SUWANEE, Ga., May 6, 2014 /PRNewswire/ -- ARRIS Group,
Inc. (NASDAQ: ARRS) today announced preliminary and unaudited
financial results for the first quarter 2014.
On April 17, 2013, the Company
closed the acquisition of Motorola Home. As a result, some
comparisons to prior periods may not be meaningful.
Financial Highlights
- Revenues in the first quarter 2014 were $1,225.0 million
- Adjusted net income (a non-GAAP measure) in the first quarter
2014 was $0.47 per diluted share
- GAAP net income in the first quarter 2014 was $0.28 per diluted share
- The Company ended the first quarter 2014 with $521.5 million of cash resources
- Order backlog at the end of the first quarter 2014 was
$996.1 million
- The Company's book-to-bill ratio in the first quarter 2014 was
1.37
"We had a strong first quarter achieving record revenue
levels. As we had anticipated last quarter, 2014 is shaping
up to be our best year so far. Continued product deployments,
new product acceptances, and an expanding international interest
will continue to drive overall improved performance," said
Bob Stanzione, ARRIS Chairman and
CEO.
"We are off to a great start in 2014. Our revenues were up
2.2% from the previous quarter and we ended the quarter with a very
strong order backlog of $996.1
million," said David Potts,
ARRIS EVP & CFO. "With respect to the second quarter
2014, we now project that revenues for the Company will be in the
range of $1,410 million to $1,450
million, with adjusted net income per diluted share in the
range of $0.64 to $0.70 and GAAP net
income per diluted share in the range of $0.27 to $0.33."
Revenues in the first quarter 2014 were $1,225.0 million as compared to first quarter
2013 revenues of $353.7 million.
Fourth quarter 2013 revenues were $1,199.1
million.
Adjusted net income (a non-GAAP measure) in the first
quarter 2014 was $0.47 per diluted
share, compared to $0.25 per diluted
share for the first quarter 2013. Adjusted net income (a
non-GAAP measure) for the fourth quarter 2013 was $0.54 per diluted
share.
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 income in the first quarter 2014 was
$0.28 per diluted share, as compared
to first quarter 2013 GAAP net loss of $(0.13) per diluted share and fourth quarter 2013
GAAP net loss of $(0.02) per diluted
share.
Cash & Cash Equivalents - The Company ended the first
quarter 2014 with $521.5 million of
cash, cash equivalents and marketable securities, as compared to
$513.4 million at the end of the
fourth quarter 2013. The Company generated $34.8 million of cash from operating activities
during the first quarter 2014, as compared to $50.1 million generated during the first quarter
2013.
Order backlog at the end of the first quarter 2014 was
$996.1 million as compared to
$282.1 million and $538.6 million at the end of the first quarter
2013 and the fourth quarter 2013, respectively. The Company's
book-to-bill ratio in the first quarter 2014 was 1.37 as compared
to the first quarter 2013 of 1.17 and the fourth quarter 2013 of
1.01.
ARRIS management will conduct a conference call at 5:00 pm EDT, today, Tuesday, May 6, 2014, to discuss these results in
detail. You may participate in this conference call by dialing
888-713-4209 or 617-213-4863 for international calls prior to the
start of the call and providing the ARRIS Group, Inc. name,
conference pass code 75018618 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
May 13, 2014 by dialing 888-286-8010
or 617-801-6888 for international calls and using the pass code
27994602. 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 global innovator in IP, video and broadband
technology. We have continually worked with our customers to
transform the experience of entertainment and communications for
millions of people across the world. The people of ARRIS are
dedicated to the success of our customers, bringing a passion for
invention that has fueled our 60-year history: We created digital
TV, delivered the first wireless broadband gateway and
are pioneering the standards and pathways for tomorrow's
personalized, Ultra HD, multiscreen, and cloud services. We are
dedicated to meeting today's challenges and preparing for the tasks
the future holds. Collaborating with our customers, ARRIS will
continue to solve the most pressing challenges of 21st century
