-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A45Ec8fud+psjdLFwM7l7fhKhfemQ4J4tZo47ORB8tnk/QSX/r/s3dsDIvyXmBWf KexkiazO+euSUVzm0PcitA== 0000950144-03-005410.txt : 20030424 0000950144-03-005410.hdr.sgml : 20030424 20030423190441 ACCESSION NUMBER: 0000950144-03-005410 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030423 ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20030424 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARRIS GROUP INC CENTRAL INDEX KEY: 0001141107 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 582588724 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-31254 FILM NUMBER: 03660925 BUSINESS ADDRESS: STREET 1: 11450 TECHNOLOGY CIRCLE CITY: DULUTH STATE: GA ZIP: 30097 BUSINESS PHONE: 6784732000 MAIL ADDRESS: STREET 1: 11450 TECHNOLOGY CIRCLE CITY: DULUTH STATE: GA ZIP: 30097 FORMER COMPANY: FORMER CONFORMED NAME: BROADBAND PARENT CORP DATE OF NAME CHANGE: 20010521 8-K 1 g82293e8vk.txt ARRIS GROUP, INC. ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------------- FORM 8-K CURRENT REPORT DATED APRIL 23, 2003 of ARRIS GROUP, INC. A Delaware Corporation IRS Employer Identification No. 58-2588724 SEC File Number 001-16631 11450 TECHNOLOGY CIRCLE DULUTH, GEORGIA 30097 (678) 473-2000 ================================================================================ ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (C) EXHIBITS 99.1 Press Release of ARRIS Group, Inc., issued April 23, 2003. ITEM 9. REGULATION FD DISCLOSURE. The information set forth under this Item 9 is being furnished pursuant to "Item 12. Results of Operations and Financial Condition" of Form 8-K in accordance with interim guidance provided by the Securities and Exchange Commission in Release Nos. 33-8216 and 34-47583. Such information, including the Exhibits attached hereto, is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. On April 23, 2003, ARRIS Group, Inc. issued a press release reporting its financial results for the first quarter ended March 31, 2003. The press release, which has been attached as Exhibit 99.1, includes net income and earnings per share amounts which have been adjusted to exclude amortization of intangibles. Management believes adding back the non cash amortization of intangibles provides useful information because it enables investors to compare to prior period disclosures more readily and reflects more meaningful information on the company's operating performance. In addition, adjusted net income and earnings per share amounts presented in the press release excluded a gain from the repurchase of Nortel Networks' membership interest in Arris Interactive and a write-off of customer relations software. ARRIS believes presenting net income and earnings per share amounts excluding such highlighted items is appropriate because such items are not likely to recur regularly or in predictable amounts and, consequently, presenting net income and earnings per share, excluding such highlighted items, is meaningful supplemental information for investors. ARRIS believes that presenting net income and earnings per share amounts adjusted for the events described herein provides meaningful information which investors want to know and will allow investors to more easily compare ARRIS' financial performance period to period. Therefore, ARRIS will continue to provide similar information in the future with full schedules reconciling the differences between GAPP and non-GAAP financial measures. As used herein, "GAAP" refers to accounting principles generally accepted in the United States. SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ARRIS Group, Inc. By: /s/ Lawrence A. Margolis ----------------------------------- Lawrence A. Margolis Executive Vice President, Chief Financial Officer and Secretary Dated: April 23, 2003 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - -------------- ----------- 99.1 Press Release by ARRIS Group, Inc., issued April 23, 2003
