SUWANEE, Ga., Feb. 10 /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 fourth quarter and full year 2009. Revenues in the
fourth quarter 2009 were $300.0 million, compared to third quarter
2009 revenues of $275.8 million and fourth quarter 2008 revenues of
$292.4 million. Full year 2009 and 2008 revenues were $1,107.8
million and $1,144.6 million, respectively. Adjusted net income (a
non-GAAP measure) for the fourth quarter 2009 was $0.32 per diluted
share, compared to $0.25 per diluted share for the third quarter
2009 and $0.25 per diluted share for the fourth quarter of 2008.
Adjusted net income was $1.01 per diluted share for the full year
2009 as compared to $0.77 per diluted share for the full year 2008.
The increased profitability is primarily due to the continued
success of the Company's new generation cable edge routers. GAAP
net income for the fourth quarter 2009 was $0.26 per diluted share,
as compared to the third quarter 2009 of $0.17 per diluted share,
and the fourth quarter 2008 loss of $(1.33) per diluted share. Full
year 2009 GAAP net income was $0.71 per diluted share as compared
to a loss of $(1.04) per diluted share for 2008. Significant GAAP
items that have been excluded in computing adjusted net income and
adjusted earnings per share include 2008 goodwill impairment,
amortization of intangibles, equity compensation, non-cash interest
expense, restructuring and acquisition-related costs, and certain
discrete tax items. A reconciliation of adjusted net income to GAAP
net income (loss) per share is attached to this release and also
can be found on the Company's website (http://www.arrisi.com/).
Gross margin for the fourth quarter 2009 was 44.8%, which compares
to the third quarter 2009 of 41.9% and the fourth quarter 2008 of
37.2%. The Company ended 2009 with $625.6 million of cash resources
(cash, short-term and long term marketable security investments) ,
up in the aggregate by approximately $48.9 million from the end of
the third quarter 2009 and up $198.3 million from the end of 2008,
as a result of both strong earnings and effective working capital
management. The Company generated $69.8 million of cash from
operating activities during the fourth quarter 2009 and $241.0
million during the full year 2009, which compares to $102.5 million
and $189.1 million during the same periods in 2008. Order backlog
at the end of the fourth quarter 2009 was $144.4 million as
compared to $169.5 million and $114.8 million at the end of the
third quarter 2009 and the fourth quarter 2008, respectively. The
Company's book to bill ratio in the fourth quarter 2009 was 0.92 as
compared to the third quarter 2009 of 1.01 and the fourth quarter
2008 of 0.90. "We ended 2009 with very strong performance," said
Bob Stanzione, ARRIS Chairman & CEO. "New applications, growth
of Internet TV and competition from both telco and satellite
providers require ongoing network capacity additions in our
customers' networks. I am confident that ARRIS has the market
leading products and services necessary for our customers to meet
these challenges. Longer term, we are well positioned to provide
new products for a converged platform to deliver voice, data and
video. We have taken key steps to grow our current business to
include a strong video product suite in order to capitalize on the
industry's vision of a converged voice, data and video platform."
During the quarter the Company completed the successful integration
of the recent acquisitions of EG Technologies and Digeo. These two
acquisitions provide ARRIS with valuable expertise and intellectual
property as it expands its portfolio of video products. The Company
also announced today that it will hold an Analyst & Investor
Conference at its corporate headquarters in Suwanee, GA on March 17
& 18, 2010. Details of the conference and instructions on how
to register as well as travel and hotel accommodations will be
issued in a separate press release. "We ended the year with
outstanding performance, exceeding our sales and earnings guidance
for the fourth quarter," said David Potts, ARRIS EVP & CFO. "It
is also very noteworthy that we generated over $240 million of cash
from operating activities in 2009 and ended the year with $626
million of cash and short-term investments. Our strong fourth
quarter was partially the result of customers accelerating
purchases we had anticipated in 2010, which has been factored into
our guidance for the first quarter 2010. As a result, we now
project that first quarter 2010 revenues for the Company will be in
the range of $253 to $273 million, with adjusted net income per
diluted share in the range of $0.18 to $0.22 and GAAP net income
per diluted share, in the range of $0.10 to $0.14." ARRIS
management will conduct a conference call at 5:00 pm EDT, today,
Wednesday, February 10, 2010, to discuss these results in detail.
