ARRIS Announces Preliminary And Unaudited First Quarter 2014 Results - KLTV.com-Tyler, Longview, Jacksonville, Texas | ETX News

ARRIS Announces Preliminary And Unaudited First Quarter 2014 Results

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SOURCE ARRIS

SUWANEE, Ga., May 6, 2014 /PRNewswire/ -- ARRIS Group, Inc. (NASDAQ: ARRS) today announced preliminary and unaudited financial results for the first quarter 2014.

On April 17, 2013, the Company closed the acquisition of Motorola Home.  As a result, some comparisons to prior periods may not be meaningful.

Financial Highlights

  • Revenues in the first quarter 2014 were $1,225.0 million
  • Adjusted net income (a non-GAAP measure) in the first quarter 2014 was $0.47 per diluted share
  • GAAP net income in the first quarter 2014 was $0.28 per diluted share
  • The Company ended the first quarter 2014 with $521.5 million of cash resources
  • Order backlog at the end of the first quarter 2014 was $996.1 million
  • The Company's book-to-bill ratio in the first quarter 2014 was 1.37

"We had a strong first quarter achieving record revenue levels.  As we had anticipated last quarter, 2014 is shaping up to be our best year so far.  Continued product deployments, new product acceptances, and an expanding international interest will continue to drive overall improved performance," said Bob Stanzione, ARRIS Chairman and CEO. 

"We are off to a great start in 2014.  Our revenues were up 2.2% from the previous quarter and we ended the quarter with a very strong order backlog of $996.1 million," said David Potts, ARRIS EVP & CFO.  "With respect to the second quarter 2014, we now project that revenues for the Company will be in the range of $1,410 million to $1,450 million, with adjusted net income per diluted share in the range of $0.64 to $0.70 and GAAP net income per diluted share in the range of $0.27 to $0.33."

Revenues in the first quarter 2014 were $1,225.0 million as compared to first quarter 2013 revenues of $353.7 million. Fourth quarter 2013 revenues were $1,199.1 million.

Adjusted net income (a non-GAAP measure) in the first quarter 2014 was $0.47 per diluted share, compared to $0.25 per diluted share for the first quarter 2013.  Adjusted net income (a non-GAAP measure) for the fourth quarter 2013 was $0.54 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).

GAAP net income in the first quarter 2014 was $0.28 per diluted share, as compared to first quarter 2013 GAAP net loss of $(0.13) per diluted share and fourth quarter 2013 GAAP net loss of $(0.02) per diluted share.

Cash & Cash Equivalents - The Company ended the first quarter 2014 with $521.5 million of cash, cash equivalents and marketable securities, as compared to $513.4 million at the end of the fourth quarter 2013.  The Company generated $34.8 million of cash from operating activities during the first quarter 2014, as compared to $50.1 million generated during the first quarter 2013. 

Order backlog at the end of the first quarter 2014 was $996.1 million as compared to $282.1 million and $538.6 million at the end of the first quarter 2013 and the fourth quarter 2013, respectively. The Company's book-to-bill ratio in the first quarter 2014 was 1.37 as compared to the first quarter 2013 of 1.17 and the fourth quarter 2013 of 1.01.

ARRIS management will conduct a conference call at 5:00 pm EDT, today, Tuesday, May 6, 2014, 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 75018618 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 13, 2014 by dialing 888-286-8010 or 617-801-6888 for international calls and using the pass code 27994602. 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 innovator in IP, video and broadband technology. We have continually worked with our customers to transform the experience of entertainment and communications for millions of people across the world. The people of ARRIS are dedicated to the success of our customers, bringing a passion for invention that has fueled our 60-year history: We created digital TV, delivered the first wireless broadband gateway and are pioneering the standards and pathways for tomorrow's personalized, Ultra HD, multiscreen, and cloud services. We are dedicated to meeting today's challenges and preparing for the tasks the future holds. Collaborating with our customers, ARRIS will continue to solve the most pressing challenges of 21st century communications. Together, we are inventing the future. For more information: 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 second quarter 2014, and beyond;
  • the integration of the Motorola Home business
  • 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 2014 as well as the general outlook for 2014 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 may encounter difficulties combining the Motorola Home operations with ours, including difficulties combining personnel, facilities, and other operations or preserving customer relationships.
  • ARRIS' customers operate in a capital intensive consumer based industry, and 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 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, 2013.  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,



