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ARRIS Announces Preliminary and Unaudited Second Quarter 2009 Results

SUWANEE, Ga., July 30 /PRNewswire-FirstCall/ -- 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 second quarter 2009.

Revenues in the second quarter 2009 were $278.5 million, up 9.9% as compared to first quarter 2009 revenues of $253.5 million, and down 0.9% compared to second quarter 2008 revenues of $281.1 million. First half 2009 revenues were $532.0 million, down 4.1% as compared to $554.6 million for the same period in 2008.

Adjusted net income (a non GAAP measure) in the second quarter 2009 was $0.27 per diluted share, up 50% from $0.18 per diluted share in the first quarter 2009 and up 80% from $0.15 per diluted share in the second quarter of 2008.

GAAP net income in the second quarter 2009 was $0.18 per diluted share, up 80% as compared to the first quarter 2009 of $0.10 per diluted share, and up 200% as compared to the second quarter 2008 of $0.06 per diluted share. Significant GAAP items in the second quarter 2009 that have been excluded in computing adjusted net income and earnings per shares include: amortization of intangibles, equity compensation expense, and non-cash interest related to convertible debt. A reconciliation of adjusted earnings to GAAP earnings per share is attached to this release and also can be found on the Company's website (www.arrisi.com).

Gross margin in the second quarter 2009 was 42.1%, up significantly from both the first quarter 2009 of 37.7% and the second quarter 2008 of 33.0%. The improvement reflects strong CMTS and MCS product sales.

The Company ended the second quarter 2009 with $524 million of cash and short-term investments, up approximately $100 million from the end of the first quarter 2009 as a result of both strong earnings and lower working capital, in particular accounts receivable. The Company generated $94.3 million of cash from operating activities in the second quarter 2009, and $108.2 million through the first half of 2009. This amount compares to cash generated from operating activities of $40.9 million during the first half of 2008.

Order backlog at the end of the second quarter 2009 was $165.7 million and the Company's book to bill ratio in the second quarter was 1.04. These amounts compare to order backlog of $155.0 million and book to bill ratio of 1.16 in the first quarter of 2009.

"I deeply appreciate the trust that our customers have placed in ARRIS as their technology partner in today's challenging market. Our impressive second quarter performance speaks volumes as to the success of our new products and the value we bring to our customers," said Bob Stanzione, ARRIS Chairman & CEO. "Continual increases in worldwide internet traffic and the resultant customer need to augment network capacity to meet both consumer demand and competitive threats continue to cause me to be optimistic about our business. ARRIS is a healthy company operating in a healthy industry segment and we are well positioned for further growth as the general economy improves."

During the quarter the Company demonstrated its broad range of ARRIS wideband data and on-demand video products at the Japan Cable Show in Tokyo. The Japanese telecommunications market continues to be driven by intense bandwidth and data speed competition between cable operators, telcos and other access providers. Also during the quarter, the Company announced that it had concluded a series of interoperability test activities of its newest Video on Demand and Ad Insertion products with several technology companies. These products will help accelerate advertising revenue services for the cable industry.

"I am very pleased with our second quarter 2009 results, most notably our strong gross margins and cash generation. Our profitability has improved significantly. First half 2009 adjusted earnings were $0.45 per diluted share, up 67% or $0.18 per diluted share from the first half of 2008," said David Potts, ARRIS EVP & CFO. "With respect to the third quarter 2009, 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 $0.22 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 5:00pm EDT, today, Thursday, July 30, 2009, 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 passcode 14472969 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 Tuesday, August 4, 2009 by dialing 888-286-8010 or 617-801-6888 for international calls and using the passcode 48051208. 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 Atlanta, Georgia, USA, ARRIS has R&D centers in Atlanta; Chicago; Beaverton, Oregon; State College, Pennsylvania; Wallingford, Connecticut; 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:

