excess
income
tax
benefits
from
stock-
based
compensation
plans (258) 36 2,989 2,683
Repurchase
of
shares
to
satisfy
employee
tax
withholdings (15) 3 (8,260) (6,422)
Fees
and
proceeds
from
issuance
of
common
stock,
net 3,115 124 21,025 5,375
----- --- ------ -----
Net
cash
used
in
financing
activities (19,243) (29,009) (63,978) (56,095)
Net
increase
(decrease)
in
cash
and
cash
equivalents (5,622) (19,038) - 1,538 (148,671)
Cash
and
cash
equivalents
at
beginning
of
period 360,281 370,932 353,121 500,565
------- ------- ------- -------
Cash
and
cash
equivalents
at end
of
period $354,659 $351,894 $354,659 $351,894
======== ======== ======== ========
ARRIS GROUP, INC.
PRELIMINARY SUPPLEMENTAL NET INCOME RECONCILIATION
(in thousands, except per share data) (unaudited)
(in
thousands,
except per
share data) Q1 2011 Q2 2011 Q3 2011 YTD 2011
------- ------- ------- --------
Per Per Per Per
Diluted Diluted Diluted Diluted
Amount Share Amount Share Amount Share Amount Share
------ ----- ------ ----- ------ ----- ------ -----
Net income $11,564 $0.09 $16,690 $0.13 $13,713 $0.11 $41,967 $0.34
Highlighted items:
Impacting gross
margin:
Stock
compensation
expense 437 - 557 - 525 - 1,519 0.01
Impacting operating
expenses:
Acquisition
costs,
restructuring
and other - - - 1,444 0.01 1,444 0.01
Amortization
of
intangible
assets 8,944 0.07 8,944 0.07 8,944 0.07 26,832 0.22
Stock
compensation
expense 4,847 0.04 5,368 0.04 5,213 0.04 15,428 0.12
Impacting other
(income) /expense:
Non-cash
interest
expense 2,832 0.02 2,889 0.02 2,883 0.02 8,604 0.07
Loss (gain)
on
retirement
of debt - - - 19 - 19 -
Impacting income tax
expense:
Adjustments
of income
tax
valuation
allowances,
research &
development
credits and
other (3,583) (0.03) - - (2,335) (0.02) (5,918) (0.05)
Tax related
to
highlighted
items above (5,024) (0.04) (4,915) (0.04) (5,265) (0.04) (15,204) (0.12)
Total
highlighted
items 8,453 0.07 12,843 0.10 11,428 0.09 32,724 0.26
----- ---- ------ ---- ------ ---- ------ ----
Net income
excluding
highlighted
items $20,017 $0.16 $29,533 $0.24 $25,141 $0.21 $74,691 $0.60
======= ===== ======= ===== ======= ===== ======= =====
Weighted average
common shares -
diluted 125,732 123,711 121,237 123,549
======= ======= ======= =======
Q1 2010 Q2 2010 Q3 2010 YTD 2010
------- ------- ------- --------
Per Per Per Per
Diluted Diluted Diluted Diluted
Amount Share Amount Share Amount Share Amount Share
------ ----- ------ ----- ------ ----- ------ -----
Net income $18,991 $0.15 $19,774 $0.15 $14,042 $0.11 $52,807 $0.41
Highlighted items:
Impacting gross
margin:
Stock
compensation
expense 433 - 481 - 491 - 1,405 0.01
Impacting operating
expenses:
Acquisition
costs,
restructuring
and other 52 - 21 - - - 73 -
Amortization
of
intangible
assets 9,022 0.07 9,021 0.07 8,970 0.07 27,013 0.21
Stock
compensation
expense 4,088 0.03 5,271 0.04 5,294 0.04 14,653 0.11
Impacting other
(income) /expense:
Non-cash
interest
expense 2,883 0.02 2,884 0.02 2,781 0.02 8,548 0.07
Loss (gain)
on
retirement
of debt - - (115) - (263) - (378) -
Impacting income tax
expense:
Adjustments
of income
tax
valuation
allowances,
research &
development
credits and
other 1,222 0.01 (351) - (1,040) (0.01) (169) -
Tax related
to
highlighted
items above (5,505) (0.04) (6,170) (0.05) (6,133) (0.05) (17,808) (0.14)
Total
highlighted
items 12,195 0.09 11,044 0.09 10,100 0.08 33,337 0.26
------ ---- ------ ---- ------ ---- ------ ----
Net income
excluding
highlighted
items $31,186 $0.24 $30,818 $0.24 $24,142 $0.19 $86,144 $0.67
======= ===== ======= ===== ======= ===== ======= =====
Weighted average
common shares -
diluted 129,975 129,717 127,638 129,103
======= ======= ======= =======
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 2011 and 2010, income tax expense adjustments were recorded
for state valuation allowances and research and development tax credits.
