SUWANEE, Ga., Oct. 28, 2015 /PRNewswire/ -- ARRIS Group, Inc.
(NASDAQ:ARRS) today announced preliminary and unaudited
financial results for the third quarter 2015.
Third Quarter 2015 Financial Highlights
- Revenues were $1,221.4
million
- GAAP net income was $0.18 per
diluted share
- Adjusted net income (a non-GAAP measure) was $0.56 per diluted share
- Cash from Operating Activities was $212.7 million
- End-of-quarter cash resources were $781.1 million
- Order backlog was $559.0
million
- Book-to-bill ratio was 0.92
"Our third quarter results were in line with our expectations
and are lower than the third quarter of last year when we were
launching an unprecedented number of new products. We
continue to encounter headwinds, in particular, those related to
telco capex, industry consolidations and the strong U.S.
dollar. With respect to the fourth quarter 2015, we expect
revenues will be in the range of $1,100
million to $1,150 million, with adjusted net income per
diluted share in the range of $0.40 to
$0.45 and GAAP net income per diluted share in the range of
$0.05 to $0.10," said Bob Stanzione, ARRIS Chairman and CEO. "I
remain confident about our future business prospects as we weather
through the current cycles. I am looking forward to closing
the pending Pace acquisition which will make us even better
positioned for future growth. Last week the shareholders of both
ARRIS and Pace approved the combination and we continue to work to
satisfy the remaining regulatory conditions to close the
transaction."
Revenues in the third quarter 2015 of $1,221.4 million were down $184.0 million, or 13.1% as compared to third
quarter 2014 revenues of $1,405.4
million. Third quarter revenues were down $38.7 million or 3.1%, as compared to second
quarter 2015 revenues of $1,260.1
million.
Through the first three quarters of 2015, revenues of
$3,696.7 million were down
$362.8 million, or 8.9% as compared
to the first three quarters of 2014 revenues of $4,059.5 million.
Adjusted net income (a non-GAAP measure) in the third
quarter 2015 was $0.56 per diluted
share, as compared to $0.81 per
diluted share for the third quarter 2014, a decrease of
$0.25 per diluted share.
Adjusted net income increased $0.03
per diluted share, as compared to the second quarter 2015 adjusted
net income of $0.53 per diluted
share.
Year to date, adjusted net income of $1.53 per diluted share for 2015 is a decrease of
$0.45 as compared to the first nine
months of 2014 adjusted net income of $1.98 per diluted
share.
A reconciliation of adjusted net income per diluted share to
GAAP net income per diluted share is attached to this release and
also can be found on the Company's website (www.arris.com).
GAAP net income in the third quarter 2015 was
$0.18 per diluted share, as compared
to the third quarter 2014 GAAP net income of $0.37 per diluted share, a decrease of
$0.19 per diluted share. GAAP
net income increased $0.07 per
diluted share as compared to the second quarter 2015 GAAP net
income of $0.11 per diluted
share. Year to date, GAAP net income of $0.42 per diluted share for 2015 is a decrease of
$0.49 as compared to the first nine
months of 2014 GAAP net income of $0.91 per diluted
share.
Cash & Cash Equivalents - The Company ended the third
quarter 2015 with $781.1 million of
cash, cash equivalents and short-term investments, as compared to
$622.8 million at the end of the
second quarter 2015, in the aggregate. The Company generated
$212.7 million of cash from operating
activities during the third quarter 2015, as compared to
$81.9 million generated during the
third quarter 2014. Through the first nine months of 2015,
the Company generated $221.3 million
of cash from operating activities. This compares to $329.2 million generated during the same period
in 2014.
Order backlog at the end of the third quarter 2015 was
$559.0 million as compared to
$594.1 million and $651.3 million at the end of the third quarter
2014 and the second quarter 2015, respectively. The Company's
book-to-bill ratio in the third quarter 2015 was 0.92 as compared
to the third quarter 2014 of 0.86 and the second quarter 2015 of
0.94.
