SUWANEE, Ga., Oct. 29, 2014 /PRNewswire/ -- ARRIS Group,
Inc. (NASDAQ: ARRS), today announced preliminary and unaudited
financial results for the third quarter 2014.
Financial Highlights
- Revenues in the third quarter 2014 were $1,405.4 million
- Adjusted net income (a non-GAAP measure) in the third quarter
2014 was $0.81 per diluted share
- GAAP net income in the third quarter 2014 was $0.37 per diluted share
- The Company ended the third quarter 2014 with $599.1 million of cash resources
- Order backlog at the end of the third quarter 2014 was
$594.1 million
- The Company's book-to-bill ratio in the third quarter 2014 was
0.86
"I am very pleased with our strong third quarter results.
We continue to capitalize on the ongoing investments Broadband
Service Providers are making in their networks," said Bob Stanzione, ARRIS Chairman and CEO.
"Our performance over the past year has been outstanding,
taking the company to a new level of sales and profitability and
laying the groundwork for a healthy future."
"We posted an outstanding third quarter," said David Potts, ARRIS EVP & CFO. "With
respect to the fourth quarter 2014, we now project that revenues
for the Company will be in the range of $1,230 to $1,270 million, with adjusted net
income per diluted share in the range of $0.58 to $0.63 and GAAP net income per diluted
share in the range of $0.26 to
$0.31."
Revenues in the third quarter 2014 were $1,405.4 million as compared to third quarter
2013 revenues of $1,067.8
million. Second quarter 2014 revenues were
$1,429.1 million.
Through the first three quarters of 2014 and 2013, revenues were
$4,059.5 million and $2,421.8 million, respectively. The first
three quarters of 2013 excludes the sales of Motorola Home prior to
April 17, 2013.
Adjusted net income (a non-GAAP measure) in the third
quarter 2014 was $0.81 per diluted
share, as compared to $0.39 per
diluted share for the third quarter 2013. Adjusted net income
for the second quarter 2014 was $0.70
per diluted share.
Year to date, adjusted net income was $1.98 per diluted share for 2014, as compared to
$1.11 per diluted share in 2013.
GAAP net income in the third quarter 2014 was
$0.37 per diluted share, as compared
to third quarter 2013 GAAP net income of $0.12 per diluted share and second quarter 2014
GAAP net income of $0.26 per diluted
share. Year to date, GAAP net income was $0.91 per diluted share in 2014 as compared to
GAAP net loss of $(0.35) per diluted
share in 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).
Cash & Cash Equivalents - The Company ended the third
quarter 2014 with $599.1 million of
cash resources, which includes $593.8
million of cash, cash equivalents and short-term
investments, and $5.3 million of
long-term marketable security investments, as compared to
$551.9 million, in aggregate, at the
end of the second quarter 2014. The Company generated
$81.9 million of cash from operating
activities during the third quarter 2014 as compared to
$36.2 million in the third quarter
2013. Through the first nine months of 2014, the
Company generated $337.1 million of
cash from operating activities, which compares to $380.2 million generated during the same period
in 2013.
Order backlog at the end of the third quarter 2014 was
$594.1 million as compared to
$523.7 million and $787.6 million at the end of the third quarter
2013 and the second quarter 2014, respectively. The Company's
book-to-bill ratio in the third quarter 2014 was 0.86 as compared
to the third quarter 2013 of 0.99 and the second quarter 2014 of
0.85.
ARRIS management will conduct a conference call at 5:00 pm EDT, today, Wednesday, October 29, 2014, to discuss these
results in detail. You may participate in this conference call by
dialing 888-713-4213 or 617-213-4865 for international calls prior
to the start of the call and providing the ARRIS Group, Inc. name,
conference pass code 99683282 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 5, 2014 by dialing
888-286-8010 or 617-801-6888 for international calls and using the
pass code 63602626. 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 around the world. The people of ARRIS are
dedicated to the success of our customers, bringing a passion for
invention that has fueled our 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 fourth quarter 2014, and
beyond;
- 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 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 completing the integration of
the Motorola Home operations with ours, including difficulties
finalizing systems conversions:
- 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;
- 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
- announced consolidations within our customer base, including
the proposed acquisition of Time Warner by Comcast and the proposed
acquisition of DIRECTV by AT&T, may have an impact on
customer's spending.
