SUWANEE, Ga., Oct. 26 /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 third quarter 2009. Revenues in the third quarter
2009 were $275.8 million, compared to second quarter 2009 revenues
of $278.5 million and third quarter 2008 revenues of $297.6
million. Through the first nine months of 2009 and 2008, revenues
were $807.8 million and $852.2 million, respectively. Adjusted net
income (a non-GAAP measure) for the third quarter 2009 was $0.25
per diluted share, compared to $0.27 per diluted share for the
second quarter 2009 and $0.24 per diluted share for the third
quarter of 2008. Year to date, adjusted net income was $0.69 per
diluted share for 2009 as compared to $0.52 per diluted share in
2008. The increased profitability primarily reflects higher gross
margins. GAAP net income for the third quarter 2009 was $0.17 per
diluted share, as compared to the second quarter 2009 of $0.18 per
diluted share, and the third quarter 2008 of $0.18 per diluted
share. Year to date, GAAP net income was $0.45 per diluted share
for 2009 as compared to $0.27 per diluted share for 2008.
Significant GAAP items in the third quarter 2009 that have been
excluded in computing adjusted net income and earnings per shares
include: amortization of intangibles, equity compensation expense,
restructuring and acquisition-related costs, and non-cash interest
related to convertible debt. 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
(http://www.arrisi.com/). Gross margin in the third quarter 2009
was 41.9%, which compares to the second quarter 2009 of 42.1% and
the third quarter 2008 of 35.7%. The year-over-year improvement
primarily reflects continued strong CMTS sales. The Company ended
the third quarter 2009 with $577 million of cash resources, which
includes $562 million of cash and short-term investments, and $15
million of long-term marketable security investments, up in the
aggregate by approximately $53 million from the end of the second
quarter 2009 as a result of both strong earnings and lower working
capital. The Company generated $63 million of cash from operating
activities in the third quarter 2009 and $171 million through the
first nine months of 2009, which compares to $46 million and $87
million in the same periods in 2008. Order backlog at the end of
the third quarter 2009 was $170 million and the Company's book to
bill ratio in the third quarter was 1.01. These amounts compare to
order backlog of $166 million and book to bill ratio of 1.04 in the
second quarter of 2009. "The ARRIS team continues to deliver
products and services that our customers worldwide need in order to
grow, meet the competition and enhance the subscriber experience,"
said Bob Stanzione, ARRIS Chairman & CEO. "Rapid increases in
internet TV traffic are altering the home video experience and
creating demand for the ARRIS high speed data platform. We have
taken key steps to grow our current business to include a strong
video product suite in order to capitalize on today's vision of a
converged voice, data and video platform." During the quarter the
Company announced the purchase of substantially all of the assets
of Digeo, Inc., which provides products and a rich patent portfolio
for video networking and multi-media services platforms as well the
purchase of EGT, Inc. which provides video processing technologies
that complement the Company's VOD, ad insertion and switched
digital video product offerings. Also during the quarter, the
Company announced that two new customers, Bresnan Communications
and Kabel Nord, had selected the market leading ARRIS C-4 CMTS
product for deployment in their operation areas. International
sales represent a growing portion of ARRIS revenues with
Cablevision Mexico the third largest customer in the quarter and
three Japanese and Canadian customers ranked in the top twenty
customers. "Our third quarter 2009 results reflect continuing
strong market acceptance of ARRIS products," said David Potts,
ARRIS EVP & CFO. "Once again, our strong gross margins and cash
generation demonstrate the financial strength of our Company. With
respect to the fourth quarter 2009, we project that revenues for
the Company will be in the range of $265 to $285 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 $0.13
to $0.17." ARRIS management will conduct a conference call at 5:00
pm EDT, today, Monday, October 26, 2009, to discuss these results
in detail. You may participate in this conference call by dialing
888-679-8033 or 617-213-4846 for international calls prior to the
start of the call and providing the ARRIS Group, Inc. name,
conference passcode 82209148 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 Friday, October 30, 2009 by
dialing 888-286-8010 or 617-801-6888 for international calls and
using the passcode 23090362. 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/. 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 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; 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 http://www.arrisi.com/.
