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Arris Group Inc Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 2, 2012 03:08PM
Arris Group Inc (ARRS) filed Quarterly Report for the period ended 2012-09-30. Arris Group, Inc. has a market cap of $1.55 billion; its shares were traded at around $13.89 with a P/E ratio of 20.8 and P/S ratio of 1.4. Arris Group, Inc. had an annual average earning growth of 2.8% over the past 5 years.
Highlight of Business Operations:Sales in the third quarter and nine months ended September 30, 2012 were $357.5 million and $1,009.7 million, respectively, as compared to $274.4 million and $807.6 million in the same periods in 2011. The increase is primarily attributed to high demand for our DOCSIS 3.0 CPE products, the introduction of our Video Gateway products in the third quarter of 2011, and the inclusion of sales of our EMP product resulting from our late 2011 acquisition of BigBand Networks.
During the three and nine months ended September 30, 2012, sales in our Access, Transport and Supplies segment increased by approximately 4.5% and 4.3%, respectively, as compared to the same period in 2011. The increase in sales is a result of metro Wi-Fi wireless products, for which initial sales of this product began in the fourth quarter of 2011. This increase in metro Wi-Fi products was partially offset by a decline in optics product sales during the periods.
During the three months ended September 30, 2012, sales in our Media & Communications Systems segment increased by approximately 4.4% as compared to the three months ended September 30, 2011. During the nine months ended September 30, 2012, sales in our Media & Communications Systems segment decreased by approximately 1.4% as compared to the same period in 2011. Revenue in this segment varies as it is tied to customer acceptances and non-linear orders.
From time to time, we hold certain investments in the common stock of publicly-traded companies, which are classified as available-for-sale. As of September 30, 2012 and December 31, 2011 our holdings in these investments were $5.3 million and $4.8 million, respectively. Changes in the market value of these securities are recorded in other comprehensive income and gains or losses on related sales of these securities are recognized in income (loss).
ARRIS holds cost method investments in private companies. These investments are recorded at $3.7 million and $1.0 million as of September 30, 2012 and December 31, 2011, respectively. Due to the fact the investments are in a private companies, we are exempt from estimating the fair values on an interim basis. However, ARRIS is required to estimate the fair value if there has been an identifiable event or change in circumstance that may have a significant adverse effect on the fair value of the investment. Each quarter, we evaluate our investments for any other-than-temporary impairment, by reviewing any capital transactions, the current revenues, bookings and long-term plan of the private company. During the evaluation performed as of December 31, 2011, ARRIS concluded that one of the private companies would be depleting cash balances in early 2012. Further, ARRIS was notified that the private company intends to raise capital by offering a new round of financing to its existing and new investors. ARRIS concluded that the investees need to raise further capital was an indicator of impairment and therefore, performed steps to determine the fair value of its investment in the private company. ARRIS was unable to apply traditional valuation techniques as the required inputs to these techniques are unavailable. ARRIS determined that the best estimate of the fair value of its investment was to calculate it based upon the preliminary indication of value related to the new round of financing. As a result of these considerations, ARRIS recorded an other-than-temporary impairment on its investment of $3.0 million in the fourth quarter of 2011. During the second quarter of 2012, the same private company continued its efforts to raise capital, and as part of this process, a new valuation was performed. The results indicated a further reduction in the valuation of the private company. As a result, ARRIS concluded that its investment was further impaired and recorded an incremental other-than-temporary impairment of $0.5 million in the second quarter of 2012. As of September 30, 2012, the balance of this investment is $0.7 million, and the balance of the two new investments is their original cost of $3.0 million. See Note 4 of Notes to the Consolidated Financial Statements for further disclosures related to the fair value of these investments.
Stocks Discussed: ARRS,