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. 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, 2014. 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,
|
|
|
2014
|
|
2014
|
|
2014
|
|
2013
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$ 526,999
|
|
$ 483,277
|
|
$ 440,707
|
|
$ 442,438
|
|
$ 541,114
|
Short-term
investments, at fair value
|
|
66,817
|
|
68,586
|
|
80,818
|
|
67,360
|
|
125,387
|
Total cash, cash
equivalents and short term investments
|
593,816
|
|
551,863
|
|
521,525
|
|
509,798
|
|
666,501
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
1,022
|
|
1,096
|
|
1,076
|
|
1,079
|
|
1,818
|
Accounts receivable,
net
|
|
703,566
|
|
738,008
|
|
724,430
|
|
637,059
|
|
627,844
|
Other
receivables
|
|
18,227
|
|
14,610
|
|
11,694
|
|
8,366
|
|
4,076
|
Inventories,
net
|
|
368,628
|
|
297,848
|
|
286,058
|
|
330,129
|
|
343,895
|
Prepaid income
taxes
|
|
4,431
|
|
32,802
|
|
51,758
|
|
13,034
|
|
49,447
|
Prepaids
|
|
34,311
|
|
33,715
|
|
15,986
|
|
61,482
|
|
18,881
|
Current deferred
income tax assets
|
|
64,948
|
|
79,070
|
|
80,427
|
|
77,167
|
|
75,875
|
Other current
assets
|
|
59,439
|
|
57,588
|
|
58,628
|
|
39,930
|
|
60,111
|
Total current
assets
|
|
1,848,388
|
|
1,806,600
|
|
1,751,582
|
|
1,678,044
|
|
1,848,448
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
371,496
|
|
376,509
|
|
388,653
|
|
396,152
|
|
398,353
|
Goodwill
|
|
938,265
|
|
944,115
|
|
940,149
|
|
940,402
|
|
938,435
|
Intangible assets,
net
|
|
1,000,441
|
|
1,057,557
|
|
1,114,231
|
|
1,176,192
|
|
1,241,258
|
Investments
|
|
74,985
|
|
68,852
|
|
72,372
|
|
71,176
|
|
96,712
|
Noncurrent deferred
income tax assets
|
|
12,567
|
|
20,468
|
|
21,862
|
|
7,678
|
|
11,358
|
Other
assets
|
|
59,102
|
|
56,719
|
|
56,180
|
|
52,363
|
|
52,300
|
|
|
$ 4,305,244
|
|
$ 4,330,820
|
|
$ 4,345,029
|
|
$ 4,322,007
|
|
$ 4,586,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ 622,867
|
|
$ 701,293
|
|
$ 596,191
|
|
$ 662,919
|
|
$ 573,673
|
Accrued compensation,
benefits and related taxes
|
|
130,116
|
|
101,644
|
|
93,251
|
|
116,262
|
|
101,233
|
Accrued
warranty
|
|
51,277
|
|
54,546
|
|
53,940
|
|
48,755
|
|
46,536
|
Deferred
revenue
|
|
102,717
|
|
114,489
|
|
126,451
|
|
69,071
|
|
77,268
|
Current portion of
long-term debt
|
|
67,062
|
|
60,171
|
|
53,268
|
|
53,254
|
|
293,399
|
Current income taxes
liability
|
|
15,344
|
|
19,672
|
|
13,508
|
|
3,068
|
|
7,012
|
Other accrued
liabilities
|
|
132,551
|
|
127,335
|
|
143,018
|
|
141,698
|
|
148,282
|
Total current
liabilities
|
|
1,121,934
|
|
1,179,150
|
|
1,079,627
|
|
1,095,027
|
|
1,247,403
|
Long-term debt, net
of current portion
|
|
1,487,585
|
|
1,507,796
|
|
1,677,712
|
|
1,691,034
|
|
1,822,941
|
Accrued
pension
|
|
59,667
|
|
59,552
|
|
58,733
|
|
58,657
|
|
65,395
|
Accrued severance
liability, net of current portion
|
|
4,004
|
|
4,213
|
|
3,833
|
|
3,814
|
|
3,870
|
Noncurrent income
taxes payable
|
|
31,141
|
|
22,597
|
|
21,913
|
|
21,048
|
|
25,012
|
Noncurrent deferred
income tax liabilities
|
|
42,926
|
|
74,297
|
|
83,903
|
|
74,791
|
|
74,242
|