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.
SOURCE ARRIS Group, Inc.
ARRIS Group, Inc.
CONTACT: Jim Bauer, Investor Relations, +1-678-473-2647, jim.bauer@arrisi.com
Web Site: http://www.arrisi.com
ARRIS Announces Preliminary and Unaudited Third Quarter 2011 Results
SUWANEE, Ga., Oct. 26, 2011 /PRNewswire/ -- ARRIS Group, Inc. (NASDAQ: ARRS),today announced preliminary and unaudited financial results for the third quarter 2011.
Revenues in the third quarter 2011 were $274.4 million as compared to third quarter 2010 revenues of $274.3 million and as compared to second quarter 2011 revenues of $265.8 million. Through the first three quarters of 2011 and 2010, revenues were $807.6 million and $821.3 million, respectively.
Adjusted net income (a non-GAAP measure) in the third quarter 2011 was $0.21 per diluted share, compared to $0.19 per diluted share for the third quarter 2010 and $0.24 per diluted share for the second quarter 2011. Year to date, adjusted net income was $0.60 per diluted share for 2011 as compared to $0.67 per diluted share in 2010.
GAAP net income in the third quarter 2011 was $0.11 per diluted share, as compared to third quarter 2010 GAAP net income of $0.11 per diluted share and second quarter 2011 GAAP net income of $0.13 per diluted share. Year to date, GAAP net income was $0.34 per diluted share in 2011 as compared to GAAP net income of $0.41 per diluted share in 2010. Significant GAAP items that have been excluded in computing adjusted net income and adjusted net income per diluted share include amortization of intangible assets, equity compensation, non-cash interest expense, restructuring charges and acquisition costs, 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 (http://www.arrisi.com).
Gross margin for the third quarter 2011 was 36.5%, which compares to the third quarter 2010 gross margin of 37.2% and the second quarter 2011 gross margin of 40.2%.
The Company ended the third quarter 2011 with $590.6 million of cash resources, which includes $575.0 million of cash, cash equivalents and short-term investments, and $15.6 million of long-term marketable security investments, as compared to $591.5 million, in the aggregate, at the end of the second quarter 2011. During the third quarter 2011, the Company repurchased approximately 1.6 million shares of ARRIS common stock for $17.1 million and also repurchased $5.0 million face amount of Convertible Debt. Year to date, the Company has repurchased 6.7 million shares for $74.7 million, and $5.0 million face amount of Convertible Debt. The Company generated $24.5 million of cash from operating activities during the third quarter 2011 and $52.3 million through the first nine months of 2011, which compares to $12.5 million and $95.9 million generated during the same periods in 2010, respectively.
Order backlog at the end of the third quarter 2011 was $155.3 million as compared to $119.6 million and $154.2 million at the end of the third quarter 2010 and the second quarter 2011, respectively. The Company's book-to-bill ratio in the third quarter 2011 was 1.00 as compared to the third quarter 2010 of 0.80 and the second quarter 2011 of 0.91.
"Our third quarter results were within previous guidance and reflect continuing demand for our market leading products," said Bob Stanzione, ARRIS Chairman & CEO. "We now look forward to completing the acquisition of BigBand Networks and growing our current business to include a strong video product suite. The BigBand portfolio joins a host of new ARRIS products gaining traction in the industry and we believe that we are positioned well for the future."
