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Press release from PR Newswire

/C O R R E C T I O N -- ARRIS Group, Inc./

Wednesday, April 25, 2012

/C O R R E C T I O N -- ARRIS Group, Inc./16:00 EDT Wednesday, April 25, 2012In the news release, ARRIS Announces Preliminary and Unaudited First Quarter 2012 Results, issued 25-Apr-2012 by ARRIS Group, Inc. over PR Newswire, we are advised by the company that the section "Notes to GAAP to Adjusted Non-GAAP Financial Measures" was omitted from the original transmission. The complete, corrected release follows: ARRIS Announces Preliminary and Unaudited First Quarter 2012 Results SUWANEE, Ga., April 25, 2012 /PRNewswire/ -- ARRIS Group, Inc. (NASDAQ:ARRS), today announced preliminary and unaudited financial results for the first quarter 2012.Revenues in the first quarter 2012 were $302.9 million as compared to first quarter 2011 revenues of $267.4 million and as compared to fourth quarter 2011 revenues of $281.1 million.  Adjusted net income (a non-GAAP measure) in the first quarter 2012 was $0.19 per diluted share, compared to $0.16 per diluted share for the first quarter 2011 and $0.21 per diluted share for the fourth quarter 2011.GAAP net income in the first quarter 2012 was $0.05 per diluted share, as compared to first quarter 2011 GAAP net income of $0.09 per diluted share and fourth quarter 2011 GAAP net loss of $(0.51) per diluted share. Significant GAAP items that have been adjusted in computing adjusted net income and adjusted net income per diluted share include: purchase accounting impacts related to acquired deferred revenue;  amortization of intangible assets; goodwill, intangible and long term investment impairments; loss on sale of product line; equity compensation; non-cash interest expense; acquisition and restructuring charges; and certain discrete tax items. A reconciliation of adjusted net income to GAAP net income (loss) per diluted 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 2012 was 36.0%, which compares to the first quarter 2011 gross margin of 36.3% and the fourth quarter 2011 gross margin of 37.9%.The Company ended the first quarter 2012 with $567.2 million of cash resources, which includes $514.3 million of cash, cash equivalents and short-term investments, and $52.9 million of long-term marketable security investments, as compared to $561.1 million, in the aggregate, at the end of the fourth quarter 2011. During the first quarter 2012, the Company repurchased approximately 2.3 million shares of ARRIS common stock for $26.3 million.  The Company generated $35.9 million of cash from operating activities during the first quarter 2012, which compares to $(3.6) million during the same period in 2011.Order backlog at the end of the first quarter 2012 was $277.7 million as compared to $177.5 million and $148.5 million at the end of the first quarter 2011 and the fourth quarter 2011, respectively. The Company's book-to-bill ratio in the first quarter 2012 was 1.43 as compared to the first quarter 2011 of 1.14 and the fourth quarter 2011 of 0.98."I am very pleased with our first quarter results. Sales were up 13% and non-GAAP earnings per share up almost 19% from the first quarter of 2011; and these results include the dilutive impact of our BigBand acquisition and our higher tax rate," said Bob Stanzione, ARRIS Chairman and CEO.  "Even more encouraging is the strong outlook for Q2.  The investment strategy of the past few years is now paying off."During the first quarter ARRIS announced that cable providers WOW and Buckeye had launched the ARRIS Whole Home Solution.  Additionally, the Company successfully demonstrated interoperability for IPv6 services with its C4 CMTS and Wideband cable modems supporting EuroDOCSIS? 3.0 features.  The Company will present its products at the upcoming NCTA cable show in Boston this May.  ARRIS will be showing its latest version of the Moxi Whole Home Solution, CCAP supporting product portfolio, on-demand video and advertising solutions, HFC and RFoG network optimization components, and network monitoring solutions."We are off to an excellent start to 2012," said David Potts, ARRIS EVP & CFO.  "With respect to the second quarter 2012, we now project that revenues for the Company will be in the range of $330 to $350 million, with adjusted net income per diluted share in the range of $0.20 to $0.24 and GAAP net income per diluted share in the range of $0.10 to $0.14, reflecting strong demand for our products." ARRIS management will conduct a conference call at 5:00 pm EDT, today, Wednesday, April 25, 2012, to discuss these results in detail. You may participate in this conference call by dialing 888-713-4214 or 617-213-4866 for international calls prior to the start of the call and providing the ARRIS Group, Inc. name, conference pass code 91925766 and Bob Puccini 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 May 2, 2012 by dialing 888-286-8010 or 617-801-6888 for international calls and using the pass code 88094687. 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, GA, USA, ARRIS has R&D centers in Suwanee, GA; Beaverton, OR; Lisle, IL; Kirkland, WA; State College, PA; Tel Aviv, Israel; 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 2012, and beyond; expected sales levels and acceptance of new ARRIS products; and 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 second quarter 2012 as well as the general outlook for 2012 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-K for the year ended December 31, 2011.  