Other noncurrent
liabilities
|
|
67,878
|
|
64,299
|
|
58,842
|
|
58,649
|
|
53,465
|
Total
liabilities
|
|
2,815,135
|
|
2,911,904
|
|
2,984,563
|
|
3,003,020
|
|
3,292,328
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Common
stock
|
|
1,792
|
|
1,795
|
|
1,794
|
|
1,766
|
|
1,729
|
Capital in excess of
par value
|
|
1,725,383
|
|
1,710,845
|
|
1,689,907
|
|
1,688,782
|
|
1,669,667
|
Treasury stock at
cost
|
|
(306,330)
|
|
(306,330)
|
|
(306,330)
|
|
(306,330)
|
|
(306,330)
|
Unrealized gain
(loss) on marketable securities
|
|
(77)
|
|
150
|
|
27
|
|
306
|
|
85
|
Unfunded pension
liability
|
|
(2,416)
|
|
(2,416)
|
|
(2,416)
|
|
(2,416)
|
|
(8,558)
|
Unrealized loss on
derivative instruments
|
|
(1,959)
|
|
(4,503)
|
|
(2,660)
|
|
(2,541)
|
|
(4,277)
|
Retained earnings
(deficit)
|
|
73,881
|
|
19,255
|
|
(19,769)
|
|
(60,569)
|
|
(57,752)
|
Cumulative
translation adjustments
|
|
(165)
|
|
120
|
|
(87)
|
|
(11)
|
|
(28)
|
Total stockholders'
equity
|
|
1,490,109
|
|
1,418,916
|
|
1,360,466
|
|
1,318,987
|
|
1,294,536
|
|
|
$ 4,305,244
|
|
$ 4,330,820
|
|
$ 4,345,029
|
|
$ 4,322,007
|
|
$ 4,586,864
|
|
|
|
|
|
|
|
|
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,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
Net sales
|
$ 1,405,445
|
|
$ 1,067,824
|
|
$ 4,059,534
|
|
$ 2,421,835
|
Cost of
sales
|
969,711
|
|
750,929
|
|
2,857,613
|
|
1,765,458
|
Gross
margin
|
435,734
|
|
316,895
|
|
1,201,921
|
|
656,377
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Selling, general, and
administrative expenses
|
103,497
|
|
99,666
|
|
314,991
|
|
227,691
|
Research and
development expenses
|
142,802
|
|
128,716
|
|
421,077
|
|
296,354
|
Acquisition,
integration and other costs
|
7,191
|
|
6,221
|
|
31,604
|
|
32,803
|
Restructuring
charges
|
3,035
|
|
6,057
|
|
2,642
|
|
38,323
|
Amortization of
intangible assets
|
57,100
|
|
65,053
|
|
179,835
|
|
128,571
|
|
313,625
|
|
305,713
|
|
950,149
|
|
723,742
|
Operating income
(loss)
|
122,109
|
|
11,182
|
|
251,772
|
|
(67,365)
|
Other expense
(income):
|
|
|
|
|
|
|
|
Interest
expense
|
14,217
|
|
25,188
|
|
49,041
|
|
48,431
|
Loss (gain) on
investments
|
6,368
|
|
(251)
|
|
11,278
|
|
(1,544)
|
Loss (gain) on
foreign currency
|
3,107
|
|
(3,752)
|
|
3,760
|
|
(2,725)
|
Interest
income
|
(653)
|
|
(832)
|
|
(1,937)
|
|
(2,310)
|
Other (income)
expense, net
|
(63)
|
|
1,676
|
|
6,530
|
|
13,356
|
Income (loss) before
income taxes
|
99,133
|
|
(10,847)
|
|
183,100
|
|
(122,573)
|
Income tax expense
(benefit)
|
44,507
|
|
(28,016)
|
|
48,649
|
|
(76,630)
|
Net income
(loss)
|
$ 54,626
|
|
$ 17,169
|
|
$ 134,451
|
|
$ (45,943)
|
|
|
|
|
|
|
|
|
Net income (loss) per
common share:
|
|
|
|
|
|
|
|
Basic
|
$
0.38
|
|
$
0.12
|
|
$
0.93
|
|
$ (0.35)
|
Diluted
|
$
0.37
|
|
$
0.12
|
|
$
0.91
|
|
$ (0.35)
|
|
|
|
|
|
|
|
|
Weighted average
common shares:
|
|
|
|
|
|
|
|
Basic
|
144,967
|
|
138,478
|
|
144,085
|
|
129,502
|
Diluted
|
148,753
|
|
140,605
|
|
147,996
|
|
129,502
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
|
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
54,626
|
|
$
17,169
