SUWANEE, Ga., Oct. 30, 2013 /PRNewswire/ -- ARRIS
Group, Inc. (NASDAQ: ARRS), today announced preliminary and
unaudited financial results for the third quarter 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 third quarter 2013 were $1,067.8 million
- Adjusted net income (a non-GAAP measure) in the third quarter
2013 was $0.39 per diluted share
- GAAP net income in the third quarter 2013 was $0.13 per diluted share
- The Company ended the third quarter 2013 with $695.0 million of cash resources
- Order backlog at the end of the third quarter 2013 was
$523.7 million
- The Company's book-to-bill ratio in the third quarter 2013 was
0.99
"I am very pleased with our third quarter results and our
outlook for the balance of the year. Our customers continue
to react positively to our Motorola Home acquisition and we are
making good progress in delivering new products to our customers,"
said Bob Stanzione, ARRIS Chairman
and CEO.
"We posted strong third quarter results which were in line with
our previously announced revenue guidance and above our EPS
guidance," said David Potts, ARRIS
EVP & CFO. "With respect to the fourth quarter 2013, we
now project that revenues for the Company will be in the range of
$1,150 to $1,180 million, with
adjusted net income per diluted share in the range of $0.42 to $0.46 and GAAP net income per diluted
share in the range of $0.00 to
$0.04."
Revenues in the third quarter 2013 were $1,067.8 million as compared to third quarter
2012 revenues of $357.4 million.
Second quarter 2013 revenues were $1,000.4
million, which excludes the sales of Motorola Home prior to
April 17, 2013. The Company
estimates that prior to the close of the acquisition, Motorola Home
recorded approximately $66 million of
revenue in the second quarter.
Through the first three quarters of 2013 and 2012, revenues were
$2,421.8 million and $1,009.7 million, respectively.
Adjusted net income (a non-GAAP measure) in the third
quarter 2013 was $0.39 per diluted
share, compared to $0.22 per diluted
share for the third quarter 2012. Adjusted net income (a
non-GAAP measure) for the second quarter 2013, which excludes the
Motorola Home operations prior to April 17,
2013, was $0.46 per diluted
share. The Company estimates that prior to the close of the
acquisition, Motorola Home generated an operating loss of
approximately $(30) million or
an impact of approximately $(0.15)
per diluted share had that result been included in the Company's
second quarter results.
Year to date, adjusted net income was $1.11 per diluted share for 2013 as compared to
$0.66 per diluted share in 2012.
GAAP net income in the third quarter 2013 was
$0.13 per diluted share, as compared
to third quarter 2012 GAAP net income of $0.15 per diluted share and second quarter 2013
GAAP net loss of $(0.35) per diluted
share. Year to date, GAAP net loss was $(0.34) per diluted share in 2013 as compared to
GAAP net income of $0.33 per diluted
share in 2012. 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).
Cash & Cash Equivalents - The Company ended the third
quarter 2013 with $695.0 million of
cash resources, which includes $666.5
million of cash, cash equivalents and short-term
investments, and $28.5 million of
long-term marketable security investments, as compared to
$764.1 million, in the aggregate, at
the end of the second quarter 2013. The Company generated
$28.1 million of cash from operating
activities during the third quarter 2013, which includes the impact
of payments to Google of approximately $125.9 million related to certain post close
vendor payments/other activities associated with the acquisition of
Motorola Home. The Company also paid $50M, its capped share, of previously disclosed
patent litigation settlements otherwise indemnified by Google.
Through the first nine months of 2013, the Company generated
$372.1 million of cash from operating
activities, which compares to $72.6
million generated during the same period in 2012.
Order backlog at the end of the third quarter 2013 was
$523.7 million as compared to
$185.8 million and $534.9 million at the end of the third quarter
2012 and the second quarter 2013, respectively. The Company's
book-to-bill ratio in the third quarter 2013 was 0.99 as compared
to the third quarter 2012 of 0.82 and the second quarter 2013 of
0.95.
