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Press release from PR Newswire

ARRIS Announces Preliminary and Unaudited First Quarter 2011 Results

Wednesday, April 27, 2011

ARRIS Announces Preliminary and Unaudited First Quarter 2011 Results16:00 EDT Wednesday, April 27, 2011SUWANEE, Ga., April 27, 2011 /PRNewswire/ -- ARRIS Group, Inc. (NASDAQ: ARRS), today announced preliminary and unaudited financial results for the first quarter 2011.Revenues in the first quarter 2011 were $267.4 million as compared to first quarter 2010 revenues of $266.7 million and as compared to fourth quarter 2010 revenues of $266.2 million.Adjusted net income (a non-GAAP measure) in the first quarter 2011 was $0.16 per diluted share, compared to $0.24 per diluted share for the first quarter 2010 and $0.19 per diluted share for the fourth quarter 2010.GAAP net income in the first quarter 2011 was $0.09 per diluted share, as compared to first quarter 2010 GAAP net income of $0.15 per diluted share and fourth quarter 2010 GAAP net income of $0.09 per diluted share. Significant GAAP items that have been excluded in computing adjusted net income and adjusted net income per diluted share include amortization of intangible assets, equity compensation, non-cash interest expense, restructuring charges, and certain discrete tax items. 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 (www.arrisi.com).Gross margin for the first quarter 2011 was 36.3%, which compares to the first quarter 2010 gross margin of 42.2% and the fourth quarter 2010 gross margin of 36.2%.The Company ended the first quarter 2011 with $619.6 million of cash, cash equivalents and short-term investments, down in the aggregate by approximately $41.5 million from the end of the first quarter 2010, reflecting approximately $93 million of repurchases of stock and debt retirement in 2010, and down $0.5 million from the end of the fourth quarter 2010. The Company used $3.6 million of cash for operating activities during the first quarter 2011, which compares to $48.2 million generated during the same period in 2010.Order backlog at the end of the first quarter 2011 was $177.5 million as compared to $195.1 million and $140.4 million at the end of the first quarter 2010 and the fourth quarter 2010, respectively. The Company's book-to-bill ratio in the first quarter 2011 was 1.14 as compared to the first quarter 2010 of 1.19 and the fourth quarter 2010 of 1.08."First quarter financial results came in within our range of guidance," said Bob Stanzione, ARRIS Chairman & CEO. "I am very pleased with the progress we are making with customers for our new higher density C4 line cards which will be shipping in the second quarter. Additionally, the recent announcement of our first customer for our new IP Home Gateway product is an indicator of our traction in the strategy to expand into the video based products market."During the quarter the Company announced a number of new products as well as a resale agreement with Ruckus Wireless which the Company expects will ramp in the second half of 2011. In February, the Company announced that its Whole Home Solution Media Gateway will be offered by Oregon-based MSO BendBroadband throughout its network. The ARRIS Whole Home solution consists of the ARRIS Media Gateway, a converged multi-services platform that provides integrated multimedia entertainment to the entire home, and ARRIS Media Players connected to each television. Also during the quarter the Company announced that the ARRIS VIPr? video transcoding platform with Digital Video Broadcasting (DVB) functionality will be available in April. The transition from analog to digital continues to accelerate, expanding the addressable market for DVB-capable devices."With respect to the second quarter 2011, 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 $0.16 to $0.20 and GAAP net income per diluted share in the range of $0.06 to $0.10," said David Potts, ARRIS EVP & CFO.  "Our guidance reflects initial sales of our new C4 CMTS line card capacity upgrade which we anticipate will gain momentum in the second half of 2011, but also reflects higher than usual start-up expenditures related to new products."ARRIS management will conduct a conference call at 5:00 pm EDT, today, Wednesday, April 27, 2011, 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 pass code 99866058 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 Wednesday, May 4, 2011 by dialing 888-286-8010 or 617-801-6888 for international calls and using the pass code 42579746. A replay also will be made available for a period of 12 months following the conference call on ARRIS' website at www.arrisi.com.About ARRISARRIS 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 converged IP video solutions, 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, GA; 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 www.arrisi.com.Forward-looking statements: Statements made in this press release, including those related to:growth expectations and business prospects;revenues and net income for the second quarter 2011, full year 2011 and beyond;start up costs;expected sales levels and acceptance of new ARRIS products; andthe general market outlook and industry trendsare 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 second quarter 2011 as well as the general outlook for 2011 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; andbecause 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-K for the year ended December 31, 2010.  