ARRIS Announces Preliminary And Unaudited Fourth Quarter And Full Year 2013 Results - WTOC-TV: Savannah, Beaufort, SC, News, Weather & Sports

ARRIS Announces Preliminary And Unaudited Fourth Quarter And Full Year 2013 Results

Information contained on this page is provided by an independent third-party content provider. WorldNow and this Station make no warranties or representations in connection therewith. If you have any questions or comments about this page please contact pressreleases@worldnow.com.

SOURCE ARRIS Group, Inc.

SUWANEE, Ga., Feb. 19, 2014 /PRNewswire/ -- ARRIS Group, Inc. (NASDAQ: ARRS) today announced preliminary and unaudited financial results for the fourth quarter and full year 2013.

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

Financial Highlights

  • Revenues in the fourth quarter 2013 were $1,199.1 million
  • Adjusted net income (a non-GAAP measure) in the fourth quarter 2013 was $0.54 per diluted share
  • GAAP net loss in the fourth quarter 2013 was $(0.02) per diluted share
  • The Company repaid $372.8 million of debt in the fourth quarter
  • The Company ended the fourth quarter 2013 with $513.4 million of cash resources
  • Order backlog at the end of the fourth quarter 2013 was $538.6 million
  • The Company's book-to-bill ratio in the fourth quarter 2013 was 1.01

"We had a great fourth quarter and made remarkable progress in 2013.  As a result of our successful acquisition and integration of Motorola Home, we are a larger, stronger and much more relevant supplier to a growing worldwide customer community.  Moreover, 2014 is looking to be our best year ever." said Bob Stanzione, ARRIS Chairman and CEO. 

"Our fourth quarter results were strong.  Our revenues were up 12% from the third quarter, largely as a result of new product introductions, and we had strong cash generation. Also, in the quarter, we retired our remaining convertible notes for $232 million and repaid $141 million of our term loan debt, including a $125 million optional prepayment," said David Potts, ARRIS EVP & CFO.  "With respect to the first quarter 2014, we now project that revenues for the Company will be in the range of $1,170 to $1,210 million, with adjusted net income per diluted share in the range of $0.42 to $0.47 and GAAP net income per diluted share in the range of $0.05 to $0.10."

Revenues in the fourth quarter 2013 were $1,199.1 million as compared to fourth quarter 2012 revenues of $344.0 million. Third quarter 2013 revenues were $1,067.8 million.    

For the full year 2013 and 2012, revenues were $3,620.9 million and $1,353.7 million, respectively.  2013 revenues include the revenues of Motorola Home following the closing of the acquisition on April 17, 2013. 

Adjusted net income (a non-GAAP measure) in the fourth quarter 2013 was $0.54 per diluted share, compared to $0.28 per diluted share for the fourth quarter 2012.  Adjusted net income (a non-GAAP measure) for the third quarter 2013 was $0.39 per diluted share.    

Year to date, adjusted net income was $1.66 per diluted share for 2013 as compared to $0.93 per diluted share in 2012. 2013 excludes the adjusted net income of Motorola Home prior to April 17, 2013.  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 loss in the fourth quarter 2013 was $(0.02) per diluted share, as compared to fourth quarter 2012 GAAP net income of $0.13 per diluted share and third quarter 2013 GAAP net income of $0.12 per diluted share. Year to date, GAAP net loss was $(0.37) per diluted share in 2013 as compared to GAAP net income of $0.46 per diluted share in 2012.  2013 includes the net income of Motorola Home following the closing of the acquisition on April 17, 2013. 

Cash & Cash Equivalents - The Company ended the fourth quarter 2013 with $513.4 million of cash resources, which includes $509.8 million of cash, cash equivalents and short-term investments, and $3.6 million of long-term marketable securities, as compared to $695.0 million, in the aggregate, at the end of the third quarter 2013.  The Company generated $190.9 million of cash from operating activities during the fourth quarter 2013, as compared to $11.8 million generated during the fourth quarter 2012.  During the full year of 2013, the Company generated $570.9 million of cash from operating activities, which compares to $84.4 million generated during 2012.   

Debt Retirements – In the fourth quarter 2013 the Company redeemed its remaining convertible notes for $232 million and 3.1 million shares of common stock.  The Company also repaid $141 million of term loan debt, including $125 million of optional prepayments.

Order backlog at the end of the fourth quarter 2013 was $538.6 million as compared to $222.6 million and $523.7 million at the end of the fourth quarter 2012 and the third quarter 2013, respectively. The Company's book-to-bill ratio in the fourth quarter 2013 was 1.01 as compared to the fourth quarter 2012 of 1.11 and the third quarter 2013 of 0.99.