ARRIS management will conduct a conference call at 5:00 pm EDT, today, Wednesday, October 30, 2013, to discuss these
results in detail. You may participate in this conference call by
dialing 888-713-4214 or 617-213-4866 for international calls prior
to the start of the call and providing the ARRIS Group, Inc. name,
conference pass code 90449404 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
November 4, 2013 by dialing
888-286-8010 or 617-801-6888 for international calls and using the
pass code 60317789. 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 fourth quarter 2013, 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 fourth quarter 2013 as well as the
general outlook for 2013 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;
- we may encounter difficulties in 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 the current 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 uncertain current economic climate and
its impact on our customers' plans and access to capital; 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 June 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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
|
2013
|
|
2013
|
|
2013
|
|
2012
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
541,114
|
|
$
610,502
|
|
$
423,551
|
|
$
131,703
|
|
$
188,653
|
Short-term investments, at fair value
|
|
125,387
|
|
130,723
|
|
184,838
|
|
398,414
|
|
359,753
|
Total
cash, cash equivalents and short term investments
|
666,501
|
|
741,225
|
|
608,389
|
|
530,117
|
|
548,406
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
1,817
|
|
3,801
|
|
4,689
|
|
4,722
|
|
4,665
|
Accounts receivable, net
|
|
641,445
|
|
662,156
|
|
206,236
|
|
188,581
|
|
171,143
|
Other receivables
|
|
4,076
|
|
11,007
|
|
3,743
|
|
350
|
|
578
|
Inventories, net
|
|
350,919
|
|
318,632
|
|
126,530
|
|
133,848
|
|
137,496
|
Prepaid income taxes
|
|
49,447
|
|
38,186
|
|
10,703
|
|
9,235
|
|
8,300
|
Prepaids
|
|
18,881
|
|
17,296
|
|
13,227
|
|
11,682
|
|
12,408
|
Current deferred income tax assets
|
|
85,373
|
|
141,610
|
|
25,927
|
|
24,944
|
|
20,787
|
Other current assets
|
|
90,986
|
|
282,048
|
|
13,674
|
|
16,413
|
|
10,607
|
Total
current assets
|
|
1,909,445
|
|
2,215,961
|
|
1,013,118
|
|
919,892
|
|
914,390
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
410,047
|
|
404,946
|
|
54,109
|
|
54,378
|
|
54,593
|
Goodwill
|
|
926,826
|
|
926,884
|
|
193,976
|
|
194,115
|
|
194,469
|
Intangible assets,
net
|
|
1,239,178
|
|
1,267,684
|
|
86,926
|
|
94,529
|
|
102,258
|
Investments
|
|
79,894
|
|
78,733
|
|
55,938
|
|
86,164
|
|
57,483
|
Noncurrent deferred
income tax assets
|
|
12,680
|
|
12,513
|
|
52,410
|
|
47,431
|
|
49,589
|
Other
assets
|
|
52,300
|
|
54,847
|
|
11,089
|
|
9,385
|
|
9,913
|
|
|
$
4,630,370
|
|
$
4,961,568
|
|
$
1,467,566
|
|
$
1,405,894
|
|
$
1,382,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
576,553
|
|
$
485,291
|
|
$
47,783
|
|
$
45,719
|
|
$
49,061
|
Accrued compensation, benefits and related taxes
|
|
101,456
|
|
88,494
|
|
36,791
|
|
29,773
|
|
35,066
|
Accrued warranty
|
|
48,619
|
|
59,616
|
|
2,768
|
|
2,882
|
|
3,036
|
Deferred revenue
|
|
77,267
|
|
80,254
|
|
61,431
|
|
44,428
|
|
50,859
|