    --  growth expectations and business prospects;
    --  third quarter and 2009 revenues and net income;
    --  expected sales levels and acceptance of new ARRIS products;

    --  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 third quarter as well as the general outlook
        for 2009 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;
    --  our customers operate in a capital intensive consumer based industry,
        and the current disruptions in the capital markets or changes in
        customer spending may adversely impact their ability or willingness
        to purchase the products that we offer; 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-Q for the quarter ended March 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)

                           June 30, March 31, Dec. 31,   Sept. 30,  June 30,
                            2009      2009      2008       2008      2008
                            ----      ----      ----       ----      ----

    ASSETS

    Current assets:
      Cash and cash
       equivalents      $476,846   $398,938   $409,894   $305,987   $290,266
      Short-term
       investments,
       at fair value      47,195     25,494     17,371     23,571      7,503
                          ------     ------     ------     ------      -----
        Total cash, cash
         equivalents and
         short-term
         investments     524,041    424,432    427,265    329,558    297,769

      Restricted cash      4,552      4,550      5,673      5,768      7,051
      Accounts
       receivable, net   128,482    155,792    159,443    180,367    178,178
      Other receivables    5,904      6,636      4,749      5,180      9,067
      Inventories, net   115,944    120,774    129,752    139,598    144,507
      Prepaids             7,700      6,994      8,004      5,156      5,305
      Current deferred
       income tax assets  41,166     49,027     44,004     42,714     47,412
      Other current
       assets             12,361     18,315     19,782     22,132     18,916
                          ------     ------     ------     ------     ------
        Total current
         Assets          840,150    786,520    798,672    730,473    708,205

    Property, plant and
     equipment, net       60,048     59,438     59,204     60,268     60,823
    Goodwill             231,684    231,684    231,684    449,418    452,398
    Intangible assets,
     net                 208,822    218,085    227,348    236,689    244,575
    Investments           10,317     14,593     14,681     15,086      9,937
    Noncurrent deferred
     income tax assets     3,870      3,771     12,157      3,988      4,256
    Other assets           6,251      5,483      6,576      7,173      9,488
                           -----      -----      -----      -----      -----
                      $1,361,142 $1,319,574 $1,350,322 $1,503,095 $1,489,682
                      ========== ========== ========== ========== ==========


    LIABILITIES AND
     STOCKHOLDERS' EQUITY

    Current liabilities:
      Accounts payable   $48,859    $44,422    $75,863    $54,304    $68,476
      Accrued compensation,
       benefits and
       related taxes      20,753     15,583     27,024     21,831     18,072
      Accrued warranty     5,185      5,306      5,652      6,354      7,566
      Deferred revenue    43,727     44,006     44,461     35,986     37,614
      Current portion of
       long-term debt        148        147        146        234        314
      Current deferred
       income tax liability  248        241      1,059          -          -
      Other accrued
       liabilities        35,852     31,922     25,410     30,205     26,884
                          ------     ------     ------     ------     ------
        Total current
         liabilities     154,772    141,627    179,615    148,914    158,926
    Long-term debt, net
     of current portion  205,710    203,080    211,870    209,340    206,865
    Accrued pension       19,665     19,289     18,820     10,622     11,362
    Noncurrent income tax
     payable              12,386     12,441      9,607     10,128      6,250
    Noncurrent deferred
     income tax liability 33,999     42,530     41,598     67,403     74,805
    Other noncurrent
     liabilities          15,094     14,391     15,343     18,088     18,694
                          ------     ------     ------     ------     ------
          Total
           liabilities   441,626    433,358    476,853    464,495    476,902

