Investor Relations
ARRIS Announces Preliminary and Unaudited First Quarter 2006 Results
SUWANEE, Ga., April 26 /PRNewswire-FirstCall/ -- ARRIS (Nasdaq: ARRS), a
global communications technology leader in the development of advanced cable
telephony solutions and next generation high-speed data across the broadband
local access network, today announced preliminary and unaudited financial
results for the first quarter 2006.
ARRIS Announces Preliminary and Unaudited First Quarter 2006 Results
Financial Highlights:
- Revenues were $208.3 million for the first quarter of 2006, up 53% as
compared to $135.9 million in the first quarter 2005 and up 15% as
compared to $181.3 million in the fourth quarter of 2005.
- Net income per diluted share for the first quarter 2006 was $0.19, up
375% as compared to $0.04 in the first quarter 2005 and down 5% as
compared to $0.20 in the fourth quarter of 2005. Excluding the items
detailed below, net income per diluted share for the first quarter 2006
was $0.21 (a non-GAAP measure).
- Consistent with prior guidance, gross margins were 27.1% in the first
quarter 2006, equal to the first quarter 2005 and down from 31.9% in
the fourth quarter 2005 primarily due to changes in product mix coupled
with price reductions that took effect at the beginning of 2006.
- Cash on hand and short-term investments at the end of the first quarter
2006 were $165.8 million, up $57.8 million, or 54%, as compared with
$107.9 at the end of the first quarter 2005 and up $36.3 million, or
28%, from the end of the fourth quarter 2005. Cash of $31.3 million
was generated from operating activities in the first quarter of 2006.
- Book-to-bill ratio was 1.01 in the first quarter as compared to 0.97 in
the fourth quarter 2005.
Financial details: Revenues for the first quarter 2006 were
basis, net income was
quarter 2006 as compared to the fourth quarter 2005 net income of
million
intangibles, equity compensation expense and other items, the net income was
GAAP to our non-GAAP earnings per share is attached to this release and can
also be found on the Company website.
Broadband product revenues were
approximately 8.1% from the fourth quarter 2005 level of
reflecting lower sales of CBR telephony products. Supplies & CPE product
revenues were
compared to
the strong resurgence of E-MTA sales in the first quarter as customer VoIP
rollouts continue. E-MTA revenues and units reached new record levels in the
first quarter, exceeding the previous levels of the third quarter 2005.
International sales were
quarter was
quarter 2005. Bookings in the first quarter were
to
first quarter was approximately 1.01, up from 0.97 in the fourth quarter 2005.
Gross margins were 27.1% in the first quarter as compared to fourth
quarter 2005 margins of 31.9%. This decrease is predominantly the result a
change in product mix during the quarter and price reductions implemented by
the Company to win market share. Gross margins of Broadband products were
45.6% in the first quarter as compared to 43.3% in the fourth quarter. Gross
margins of the Supplies & CPE products were 14.3% in the first quarter as
compared to 19.9% in the fourth quarter.
Operating expenses were
equity compensation expense of approximately
compensation expense. Research and development costs included in operating
expenses were
in the fourth quarter of 2005.
The Company ended the first quarter with
and short-term investments, up from the fourth quarter level of
and from the first quarter 2005 level of
million
Inventory and turns for the first quarter were
respectively, as compared to
fourth quarter 2005. Accounts receivable ended the first quarter at
million
of the fourth quarter 2005.
'Our results this quarter show that we have started 2006 with great
momentum,' said
competition within our customers' markets continues to drive demand for more
bandwidth, more new services and higher levels of quality. The new,
innovative and market leading products that ARRIS is now delivering for data,
voice and video transport, help our customers in the growing competition
between, cable, telco and satellite. As a result, I am very positive about
the outlook for ARRIS in 2006 and beyond.'
During the first quarter the Company announced a 100 Mb/s broadband trial
with NTL, the largest cable operator in the
introduction of new customer premises products for T1/E1 services over cable
operator's HFC networks. Also of long term importance was the Company's
7, 2006
with UTStarcom (Nasdaq: UTSI) that will together enable the fourth leg of the
quadruple play for cable MSOs worldwide. The joint solution will allow
customers with Wi-Fi enabled handsets to seamlessly roam between their
cellular and Wi-Fi connections, or a service commonly referred to as Fixed
Mobile Convergence (FMC). The Company recently demonstrated this FMC
capability at the National Cable show in
'We are off to a strong start to 2006 as customers continue robust
deployments of VoIP,' said
that our revenues for the second quarter of 2006 will be in the range of
to $220 million
range of
compensation expense of
expense is
encompassed in the agreements recently entered into with UTStarcom. The
Company anticipates that a total of
UTStarcom for license fees over a three year period with the next payment
scheduled in 2007.'
