ARRIS Announces Preliminary and Unaudited Fourth Quarter and Full Year 2006 Results
biz.yahoo.com
Thursday February 15, 4:00 pm ET
SUWANEE, Ga., Feb. 15 /PRNewswire-FirstCall/ -- ARRIS Group, Inc. (Nasdaq: ARRS), a global communications technology leader in the development of advanced cable telephony and next generation high-speed data solutions across the broadband local access network, today announced preliminary and unaudited financial results for the fourth quarter and full year 2006.
Financial Highlights:
- Revenues were $234.6 million for the fourth quarter 2006, up 29.4% as
compared to $181.3 million in the fourth quarter 2005 and up 2.6% as
compared to $228.6 million in the third quarter 2006.
- Full year 2006 revenues were $891.6 million, up $211.2 million or 31.0%
over 2005 revenues of $680.4 million.
- Net income in the fourth quarter 2006 was $70.3 million or $0.64 per
diluted share and compares to net income of $22.0 million or $0.20 per
diluted share in the fourth quarter 2005 and to net income of
$26.6 million or $0.24 per diluted share in the third quarter 2006.
Net income for the full year 2006 was $142.3 million or $1.30 per
diluted share, as compared to $51.5 million or $0.52 per diluted share
in 2005. The fourth quarter and full year net income reflects certain
income tax benefits, in particular a reduction in valuation allowances
related to deferred tax assets, as discussed below. Excluding the
items detailed below, net income per diluted share was $0.32 and $1.04
for the fourth quarter and full year respectively (a non-GAAP measure).
- Gross margins were 29.3% in the fourth quarter 2006 as compared to
31.9% in the fourth quarter 2005 and 27.6% in the third quarter 2006
and reflects the expected sequential improvement in gross margin
percentages for the Supplies & CPE product line. Gross margins for the
full year 2006 were 28.3% as compared to 28.0% in 2005.
- Cash, cash equivalents, and short-term investments at the end of the
fourth quarter 2006 were $549.2 million, up significantly from
$129.5 million at the end of the fourth quarter 2005 and $210.0 million
at the end of the third quarter 2006, and includes approximately
$276.0 million raised in a 2% Convertible Notes offering completed in
November 2006. Cash generated from operating activities was
$65.0 million in the fourth quarter 2006 and was $144.2 million for the
full year 2006.
- Book-to-bill ratio was 0.87 in the fourth quarter as compared to 0.88
in the third quarter 2006 and 0.97 in the fourth quarter 2005.
Financial details:
Revenues for the fourth quarter 2006 were $234.6 million. Revenues grew by $53.3 million or 29.4%, and by $6.0 million or 2.6%, as compared to the fourth quarter 2005 and the third quarter 2006, respectively. For the full year 2006, revenues were $891.6 million, up $211.2 million or approximately 31.0% as compared to full year 2005 revenues. The revenue growth was a result of continuing demand for the Company's Voice over IP (VoIP) and high speed data products as cable operators aggressively sign up customers for the "triple-play" offerings of voice, data and video services.
Net income in the fourth quarter 2006 was $70.3 million, or $0.64 per diluted share, as compared to the fourth quarter 2005 net income of $22.0 million, or $0.20 per diluted share, and as compared to the third quarter 2006 net income of $26.6 million, or $0.24 per diluted share. Net income for the full year 2006 was $142.3 million, or $1.30 per diluted share, and compares to $51.5 million or $0.52 per diluted share in 2005. Excluding amortization of intangibles, equity compensation expense, restructuring accrual adjustments, and certain tax benefits, net income was $0.32 and $1.04 per diluted share in the fourth quarter and full year 2006, respectively. The tax benefits realized were associated with: 1) adjustments to deferred tax asset valuation allowances based upon the current judgment that the tax benefits will be realized by the Company, and 2) recognition of research and development tax credits. A reconciliation of GAAP to non-GAAP earnings per share is attached to this release and also can be found on the Company's website (www.arrisi.com).
Broadband product revenues were $92.4 million in the fourth quarter 2006, down compared to $92.9 million in the fourth quarter of 2005, reflecting the expected phase-out of CBR telephony product sales as customers migrate to VoIP, but up approximately 5.5% from the third quarter 2006 level of $87.6 million. Full year Broadband sales of $364.3 million are up 15.6% as compared to $315.1 million in 2005 reflecting strong CMTS revenue trends. CMTS revenues in 2006 continued to reach record sales levels each quarter and have more than offset declining CBR telephony sales over the same period. Demand for CMTS products continues to be driven by the Multi System Operators' (MSOs) aggressive deployment programs to meet their subscribers' demands for increasingly higher data rates to support new data and video transport applications. Supplies & CPE product revenues were $142.2 million in the fourth quarter, up 60.9% as compared to $88.4 million in the fourth quarter 2005 and up 0.9% as compared to $141.0 million in the third quarter of 2006. Full year 2006 Supplies & CPE sales of $527.3 million are up 44.4% as compared to $365.3 million for full year 2005. International sales were $59.9 million in the fourth quarter and compare to $52.3 million in the fourth quarter 2005 and $54.4 million in the third quarter 2006. Backlog at the end of the fourth quarter was $92.7 million compared to $122.0 million at the end of the third quarter 2006. Bookings in the fourth quarter 2006 were $205.2 million as compared to $201.4 million in the third quarter 2006. The book-to-bill ratio in the fourth quarter was approximately 0.87 as compared to 0.97 in the fourth quarter 2005 and 0.88 in the third quarter 2006.