    Stockholders' equity:
      Preferred stock          -          -          -          -          -
      Common stock         1,379      1,368      1,362      1,360      1,358
      Capital in excess
       of par value    1,169,223  1,159,054  1,159,097  1,155,211  1,151,680
      Treasury stock
       at cost           (75,960)   (75,960)   (75,960)   (75,960)   (76,007)
      Unrealized gain
       (loss) on marketable
       securities           (161)      (372)      (274)      (128)        66
      Unfunded pension
       liability          (8,070)    (8,070)    (8,070)    (3,358)    (3,358)
      Accumulated
       deficit          (166,711)  (189,620)  (202,502)   (38,341)   (60,775)
      Cumulative
       translation
       adjustments          (184)      (184)      (184)      (184)      (184)
                            ----       ----       ----       ----       ----
        Total stockholders'
         equity          919,516    886,216    873,469  1,038,600  1,012,780
                         -------    -------    -------  ---------  ---------
                      $1,361,142 $1,319,574 $1,350,322 $1,503,095 $1,489,682
                      ========== ========== ========== ========== ==========



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

                              For the Three Months      For the Six Months
                                  Ended June 30,          Ended June 30,
                                  --------------          --------------
                                 2009        2008        2009        2008
                                 ----        ----        ----        ----

    Net sales                  $278,521    $281,110    $532,039    $554,616
    Cost of sales               161,241     188,226     319,249     376,484
                                -------     -------     -------     -------
      Gross margin              117,280      92,884     212,790     178,132
      Gross margin %               42.1%       33.0%       40.0%       32.1%
    Operating expenses:
      Selling, general, and
       administrative expenses   39,128      37,046      74,471      74,028
      Research and development
       expenses                  30,143      27,662      58,538      55,784
      Restructuring charges         592         175         712         580
      Amortization of intangible
       assets                     9,263      12,454      18,526      25,708
                                  -----      ------      ------      ------
                                 79,126      77,337     152,247     156,100
                                 ------      ------     -------     -------
    Operating income             38,154      15,547      60,543      22,032
    Other expense (income):
      Interest expense            4,278       4,291       8,765       8,312
      Loss (gain) on investments   (512)        171        (215)        173
      Loss (gain) on foreign
       currency                   1,570         350       2,528        (640)
      Interest income              (363)     (1,702)       (748)     (4,387)
      Gain on debt retirement         -           -      (4,151)          -
      Other (income) expense, net  (522)         65        (625)         29
                                   ----          --        ----          --
    Income from continuing
     operations before
     income taxes                33,703      12,372      54,989      18,545
      Income tax expense         10,794       4,543      19,198       6,887
                                 ------       -----      ------       -----
        Net income              $22,909      $7,829     $35,791     $11,658
                                =======      ======     =======     =======

    Net income per common share
      Basic                       $0.18       $0.06       $0.29       $0.09
                                  =====       =====       =====       =====
      Diluted                     $0.18       $0.06       $0.28       $0.09
                                  =====       =====       =====       =====

    Weighted average common
     shares:
      Basic                     124,412     122,741     123,849     126,752
                                =======     =======     =======     =======
      Diluted                   128,054     124,651     126,482     128,190
                                =======     =======     =======     =======



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

                                For the Three Months     For the Six Months
                                   Ended June 30,           Ended June 30,
                                   --------------          --------------
                                  2009        2008        2009        2008
                                  ----        ----        ----        ----

    Operating Activities:
      Net income                $22,909      $7,829     $35,791     $11,658
        Depreciation              5,135       5,132       9,962      10,095
        Amortization of
         intangible assets        9,263      12,454      18,526      25,708
        Stock compensation
         expense                  4,053       2,840       7,454       5,391
        Deferred income tax
         provision (benefit)       (762)      5,396       3,927        (993)
        Amortization of deferred
         finance fees               179         190         368         381
        Provision for doubtful
         accounts                   (16)          9         (10)        214
        Loss (gain) on investments (512)        171        (215)        173
        Loss (gain) on disposal
         of fixed assets             30          (2)         30          (2)
        Non-cash interest expense 2,718       2,657       5,536       5,262
        Gain on debt retirement       -           -      (4,152)          -
        Excess tax benefits from
         stock-based compensation
         plans                     (125)          -        (556)          -
      Changes in operating assets
       & liabilities, net of
       effects of acquisitions
       and disposals:
        Accounts receivable      27,326      (4,948)     30,971     (10,284)
        Other receivables           212      (2,993)     (1,820)     (4,737)
        Inventory                 4,830     (21,455)     13,808     (11,210)
        Income taxes payable      3,055      (3,895)      1,932      (5,629)
        Accounts payable and
         accrued liabilities     12,926      11,010     (22,863)     20,310
        Other, net                3,088      (3,975)      9,465      (5,402)
                                  -----      ------       -----      ------
          Net cash provided by
           operating activities  94,309      10,420     108,154      40,935