ARRIS management will conduct a conference call at 5:00 pm EDT, today, Wednesday, October 28, 2015, 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 42116386 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, 2015, by dialing
888-286-8010 or 617-801-6888 for international calls and using the
pass code 18378787. A replay also will be made available for a
period of 12 months following the conference call on ARRIS' website
at www.arris.com.
About ARRIS
ARRIS Group, Inc. (NASDAQ: ARRS) is a
world leader in entertainment and communications technology. Our
innovations combine hardware, software, and services across the
cloud, network, and home to power TV and Internet for millions
of people around the globe. The people of ARRIS collaborate with
the world's top service providers, content providers, and
retailers to advance the state of our industry and pioneer
tomorrow's connected world. Together, we are inventing the future.
For more information, visit www.arris.com.
For the latest ARRIS news:
- Check out our blog: ARRIS EVERYWHERE
- Follow us on Twitter: @ARRIS
No Offer or Solicitation
This release is provided for informational purposes only and
does not constitute an offer to sell, or an invitation to subscribe
for, purchase or exchange any securities or the solicitation of any
vote or approval in any jurisdiction, nor shall there be any sale,
issuance, exchange or transfer of the securities referred to in
this document in any jurisdiction in contravention of applicable
law.
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 2015, and
beyond;
- the Pace acquisition;
- 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 2015 as well as the
general outlook for 2015 and beyond are based on preliminary
estimates, assumptions and projections that management believes to
be reasonable at this time, but are largely beyond management's
control;
- ARRIS may fail to realize the expected benefits of the
announced acquisition of Pace; there may be negative effects
relating to the announcement of the transaction or any further
announcements relating to the transaction; and ARRIS may incur
significant transaction costs and/or unknown liabilities;
- completion of the Pace acquisition is subject to satisfaction
of a number of conditions outside of ARRIS' control, including
receipt of the remaining necessary regulatory approvals;
- the strengthening U.S. Dollar may adversely impact ARRIS'
international customer's ability or willingness to purchase
products and the pricing of ARRIS products;
- 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 transactions within our customer base, including the
proposed acquisition by Frontier Communications of several
properties owned by Verizon, the proposed acquisitions of
Suddenlink and Cablevision by Altice, and the announced acquisition
of Time Warner by Charter may have an impact on the amount and/or
timing of 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, 2015. 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, except as required by law.
UK Takeover Code Directors' Confirmation
The statements above with respect to adjusted net income per
diluted share and GAAP net income per diluted share for the fourth
quarter 2015 constitute a profit forecast for the purposes of the
UK City Code on Takeovers and Mergers (the "Profit
Forecast"). The Profit Forecast has been prepared on a basis
consistent with ARRIS' accounting policies, which are in accordance
with U.S. GAAP.
The Profit Forecast is based on the following assumptions:
Factors outside the control of ARRIS:
- there will be no material changes to the conditions of the
markets in which ARRIS operates, including material changes in the
capital spending of ARRIS' customers during the fourth
quarter;
- foreign currency exchange rates, interests rates and tax rates
in the geographic markets in which ARRIS operates remain materially
unchanged from the currently prevailing rates;
- there will be no material interruptions in the delivery of
components for the manufacture of ARRIS' products or the
delivery of finished products to customers;
- there will be no material adverse changes to existing global
macroeconomic or political conditions;
- there will be no material regulatory developments that affect
ARRIS' operations or the operations of its customers; and
- there will be no material adverse events that have a
significant impact on ARRIS' financial condition.
Factors within the control of ARRIS:
- there will be no material acquisitions or dispositions
completed by ARRIS prior to December 31,
2015;
- there will be no material change in the supplier base of
ARRIS;
- ARRIS's operational costs will not change materially prior to
December 31, 2015;
- there will be no material change in the business or operational
strategy of ARRIS; and
- there will be no material changes to the management of
ARRIS.
