SUWANEE, Ga., Oct. 28 /PRNewswire-FirstCall/ -- ARRIS Group, Inc.
(NASDAQ: ARRS), a global technology leader in advanced cable
telephony and broadband access equipment, next generation
high-speed data, and video applications and operations software
solutions, today announced preliminary and unaudited financial
results for the third quarter 2008. Third quarter 2008 revenues of
$297.6 million represent an increase of $16.5 million, or 6%, as
compared to second quarter 2008 revenues of $281.1 million. Third
quarter and first nine month 2008 revenues increased $42.9 million,
or 17%, and $109.5 million, or 15%, respectively, as compared to
the same periods in 2007, primarily as a result of the C-COR
acquisition in December 2007. Third quarter 2008 gross margin was
$106.1 million, or 35.7%, as compared to $92.9 million, or 33.0%,
in the second quarter 2008 and $68.8 million, or 27.0%, in the
third quarter 2007. Order backlog decreased to $144.1 million at
the end of the third quarter 2008 as compared to $206.0 million at
the end of the second quarter 2008. Book-to-bill ratio in the third
quarter 2008 was 0.79. GAAP net income in the third quarter 2008
was $0.19 per diluted share, as compared to $0.08 per diluted share
in the second quarter 2008 and $0.25 per diluted share in the third
quarter 2007. Adjusted (non-GAAP) net income in the third quarter
2008 was $0.24 per diluted share, as compared to $0.15 per diluted
share in the second quarter 2008 and $0.21 in the third quarter
2007. Items excluded from the computed adjusted (non-GAAP) net
income include amortization of intangibles, certain tax benefits
and costs, equity compensation expense and adjustments to
restructuring accruals. A reconciliation of GAAP to adjusted
(non-GAAP) earnings per share is attached to this release and also
can be found on the Company's website (http://www.arrisi.com/). The
Company ended the third quarter 2008 with $329.6 million of cash
and short-term investments, which compares to $297.8 million at the
end of the second quarter 2008. The Company generated $44.9 million
of cash from operating activities in the third quarter 2008. The
Company also announced that its flagship Cable Modem Termination
System (CMTS), the ARRIS C4, continues to ship in record numbers to
cable operators around the world. The ARRIS C4 CMTS supports
downstream channel bonding capabilities for speeds up to 160 Mbp/s,
which enables cable operators to deploy a cost-effective platform
for new revenue generating video over IP applications, as well as
far greater channel density per rack unit of space. The ARRIS C4
CMTS is deployed by the world's largest cable operators and
supports more than 18 million subscribers worldwide. ARRIS C4
DOCSIS 3.0 equipment has already been delivered to operators in the
United States, Canada, South America, Europe, and Asia. "Our CMTS
business in the quarter was remarkably strong with record shipments
as customers began their rollouts of new DOCSIS 3.0 wideband
platforms," said Bob Stanzione, ARRIS Chairman & CEO.
"Partially offsetting our strong CMTS performance were the expected
Access, Transport & Supplies results. Although the current
economic climate may present some obstacles in the near term,
demand for ARRIS products that enable high speed data and video
traffic remains strong as both competition and traffic intensifies.
In addition, opportunities in Latin America, Asia and Europe, give
me optimism that our international sales will be a bright spot in
ARRIS' results in the coming year. ARRIS products for high speed
data, VoIP, ad insertion, Operations Support System solutions and
on-demand video were well received last month at the International
Broadcasting Convention in Amsterdam. Therefore, I continue to be
very optimistic about the future of ARRIS because even in light of
the macro economic climate, consumers more than ever need to remain
connected to the internet." "The ARRIS team delivered strong
results in the third quarter in the face of difficult economic
times," said David Potts, ARRIS EVP & CFO. "We have made
substantial progress toward the financial goals that we established
earlier this year. At this point we now project that revenues for
the Company in the fourth quarter 2008 will be in the range of $280
to $300 million with GAAP net income per diluted share in the range
of $0.16 to $0.21 and adjusted (non-GAAP) net income per diluted
share, in the range of $0.22 to $0.27. This guidance reflects a
cumulative tax benefit of approximately $0.03 per diluted share
associated with the recent passage of the extension of R&D tax
credit legislation. ARRIS management will conduct a conference call
at 5:00pm EDT, today, Tuesday, October 28, 2008, to discuss these
results in detail. You may participate in this conference call by
dialing 888-713-4218 or 617-213-4870 for international calls prior
to the start of the call and providing the ARRIS Group, Inc. name,
conference pass code 13270376 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 November 2, 2008 by dialing
888-286-8010 or 617-801-6888 for international calls and using the
pass code 63707556. 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/. ARRIS is a global communications
technology company specializing in the design, engineering and
supply of technology supporting triple and quad-play broadband
services for residential and business customers around the world.