    Investing Activities:
      Purchases of property,
       plant, and equipment      (5,802)     (5,363)    (10,868)    (11,792)
      Cash paid for acquisition,
       net of cash acquired           -        (227)       (200)     (4,419)
      Cash proceeds from sale of
       property, plant & equipment    1          13           1         237
      Purchases of short-term-
       investments              (34,896)          -     (58,766)    (16,887)
      Disposals of short-term-
       investments               18,131      41,980      33,937      72,480
                                 ------      ------      ------      ------
          Net cash provided by
           (used in) investing
           activities           (22,566)     36,403     (35,896)     39,619

    Financing Activities:
      Payment of debt and
       capital lease obligations    (36)        (99)    (10,628)    (35,196)
      Repurchase of common stock      -           -           -     (75,960)
      Excess tax benefits from
       stock-based compensation
       plans                        125           -         556           -
      Repurchase of shares to
       satisfy minimum tax
       withholdings                (373)       (796)     (2,180)     (1,035)
      Fees and proceeds from
       issuance of common stock,
       net                        6,449         823       6,946      (1,894)
                                  -----         ---       -----      ------
          Net cash provided by
           (used in) financing
           activities             6,165         (72)     (5,306)   (114,085)

          Net increase (decrease)
           in cash and cash
           equivalents           77,908      46,751      66,952     (33,531)
    Cash and cash equivalents
     at beginning of period     398,938     243,515     409,894     323,797
                                -------     -------     -------     -------
    Cash and cash equivalents
     at end of period          $476,846    $290,266    $476,846    $290,266
                               ========    ========    ========    ========



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

                                      Q1 2009               Q2 2009
                                      -------               -------
                                          Per Diluted             Per Diluted
                                  Amount     Share      Amount       Share
                                  ------     -----      ------       -----
      Net income                 $12,882      $0.10     $22,909       $0.18

      Highlighted items:
        Impacting gross margin:
          Stock compensation
           expense                   303          -         366           -

        Impacting operating
         expenses:
          Restructuring charges      120          -         592           -
          Amortization of
           intangible assets       9,263       0.07       9,263        0.07
          Stock compensation
           expense                 3,098       0.02       3,687        0.03

        Impacting other
         (income) / expense:
          Non-cash interest
           expense                 2,818       0.02       2,718        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               1,455       0.01           -           -
        Tax related to highlighted
         items above              (3,646)     (0.03)     (5,322)      (0.04)
                                   -----       ----      ------        ----
      Total highlighted items      9,259       0.07      11,304        0.09
                                   -----       ----      ------        ----
      Net income excluding
       highlighted items         $22,141      $0.18     $34,213       $0.27
                                 =======      =====     =======       =====

      Weighted average common
       shares - diluted                     124,920                 128,054
                                            =======                 =======



                                                        First Half 2009
                                                        ---------------
                                                                 Per Diluted
                                                      Amount        Share
                                                      ------        -----
      Net income                                     $35,791        $0.28

      Highlighted items:
        Impacting gross margin:
          Stock compensation expense                     669         0.01

        Impacting operating expenses:
          Restructuring charges                          712         0.01
          Amortization of intangible assets           18,526         0.15
          Stock compensation expense                   6,785         0.05