The Directors of ARRIS Group, Inc. confirm that the Profit
Forecast has been properly compiled on the basis of the assumptions
stated above and the basis of accounting used in preparing the
Profit Forecast is consistent with the accounting policies of ARRIS
Group, Inc.
ARRIS GROUP,
INC.
|
|
PRELIMINARY
CONSOLIDATED BALANCE SHEETS
|
|
(in
thousands)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
|
2015
|
|
2015
|
|
2015
|
|
2014
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$673,346
|
|
$490,939
|
|
$499,482
|
|
$565,790
|
|
$526,999
|
Short-term
investments, at fair value
|
|
107,777
|
|
128,852
|
|
129,073
|
|
126,748
|
|
66,817
|
Total cash, cash
equivalents and short term investments
|
|
781,123
|
|
619,791
|
|
628,555
|
|
692,538
|
|
593,816
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
-
|
|
-
|
|
-
|
|
-
|
|
1,022
|
Accounts receivable,
net
|
|
647,726
|
|
785,869
|
|
819,918
|
|
598,603
|
|
684,722
|
Other
receivables
|
|
8,684
|
|
11,268
|
|
15,054
|
|
10,640
|
|
18,227
|
Inventories,
net
|
|
367,536
|
|
389,556
|
|
372,379
|
|
401,165
|
|
368,628
|
Prepaid income
taxes
|
|
29,071
|
|
26,413
|
|
13,380
|
|
11,023
|
|
4,431
|
Prepaids
|
|
26,430
|
|
36,746
|
|
31,814
|
|
27,497
|
|
34,311
|
Current deferred
income tax assets
|
|
104,345
|
|
105,384
|
|
115,926
|
|
113,390
|
|
64,948
|
Other current
assets
|
|
153,526
|
|
108,134
|
|
80,943
|
|
61,450
|
|
80,426
|
Total current
assets
|
|
2,118,442
|
|
2,083,161
|
|
2,077,969
|
|
1,916,306
|
|
1,850,531
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
319,443
|
|
324,154
|
|
325,727
|
|
366,431
|
|
371,496
|
Goodwill
|
|
1,016,696
|
|
1,017,430
|
|
938,645
|
|
936,067
|
|
938,265
|
Intangible assets,
net
|
|
868,054
|
|
923,837
|
|
919,876
|
|
943,388
|
|
1,000,441
|
Investments
|
|
74,924
|
|
75,381
|
|
76,492
|
|
77,640
|
|
74,985
|
Noncurrent deferred
income tax assets
|
|
70,557
|
|
87,291
|
|
88,366
|
|
71,686
|
|
12,567
|
Other
assets
|
|
45,124
|
|
47,421
|
|
45,711
|
|
54,127
|
|
59,102
|
|
|
$4,513,240
|
|
$4,558,675
|
|
$4,472,786
|
|
$4,365,645
|
|
$4,307,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$558,371
|
|
$608,133
|
|
$594,690
|
|
$480,150
|
|
$577,319
|
Accrued compensation,
benefits and related taxes
|
|
97,326
|
|
78,333
|
|
75,849
|
|
145,278
|
|
130,116
|
Accrued
warranty
|
|
35,488
|
|
29,176
|
|
36,824
|
|
42,763
|
|
51,277
|
Deferred
revenue
|
|
97,490
|
|
107,632
|
|
107,230
|
|
92,772
|
|
102,717
|
Current portion of LT
debt & financing lease obligations
|
|
48,647
|
|
48,594
|
|
82,787
|
|
73,956
|
|
67,062
|
Current income taxes
liability
|
|
13,139
|
|
9,587
|
|
13,092
|
|
10,610
|
|
15,344
|
Other accrued
liabilities
|
|
168,870
|
|
155,482
|
|
167,430
|
|
164,341
|
|
180,242
|
Total current
liabilities
|
|
1,019,330
|
|
1,036,937
|
|
1,077,902
|
|
1,009,870
|
|
1,124,077
|
Long-term debt &
