SUWANEE, Ga., Oct. 26, 2016 /PRNewswire/ -- ARRIS
International plc (NASDAQ: ARRS) today announced preliminary
and unaudited financial results for the third quarter 2016.
Third Quarter 2016 Financial Highlights
- GAAP revenues were $1.725
billion
- Adjusted revenues (a non-GAAP measure) were $1.735 billion
- GAAP net income was $0.25 per
diluted share
- Adjusted net income (a non-GAAP measure) was $0.77 per diluted share
- End-of-quarter cash resources were $1.110 billion
- Cash from operating activities was $297
million
- Order backlog was $1.034
billion
- Book-to-bill ratio was 0.88
On January 4, 2016, the Company
completed the acquisition of Pace plc and, as a result, comparisons
to prior year periods are materially affected and the results
include several restructuring and acquisition related items.
"We had a strong third quarter with revenue solidly in line with
our guidance. Cash generation was very robust, with our continued
success in the market and the integration of Pace and planned
synergies ahead of schedule. I am very proud of what the ARRIS team
has accomplished so far in 2016, and excited to lead the
organization going forward," said Bruce
McClelland, newly appointed ARRIS CEO. "The industry shift
to enable the delivery of video content over robust,
high-performance broadband networks continues to accelerate and is
at the heart of our strategy. I am very confident we have the
talent and product pipeline to capitalize on this global
opportunity."
"With respect to the fourth quarter 2016, we expect revenues
will be in the range of $1.665 billion to
$1.715 billion, adjusted revenues in the range of
$1.675 billion to $1.725 billion.
GAAP net income per diluted share in the range of
$0.23 to $0.27 and adjusted net
income per diluted share in the range of $0.68 to $0.72," said David Potts, ARRIS CFO.
GAAP revenues in the third quarter 2016 of $1.725 billion were up $504 million, or 41%, as compared to third
quarter 2015 revenues of $1.221
billion. Third quarter revenues were down $5 million, or less than 1%, as compared to
second quarter 2016 revenues of $1.730
billion. Through the first three quarters of 2016, revenues
of $5.070 billion were up
$1.373 billion, or 37%, as compared
to the first three quarters of 2015 revenues of $3.697 billion. GAAP revenues include a
$9.6 million reduction for the third
quarter 2016 and a $14.0 million
reduction for the nine months ended September 30, 2016 as a result of the accounting
for the customer warrant programs.
Adjusted revenues (a non-GAAP measure) in the third
quarter 2016 were $1.735 billion as
compared to $1.221 billion for the
third quarter 2015, and the second quarter 2016 revenue of
$1.734 billion. Year to date,
adjusted revenues were $5.084 billion
for 2016 as compared to the first nine months of 2015 adjusted
revenues of $3.697 billion. As
noted above, the adjustments to revenues are non-cash and solely
relate to the accounting for the customer warrant
programs.
A reconciliation of adjusted revenue to GAAP revenue 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 2016 was
$0.25 per diluted share, as compared
to GAAP net income of $0.18 per
diluted share in the third quarter 2015 and a GAAP net income of
$0.44 per diluted share in the second
quarter 2016.
Year to date, GAAP net loss was $(0.37) per diluted share for 2016, as compared
to the first nine months of 2015 GAAP net income of $0.42 per diluted share.
Adjusted net income (a non-GAAP measure) in the third
quarter 2016 was $0.77 per diluted
share, as compared to $0.56 per
diluted share for the third quarter 2015, and the second quarter
2016 adjusted net income of $0.84 per
diluted share.
Year to date, adjusted net income was $2.07 per diluted share for 2016 as compared to
the first nine months of 2015 adjusted net income of $1.53 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).
Cash & Cash Equivalents - The Company ended the third
quarter 2016 with $1.110 billion of
cash resources, as compared to $903
million at the end of the second quarter 2016. The
Company generated $297 million of
cash from operating activities during the third quarter 2016, as
compared to $208 million during the
third quarter 2015. Through the first nine months of 2016,
the Company generated $335 million of
cash from operating activities as compared to $216 million generated during the same period in
2015.
Order backlog at the end of the third quarter 2016 was
$1.034 billion as compared to
$559 million and $1.239 billion at the end of the third quarter
2015 and the second quarter 2016, respectively. The Company's
book-to-bill ratio in the third quarter 2016 was 0.88 as compared
to the third quarter 2015 of 0.92 and the second quarter 2016 of
0.94.
