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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 at www.arrisi.com.

About ARRIS

ARRIS is a global communications technology company specializing in the design, engineering and supply of technology supporting triple- and quad-play broadband services for residential and business customers around the world. The company supplies broadband operators with the tools and platforms they


need to deliver converged IP video solutions, carrier-grade telephony, demand driven video, next-generation advertising, network and workforce management solutions, access and transport architectures and ultra high-speed data services. Headquartered in Suwanee, GA, USA, ARRIS has R&D centers in Suwanee, GA; Beaverton, OR; Lisle, IL; Kirkland, WA; State College, PA; Tel Aviv, Israel; Wallingford, CT; Waltham, MA; Cork, Ireland; and Shenzhen, China, and operates support and sales offices throughout the world. Information about ARRIS products and services can be found at www.arrisi.com.

Forward-looking statements:

Statements made in this press release, including those related to:

 

   

growth expectations and business prospects;

 

   

revenues and net income for the 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   
  

 

 

   

 

 

 


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   
    

 

 

     

 

 

 


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:

Purchase Accounting Impacts Related to Deferred Revenue: In connection with our acquisition of 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.

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.

Acquisition Costs: We have excluded the effect of acquisition related and other expenses and the effect of restructuring expenses in calculating our non-GAAP operating expenses and net income measures. We incurred significant expenses in connection with our recent acquisition of BigBand, which we generally would not have otherwise incurred in the periods presented as part of our continuing operations. Acquisition related expenses consist of transaction costs, costs for transitional employees, other acquired employee related costs, and integration related outside services. We believe it is useful to understand the effects of these items on our total operating expenses.

Restructuring Costs: We have excluded the effect of restructuring charges in calculating our non-GAAP operating expenses and net income measures. Restructuring expenses consist of employee severance, abandoned facilities, and other exit costs. We believe it is useful to understand the effects of these items on our total operating expenses.

Loss on Sale of Product Line: 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.

Income Tax Expense: 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.