On October 11, 2011, the Company announced its intention to purchase BigBand Networks and launched a Tender Offer on October 21. The Company anticipates closing the transaction in late November 2011.
The Company will present its Whole Home Solution Media Gateway and Media Player, its Multi-screen On Demand and Advertising solutions and industry-leading family of DOCSIS® 3.0 high density products at the SCTE show in Atlanta in November. These new products enable MSO customers to access their information and entertainment anywhere, anytime and across multiple screens. Also, during the quarter the Company announced that their ServAssure(TM) Advanced Performance Management Software platform now handles IPv4, IPv6 and dual-stack devices for data collection as well as real-time requests. ARRIS ServAssure currently manages over 80 million customer premises devices worldwide, or more than 30% of all existing in-home broadband devices.
"With respect to the fourth quarter 2011, we now project that revenues for the Company will be in the range of $270 to $290 million, with adjusted net income per diluted share in the range of $0.18 to $0.22 and GAAP net income per diluted share in the range of $0.08 to $0.12," said David Potts, ARRIS EVP & CFO. "The guidance excludes the impact of the BigBand acquisition, which is expected to have approximately a $(0.01) to $(0.03) effect in the fourth quarter on a non GAAP basis."
ARRIS management will conduct a conference call at 5:00 pm EDT, today, Wednesday, October 26, 2011, to discuss these results in detail. You may participate in this conference call by dialing 888-713-4216 or 617-213-4868 for international calls prior to the start of the call and providing the ARRIS Group, Inc. name, conference pass code 77404552 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 conference call. A replay of the conference call can be accessed approximately two hours after the call through October 31, 2011 by dialing 888-286-8010 or 617-801-6888 for international calls and using the pass code 24855789. A replay also will be made available for a period of 12 months following the conference call on ARRIS' website at http://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 converged IP video solutions, 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, GA, USA, ARRIS has R&D centers in Suwanee, GA; Beaverton, OR; Lisle, 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 http://www.arrisi.com.
Forward-looking statements:
Statements made in this press release, including those related to:
-- growth expectations and business prospects;
-- revenues and net income for the fourth quarter 2011, full year 2011 and
beyond;
-- the impact of the BigBand Networks acquisition
-- 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 fourth quarter 2011 as well as the general
outlook for 2011 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;
-- the acquisition of BigBand is subject to a number of factors including a
minimum tender requirement, shareholder approval, the fulfillment of
closing conditions and the absence of litigation preventing the closing;
in addition, all acquisitions involve integration and similar risks
relating to their ultimate performance; 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 June 30, 2011 Form 10-Q. 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 December September
30, June 30, 31, 31, 30,
2011 2011 2011 2010 2010
---- ---- ---- ---- ----
ASSETS
Current
assets:
Cash
and
cash
equivalents $354,659 $360,281 $358,747 $353,121 $351,894
Short-
term
investments,
at
fair
value 220,318 231,254 260,862 266,981 288,463
------- ------- ------- ------- -------
Total
cash,
cash
equivalents
and
short
term
investments 574,977 591,535 619,609 620,102 640,357
Restricted
cash 3,647 3,646 4,176 4,937 4,480
Accounts
receivable,
net 165,821 152,436 149,976 125,933 133,915
Other
receivables 5,296 406 5,275 6,528 2,654
Inventories,
net 116,769 113,020 105,787 101,763 89,203
Prepaids 10,692 10,272 12,115 9,237 8,934