Gross margins were 29.3% in the fourth quarter, up 170 basis points as compared to third quarter 2006 margins of 27.6%. The increase was primarily due to the migration of EMTA sales to the new reduced-cost 500-series. Gross margins of Broadband products were 46.2% in both the third and fourth quarters of 2006. Gross margins of the Supplies & CPE products were up 220 basis points to 18.3% in the fourth quarter 2006 as compared to 16.1% in the third quarter 2006 reflecting an increased percentage of higher margin 500-series EMTAs and ongoing cost reductions. Operating expenses were $40.2 million in the fourth quarter 2006, which included equity compensation expense of approximately $2.2 million and $1.9 million of adjustments to increase restructuring reserves related to real estate leases. Operating expenses in the third quarter 2006 were $37.7 million, which included equity compensation expense of $2.3 million. Operating expenses were $156.1 million for the full year 2006 as compared to $137.0 million for 2005. Research and development costs included in operating expenses were $15.6 million in the fourth quarter 2006 and compare to $16.1 million in the third quarter of 2006. Research and development costs for the full year 2006 were $66.0 million as compared to $60.1 million in 2005.
The Company ended the fourth quarter with $549.2 million of cash, cash equivalents, and short-term investments, up from the third quarter level of $210.0 million and up from the fourth quarter 2005 level of $129.5 million. Approximately $65.0 million and $144.2 million of cash were generated from operating activities in the fourth quarter and full year 2006, respectively. Additionally, as described earlier, the Company raised approximately $276.0 million in a 2% Convertible Notes offering completed in November 2006. Inventory and turns for the fourth quarter were $94.2 million and 6.8 on an annualized basis, respectively, as compared to $101.1 million and 6.9 on an annualized basis, respectively for the third quarter 2006. Accounts receivable ended the fourth quarter at $115.3 million with DSOs of 46 as compared to $120.7 million and DSOs of 45 at the end of the third quarter 2006.
"The year 2006 was truly an outstanding year for ARRIS," said Bob Stanzione, ARRIS Chairman & CEO. "We executed well on all fronts. We maintained our technology leadership in voice over IP and high speed data, we expanded our market penetration, we strengthened our cash position to enable strategic acquisitions and we delivered on our promises to our customers by bringing new innovative, revenue-generating products to the market with a pipeline of new products to meet their future needs. Our results clearly indicate that our strategy for growth is working and I am confident that our technical and operational excellence positions us well for a very bright future."
Stanzione continued, "On January 15, 2007, we announced our intent to acquire TANDBERG Television for approximately $1.2 billion via a tender offer thereby fulfilling our long term strategic goal of expanding our product offerings and the addressable markets we serve. The tender offer was launched this morning and the transaction is expected to close during the second quarter of 2007. We could not be more pleased with the people, products, expertise and market positions this combination brings. This is truly a case of one plus one equals three for our customers, our employees and our stockholders, both old and new."
"Our strong results for the fourth quarter 2006 reflect the continuing momentum of both our business and the overall industry," said David Potts, ARRIS EVP & CFO. "ARRIS products are exceptionally well positioned to meet the needs for the delivery of voice, data and video. The success of our strategy and products is borne out by our outstanding results for the year. Looking forward, we now project that our revenues for the first quarter 2007 will be in the range of $230 to $240 million with net income per diluted share, on a U.S. GAAP basis, in the range of $0.15 to $0.18 including amortization of intangibles and equity compensation expense of $0.01. Our first quarter guidance excludes the impacts of certain items that we may incur related to the TANDBERG Television tender offer which we announced last month. It is also important to note that our guidance assumes a tax rate of approximately 37.5%."
ARRIS management will conduct a conference call at 5:00 pm EST, today, Thursday, February 15, 2007, to discuss these results in detail. You may participate in this conference call by dialing 866-700-6979 or 617-213-8836 for international calls prior to the start of the call and providing the ARRIS Group, Inc. name, conference passcode 11947847 and Jim Bauer as the moderator. Please note that ARRIS will not accept any calls related to this earnings release until after the conclusion of the 5:00 pm EST conference call. A replay of the conference call can be accessed approximately two hours after the call through Thursday, February 22, 2007 by dialing 888-286-8010 or 617- 801-6888 for international calls and using the passcode 63741735. 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, Georgia, USA, ARRIS has design, 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:
- first quarter 2007 revenues and net income;
- income tax expense impacts;
- impacts related to the TANDBERG Television acquisition;
- expected sales levels and acceptance of certain ARRIS products;
- the general market outlook; and
- the outlook for 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 of 2007 as well as the general
outlook for 2007 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;
- 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
- the TANDBERG Television tender offer may not be successful or its
impact may be less favorable than management has estimated. |