You may participate in this conference call by dialing (888)
679-8037 or (617) 213-4849 for international calls prior to the
start of the call and providing the ARRIS Group, Inc. name,
conference pass code 18555894 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 5:00 pm EDT
conference call. A replay of the conference call can be accessed
approximately two hours after the call through Monday, February 15,
2010 by dialing (888) 286-8010 or (617) 801-6888 for international
calls and using the pass code 88718508. 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 Atlanta; 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; -- first quarter and 2010 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 first quarter as well as the general outlook for 2010 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; -- ARRIS' customers operate in
a capital intensive consumer based industry, and the current
volatility in the capital markets or changes in customer spending
may adversely impact their ability or willingness to purchase the
products that the Company offers; 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 September 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) December 31,
September 30, June 30, 2009 2009 2009 (unaudited) (unaudited)
(unaudited) ------------ ------------- ----------- ASSETS Current
assets: Cash and cash equivalents $500,565 $461,795 $476,846
Short-term investments, at fair value 125,031 99,917 47,195 -------
------ ------ 625,596 561,712 524,041 Restricted cash 4,475 4,473
4,552 Accounts receivable, net 143,708 119,125 128,482 Other
receivables 6,113 2,235 5,904 Inventories, net 95,851 100,024
115,944 Prepaids 11,675 10,764 7,700 Income taxes recoverable 3,106
4,212 366 Current deferred Income tax assets 35,994 32,883 41,166
Other current assets 15,790 12,981 11,995 ------- ------- -------
Total current assets 942,308 848,409 840,150 Property, plant and
equipment, net 57,195 58,339 60,048 Goodwill 235,388 234,416
231,684 Intangible assets, net 204,572 201,351 208,822 Investments
20,618 30,574 10,317 Noncurrent deferred income tax assets 6,759
3,593 3,870 Other assets 8,776 7,648 6,251 ---------- ----------
---------- $1,475,616 $1,384,330 $1,361,142 ========== ==========
========== LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable $53,979 $42,659 $48,859 Accrued
compensation, benefits and related taxes 36,936 27,054 20,753
Accrued warranty 4,265 5,292 5,185 Deferred revenue 47,044 35,423
43,727 Current portion of long-term debt 124 148 148 Current
deferred income tax liability - 250 248 Other accrued liabilities
46,203 34,979 35,852 ------ ------ ------ Total current liabilities
188,551 145,805 154,772 Long-term debt, net of current portion
211,248 208,433 205,710 Accrued pension 16,408 18,914 19,665
Noncurrent income tax payable 14,815 10,632 12,386 Noncurrent
deferred income tax liability 37,203 35,188 33,999 Other noncurrent
liabilities 16,021 15,301 15,094 ------- ------- ------- Total
liabilities 484,246 434,273 441,626 Stockholders' equity: Preferred
stock - - - Common stock 1,388 1,385 1,379 Capital in excess of par
value 1,183,872 1,177,958 1,169,223 Treasury stock at cost (75,960)
(75,960) (75,960) Unrealized gain (loss) on marketable securities
28 (60) (161) Unfunded pension liability (6,041) (8,070) (8,070)
Accumulated deficit (111,733) (145,012) (166,711) Cumulative
translation adjustments (184) (184) (184) ------- ------- -------
Total stockholders' equity 991,370 950,057 919,516 ----------
---------- ---------- $1,475,616 $1,384,330 $1,361,142 ==========
========== ========== March 31, December 31, 2009 2008 (unaudited)
----------- ------------ ASSETS Current assets: Cash and cash
equivalents $398,938 $409,894 Short-term investments, at fair value
25,494 17,371 ------- ------- 424,432 427,265 Restricted cash 4,550
5,673 Accounts receivable, net 155,792 159,443 Other receivables
6,636 4,749 Inventories, net 120,774 129,752 Prepaids 6,994 8,004
Income taxes recoverable 3,232 362 Current deferred income tax
assets 49,027 44,004 Other current assets 15,083 19,420 -------
------- Total current assets 786,520 798,672 Property, plant and
equipment, net 59,438 59,204 Goodwill 231,684 231,684 Intangible
assets, net 218,085 227,348 Investments 14,593 14,681 Noncurrent
deferred income tax assets 3,771 12,157 Other assets 5,483 6,576
---------- ---------- $1,319,574 $1,350,322 ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts
payable $44,422 $75,863 Accrued compensation, benefits and related
taxes 15,583 27,024 Accrued warranty 5,306 5,652 Deferred revenue
44,006 44,461 Current portion of long-term debt 147 146 Current
deferred income tax liability 241 1,059 Other accrued liabilities
31,922 25,410 ------- ------- Total current liabilities 141,627
179,615 Long-term debt, net of current portion 203,080 211,870
Accrued pension 19,289 18,820 Noncurrent income tax payable 12,441
9,607 Noncurrent deferred income tax liability 42,530 41,598 Other
noncurrent liabilities 14,391 15,343 ------- ------- Total
liabilities 433,358 476,853 Stockholders' equity: Preferred stock -
- Common stock 1,368 1,362 Capital in excess of par value 1,159,054
1,159,097 Treasury stock at cost (75,960) (75,960) Unrealized gain
(loss) on marketable securities (372) (274) Unfunded pension
liability (8,070) (8,070) Accumulated deficit (189,620) (202,502)
Cumulative translation adjustments (184) (184) ------- -------
Total stockholders' equity 886,216 873,469 ---------- ----------
$1,319,574 $1,350,322 ========== ========== ARRIS GROUP, INC.
PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands,
except per share data) For the Three Months For the Twelve Months
Ended December 31, Ended December 31, ------------------
------------------ 2009 2008 2009 2008 (unaudited) (unaudited)
(unaudited) ----------- ----------- ----------- ---------- Net
sales $299,995 $292,398 $1,107,806 $1,144,565 Cost of sales 165,495
183,535 645,043 751,436 Gross margin 134,500 108,863 462,763
393,129 Gross margin % 44.8% 37.2% 41.8% 34.3% Operating expenses:
Selling, general, and administrative expenses 37,622 36,957 148,403
143,997 Research and Development expenses 35,102 29,285 124,550
112,542 Restructuring charges 2,917 429 3,702 1,211 Goodwill
impairment - 209,297 - 209,297 Amortization of intangible assets
9,554 9,341 37,361 44,195 ----- ----- ------ ------ 85,195 285,309
314,016 511,242 ------ -------- ------- -------- Operating income
49,305 (176,446) 148,747 (118,113) Other expense (income): Interest
expense 4,549 4,451 17,670 17,123 Loss (gain) on investments (258)
507 (711) 717 Loss (gain) On foreign currency (198) (164) 3,445
(422) Interest income (237) (1,333) (1,409) (7,224) Gain on debt
retirement - - (4,152) - Other (income) expense, net 174 (1,000)
(714) (1,043) --- ------ ---- ------ Income (loss) from continuing
operations before income taxes 45,275 (178,907) 134,618 (127,264)
Income tax expense (benefit) 11,996 (15,176) 43,849 2,375 ------
------- ------ ----- Net income (loss) $33,279 $(163,731) $90,769
$(129,639) ======= ========= ======= ========= Net income (loss)
per common share Basic $0.26 $(1.33) $0.73 $(1.04) ===== ======
===== ====== Diluted $0.26 $(1.33) $0.71 $(1.04) ===== ====== =====
====== Weighted average common shares: Basic 125,698 123,128
124,716 124,878 ======= ======= ======= ======= Diluted 129,524
123,128 128,085 124,878 ======= ======= ======= ======= ARRIS
GROUP, INC. PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS (in
thousands) For the Three Months For the Twelve Months Ended
December 31, Ended December 31, ------------------
------------------ 2009 2008 2009 2008 (unaudited) (unaudited)
(unaudited) ----------- ----------- ----------- --------- Operating
Activities: Net income (loss) $33,279 $(163,731) $90,769 $(129,639)
Depreciation 5,492 5,394 20,862 20,915 Amortization of intangible
assets 9,554 9,341 37,361 44,195 Stock compensation expense 4,207
2,991 15,921 11,277 Deferred income tax provision (benefit) (5,681)
5,100 7,997 7,963 Deferred income tax related to goodwill
impairment - (24,725) - (24,725) Amortization of deferred finance
fees 180 189 728 760 Provision for doubtful accounts (1,281) 454
(1,280) 819 Loss (gain) on investments (258) 507 (711) 717 Loss on
disposal of fixed assets 474 29 428 14 Non-cash interest expense
2,828 2,764 11,136 10,736 Gain on debt retirement - - (4,152) -
Excess income tax benefits from stock- based compensation plans
(980) (32) (3,007) (56) Goodwill impairment - 209,297 - 209,297
Changes in operating assets & liabilities, net of effects of
acquisitions and disposals: Accounts receivable (19,097) 20,682
21,704 8,579 Other receivables (2,922) 3,530 (2,383) (471)
Inventory 8,457 10,051 38,906 4,023 Income taxes payable/
recoverable 7,834 (1,801) 4,966 (2,458) Accounts payable and
accrued liabilities 37,031 29,762 4,707 41,905 Other, net (9,344)
(7,261) (2,975) (14,778) ------ ------ ------ ------- Net cash
provided by operating activities 69,773 102,541 240,977 189,073
Investing Activities: Purchases of property, plant, and equipment
(4,336) (4,908) (18,663) (21,352) Cash paid for acquisition, net of
cash acquired (14,604) (434) (22,734) (10,500) Cash proceeds from
sale of property, plant & equipment 2 - 210 250 Purchases of
short- term investments (64,859) (26,736) (216,704) (113,734)
Disposals of short- term investments 50,072 32,628 104,488 155,114
------ ------ ------- ------- Net cash provided by (used in)
investing activities (33,725) 550 (153,403) 9,778 Financing
Activities: Payment of debt and capital lease obligations (37)
(346) (10,714) (35,864) Repurchase of common stock - - - (75,960)
Excess income tax benefits from stock- based compensation plans 980
32 3,007 56 Repurchase of shares to satisfy employee tax