ARRIS management will conduct a conference call at
April 27, 2006
this conference call by dialing 877-691-0879 prior to the start of the call
and providing the ARRIS Group, Inc. name and
Please note that ARRIS will not accept any calls related to this earnings
release during the period between the
the completion of the scheduled conference call on
of the conference call can be accessed through
877-519-4471 and using the PIN#7252270. A replay also will be made available
for a period of 12 months following the conference call on ARRIS' website at
www.arrisi.com.
ARRIS provides broadband local access networks with innovative next
generation high-speed data and telephony systems for the delivery of voice,
video and data to the home and business. ARRIS' complete solutions enhance the
reliability and value of converged services from the network to the
subscriber. Headquartered in Suwanee,
engineering, distribution, service and sales office locations 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:
- second quarter 2006 revenues and net income;
- the general market outlook and acceptance of ARRIS products; and
- the outlook for industry conditions
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 of 2006 as well as the general
outlook for 2006 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; 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. 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.
Consolidated Balance Sheets
(in thousands)
March 31, Dec. 31, Sept. 30, June 30, March 31,
2006 2005 2005 2005 2005
(unaudited) (unaudited)(unaudited)(unaudited)
ASSETS
Current assets:
Cash and cash
equivalents $129,559 $75,286 $48,194 $97,194 $26,546
Short-term
investments 36,250 54,250 46,250 - 81,400
Total cash, cash
equivalents and
short-term
investments 165,809 129,536 94,444 97,194 107,946
Restricted cash 6,092 6,073 4,053 4,037 4,025
Accounts receivable,
net 91,360 83,540 95,791 87,900 63,938
Other receivables 4,138 286 887 288 400
Inventories, net 99,673 113,909 90,122 80,869 76,249
Other current assets 7,345 15,276 20,198 6,700 9,310
Total current
assets 374,417 348,620 305,495 276,988 261,868
Property, plant and
equipment, net 24,327 25,557 26,483 26,351 26,217
Goodwill 150,569 150,569 150,569 150,569 150,569
Intangibles, net 702 920 1,138 1,356 884
Investments 3,358 3,321 3,347 3,223 4,450
Other assets 388 416 395 399 2,210
$553,761 $529,403 $487,427 $458,886 $446,198
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $41,478 $35,920 $25,602 $30,863 $30,922
Accrued compensation,
benefits and related
taxes 9,503 20,424 16,083 9,927 6,990
Accrued warranty 8,020 8,479 6,724 6,534 5,450
Other accrued
liabilities 22,151 20,633 23,104 23,345 25,431
Total current
liabilities 81,152 85,456 71,513 70,669 68,793
Long-term debt, net of
current portion - - - - 75,000
Accrued pension 12,943 12,636 11,040 11,574 11,309
Other long-term
liabilities 5,618 5,594 5,643 5,637 5,687
99,713 103,686 88,196 87,880 160,789
Stockholders' equity:
Preferred stock - - - - -
Common stock 1,081 1,069 1,065 1,053 873
Capital in excess
of par value 740,954 732,405 727,249 727,096 644,891
Unearned compensation - - - (8,112) (3,939)
Unrealized gain on
marketable securities 1,114 1,076 975 838 742
Unfunded pension losses (4,618) (4,618) (3,345) (3,345) (3,345)
Accumulated deficit (284,831) (305,554) (327,520) (346,340) (353,629)
Unrealized gain on
derivatives 532 1,523 991 - -
Cumulative translation
adjustments (184) (184) (184) (184) (184)
Total stockholders'
equity 454,048 425,717 399,231 371,006 285,409
$553,761 $529,403 $487,427 $458,886 $446,198
ARRIS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
(unaudited)
For the Three Months
Ended March 31,
2006 2005
Net sales $208,344 $135,924
Cost of sales 151,837 99,133
Gross profit 56,507 36,791
Gross profit % 27.1% 27.1%
Operating expenses:
Selling, general, and administrative
expenses 21,278 16,519
Research and development expenses 15,074 14,801
Restructuring and impairment charges 328 198
Amortization of intangibles 218 557
36,898 32,075
Operating income 19,609 4,716
Other expense (income):
Interest expense 10 1,018
Loss on investments and notes receivable - 75
Loss (gain) on foreign currency (317) 935
Interest income (1,520) (609)
Other (income) expense, net 106 51
Income from continuing operations
before income taxes 21,330 3,246
Income tax expense (benefit) 628 (152)
Net income from continuing operations 20,702 3,398
Income from discontinued operations 21 10
Net income $20,723 $3,408
Net income per common share - basic:
Income from continuing operations $0.20 $0.04