financing lease obligations, net of current portion
|
|
1,525,454
|
|
1,537,641
|
|
1,505,073
|
|
1,467,370
|
|
1,487,585
|
Accrued
pension
|
|
67,570
|
|
68,865
|
|
68,060
|
|
64,917
|
|
59,667
|
Noncurrent income
taxes payable
|
|
38,145
|
|
43,586
|
|
42,282
|
|
41,082
|
|
31,141
|
Noncurrent deferred
income tax liabilities
|
|
329
|
|
332
|
|
412
|
|
274
|
|
42,926
|
Other noncurrent
liabilities
|
|
71,561
|
|
92,544
|
|
90,428
|
|
91,371
|
|
71,882
|
Total
liabilities
|
|
2,722,388
|
|
2,779,905
|
|
2,784,157
|
|
2,674,884
|
|
2,817,278
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Common
stock
|
|
1,819
|
|
1,814
|
|
1,811
|
|
1,796
|
|
1,792
|
Capital in excess of
par value
|
|
1,762,111
|
|
1,765,804
|
|
1,745,345
|
|
1,739,700
|
|
1,725,383
|
Treasury stock at
cost
|
|
(331,329)
|
|
(331,329)
|
|
(331,329)
|
|
(306,330)
|
|
(306,330)
|
Accumulated other
comprehensive loss
|
|
(20,235)
|
|
(12,664)
|
|
(12,966)
|
|
(11,047)
|
|
(4,617)
|
Retained
earnings
|
|
328,782
|
|
302,525
|
|
285,768
|
|
266,642
|
|
73,881
|
Total ARRIS Group
Inc. stockholders' equity
|
|
1,741,147
|
|
1,726,150
|
|
1,688,629
|
|
1,690,761
|
|
1,490,109
|
Stockholders' equity
attributable to noncontrolling interest
|
|
49,704
|
|
52,620
|
|
-
|
|
-
|
|
-
|
Total stockholders'
equity
|
|
1,790,851
|
|
1,778,770
|
|
1,688,629
|
|
1,690,761
|
|
1,490,109
|
|
|
$4,513,240
|
|
$4,558,675
|
|
$4,472,786
|
|
$4,365,645
|
|
$4,307,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
Net sales
|
$1,221,416
|
|
$1,405,445
|
|
$3,696,650
|
|
$4,059,534
|
Cost of
sales
|
862,083
|
|
969,711
|
|
2,636,400
|
|
2,857,613
|
Gross
margin
|
359,333
|
|
435,734
|
|
1,060,250
|
|
1,201,921
|
Operating
expenses:
|
|
|
|
|
|
|
|
Selling, general, and
administrative expenses
|
101,685
|
|
103,497
|
|
309,219
|
|
314,991
|
Research and
development expenses
|
132,204
|
|
142,802
|
|
400,932
|
|
421,077
|
Amortization of
intangible assets
|
57,132
|
|
57,100
|
|
171,062
|
|
179,835
|
Integration,
acquisition, restructuring and other costs
|
7,532
|
|
10,226
|
|
20,996
|
|
34,246
|
|
298,553
|
|
313,625
|
|
902,209
|
|
950,149
|
Operating
income
|
60,781
|
|
122,109
|
|
158,041
|
|
251,772
|
Other expense
(income):
|
|
|
|
|
|
|
|
Interest
expense
|
14,748
|
|
14,217
|
|
56,570
|
|
49,041
|
Loss on
investments
|
3,446
|
|
6,368
|
|
6,565
|
|
11,278
|
Loss on foreign
currency
|
10,843
|
|
3,107
|
|
4,204
|
|
3,760
|
Interest
income
|
(513)
|
|
(653)
|
|
(1,792)
|
|
(1,937)
|
Other (income)
expense, net
|
(2,827)
|
|
(63)
|
|
5,170
|
|
6,530
|
Income before income
taxes
|
35,083
|
|
99,133
|
|
87,324
|
|
183,100
|
Income tax
expense
|
11,737
|
|
44,507
|
|
29,710
|
|
48,649
|
Consolidated net
income
|
23,346
|
|
54,626
|
|
57,614
|
|
134,451
|
Net loss attributable
to noncontrolling interests
|
(2,911)
|
|
-
|
|
(4,526)
|
|
-
|
Net income
attributable to ARRIS Group, Inc.