ARRIS management will conduct a conference call at 5:00 pm EDT, today, Wednesday, October 26, 2016, to discuss these
results in detail. You may participate in this conference call by
dialing 888-679-8034 or 617-213-4847 for international calls prior
to the start of the call and providing the ARRIS International plc
name, conference pass code 26216592# 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 9, 2016, by
dialing 888-286-8010 or 617-801-6888 for international calls and
using the pass code 95195329. A replay also will be made available
for a period of 12 months following the conference call on ARRIS'
website at www.arris.com.
Forward-Looking Statements
Statements made in this press release, including those related
to:
- revenues and net income for the fourth quarter 2016;
- integration of the acquired Pace business;
- expected sales levels and acceptance of new ARRIS products;
and
- the general market outlook and industry trends
are forward-looking statements. These statements involve risks
and uncertainties that may cause actual results to differ
materially from those set forth in these statements. Among
other things,
- projected results for the fourth quarter 2016 as well as the
general outlook are based on preliminary estimates, assumptions and
projections that management believes to be reasonable at this time,
but are beyond management's control;
- volatility in the currency fluctuation may adversely impact our
international customer's ability or willingness to purchase
products and the pricing of our products;
- we may fail to realize the expected benefits of the recently
completed Pace acquisition and may incur unknown liabilities;
- impacts of the recent U.K. referendum to leave the European
Union, and the timing with respect to the same, remain largely
unknown and could have an adverse impact on our results of
operations;
- regulatory changes, including those related to tax and the FCC,
could have an adverse impact on our operations and results of
operations;
- the outstanding warrants held by customers will result in
fluctuations in our GAAP revenues and GAAP net income per diluted
share as a result of the required accounting adjustments;
- our 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 we offer;
- because the market in which we operate 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
- recently completed transactions within our customer base,
including the acquisition of Cablevision by Altice, and the
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: rights to intellectual property,
including related litigation; the impact of rapidly changing
technologies; 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 the Company's reports filed with the
Securities and Exchange Commission, including its Form 10-Q for the
quarter ended June 30, 2016. 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.
About ARRIS
ARRIS International plc (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. For more information, visit www.arris.com.
For the latest ARRIS news:
- Check out our blog: ARRIS EVERYWHERE
- Follow us on Twitter: @ARRIS
ARRIS and the ARRIS Logo are trademarks or registered trademarks
of ARRIS Enterprises, LLC. All other trademarks are the property of
their respective owners. © ARRIS Enterprises, LLC. 2016. All rights
reserved.
ARRIS
INTERNATIONAL PLC
|
|
PRELIMINARY
CONSOLIDATED BALANCE SHEETS
|
|
(in
thousands)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