communications. Together, we are inventing the future. 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 second 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 second 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-K for the
year ended December 31, 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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
|
2014
|
|
2013
|
|
2013
|
|
2013
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
440,707
|
|
$
442,438
|
|
$
541,114
|
|
$
610,502
|
|
$
423,551
|
Short-term
investments, at fair value
|
|
80,818
|
|
67,360
|
|
125,387
|
|
130,723
|
|
184,838
|
Total cash, cash
equivalents and short term investments
|
|
521,525
|
|
509,798
|
|
666,501
|
|
741,225
|
|
608,389
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
1,076
|
|
1,079
|
|
1,818
|
|
3,801
|
|
4,689
|
Accounts receivable,
net
|
|
731,677
|
|
637,059
|
|
627,844
|
|
662,156
|
|
206,236
|
Other
receivables
|
|
11,694
|
|
8,366
|
|
4,076
|
|
11,007
|
|
3,743
|
Inventories,
net
|
|
286,058
|
|
330,129
|
|
343,895
|
|
311,608
|
|
126,530
|
Prepaid income taxes
and taxes recoverable
|
|
51,758
|
|
13,034
|
|
49,447
|
|
38,186
|
|
10,703
|
Prepaids
|
|
15,986
|
|
61,482
|
|
18,881
|
|
17,296
|
|
13,227
|
Current deferred
income tax assets
|
|
80,427
|
|
77,167
|
|
75,875
|
|
132,113
|
|
25,927
|
Other current
assets
|
|
50,601
|
|
39,930
|
|
60,111
|
|
281,987
|
|
13,674
|
Total current
assets
|
|
1,750,802
|
|
1,678,044
|
|
1,848,448
|
|
2,199,379
|
|
1,013,118
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
388,653
|
|
396,152
|
|
398,353
|
|
393,594
|
|
54,109
|
Goodwill
|
|
940,149
|
|
940,402
|
|
942,258
|
|
943,316
|
|
193,976
|
Intangible assets,
net
|
|
1,114,231
|
|
1,176,192
|
|
1,241,258
|
|
1,270,211
|
|
86,926
|
Investments
|
|
72,372
|
|
71,176
|
|
96,711
|
|
95,551
|
|
55,938
|
Noncurrent deferred
income tax assets
|
|
21,862
|
|
7,678
|
|
6,535
|
|
6,368
|
|
52,410
|
Other
assets
|
|
56,180
|
|
52,363
|
|
52,300
|
|
54,847
|
|
11,089
|
|
|
$
4,344,249
|
|
$
4,322,007
|
|
$
4,585,863
|
|
$
4,963,266
|
|
$
1,467,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
596,191
|
|
$
662,919
|
|
$
573,673
|
|
$
485,291
|
|
$
47,783
|
Accrued compensation,
benefits and related taxes
|
|
93,251
|
|
116,262
|
|
101,233
|
|
88,494
|
|
36,791
|
Accrued
warranty
|
|
53,940
|
|
48,755
|
|
46,536
|
|
57,532
|
|
2,768
|
Deferred
revenue
|
|
125,670
|
|
69,071
|
|
77,267
|
|
80,254
|
|
61,431
|
Current portion of LT
debt
|
|
53,268
|
|
53,254
|
|
293,399
|
|
289,990
|
|
225,368
|
Current income taxes
liability
|
|
13,508
|
|
3,068
|
|
7,012
|
|
6,528
|
|
350
|
Other accrued
liabilities
|
|
143,018
|
|
141,699
|
|
148,282
|
|
549,995
|
|
59,055
|
Total current
liabilities
|
|
1,078,846
|
|
1,095,028
|
|
1,247,402
|
|
1,558,084
|
|
433,546
|
Long-term debt, net
of current portion
|
|
1,677,712
|
|
1,691,034
|
|
1,822,941
|
|
1,837,952
|
|
-
|
Accrued
pension
|
|
58,733
|
|
58,657
|
|
65,395
|
|
64,263
|
|
27,200
|
Accrued severance
liability, net of current portion
|
|
3,833
|
|
3,814
|
|
3,870
|
|
3,782
|
|
4,262
|
Noncurrent income
taxes payable
|
|
21,913
|
|
21,048
|
|
25,012
|
|
35,320
|
|
30,168
|
Noncurrent deferred
income tax liabilities
|
|
83,904
|
|
74,791
|
|
74,242
|
|
146,086
|
|
351
|
Other noncurrent
liabilities
|
|
58,842
|
|
58,648
|
|
53,465
|
|
48,196
|
|
18,836
|
Total
liabilities
|
|
2,983,783
|
|
3,003,020
|
|
3,292,327
|
|
3,693,683
|
|
514,363
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Common
stock
|
|
1,794
|
|
1,766
|
|
1,729
|
|
1,726
|
|
1,509
|
Capital in excess of
par value
|
|
1,689,907
|
|
1,688,782
|
|
1,669,667
|
|
1,657,383
|
|
1,292,971
|
Treasury stock at
cost
|
|
(306,330)
|
|
(306,330)
|
|
(306,330)
|
|
(306,330)
|
|
(306,330)
|
Unrealized gain
(loss) on marketable securities
|
|
27
|
|
306
|
|
85
|
|
(19)
|
|
288
|
Unfunded pension
liability
|
|
(2,416)
|
|
(2,416)
|
|
(8,558)
|
|
(8,558)
|
|
(8,592)
|
Unrealized gain
(loss) on Derivative Instruments
|
|
(2,660)
|
|
(2,541)
|
|
(4,277)
|
|
-
|
|
-
|
Accumulated
deficit
|
|
(19,769)
|
|
(60,569)
|
|
(57,752)
|
|
(74,922)
|
|
(26,459)
|
Cumulative
translation adjustments
|
|
(87)
|
|
(11)
|
|
(28)
|
|
303
|
|
(184)
|
Total stockholders'
equity
|
|
1,360,466
|
|
1,318,987
|
|
1,294,536
|
|
1,269,583
|
|
953,203
|
|
|
$
4,344,249
|
|
$
4,322,007
|
|
$
4,586,863
|
|
$
4,963,266
|
|
$
1,467,566
|
ARRIS GROUP,
INC.