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 31,20122011201120112011ASSETSCurrent assets:Cash and cash equivalents$   215,808$        235,875$         354,659$   360,281$   358,747Short-term investments, at fair value298,539282,904220,318231,254260,862Total cash, cash equivalents and short term investments514,347518,779574,977591,535619,609Restricted cash3,9434,1013,6473,6464,176Accounts receivable, net183,427152,437165,821152,436149,976Other receivables 5,0718,7895,2964065,275Inventories, net105,114115,912116,769113,020105,787Prepaids12,43610,40810,69210,27212,115Current deferred income tax assets22,06822,04824,23922,68120,450Other current assets16,79227,07121,69525,21633,535Total current assets863,198859,545923,136919,212950,923Property, plant and equipment, net 57,81061,37557,61957,10056,617Goodwill195,268194,542233,430233,440233,471Intangible assets, net117,444124,823141,784150,728159,672Investments82,96871,09547,22134,23732,787Noncurrent deferred income tax assets42,10638,4339,6379,83910,183Other assets11,69910,9975,4005,8785,798$1,370,493$     1,360,810$      1,418,227$1,410,434$1,449,451LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable$     54,576$          40,671$           38,918$     27,825$     35,796Accrued compensation, benefits and related taxes31,08136,76425,32020,83226,278Accrued warranty3,0943,3502,9333,3002,931Deferred revenue60,12943,74639,09447,16643,019Other accrued liabilities31,05433,32519,65317,80517,594Total current liabilities179,934157,856125,918116,928125,618Long-term debt, net of current portion212,765209,766206,825208,336205,447Accrued pension25,73925,26017,98917,73017,472Accrued severance liability, net of current portion3,8844,191---Noncurrent income taxes payable26,67624,45022,47121,84421,844Noncurrent deferred income tax liabilities35233721,11724,80825,827Other noncurrent liabilities22,37222,74516,25317,36718,271Total liabilities471,722444,605410,573407,013414,479Stockholders' equity:Preferred stock-----Common stock1,4671,4491,4461,4431,438Capital in excess of par value1,247,7631,245,1151,237,8521,228,7291,219,615Treasury stock at cost(280,724)(254,409)(220,034)(202,933)(145,286)Unrealized gain (loss) on marketable securities149(267)261,5301,244Unfunded pension liability(10,231)(10,231)(5,813)(5,813)(5,813)Accumulated deficit(59,469)(65,268)(5,639)(19,351)(36,042)Cumulative translation adjustments(184)(184)(184)(184)(184)Total stockholders' equity898,771916,2051,007,6541,003,4211,034,972$1,370,493$     1,360,810$      1,418,227$1,410,434$1,449,451    ARRIS GROUP, INC. PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share data)(unaudited)For the Three MonthsEnded March 31,20122011Net sales$    302,901$    267,436Cost of sales193,993170,490Gross margin108,90896,946Operating expenses:Selling, general, and administrative expenses39,54336,838Research and development expenses44,14736,040Acquisition costs607-Loss on sale of product line337-Restructuring charges5,203-Amortization of intangible assets7,3798,94497,21681,822Operating income 11,69215,124Other expense (income):Interest expense4,3504,225Gain on investments(961)(423)Loss on foreign currency808888Interest income(755)(778)Other (income) expense, net(436)(113)Income from continuing operations before income taxes8,68611,325Income tax expense (benefit)2,887(239)Net income $        5,799$      11,564Net income per common share:Basic$          0.05$          0.09Diluted$          0.05$          0.09Weighted average common shares:Basic115,075122,297Diluted117,597125,732   ARRIS GROUP, INC.PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited)For the Three MonthsEnded March 31,20122011Operating Activities:Net income$     5,799$   11,564Depreciation7,1955,855Amortization of intangible assets7,3798,944Amortization of deferred finance fees160163Non-cash interest expense2,9992,832Deferred income tax provision (benefit)(4,635)(7,844)Stock compensation expense6,6495,284Provision for doubtful accounts54-Loss on sale of product line337-Loss on disposal of fixed assets334Gain on investments(854)(423)Excess tax benefits from stock-based compensation plans(1,654)(3,700)Changes in operating assets & liabilities, net of effects of acquisitions and disposals:Accounts receivable(31,799)(24,043)Other receivables3,693534Inventory7,243(4,024)Income taxes payable/recoverable6,3652,270Accounts payable and accrued liabilities23,045(7,048)Other, net3,9016,031Net cash provided by (used in) operating activities35,880(3,571)Investing Activities:Purchases of investments(77,766)(99,361)Disposals of investments51,908105,949Purchases of property & equipment, net(3,762)(6,251)Cash proceeds from sale of property & equipment-42Cash paid for acquisition, net of cash acquired(607)-Cash proceeds from sale of product line3,249-Net cash provided by (used in) investing activities(26,978)379Financing Activities:Repurchase of common stock(26,315)-Excess income tax benefits from stock-based compensation plans1,6543,700Repurchase of shares to satisfy employee tax withholdings(8,033)(8,245)Fees and proceeds from issuance of common stock, net3,72513,363Net cash provided by (used in) financing activities(28,969)8,818Net increase (decrease) in cash and cash equivalents(20,067)5,626Cash and cash equivalents at beginning of period235,875353,121Cash and cash equivalents at end of period$ 215,808$ 358,747   ARRIS GROUP, INC.PRELIMINARY SUPPLEMENTAL SALES & NET INCOME RECONCILIATION(in thousands, except per share data) (unaudited)(in thousands, except per share data)Q1 2012Q1 2011Per DilutedPer DilutedAmountShareAmountShareSales $  302,901$  267,436Highlighted items:Purchase accounting impacts of deferred revenue1,2580.01--Sales