|
2016
|
|
2016
|
|
2016
|
|
2015
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$1,031,978
|
|
$870,992
|
|
$659,181
|
|
$863,582
|
|
$673,346
|
Short-term
investments, at fair value
|
|
67,567
|
|
21,881
|
|
17,069
|
|
15,470
|
|
107,777
|
Total cash, cash
equivalents and short term investments
|
|
1,099,545
|
|
892,873
|
|
676,250
|
|
879,052
|
|
781,123
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable,
net
|
|
1,104,596
|
|
1,053,760
|
|
972,540
|
|
651,893
|
|
647,726
|
Other
receivables
|
|
45,456
|
|
55,698
|
|
31,868
|
|
12,233
|
|
8,684
|
Inventories,
net
|
|
598,105
|
|
647,497
|
|
662,287
|
|
401,592
|
|
367,536
|
Prepaid income
taxes
|
|
30,123
|
|
29,797
|
|
22,349
|
|
25,624
|
|
29,071
|
Prepaids
|
|
30,992
|
|
39,388
|
|
37,285
|
|
19,319
|
|
26,430
|
Current deferred
income tax assets
|
|
-
|
|
-
|
|
-
|
|
-
|
|
104,345
|
Other current
assets
|
|
140,895
|
|
136,177
|
|
123,858
|
|
120,490
|
|
148,385
|
Total current
assets
|
|
3,049,712
|
|
2,855,191
|
|
2,526,437
|
|
2,110,203
|
|
2,113,300
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
352,380
|
|
367,696
|
|
369,255
|
|
312,311
|
|
319,443
|
Goodwill
|
|
2,083,567
|
|
2,089,840
|
|
2,068,274
|
|
1,013,963
|
|
1,016,696
|
Intangible assets,
net
|
|
1,772,243
|
|
1,902,864
|
|
2,036,791
|
|
810,448
|
|
868,054
|
Investments
|
|
80,914
|
|
77,749
|
|
72,115
|
|
69,542
|
|
74,924
|
Noncurrent deferred
income tax assets
|
|
269,011
|
|
224,889
|
|
221,315
|
|
185,439
|
|
70,557
|
Other
assets
|
|
43,989
|
|
21,626
|
|
18,849
|
|
21,610
|
|
26,843
|
|
|
$7,651,816
|
|
$7,539,853
|
|
$7,313,036
|
|
$4,523,516
|
|
$4,489,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$1,010,152
|
|
$1,016,956
|
|
$818,494
|
|
$514,877
|
|
$558,371
|
Accrued compensation,
benefits and related taxes
|
|
123,449
|
|
97,273
|
|
97,346
|
|
111,389
|
|
97,326
|
Accrued
warranty
|
|
56,795
|
|
66,568
|
|
58,812
|
|
27,630
|
|
35,488
|
Deferred
revenue
|
|
160,899
|
|
147,284
|
|
144,603
|
|
137,606
|
|
97,490
|
Current portion of LT
debt & financing lease obligations
|
|
82,762
|
|
94,217
|
|
94,119
|
|
43,591
|
|
43,506
|
Current income taxes
liability
|
|
4,581
|
|
2,892
|
|
65,543
|
|
8,368
|
|
13,139
|
Other accrued
liabilities
|
|
317,638
|
|
262,603
|
|
248,812
|
|
169,169
|
|
168,870
|
Total current
liabilities
|
|
1,756,276
|
|
1,687,793
|
|
1,527,729
|
|
1,012,630
|
|
1,014,190
|
Long-term debt &
financing lease obligations, net of current portion
|
|
2,200,642
|
|
2,221,383
|
|
2,242,071
|
|
1,496,243
|
|
1,507,172
|
Accrued
pension
|
|
51,878
|
|
55,742
|
|
55,287
|
|
64,052
|
|
67,570
|
Noncurrent income
taxes payable
|
|
109,955
|
|
84,694
|
|
68,974
|
|
42,197
|
|
38,145
|
Noncurrent deferred
income tax liabilities
|
|
334,434
|
|
348,378
|
|
385,690
|
|
503
|
|
329
|
Other noncurrent
liabilities
|
|
138,227
|
|
138,013
|
|
126,330
|
|
66,930
|
|
71,560
|
Total
liabilities
|
|
4,591,412
|
|
4,536,004
|
|
4,406,081
|
|
2,682,555
|
|
2,698,966
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
Ordinary
shares
|
|
2,825
|
|
2,834
|
|
-
|
|
-
|
|
-
|
Common
stock
|
|
-
|
|
-
|
|
2,824
|
|
1,790
|
|
1,819
|
Capital in excess of
par value
|
|
3,259,143
|
|
3,227,758
|
|
3,204,853
|
|
1,777,276
|
|
1,762,111
|
Treasury stock at
cost
|
|
-
|
|
-
|
|
-
|
|
(331,329)
|
|
(331,329)
|
Accumulated other
comprehensive loss
|
|
(21,410)
|
|
(28,973)
|
|
(20,476)
|
|
(12,646)
|
|
(20,236)
|