|
PRELIMINARY
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(in thousands,
except per share data)
|
(unaudited)
|
|
|
|
|
|
For the Three
Months
|
|
Ended March
31,
|
|
2014
|
|
2013
|
|
|
|
|
Net sales
|
$1,225,017
|
|
$
353,650
|
Cost of
sales
|
878,243
|
|
245,124
|
Gross
margin
|
346,774
|
|
108,526
|
Operating
expenses:
|
|
|
|
Selling, general, and
administrative expenses
|
99,132
|
|
40,126
|
Research and
development expenses
|
134,153
|
|
44,082
|
Integration,
acquisition, restructuring and other costs
|
11,502
|
|
7,199
|
Amortization of
intangible assets
|
64,001
|
|
7,603
|
|
308,788
|
|
99,010
|
Operating
income
|
37,986
|
|
9,516
|
Other expense
(income):
|
|
|
|
Interest
expense
|
16,598
|
|
4,631
|
Loss (gain) on
investments
|
1,674
|
|
(564)
|
Loss (gain) on
foreign currency
|
(679)
|
|
821
|
Interest
income
|
(583)
|
|
(838)
|
Other expense,
net
|
2,172
|
|
19,416
|
Income (loss) before
income taxes
|
18,804
|
|
(13,950)
|
Income tax (benefit)
expense
|
(21,996)
|
|
700
|
Net income
(loss)
|
$
40,800
|
|
$
(14,650)
|
|
|
|
|
Net income (loss) per
common share:
|
|
|
|
Basic
|
$
0.29
|
|
$
(0.13)
|
Diluted
|
$
0.28
|
|
$
(0.13)
|
|
|
|
|
Weighted average
common shares:
|
|
|
|
Basic
|
142,854
|
|
115,150
|
Diluted
|
147,152
|
|
115,150
|
ARRIS GROUP,
INC.
|
PRELIMINARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
For the Three
Months
|
|
|
|
|
|
Ended March
31,
|
|
|
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
Operating
Activities:
|
|
|
|
|
|
Net income
(loss)
|
|
$
40,800
|
|
$
(14,650)
|
|
|
Depreciation
|
|
19,994
|
|
6,509
|
|
|
Amortization of
intangible assets
|
|
64,001
|
|
7,603
|
|
|
Amortization of
deferred finance fees and debt discount
|
|
2,331
|
|
160
|
|
|
Non-cash interest
expense
|
|
-
|
|
3,244
|
|
|
Deferred income tax
provision (benefit)
|
|
(8,385)
|
|
(5,995)
|
|
|
Stock compensation
expense
|
|
11,033
|
|
6,744
|
|
|
Reduction in revenue
related to Comcast investment in ARRIS
|
|
-
|
|
13,182
|
|
|
Mark-to-market fair
value adjustment related to Comcast investment in ARRIS
|
|
-
|
|
19,348
|
|
|
Loss on disposal of
fixed assets
|
|
412
|
|
(4)
|
|
|
Loss (gain) on
investments
|
|
1,674
|
|
(564)
|
|
|
Excess tax benefits
from stock-based compensation plans
|
|
(10,457)
|
|
(4,659)
|
|
Changes in operating
assets & liabilities, net of effects of acquisitions and
disposals:
|
|
|
|
|
|
|
Accounts
receivable
|
|
(94,618)
|
|
(17,655)
|
|
|
Other
receivables
|
|
773
|
|
(3,889)
|
|
|
Inventory
|
|
44,071
|
|
7,318
|
|
|
Income taxes
payable/recoverable
|
|
(27,419)
|
|
3,808
|
|
|
Accounts payable and
accrued liabilities
|
|
(42,651)
|
|
28,014
|
|
|
Prepaids and other,
net
|
|
33,289
|
|
1,543
|
|
|
|
Net cash provided
by operating activities
|
|
34,848
|
|
50,057
|
|
|
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
|
Purchases of
investments
|
|
(29,095)
|
|
-
|
|
Disposals of
investments
|
|
11,175
|
|
244,711
|
|
Purchases of property
& equipment, net
|
|
(12,924)
|
|
(6,289)
|
|
Sale of property
& equipment
|
|
17
|
|
53
|
|
|
|
Net cash (used in)
provided by investing activities
|
|
(30,827)
|
|
238,475
|
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