The company supplies broadband operators with the tools and
platforms they need to deliver reliable telephony, demand driven
video, next-generation advertising and high-speed data services.
ARRIS products expand and help grow network capacity with access
and outside plant construction equipment, reliably deliver voice,
video and data services and assure optimal service delivery for end
customers. Headquartered in Suwanee, Georgia, USA, ARRIS has
R&D centers in Atlanta, Chicago, Beaverton, State College,
Wallingford, Ireland and China, and operates support and sales
offices throughout the world. Information about ARRIS products and
services can be found at http://www.arrisi.com/. Forward-looking
statements: Statements made in this press release, including those
related to: -- fourth quarter and 2008 revenues and net income; --
full year 2008 and 2009 outlook, and -- the general market outlook;
are forward-looking statements. These statements involve risks and
uncertainties that may cause actual results to differ materially
from those set forth in these statements. Among other things, --
projected results for the fourth 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; -- we
operate in a capital intensive industry, and the recent disruptions
in the financial markets may make it more difficult for our
customers to expand and update their equipment, thereby, negatively
impacting sales of equipment by us; 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 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 and the increasing
trend of patent lawsuits being brought by financial investors in
patents; the adoption of industry standards; and consolidations
within the telecommunications industry of both the customer and
supplier base. These factors are not intended to be an
all-encompassing list of risks and uncertainties that may affect
the Company's business. Additional information regarding these and
other factors can be found in ARRIS' reports filed with the
Securities and Exchange Commission, including its Form 10-K for the
year ended December 31, 2007 and its Form 10-Q for the quarter
ended June 30, 2008. The Company expressly disclaims any obligation
to update publicly or otherwise these statements, whether as a
result of new information, future events or otherwise. ARRIS GROUP,
INC. CONSOLIDATED BALANCE SHEETS (in thousands) September 30, June
30, March 31, 2008 2008 2008 (unaudited) (unaudited) (unaudited)
ASSETS Current assets: Cash and cash equivalents $305,987 $290,266
$243,515 Short-term investments, at fair value 23,571 7,503 49,513
Total cash, cash equivalents and short-term investments 329,558
297,769 293,028 Restricted cash 5,768 7,051 7,186 Accounts
receivable, net 168,121 168,664 159,881 Other receivables 5,180
9,067 6,074 Inventories, net 141,564 147,716 125,105 Prepaids 5,156
5,305 5,680 Current deferred income tax assets 37,999 43,749 47,051
Other current assets 20,167 15,707 8,209 Total current assets
713,513 695,028 652,214 Property, plant and equipment, net 60,268
60,823 60,747 Goodwill 449,418 452,398 453,454 Intangible assets,
net 236,689 244,575 257,029 Investments 12,784 9,937 10,200
Noncurrent deferred income tax assets 3,312 3,547 3,688 Other
assets 11,282 11,383 12,624 $1,487,266 $1,477,691 $1,449,956
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts
payable $54,304 $68,476 $60,490 Accrued compensation, benefits and
related taxes 21,831 18,072 14,397 Accrued warranty 7,554 7,566
7,919 Deferred revenue 24,974 28,100 19,901 Current portion of
long-term debt 234 314 310 Other accrued liabilities 25,490 23,221
27,980 Total current liabilities 134,387 145,749 130,997 Long-term
debt, net of current portion 276,371 276,606 276,686 Accrued
pension 10,622 11,362 10,905 Noncurrent income tax payable 10,128
6,250 6,487 Noncurrent deferred income tax liability 42,337 48,725
47,090 Other long-term liabilities 15,655 18,694 19,704 Total
liabilities 489,500 507,386 491,869 Stockholders' equity: Preferred
stock - - - Common stock 1,360 1,358 1,357 Capital in excess of par
value 1,102,112 1,098,581 1,095,716 Treasury stock at cost (75,960)
(76,007) (76,007) Unrealized gain (loss) on marketable securities
