Exhibit 99.1
FOR IMMEDIATE RELEASE | Contact: | Jim Bauer | ||
Investor Relations | ||||
(678) 473-2647 | ||||
jim.bauer@arrisi.com |
ARRIS ANNOUNCES PRELIMINARY AND UNAUDITED
FOURTH QUARTER AND FULL YEAR 2009 RESULTS
FOURTH QUARTER AND FULL YEAR 2009 RESULTS
Suwanee, Ga. (February 10, 2010)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 5:00pm 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)
PRELIMINARY CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||
2009 | 2009 | 2009 | 2009 | 2008 | ||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 500,565 | $ | 461,795 | $ | 476,846 | $ | 398,938 | $ | 409,894 | ||||||||||
Short-term investments, at fair value | 125,031 | 99,917 | 47,195 | 25,494 | 17,371 | |||||||||||||||
625,596 | 561,712 | 524,041 | 424,432 | 427,265 | ||||||||||||||||
Restricted cash | 4,475 | 4,473 | 4,552 | 4,550 | 5,673 | |||||||||||||||
Accounts receivable, net | 143,708 | 119,125 | 128,482 | 155,792 | 159,443 | |||||||||||||||
Other receivables | 6,113 | 2,235 | 5,904 | 6,636 | 4,749 | |||||||||||||||
Inventories, net | 95,851 | 100,024 | 115,944 | 120,774 | 129,752 | |||||||||||||||
Prepaids | 11,675 | 10,764 | 7,700 | 6,994 | 8,004 | |||||||||||||||
Income taxes recoverable | 3,106 | 4,212 | 366 | 3,232 | 362 | |||||||||||||||
Current deferred income tax assets | 35,994 | 32,883 | 41,166 | 49,027 | 44,004 | |||||||||||||||
Other current assets | 15,790 | 12,981 | 11,995 | 15,083 | 19,420 | |||||||||||||||
Total current assets | 942,308 | 848,409 | 840,150 | 786,520 | 798,672 | |||||||||||||||
Property, plant and equipment, net | 57,195 | 58,339 | 60,048 | 59,438 | 59,204 | |||||||||||||||
Goodwill | 235,388 | 234,416 | 231,684 | 231,684 | 231,684 | |||||||||||||||
Intangible assets, net | 204,572 | 201,351 | 208,822 | 218,085 | 227,348 | |||||||||||||||
Investments | 20,618 | 30,574 | 10,317 | 14,593 | 14,681 | |||||||||||||||
Noncurrent deferred income tax assets | 6,759 | 3,593 | 3,870 | 3,771 | 12,157 | |||||||||||||||
Other assets | 8,776 | 7,648 | 6,251 | 5,483 | 6,576 | |||||||||||||||
$ | 1,475,616 | $ | 1,384,330 | $ | 1,361,142 | $ | 1,319,574 | $ | 1,350,322 | |||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Accounts payable | $ | 53,979 | $ | 42,659 | $ | 48,859 | $ | 44,422 | $ | 75,863 | ||||||||||
Accrued compensation, benefits and related taxes | 36,936 | 27,054 | 20,753 | 15,583 | 27,024 | |||||||||||||||
Accrued warranty | 4,265 | 5,292 | 5,185 | 5,306 | 5,652 | |||||||||||||||
Deferred revenue | 47,044 | 35,423 | 43,727 | 44,006 | 44,461 | |||||||||||||||
Current portion of long-term debt | 124 | 148 | 148 | 147 | 146 | |||||||||||||||
Current deferred income tax liability | — | 250 | 248 | 241 | 1,059 | |||||||||||||||
Other accrued liabilities | 46,203 | 34,979 | 35,852 | 31,922 | 25,410 | |||||||||||||||
Total current liabilities | 188,551 | 145,805 | 154,772 | 141,627 | 179,615 | |||||||||||||||
Long-term debt, net of current portion | 211,248 | 208,433 | 205,710 | 203,080 | 211,870 | |||||||||||||||
Accrued pension | 16,408 | 18,914 | 19,665 | 19,289 | 18,820 | |||||||||||||||
Noncurrent income tax payable | 14,815 | 10,632 | 12,386 | 12,441 | 9,607 | |||||||||||||||
Noncurrent deferred income tax liability | 37,203 | 35,188 | 33,999 | 42,530 | 41,598 | |||||||||||||||
Other noncurrent liabilities | 16,021 | 15,301 | 15,094 | 14,391 | 15,343 | |||||||||||||||
