Press Release

Printer Friendly Version  View printer-friendly version
<< Back
ARRIS Announces Preliminary and Unaudited First Quarter 2011 Results

SUWANEE, Ga., April 27, 2011 /PRNewswire via COMTEX/ --

ARRIS Group, Inc. (NASDAQ: ARRS), today announced preliminary and unaudited financial results for the first quarter 2011.

Revenues in the first quarter 2011 were $267.4 million as compared to first quarter 2010 revenues of $266.7 million and as compared to fourth quarter 2010 revenues of $266.2 million.

Adjusted net income (a non-GAAP measure) in the first quarter 2011 was $0.16 per diluted share, compared to $0.24 per diluted share for the first quarter 2010 and $0.19 per diluted share for the fourth quarter 2010.

GAAP net income in the first quarter 2011 was $0.09 per diluted share, as compared to first quarter 2010 GAAP net income of $0.15 per diluted share and fourth quarter 2010 GAAP net income of $0.09 per diluted share. 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 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 2011 was 36.3%, which compares to the first quarter 2010 gross margin of 42.2% and the fourth quarter 2010 gross margin of 36.2%.

The Company ended the first quarter 2011 with $619.6 million of cash, cash equivalents and short-term investments, down in the aggregate by approximately $41.5 million from the end of the first quarter 2010, reflecting approximately $93 million of repurchases of stock and debt retirement in 2010, and down $0.5 million from the end of the fourth quarter 2010. The Company used $3.6 million of cash for operating activities during the first quarter 2011, which compares to $48.2 million generated during the same period in 2010.

Order backlog at the end of the first quarter 2011 was $177.5 million as compared to $195.1 million and $140.4 million at the end of the first quarter 2010 and the fourth quarter 2010, respectively. The Company's book-to-bill ratio in the first quarter 2011 was 1.14 as compared to the first quarter 2010 of 1.19 and the fourth quarter 2010 of 1.08.

"First quarter financial results came in within our range of guidance," said Bob Stanzione, ARRIS Chairman & CEO. "I am very pleased with the progress we are making with customers for our new higher density C4 line cards which will be shipping in the second quarter. Additionally, the recent announcement of our first customer for our new IP Home Gateway product is an indicator of our traction in the strategy to expand into the video based products market."

During the quarter the Company announced a number of new products as well as a resale agreement with Ruckus Wireless which the Company expects will ramp in the second half of 2011. In February, the Company announced that its Whole Home Solution Media Gateway will be offered by Oregon-based MSO BendBroadband throughout its network. The ARRIS Whole Home solution consists of the ARRIS Media Gateway, a converged multi-services platform that provides integrated multimedia entertainment to the entire home, and ARRIS Media Players connected to each television. Also during the quarter the Company announced that the ARRIS VIPr(TM) video transcoding platform with Digital Video Broadcasting (DVB) functionality will be available in April. The transition from analog to digital continues to accelerate, expanding the addressable market for DVB-capable devices.

"With respect to the second quarter 2011, we now project that revenues for the Company will be in the range of $260 to $280 million, with adjusted net income per diluted share in the range of $0.16 to $0.20 and GAAP net income per diluted share in the range of $0.06 to $0.10," said David Potts, ARRIS EVP & CFO. "Our guidance reflects initial sales of our new C4 CMTS line card capacity upgrade which we anticipate will gain momentum in the second half of 2011, but also reflects higher than usual start-up expenditures related to new products."