(128) 66 151 Unfunded pension liability (3,358) (3,358) (3,358)
Accumulated deficit (26,076) (50,151) (59,588) Cumulative
translation adjustments (184) (184) (184) Total stockholders'
equity 997,766 970,305 958,087 $1,487,266 $1,477,691 $1,449,956
ARRIS GROUP, INC. CONSOLIDATED BALANCE SHEETS (in thousands)
December 31, September 30, 2007 2007 (unaudited) ASSETS Current
assets: Cash and cash equivalents $323,797 $370,708 Short-term
investments, at fair value 68,011 217,845 Total cash, cash
equivalents and short-term investments 391,808 588,553 Restricted
cash 6,977 3,142 Accounts receivable, net 166,953 130,216 Other
receivables 4,330 5,000 Inventories, net 131,792 118,227 Prepaids
5,856 3,626 Current deferred income tax assets 44,939 19,602 Other
current assets 4,841 13,703 Total current assets 757,496 882,069
Property, plant and equipment, net 59,156 31,251 Goodwill 455,352
150,569 Intangible assets, net 269,893 115 Investments 6,412 8,916
Noncurrent deferred income tax assets 3,459 16,238 Other assets
10,181 9,084 $1,561,949 $1,098,242 LIABILITIES AND STOCKHOLDERS'
EQUITY Current liabilities: Accounts payable $58,852 $35,540
Accrued compensation, benefits and related taxes 26,177 18,857
Accrued warranty 8,298 4,085 Deferred revenue 8,474 6,273 Current
portion of long-term debt 35,305 - Other accrued liabilities 42,121
20,854 Total current liabilities 179,227 85,609 Long-term debt, net
of current portion 276,765 276,000 Accrued pension 10,455 11,810
Noncurrent income tax payable 6,322 5,262 Noncurrent deferred
income tax liability 45,255 - Other long-term liabilities 18,158
8,404 Total liabilities 536,182 387,085 Stockholders' equity:
Preferred stock - - Common stock 1,356 1,104 Capital in excess of
par value 1,093,498 789,348 Treasury stock at cost (572) -
Unrealized gain (loss) on marketable securities 20 (151) Unfunded
pension liability (3,358) (4,462) Accumulated deficit (64,993)
(74,498) Cumulative translation adjustments (184) (184) Total
stockholders' equity 1,025,767 711,157 $1,561,949 $1,098,242 ARRIS
GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands,
except per share data) For the Three Months For the Nine Months
Ended September 30, Ended September 30, 2008 2007 2008 2007
(unaudited) (unaudited) (unaudited) (unaudited) Net sales $297,551
$254,662 $852,167 $742,633 Cost of sales 191,417 185,828 567,901
532,676 Gross margin 106,134 68,834 284,266 209,957 Gross margin %
35.7% 27.0% 33.4% 28.3% Operating expenses: Selling, general, and
administrative expenses 33,012 23,778 107,040 74,408 Research and
development expenses 27,473 17,797 83,257 53,684 Restructuring and
impairment charges 202 - 782 421 Amortization of intangible assets
9,146 57 34,854 173 69,833 41,632 225,933 128,686 Operating income
36,301 27,202 58,333 81,271 Other expense (income): Interest
expense 1,738 1,683 4,964 5,003 Loss (gain) on investments 37
(3,453) 210 (4,878) Loss (gain) on foreign currency 382 (112) (258)
64 Interest income (1,504) (6,307) (5,891) (19,249) Gain related to
terminated acquisition, net of expenses - - - (22,835) Other
(income) expense, net (72) 215 (43) 331 Income from continuing
operations before income taxes 35,720 35,176 59,351 122,835 Income
tax expense 11,645 7,654 20,434 34,395 Net income from continuing
operations 24,075 27,522 38,917 88,440 Income from discontinued
operations - 330 - 330 Net income $24,075 $27,852 $38,917 $88,770
Net income per common share - Basic: Income from continuing
operations $0.20 $0.25 $0.31 $0.81 Income from discontinued
operations - - - - Net income $0.20 $0.25 $0.31 $0.81 Diluted:
Income from continuing operations $0.19 $0.25 $0.31 $0.79 Income
from discontinued operations - - - - Net income $0.19 $0.25 $0.31
$0.80 Weighted average common shares: Basic 122,922 110,178 125,466
109,354 Diluted 125,420 112,085 127,249 111,595 ARRIS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the Three
Months For the Nine Months Ended September 30, Ended September 30,
2008 2007 2008 2007 (unaudited) (unaudited)(unaudited) (unaudited)
Operating Activities: Net income $24,075 $27,852 $38,917 $88,770
Adjustments to reconcile net income to net cash provided by (used