|
$26,257
|
|
$54,626
|
|
$62,139
|
|
$134,451
|
|
|
|
|
|
|
|
|
Net income per common
share (1):
|
|
|
|
|
|
|
|
Basic
|
$
0.18
|
|
$
0.38
|
|
$
0.43
|
|
$ 0.93
|
Diluted
|
$
0.18
|
|
$
0.37
|
|
$
0.42
|
|
$ 0.91
|
|
|
|
|
|
|
|
|
Weighted average
common shares:
|
|
|
|
|
|
|
|
Basic
|
146,781
|
|
144,967
|
|
146,146
|
|
144,085
|
Diluted
|
149,422
|
|
148,753
|
|
149,232
|
|
147,996
|
|
|
|
|
|
|
|
|
(1)
Calculated based on net income attributable to shareowners of ARRIS
Group, Inc.
|
|
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,
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net
income
|
|
|
|
|
|
$
23,346
|
|
$
54,626
|
|
57,614
|
|
$ 134,451
|
|
|
Depreciation
|
|
|
|
|
|
17,306
|
|
20,538
|
|
54,243
|
|
60,213
|
|
|
Amortization of
intangible assets
|
|
|
|
|
|
58,283
|
|
57,099
|
|
173,984
|
|
179,835
|
|
|
Amortization of
deferred finance fees and debt discount
|
|
|
|
|
|
1,682
|
|
2,182
|
|
7,975
|
|
9,376
|
|
|
Deferred income tax
provision (benefit)
|
|
|
|
|
|
21,760
|
|
(5,474)
|
|
14,971
|
|
(19,503)
|
|
|
Stock compensation
expense
|
|
|
|
|
|
16,289
|
|
13,495
|
|
46,556
|
|
39,812
|
|
|
Provision for
doubtful accounts
|
|
|
|
|
|
4
|
|
4,041
|
|
2,253
|
|
5,285
|
|
|
Loss (gain) on
disposal of fixed assets
|
|
|
|
|
|
36
|
|
(58)
|
|
6,058
|
|
3,128
|
|
|
Loss on
investments
|
|
|
|
|
|
3,445
|
|
6,368
|
|
6,564
|
|
11,278
|
|
|
Excess tax benefits
from stock-based compensation plans
|
|
|
|
|
|
12,488
|
|
(3,326)
|
|
(354)
|
|
(14,651)
|
|
Changes in operating
assets & liabilities, net of effects of acquisitions and
disposals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
|
|
|
138,139
|
|
34,764
|
|
(50,221)
|
|
(69,272)
|
|
|
Other
receivables
|
|
|
|
|
|
3,436
|
|
(2,418)
|
|
749
|
|
(10,465)
|
|
|
Inventory
|
|
|
|
|
|
15,762
|
|
(70,780)
|
|
27,371
|
|
(38,499)
|
|
|
Income taxes
payable/recoverable
|
|
|
|
|
|
(4,548)
|
|
32,587
|
|
(21,303)
|
|
31,002
|
|
|
Accounts payable and
accrued liabilities
|
|
|
|
|
|
(25,051)
|
|
(59,185)
|
|
3,866
|
|
2,865
|
|
|
Prepaids and other,
net
|
|
|
|
|
|
(69,631)
|
|
(2,524)
|
|
(108,987)
|
|
4,381
|
|
|
|
Net cash provided
by operating activities
|
|
|
|
|
|
212,746
|
|
81,935
|
|
221,339
|
|
329,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
|
|
|
|
(16,522)
|
|
(9,886)
|
|
(47,625)
|
|
(33,046)
|
|
Sales of
investments
|
|
|
|
|
|
31,810
|
|
4,638
|
|
61,425
|
|
29,319
|
|
Purchases of
property, plant & equipment, net
|
|
|
|
|
|
(13,377)
|
|
(15,467)
|
|
(37,698)
|
|
(41,759)
|
|
Proceeds from
sale-leaseback transaction
|
|
|
|
|
|
-
|
|
-
|
|
24,960
|
|
-
|
|
Acquisition, net of
cash acquired
|
|
|
|
|
|
-
|
|
-
|
|
(97,905)
|
|
84
|
|
