Exhibit 99.1
| | | | |
FOR IMMEDIATE RELEASE | | Contact: | | Bob Puccini Investor Relations (720) 895-7787 bob.puccini@arrisi.com |
ARRIS ANNOUNCES PRELIMINARY AND UNAUDITED
FIRST QUARTER 2012 RESULTS
Suwanee, Ga. (April 25, 2012)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 EuroDOCSISTM 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 atwww.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 atwww.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, 2012 | | | December 31, 2011 | | | September 30, 2011 | | | June 30, 2011 | | | March 31, 2011 | |
ASSETS | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Current assets: | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 215,808 | | | $ | 235,875 | | | $ | 354,659 | | | $ | 360,281 | | | $ | 358,747 | |
Short-term investments, at fair value | | | 298,539 | | | | 282,904 | | | | 220,318 | | | | 231,254 | | | | 260,862 | |
| | | | | | | | | | | | | | | | | | | | |
Total cash, cash equivalents and short term investments | | | 514,347 | | | | 518,779 | | | | 574,977 | | | | 591,535 | | | | 619,609 | |
| | | | | |
Restricted cash | | | 3,943 | | | | 4,101 | | | | 3,647 | | | | 3,646 | | | | 4,176 | |
Accounts receivable, net | | | 183,427 | | | | 152,437 | | | | 165,821 | | | | 152,436 | | | | 149,976 | |
Other receivables | | | 5,071 | | | | 8,789 | | | | 5,296 | | | | 406 | | | | 5,275 | |
Inventories, net | | | 105,114 | | | | 115,912 | | | | 116,769 | | | | 113,020 | | | | 105,787 | |
Prepaids | | | 12,436 | | | | 10,408 | | | | 10,692 | | | | 10,272 | | | | 12,115 | |
Current deferred income tax assets | | | 22,068 | | | | 22,048 | | | | 24,239 | | | | 22,681 | | | | 20,450 | |
Other current assets | | | 16,792 | | | | 27,071 | | | | 21,695 | | | | 25,216 | | | | 33,535 | |
| | | | | | | | | | | | | | | | | | | | |
Total current assets | | | 863,198 | | | | 859,545 | | | | 923,136 | | | | 919,212 | | | | 950,923 | |
| | | | | |
Property, plant and equipment, net | | | 57,810 | | | | 61,375 | | | | 57,619 | | | | 57,100 | | | | 56,617 | |
Goodwill | | | 195,268 | | | | 194,542 | | | | 233,430 | | | | 233,440 | | | | 233,471 | |
Intangible assets, net | | | 117,444 | | | | 124,823 | | | | 141,784 | | | | 150,728 | | | | 159,672 | |
Investments | | | 82,968 | | | | 71,095 | | | | 47,221 | | | | 34,237 | | | | 32,787 | |
Noncurrent deferred income tax assets | | | 42,106 | | | | 38,433 | | | | 9,637 | | | | 9,839 | | | | 10,183 | |
Other assets | | | 11,699 | | | | 10,997 | | | | 5,400 | | | | 5,878 | | | | 5,798 | |
| | | | | | | | | | | | | | | | | | | | |
| | $ | 1,370,493 | | | $ | 1,360,810 | | | $ | 1,418,227 | | | $ | 1,410,434 | | | $ | 1,449,451 | |
| | | | | | | | | | | | | | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Current liabilities: | | | | | | | | | | | | | | | | | | | | |
Accounts payable | | $ | 54,576 | | | $ | 40,671 | | | $ | 38,918 | | | $ | 27,825 | | | $ | 35,796 | |
Accrued compensation, benefits and related taxes | | | 31,081 | | | | 36,764 | | | | 25,320 | | | | 20,832 | | | | 26,278 | |
Accrued warranty | | | 3,094 | | | | 3,350 | | | | 2,933 | | | | 3,300 | | | | 2,931 | |
Deferred revenue | | | 60,129 | | | | 43,746 | | | | 39,094 | | | | 47,166 | | | | 43,019 | |
Other accrued liabilities | | | 31,054 | | | | 33,325 | | | | 19,653 | | | | 17,805 | | | | 17,594 | |
| | | | | | | | | | | | | | | | | | | | |