Retained earnings
(deficit)
|
|
(220,296)
|
|
(240,424)
|
|
(324,667)
|
|
358,823
|
|
328,782
|
Total ARRIS
International plc stockholders' equity
|
|
3,020,262
|
|
2,961,195
|
|
2,862,534
|
|
1,793,914
|
|
1,741,147
|
Stockholders' equity
attributable to noncontrolling interest
|
|
40,142
|
|
42,655
|
|
44,421
|
|
47,047
|
|
49,704
|
Total stockholders'
equity
|
|
3,060,404
|
|
3,003,850
|
|
2,906,955
|
|
1,840,961
|
|
1,790,851
|
|
|
$7,651,816
|
|
$7,539,853
|
|
$7,313,036
|
|
$4,523,516
|
|
$4,489,817
|
ARRIS
INTERNATIONAL PLC
|
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,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
Net sales
|
$1,725,145
|
|
$1,221,416
|
|
$5,069,895
|
|
$3,696,650
|
Cost of
sales
|
1,282,295
|
|
862,083
|
|
3,798,278
|
|
2,636,400
|
Gross
margin
|
442,850
|
|
359,333
|
|
1,271,617
|
|
1,060,250
|
Operating
expenses:
|
|
|
|
|
|
|
|
Selling, general, and
administrative expenses
|
112,883
|
|
101,685
|
|
338,593
|
|
309,219
|
Research and
development expenses
|
138,781
|
|
132,204
|
|
452,508
|
|
400,932
|
Amortization of
intangible assets
|
89,042
|
|
57,132
|
|
297,417
|
|
171,062
|
Integration,
acquisition, restructuring and other costs
|
10,831
|
|
7,531
|
|
144,888
|
|
20,996
|
|
351,537
|
|
298,552
|
|
1,233,406
|
|
902,209
|
Operating
income
|
91,313
|
|
60,781
|
|
38,211
|
|
158,041
|
Other expense
(income):
|
|
|
|
|
|
|
|
Interest
expense
|
20,104
|
|
14,749
|
|
58,832
|
|
56,570
|
Loss on
investments
|
5,058
|
|
3,446
|
|
13,406
|
|
6,565
|
Loss on foreign
currency
|
5,729
|
|
10,843
|
|
8,169
|
|
4,204
|
Interest
income
|
(804)
|
|
(513)
|
|
(2,772)
|
|
(1,792)
|
Other expense
(income), net
|
6,723
|
|
(2,827)
|
|
11,592
|
|
5,170
|
Income (loss) before
income taxes
|
54,503
|
|
35,083
|
|
(51,016)
|
|
87,324
|
Income tax
expense
|
8,851
|
|
11,737
|
|
26,069
|
|
29,710
|
Consolidated net
income (loss)
|
45,652
|
|
23,346
|
|
(77,085)
|
|
57,614
|
Net loss attributable
to noncontrolling interests
|
(2,510)
|
|
(2,911)
|
|
(6,902)
|
|
(4,526)
|
Net income (loss)
attributable to ARRIS International plc
|
$48,162
|
|
$26,257
|
|
($70,183)
|
|
$62,140
|
|
|
|
|
|
|
|
|
Net income (loss) per
common share (1):
|
|
|
|
|
|
|
|
Basic
|
$
0.25
|
|
$
0.18
|
|
$
(0.37)
|
|
$
0.43
|
Diluted
|
$
0.25
|
|
$
0.18
|
|
$
(0.37)
|
|
$
0.42
|
|
|
|
|
|
|
|
|
Weighted average
common shares:
|
|
|
|
|
|
|
|
Basic
|
190,515
|
|
146,781
|
|
190,888
|
|
146,146
|
Diluted
|
191,508
|
|
149,313
|
|
190,888
|
|
149,196
|
|
(1) Calculated
based on net income (loss) attributable to shareowners of ARRIS
International plc
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
For the Three
Months
|
|
For the Nine
Months
|
|
|
|
|
|
Ended September
30,
|
|
Ended September
30,
|
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
|
Consolidated net
income (loss)
|
|
$
45,652
|
|
$
23,346
|
|
(77,085)
|
|
$
57,614
|
|
|
Depreciation
|
|
22,770
|
|
17,306
|
|
68,813
|
|
54,243
|
|
|
Amortization of
intangible assets
|
|
90,521
|
|
58,283
|
|
301,828
|
|
173,984
|
|
|
Amortization of
deferred finance fees and debt discount
|
|
1,926
|
|
1,682
|
|
5,790
|
|
7,975
|
|
|
Impairment of
intangible assets
|
|
(100)
|
|
-
|
|
2,200
|
|
-
|
|
|
Deferred income tax
(benefit) provision
|
|
(18,628)
|
|
21,758
|
|
(97,965)
|
|
14,968
|
|
|
Share-based
compensation expense
|
|
17,875
|
|
16,289
|
|
44,052
|
|
46,556
|
|
|
Provision for
non-cash warrants
|
|
9,611
|
|
-
|
|
13,894
|
|
-