        Impacting other (income) / expense:
          Non-cash interest expense                    5,536         0.04
          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                           1,455         0.01
        Tax related to highlighted items above        (8,968)       (0.07)

                                                      ------         ----
      Total highlighted items                         20,563         0.16
                                                      ------         ----
      Net income excluding highlighted items         $56,354        $0.45
                                                     =======        =====

      Weighted average common shares - diluted                    126,482
                                                                  =======



                                        Q1 2008               Q2 2008
                                        -------               -------
                                            Per Diluted           Per Diluted
                                  Amount      Share      Amount       Share
                                  ------      -----      ------       -----
      Net income                  $3,829      $0.03      $7,829       $0.06

      Highlighted items:
        Impacting gross margin:
          Stock compensation
           expense                   201          -         245           -

        Impacting operating
         expenses:
          Integration costs          427          -           -           -
          Restructuring charges      405          -         175           -
          Amortization of
           intangible assets      13,254       0.10      12,454        0.10
          Stock compensation
           expense                 2,350       0.02       2,595        0.02

        Impacting other
         (income) / expense:
          Non-cash interest
           expense                 2,605       0.02       2,657        0.02

        Impacting income
         tax expense:

        Tax related to
         highlighted
         items above              (7,268)     (0.06)     (6,726)      (0.05)
                                  ------       ----      ------        ----
      Total highlighted items     11,974       0.09      11,400        0.09
                                  ------       ----      ------        ----
      Net income excluding
       highlighted items         $15,803      $0.12     $19,229       $0.15
                                 =======      =====     =======       =====

      Weighted average common
       shares - diluted                     131,981                 124,651
                                            =======                 =======



                                                        First Half 2008
                                                        ---------------
                                                                 Per Diluted
                                                      Amount      Share (1)
                                                      ------      ---------
      Net income                                     $11,658        $0.09

      Highlighted items:
        Impacting gross margin:
          Stock compensation expense                     446            -

        Impacting operating expenses:
          Integration costs                              427            -
          Restructuring charges                          580            -
          Amortization of intangible assets           25,708         0.20
          Stock compensation expense                   4,945         0.04

        Impacting other (income) / expense:
          Non-cash interest expense                    5,262         0.04

        Impacting income tax expense:

        Tax related to highlighted items above       (13,994)       (0.11)

                                                      ------         ----
      Total highlighted items                         23,374         0.18
                                                      ------         ----
      Net income excluding highlighted items         $35,032        $0.27
                                                     =======        =====

      Weighted average common shares - diluted                    128,190
                                                                  =======

    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 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.  With
    respect to the convertible debt non-cash interest, ARRIS records
    non-cash interest expense related to the 2013 convertible debt as a
    result of the adoption of FSP ABP 14-1 on January 1, 2009.  Disclosing
    the non-cash piece provides investors with the information regarding
    interest that will not be paid out in cash.  During the first quarter
    of 2009, ARRIS repurchased a portion of their convertible debt and
    recognized a gain of approximately $4.2 million.  In the first quarter
    of 2009, a tax expense of approximately $1.5 million was recorded for
    state valuation allowances and research and development tax credits.
    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 GROUP, INC.
                 Net Income Reconciliation (unaudited)
                         Q3 EPS 2009 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 Reconciliation for a
     discussion regarding management's reasoning for providing
     this adjusted financial measure

SOURCE  ARRIS
    -0-                           07/30/2009
    /CONTACT:  Jim Bauer, Investor Relations of ARRIS, +1-678-473-2647,
jim.bauer@arrisi.com/
    /Web Site:  http://www.arrisi.com /
    (ARRS)

CO:  ARRIS
ST:  Georgia
IN:  TLS ADV CPR NET
SU:  ERN ERP CCA

PR
-- CL54593 --
0493 07/30/200916:00 EDThttp://www.prnewswire.com