Current
deferred
income
tax
assets 24,239 22,681 20,450 19,819 28,585
Other
current
assets 21,695 25,216 33,535 33,054 28,347
------ ------ ------ ------ ------
Total
current
assets 923,136 919,212 950,923 921,373 936,475
Property,
plant
and
equipment,
net 57,619 57,100 56,617 56,306 56,816
Goodwill 233,430 233,440 233,471 234,964 235,109
Intangible
assets,
net 141,784 150,728 159,672 168,616 177,560
Investments 47,221 34,237 32,787 31,015 29,591
Noncurrent
deferred
income
tax
assets 9,637 9,839 10,183 6,293 6,560
Other
assets 5,400 5,878 5,798 5,520 6,129
----- ----- ----- ----- -----
$1,418,227 $1,410,434 $1,449,451 $1,424,087 $1,448,240
========== ========== ========== ========== ==========
LIABILITIES
AND
STOCKHOLDERS'
EQUITY
Current
liabilities:
Accounts
payable $38,918 $27,825 $35,796 $50,736 $52,011
Accrued
compensation,
benefits
and
related
taxes 25,320 20,832 26,278 28,778 25,913
Accrued
warranty 2,933 3,300 2,931 2,945 3,504
Deferred
revenue 39,094 47,166 43,019 31,625 36,029
Current
portion
of
long-
term
debt - - - - 12
Other
accrued
liabilities 19,653 17,805 17,594 18,847 25,891
------ ------ ------ ------ ------
Total
current
liabilities 125,918 116,928 125,618 132,931 143,360
Long-
term
debt,
net
of
current
portion 206,825 208,336 205,447 202,615 204,053
Accrued
pension 17,989 17,730 17,472 17,213 17,383
Noncurrent
income
taxes
payable 22,471 21,844 21,844 17,702 16,509
Noncurrent
deferred
income
tax
liabilities 21,117 24,808 25,827 29,151 32,193
Other
noncurrent
liabilities 16,253 17,367 18,271 15,406 14,926
------ ------ ------ ------ ------
Total
liabilities 410,573 407,013 414,479 415,018 428,424
Stockholders'
equity:
Preferred
stock - - - - -
Common
stock 1,446 1,443 1,438 1,409 1,406
Capital
in
excess
of
par
value 1,237,852 1,228,729 1,219,615 1,206,157 1,199,184
Treasury
stock
at
cost (220,034) (202,933) (145,286) (145,286) (115,248)
Unrealized
gain
(loss)
on
marketable
securities 26 1,530 1,244 392 (374)
Unfunded
pension
liability (5,813) (5,813) (5,813) (5,813) (6,041)
Accumulated
deficit (5,639) (19,351) (36,042) (47,606) (58,927)
Cumulative
translation
adjustments (184) (184) (184) (184) (184)
---- ---- ---- ---- ----
Total
stockholders'
equity 1,007,654 1,003,421 1,034,972 1,009,069 1,019,816
--------- --------- --------- --------- ---------
$1,418,227 $1,410,434 $1,449,451 $1,424,087 $1,448,240
========== ========== ========== ========== ==========
ARRIS GROUP, INC.
PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
For the Three
Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
2011 2010 2011 2010
---- ---- ---- ----
Net sales $274,374 $274,286 $807,609 $821,338
Cost of sales 174,250 172,299 503,641 493,562
------- ------- ------- -------
Gross margin 100,124 101,987 303,968 327,776
Operating
expenses:
Selling,
general, and
administrative
expenses 35,695 33,913 108,401 103,489
Research and
development
expenses 36,065 35,138 108,734 105,041
Restructuring
charges 969 - 969 73
Amortization
of intangible
assets 8,944 8,970 26,832 27,013
81,673 78,021 244,936 235,616
------ ------ ------- -------
Operating
income 18,451 23,966 59,032 92,160
Other expense
(income):
Interest
expense 4,277 4,533 12,682 13,728
Loss (gain) on
investments 253 (369) (504) (401)
Loss (gain) on
foreign
currency (841) 94 126 283
Interest
income (775) (399) (2,439) (1,468)
Loss (gain) on
debt
redemption 19 (263) 19 (378)
Other (income)
expense, net (150) 280 (682) 107
---- --- ---- ---
Income from
continuing
operations
before income
taxes 15,668 20,090 49,830 80,289
Income tax
expense 1,955 6,048 7,863 27,482
----- ------
Net income $13,713 $14,042 $41,967 $52,807
======= ======= ======= =======
Net income per
common share:
Basic $0.11 $0.11 $0.35 $0.42
===== ===== ===== =====
Diluted $0.11 $0.11 $0.34 $0.41
===== ===== ===== =====
Weighted
average
common
shares:
Basic 119,283 125,237 121,115 125,927
======= ======= ======= =======
Diluted 121,237 127,638 123,549 129,103
======= ======= ======= =======
ARRIS GROUP, INC.