|
|
|
Provision for
doubtful accounts
|
|
86
|
|
4
|
|
1,140
|
|
2,253
|
|
|
Loss on disposal of
property, plant & equipment and other
|
|
949
|
|
36
|
|
4,878
|
|
6,058
|
|
|
Loss on
investments
|
|
5,059
|
|
3,446
|
|
13,407
|
|
6,565
|
|
|
Excess tax benefits
from stock-based compensation plans
|
|
(1,206)
|
|
12,488
|
|
(3,560)
|
|
(354)
|
|
Changes in operating
assets & liabilities, net of effects of acquisitions and
disposals:
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
(50,922)
|
|
138,139
|
|
(1,889)
|
|
(50,221)
|
|
|
Other
receivables
|
|
10,242
|
|
3,436
|
|
(3,780)
|
|
749
|
|
|
Inventories
|
|
49,392
|
|
15,762
|
|
231,129
|
|
27,371
|
|
|
Accounts payable and
accrued liabilities
|
|
79,639
|
|
(22,050)
|
|
(247,945)
|
|
6,128
|
|
|
Prepaids and other,
net
|
|
34,058
|
|
(82,032)
|
|
80,246
|
|
(137,402)
|
|
|
|
Net cash provided
by operating activities
|
|
296,924
|
|
207,893
|
|
335,153
|
|
216,487
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
(55,564)
|
|
(8,511)
|
|
(77,812)
|
|
(39,614)
|
|
Sales of
investments
|
|
885
|
|
31,810
|
|
3,326
|
|
61,425
|
|
Purchases of
property, plant and equipment, net
|
|
(16,894)
|
|
(13,377)
|
|
(40,646)
|
|
(37,698)
|
|
Proceeds from
sale-leaseback transaction
|
|
-
|
|
-
|
|
-
|
|
24,960
|
|
Acquisitions, net of
cash acquired
|
|
-
|
|
-
|
|
(340,118)
|
|
(97,905)
|
|
Purchases of
intangible assets
|
|
-
|
|
(3,000)
|
|
(3,310)
|
|
(37,340)
|
|
Other, net
|
|
-
|
|
67
|
|
3,507
|
|
2,971
|
|
|
|
Net cash (used in)
provided by investing activities
|
|
(71,573)
|
|
6,989
|
|
(455,053)
|
|
(123,201)
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from
issuance of debt
|
|
-
|
|
-
|
|
800,000
|
|
-
|
|
Proceeds from
sale-leaseback financing transaction
|
|
-
|
|
-
|
|
-
|
|
58,729
|
|
Payment of accounts
receivable financing facility
|
|
(11,549)
|
|
-
|
|
(23,591)
|
|
-
|
|
Payment of financing
lease obligation
|
|
(198)
|
|
(159)
|
|
(512)
|
|
(264)
|
|
Payment of debt
obligations
|
|
(22,375)
|
|
(12,375)
|
|
(297,375)
|
|
(41,125)
|
|
Payment for deferred
financing fees and debt discount
|
|
-
|
|
-
|
|
(2,304)
|
|
(8,239)
|
|
Repurchase of
shares
|
|
(28,032)
|
|
-
|
|
(178,035)
|
|
(24,999)
|
|
Excess income tax
benefits from stock-based compensation plans
|
|
1,206
|
|
(12,488)
|
|
3,560
|
|
354
|
|
Repurchase of shares
to satisfy employee minimum tax withholdings
|
|
(3,569)
|
|
(7,466)
|
|
(17,762)
|
|
(32,452)
|
|
Proceeds from
issuance of shares, net
|
|
152
|
|
12
|
|
4,315
|
|
8,016
|
|
Contribution from
noncontrolling interest
|
|
-
|
|
-
|
|
-
|
|
54,250
|
|
|
|
Net cash (used in)
provided by financing activities
|
|
(64,365)
|
|
(32,476)
|
|
288,296
|
|
14,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in
cash and cash equivalents
|
|
160,986
|
|
182,406
|
|
168,396
|
|
107,556
|
Cash and cash
equivalents at beginning of period
|
|
870,992
|
|
490,940
|
|
863,582
|
|
565,790
|
Cash and cash
equivalents at end of period
|
|
$
1,031,978
|
|
$
673,346
|
|
$
1,031,978
|
|
$
673,346
|
ARRIS
INTERNATIONAL PLC
|
|
|
|
|
|
|
|
|
PRELIMINARY
SUPPLEMENTAL SALES & NET INCOME RECONCILIATION
|
|
|
|
|
|
|
|
|
(in thousands,
except per share data) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3 2015
|
|
Q2 2016
|
|
Q3 2016
|
|
YTD Sep
2015
|
|
YTD Sep
2016
|
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Net sales
|
$
1,221,416
|
|
|
|
$
1,730,044
|
|
|
|
$
1,725,145
|
|
|
|
$
3,696,650
|
|