2014


2013


2013


2013


2013












ASSETS






















Current assets:











Cash and cash equivalents


$       440,707


$       442,438


$       541,114


$       610,502


$       423,551

Short-term investments, at fair value


80,818


67,360


125,387


130,723


184,838

Total cash, cash equivalents and short term investments


521,525


509,798


666,501


741,225


608,389












Restricted cash


1,076


1,079


1,818


3,801


4,689

Accounts receivable, net


731,677


637,059


627,844


662,156


206,236

Other receivables 


11,694


8,366


4,076


11,007


3,743

Inventories, net


286,058


330,129


343,895


311,608


126,530

Prepaid income taxes and taxes recoverable


51,758


13,034


49,447


38,186


10,703

Prepaids


15,986


61,482


18,881


17,296


13,227

Current deferred income tax assets


80,427


77,167


75,875


132,113


25,927

Other current assets


50,601


39,930


60,111


281,987


13,674

Total current assets


1,750,802


1,678,044


1,848,448


2,199,379


1,013,118












Property, plant and equipment, net 


388,653


396,152


398,353


393,594


54,109

Goodwill


940,149


940,402


942,258


943,316


193,976

Intangible assets, net


1,114,231


1,176,192


1,241,258


1,270,211


86,926

Investments


72,372


71,176


96,711


95,551


55,938

Noncurrent deferred income tax assets


21,862


7,678


6,535


6,368


52,410

Other assets


56,180


52,363


52,300


54,847


11,089



$     4,344,249


$     4,322,007


$     4,585,863


$     4,963,266


$     1,467,566























LIABILITIES AND STOCKHOLDERS' EQUITY






















Current liabilities:











Accounts payable


$       596,191


$       662,919


$       573,673


$       485,291


$         47,783

Accrued compensation, benefits and related taxes


93,251


116,262


101,233


88,494


36,791

Accrued warranty


53,940


48,755


46,536


57,532


2,768

Deferred revenue


125,670


69,071


77,267


80,254


61,431

Current portion of LT debt


53,268


53,254


293,399


289,990


225,368

Current income taxes liability


13,508


3,068


7,012


6,528


350

Other accrued liabilities


143,018


141,699


148,282


549,995


59,055

Total current liabilities


1,078,846


1,095,028


1,247,402


1,558,084


433,546

Long-term debt, net of current portion


1,677,712


1,691,034


1,822,941


1,837,952


-

Accrued pension


58,733


58,657


65,395


64,263


27,200

Accrued severance liability, net of current portion


3,833


3,814


3,870


3,782


4,262

Noncurrent income taxes payable


21,913


21,048


25,012


35,320


30,168

Noncurrent deferred income tax liabilities


83,904


74,791


74,242


146,086


351

Other noncurrent liabilities


58,842


58,648


53,465


48,196


18,836

Total liabilities


2,983,783


3,003,020


3,292,327


3,693,683


514,363












Stockholders' equity:











Preferred stock


-


-


-


-


-

Common stock


1,794


1,766


1,729


1,726


1,509

Capital in excess of par value


1,689,907


1,688,782


1,669,667


1,657,383


1,292,971

Treasury stock at cost


(306,330)


(306,330)


(306,330)


(306,330)


(306,330)

Unrealized gain (loss) on marketable securities


27


306


85


(19)


288

Unfunded pension liability


(2,416)


(2,416)


(8,558)


(8,558)


(8,592)

Unrealized gain (loss) on Derivative Instruments


(2,660)


(2,541)


(4,277)


-


-

Accumulated deficit


(19,769)


(60,569)


(57,752)


(74,922)


(26,459)

Cumulative translation adjustments


(87)


(11)


(28)


303


(184)

Total stockholders' equity


1,360,466


1,318,987


1,294,536


1,269,583


953,203



$     4,344,249


$     4,322,007


$     4,586,863


$     4,963,266


$     1,467,566

 

 ARRIS GROUP, INC.

 PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)






For the Three Months


Ended March 31,


2014


2013





Net sales

$1,225,017


$    353,650

Cost of sales

878,243


245,124

Gross margin

346,774


108,526

 

Operating expenses:




Selling, general, and administrative expenses

99,132


40,126

Research and development expenses

134,153


44,082

Integration, acquisition, restructuring and other costs

11,502


7,199

Amortization of intangible assets

64,001


7,603


308,788


99,010

Operating income 

37,986


9,516

Other expense (income):




Interest expense

16,598


4,631

Loss (gain) on investments

1,674


(564)

Loss (gain) on foreign currency

(679)


821

Interest income

(583)


(838)

Other expense, net

2,172


19,416

Income (loss) before income taxes

18,804


(13,950)

Income tax (benefit) expense

(21,996)


700

Net income (loss)

$     40,800


$    (14,650)





Net income (loss) per common share:




Basic

$        0.29


$        (0.13)

Diluted

$        0.28


$        (0.13)





Weighted average common shares:




Basic

142,854


115,150

Diluted

147,152


115,150

 

ARRIS GROUP, INC.

PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)






For the Three Months






Ended March 31,






2014


2013









Operating Activities:






Net income (loss)


$         40,800


$        (14,650)



Depreciation


19,994


6,509



Amortization of intangible assets


64,001


7,603



Amortization of deferred finance fees and debt discount


2,331


160



Non-cash interest expense


-


3,244



Deferred income tax provision (benefit)


(8,385)


(5,995)



Stock compensation expense


11,033


6,744



Reduction in revenue related to Comcast investment in ARRIS


-


13,182



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


-


19,348



Loss on disposal of fixed assets


412


(4)



Loss (gain) on investments


1,674


(564)



Excess tax benefits from stock-based compensation plans


(10,457)


(4,659)


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







Accounts receivable


(94,618)


(17,655)



Other receivables


773


(3,889)



Inventory


44,071


7,318



Income taxes payable/recoverable


(27,419)


3,808



Accounts payable and accrued liabilities


(42,651)


28,014



Prepaids and other, net


33,289


1,543




Net cash provided by operating activities


34,848


50,057









Investing Activities:






Purchases of investments


(29,095)


-


Disposals of investments


11,175


244,711


Purchases of property & equipment, net


(12,924)


(6,289)


Sale of property & equipment


17


53




Net cash (used in) provided by investing activities


(30,827)


238,475









Financing Activities:






Payment of debt obligations


(13,750)


-


Excess income tax benefits from stock-based compensation plans


10,457


4,659


Repurchase of shares to satisfy employee tax minimum withholdings


(6,239)


(11,992)


Fees and proceeds from issuance of common stock, net


3,780


10,649




Net cash (used in) provided by financing activities


(5,752)


3,316




Net (decrease) increase in cash and cash equivalents


(1,731)


291,848

Cash and cash equivalents at beginning of period


442,438


131,703

Cash and cash equivalents at end of period


$       440,707


$       423,551

 

 

ARRIS GROUP, INC.

PRELIMINARY SUPPLEMENTAL SALES & NET INCOME RECONCILIATION

 (unaudited)











(in thousands, except per share data)

Q1 2013


Q1 2014












Amount




Amount




Sales 

$  353,650




$  1,225,017













Highlighted items:









Reduction in revenue related to Comcast investment and other acquisition-related adjustments

13,182




206




Sales excluding highlighted items

$  366,832




$  1,225,223























Q1 2013


Q1 2014





Per Diluted




Per Diluted



Amount


Share


Amount


Share


Net income (loss)

$   (14,650)


$          (0.13)

(1)

$       40,800


$           0.28











Highlighted items:









Impacting gross margin:









Impacts related to Comcast investment and other acquisition-related adjustments

13,182


0.11


199


0.00


Stock compensation expense

831


0.01


1,275


0.01











Impacting operating expenses:









Integration, acquisition, restructuring and other costs

7,199


0.06


11,502


0.08


Amortization of intangible assets

7,603


0.06


64,001


0.43


Stock compensation expense

5,913


0.05


9,758


0.07











Impacting other (income) / expense:









Non-cash interest expense

3,244


0.03


-


-


Credit facility - ticking fees

388


0.00


-


-


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

19,348


0.16


-


-











Net tax items

(13,251)


(0.11)


(58,850)


(0.40)