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)March 31,December 31,September 30,June 30,March 31,20112010201020102010ASSETSCurrent assets:Cash and cash equivalents$    358,747$        353,121$          351,894$    370,932$    500,044Short-term investments, at fair value260,862266,981288,463292,421161,012Total cash, cash equivalents and short term investments619,609620,102640,357663,353661,056Restricted cash4,1764,9374,4804,4784,476Accounts receivable, net149,976125,933133,915139,673139,207Other receivables 5,2756,5282,6546,3683,057Inventories, net105,787101,76389,20378,83079,907Prepaids12,1159,2378,93410,19610,546Current deferred income tax assets20,45019,81928,58530,46937,324Income taxes recoverable23,63321,90717,0945,943-Other current assets10,23911,14711,25315,38614,328Total current assets951,260921,373936,475954,696949,901Property, plant and equipment, net 56,61756,30656,81656,12856,223Goodwill233,471234,964235,109235,122235,256Intangible assets, net159,672168,616177,560186,529195,551Investments32,78731,01529,59129,48525,435Noncurrent deferred income tax assets10,1836,2936,5606,1276,298Other assets5,7985,5206,1296,7558,050$ 1,449,788$     1,424,087$       1,448,240$ 1,474,842$ 1,476,714LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable$      35,796$          50,736$            52,011$      72,652$      44,523Accrued compensation, benefits and related taxes26,27828,77825,91320,69623,639Accrued warranty2,9312,9453,5043,5393,632Deferred revenue43,01931,62536,02944,91353,024Current portion of long-term debt--125087Other accrued liabilities17,59418,84725,89124,47642,978Total current liabilities125,618132,931143,360166,326167,883Long-term debt, net of current portion205,447202,615204,053212,914214,131Accrued pension17,47217,21317,38317,05816,733Noncurrent income taxes payable21,84417,70216,50916,52316,248Noncurrent deferred income tax liabilities25,82729,15132,19328,70533,577Other noncurrent liabilities18,27115,40614,92615,70416,871Total liabilities414,479415,018428,424457,230465,443Stockholders' equity:Preferred stock-----Common stock1,4381,4091,4061,4051,402Capital in excess of par value1,219,6151,206,1571,199,1841,194,8291,187,854Treasury stock at cost(145,286)(145,286)(115,248)(99,645)(79,019)Unrealized gain (loss) on marketable securities1,244392(374)2172Unfunded pension liability(5,813)(5,813)(6,041)(6,041)(6,041)Accumulated deficit(35,705)(47,606)(58,927)(72,969)(92,743)Cumulative translation adjustments(184)(184)(184)(184)(184)Total stockholders' equity1,035,3091,009,0691,019,8161,017,6121,011,271$ 1,449,788$     1,424,087$       1,448,240$ 1,474,842$ 1,476,714ARRIS GROUP, INC. PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share data)(unaudited)For the Three MonthsEnded March 31,20112010Net sales$ 267,436$ 266,697Cost of sales170,490154,186Gross margin96,946112,511Operating expenses:Selling, general, and administrative expenses36,83835,117Research and development expenses36,04034,365Restructuring charges-52Amortization of intangible assets8,9449,02281,82278,556Operating income 15,12433,955Other expense (income):Interest expense4,2254,430Gain on investments(570)(146)Loss (gain) on foreign currency888(268)Interest income(1,108)(374)Other (income) expense, net(113)(42)Income from continuing operations before income taxes11,80230,355Income tax expense (benefit)(99)11,364Net income $   11,901$   18,991Net income per common share:Basic$       0.10$       0.15Diluted$       0.09$       0.15Weighted average common shares:Basic122,297125,967Diluted125,732129,975ARRIS GROUP, INC.PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited)For the Three MonthsEnded March 31,2011 2010 Operating Activities:Net income$   11,901$   18,991Depreciation5,8555,359Amortization of intangible assets8,9449,021Amortization of deferred finance fees163180Non-cash interest expense2,8322,883Deferred income tax provision (benefit)(7,844)(4,495)Stock compensation expense5,2844,521Provision for doubtful accounts-295Loss on disposal of fixed assets3411Gain on investments(570)(146)Excess tax benefits from stock-based compensation plans(3,700)(2,486)Changes in operating assets & liabilities, net of effects of acquisitions and disposals:Accounts receivable(24,043)4,206Other receivables5342,420Inventory(4,024)15,944Income taxes payable/recoverable2,4109,167Accounts payable and accrued liabilities(7,048)(24,935)Other, net5,7017,274Net cash provided by (used in) operating activities(3,571)48,210Investing Activities:Purchases of investments(99,361)(42,436)Disposals of investments105,9492,100Purchases of property & equipment, net(6,251)(4,654)Cash proceeds from sale of property & equipment42240Net cash provided by (used in) investing activities379(44,750)Financing Activities:Payment of debt obligations-(37)Repurchase of common stock-(3,059)Excess income tax benefits from stock-based compensation plans3,7002,486Repurchase of shares to satisfy employee tax withholdings(8,245)(5,993)Fees and proceeds from issuance of common stock, net13,3632,622Net cash provided by (used in) financing activities8,818(3,981)Net increase (decrease) in cash and cash equivalents5,626(521)Cash and cash equivalents at beginning of period353,121500,565Cash and cash equivalents at end of period$ 358,747$ 500,044ARRIS GROUP, INC.PRELIMINARY SUPPLEMENTAL NET INCOME RECONCILIATION(in thousands, except per share data)(unaudited)Q1 2011Q1 2010Per DilutedPer DilutedAmountShareAmountShareNet income$ 11,901$         0.09$ 18,991$         0.15Highlighted items:Impacting gross margin:Stock compensation expense437-433-Impacting operating expenses:Acquisition costs, restructuring and other--52-Amortization of intangible assets8,9440.079,0220.07Stock compensation expense4,8470.044,0880.03Impacting other (income) / expense:Non-cash interest expense2,8320.022,8830.02Impacting income tax expense:Adjustments of income tax valuation allowances, research & development credits and other(3,583)(0.03)1,2220.01Tax related to highlighted items above(5,024)(0.04)(5,505)(0.04)Total highlighted items8,4530.0712,1950.09Net income excluding highlighted items$ 20,354$         0.16$ 31,186$         0.24Weighted average common shares - diluted125,732129,975With 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 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 .  Disclosing the non-cash piece provides investors with the information regarding interest that will not be paid out in cash.     In the first quarters of 2011 and 2010,   income tax expense adjustments were recorded for state valuation allowances and research and development tax credits.  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. SOURCE ARRIS Group, Inc.For further information: Jim Bauer, Investor Relations, +1-678-473-2647, jim.bauer@arrisi.com