ARRIS Announces Preliminary and Unaudited Fourth Quarter and Full Year 2009 Results
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 (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 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 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
SOURCE ARRIS Group, Inc.
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