Forward-looking statements: Statements made in this press release,
including those related to: -- growth expectations and business
prospects; -- fourth 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 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; -- 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 June 30, 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)
September 30, June 30, March 31, December 31, September 30, 2009
2009 2009 2008 2008 ASSETS Current assets: Cash and cash
equivalents $461,795 $476,846 $398,938 $409,894 $305,987 Short-term
investments, at fair value 99,917 47,195 25,494 17,371 23,571
------ ------ ------ ------ ------ 561,712 524,041 424,432 427,265
329,558 Restricted cash 4,473 4,552 4,550 5,673 5,768 Accounts
receivable, net 119,125 128,482 155,792 159,443 180,367 Other
receivables 2,235 5,904 6,636 4,749 5,180 Inventories, net 100,024
115,944 120,774 129,752 139,598 Prepaids 10,764 7,700 6,994 8,004
5,156 Income taxes recoverable 4,212 366 3,232 362 1,896 Current
deferred income tax assets 32,883 41,166 49,027 44,004 42,714 Other
current assets 12,981 11,995 15,083 19,420 20,236 ------ ------
------ ------ ------ Total current assets 848,409 840,150 786,520
798,672 730,473 Property, plant and equipment, net 58,339 60,048
59,438 59,204 60,268 Goodwill 234,416 231,684 231,684 231,684
449,418 Intangible assets, net 201,351 208,822 218,085 227,348
236,689 Investments 30,574 10,317 14,593 14,681 15,086 Noncurrent
deferred income tax assets 3,593 3,870 3,771 12,157 3,988 Other
assets 7,648 6,251 5,483 6,576 7,173 ----- ----- ----- ----- -----
$1,384,330 $1,361,142 $1,319,574 $1,350,322 $1,503,095 ==========
========== ========== ========== ========== LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $42,659
$48,859 $44,422 $75,863 $54,304 Accrued compensation, benefits and
related taxes 27,054 20,753 15,583 27,024 21,831 Accrued warranty
5,292 5,185 5,306 5,652 6,354 Deferred revenue 35,423 43,727 44,006
44,461 35,986 Current portion of long-term debt 148 148 147 146 234
Current deferred income tax liability 250 248 241 1,059 - Other
accrued liabilities 34,979 35,852 31,922 25,410 30,205 ------
------ ------ ------ ------ Total current liabilities 145,805
154,772 141,627 179,615 148,914 Long-term debt, net of current
portion 208,433 205,710 203,080 211,870 209,340 Accrued pension
18,914 19,665 19,289 18,820 10,622 Noncurrent income tax payable
10,632 12,386 12,441 9,607 10,128 Noncurrent deferred income tax
liability 35,188 33,999 42,530 41,598 67,403 Other noncurrent
liabilities 15,301 15,094 14,391 15,343 18,088 ------ ------ ------
------ ------ Total liabili- ties 434,273 441,626 433,358 476,853
464,495 Stockholders' equity: Preferred stock - - - - - Common
stock 1,385 1,379 1,368 1,362 1,360 Capital in excess of par value
1,177,958 1,169,223 1,159,054 1,159,097 1,155,211 Treasury stock at
cost (75,960) (75,960) (75,960) (75,960) (75,960) Unrealized loss
on marketable securities (60) (161) (372) (274) (128) Unfunded
pension liability (8,070) (8,070) (8,070) (8,070) (3,358)
Accumulated deficit (145,012) (166,711) (189,620) (202,502)
(38,341) Cumulative translation adjustments (184) (184) (184) (184)
(184) ---- ---- ---- ---- ---- Total stockholders' equity 950,057
919,516 886,216 873,469 1,038,600 ------- ------- ------- -------
--------- $1,384,330 $1,361,142 $1,319,574 $1,350,322 $1,503,095
========== ========== ========== ========== ========== ARRIS GROUP,
INC. PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS (in
thousands, except per share data) For the Three Months For the Nine
Months Ended September 30, Ended September 30, ------------------
------------------ 2009 2008 2009 2008 (unaudited) (unaudited)
(unaudited) (unaudited) --------- --------- --------- --------- Net
sales $275,772 $297,551 $807,811 $852,167 Cost of sales 160,299
191,417 479,548 567,901 ------- ------- ------- ------- Gross
