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 (http://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 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 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 DATASOURCE: ARRIS CONTACT: Jim
Bauer, Investor Relations of ARRIS, +1-678-473-2647, Web Site:
http://www.arrisi.com/
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