Purchases of
intangible assets
|
|
|
|
|
|
-
|
|
-
|
|
(34,340)
|
|
-
|
|
Other, net
|
|
|
|
|
|
67
|
|
-
|
|
2,971
|
|
19
|
|
|
|
Net cash provided
by (used in) investing activities
|
|
|
|
|
|
1,978
|
|
(20,715)
|
|
(128,212)
|
|
(45,383)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from
sale-leaseback financing transaction
|
|
|
|
|
|
-
|
|
-
|
|
58,729
|
|
-
|
|
Payment of financing
lease obligation
|
|
|
|
|
|
-
|
|
-
|
|
(105)
|
|
-
|
|
Payment of debt
obligations
|
|
|
|
|
|
(12,375)
|
|
(13,750)
|
|
(41,125)
|
|
(195,903)
|
|
Payment for debt
discount
|
|
|
|
|
|
-
|
|
-
|
|
(3,247)
|
|
-
|
|
Payment for deferred
financing costs
|
|
|
|
|
|
-
|
|
-
|
|
(4,992)
|
|
-
|
|
Repurchase of common
stock
|
|
|
|
|
|
-
|
|
-
|
|
(24,999)
|
|
-
|
|
Excess income tax
benefits from stock-based compensation plans
|
|
|
|
|
|
(12,488)
|
|
3,326
|
|
354
|
|
14,651
|
|
Repurchase of shares
to satisfy employee minimum tax withholdings
|
|
|
|
|
|
(7,466)
|
|
(7,193)
|
|
(32,452)
|
|
(29,605)
|
|
Fees and proceeds
from issuance of common stock, net
|
|
|
|
|
|
12
|
|
119
|
|
8,016
|
|
11,565
|
|
Capital contribution
from non-controlling interest
|
|
|
|
|
|
-
|
|
-
|
|
54,250
|
|
-
|
|
|
|
Net cash (used in)
provided by financing activities
|
|
|
|
|
|
(32,317)
|
|
(17,498)
|
|
14,429
|
|
(199,292)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
|
|
|
|
182,407
|
|
43,722
|
|
107,556
|
|
84,561
|
Cash and cash
equivalents at beginning of period
|
|
|
|
|
|
490,939
|
|
483,277
|
|
565,790
|
|
442,438
|
Cash and cash
equivalents at end of period
|
|
|
|
|
|
$ 673,346
|
|
$ 526,999
|
|
$ 673,346
|
|
$ 526,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRIS GROUP,
INC.
|
PRELIMINARY
SUPPLEMENTAL SALES & NET INCOME RECONCILIATION
|
(in thousands,
except per share data) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3 2014
|
|
Q2 2015
|
|
Q3 2015
|
|
Sep YTD
2014
|
|
Sep YTD
2015
|
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Amount
|
|
|
|
Amount
|
|
|
|
Sales
|
$ 1,405,446
|
|
|
|
$ 1,260,077
|
|
|
|
$ 1,221,416
|
|
|
|
$ 4,059,533
|
|
|
|
$ 3,696,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Highlighted
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition
accounting impacts of deferred revenue
|
780
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$ 4,475
|
|
|
|
$
-
|
|
|
|
Sales excluding
highlighted items
|
$ 1,406,226
|
|
|
|
$ 1,260,077
|
|
|
|
$ 1,221,416
|
|
|
|
$ 4,064,008
|
|
|
|
$ 3,696,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3 2014
|
|
Q2 2015
|
|
Q3 2015
|
|
Sep YTD
2014
|
|
Sep YTD
2015
|
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Net income
attributable to ARRIS Group, Inc.