|
|
$ 134,451
|
|
$ (45,943)
|
|
|
Depreciation
|
|
20,538
|
|
20,048
|
|
60,213
|
|
42,567
|
|
|
Amortization of
intangible assets
|
|
57,100
|
|
65,053
|
|
179,835
|
|
128,571
|
|
|
Amortization of
deferred finance fees and debt discount
|
|
2,182
|
|
2,762
|
|
9,376
|
|
4,999
|
|
|
Non-cash interest
expense
|
|
-
|
|
3,374
|
|
-
|
|
9,926
|
|
|
Deferred income tax
provision (benefit)
|
|
(5,474)
|
|
(13,352)
|
|
(19,503)
|
|
(54,551)
|
|
|
Stock compensation
expense
|
|
13,495
|
|
10,729
|
|
39,812
|
|
24,653
|
|
|
Reduction in revenue
related to Comcast investment in ARRIS
|
|
-
|
|
-
|
|
-
|
|
13,182
|
|
|
Mark-to-market fair
value adj. related to Comcast investment in ARRIS
|
|
-
|
|
-
|
|
-
|
|
13,189
|
|
|
Provision for
doubtful accounts
|
|
4,041
|
|
5
|
|
5,285
|
|
5
|
|
|
Loss on disposal of
fixed assets
|
|
(58)
|
|
412
|
|
3,128
|
|
375
|
|
|
Non-cash
restructuring and related charges
|
|
-
|
|
6,761
|
|
-
|
|
6,761
|
|
|
Loss (gain) on
investments
|
|
6,368
|
|
(250)
|
|
11,278
|
|
(1,544)
|
|
|
Excess tax benefits
from stock-based compensation plans
|
|
(3,326)
|
|
(647)
|
|
(14,651)
|
|
(6,417)
|
|
Changes in operating
assets & liabilities, net of effects of acquisitions and
disposals:
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
30,401
|
|
34,307
|
|
(70,627)
|
|
17,793
|
|
|
Other
receivables
|
|
(2,418)
|
|
8,222
|
|
(10,465)
|
|
1,095
|
|
|
Inventory
|
|
(70,780)
|
|
(32,287)
|
|
(38,499)
|
|
60,345
|
|
|
Income taxes
payable/recoverable
|
|
32,587
|
|
(21,086)
|
|
31,002
|
|
(37,719)
|
|
|
Accounts payable and
accrued liabilities
|
|
(59,702)
|
|
(96,035)
|
|
2,592
|
|
155,264
|
|
|
Prepaids and other,
net
|
|
2,355
|
|
31,004
|
|
13,864
|
|
47,647
|
|
|
|
Net cash provided
by operating activities
|
|
81,935
|
|
36,189
|
|
337,091
|
|
380,198
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
(9,886)
|
|
(46,525)
|
|
(40,901)
|
|
(104,546)
|
|
Disposals of
investments
|
|
4,638
|
|
35,213
|
|
29,319
|
|
393,234
|
|
Purchases of property
& equipment, net
|
|
(15,467)
|
|
(31,981)
|
|
(41,759)
|
|
(53,383)
|
|
Sale of property
& equipment
|
|
-
|
|
-
|
|
19
|
|
90
|
|
Cash paid for
acquisition, net of cash acquired
|
|
-
|
|
(48,352)
|
|
84
|
|
(2,208,114)
|
|
|
|
Net cash used in
investing activities
|
|
(20,715)
|
|
(91,645)
|
|
(53,238)
|
|
(1,972,719)
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from
issuance of debt
|
|
-
|
|
-
|
|
-
|
|
1,925,000
|
|
Cash paid for debt
discount
|
|
-
|
|
-
|
|
-
|
|
(9,853)
|
|
Payment of debt
obligations
|
|
(13,750)
|
|
(15,812)
|
|
(195,903)
|
|
(31,625)
|
|
Early redemption of
long-term debt
|
|
-
|
|
-
|
|
-
|
|
(79)
|
|
Deferred financing
costs paid
|
|
-
|
|
(149)
|
|
-
|
|
(42,356)
|
|
Excess income tax
benefits from stock-based compensation plans
|
|
3,326
|
|
646
|
|
14,651
|
|
6,416
|
|
Repurchase of shares
to satisfy employee tax withholdings
|
|
(7,193)
|
|
(115)
|
|
(29,605)
|
|
(12,522)
|
|
Fees and proceeds
from issuance of common stock, net
|
|
119
|
|
1,498
|
|
11,565
|
|
166,951
|
|
|
|
Net cash provided
by (used in) financing activities
|
|
(17,498)