ARRIS management will conduct a conference call at 5:00 pm EST, today, Wednesday, February 19, 2014, to discuss these results in detail. You may participate in this conference call by dialing 888-679-8034 or 617-213-4847 for international calls prior to the start of the call and providing the ARRIS Group, Inc. name, conference pass code 52957683 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 February 26, 2014 by dialing 888-286-8010 or 617-801-6888 for international calls and using the pass code 57012703. 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 premier video and broadband technology company that transforms how service providers worldwide deliver entertainment and communications without boundaries.  Its powerful end-to-end platforms enable service and content providers to improve the way people connect – with each other and with their favorite content.  The Company's vision and expertise continue to drive the industry's innovations, as they have for more than 60 years. Headquartered north of Atlanta, in Suwanee, Georgia, ARRIS has R&D, sales and support centers throughout the world. 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 first 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 first 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-Q for the quarter ended September 30, 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)












December 31,


September 30,


June 30,


March 31,


December 31,


2013


2013


2013


2013


2012











ASSETS




















Current assets:










Cash and cash equivalents

$ 442,438


$ 541,114


$ 610,502


$ 423,551


$ 131,703

Short-term investments, at fair value

67,360


125,387


130,723


184,838


398,414

      Total cash, cash equivalents and short term investments

509,798


666,501


741,225


608,389


530,117











Restricted cash

1,079


1,818


3,801


4,689


4,722

Accounts receivable, net

647,154


627,844


662,156


206,236


188,581

Other receivables

8,366


4,076


11,007


3,743


350

Inventories, net

330,129


343,895


311,608


126,530


133,848

Prepaid income taxes

13,034


49,447


38,186


10,703


9,235

Prepaids

61,482


18,881


17,296


13,227


11,682

Current deferred income tax assets

77,167


75,875


132,113


25,927


24,944

Other current assets

39,930


60,111


281,987


13,674


16,413

      Total current assets

1,688,139


1,848,448


2,199,379


1,013,118


919,892











Property, plant and equipment, net

396,152


398,353


393,594


54,109


54,378

Goodwill

935,579


938,435


938,493


193,976


194,115

Intangible assets, net

1,176,192


1,241,258


1,270,211


86,926


94,529

Investments

71,176


96,711


95,551


55,938


86,164

Noncurrent deferred income tax assets

12,501


11,358


11,191


52,410


47,431

Other assets

52,363


52,300


54,847


11,089


9,385


$ 4,332,102


$ 4,586,863


$ 4,963,266


$ 1,467,566


$ 1,405,894





















LIABILITIES AND STOCKHOLDERS' EQUITY




















Current liabilities:










Accounts payable

$ 662,919


$ 573,673


$ 485,291


$ 47,783


$ 45,719

Accrued compensation, benefits and related taxes

116,262


101,233


88,494


36,791


29,773

Accrued warranty

48,755


46,536


57,532


2,768


2,882

Deferred revenue

69,071


77,267


80,254


61,431


44,428

Current portion of LT debt

53,254


293,399


289,990


225,368


222,124

Current income taxes liability

3,068


7,012


6,528


350


853

Other accrued liabilities

151,793


148,282


549,995


59,055


24,942

      Total current liabilities

1,105,122


1,247,402


1,558,084


433,546


370,721

Long-term debt, net of current portion

1,691,034


1,822,941


1,837,952


-


-

Accrued pension

58,657


65,395


64,263


27,200


26,883

Accrued severance liability, net of current portion

3,814


3,870


3,782


4,262


4,119

Noncurrent income taxes payable

21,048


25,012


35,320


30,168


24,389

Noncurrent deferred income tax liabilities

74,791


74,242


146,086


351


351

Other noncurrent liabilities

58,649


53,465


48,196


18,836


19,043

      Total liabilities

3,013,115


3,292,327


3,693,683


514,363


445,506











Stockholders' equity:










Preferred stock

-


-


-


-


-

Common stock

1,766


1,729


1,726


1,509


1,488

Capital in excess of par value

1,688,782


1,669,667


1,657,383


1,292,971


1,285,575

Treasury stock at cost

(306,330)


(306,330)


(306,330)


(306,330)


(306,330)

Unrealized gain (loss) on marketable securities

306


85


(19)


288


206

Unfunded pension liability

(2,416)


(8,558)


(8,558)


(8,592)


(8,558)

Unrealized gain (loss) on derivative Instruments

(2,541)


(4,277)


-


-


-

Accumulated deficit

(60,569)


(57,752)


(74,922)


(26,459)


(11,809)

Cumulative translation adjustments

(11)


(28)


303


(184)


(184)

      Total stockholders' equity

1,318,987


1,294,536


1,269,583


953,203


960,388


$ 4,332,102


$ 4,586,863


$ 4,963,266


$ 1,467,566


$ 1,405,894

 

 ARRIS GROUP, INC.

 PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)










For the Three Months


For the Twelve Months


Ended December 31,


Ended December 31,


2013


2012


2013


2012









Net sales

$1,199,067


$    344,003


$3,620,902


$1,353,663

Cost of sales

832,696


220,812


2,598,154


891,086

Gross margin

366,371


123,191


1,022,748


462,577

Operating expenses:








Selling, general, and administrative expenses

110,562


43,794


338,252


161,338

Research and development expenses

129,471


40,700


425,825


170,706

Acquisition, integration and other costs

12,668


5,131


45,471


6,207

Restructuring charges

(747)


306


37,576


6,761

Amortization of intangible assets

65,066


7,729


193,637


30,294


317,020


97,660


1,040,761


375,306

Operating income (loss)

49,351


25,531


(18,013)


87,271

Other expense (income):








Interest expense

19,457


4,546


67,888


17,797

Loss (gain) on investments

4,242


78


2,698


(1,405)

Loss (gain) on foreign currency

(777)


(131)


(3,502)


786

Interest income

(626)


(993)


(2,936)


(3,241)

Other (income) expense, net

632


(171)


13,989


(962)

Income (loss) before income taxes

26,423


22,202


(96,150)


74,296

Income tax expense (benefit)

29,240


7,407


(47,390)


20,837

      Net income (loss)

$     (2,817)


$     14,795


$    (48,760)


$     53,459









Net income (loss) per common share:








Basic

$       (0.02)


$         0.13


$       (0.37)


$        0.47

Diluted

$       (0.02)


$         0.13


$       (0.37)


$        0.46









Weighted average common shares:








Basic

139,333


114,028


131,980


114,161

Diluted

139,333


117,013


131,980


116,514









 

ARRIS GROUP, INC.

PRELIMINARY CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)






For the Three Months


For the Twelve Months






Ended December 31,


Ended December 31,






2013


2012


2013


2012













Operating Activities:










Net income (loss)


$         (2,817)


$         14,795


$      (48,760)


$       53,459


Adjustments to reconcile net income (loss) to cash provided by operating activities

105,955


21,056


287,671


80,867


Net income, including adjustments


103,138


35,851


238,911


134,326


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



-




-



Accounts receivable


(18,647)


(17,624)


(854)


(37,139)



Other receivables


(3,277)


211


(2,182)


8,398



Inventory


13,766


3,648


74,111


(21,491)



Accounts payable and accrued liabilities


102,132


(8,289)


257,396


(5,675)



Prepaids and other, net


(6,252)


(2,004)


3,527


5,982




Net cash provided by operating activities


190,860


11,793


570,909


84,401













Investing Activities:










Investments, net


92,905


(69,654)


381,593


(132,943)


Property, plant and equipment, net


(18,030)


(6,861)


(71,323)


(21,368)


Cash paid for acquisition, net of cash acquired


-


-


(2,208,114)


-


Other, net


-


-


-


3,249




Net cash provided by (used in) investing activities


74,875


(76,515)


(1,897,844)


(151,062)













Financing Activities:










Proceeds from issuance of debt


-


-


1,925,000


-


Payment of debt obligations


(372,784)


-


(404,409)


-


Other, net


8,373


7,772


117,079


(37,511)




Net cash provided by (used in) financing activities


(364,411)


7,772


1,637,670


(37,511)
















Net increase (decrease) in cash and cash equivalents


(98,676)


(56,950)


310,735


(104,172)

Cash and cash equivalents at beginning of period


541,114


188,653


131,703


235,875

Cash and cash equivalents at end of period


$       442,438


$       131,703


$      442,438


$      131,703













 

ARRIS GROUP, INC.