PRELIMINARY CONSOLIDATED STATEMENTS OF CASH
FLOWS
(in thousands)
(unaudited)
For the Three For the Nine
Months Months
Ended September Ended September
30, 30,
---------------- ----------------
2011 2010 2011 2010
---- ---- ---- ----
Operating
Activities:
Net
income $13,713 $14,042 $41,967 $52,807
Depreciation 5,882 5,837 17,550 16,893
Amortization
of
intangible
assets 8,944 8,969 26,832 27,013
Amortization
of
deferred
finance
fees 161 170 487 527
Non-
cash
interest
expense 2,883 2,781 8,604 8,548
Deferred
income
tax
provision
(benefit) (4,084) 4,939 (15,487) 2,598
Stock
compensation
expense 5,738 5,785 16,947 16,058
Provision
for
doubtful
accounts (1) (209) (1) 83
Loss
(gain)
on
debt
retirement 19 (263) 19 (378)
Loss
(gain)
on
disposal
of
fixed
assets (27) 337 6 369
Loss
(gain)
on
investments 253 (370) (504) (401)
Excess
tax
benefits
from
stock-
based
compensation
plans 258 (36) (2,989) (2,683)
Changes
in
operating
assets
&
liabilities,
net of
effects
of
acquisitions
and
disposals:
Accounts
receivable (13,384) 5,967 (39,887) 9,710
Other
receivables (6,134) 3,930 (17) 2,760
Inventory (3,749) (10,373) (15,006) 6,648
Income
taxes
payable/
recoverable 5,362 (11,165) 17,953 (14,173)
Accounts
payable
and
accrued
liabilities 9,148 (22,603) (6,332) (42,226)
Other,
net (520) 4,796 2,129 11,788
---- ----- ----- ------
Net
cash
provided
by
operating
activities 24,462 12,534 52,271 95,941
Investing
Activities:
Purchases
of
investments (85,263) (100,461) (228,104) (331,547)
Disposals
of
investments 80,796 104,760 260,227 159,914
Purchases
of
property
&
equipment,
net (6,401) (6,862) (18,948) (17,127)
Cash
proceeds
from
sale
of
property
&
equipment 27 - 70 243
--- --- --- ---
Net
cash
provided
by
(used
in)
investing
activities (10,841) (2,563) 13,245 (188,517)
Financing
Activities:
Payment
of debt
obligations - (38) - (112)
Early
redemption
of
long-
term
debt (4,984) (13,531) (4,984) (18,331)
Repurchase
of
common
stock (17,101) (15,603) (74,748) (39,288)
Excess
income
tax
benefits
from
stock-
based
compensation
plans (258) 36 2,989 2,683
Repurchase
of
shares
to
satisfy
employee
tax
withholdings (15) 3 (8,260) (6,422)
Fees
and
proceeds
from
issuance
of
common
stock,
net 3,115 124 21,025 5,375
----- --- ------ -----
Net
cash
used
in
financing
activities (19,243) (29,009) (63,978) (56,095)
Net
increase
(decrease)
in
cash
and
cash
equivalents (5,622) (19,038) - 1,538 (148,671)
Cash
and
cash
equivalents
at
beginning
of
period 360,281 370,932 353,121 500,565
------- ------- ------- -------
Cash
and
cash
equivalents
at end
of
period $354,659 $351,894 $354,659 $351,894
======== ======== ======== ========
ARRIS GROUP, INC.