Current portion of LT debt
|
|
293,399
|
|
289,990
|
|
225,368
|
|
222,124
|
|
-
|
Current income taxes payable
|
|
5,827
|
|
5,343
|
|
350
|
|
853
|
|
-
|
Other accrued liabilities
|
|
188,508
|
|
548,907
|
|
59,055
|
|
24,942
|
|
21,768
|
Total
current liabilities
|
|
1,291,629
|
|
1,557,895
|
|
433,546
|
|
370,721
|
|
159,790
|
Long-term debt, net
of current portion
|
|
1,822,941
|
|
1,837,952
|
|
-
|
|
-
|
|
218,943
|
Accrued
pension
|
|
61,349
|
|
60,216
|
|
27,200
|
|
26,883
|
|
26,172
|
Accrued severance
liability, net of current portion
|
|
3,870
|
|
3,782
|
|
4,262
|
|
4,119
|
|
3,895
|
Noncurrent income
taxes payable
|
|
25,012
|
|
35,320
|
|
30,168
|
|
24,389
|
|
24,434
|
Noncurrent deferred
income tax liabilities
|
|
76,005
|
|
147,850
|
|
351
|
|
351
|
|
334
|
Other noncurrent
liabilities
|
|
53,465
|
|
48,196
|
|
18,836
|
|
19,043
|
|
20,362
|
Total
liabilities
|
|
3,334,271
|
|
3,691,211
|
|
514,363
|
|
445,506
|
|
453,930
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Common stock
|
|
1,729
|
|
1,726
|
|
1,509
|
|
1,488
|
|
1,479
|
Capital in excess of par value
|
|
1,669,667
|
|
1,657,383
|
|
1,292,971
|
|
1,285,575
|
|
1,270,561
|
Treasury stock at cost
|
|
(306,330)
|
|
(306,330)
|
|
(306,330)
|
|
(306,330)
|
|
(306,330)
|
Unrealized gain (loss) on marketable securities
|
|
85
|
|
(19)
|
|
254
|
|
206
|
|
74
|
Unfunded pension liability
|
|
(8,558)
|
|
(8,558)
|
|
(8,558)
|
|
(8,558)
|
|
(10,231)
|
Unrealized gain (loss) on derivative instruments
|
|
(4,277)
|
|
-
|
|
-
|
|
-
|
|
-
|
Accumulated deficit
|
|
(56,189)
|
|
(74,148)
|
|
(26,459)
|
|
(11,809)
|
|
(26,604)
|
Cumulative translation adjustments
|
|
(28)
|
|
303
|
|
(184)
|
|
(184)
|
|
(184)
|
Total
stockholders' equity
|
|
1,296,099
|
|
1,270,357
|
|
953,203
|
|
960,388
|
|
928,765
|
|
|
$
4,630,370
|
|
$
4,961,568
|
|
$
1,467,566
|
|
$
1,405,894
|
|
$
1,382,695
|
|
|
|
|
|
|
|
|
ARRIS GROUP, INC.
|
PRELIMINARY CONSOLIDATED STATEMENTS OF
OPERATIONS
|
(in thousands, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
For the Three
Months
|
|
For the Nine
Months
|
|
Ended September
30,
|
|
Ended September
30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
Net sales
|
$1,067,823
|
|
$
357,432
|
|
$2,421,835
|
|
$1,009,660
|
Cost of
sales
|
750,831
|
|
245,480
|
|
1,765,240
|
|
670,274
|
Gross margin
|
316,992
|
|
111,952
|
|
656,595
|
|
339,386
|
Operating
expenses:
|
|
|
|
|
|
|
|
Selling, general, and administrative expenses
|
99,557
|
|
37,866
|
|
227,457
|
|
117,544
|
Research and development expenses
|
128,579
|
|
42,978
|
|
296,061
|
|
130,006
|
Acquisition and other costs
|
6,221
|
|
30
|
|
32,803
|
|
1,076
|
Restructuring charges
|
6,057
|
|
213
|
|
38,323
|
|
6,455
|
Amortization of intangible assets
|
64,606
|
|
7,742
|
|
127,752
|
|
22,565
|
|
305,020
|
|
88,829
|
|
722,396
|
|
277,646
|
Operating income
(loss)
|
11,972
|
|
23,123
|
|
(65,801)
|
|
61,740
|
Other expense
(income):
|
|
|
|
|
|
|
|
Interest expense
|
25,188
|
|
4,479
|
|
48,431
|
|
13,251
|
Loss (gain) on investments
|
(251)
|
|
(878)
|
|
(1,544)
|
|
(1,483)
|
Loss (gain) on foreign currency
|
(3,752)
|
|
(431)
|
|
(2,725)
|
|
917
|
Interest income
|
(832)
|
|
(764)
|
|
(2,310)
|
|
(2,248)
|
Other (income) expense, net
|
1,676
|
