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.
SOURCE ARRIS Group, Inc.