2014

ARRIS Announces Preliminary And Unaudited First Quarter 2013 Results

SUWANEE, Ga., April 24, 2013 /PRNewswire/ -- ARRIS Group, Inc. (NASDAQ: ARRS), today announced preliminary and unaudited financial results for the first quarter 2013.

Revenues in the first quarter 2013 reflect a $13.2 million reduction related to Comcast's investment in ARRIS associated with the Company's acquisition of Motorola Home, which closed on April 17, 2013.  Prior to the adjustment, revenues were $366.8 million.  Including the adjustment, revenues were $353.7 million as compared to first quarter 2012 revenues of $302.9 million and as compared to fourth quarter 2012 revenues of $344.0 million.    

Adjusted net income (a non-GAAP measure) in the first quarter 2013 was $0.25 per diluted share, compared to $0.19 per diluted share for the first quarter 2012 and $0.28 per diluted share for the fourth quarter 2012. GAAP net loss in the first quarter 2013 was $(0.13) per diluted share, as compared to first quarter 2012 GAAP net income of $0.05 per diluted share and fourth quarter 2012 GAAP net income of $0.13 per diluted share. A reconciliation of adjusted net income to GAAP net income per diluted share is attached to this release and also can be found on the Company's website (www.arrisi.com).

Excluding the reduction of revenue and a corresponding reduction in gross profit related to the investment in ARRIS by Comcast, gross margin for the first quarter 2013 was 33.2%. Gross margin including the adjustments for the first quarter 2013 was 30.7%.  The Company ended the first quarter of 2013 with $631.3 million of cash resources, which included $608.4 million of cash, cash equivalents and short-term investments, and $22.9 million of long-term marketable security investments, as compared to $584.0 million, in the aggregate, at the end of the fourth quarter of 2012. The Company generated $50.1 million of cash from operating activities during the first quarter 2013, which compares to $35.3 million generated in the first quarter 2012.

Order backlog at the end of the first quarter 2013 was $282.1 million as compared to $277.7 million and $222.6 million at the end of the first quarter 2012 and the fourth quarter 2012, respectively. The Company's book-to-bill ratio in the first quarter 2013 was 1.17 as compared to the first quarter 2012 of 1.43 and the fourth quarter 2012 of 1.11.

"Our record first quarter revenues reflect the culmination of a decade of growth during which ARRIS revenues have tripled. I am looking forward to continued growth now that we have closed our acquisition of Motorola Home. We welcome all of our new employees to the ARRIS team.  The combination will be very powerful for our customers and shareholders," said Bob Stanzione, ARRIS Chairman and CEO.

"We are off to a good start to the year with sales and adjusted net income per share in the upper half of our guidance.  As previously disclosed, the investment in ARRIS by Comcast in conjunction with the acquisition of the Motorola Home business resulted in fair value impacts on the balance sheet and income statement; $13.2 million was recorded as a reduction in revenue and gross margin, and $19.3 million was recorded as other expense in the first quarter 2013.  An explanation of the accounting for these impacts is attached to the press release," said David Potts, ARRIS EVP & CFO.  "With the closure of our Motorola Home acquisition last week, we are now in the midst of reviewing our outlook for the second quarter and the balance of 2013. We plan on providing an update in the near future."

ARRIS management will conduct a conference call at 5:00 pm EDT, today, Wednesday, April 24, 2013, to discuss these results in detail. You may participate in this conference call by dialing (888) 680-0892 or (617) 213-4858 for international calls prior to the start of the call and providing the ARRIS Group, Inc. name, conference pass code 78256359, 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 1, 2013 by dialing (888) 286-8010 or (617) 801-6888 and using the pass code 35756915. Live internet access to the call will be available through the Investor Relations section of the Company's website at www.arrisi.com.  A replay will also be made available for a period of 12 months following the conference call on ARRIS' website at www.arrisi.com.

About ARRIS

ARRIS is a premier video and broadband technology company that transforms how service providers worldwide deliver entertainment and communications without boundaries.  Its powerful end-to-end platforms enable service and content providers to improve the way people connect – with each other and with their favorite content.  The Company's vision and expertise continue to drive the industry's innovations, as they have for more than 60 years. Headquartered north of Atlanta, in Suwanee, Georgia, ARRIS has R&D, sales and support centers 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 and in the related conference call, including those related to:

  • growth expectations and business prospects;
  • revenues and net income for the second quarter 2013 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 2013 as well as the general outlook for 2013 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 economic uncertainty 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 current volatility in the capital markets, the potential impact on the business of the Motorola Home acquisition, the retention of employees and the ability of ARRIS to successfully integrate Motorola Home's business opportunities, technology, personnel and operations; 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, 2012.  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,



2013


2012


2012


2012


2012












ASSETS






















Current assets:











Cash and cash equivalents


$     423,551


$        131,703


$         188,653


$     199,395


$     215,808

Short-term investments, at fair value


184,838


398,414


359,753


340,166


298,539

Total cash, cash equivalents and short term investments


608,389


530,117


548,406


539,561


514,347












Restricted cash


4,689


4,722


4,665


3,942


3,943

Accounts receivable, net


206,236


188,581


171,143


179,371


183,427

Other receivables 


3,743


350


578


1,414


5,071

Inventories, net


126,530


133,848


137,496


102,361


105,114

Prepaids


13,227


11,682


12,408


12,124


12,436

Current deferred income tax assets


25,927


24,944


20,787


21,972


22,068

Other current assets


24,377


25,648


18,907


16,766


16,792

Total current assets


1,013,118


919,892


914,390


877,511


863,198












Property, plant and equipment, net 


54,109


54,378


54,593


56,175


57,810

Goodwill


193,976


194,115


194,469


194,626


195,268

Intangible assets, net


86,926


94,529


102,258


110,000


117,444

Investments


55,938


86,164


57,483


70,967


82,968

Noncurrent deferred income tax assets


52,410


47,431


49,589


47,228


42,106

Other assets


11,089


9,385


9,913


10,575


11,699



$  1,467,566


$     1,405,894


$      1,382,695


$  1,367,082


$  1,370,493























LIABILITIES AND STOCKHOLDERS' EQUITY






















Current liabilities:











Accounts payable


$       47,783


$          45,719


$           49,061


$       44,800


$       54,576

Accrued compensation, benefits and related taxes


36,791


29,773


35,066


28,165


31,081

Accrued warranty


2,768


2,882


3,036


2,995


3,094

Deferred revenue


61,431


44,428


50,859


63,023


60,129

Current portion of LT debt


225,368


222,124


-


-


-

Other accrued liabilities


59,405


25,795


21,768


23,980


31,054

Total current liabilities


433,546


370,721


159,790


162,963


179,934

Long-term debt, net of current portion


-


-


218,943


215,823


212,765

Accrued pension


27,200


26,883


26,172


25,696


25,739

Accrued severance liability, net of current portion


4,262


4,119


3,895


3,758


3,884

Noncurrent income taxes payable


30,168


24,389


24,434


26,676


26,676

Noncurrent deferred income tax liabilities


351


351


334


340


352

Other noncurrent liabilities


18,836


19,043


20,362


21,039


22,372

Total liabilities


514,363


445,506


453,930


456,295


471,722












Stockholders' equity:











Preferred stock


-


-


-


-


-

Common stock


1,509


1,488


1,479


1,473


1,467

Capital in excess of par value


1,292,971


1,285,575


1,270,561


1,259,946


1,247,763

Treasury stock at cost


(306,330)


(306,330)


(306,330)


(295,960)


(280,724)

Unrealized gain on marketable securities


288


206


74


211


149

Unfunded pension liability


(8,592)


(8,558)


(10,231)


(10,231)


(10,231)

Accumulated deficit


(26,459)


(11,809)


(26,604)


(44,468)


(59,469)

Cumulative translation adjustments


(184)


(184)


(184)


(184)


(184)

Total stockholders' equity


953,203


960,388


928,765


910,787


898,771



$  1,467,566


$     1,405,894


$      1,382,695


$  1,367,082


$  1,370,493












    





 ARRIS GROUP, INC.

 PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)




For the Three Months


Ended March 31,


2013


2012





Net sales

$  353,650


$  302,901

Cost of sales

245,124


193,993

Gross margin

108,526


108,908

Operating expenses:




Selling, general, and administrative expenses

40,126


39,544

Research and development expenses

44,082


44,147

Acquisition costs

7,190


607

Loss on sale of product line

-


337

Restructuring charges

9


5,203

Amortization of intangible assets

7,603


7,379


99,010


97,217

Operating income 

9,516


11,691

Other expense (income):




Interest expense

4,631


4,350

Gain on investments

(564)


(961)

Loss on foreign currency

821


808

Interest income

(838)


(755)

Other (income) expense, net

19,416


(436)

Income (loss) from continuing operations before income taxes

(13,950)


8,685

Income tax expense (benefit)

700


2,886

Net income (loss) 

$   (14,650)


$      5,799





Net income (loss) per common share:




Basic

$       (0.13)


$        0.05

Diluted

$       (0.13)


$        0.05





Weighted average common shares:




Basic

115,150


115,075

Diluted

115,150


117,597





    









ARRIS GROUP, INC.

PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)






For the Three Months






Ended March 31,






2013


2012









Operating Activities:






Net income (loss)


$ (14,650)


$    5,799



Depreciation


6,509


7,195



Amortization of intangible assets


7,603


7,379



Amortization of deferred finance fees


160


160



Non-cash interest expense


3,244


2,999



Deferred income tax provision (benefit)


(5,995)


(4,635)



Stock compensation expense


6,744


6,649



Revenue reduction related to Comcast's investment in ARRIS


13,182


-



Mark-to-market fair value adjustment related to Comcast's investment in ARRIS


19,348


-



Provision for doubtful accounts


-


54



Loss on sale of product line


-


337



Loss (gain) on disposal of fixed assets


(4)


3



Gain on investments


(564)


(961)