Income from discontinued operations 0.00 0.00
Net income $0.20 $0.04
Net income per common share - diluted:
Income from continuing operations $0.19 $0.04
Income from discontinued operations 0.00 0.00
Net income $0.19 $0.04
Weighted average common shares:
Basic 106,227 87,851
Diluted 109,345 90,497
ARRIS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
For the Three Months
Ended March 31,
2006 2005
Operating Activities:
Net income $20,723 $3,408
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation 2,618 2,727
Amortization of intangibles 218 557
Equity compensation expense 2,248 553
Excess tax benefits from stock-
based compensation plans (169) -
Amortization of deferred finance fees - 153
Provision for doubtful accounts (265) (153)
Gain related to Adelphia receivables (475) -
Loss on disposal of fixed assets 2 (12)
Loss (gain) on investments and
notes receivable - 75
Impairment of long-lived assets - 291
Income from on discontinued operations (21) (10)
Changes in operating assets & liabilities,
net of effects of acquisitions and disposals:
Accounts receivable (7,555) (8,124)
Other receivables (3,852) 20
Inventory 14,236 16,387
Accounts payable and accrued liabilities (3,666) (8,833)
Prepaids and Other, net 7,280 (133)
Net cash provided by (used
in) operating activities 31,322 6,906
Investing Activities:
Purchases of property, plant, and
equipment (1,389) (1,924)
Cash proceeds from sale of
property, plant, and equipment - 40
Purchases of short term investments - (5,000)
Disposals of short term investments 18,000 1,600
Other - (259)
Net cash provided by (used
in) investing activities 16,611 (5,543)
Financing Activities:
Excess tax benefits from stock-
based compensation plans 169 -
Proceeds from issuance of common
stock and other 6,171 111
Net cash provided by (used
in) financing activities 6,340 111
Net increase in cash and cash
equivalents 54,273 1,474
Cash and cash equivalents at
beginning of period 75,286 25,072
Cash and cash equivalents at end of period $129,559 $26,546
ARRIS GROUP, INC.
SUPPLEMENTAL EARNINGS RECONCILIATION
(in thousands, except per share data)
(unaudited)
Q1 2006 Q1 2005 Q4 2005
Per Per Per
Diluted Diluted Diluted
Amount Share Amount Share Amount Share
Net income (loss) $20,723 $0.19 $3,408 $0.04 $21,966 $0.20
Highlighted items:
Impacting gross
margin:
Equity
compensation* 108 - 31 - 125 -
Impacting operating
expenses:
Impairment
of long-
lived assets - - 291 - - -
Gain related to
Adelphia
receivables (475) - - - - -
Restructuring
charges -
adjustments to
existing accruals 328 - (93) - 901 0.01
Amortization of
intangibles 218 - 557 0.01 219 -
Equity
compensation* 2,140 0.02 522 0.01 2,448 0.02
Impacting other
expenses:
Gain on
investment - - - - 131 -
Impacting
discontinued
operations:
Restructuring
charges -
adjustments to
existing accruals (21) - (10) - (152) -
Total highlighted
items 2,298 0.02 1,298 0.01 3,672 0.03
Net income (loss)
excluding
highlighted items $23,021 $0.21 $4,706 $0.05 $25,638 $0.24
Weighted average
common shares -
diluted 109,345 90,497 107,296
* ARRIS adopted SFAS 123R effective July 1, 2005. Prior to the adoption
date, the provisions of APB 25 were followed. In the periods before Q3
2005, the Company recorded compensation expense related to restricted
stock and options subject to variable accounting.
ARRIS believes that presenting net income (loss) and related per share
amounts adjusted for the items detailed above provides meaningful information
that will allow investors to more easily understand ARRIS' financial
performance and compare its period-to-period results. With respect to stock
compensation expense, ARRIS adopted SFAS 123R effective
result of which ARRIS will record 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 the gain related to Adelphia receivables,
ARRIS adjusted its reserve estimate associated with a previously written off
Adelphia receivable. With respect to amortization of intangibles, the
intangibles being amortized relate to our most recent acquisitions and will
not recur. Similarly, the impairment of long-lived assets, restructuring
charge adjustments and gain on investment reflect items that, although they or
similar items might recur, are of a nature and magnitude that identifying them
separately provides that investors with a greater ability to project ARRIS'
future performance. As importantly, 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 expects to continue providing similar information in the
future with schedules reconciling the differences between GAAP and non-GAAP
financial measures.
SOURCE ARRIS