ARRIS management will conduct a conference call at 5:00 pm EDT, today, Wednesday, April 27, 2011, to discuss these results in detail. You may participate in this conference call by dialing 888-713-4217 or 617-213-4869 for international calls prior to the start of the call and providing the ARRIS Group, Inc. name, conference pass code 99866058 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 Wednesday, May 4, 2011 by dialing 888-286-8010 or 617-801-6888 for international calls and using the pass code 42579746. 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 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, 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;
  • revenues and net income for the second quarter 2011, full year 2011 and beyond;
  • start up costs;
  • 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 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; 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, 2010. 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)

























March 31,


December 31,


September 30,


June 30,


March 31,



2011


2010


2010


2010


2010












ASSETS






















Current assets:











Cash and cash equivalents


$ 358,747


$ 353,121


$ 351,894


$ 370,932


$ 500,044

Short-term investments, at fair value


260,862


266,981


288,463


292,421


161,012

Total cash, cash equivalents and short term investments


619,609


620,102


640,357


663,353


661,056












Restricted cash


4,176


4,937


4,480


4,478


4,476

Accounts receivable, net


149,976


125,933


133,915


139,673


139,207

Other receivables


5,275


6,528


2,654


6,368


3,057

Inventories, net


105,787


101,763


89,203


78,830


79,907

Prepaids


12,115


9,237


8,934


10,196


10,546

Current deferred income tax assets


20,450


19,819


28,585


30,469


37,324

Income taxes recoverable


23,633


21,907


17,094


5,943


-

Other current assets


10,239


11,147


11,253


15,386


14,328

Total current assets


951,260


921,373


936,475


954,696


949,901












Property, plant and equipment, net


56,617


56,306


56,816


56,128


56,223

Goodwill


233,471


234,964


235,109


235,122


235,256

Intangible assets, net


159,672


168,616


177,560


186,529


195,551

Investments


32,787


31,015


29,591


29,485


25,435

Noncurrent deferred income tax assets


10,183


6,293


6,560


6,127


6,298

Other assets


5,798


5,520


6,129


6,755


8,050



$ 1,449,788


$ 1,424,087


$ 1,448,240


$ 1,474,842


$ 1,476,714























LIABILITIES AND STOCKHOLDERS' EQUITY






















Current liabilities:











Accounts payable


$ 35,796


$ 50,736


$ 52,011


$ 72,652


$ 44,523

Accrued compensation, benefits and related taxes


26,278


28,778


25,913


20,696


23,639

Accrued warranty


2,931


2,945


3,504


3,539


3,632

Deferred revenue


43,019


31,625


36,029


44,913


53,024

Current portion of long-term debt


-


-


12


50


87

Other accrued liabilities


17,594


18,847


25,891


24,476


42,978

Total current liabilities


125,618


132,931


143,360


166,326


167,883

Long-term debt, net of current portion


205,447


202,615


204,053


212,914


214,131

Accrued pension


17,472


17,213


17,383


17,058


16,733

Noncurrent income taxes payable


21,844


17,702


16,509


16,523


16,248

Noncurrent deferred income tax liabilities


25,827


29,151


32,193


28,705


33,577

Other noncurrent liabilities


18,271


15,406


14,926


15,704


16,871

Total liabilities


414,479


415,018


428,424


457,230


465,443












Stockholders' equity:











Preferred stock


-


-


-


-


-

Common stock


1,438


1,409


1,406


1,405


1,402

Capital in excess of par value


1,219,615


1,206,157


1,199,184


1,194,829


1,187,854

Treasury stock at cost


(145,286)


(145,286)


(115,248)


(99,645)


(79,019)

Unrealized gain (loss) on marketable securities


1,244


392


(374)


217


2

Unfunded pension liability


(5,813)


(5,813)


(6,041)


(6,041)


(6,041)

Accumulated deficit


(35,705)


(47,606)


(58,927)


(72,969)


(92,743)

Cumulative translation adjustments


(184)


(184)


(184)


(184)


(184)

Total stockholders' equity


1,035,309


1,009,069


1,019,816


1,017,612


1,011,271



$ 1,449,788


$ 1,424,087


$ 1,448,240


$ 1,474,842


$ 1,476,714

ARRIS GROUP, INC.

PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)






For the Three Months


Ended March 31,


2011


2010





Net sales

$ 267,436


$ 266,697

Cost of sales

170,490


154,186

Gross margin

96,946


112,511

Operating expenses:




Selling, general, and administrative expenses

36,838


35,117

Research and development expenses

36,040


34,365

Restructuring charges

-


52

Amortization of intangible assets

8,944


9,022


81,822


78,556

Operating income

15,124


33,955

Other expense (income):




Interest expense

4,225


4,430

Gain on investments

(570)


(146)

Loss (gain) on foreign currency

888


(268)

Interest income

(1,108)


(374)

Other (income) expense, net

(113)


(42)

Income from continuing operations before income taxes

11,802


30,355

Income tax expense (benefit)

(99)


11,364

Net income

$ 11,901


$ 18,991





Net income per common share:




Basic

$ 0.10


$ 0.15

Diluted

$ 0.09


$ 0.15





Weighted average common shares:




Basic

122,297


125,967

Diluted

125,732


129,975

ARRIS GROUP, INC.

PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)






For the Three Months







Ended March 31,







2011


2010











Operating Activities:







Net income


$ 11,901


$ 18,991




Depreciation


5,855


5,359




Amortization of intangible assets


8,944


9,021




Amortization of deferred finance fees


163


180




Non-cash interest expense


2,832


2,883




Deferred income tax provision (benefit)


(7,844)


(4,495)




Stock compensation expense


5,284


4,521




Provision for doubtful accounts


-


295




Loss on disposal of fixed assets


34


11




Gain on investments


(570)


(146)




Excess tax benefits from stock-based compensation plans


(3,700)


(2,486)



Changes in operating assets & liabilities, net of effects of acquisitions and disposals:








Accounts receivable


(24,043)


4,206




Other receivables


534


2,420




Inventory


(4,024)


15,944




Income taxes payable/recoverable


2,410


9,167




Accounts payable and accrued liabilities


(7,048)


(24,935)




Other, net


5,701


7,274





Net cash provided by (used in) operating activities


(3,571)


48,210











Investing Activities:







Purchases of investments


(99,361)


(42,436)



Disposals of investments


105,949


2,100



Purchases of property & equipment, net


(6,251)


(4,654)



Cash proceeds from sale of property & equipment


42


240





Net cash provided by (used in) investing activities


379


(44,750)











Financing Activities:







Payment of debt obligations


-


(37)



Repurchase of common stock


-


(3,059)



Excess income tax benefits from stock-based compensation plans


3,700


2,486



Repurchase of shares to satisfy employee tax withholdings


(8,245)


(5,993)



Fees and proceeds from issuance of common stock, net


13,363


2,622





Net cash provided by (used in) financing activities


8,818


(3,981)














Net increase (decrease) in cash and cash equivalents


5,626


(521)


Cash and cash equivalents at beginning of period


353,121


500,565


Cash and cash equivalents at end of period


$ 358,747


$ 500,044


ARRIS GROUP, INC.

PRELIMINARY SUPPLEMENTAL NET INCOME RECONCILIATION

(in thousands, except per share data)

(unaudited)





















Q1 2011


Q1 2010





Per Diluted




Per Diluted



Amount


Share


Amount


Share


Net income

$ 11,901


$ 0.09


$ 18,991


$ 0.15











Highlighted items:









Impacting gross margin:









Stock compensation expense

437


-


433


-











Impacting operating expenses:









Acquisition costs, restructuring and other

-


-


52


-


Amortization of intangible assets

8,944


0.07


9,022


0.07


Stock compensation expense

4,847


0.04


4,088


0.03











Impacting other (income) / expense:









Non-cash interest expense

2,832


0.02


2,883


0.02











Impacting income tax expense:









Adjustments of income tax valuation allowances, research & development credits and other

(3,583)


(0.03)


1,222


0.01











Tax related to highlighted items above

(5,024)


(0.04)


(5,505)


(0.04)











Total highlighted items

8,453


0.07


12,195


0.09


Net income excluding highlighted items

$ 20,354


$ 0.16


$ 31,186


$ 0.24











Weighted average common shares - diluted



125,732




129,975




















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 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.