|
(129)
|
|
13,356
|
|
(791)
|
Income (loss) before
income taxes
|
(10,057)
|
|
20,846
|
|
(121,009)
|
|
52,094
|
Income tax expense (benefit)
|
(28,016)
|
|
2,982
|
|
(76,629)
|
|
13,430
|
Net income
(loss)
|
$
17,959
|
|
$
17,864
|
|
$
(44,380)
|
|
$
38,664
|
|
|
|
|
|
|
|
|
Net income (loss) per
common share:
|
|
|
|
|
|
|
|
Basic
|
$
0.13
|
|
$
0.16
|
|
$
(0.34)
|
|
$
0.34
|
Diluted
|
$
0.13
|
|
$
0.15
|
|
$
(0.34)
|
|
$
0.33
|
|
|
|
|
|
|
|
|
Weighted average
common shares:
|
|
|
|
|
|
|
|
Basic
|
138,478
|
|
113,709
|
|
129,502
|
|
114,206
|
Diluted
|
140,605
|
|
116,346
|
|
129,502
|
|
116,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRIS GROUP,
INC.
|
PRELIMINARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
For the Three
Months
|
|
For the Nine
Months
|
|
|
|
|
|
Ended September
30,
|
|
Ended September
30,
|
|
|
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
17,959
|
|
$
17,864
|
|
$
(44,380)
|
|
$
38,664
|
|
|
Depreciation
|
|
19,706
|
|
6,788
|
|
41,824
|
|
20,965
|
|
|
Amortization of
intangible assets
|
|
64,606
|
|
7,742
|
|
127,751
|
|
22,565
|
|
|
Amortization of
deferred finance fees and debt discount
|
|
2,762
|
|
159
|
|
4,999
|
|
479
|
|
|
Non-cash interest
expense
|
|
3,374
|
|
3,120
|
|
9,926
|
|
9,177
|
|
|
Deferred income tax
provision (benefit)
|
|
(13,355)
|
|
(1,184)
|
|
(54,551)
|
|
(10,904)
|
|
|
Stock compensation
expense
|
|
10,729
|
|
6,678
|
|
24,653
|
|
21,194
|
|
|
Reduction in revenue
related to Comcast investment in ARRIS
|
|
-
|
|
-
|
|
13,182
|
|
-
|
|
|
Mark-to-market fair
value adjustment related to Comcast investment in ARRIS
|
-
|
|
-
|
|
13,189
|
|
-
|
|
|
Provision for
doubtful accounts
|
|
5
|
|
-
|
|
5
|
|
54
|
|
|
Loss on sale of
product line
|
|
-
|
|
-
|
|
-
|
|
337
|
|
|
Loss on disposal of
fixed assets
|
|
1,332
|
|
34
|
|
1,294
|
|
40
|
|
|
Gain on
investments
|
|
(251)
|
|
(877)
|
|
(1,544)
|
|
(1,482)
|
|
|
Excess tax benefits
from stock-based compensation plans
|
|
(2,745)
|
|
(154)
|
|
(8,515)
|
|
(2,614)
|
|
Changes in operating
assets & liabilities, net of effects of acquisitions and
disposals:
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
20,706
|
|
8,228
|
|
4,192
|
|
(19,515)
|
|
|
Other
receivables
|
|
8,222
|
|
794
|
|
1,095
|
|
8,187
|
|
|
Inventory
|
|
(32,287)
|
|
(35,135)
|
|
60,345
|
|
(25,139)
|
|
|
Income taxes
payable/recoverable
|
|
(21,085)
|
|
(6,509)
|
|
(37,720)
|
|
1,943
|
|
|
Accounts payable and
accrued liabilities
|
|
(66,618)
|
|
(2,522)
|
|
184,681
|
|
2,614
|
|
|
Other, net
|
|
15,050
|
|
1,716
|
|
31,693
|
|
6,043
|
|
|
|
Net cash provided by
operating activities
|
|
28,110
|
|
6,742
|
|
372,119
|
|
72,608
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
(46,526)
|
|
(94,995)
|
|
(104,547)
|
|
(235,348)
|
|
Disposals of
investments
|
|
35,213
|
|
88,898
|
|
393,234
|
|
172,059
|
|
Purchases of property
& equipment, net
|
|
(26,139)
|
|
(5,264)
|
|
(47,541)
|
|
(14,520)
|
|
Sale of property
& equipment
|
|
-
|
|
13
|
|
90
|
|
13
|
|
Cash paid for
acquisition, net of cash acquired
|
|
(48,352)
|
|
-
|
|
(2,208,114)
|
|
-
|
|
Sale of product
line
|
|
-
|
|
-
|
|
-
|
|
3,249
|
|
|
|
Net cash provided
used in investing activities
|
|
(85,804)
|
|
(11,348)
|
|
(1,966,878)