Total highlighted items

44,457


0.37


27,885


0.19


Net income excluding highlighted items

$    29,807


$           0.25


$       68,685


$           0.47











Weighted average common shares - Basic



115,150




142,854


Weighted average common shares - diluted 



119,022




147,152




















(1) Basic shares used 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

Notes to GAAP to Adjusted Non-GAAP Financial Measures

The Company reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP" or referred to herein as "reported"). However, management believes that certain non-GAAP financial measures provide management and other users with additional meaningful financial information that should be considered when assessing our ongoing performance. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the factors management uses in planning for and forecasting future periods.  Non-GAAP financial measures should be viewed in addition to, and not as an alternative to, the Company's reported results prepared in accordance with GAAP.  Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:

Acquisition Accounting Impacts Related to Deferred Revenue:  In connection with our acquisitions of Motorola Home and BigBand, business combination rules require us to account for the fair values of arrangements for which acceptance has not been obtained, and post contract support in our purchase accounting.  The non-GAAP adjustment to our sales and cost of sales is intended to include the full amounts of such revenues.  We believe the adjustment to these revenues is useful as a measure of the ongoing performance of our business.  We have historically experienced high renewal rates related to our support agreements and our objective is to increase the renewal rates on acquired post contract support agreements; however, we cannot be certain that our customers will renew our contracts. 

Reduction in Revenue Related to Comcast Investment in ARRIS:  In connection with our acquisition of Motorola Home, Comcast was given an opportunity to invest in ARRIS.  The accounting guidance requires that we record the implied fair value of benefit received by Comcast as a reduction in revenue. Until the closing of the deal, changes in the value of the investment will be marked to market and flow through other expense (income).  We have excluded the effect of the implied fair value in calculating our non-GAAP financial measures. We believe it is useful to understand the effects of these items on our total revenues and other expense (income).

Stock-Based Compensation Expense: We have excluded the effect of stock-based compensation expenses in calculating our non-GAAP operating expenses and net income measures. Although stock-based compensation is a key incentive offered to our employees, we continue to evaluate our business performance excluding stock-based compensation expenses. We record non-cash compensation expense related to grants of options and restricted stock. Depending upon the size, timing and the terms of the grants, the non-cash compensation expense may vary significantly but will recur in future periods.

Integration, Acquisition, Restructuring and Other Costs:  We have excluded the effect of acquisition, integration, and other expenses and the effect of restructuring expenses in calculating our non-GAAP operating expenses and net income measures. We will incur significant expenses in connection with our recent acquisition of Motorola Home, which we generally would not otherwise incur in the periods presented as part of our continuing operations. Acquisition and integration expenses consist of transaction costs, costs for transitional employees, other acquired employee related costs, and integration related outside services. Restructuring expenses consist of employee severance, abandoned facilities, and other exit costs. Additionally, we have excluded the effect of a loss on the sale of a product line in calculating our non-GAAP operating expenses and net income measures. We believe it is useful to understand the effects of these items on our total operating expenses.

Amortization of Intangible Assets: We have excluded the effect of amortization of intangible assets in calculating our non-GAAP operating expenses and net income measures. Amortization of intangible assets is non-cash, and is inconsistent in amount and frequency and is significantly affected by the timing and size of our acquisitions. Investors should note that the use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well. Amortization of intangible assets will recur in future periods.

Non-Cash Interest on Convertible Debt: We have excluded the effect of non-cash interest in calculating our non-GAAP operating expenses and net income measures. We record the accretion of the debt discount related to the equity component non-cash interest expense. We believe it is useful to understand the component of interest expense that will not be paid out in cash.

Credit Facility - Ticking Fees:  In connection with our acquisition of Motorola Home, the cash portion of the consideration is funded through debt financing commitments.  A ticking fee is a fee paid to our banks to compensate for the time lag between the commitment allocation on a loan and the actual funding. We have excluded the effect of the ticking fee in calculating our non-GAAP financial measures. We believe it is useful to understand the effect of this non-cash item in our other expense (income). 

Mark To Market Fair Value Adjustment Related To Comcast Investment in ARRIS: :  In connection with our acquisition of Motorola Home, Comcast was given an opportunity to invest in ARRIS.  The accounting guidance requires we mark to market the changes in the value of the investment and flow through other expense (income).  We have excluded the effect of the implied fair value in calculating our non-GAAP financial measures. We believe it is useful to understand the effects of these items on our total other expense (income).

Income Tax Expense (Benefit): We have excluded the tax effect of the non-GAAP items mentioned above.  Additionally, we have excluded the effects of certain tax adjustments related to state valuation allowances, research and development tax credits and provision to return differences.

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