Excess tax benefits from stock-based compensation plans


(4,659)


(1,654)


Changes in operating assets & liabilities, net of effects of acquisitions and disposals:







Accounts receivable


(17,655)


(31,799)



Other receivables


(3,889)


3,693



Inventory


7,318


7,243



Income taxes payable/recoverable


3,808


6,365



Accounts payable and accrued liabilities


28,014


22,398



Other, net


1,543


4,048




Net cash provided by operating activities


50,057


35,273









Investing Activities:






Purchases of investments


-


(77,766)


Disposals of investments


244,711


51,908


Purchases of property & equipment, net


(6,289)


(3,762)


Sale of property & equipment


53


-


Sale of product line


-


3,249




Net cash provided by (used in) investing activities


238,475


(26,371)









Financing Activities:






Repurchase of common stock


-


(26,315)


Excess income tax benefits from stock-based compensation plans


4,659


1,654


Repurchase of shares to satisfy employee tax withholdings


(11,992)


(8,033)


Fees and proceeds from issuance of common stock, net


10,649


3,725




Net cash provided by (used in) financing activities


3,316


(28,969)












Net increase (decrease) in cash and cash equivalents


291,848


(20,067)

Cash and cash equivalents at beginning of period


131,703


235,875

Cash and cash equivalents at end of period


$423,551


$215,808









    















ARRIS GROUP, INC.


PRELIMINARY SUPPLEMENTAL SALES & NET INCOME RECONCILIATION


(in thousands, except per share data) (unaudited)
































Q1 2012


Q4 2012


Q1 2013


















Amount




Amount




Amount





Sales 

$  302,901




$  344,003




$  353,650



















Highlighted items:














Acquisition accounting impacts of BigBand deferred revenue

1,771




432




-





Reduction in revenue related to Comcast's investment in ARRIS

-




-




13,182





Sales excluding highlighted items

$  304,672




$  344,435




$  366,832


































Q1 2012


Q4 2012


Q1 2013






Per Diluted




Per Diluted




Per Diluted




Amount


Share


Amount


Share


Amount


Share



Net income (loss)

$     5,799


$       0.05


$   14,795


$       0.13


$  (14,650)


$      (0.13)

















Highlighted items:














Impacting gross margin:














Acquisition accounting impacts of BigBand deferred revenue

1,258


0.01


432


0.00


-


-



Reduction in gross margin related to Comcast's investment in ARRIS

-


-


-


-


13,182


0.11



Stock compensation expense

750


0.01


802


0.01


831


0.01

















Impacting operating expenses:














Acquisition costs

607


0.01


5,131


0.04


7,190


0.06



Restructuring

5,203


0.04


306


0.00


9


0.00



Amortization of intangible assets

7,379


0.06


7,729


0.07


7,603


0.06



Loss of sale of product line

337


0.00


-


-


-


-



Settlement charge - pension

-


-


3,064


0.03


-


-



Stock compensation expense

5,899


0.05


5,910


0.05


5,913


0.05

















Impacting other (income) / expense:














Non-cash interest expense

2,999


0.03


3,181


0.03


3,244


0.03



Impairment of investment

-


-


67


0.00


-


-



Credit facility - ticking fees

-


-


-


-


388


0.00



Mark-to-market FV adjustment related to Comcast's investment in ARRIS

-


-


-


-


19,348


0.16

















Impacting income tax expense:














Adjustments of income tax valuation allowances and other

-


-


(475)


(0.00)


(7,516)


(0.06)



Tax related to highlighted items above

(8,121)


(0.07)


(8,724)


(0.07)


(5,735)


(0.05)

















Total highlighted items

16,311


0.14


17,423


0.15


44,457


0.37



Net income excluding highlighted items

$   22,110


$       0.19


$   32,218


$       0.28


$   29,807


$       0.25

















Weighted average common shares - Basic



115,075




114,028




115,150



Weighted average common shares - Diluted(1)



117,597




117,013




119,022































(1) Basic shares used for Q1 2013 as losses were reported for those periods and the inclusion of dilutive shares would be anti-dilutive



See Notes to GAAP and Adjust Non-GAAP Financial Measures


    



ARRIS GROUP, INC.


PRELIMINARY SUPPLEMENTAL RECONCILIATION 


ADJUSTMENTS RELATED TO COMCAST'S INVESTMENT IN ARRIS


(unaudited)











Adjustments recorded in Q1 2013



Share
Price - $



Share
Appreciation - $











December 19, 2012 (date of signing with Google)



14.11

(1)










>

1.24


January 11, 2013 (date of signing with Comcast)



15.35











>

1.82


March, 31, 2013 (quarter end)



17.17






























Total Before Tax
Impact - $M


Revenue / Gross Margin Impact








*

10.6M shares x $1.24 






13.2


*  

Recorded as contra revenue per ASC 605

















Other (Income) Expense Impact








*

10.6M shares x $1.82 






19.3


*  

Mark to market per fair value measurement guidance
























32.5











(1)

20 trading day trailing closing price


SOURCE ARRIS



RELATED LINKS
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