EX-99.1 3 g82293exv99w1.txt PRESS RELEASE EXHIBIT 99.1 FOR IMMEDIATE RELEASE CONTACT: Jim Bauer Investor Relations (678) 473-2647 jim.bauer@arrisi.com ARRIS ANNOUNCES FIRST QUARTER 2003 FINANCIAL RESULTS AND BALANCE SHEET IMPROVEMENTS DULUTH, GA. (APRIL 23, 2003) ARRIS (NASDAQ:ARRS), a global telecommunications technology leader, today announced financial results for the first quarter 2003 that were in line with the Company's previously provided guidance range for the quarter. FINANCIAL HIGHLIGHTS: - Revenue in the first quarter was $91.3 million. - Net income per share for the first quarter was $0.04 which includes: amortization of intangibles, a gain from the repurchase of Nortel Networks' membership interest at a discount, and the write off of customer relations software. Net income (loss) per share excluding these three items was $(0.17) in the first quarter. - Cash on hand at the end of the quarter was $76.5 million with zero drawn on the revolving credit facility. - Successfully completed $125 million, 4.5% convertible subordinated note offering. - $12.4 million of convertible notes were redeemed in the first quarter, leaving a balance of $11.5 million, due May 2003. - Backlog was $54.6 million at the end of the first quarter with a book-to-bill ratio of 1.12 in the quarter. FINANCIAL DETAILS: First quarter revenues were $91.3 million, down from fourth quarter 2002 revenues of $122.4 million, reflecting the previously announced delay of substantial amounts of product from the first quarter into the second quarter. The delay was caused by previously disclosed manufacturing and component availability issues, coupled with weather related events during the quarter. On a GAAP basis, net income (loss) for the first quarter was $3.4 million or $0.04 per share, as compared to $(1.14) per share in fourth quarter 2002 and $(0.75) per share in first quarter 2002. The first quarter earnings include the impact of two previously disclosed items: 1) a $28.5 million, or $0.34 per share, gain realized from the repurchase of Nortel Networks' membership interest in Arris Interactive at a discount, 2) a $(2.2) million, or $(0.03) per share, write off of customer relations software. Also included in the results is an $(8.7) million, or $(0.10) per share, expense for the ongoing amortization of intangibles. Excluding these items, net income (loss) was $(14.1) million or $(0.17) per share in the first quarter of 2003. Broadband product revenues were $61.6 million in the first quarter as compared to the fourth quarter 2002 level of $79.1 million, reflecting the previously disclosed delay of shipments of Broadband products at the end of the quarter. Supplies & Services product revenues were $29.7 million, as compared to $43.3 million in fourth quarter 2002 due principally to weather related impacts nationwide during the quarter. International sales were $18.7 million in the quarter and compare to $26.3 million in fourth quarter 2002. Sales to Comcast/AT&T Broadband were $23.8 million in the quarter and compare to $35.0 million in fourth quarter 2002. Backlog at the end of the first quarter was $54.6 million compared to $43.8 million at the end of fourth quarter 2002. Bookings in the first quarter were $102.2 million as compared to $110.3 million in the fourth quarter 2002. The book-to-bill ratio was 1.12 in the first quarter 2003, compared to 0.90 in fourth quarter 2002. Operating expenses (excluding amortization of intangibles and impairment of goodwill) continue to be aggressively managed at $37.6 million for the quarter which includes the $2.2 million write off of customer relations software. This compares to $46.1 million in the fourth quarter of 2002, which included $7.1 million of restructuring and impairment charges. Excluding the aforementioned items, operating expenses decreased by $4.0 million quarter over quarter from $39.0 million in fourth quarter 2002 to $35.0 million in first quarter 2003. The Company also highlighted the improvements that were made to its balance sheet. During the quarter the Company issued $125.0 million of 4.5% convertible notes due 2008. The proceeds were used to redeem, at a discount, the outstanding $116.9 million balance of membership interest in Arris Interactive LLC that was owned by Nortel Networks for $88.4 million, resulting in a $28.5 million gain. In addition, the Company used a portion of the proceeds to repurchase 8 million shares of ARRIS common stock, which were owned by Nortel Networks, for $3.50 per share, or $28.0 million. The Company has an option through June 30, 2003 to buy up to an additional 8 million ARRIS shares from Nortel Networks at a 10% discount, subject to certain conditions. Also during the quarter, the Company repurchased $12.4 million of its convertible notes due May 2003, leaving only $11.5 million of the original $115.0 million outstanding. The Company ended the first quarter with $76.5 million of cash on hand, down $21.9 million from the fourth quarter 2002, and continues to have zero drawn on its revolving