|
|
(74,547)
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from
issuance of debt
|
|
-
|
|
-
|
|
1,925,000
|
|
-
|
|
Cash paid for debt
discount
|
|
-
|
|
-
|
|
(9,853)
|
|
-
|
|
Payment of debt
obligations
|
|
(15,812)
|
|
-
|
|
(31,625)
|
|
-
|
|
Early redemption of
long-term debt
|
|
(10)
|
|
-
|
|
(89)
|
|
-
|
|
Deferred financing
costs paid
|
|
-
|
|
-
|
|
(42,207)
|
|
-
|
|
Repurchase of common
stock
|
|
-
|
|
(10,370)
|
|
-
|
|
(51,921)
|
|
Excess income tax
benefits from stock-based compensation plans
|
|
2,745
|
|
154
|
|
8,515
|
|
2,614
|
|
Repurchase of shares
to satisfy employee tax withholdings
|
|
(115)
|
|
(132)
|
|
(12,522)
|
|
(8,184)
|
|
Fees and proceeds
from issuance of common stock, net
|
|
1,498
|
|
4,212
|
|
166,951
|
|
12,208
|
|
|
|
Net cash provided
(used) in financing activities
|
|
(11,694)
|
|
(6,136)
|
|
2,004,170
|
|
(45,283)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
(69,388)
|
|
(10,742)
|
|
409,411
|
|
(47,222)
|
Cash and cash
equivalents at beginning of period
|
|
610,502
|
|
199,395
|
|
131,703
|
|
235,875
|
Cash and cash
equivalents at end of period
|
|
$
541,114
|
|
$
188,653
|
|
$
541,114
|
|
$
188,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRIS GROUP,
INC.
|
|
PRELIMINARY
SUPPLEMENTAL SALES & NET INCOME RECONCILIATION
|
|
(in thousands,
except per share data) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except
per share data)
|
Q3 2012
|
|
Q3 2013
|
|
|
YTD 2012
|
|
YTD
2013(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
|
Amount
|
|
|
|
|
Amount
|
|
|
|
Amount
|
|
|
|
|
Sales
|
$ 357,432
|
|
|
|
$
1,067,823
|
|
|
|
|
$
1,009,660
|
|
|
|
$
2,421,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Highlighted
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition
accounting impacts related to Motorola Home and BigBand deferred
revenue
|
546
|
|
|
|
1,556
|
|
|
|
|
2,467
|
|
|
|
3,973
|
|
|
|
|
Reduction in revenue
related to Comcast investment in ARRIS
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
13,182
|
|
|
|
|
Sales excluding
highlighted items
|
$ 357,978
|
|
|
|
$
1,069,379
|
|
|
|
|
$
1,012,127
|
|
|
|
$
2,438,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3 2012
|
|
Q3 2013
|
|
|
YTD 2012
|
|
YTD 2013
|
|
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
|
Net income
(loss)
|
$
17,864
|
|
$
0.15
|
|
$
17,959
|
|
$
0.13
|
|
|
$
38,664
|
|
$
0.33
|
|
$
(44,380)
|
|
$
(0.34)
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Highlighted
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impacting gross
margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition
accounting impacts related to Motorola Home fair value of
inventory
|
-
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
-
|
|
57,600
|
|
0.44
|
|
|
Product
rationalization
|
-
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
-
|
|
13,582
|
|
0.10
|
|
|
Acquisition
accounting impacts related to Motorola Home and BigBand deferred
revenue
|
546
|
|
0.00
|
|
1,006
|
|
0.01
|
|
|
2,467
|
|
0.02
|
|
2,478
|
|
0.02
|
|
|
Fair value impacts
related to Comcast investment in ARRIS
|
-
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
-
|
|
13,182
|
|
0.10
|
|
|
Stock compensation
expense
|
808
|
|
0.01