in) operating activities: Depreciation 5,426 2,858 15,521 8,003
Amortization of intangible assets 9,146 57 34,854 173 Stock
compensation expense 2,895 2,676 8,286 8,710 Deferred income tax
provision 5,889 4,693 10,461 14,319 Amortization of deferred
finance fees 278 279 835 836 Provision for doubtful accounts 151
(112) 365 484 Gain related to previously written off receivables -
- - (377) Gain on discontinued product line - (330) - (330) Loss
(gain) on disposal of fixed assets (13) 167 (15) 167 Loss (gain) on
investments 37 (3,453) 210 (4,878) Gain related to terminated
acquisition, net of expenses - - - (22,835) Excess tax benefits
from stock-based compensation plans (145) (1,738) (145) (8,269)
Changes in operating assets & liabilities, net of effects of
acquisitions and disposals: Accounts receivable 913 (9,424) 143
(15,396) Other receivables 736 1,845 (4,001) (2,444) Inventory
6,425 (27,685) (7,994) (24,001) Accounts payable and accrued
liabilities (8,146) (8,540) (6,642) (32,080) Other, net (2,791)
(2,420) (4,984) (262) Net cash provided by (used in) operating
activities 44,876 (13,275) 85,811 10,590 Investing Activities:
Purchases of property, plant, and equipment (4,652) (4,083)
(16,444) (11,138) Cash proceeds related to terminated acquisition,
net of expenses paid - - - 10,554 Cash paid for hedge related to
terminated acquisition - - - (26,469) Cash proceeds from hedge
related to terminated acquisition - - - 38,750 Cash paid for
acquisitions, net of cash acquired (5,094) - (9,513) - Cash
proceeds from sale of property, plant & equipment 13 3 250 3
Cash proceeds from sale of short-term investments - - 16 -
Purchases of short-term- investments (66,111) (97,776) (82,998)
(295,626) Disposals of short-term- investments 50,006 37,792
122,470 162,902 Purchases of investment securities (4,000) -
(4,000) - Net cash provided by (used in) investing activities
(29,838) (64,064) 9,781 (121,024) Financing Activities: Payment of
debt and capital lease obligations (322) - (35,518) - Repurchase of
common stock 47 - (75,913) - Excess tax benefits from stock- based
compensation plans 145 1,738 145 8,269 Employer repurchase of
shares to satisfy minimum tax withholdings - (1,402) (1,035)
(3,092) Fees and proceeds from issuance of common stock, net 813
3,691 (1,081) 14,347 Net cash provided by (used in) financing
activities 683 4,027 (113,402) 19,524 Net increase (decrease) in
cash and cash equivalents 15,721 (73,312) (17,810) (90,910) Cash
and cash equivalents at beginning of period 290,266 444,020 323,797
461,618 Cash and cash equivalents at end of period $305,987
$370,708 $305,987 $370,708 ARRIS GROUP, INC. SUPPLEMENTAL NET
INCOME RECONCILIATION (in thousands, except per share data)
(unaudited) Q1 2008 Q2 2008 Q3 2008 YTD 2008 Per Per Per Per
Diluted Diluted Diluted Diluted Amount Share Amount Share Amount
Share Amount Share Net income $5,405 $0.04 $9,437 $0.08 $ 24,075
$0.19 $ 38,917 0.31 Highlighted items: Impacting gross margin:
Stock compen- sation expense 201 - 245 - 264 0.00 710 0.01
Impacting operating expenses: Integration costs 427 - - - - - 427 -
Restructuring charges - adj to existing accruals 405 - 175 - 202
0.00 782 0.01 Amortization of intan- gible assets 13,254 0.10
12,454 0.10 9,146 0.07 34,854 0.27 Stock compen- sation expense
2,350 0.02 2,595 0.02 2,631 0.02 7,576 0.06 Impacting income tax
expense: Adj of income tax valuation allowances and research &
development credits and other - - - - (1,565) (0.01) (1,565) (0.01)
Tax related to highlighted items above (6,294) (0.05) (5,732)
(0.05) (4,150) (0.03) (16,176) (0.13) Total highlighted items
10,343 0.08 9,737 0.08 6,528 0.05 26,608 0.21 Net income excluding
highlighted items $ 15,748 $0.12 $ 19,174 $0.15 $ 30,603 $0.24 $
65,525 $0.51 131,981 124,651 125,420 127,249 Q1 2007 Q2 2007 Q3
2007 YTD 2007 Per Per Per Per Diluted Diluted Diluted Diluted
Amount Share Amount Share Amount Share Amount Share Net income $
37,644 $0.34 23,274 $0.21 $ 27,852 $0.25 $ 88,770 0.80 Highlighted
items: Impacting gross margin: Stock compen- sation expense 165 -
229 - 196 0.00 590 0.01 Impacting operating expenses: Gain related