PRELIMINARY SUPPLEMENTAL NET INCOME RECONCILIATION
(in thousands, except per share data) (unaudited)
(in
thousands,
except per
share data) Q1 2011 Q2 2011 Q3 2011 YTD 2011
------- ------- ------- --------
Per Per Per Per
Diluted Diluted Diluted Diluted
Amount Share Amount Share Amount Share Amount Share
------ ----- ------ ----- ------ ----- ------ -----
Net income $11,564 $0.09 $16,690 $0.13 $13,713 $0.11 $41,967 $0.34
Highlighted items:
Impacting gross
margin:
Stock
compensation
expense 437 - 557 - 525 - 1,519 0.01
Impacting operating
expenses:
Acquisition
costs,
restructuring
and other - - - 1,444 0.01 1,444 0.01
Amortization
of
intangible
assets 8,944 0.07 8,944 0.07 8,944 0.07 26,832 0.22
Stock
compensation
expense 4,847 0.04 5,368 0.04 5,213 0.04 15,428 0.12
Impacting other
(income) /expense:
Non-cash
interest
expense 2,832 0.02 2,889 0.02 2,883 0.02 8,604 0.07
Loss (gain)
on
retirement
of debt - - - 19 - 19 -
Impacting income tax
expense:
Adjustments
of income
tax
valuation
allowances,
research &
development
credits and
other (3,583) (0.03) - - (2,335) (0.02) (5,918) (0.05)
Tax related
to
highlighted
items above (5,024) (0.04) (4,915) (0.04) (5,265) (0.04) (15,204) (0.12)
Total
highlighted
items 8,453 0.07 12,843 0.10 11,428 0.09 32,724 0.26
----- ---- ------ ---- ------ ---- ------ ----
Net income
excluding
highlighted
items $20,017 $0.16 $29,533 $0.24 $25,141 $0.21 $74,691 $0.60
======= ===== ======= ===== ======= ===== ======= =====
Weighted average
common shares -
diluted 125,732 123,711 121,237 123,549
======= ======= ======= =======
Q1 2010 Q2 2010 Q3 2010 YTD 2010
------- ------- ------- --------
Per Per Per Per
Diluted Diluted Diluted Diluted
Amount Share Amount Share Amount Share Amount Share
------ ----- ------ ----- ------ ----- ------ -----
Net income $18,991 $0.15 $19,774 $0.15 $14,042 $0.11 $52,807 $0.41
Highlighted items:
Impacting gross
margin:
Stock
compensation
expense 433 - 481 - 491 - 1,405 0.01
Impacting operating
expenses:
Acquisition
costs,
restructuring
and other 52 - 21 - - - 73 -
Amortization
of
intangible
assets 9,022 0.07 9,021 0.07 8,970 0.07 27,013 0.21
Stock
compensation
expense 4,088 0.03 5,271 0.04 5,294 0.04 14,653 0.11
Impacting other
(income) /expense:
Non-cash
interest
expense 2,883 0.02 2,884 0.02 2,781 0.02 8,548 0.07
Loss (gain)
on
retirement
of debt - - (115) - (263) - (378) -
Impacting income tax
expense:
Adjustments
of income
tax
valuation
allowances,
research &
development
credits and
other 1,222 0.01 (351) - (1,040) (0.01) (169) -
Tax related
to
highlighted
items above (5,505) (0.04) (6,170) (0.05) (6,133) (0.05) (17,808) (0.14)
Total
highlighted
items 12,195 0.09 11,044 0.09 10,100 0.08 33,337 0.26
------ ---- ------ ---- ------ ---- ------ ----
Net income
excluding
highlighted
items $31,186 $0.24 $30,818 $0.24 $24,142 $0.19 $86,144 $0.67
======= ===== ======= ===== ======= ===== ======= =====
Weighted average
common shares -
diluted 129,975 129,717 127,638 129,103
======= ======= ======= =======
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 2011 and 2010, income tax expense adjustments were recorded
for state valuation allowances and research and development tax credits.
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.
SOURCE ARRIS Group, Inc.
ARRIS Group, Inc.
CONTACT: Jim Bauer, Investor Relations, +1-678-473-2647, jim.bauer@arrisi.com
Web Site: http://www.arrisi.com