Payment of debt
obligations
|
|
(13,750)
|
|
-
|
|
Excess income tax
benefits from stock-based compensation plans
|
|
10,457
|
|
4,659
|
|
Repurchase of shares
to satisfy employee tax minimum withholdings
|
|
(6,239)
|
|
(11,992)
|
|
Fees and proceeds
from issuance of common stock, net
|
|
3,780
|
|
10,649
|
|
|
|
Net cash (used in)
provided by financing activities
|
|
(5,752)
|
|
3,316
|
|
|
|
Net (decrease)
increase in cash and cash equivalents
|
|
(1,731)
|
|
291,848
|
Cash and cash
equivalents at beginning of period
|
|
442,438
|
|
131,703
|
Cash and cash
equivalents at end of period
|
|
$
440,707
|
|
$
423,551
|
ARRIS GROUP,
INC.
|
PRELIMINARY
SUPPLEMENTAL SALES & NET INCOME RECONCILIATION
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except
per share data)
|
Q1 2013
|
|
Q1 2014
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
|
Amount
|
|
|
|
Sales
|
$
353,650
|
|
|
|
$
1,225,017
|
|
|
|
|
|
|
|
|
|
|
|
|
Highlighted
items:
|
|
|
|
|
|
|
|
|
Reduction in revenue
related to Comcast investment and other acquisition-related
adjustments
|
13,182
|
|
|
|
206
|
|
|
|
Sales excluding
highlighted items
|
$
366,832
|
|
|
|
$
1,225,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2013
|
|
Q1 2014
|
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Net income
(loss)
|
$
(14,650)
|
|
$
(0.13)
|
(1)
|
$
40,800
|
|
$
0.28
|
|
|
|
|
|
|
|
|
|
|
Highlighted
items:
|
|
|
|
|
|
|
|
|
Impacting gross
margin:
|
|
|
|
|
|
|
|
|
Impacts related to
Comcast investment and other acquisition-related
adjustments
|
13,182
|
|
0.11
|
|
199
|
|
0.00
|
|
Stock compensation
expense
|
831
|
|
0.01
|
|
1,275
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
Impacting
operating expenses:
|
|
|
|
|
|
|
|
|
Integration,
acquisition, restructuring and other costs
|
7,199
|
|
0.06
|
|
11,502
|
|
0.08
|
|
Amortization of
intangible assets
|
7,603
|
|
0.06
|
|
64,001
|
|
0.43
|
|
Stock compensation
expense
|
5,913
|
|
0.05
|
|
9,758
|
|
0.07
|
|
|
|
|
|
|
|
|
|
|
Impacting other
(income) / expense:
|
|
|
|
|
|
|
|
|
Non-cash interest
expense
|
3,244
|
|
0.03
|
|
-
|
|
-
|
|
Credit facility -
ticking fees
|
388
|
|
0.00
|
|
-
|
|
-
|
|
Mark-to-market FV
adjustment related to Comcast investment in ARRIS
|
19,348
|
|
0.16
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net tax
items
|
(13,251)
|
|
(0.11)
|
|
(58,850)
|
|
(0.40)
|
|
|
|
|
|
|
|
|
|
|
Total highlighted
items
|
44,457
|
|
0.37
|
|
27,885
|
|
0.19
|
|
Net income excluding
highlighted items
|
$
29,807
|
|
$
0.25
|
|
$
68,685
|
|
$
0.47
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares - Basic
|
|
|
115,150
|
|
|
|
142,854
|
|
Weighted average
common shares - diluted
|
|
|
119,022
|
|
|
|
147,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Basic shares
used as losses were reported for those periods and the inclusion of
dilutive shares would be anti-dilutive
|
|
See Notes to GAAP and
Adjust 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.
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.
Integration, Acquisition, Restructuring 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.
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