Total liabilities | 484,246 | 434,273 | 441,626 | 433,358 | 476,853 | |||||||||||||||
Stockholders’ equity: | ||||||||||||||||||||
Preferred stock | — | — | — | — | — | |||||||||||||||
Common stock | 1,388 | 1,385 | 1,379 | 1,368 | 1,362 | |||||||||||||||
Capital in excess of par value | 1,183,872 | 1,177,958 | 1,169,223 | 1,159,054 | 1,159,097 | |||||||||||||||
Treasury stock at cost | (75,960 | ) | (75,960 | ) | (75,960 | ) | (75,960 | ) | (75,960 | ) | ||||||||||
Unrealized gain (loss) on marketable securities | 28 | (60 | ) | (161 | ) | (372 | ) | (274 | ) | |||||||||||
Unfunded pension liability | (6,041 | ) | (8,070 | ) | (8,070 | ) | (8,070 | ) | (8,070 | ) | ||||||||||
Accumulated deficit | (111,733 | ) | (145,012 | ) | (166,711 | ) | (189,620 | ) | (202,502 | ) | ||||||||||
Cumulative translation adjustments | (184 | ) | (184 | ) | (184 | ) | (184 | ) | (184 | ) | ||||||||||
Total stockholders’ equity | 991,370 | 950,057 | 919,516 | 886,216 | 873,469 | |||||||||||||||
$ | 1,475,616 | $ | 1,384,330 | $ | 1,361,142 | $ | 1,319,574 | $ | 1,350,322 | |||||||||||
ARRIS GROUP, INC.
PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
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)
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)
PRELIMINARY SUPPLEMENTAL NET INCOME (LOSS) RECONCILIATION
(in thousands, except per share data)
Q4 2009 | Year 2009 | Q4 2008 | Year 2008 | |||||||||||||||||||||||||||||
Unaudited | Unaudited | Unaudited | Unaudited | |||||||||||||||||||||||||||||
Per Diluted | Per Diluted | Per Diluted | Per Diluted | |||||||||||||||||||||||||||||
Amount | Share | Amount | Share | Amount | Share(1) | Amount | Share(1) | |||||||||||||||||||||||||
Net income (loss) | $ | 33,279 | $ | 0.26 | $ | 90,769 | 0.71 | $ | (163,731 | ) | (1.32 | ) | $ | (129,639 | ) | (1.03 | ) | |||||||||||||||
Highlighted items: | ||||||||||||||||||||||||||||||||
Impacting gross margin: | ||||||||||||||||||||||||||||||||
Stock compensation expense | 383 | — | 1,446 | 0.01 | 269 | — | 979 | 0.01 | ||||||||||||||||||||||||
Impacting operating expenses: | ||||||||||||||||||||||||||||||||
Integration costs | — | — | — | — | — | — | 427 | 0.00 | ||||||||||||||||||||||||
Acquisition costs, restructuring and other | 2,917 | 0.02 | 3,977 | 0.03 | 429 | — | 1,211 | 0.01 | ||||||||||||||||||||||||
Amortization of intangible assets | 9,554 | 0.07 | 37,361 | 0.29 | 9,341 | 0.08 | 44,195 | 0.35 | ||||||||||||||||||||||||
Stock compensation expense | 3,824 | 0.03 | 14,475 | 0.11 | 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 | 2,827 | 0.02 | 11,135 | 0.09 | 2,763 | 0.02 | 10,735 | 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 | ) | (24,725 | ) | (0.20 | ) | (26,255 | ) | (0.21 | ) | ||||||||||||||||
Tax related to highlighted items above, except for goodwill impairment | (7,375 | ) | (0.06 | ) | (22,305 | ) | (0.17 | ) | (5,138 | ) | (0.04 | ) | (23,991 | ) | (0.19 | ) | ||||||||||||||||
Total highlighted items | 7,708 | 0.06 | 38,804 | 0.30 | 194,958 | 1.57 | 226,896 | 1.80 | ||||||||||||||||||||||||
Net income excluding highlighted items | $ | 40,987 | $ | 0.32 | $ | 129,573 | $ | 1.01 | $ | 31,227 | $ | 0.25 | $ | 97,257 | $ | 0.77 | ||||||||||||||||
Weighted average common shares — diluted | 129,524 | 128,085 | 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
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