withholdings - - (2,180) (1,035) Proceeds from issuance of common
stock 1,779 1,130 12,984 49 ----- ----- ------ --- Net cash
provided by (used in) financing activities 2,722 816 3,097
(112,754) Net increase in cash and cash equivalents 38,770 103,907
90,671 86,097 Cash and cash equivalents at beginning of period
461,795 305,987 409,894 323,797 ------- ------- ------- -------
Cash and cash equivalents at end of period $500,565 $409,894
$500,565 $409,894 ======== ======== ======== ======== ARRIS GROUP,
INC. PRELIMINARY SUPPLEMENTAL NET INCOME (LOSS) RECONCILIATION (In
thousands, except per share data) Q4 2009 Year 2009 -------
--------- Unaudited Unaudited --------- --------- Per Diluted Per
Diluted Amount Share Amount Share ------ ---------- ------
----------- Net income (loss) $33,279 $0.26 $90,769 0.71
Highlighted items: Impacting gross margin: Stock compensation
expense 383 - 1,446 0.01 Impacting operating expenses: Integration
costs - - - - Acquisition costs, restructuring and other 2,917 0.02
3,977 0.03 Amortization of intangible assets 9,554 0.07 37,361 0.29
Stock compensation expense 3,824 0.03 14,475 0.11 Goodwill
Impairment - - - - Impacting other (income) /expense: Non-cash
interest expense 2,827 0.02 11,135 0.09 Gain on repurchase of debt
- - (4,152) (0.03) Impacting income tax expense: Adjustments of
income tax valuation allowances and research & development
credits and goodwill impairment (4,422) (0.03) (3,133) (0.02) Tax
related to highlighted items above, except for goodwill impairment
(7,375) (0.06) (22,305) (0.17) ------- -------- Total highlighted
items 7,708 0.06 38,804 0.30 ----- ---- ------ ---- Net income
excluding highlighted items $40,987 $0.32 $129,573 $1.01 =======
===== ======== ===== Weighted average common shares - diluted
129,524 128,085 ======= ======= Q4 2008 Year 2008 ------- ---------
Unaudited Unaudited --------- --------- Per Diluted Per Diluted
Amount Share (1) Amount Share (1) ------ -------- ------ --------
Net income (loss) $(163,731) (1.32) $(129,639) (1.03) Highlighted
items: Impacting gross margin: Stock compensation expense 269 - 979
0.01 Impacting operating expenses: Integration costs - - 427 0.00
Acquisition costs, restructuring and other 429 - 1,211 0.01
Amortization of intangible assets 9,341 0.08 44,195 0.35 Stock
compensation expense 2,722 0.02 10,298 0.08 Goodwill Impairment
209,297 1.68 209,297 1.66 Impacting other (income) /expense:
Non-cash interest expense 2,763 0.02 10,735 0.09 Gain on repurchase
of debt - - - - Impacting income tax expense: Adjustments of income
tax valuation allowances and research & development credits and
goodwill impairment (24,725) (0.20) (26,255) (0.21) Tax related to
highlighted items above, except for goodwill impairment (5,138)
(0.04) (23,991) (0.19) ------- -------- Total highlighted items
194,958 1.57 226,896 1.80 ------- ---- ------- ---- Net income
excluding highlighted items $31,227 $0.25 $97,257 $0.77 =======
===== ======= ===== Weighted average common shares - diluted
124,355 126,277 ======= ======= (1) Although net income for these
periods is a loss and inclusion of options would be antidilutive,
weighted average diluted shares are used in this calculation as the
earnings excluding highlighted items is net income. 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 acquisitions. The acquisition costs, restructuring,
and other items reflect 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. In the fourth quarter of 2009, a tax
benefit of approximately $4.6 million was recorded for changes to
foreign valuation allowances relating to historic net operating
losses in the various jurisdictions. 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. Lastly, during the fourth quarter 2008, ARRIS recorded an
impairment on goodwill of $209.3 million and the related deferred
tax adjustment of $24.7 million. 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) Q1 2010 EPS Guidance
Estimated GAAP EPS - diluted $0.10 - $0.14 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 $0.18 - $0.22 ============= See the
Supplemental Net Income (Loss) Reconciliation for a discussion
regarding these adjustments and 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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