credit facility. Major uses of cash in the quarter included the $12.4 million redemption of notes and the payment to Nortel for agency fees, accrued during 2002, of $10.8 million. The Company used $12.4 million of cash for operations in the quarter, including the payment of the agency fees. The Company ended the first quarter with approximately $104.3 million of net inventory, which was essentially flat to the fourth quarter 2002. Inventory turns were 2.6 at the end of the first quarter as compared to 2.9 at the end of the fourth quarter 2002. Trade accounts receivable were approximately $69.6 million at the end of the first quarter and compares to approximately $81.0 million at the end of the fourth quarter 2002. Included within the accounts receivable balance is $19.5 million due from Cabovisao, a Portugal-based MSO. As previously disclosed, Cabovisao and its parent company CSii are in the process of restructuring their financing. The Company continues to monitor the progress of the financing efforts by Cabovisao. DSO's were 75 days at the end of the first quarter as compared to 72 days at the end of the fourth quarter 2002. "Although we are disappointed by the confluence of events that delayed product shipments at the end of the first quarter and the continuing tight capital spending environment that our customers are enduring, we were pleased with the growing acceptance of our next generation high speed data products," said Bob Stanzione, ARRIS President & CEO. "The improvements in our balance sheet, the outlook for resolution of internal problems that plagued some of our customers in 2002 and our demonstrated market leadership in new technologies make me cautiously optimistic about the second half of this year. We will continue to aggressively invest in our future. For example, our recent acquisition of Atoga Systems represents a step of a growth strategy that will position ARRIS to take advantage of new markets and new customers." Stanzione continued, "We are also quite pleased that our technology leadership has again been recognized. Earlier this month ARRIS products did very well in Wave 25 of CableLabs(R) certification cycle. Our Touchstone(TM) Cable Modem 450 was certified for both DOCSIS 2.0 and 1.1 and our C4 CMTS received PacketCable qualification. In addition, our Touchstone Telephony Modem 202p was PacketCable 1.0 certified." During the quarter, the Company announced that Insight Communications, the nation's ninth largest cable operator, had placed an order for its Touchstone(TM) CM 300 cable modems and that the Touchstone(TM) Telephony Modem 202P had been awarded "Product of the Year" by Internet Telephony magazine. "Our balance sheet and operating expense control progress during the quarter has been quite strong," said Larry Margolis, ARRIS EVP & CFO. "The success of our $125.0 million convertible note offering during the quarter allowed us to redeem at a significant discount 10% debt replacing it with 4.5% debt, to reduce our outstanding share count, and gave us the financial flexibility to pursue future growth strategies as appropriate. However, the market itself still has many uncertainties that again make it imprudent to forecast financial results beyond the current quarter. Therefore, we now believe that second quarter 2003 revenues should be in the range of $130 million to $140 million. Net income (loss) per share, based upon a share base of approximately 75 million shares, should be in the range of $(0.11) to $(0.06) inclusive of amortization of intangibles, or $0.00 to $0.05 excluding the amortization of intangibles." ARRIS management will conduct a conference call at 8:30am EST on Thursday April 24, 2003 to discuss these results in detail. You may participate in this conference call by dialing 877-691-0879 prior to the start of the call and providing the ARRIS Group Inc. name and Jim Bauer as the moderator. Please note that ARRIS will not accept any calls related to this earnings release during the period between the 4:30pm EST release on April 23rd and the completion of the scheduled conference call at 8:30am EST on April 24, 2003. A replay of the conference call can be accessed by dialing 877-519-4471 and using the PIN#3868423. 