|
$ 54,626
|
|
$
0.37
|
|
$ 16,758
|
|
$
0.11
|
|
$ 26,257
|
|
$
0.18
|
|
$ 134,451
|
|
$
0.91
|
|
$ 62,139
|
|
$
0.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Highlighted
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impacting gross
margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation
expense
|
1,824
|
|
0.01
|
|
2,214
|
|
0.01
|
|
2,284
|
|
0.02
|
|
4,934
|
|
0.03
|
|
6,289
|
|
0.04
|
|
Acquisition
accounting impacts of deferred revenue
|
47
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
3,048
|
|
0.02
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impacting
operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Integration,
acquisition, restructuring and other costs
|
10,226
|
|
0.07
|
|
12,566
|
|
0.08
|
|
7,531
|
|
0.05
|
|
34,246
|
|
0.23
|
|
20,995
|
|
0.14
|
|
Amortization of
intangible assets
|
57,100
|
|
0.38
|
|
56,783
|
|
0.38
|
|
57,132
|
|
0.38
|
|
179,836
|
|
1.22
|
|
171,062
|
|
1.15
|
|
Stock compensation
expense
|
11,671
|
|
0.08
|
|
14,079
|
|
0.09
|
|
14,005
|
|
0.09
|
|
34,878
|
|
0.24
|
|
40,267
|
|
0.27
|
|
Non GAAP items
included in Noncontrolling interest
|
-
|
|
-
|
|
(799)
|
|
(0.01)
|
|
(791)
|
|
(0.01)
|
|
-
|
|
-
|
|
(1,590)
|
|
(0.01)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impacting other
(income) / expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment on
Investments
|
4,000
|
|
0.03
|
|
150
|
|
-
|
|
-
|
|
-
|
|
7,000
|
|
0.05
|
|
150
|
|
-
|
|
Debt amendement
fees
|
-
|
|
-
|
|
14,382
|
|
0.10
|
|
669
|
|
-
|
|
-
|
|
-
|
|
15,051
|
|
0.10
|
|
Credit facility -
ticking fees
|
-
|
|
-
|
|
-
|
|
-
|
|
678
|
|
-
|
|
-
|
|
-
|
|
678
|
|
-
|
|
Asset held for sale
impairment
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
2,125
|
|
0.01
|
|
-
|
|
-
|
|
Foreign exchange
contract (gains) losses related to cash consideration of Pace
acquisition
|
-
|
|
-
|
|
(6,845)
|
|
(0.05)
|
|
15,429
|
|
0.10
|
|
-
|
|
-
|
|
8,584
|
|
0.06
|
|
Adjustment to
liability related to foreign tax credit benefits
|
-
|
|
-
|
|
-
|
|
-
|
|
(3,669)
|
|
(0.02)
|
|
-
|
|
-
|
|
(3,669)
|
|
(0.02)
|
|
Loss on sale of
building
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
5,142
|
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Impacting income
tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net tax
items
|
(19,375)
|
|
(0.13)
|
|
(30,122)
|
|
(0.20)
|
|
(35,845)
|
|
(0.24)
|
|
(107,429)
|
|
(0.73)
|
|
(96,500)
|
|
(0.65)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total highlighted
items
|
65,493
|
|
0.44
|
|
62,408
|
|
0.42
|
|
57,423
|
|
0.38
|
|
158,638
|
|
1.07
|
|
166,459
|
|
1.12
|
|
Net income excluding
highlighted items
|
$ 120,119
|
|
$
0.81
|
|
$ 79,166
|
|
$
0.53
|
|
$ 83,680
|
|
$
0.56
|
|
$ 293,089
|
|
$
1.98
|
|
$ 228,598
|
|
$
1.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares - basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares - diluted
|
|
|
148,753
|
|
|
|
149,276
|
|
|
|
149,422
|
|
|
|
147,995
|
|
|
|
149,232
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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.