margin 115,473 106,134 328,263 284,266 Gross margin % 41.9% 35.7%
40.6% 33.4% Operating expenses: Selling, general, and
administrative expenses 36,311 33,012 110,782 107,040 Research and
development expenses 30,909 27,473 89,447 83,257 Restructuring
charges 73 202 785 782 Amortization of intangible assets 9,281
9,146 27,807 34,854 ----- ----- ------ ------ 76,574 69,833 228,821
225,933 ------ ------ ------- ------- Operating income 38,899
36,301 99,442 58,333 Other expense (income): Interest expense 4,356
4,360 13,121 12,672 Loss (gain) on investments (238) 37 (453) 210
Loss (gain) on foreign currency 1,114 382 3,642 (258) Interest
income (424) (1,504) (1,172) (5,891) Gain on debt retirement - -
(4,152) - Other income, net (263) (72) (887) (43) ---- --- ---- ---
Income from continuing operations before income taxes 34,354 33,098
89,343 51,643 Income tax expense 12,655 10,664 31,853 17,551 ------
------ ------ ------ Net income $21,699 $22,434 $57,490 $34,092
======= ======= ======= ======= Net income per common share: Basic
$0.17 $0.18 $0.46 $0.27 ===== ===== ===== ===== Diluted $0.17 $0.18
$0.45 $0.27 ===== ===== ===== ===== Weighted average common shares:
Basic 125,326 122,922 124,381 125,466 ======= ======= =======
======= Diluted 129,695 125,420 127,916 127,249 ======= =======
======= ======= ARRIS GROUP, INC. PRELIMINARY CONSOLIDATED
STATEMENTS OF CASH FLOWS (in thousands) For the Three Months For
the Nine Months Ended September 30, Ended September 30,
------------------ ------------------ 2009 2008 2009 2008
(unaudited) (unaudited) (unaudited) (unaudited) --------- ---------
--------- --------- Operating Activities: Net income $21,699
$22,434 $57,490 $34,092 Depreciation 5,408 5,426 15,370 15,521
Amortization of intangible assets 9,281 9,146 27,807 34,854 Stock
compensation expense 4,260 2,895 11,714 8,286 Deferred income tax
provision 9,751 3,856 13,678 2,863 Amortization of deferred finance
fees 180 190 548 571 Provision for doubtful accounts 11 151 1 365
Loss (gain) on investments (238) 37 (453) 210 Gain on disposal of
fixed assets (76) (13) (46) (15) Non-cash interest expense 2,772
2,710 8,308 7,972 Gain on debt retirement - - (4,152) - Excess tax
benefits from stock-based compensation plans (1,471) (24) (2,027)
(24) Changes in operating assets & liabilities, net of effects
of acquisitions and disposals: Accounts receivable 9,830 (1,819)
40,801 (12,103) Other receivables 2,359 736 539 (4,001) Inventory
16,641 5,182 30,449 (6,028) Income taxes payable/ recoverable
(4,800) 4,972 (2,868) (657) Accounts payable and accrued
liabilities (9,757) (10,567) (32,620) 9,743 Other, net (2,800) 285
6,665 (5,117) ------ --- ----- ------ Net cash provided by
operating activities 63,050 45,597 171,204 86,532 Investing
Activities: Purchases of property, plant, and equipment (3,459)
(4,652) (14,327) (16,444) Cash paid for acquisition, net of cash
acquired (7,930) (5,647) (8,130) (10,066) Cash proceeds from sale
of property, plant & equipment 207 13 208 250 Purchases of
investments (93,079) (70,111) (151,845) (86,998) Disposals of
investments 20,479 50,006 54,416 122,486 ------ ------ ------
------- Net cash provided by (used in) investing activities
(83,782) (30,391) (119,678) 9,228 Financing Activities: Payment of
debt and capital lease obligations (49) (322) (10,677) (35,518)
Repurchase of common stock - - - (75,960) Excess tax benefits from
stock-based compensation plans 1,471 24 2,027 24 Repurchase of
shares to satisfy minimum tax withholdings - - (2,180) (1,035) Fees
and proceeds from issuance of common stock, net 4,259 813 11,205
(1,081) ----- --- ------ ------ Net cash provided by (used in)
financing activities 5,681 515 375 (113,570) Net increase
(decrease) in cash and cash equivalents (15,051) 15,721 51,901
(17,810) Cash and cash equivalents at beginning of period 476,846
290,266 409,894 323,797 ------- ------- ------- ------- Cash and
cash equivalents at end of period $461,795 $305,987 $461,795
