ARRS Arris International Plc - Ordinary Shares

Yesterday, after the closing bell, Arris Group Inc. (ARRS) declared financial results for the fourth quarter of 2012, which fell below the Zacks Consensus Estimates. However, the company exited the third quarter with a strong order backlog. Arris currently has a Zacks Rank #2 (Buy). The company has decided to purchase the cable set top box business of Motorola Mobility, a subsidiary of Google Inc. (GOOG). The deal is expected to get regulatory approval by the second quarter of 2013.

GAAP net income in the fourth quarter of 2012 was $14.8 million or 13 cents per share compared with a net loss of $59.6 million or 51 cents per share in the prior-year quarter. However, quarterly adjusted (excluding special items) earnings per share came in at 22 cents, which fell below the Zacks Consensus Estimate of 25 cents.

Quarterly total revenue was $344 million, up 22.4% year over year but fell shy of the Zacks Consensus Estimate of $354 million. Quarterly Domestic revenue was 74.4% while International revenue was 25.6%. Comcast Corp. (CMCSA) and Time Warner Cable Inc. (TWC) together constituted 51.7% of the total fourth-quarter revenue of Arris.

Quarterly gross margin came in at 35.8% compared with 37.9% in the year-ago quarter.  Operating income, in reported quarter, was $25.5 million compared with $25.2 million in the prior-year quarter. Quarterly operating margin was 7.4% compared with 9% in the year-ago quarter.

Total order backlog of Arris, at the end of fiscal 2012, was $222.6 million compared with $148.5 million at the end of fiscal 2011. Book-to-bill ratio was 1.11 in the fourth quarter compared with 0.98 in the prior-year quarter. Arris refrained from repurchasing its own common stocks in the reported quarter. 

Arris generated $11.8 million of cash from operations during the fourth quarter of 2012 compared with $60.9 million in the prior-year quarter. Quarterly free cash flow (cash flow from operation-less capital expenditure) was $4.8 million compared with $56.5 million in the year-ago quarter. At the end of fiscal 2012, Arris had $530.1 million of cash & marketable securities on its balance sheet compared with $589.9 million at the end of 2011. Total debt was $222.1 million at the end of fiscal 2012 compared with $209.8 million at the end of 2011.

Broadband Communications Systems Segment

Quarterly revenue was $272.7 million, up 28.7% year over year. Quarterly gross margin was 36.1% compared with 38.3% in the year-ago quarter. Arris shipped 2.266 million CPE units, 87% of which are DOCSIS 3.0. The company also shipped 105,246 C4 CMTS downstream ports. The company’s E6000 Cable Edge Router received market traction.

Access, Transport, & Supplies Segment

Quarterly revenue was $54.6 million, up 7.1% year over year. Quarterly gross margin was 24.9%, compared with 25.9% year over year.

Media & Communication System Segment

Quarterly revenue was $16.7 million, down 7.7% year over year. Quarterly gross margin was 66.1% compared with 67% in the year-ago quarter.

Financial outlook

Management’s guidance for net sales in the first quarter of 2013 will be within the range of $350 - $370 million. Earnings per share, on a GAAP basis, are expected within the range of 2 cents to 6 cents. Earnings per share, on a non-GAAP basis, are expected within the range of 22 cents to 26 cents.  This includes stock-based compensation expenses of 4 cents per share.

 
ARRIS GROUP INC (ARRS): Free Stock Analysis Report
 
COMCAST CORP A (CMCSA): Free Stock Analysis Report
 
GOOGLE INC-CL A (GOOG): Free Stock Analysis Report
 
TIME WARNER CAB (TWC): Free Stock Analysis Report
 
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