|
|
(13,932)
|
|
(199,292)
|
|
2,001,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
43,722
|
|
(69,388)
|
|
84,561
|
|
409,411
|
Cash and cash
equivalents at beginning of period
|
|
483,277
|
|
610,502
|
|
442,438
|
|
131,703
|
Cash and cash
equivalents at end of period
|
|
$ 526,999
|
|
$ 541,114
|
|
$ 526,999
|
|
$ 541,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRIS GROUP,
INC.
|
PRELIMINARY
SUPPLEMENTAL SALES & NET INCOME RECONCILIATION
|
(in thousands,
except per share data) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except
per share data)
|
Q3 2013
|
|
Q2 2014
|
|
Q3 2014
|
|
September YTD
2013
|
|
September YTD
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
|
Amount
|
|
|
|
Amount
|
|
|
|
Amount
|
|
|
|
Amount
|
|
|
|
Sales
|
$ 1,067,824
|
|
|
|
$ 1,429,071
|
|
|
|
$ 1,405,445
|
|
|
|
$ 2,421,835
|
|
|
|
$ 4,059,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Highlighted
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction in revenue
related to Comcast investment in ARRIS
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,182
|
|
|
|
-
|
|
|
|
Purchase accounting
impacts of deferred revenue
|
1,556
|
|
|
|
3,489
|
|
|
|
780
|
|
|
|
3,973
|
|
|
|
4,475
|
|
|
|
Sales excluding
highlighted items
|
$ 1,069,380
|
|
|
|
$ 1,432,560
|
|
|
|
$ 1,406,225
|
|
|
|
$ 2,438,990
|
|
|
|
$ 4,064,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3
2013(2)
|
|
Q2 2014
|
|
Q3 2014
|
|
September YTD 2013
(2)
|
|
September YTD
2014
|
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Net income
(loss)
|
$ 17,169
|
|
$ 0.12
|
|
$ 39,024
|
|
$ 0.26
|
|
$ 54,626
|
|
$ 0.37
|
|
$ (45,943)
|
|
(0.35)
|
(1)
|
$ 134,451
|
|
$ 0.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Highlighted
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impacting gross
margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction in revenue
related to Comcast investment in ARRIS
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
13,182
|
|
0.10
|
|
-
|
|
-
|
|
Acquisition
accounting impacts related to inventory
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
57,600
|
|
0.44
|
|
-
|
|
-
|
|
Product
rationalization
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
13,582
|
|
0.10
|
|
-
|
|
-
|
|
Stock compensation
expense
|
1,248
|
|
0.01
|
|
1,835
|
|
0.01
|
|
1,824
|
|
0.01
|
|
2,945
|
|
0.02
|
|
4,934
|
|
0.03
|
|
Purchase accounting
impacts of deferred revenue
|
1,006
|
|
0.01
|
|
2,802
|
|
0.02
|
|
47
|
|
-
|
|
2,478
|
|
0.02
|
|
3,048
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impacting
operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition and
integration costs
|
6,221
|
|
0.04
|
|
12,532
|
|
0.08
|
|
7,191
|
|
0.05
|
|
32,803
|
|
0.25
|
|
31,604
|
|
0.21
|
|
Restructuring
|
6,057
|
|
0.04
|
|
(14)
|
|
-
|
|
3,035
|
|
0.02
|
|
38,323
|
|
0.29
|
|
2,642
|
|
0.02
|
|
Amortization of
intangible assets
|
65,053
|
|
0.46
|
|
58,735
|
|
0.40
|
|
57,100
|
|
0.38
|
|
128,571
|
|
0.97
|
|
179,835
|
|
1.22
|
|
Stock compensation
expense
|
9,481
|
|
0.07
|
|
13,449
|
|
0.09
|
|
11,671
|
|
0.08
|
|