$305,987 ======== ======== ======== ======== 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 (loss) $12,882 $0.10 $22,909 $0.18
Highlighted items: Impacting gross margin: Stock compensation
expense 303 - 366 - Impacting operating expenses: Acquisition
costs, restructuring, and other 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 ======= ======= Q1 2008 Q2 2008 -------
------- Per Diluted Per Diluted Amount Share Amount Share ------
----- ------ ----- Net income (loss) $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: Adjustments of tax related to goodwill impairment and
certain provision to return adjustments - - - - 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 ======= ======= Q3 2009
Sept YTD 2009 ------- ------------- Per Diluted Per Diluted Amount
Share Amount Share ------ ----- ------ ----- Net income (loss)
$21,699 $0.17 $57,490 0.45 Highlighted items: Impacting gross
margin: Stock compensation expense 394 - 1,063 0.01 Impacting
operating expenses: Acquisition costs, restructuring, and other 348
- 1,060 0.01 Amortization of intangible assets 9,281 0.07 27,807
0.22 Stock compensation expense 3,866 0.03 10,651 0.08 Impacting
other (income) / expense: Non-cash interest expense 2,772 0.02
8,308 0.06 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 (166) - 1,289 0.01
Tax related to highlighted items above (6,218) (0.05) (15,186)
(0.12) ------ ---- ------ ---- Total highlighted items 10,277 0.08
30,840 0.24 ------ ---- ------ ---- Net income excluding
highlighted items $31,976 $0.25 $88,330 $0.69 ======= ===== =======
===== Weighted average common shares - diluted 129,695 127,916
======= ======= Q3 2008 Sept YTD 2008 ------- ------------- Per
Diluted Per Diluted Amount Share Amount Share ------ ----- ------
----- Net income (loss) $22,434 $0.18 $34,092 $0.27 Highlighted
items: Impacting gross margin: Stock compensation expense 264 - 710
0.01 Impacting operating expenses: Integration costs - - 427 -
Restructuring charges 202 - 782 0.01 Amortization of intangible
assets 9,146 0.07 34,854 0.27 Stock compensation expense 2,631 0.02
7,576 0.06 Impacting other (income) / expense: Non-cash interest
expense 2,710 0.02 7,972 0.06 Impacting income tax expense:
Adjustments of tax related to goodwill impairment and certain
provision to return adjustments (1,530) (0.01) (1,530) (0.01) Tax
related to highlighted items above (5,164) (0.04) (19,158) (0.15)
----- ---- ------ ---- Total highlighted items 8,259 0.07 31,633
0.25 ----- ---- ------ ---- Net income excluding highlighted items
$30,693 $0.24 $65,725 $0.52 ======= ===== ======= ===== Weighted
average common shares - diluted 125,420 127,249 ======= =======
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
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 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 and third quarter of 2009, a tax expense of
approximately $1.3 million was recorded for state valuation
allowances, research and development tax credits and provision to
return differences resulting from filing of the 2008 tax return.
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 GROUP,
INC. Net Income Reconciliation (unaudited) Q4 EPS 2009 Guidance
Estimated GAAP EPS - diluted $0.13 - $0.17 Reconciling Items:
Amortization of intangibles, after tax* 0.05 Stock compensation
expense, after tax 0.02 Non-cash interest expense, after tax 0.01
Acquisition, restructuring and other, after tax 0.01 ---- Subtotal
0.09 ---- Estimated adjusted (non-GAAP) EPS - diluted $0.22 - $0.26
================== * Does not include the amortization for the
Digeo intangibles as the valuation has not been completed. See the
Supplemental Net Income Reconciliation for a discussion regarding
management's reasoning for providing this adjusted financial
measure DATASOURCE: ARRIS Group, Inc. CONTACT: Jim Bauer, Investor
Relations, +1-678-473-2647, Web Site: http://www.arrisi.com/
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