Total current liabilities | | | 179,934 | | | | 157,856 | | | | 125,918 | | | | 116,928 | | | | 125,618 | |
Long-term debt, net of current portion | | | 212,765 | | | | 209,766 | | | | 206,825 | | | | 208,336 | | | | 205,447 | |
Accrued pension | | | 25,739 | | | | 25,260 | | | | 17,989 | | | | 17,730 | | | | 17,472 | |
Accrued severance liability, net of current portion | | | 3,884 | | | | 4,191 | | | | — | | | | — | | | | — | |
Noncurrent income taxes payable | | | 26,676 | | | | 24,450 | | | | 22,471 | | | | 21,844 | | | | 21,844 | |
Noncurrent deferred income tax liabilities | | | 352 | | | | 337 | | | | 21,117 | | | | 24,808 | | | | 25,827 | |
Other noncurrent liabilities | | | 22,372 | | | | 22,745 | | | | 16,253 | | | | 17,367 | | | | 18,271 | |
| | | | | | | | | | | | | | | | | | | | |
Total liabilities | | | 471,722 | | | | 444,605 | | | | 410,573 | | | | 407,013 | | | | 414,479 | |
| | | | | |
Stockholders’ equity: | | | | | | | | | | | | | | | | | | | | |
Preferred stock | | | — | | | | — | | | | — | | | | — | | | | — | |
Common stock | | | 1,467 | | | | 1,449 | | | | 1,446 | | | | 1,443 | | | | 1,438 | |
Capital in excess of par value | | | 1,247,763 | | | | 1,245,115 | | | | 1,237,852 | | | | 1,228,729 | | | | 1,219,615 | |
Treasury stock at cost | | | (280,724 | ) | | | (254,409 | ) | | | (220,034 | ) | | | (202,933 | ) | | | (145,286 | ) |
Unrealized gain (loss) on marketable securities | | | 149 | | | | (267 | ) | | | 26 | | | | 1,530 | | | | 1,244 | |
Unfunded 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’ equity | | | 898,771 | | | | 916,205 | | | | 1,007,654 | | | | 1,003,421 | | | | 1,034,972 | |
| | | | | | | | | | | | | | | | | | | | |
| | $ | 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 Months Ended March 31, | |
| | 2012 | | | 2011 | |
Net sales | | $ | 302,901 | | | $ | 267,436 | |
Cost of sales | | | 193,993 | | | | 170,490 | |
| | | | | | | | |
Gross margin | | | 108,908 | | | | 96,946 | |
| | |
Operating expenses: | | | | | | | | |
Selling, general, and administrative expenses | | | 39,543 | | | | 36,838 | |
Research and development expenses | | | 44,147 | | | | 36,040 | |
Acquisition costs | | | 607 | | | | — | |
Loss on sale of product line | | | 337 | | | | — | |
Restructuring charges | | | 5,203 | | | | — | |
Amortization of intangible assets | | | 7,379 | | | | 8,944 | |
| | | | | | | | |
| | | 97,216 | | | | 81,822 | |
| | | | | | | | |
Operating income | | | 11,692 | | | | 15,124 | |
Other expense (income): | | | | | | | | |
Interest expense | | | 4,350 | | | | 4,225 | |
Gain on investments | | | (961 | ) | | | (423 | ) |
Loss on foreign currency | | | 808 | | | | 888 | |
Interest income | | | (755 | ) | | | (778 | ) |
Other (income) expense, net | | | (436 | ) | | | (113 | ) |
| | | | | | | | |
Income from continuing operations before income taxes | | | 8,686 | | | | 11,325 | |
Income tax expense (benefit) | | | 2,887 | | | | (239 | ) |
| | | | | | | | |
Net income | | $ | 5,799 | | | $ | 11,564 | |
| | | | | | | | |
Net income per common share: | | | | | | | | |
Basic | | $ | 0.05 | | | $ | 0.09 | |
| | | | | | | | |
Diluted | | $ | 0.05 | | | $ | 0.09 | |
| | | | | | | | |
Weighted average common shares: | | | | | | | | |
Basic | | | 115,075 | | | | 122,297 | |
| | | | | | | | |
Diluted | | | 117,597 | | | | 125,732 | |
| | | | | | | | |
ARRIS GROUP, INC.
PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| | | | | | | | |
| | For the Three Months | |
| | Ended March 31, | |
| | 2012 | | | 2011 | |
Operating Activities: | | | | | | | | |
Net income | | $ | 5,799 | | | $ | 11,564 | |
Depreciation | | | 7,195 | | | | 5,855 | |
Amortization of intangible assets | | | 7,379 | | | | 8,944 | |
Amortization of deferred finance fees | | | 160 | | | | 163 | |
Non-cash interest expense | | | 2,999 | | | | 2,832 | |
Deferred income tax provision (benefit) | | | (4,635 | ) | | | (7,844 | ) |
Stock compensation expense | | | 6,649 | | | | 5,284 | |
Provision for doubtful accounts | | | 54 | | | | — | |
Loss on sale of product line | | | 337 | | | | — | |
Loss on disposal of fixed assets | | | 3 | | | | 34 | |
Gain 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 receivables | | | 3,693 | | | | 534 | |
Inventory | | | 7,243 | | | | (4,024 | ) |
Income taxes payable/recoverable | | | 6,365 | | | | 2,270 | |
Accounts payable and accrued liabilities | | | 23,045 | | | | (7,048 | ) |
Other, net | | | 3,901 | | | | 6,031 | |
| | | | | | | | |
Net cash provided by (used in) operating activities | | | 35,880 | | | | (3,571 | ) |
| | |
Investing Activities: | | | | | | | | |
Purchases of investments | | | (77,766 | ) | | | (99,361 | ) |
Disposals of investments | | | 51,908 | | | | 105,949 | |
Purchases of property & equipment, net | | | (3,762 | ) | | | (6,251 | ) |
Cash proceeds from sale of property & equipment | | | — | | | | 42 | |
Cash paid for acquisition, net of cash acquired | | | (607 | ) | | | — | |
Cash proceeds from sale of product line | | | 3,249 | | | | — | |
| | | | | | | | |
Net cash provided by (used in) investing activities | | | (26,978 | ) | | | 379 | |
| | |
Financing Activities: | | | | | | | | |
Repurchase of common stock | | | (26,315 | ) | | | — | |
Excess income tax benefits from stock-based compensation plans | | | 1,654 | | | | 3,700 | |
Repurchase of shares to satisfy employee tax withholdings | | | (8,033 | ) | | | (8,245 | ) |
Fees and proceeds from issuance of common stock, net | | | 3,725 | | | | 13,363 | |
| | | | | | | | |
Net cash provided by (used in) financing activities | | | (28,969 | ) | | | 8,818 | |
| | |
Net increase (decrease) in cash and cash equivalents | | | (20,067 | ) | | | 5,626 | |
Cash and cash equivalents at beginning of period | | | 235,875 | | | | 353,121 | |
| | | | | | | | |
Cash and cash equivalents at end of period | | $ | 215,808 | | | $ | 358,747 | |
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ARRIS GROUP, INC.
PRELIMINARY SUPPLEMENTAL SALES & NET INCOME RECONCILIATION
(in thousands, except per share data) (unaudited)
| | | | | | | | | | | | | | | | |
(in thousands, except per share data) | | Q1 2012 | | | Q1 2011 | |
| | | | | Per Diluted | | | | | | Per Diluted | |
| | Amount | | | Share | | | Amount | | | Share | |
Sales | | $ | 302,901 | | | | | | | $ | 267,436 | | | | | |
| | | | |
Highlighted items: | | | | | | | | | | | | | | | | |
Purchase accounting impacts of deferred revenue | | | 1,258 | | | | 0.01 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
Sales excluding highlighted items | | $ | 304,159 | | | | | | | $ | 267,436 | | | | | |
| | | | | | | | | | | | | | | | |
| | |
| | Q1 2012 | | | Q1 2011 | |
| | | | | Per Diluted | | | | | | Per Diluted | |
| | Amount | | | Share | | | Amount | | | Share | |
Net income | | $ | 5,799 | | | $ | 0.05 | | | $ | 11,564 | | | $ | 0.09 | |
| | | | |
Highlighted items: | | | | | | | | | | | | | | | | |
Impacting gross margin: | | | | | | | | | | | | | | | | |
Purchase accounting impacts of deferred revenue | | | 1,258 | | | | 0.01 | | | | — | | | | — | |
Stock compensation expense | | | 750 | | | | 0.01 | | | | 437 | | | | — | |
| | | | |
Impacting operating expenses: | | | | | | | | | | | | | | | | |
Acquisition costs | | | 607 | | | | 0.01 | | | | — | | | | — | |
Restructuring | | | 5,203 | | | | 0.04 | | | | — | | | | — | |
Amortization of intangible assets | | | 7,379 | | | | 0.06 | | | | 8,944 | | | | 0.07 | |
Loss of sale of product line | | | 337 | | | | — | | | | — | | | | — | |
Stock compensation expense | | | 5,899 | | | | 0.05 | | | | 4,847 | | | | 0.04 | |
| | | | |
Impacting other (income) / expense: | | | | | | | | | | | | | | | | |
Non-cash interest expense | | | 2,999 | | | | 0.03 | | | | 2,832 | | | | 0.02 | |
| | | | |
Impacting 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 items | | | 16,311 | | | | 0.14 | | | | 8,453 | | | | 0.07 | |
| | | | | | | | | | | | | | | | |
Net income excluding highlighted items | | $ | 22,110 | | | $ | 0.19 | | | $ | 20,017 | | | $ | 0.16 | |
| | | | | | | | | | | | | | | | |
Weighted average common shares - diluted | | | | | | | 117,597 | | | | | | | | 125,732 | |
| | | | | | | | | | | | | | | | |