ARRIS Announces Preliminary and Unaudited Third Quarter 2012 Results

SUWANEE, Ga., Oct. 24, 2012 /PRNewswire/ -- ARRIS Group, Inc. (NASDAQ: ARRS), today announced preliminary and unaudited financial results for the third quarter 2012.

Revenues in the third quarter 2012 were $357.5 million as compared to third quarter 2011 revenues of $274.4 million and as compared to second quarter 2012 revenues of $349.3 million.  Through the first three quarters of 2012 and 2011, revenues were $1,009.7 million and $807.6 million, respectively. 

Adjusted net income (a non-GAAP measure) in the third quarter 2012 was $0.22 per diluted share, compared to $0.21 per diluted share for the third quarter 2011 and $0.25 per diluted share for the second quarter 2012.  Year to date, adjusted net income was $0.66 per diluted share for 2012 as compared to $0.60 per diluted share in 2011.

GAAP net income in the third quarter 2012 was $0.15 per diluted share, as compared to third quarter 2011 GAAP net income of $0.11 per diluted share and second quarter 2012 GAAP net income of $0.13 per diluted share. Year to date, GAAP net income was $0.33 per diluted share in 2012 as compared to GAAP net income of $0.34 per diluted share in 2011.  Significant GAAP items that have been adjusted in computing adjusted net income and adjusted net income per diluted share include: acquisition accounting impacts related to acquired deferred revenue;  amortization of intangible assets;  long-term investment impairment;  loss on the sale of a 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 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 third quarter 2012 was 31.3%, which compares to the third quarter 2011 gross margin of 36.5% and the second quarter 2012 gross margin of 33.9%.

The Company ended the third quarter of 2012 with $571.2 million of cash resources, which includes $548.4 million of cash, cash equivalents and short-term investments, and $22.8 million of long-term marketable security investments, as compared to $576.3 million, in the aggregate, at the end of the second quarter of 2012. During the third quarter 2012, the Company repurchased approximately 0.8 million shares of ARRIS common stock for $10.4 million.  Year to date the Company has repurchased approximately 4.5 million shares for $51.9 million.  The Company generated $6.7 million of cash from operating activities during the third quarter 2012 and $72.6 million through the first nine months of 2012, which compares to $24.5 million and $52.3 million, respectively, during the same periods in 2011.

Order backlog at the end of the third quarter 2012 was $185.8 million as compared to $155.3 million and $251.9 million at the end of the third quarter 2011 and the second quarter 2012, respectively. The Company's book-to-bill ratio in the third quarter 2012 was 0.82 as compared to the third quarter 2011 of 1.00 and the second quarter 2012 of 0.93.

"I am very pleased with our third quarter and year to date results as we continue to see strong demand for our products.  We just completed a successful SCTE Expo show in Orlando where we showcased our new E6000 Converged Edge Router," said Bob Stanzione, ARRIS Chairman and CEO.  "The level of engagement with our customers is outstanding and I am very encouraged by the alignment of our products with their investment priorities." 

"Our third quarter results were strong, with adjusted net income per share in the upper half of our guidance," said David Potts, ARRIS EVP & CFO.  "With respect to the fourth quarter 2012, we now project that revenues for the Company will be in the range of $345 to $365 million, with adjusted net income per diluted share in the range of $0.26 to $0.30 and GAAP net income per diluted share in the range of $0.13 to $0.17, reflecting higher demand for our CMTS product line."

ARRIS management will conduct a conference call at 5:00 pm EDT, today, Wednesday, October 24, 2012, to discuss these results in detail. You may participate in this conference call by dialing (888) 713-4209 or (617) 213-4863 for international calls prior to the start of the call and providing the ARRIS Group, Inc. name, conference pass code 70703648, 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 October 30, 2012 by dialing (888) 286-8010 or (617) 801-6888 and using the pass code 74972935. 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 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 fourth 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 fourth quarter 2012 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, 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, 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)

























September 30,


June 30,


March 31,


December 31,


September 30,



2012


2012


2012


2011


2011












ASSETS






















Current assets:











  Cash and cash equivalents


$       188,653


$       199,395


$       215,808


$       235,875


$       354,659

  Short-term investments, at fair value


359,753


340,166


298,539


282,904


220,318

  Total cash, cash equivalents and short term investments

548,406


539,561


514,347


518,779


574,977












  Restricted cash


4,665


3,942


3,943


4,101


3,647

  Accounts receivable, net


171,143


179,371


183,427


152,437


165,821

  Other receivables 


578


1,414


5,071


8,789


5,296

  Inventories, net


137,496


102,361


105,114


115,912


116,769

  Prepaids


12,408


12,124


12,436


10,408


10,692

  Current deferred income tax assets


20,787


21,972


22,068


22,048


24,239

  Other current assets


18,907


16,766


16,792


27,071


21,695

  Total current assets


914,390


877,511


863,198


859,545


923,136












Property, plant and equipment, net 


54,593


56,175


57,810


61,375


57,619

Goodwill


194,469


194,626


195,268


194,542


233,430

Intangible assets, net


102,258


110,000


117,444


124,823


141,784

Investments


57,483


70,967


82,968


71,095


47,221

Noncurrent deferred income tax assets


49,589


47,228


42,106


38,433


9,637

Other assets


9,913


10,575


11,699


10,997


5,400



$     1,382,695


$     1,367,082


$     1,370,493


$     1,360,810


$     1,418,227























LIABILITIES AND STOCKHOLDERS' EQUITY






















Current liabilities:











  Accounts payable


$         49,061


$         44,800


$         54,576


$         40,671


$         38,918

  Accrued compensation, benefits and related taxes


35,066


28,165


31,081


36,764


25,320

  Accrued warranty


3,036


2,995


3,094


3,350


2,933

  Deferred revenue


50,859


63,023


60,129


43,746


39,094

  Other accrued liabilities


21,768


23,980


31,054


33,325


19,653

  Total current liabilities


159,790


162,963


179,934


157,856


125,918

Long-term debt, net of current portion


218,943


215,823


212,765


209,766


206,825

Accrued pension


26,172


25,696


25,739


25,260


17,989

Accrued severance liability, net of current portion


3,895


3,758


3,884


4,191


-

Noncurrent income taxes payable


24,434


26,676


26,676


24,450


22,471

Noncurrent deferred income tax liabilities


334


340


352


337


21,117

Other noncurrent liabilities


20,362


21,039


22,372


22,745


16,253

  Total liabilities


453,930


456,295


471,722


444,605


410,573












Stockholders' equity:











  Preferred stock


-


-


-


-


-

  Common stock


1,479


1,473


1,467


1,449


1,446

  Capital in excess of par value


1,270,561


1,259,946


1,247,763


1,245,115


1,237,852

  Treasury stock at cost


(306,330)


(295,960)


(280,724)


(254,409)


(220,034)

  Unrealized gain (loss) on marketable securities


74


211


149


(267)


26

  Unfunded pension liability


(10,231)


(10,231)


(10,231)


(10,231)


(5,813)

  Accumulated deficit


(26,604)


(44,468)


(59,469)


(65,268)


(5,639)

  Cumulative translation adjustments


(184)


(184)


(184)


(184)


(184)

  Total stockholders' equity


928,765


910,787


898,771


916,205


1,007,654



$     1,382,695


$     1,367,082


$     1,370,493


$     1,360,810


$     1,418,227












 

 

 ARRIS GROUP, INC.

 PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)










 

For the Three Months


 

For the Nine Months


Ended September 30,


Ended September 30,


2012


2011


2012


2011









Net sales

$   357,432


$    274,374


$  1,009,660


$   807,609

Cost of sales

245,480


174,250


670,274


503,641

Gross margin

111,952


100,124


339,386


303,968

Operating expenses:








Selling, general, and administrative expenses

37,866


35,220


117,544


107,926

Research and development expenses

42,978


36,065


130,006


108,734

Acquisition costs

30


475


739


475

Loss on sale of product line

-


-


337


-

Restructuring charges

213


969


6,455


969

Amortization of intangible assets

7,742


8,944


22,565


26,832


88,829


81,673


277,646


244,936

Operating income 

23,123


18,451


61,740


59,032

Other expense (income):








Interest expense

4,479


4,277


13,251


12,681

Loss (gain) on investments

(878)


253


(1,483)


(504)

Loss (gain) on foreign currency

(431)


(841)


917


125

Interest income

(764)


(775)


(2,248)


(2,438)

Loss on debt redemption

-


19


-


19

Other (income) expense, net

(129)


(150)


(791)


(681)

Income from continuing operations before income taxes

20,846


15,668


52,094


49,830

Income tax expense

2,982


1,955


13,430


7,863

Net income 

$     17,864


$     13,713


$       38,664


$     41,967









Net income per common share:








Basic

$        0.16


$         0.11


$          0.34


$        0.35

Diluted

$        0.15


$         0.11


$          0.33


$        0.34









Weighted average common shares:








Basic

113,709


119,283


114,206


121,115

Diluted

116,346


121,237


116,348


123,549