|
|
1,248
|
|
0.01
|
|
|
2,367
|
|
0.02
|
|
2,945
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impacting
operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition costs and
other
|
30
|
|
0.00
|
|
6,221
|
|
0.04
|
|
|
739
|
|
0.01
|
|
32,804
|
|
0.25
|
|
|
Restructuring
|
213
|
|
0.00
|
|
6,057
|
|
0.04
|
|
|
6,455
|
|
0.06
|
|
38,323
|
|
0.29
|
|
|
Amortization of
intangible assets
|
7,742
|
|
0.07
|
|
64,606
|
|
0.46
|
|
|
22,565
|
|
0.19
|
|
127,751
|
|
0.97
|
|
|
Loss off sale of
product line
|
-
|
|
-
|
|
-
|
|
-
|
|
|
337
|
|
0.00
|
|
-
|
|
-
|
|
|
Stock compensation
expense
|
5,870
|
|
0.05
|
|
9,481
|
|
0.07
|
|
|
18,827
|
|
0.16
|
|
21,708
|
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
Impacting other
(income) / expense:
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
Non-cash interest
expense
|
3,120
|
|
0.03
|
|
3,374
|
|
0.02
|
|
|
9,177
|
|
0.08
|
|
9,926
|
|
0.08
|
|
|
Impairment of
investment
|
-
|
|
-
|
|
-
|
|
-
|
|
|
466
|
|
0.00
|
|
-
|
|
-
|
|
|
Credit facility -
ticking Fees
|
-
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
-
|
|
865
|
|
0.01
|
|
|
Mark-to-market FV
adjustment related to Comcast investment in ARRIS
|
-
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
-
|
|
13,189
|
|
0.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Tax
Items
|
(10,545)
|
|
(0.09)
|
|
(54,998)
|
|
(0.39)
|
|
|
(25,415)
|
|
(0.22)
|
|
(143,034)
|
|
(1.08)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total highlighted
items
|
7,784
|
|
0.07
|
|
36,995
|
|
0.26
|
|
|
37,985
|
|
0.33
|
|
191,319
|
|
1.45
|
|
|
Net income excluding
highlighted items
|
$
25,648
|
|
$
0.22
|
|
$
54,954
|
|
$
0.39
|
|
|
$
76,649
|
|
$
0.66
|
|
$
146,939
|
|
$
1.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares - Basic
|
|
|
113,709
|
|
|
|
138,478
|
|
|
|
|
114,206
|
|
|
|
129,502
|
|
|
Weighted average
common shares - diluted
|
|
|
116,346
|
|
|
|
140,605
|
|
|
|
|
116,348
|
|
|
|
132,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Excludes
Motorola Home results prior to April 17, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Basic shares
used for YTD 2013 as a loss was reported for that periods and the
inclusion of dilutive shares would be
anti-dilutive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to GAAP and
Adjusted Non-GAAP Financial Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to GAAP and 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. This resulted in an increase in the value
of inventory and will result in higher cost of goods sold as it is
sold.
Product Rationalization: In conjunction with the
integration of Motorola Home, we have identified certain product
lines which overlap. In the second quarter 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 and Integration Costs: We have
excluded the effect of acquisition related 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
related 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. We believe it is useful to understand the effects of
these items on our total operating expenses.
Loss on Sale of Product Line: 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).
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.
SOURCE ARRIS Group, Inc.