excluding highlighted items$  304,159$  267,436Q1 2012Q1 2011Per DilutedPer DilutedAmountShareAmountShareNet income$     5,799$       0.05$   11,564$       0.09Highlighted items:Impacting gross margin:Purchase accounting impacts of deferred revenue1,2580.01--Stock compensation expense7500.01437-Impacting operating expenses:Acquisition costs6070.01--Restructuring5,2030.04--Amortization of intangible assets7,3790.068,9440.07Loss of sale of product line337---Stock compensation expense5,8990.054,8470.04Impacting other (income) / expense:Non-cash interest expense2,9990.032,8320.02Impacting income tax expense:Adjustments of income tax valuation allowances and other--(3,583)(0.03)Tax related to highlighted items above(8,121)(0.07)(5,024)(0.04)Total highlighted items16,3110.148,4530.07Net income excluding highlighted items$   22,110$       0.19$   20,017$       0.16Weighted average common shares - diluted117,597125,732See Notes to GAAP to Adjusted Non-GAAP Financial Measures Notes to GAAP to Adjusted Non-GAAP Financial MeasuresThe Company reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP" or referred to herein as "reported"). However, management believes that certain non-GAAP financial measures provide management and other users with additional meaningful financial information that should be considered when assessing our ongoing performance. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the factors management uses in planning for and forecasting future periods.  Non-GAAP financial measures should be viewed in addition to, and not as an alternative to, the Company's reported results prepared in accordance with GAAP.  Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:Purchase Accounting Impacts Related to Deferred Revenue:  In connection with our acquisition of BigBand, business combination rules require us to account for the fair values of arrangements for which acceptance has not been obtained, and post contract support in our purchase accounting.  The non-GAAP adjustment to our sales and cost of sales is intended to include the full amounts of such revenues.  We believe the adjustment to these revenues is useful as a measure of the ongoing performance of our business.  We have historically experienced high renewal rates related to our support agreements and our objective is to increase the renewal rates on acquired post contract support agreements; however, we cannot be certain that our customers will renew our contracts.  Stock-Based Compensation Expense: We have excluded the effect of stock-based compensation expenses in calculating our non-GAAP operating expenses and net income measures. Although stock-based compensation is a key incentive offered to our employees, we continue to evaluate our business performance excluding stock-based compensation expenses. We record non-cash compensation expense related to grants of options and restricted stock. Depending upon the size, timing and the terms of the grants, the non-cash compensation expense may vary significantly but will recur in future periods.Acquisition Costs:  We have excluded the effect of acquisition related and other expenses and the effect of restructuring expenses in calculating our non-GAAP operating expenses and net income measures. We incurred significant expenses in connection with our recent acquisition of BigBand, which we generally would not have otherwise incurred in the periods presented as part of our continuing operations. Acquisition related expenses consist of transaction costs, costs for transitional employees, other acquired employee related costs, and integration related outside services. We believe it is useful to understand the effects of these items on our total operating expenses. Restructuring Costs:  We have excluded the effect of restructuring charges in calculating our non-GAAP operating expenses and net income measures. Restructuring expenses consist of employee severance, abandoned facilities, and other exit costs. We believe it is useful to understand the effects of these items on our total operating expenses. Loss on Sale of Product Line:  We have excluded the effect of a loss on the sale of a product line in calculating our non-GAAP operating expenses and net income measures.  We believe it is useful to understand the effects of these items on our total operating expenses. Amortization of Intangible Assets: We have excluded the effect of amortization of intangible assets in calculating our non-GAAP operating expenses and net income measures. Amortization of intangible assets is non-cash, and is inconsistent in amount and frequency and is significantly affected by the timing and size of our acquisitions. Investors should note that the use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well. Amortization of intangible assets will recur in future periods.Non-Cash Interest on Convertible Debt: We have excluded the effect of non-cash interest in calculating our non-GAAP operating expenses and net income measures. We record the accretion of the debt discount related to the equity component non-cash interest expense. We believe it is useful to understand the component of interest expense that will not be paid out in cash.Income Tax Expense: We have excluded the tax effect of the non-GAAP items mentioned above.  Additionally, we have excluded the effects of certain tax adjustments related to state valuation allowances, research and development tax credits and provision to return differences. SOURCE ARRIS Group, Inc.For further information: Bob Puccini, Investor Relations, +1-720-895-7787, bob.puccini@arrisi.com