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 incurred expenses in connection with the Active
Video Joint Venture, the Motorola Home acquisition, the anticipated
Pace acquisition and, 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 and
other costs consist of employee severance, abandoned facilities,
product line disposition and other exit costs. 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.
Noncontrolling Interest share of Non-GAAP
Adjustments: In the second quarter of 2015, ARRIS and Charter
formed a joint venture that acquired Active Video Networks, Inc..
ARRIS and Charter own 65% and 35%, respectively, of the joint
venture. The joint venture is accounted for by ARRIS under
the consolidation method. As a result, the consolidated
statement of operations include the revenues, expenses, and gains
and losses of the noncontrolling
interest. The amount of net income (loss) related to the
noncontrolling interest are reported and presented separately in
the consolidated statement of operations. We have excluded
the noncontrolling share of any non GAAP adjusted measures recorded
by the joint venture, as we believe it is useful to understand the
effect of excluding this item when evaluating our ongoing
performance.
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).
Debt Amendment Fees: In the second quarter of
2015, the Company amended its credit agreement. This debt
modification allowed us to improve the terms and conditions of the
credit agreement, extend the maturities of certain loan facilities,
increase the amount of the revolving credit facility, and add a new
term A-1 loan facility. It is our intent that the new term A-1 loan
facility be funded upon the closing of the Pace Acquisition. If the
Pace acquisition does not close, the entire facility is available
to ARRIS so long as the first $400
million drawn is used to reduce other debt; the remaining
$400 million can be used for general
corporate purposes. Certain fees related to the debt modification
have already been paid, and other fees related to the new term A-1
loan facility will be paid upon funding. We believe it is
useful to understand the effect of this on our other expense
(income).
Credit Facility - Ticking Fees: In
connection with our acquisition of Pace plc, 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).
Adjustment to Liability Related to Foreign Tax
Credit Benefits: In connection with our acquisition of
Motorola Home, we have obtained certain foreign tax credit benefits
for which we have recorded a liability to Google resulting from
certain provisions in the acquisition agreement. The expense
and subsequent adjustments related to this liability has been
recorded as part of other expense (income). We have excluded
the effect of the expense in the calculation of our non-GAAP
financial measures. We believe it is useful to understand the
effects of this item on our total 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).
Foreign Exchange Contract (Gains) Losses Related
to Cash Consideration of Pace Acquisition: In the second quarter of
2015, the Company announced its intent to acquire Pace plc in
exchange for stock and cash. We subsequently entered into
foreign exchange forward contracts in order to hedge the foreign
currency risk associated with the cash consideration of the Pace
Acquisition. These foreign exchange forward contracts were
not designated as hedges, and accordingly, all changes in the fair
value of these instruments are recognized as a loss (gain) on
foreign currency in the Consolidated Statements of
Operations. We believe it is useful to understand the effect
of this on our other expense (income).
Loss on Sale of Building: In the first
quarter of 2015, the Company sold land and a building that
qualified for sale-leaseback accounting and was classified as an
operating lease. A loss has been recorded on the sale.
We have excluded the effect of the loss on sale of property in
calculating our non-GAAP financial measures. We believe it is
useful to understand the effect of excluding this item when
evaluating our ongoing performance.
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.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/arris-announces-preliminary-and-unaudited-third-quarter-2015-results-300168133.html
SOURCE ARRIS Group, Inc.