PRELIMINARY SUPPLEMENTAL SALES & NET INCOME RECONCILIATION


(in thousands, except per share data) (unaudited)




















(in thousands, except per share data)

Q4 2012


Q4 2013



Year 2012


Year 2013(1)





















Amount




Amount





Amount




Amount




Sales 

$ 344,003




$ 1,199,067





$ 1,353,663




$ 3,620,902






















Highlighted items:


















    Acquisition accounting impacts related to Motorola Home and BigBand deferred revenue

432




3,148





2,899




7,121




    Reduction in revenue related to Comcast investment in ARRIS

-




-





-




13,182




Sales excluding highlighted items

$ 344,435




$ 1,202,215





$ 1,356,562




$ 3,641,205









































Q4 2012


Q4 2013



Year 2012


Year 2013(1)





Per Diluted




Per Diluted





Per Diluted




Per Diluted



Amount


Share


Amount


Share



Amount


Share


Amount


Share


Net income (loss)

$ 14,795


$           0.13


$      (2,817)


$      (0.02)

(2)


$      53,459


$       0.46


$     (48,760)


$      (0.37)

(2)



















Highlighted items:


















   Impacting gross margin:


















      Acquisition accounting impacts related to Motorola Home inventory

-


-


(3,818)


(0.03)



-


-


53,782


0.40


      Product rationalization

-


-


2,891


0.02



-


-


16,473


0.12


      Acquisition accounting impacts related to Motorola Home and BigBand deferred revenue

432


0.00


3,067


0.02



2,899


0.02


5,545


0.04


      Fair value impacts related to Comcast investment in ARRIS

-


-


-


-



-


-


13,182


0.10


      Stock compensation expense

802


0.01


1,324


0.01



3,169


0.03


4,269


0.03




















   Impacting operating expenses:


















      Acquisition, integration and other costs

5,131


0.04


12,667


0.09



6,207


0.05


45,471


0.34


      Restructuring

306


0.00


(747)


(0.01)



6,761


0.06


37,575


0.28


      Amortization of intangible assets

7,729


0.07


65,066


0.45



30,294


0.26


193,637


1.43


      Stock compensation expense

5,910


0.05


9,812


0.07



24,737


0.21


31,520


0.23














-






   Impacting other (income) / expense:












-




-


      Non-cash interest expense

3,181


0.03


-


-



12,358


0.11


9,926


0.07


      Impairment of investment

67


0.00


-


-



533


0.00


-


-


      Settlement charge - pension

3,064


0.03


-


-



3,064


0.03


-


-


      Credit facility - ticking fees

-


-


-


-



-


-


865


0.01


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

-


-


-


-



-


-


13,189


0.10




















   Impacting income tax expense:


















      Net tax items

(9,199)


(0.08)


(9,849)


(0.07)



(34,614)


(0.30)


(152,883)


(1.13)




















Total highlighted items

17,423


0.15


80,413


0.56



55,408


0.48


272,551


2.02


Net income excluding highlighted items

$ 32,218


$           0.28


$      77,596


$       0.54



$    108,867


$       0.93


$    223,791


$       1.66




















Weighted average common shares - Basic



114,028




139,333





114,161




131,980


Weighted average common shares - diluted



117,013




143,956





116,514




135,136






































(1) Excludes Motorola Home results prior to April 17, 2013











(2) Basic shares used for Q4 2013 and YTD 2013 as losses were reported for those periods and the inclusion of dilutive shares would be anti-dilutive




See Notes to GAAP and Adjusted 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. 

Inventory Valuation:  In connection with our acquisition of Motorola Home, business combinations rules require the inventory be recorded at fair value on the opening balance sheet.  This is different from historical cost.  Essentially we were required to write the inventory up to end customer price less a reasonable margin as a distributor.  In addition, we have conformed other cost basis inventory valuation policies during the period.  We have excluded the resulting adjustments in inventory and cost of goods sold.

Product Rationalization:  In conjunction with the integration of Motorola Home, we have identified certain product lines which overlap.  In the second and fourth quarters of 2013, we made the decision to eliminate certain products.  As a result, we recorded expenses related to the elimination of inventory and certain vendor liabilities.  We believe it is useful to understand the effects of this item on our total cost of goods sold.     

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.

Restructuring, Acquisition, Integration 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.

Impairment of Investment: We have excluded the effect of an other-than-temporary impairment of a cost method investment 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). 

Settlement Charge - Pension:  In an effort to reduce volatility and administrative expense in connection with the Company's pension plan, we have offered certain participants an opportunity to voluntarily elect an early payout of their pension benefits.  We exclude this charge in Non-GAAP measures, as this is a one-time charge that is not considered by management in their review of financial results.

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. 

©2012 PR Newswire. All Rights Reserved.

Powered by WorldNow