21,708
|
|
0.16
|
|
34,878
|
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impacting other
(income) / expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash interest
expense
|
3,374
|
|
0.02
|
|
-
|
|
-
|
|
-
|
|
-
|
|
9,926
|
|
0.08
|
|
-
|
|
-
|
|
Impairment on
Investments
|
-
|
|
-
|
|
3,000
|
|
0.02
|
|
4,000
|
|
0.03
|
|
-
|
|
-
|
|
7,000
|
|
0.05
|
|
Credit facility -
ticking fees
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
865
|
|
0.01
|
|
-
|
|
-
|
|
Mark to market FV
adj. related to Comcast investment in ARRIS
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
13,189
|
|
0.10
|
|
-
|
|
-
|
|
Asset held for sale
impairment
|
-
|
|
-
|
|
2,125
|
|
0.01
|
|
-
|
|
-
|
|
-
|
|
-
|
|
2,125
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net tax
items
|
(54,998)
|
|
(0.39)
|
|
(29,204)
|
|
(0.20)
|
|
(19,375)
|
|
(0.13)
|
|
(143,033)
|
|
(1.08)
|
|
(107,428)
|
|
(0.73)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total highlighted
items
|
37,442
|
|
0.27
|
|
65,260
|
|
0.44
|
|
65,493
|
|
0.44
|
|
192,139
|
|
1.45
|
|
158,638
|
|
1.07
|
|
Net income excluding
highlighted items
|
$ 54,611
|
|
$ 0.39
|
|
$ 104,284
|
|
$ 0.70
|
|
$ 120,119
|
|
$ 0.81
|
|
$ 146,196
|
|
$ 1.11
|
|
$ 293,089
|
|
$ 1.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares - basic
|
|
|
138,478
|
|
|
|
144,415
|
|
|
|
144,967
|
|
|
|
129,502
|
|
|
|
144,085
|
|
Weighted average
common shares - diluted
|
|
|
140,605
|
|
|
|
148,063
|
|
|
|
148,753
|
|
|
|
132,169
|
|
|
|
147,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Basic shares used
as losses were reported for the period and the inclusion of
dilutive shares would be anti-dilutive
|
|
|
|
|
|
|
|
(2) In connection
with the acquisition of Motorola Home, the consolidated financial
statements for prior periods have been recast to include
restrospective acquisition accounting adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 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 were
marked to market and flowed 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).
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.
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
was 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).
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).
Asset Held for Sale Impairment: In the second quarter of
2014, we entered into a contract to facilitate the sale of a
building at less than its carrying value. The asset has been
reclassified as held for sale and was measured at the lower of its
carrying amount or fair value less cost to sell. We have
recorded an initial impairment charge to reduce the assets carrying
amount to its fair value less costs to sell in the period the
held for sale criteria were met. We have excluded the effect of the
asset held for sale impairment 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).
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 tax and
legal restructuring, state valuation allowances, research and
development tax credits and provision to return differences.
SOURCE ARRIS Group, Inc.