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 Duluth, Georgia, USA, ARRIS has design, engineering, distribution, service and sales office locations throughout the world. Information about ARRIS' products and services is found at www.arrisi.com. Forward-looking statements: Certain information and statements contained in this press release constitute forward-looking statements with respect to the financial condition, results of operations, and business of ARRIS. Statements that are based on current expectations, estimates, forecasts, and projections about the markets in which the Company operates and management's beliefs and assumptions regarding these markets are forward-looking statements. The Company cautions that any forward-looking statements made are not guarantees of future performance. Statements made in this press release, including those related to: - second quarter 2003 revenues and earnings; - the general market outlook; and - the timing of improvements in 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 2003 are based on preliminary estimates, assumptions and projections that management believes to be reasonable at this time, but are beyond management's control; - 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; and - several of the substantial participants in our industry, including some of our customers are in a weakened financial condition which could directly or indirectly cause a reduced demand for our products or other unexpected consequences, additionally, we cannot be certain if or when the general uncertainty in our industry will stabilize or improve. 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 DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31 2003 2002 2002 2002 2002 (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) --------- --------- --------- --------- --------- ASSETS Current assets: Cash and cash equivalents $ 76,543 $ 98,409 $ 94,037 $ 53,212 $ 27,357 Accounts receivable, net 69,264 78,743 132,418 143,073 125,081 Accounts receivable from Nortel 289 2,212 2,930 3,177 8,299 Other receivables 1,919 3,154 3,766 6,292 12,525 Inventories 104,331 104,203 113,874 122,550 122,626 Income taxes recoverable -- -- -- 12,629 12,853 Investment held for resale 160 137 83 225 581 Current assets - discontinued operations -- -- 22,830 26,190 51,665 Other current assets 14,647 14,834 18,905 21,057 23,857 --------- --------- --------- --------- --------- Total current assets 267,153 301,692 388,843 388,405 384,844 Property, plant and equipment, net 30,210 34,540 40,528 42,510 44,399 Goodwill 151,253 151,265 222,507 223,561 223,301 Intangibles 56,794 64,843 74,318 83,026 97,734 Investments 4,885 4,594 12,387 12,593 14,079 Deferred income taxes, net -- -- -- -- -- Other assets 11,701 6,478 10,721 10,078 11,154 --------- --------- --------- --------- --------- $ 521,996 $ 563,412 $ 749,304 $ 760,173 $ 775,511 ========= ========= ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 29,343 $ 24,253 $ 43,383 $ 53,073 $ 41,806 Accrued compensation, benefits and related taxes 16,914 23,423 27,238 25,181 28,272 Accounts payable and accrued expenses - Nortel 540 11,303 13,095 19,643 13,042 Current portion of long-term debt 11,755 23,887 99,598 99,598 -- Current portion of capital lease obligations 1,415 1,120 1,142 1,163 1,122 Other accrued liabilities 39,513 44,360 41,037 44,619 45,219 --------- --------- --------- --------- --------- Total current liabilities 99,480 128,346 225,493 243,277 129,461 Capital lease obligations, net of current portion 337 158 389 615 899 Long-term debt 125,028 -- -- -- 115,000 --------- --------- --------- --------- --------- Total liabilities 224,845 128,504 225,882 243,892 245,360 Membership interest - Nortel -- 114,518 111,768 109,110 106,610 --------- --------- --------- --------- --------- Total liabilities & membership interest 224,845 243,022 337,650 353,002 351,970 Stockholders' equity: Preferred stock -- -- -- -- -- Common stock 758 831 830 828 807 Capital in excess of par value 578,397 603,563 603,639 603,109 578,829 Unearned compensation (3,328) (1,649) (2,010) (2,175) (2,618) Unrealized holding gain (loss) on marketable securities 445 227 (3,469) (3,656) (3,170) Unfunded pension losses (1,219) (1,219) -- -- -- Retained earnings (277,883) (281,329) (187,283) (190,769) (150,056) Cumulative translation adjustments (19) (34) (53) (166) (251) --------- --------- --------- --------- --------- Total stockholders' equity 297,151 320,390 411,654 407,171 423,541 --------- --------- --------- --------- --------- $ 521,996 $ 563,412 $ 749,304 $ 760,173 $ 775,511 ========= ========= ========= ========= =========
ARRIS GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE DATA)