to previously written off receiv- ables (377) - - - - - (377) -
Restructuring charges - adj to existing accruals 421 - - - - - 421
- Amortization of intan- gible assets 58 - 58 - 57 0.00 173 - Stock
compen- sation expense 2,491 0.02 3,149 0.03 2,480 0.02 8,120 0.07
Impacting net income from continuing operations: Gains related to
termin- ated acquisition, net of expens- es (22,835) (0.21) - - - -
(22,835) (0.20) Gain on invest- ments - - (1,345) (0.01) (3,519)
(0.03) (4,864) (0.04) Impacting discontinued operations: Gains
related to previously written off receiv- ables - - - - (330)
(0.00) (330) - Impacting income tax expense: Adjustments of income
tax valuation allowances and research & development credits and
other (3,246) (0.03) - - (3,466) (0.03) (6,712) (0.06) Tax related
to high- lighted items above 7,754 0.07 (670) (0.01) 423 0.00 7,507
0.07 Total high- lighted items (15,569) (0.14) 1,421 0.01 (4,160)
(0.04) (18,308) (0.16) Net income excluding highlighted items
$22,075 $0.20 $24,695 $0.22 $23,692 $0.21 $70,463 $0.63 110,988
111,698 112,085 111,595 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. ARRIS recognized a gain in both Q1 and Q3 of
2007 associated with previously written off receivables. With
respect to amortization of intangibles, the intangibles being
amortized relate to our recent acquisition of C-COR. The
restructuring charge adjustments reflect items that, although they
or similar items might recur, are of a nature and magnitude that
identifying them separately provides investors with a greater
ability to project ARRIS' future performance. In the second quarter
of 2007, ARRIS realized a gain before tax of $1.3 million on its
deferred compensation asset that had been previously recorded as an
unrealized gain on the balance sheet. During the third quarter of
2007, ARRIS bought and sold investments and realized a gain of $3.5
million. In the third quarter of 2007, a tax benefit of
approximately $3.5 million was recorded for a reversal of valuation
allowances and research and development tax credits related to a
tax credit study that was undertaken for prior years (2001 - 2006).
During the first quarter of 2007, ARRIS announced that it entered
into a transaction agreement with TANDBERG Television ASA, in which
ARRIS was to buy all the outstanding shares of TANDBERG. ARRIS was
subsequently outbid by another buyer and the transaction agreement
was terminated during the first quarter 2007. ARRIS recorded gains,
net before tax, of $22.8 million related to the termination of the
transaction (termination fee, foreign exchange gains, and
expenses). The net termination fee resulted in a capital gain which
provided greater access to prior tax capital losses that had
previously been viewed as more likely than not unrealizable. As a
result, net income tax valuation allowances totaling $3.2 million
were reversed in the first quarter 2007. During the first quarter
of 2008, ARRIS recorded incremental costs of $0.4 million as a
result of the C-COR integration. In the third quarter of 2008,
ARRIS recorded a net tax benefit of $1.6 million related to
provision to return differences resulting from the filing of the
2007 tax return. In assessing operating performance and preparing
budgets and forecasts, ARRIS' management considers performance
after making these adjustments and believes that providing
investors with the same information provides greater transparency
and insight into management's analysis. ARRIS expects to continue
providing similar information in the future with schedules
reconciling the differences between GAAP and non-GAAP financial
measures. ARRIS GROUP, INC. Net Income Reconciliation (unaudited)
Q4 EPS 2008 Guidance Estimated GAAP EPS - diluted $0.16 - $0.21
Reconciling Items Amortization of intangibles, after tax 0.05 Stock
compensation expense, after tax 0.01 Subtotal 0.06 Estimated
adjusted (non-GAAP) EPS - diluted $0.22 - $0.27 See the
Supplemental Net Income Reconciliation for a discussion regarding
management's reasoning for providing this non-GAAP financial
measure DATASOURCE: ARRIS Group, Inc. CONTACT: Jim Bauer, Investor
Relations, ARRIS, +1-678-473-2647, Web site: http://www.arrisi.com/
Copyright