THREE MONTHS ENDED MARCH 31, ------------------------------------- 2003 2002 ---------------- --------------- Net sales $ 91,343 $ 172,397 Cost of sales 66,599 114,166 ---------------- --------------- Gross profit 24,744 58,231 Operating expenses: Selling, general, administrative and development 37,240 47,183 Restructuring and impairment charges 336 -- Amortization of intangibles 8,708 8,370 ---------------- --------------- 46,284 55,553 ---------------- --------------- Operating profit (loss) (21,540) 2,678 Interest expense 1,664 2,298 Membership interest 2,418 2,500 Loss (gain) on debt retirement (28,506) -- Loss (gain) on investments (23) 214 Other (income) expense, net (539) 1,023 ---------------- --------------- Income (loss) from continuing operations before income taxes 3,446 (3,357) Income tax expense (benefit) -- (6,800) ---------------- --------------- Net income (loss) from continuing operations 3,446 3,443 Discontinued Operations: Income (loss) from discontinued operations -- (5,377) Income tax expense (benefit) -- -- ---------------- --------------- Gain (loss) from discontinued operations -- (5,377) ---------------- --------------- Net income (loss) before cumulative effect of an accounting change 3,446 (1,934) Cumulative effect of an accounting change - goodwill -- 57,960 ---------------- --------------- Net income (loss) $ 3,446 $ (59,894) ================ =============== Net income (loss) per common share Basic: Income (loss) from continuing operations $ 0.04 $ 0.04 Income (loss) from discontinued operations -- (0.07) Cumulative effect of an accounting change -- (0.72) ---------------- --------------- Basic: Net income (loss) $ 0.04 $ (0.75) ================ =============== Diluted: Income (loss) from continuing operations $ 0.04 $ 0.04 Income (loss) from discontinued operations -- (0.07) Cumulative effect of an accounting change -- (0.72) ---------------- --------------- Diluted: Net income (loss) $ 0.04 $ (0.75) ================ =============== Weighted average common shares Basic 82,068 80,258 ================ =============== Diluted 83,602 80,258 ================ ===============
ARRIS GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2003 2002 --------- -------- Operating Activities: Net income (loss) $ 3,446 $ (1,934) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 6,165 5,564 Amortization of intangibles 8,708 8,370 Amortization of deferred finance fees 943 635 Amortization of unearned compensation 476 491 Provision for doubtful accounts 843 2,115 Loss (gain) on investments (23) 214 Gain on retirement of membership interest (28,506) -- Changes in operating assets & liabilities, net of effects of acquisitions and disposals: Accounts receivable 10,559 1,774 Other receivables 1,235 (2,476) Inventory 203 21,797 A/P & accrued liabilities (17,153) 2,375 Income taxes recoverable -- (7,787) Accrued membership interest 2,418 2,500 Other, net (1,728) (9,676) --------- -------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (12,414) 23,962 INVESTING ACTIVITIES: Purchases of property, plant, and equipment (1,099) (1,105) Cash paid for acquisition (24) (676) --------- -------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (1,123) (1,781) FINANCING ACTIVITIES: Proceeds from issuance of bonds 125,000 -- Redemption of preferred membership interest (88,430) -- Repurchase and retirement of common stock (28,000) -- Payments on capital lease obligations (392) (238) Payments on debt obligations (12,370) -- Deferred finance costs paid (4,744) -- Proceeds from issuance of stock 607 77 --------- -------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (8,329) (161) NET INCREASE IN CASH AND CASH EQUIVALENTS (21,866) 22,020 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 98,409 5,337 --------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 76,543 $ 27,357 ========= ========
ARRIS GROUP, INC. SUPPLEMENTAL EARNINGS RECONCILIATION (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
---------------------------- THREE MONTHS ENDED MARCH 31, ---------------------------- PER DILUTED AMOUNT SHARE -------- -------- Net income $ 3,446 $ 0.04 Highlighted items: Amortization of intangibles 8,708 0.10 Gain on retirement of membership interest (28,506) (0.34) Write-off of customer relationship software 2,243 0.03 -------- -------- Total highlighted items (17,555) (0.21) -------- -------- Net income excluding highlighted items $(14,109) $ (0.17) ======== ======== Weighted average common shares - diluted 83,602 ========
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