|
|
$
5,069,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Highlighted
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction in net
sales related to warrants
|
-
|
|
|
|
4,283
|
|
|
|
9,611
|
|
|
|
-
|
|
|
|
13,894
|
|
|
|
Net sales excluding
highlighted items
|
$
1,221,416
|
|
|
|
$
1,734,327
|
|
|
|
$
1,734,756
|
|
|
|
$
3,696,650
|
|
|
|
$
5,083,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3 2015
|
|
Q2 2016
|
|
Q3 2016
|
|
YTD Sep
2015
|
|
YTD Sep
2016
|
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Net income (loss)
attributable to ARRIS International plc
|
$
26,257
|
|
$
0.18
|
|
$
84,227
|
|
$
0.44
|
|
$
48,162
|
|
$
0.25
|
|
$
62,140
|
|
$
0.42
|
|
$
(70,183)
|
|
$
(0.37)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Highlighted
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impacting gross
margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation
expense
|
2,284
|
|
0.02
|
|
1,997
|
|
0.01
|
|
2,773
|
|
0.01
|
|
6,289
|
|
0.04
|
|
7,009
|
|
0.04
|
|
Reduction in net
sales related to warrants
|
-
|
|
-
|
|
4,283
|
|
0.02
|
|
9,611
|
|
0.05
|
|
-
|
|
-
|
|
13,894
|
|
0.07
|
|
Acquisition
accounting impacts of inventory valuation
|
-
|
|
-
|
|
20,039
|
|
0.10
|
|
493
|
|
-
|
|
-
|
|
-
|
|
50,824
|
|
0.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impacting
operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Integration,
acquisition, restructuring and other costs
|
7,532
|
|
0.05
|
|
43,138
|
|
0.23
|
|
10,831
|
|
0.06
|
|
20,996
|
|
0.14
|
|
144,888
|
|
0.75
|
|
Amortization of
intangible assets
|
57,132
|
|
0.38
|
|
109,883
|
|
0.57
|
|
89,042
|
|
0.46
|
|
171,063
|
|
1.15
|
|
297,417
|
|
1.55
|
|
Stock compensation
expense
|
14,005
|
|
0.09
|
|
9,905
|
|
0.05
|
|
15,102
|
|
0.08
|
|
40,267
|
|
0.27
|
|
37,044
|
|
0.19
|
|
Noncontrolling
interest share of non-GAAP adjustments
|
(791)
|
|
(0.01)
|
|
(776)
|
|
-
|
|
(776)
|
|
-
|
|
(1,590)
|
|
(0.01)
|
|
(2,328)
|
|
(0.01)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impacting other
(income) / expense:
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment on
investments
|
-
|
|
-
|
|
5,000
|
|
0.03
|
|
2,851
|
|
0.01
|
|
150
|
|
-
|
|
7,851
|
|
0.04
|
|
Debt amendment
fees
|
669
|
|
-
|
|
-
|
|
-
|
|
(237)
|
|
-
|
|
15,051
|
|
0.10
|
|
(237)
|
|
-
|
|
Credit facility -
ticking fees
|
678
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
678
|
|
-
|
|
(9)
|
|
-
|
|
Foreign exchange
contract losses related to cash consideration of Pace
acquisition
|
15,429
|
|
0.10
|
|
-
|
|
-
|
|
-
|
|
-
|
|
8,584
|
|
0.06
|
|
1,610
|
|
0.01
|
|
Adjustment to
liability related to foreign tax credit benefits
|
(3,669)
|
|
(0.02)
|
|
|
|
|
|
|
|
|
|
(3,669)
|
|
(0.02)
|
|
-
|
|
-
|
|
France R&D tax
credit
|
-
|
|
-
|
|
-
|
|
-
|
|
4,992
|
|
0.03
|
|
-
|
|
|
|
4,992
|
|
0.03
|
|
Loss on sale of
building
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
5,142
|
|
0.03
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impacting income
tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
Foreign withholding
tax
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
-
|
|
-
|
|
-
|
|
54,741
|
|
0.28
|
|
Net tax
items
|
(35,845)
|
|
(0.24)
|
|
(117,291)
|
|
(0.61)
|
|
(36,140)
|
|
(0.19)
|
|
(96,500)
|
|
(0.65)
|
|
(150,014)
|
|
(0.78)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total highlighted
items
|
57,424
|
|
0.38
|
|
76,178
|
|
0.40
|
|
98,542
|
|
0.51
|
|
166,461
|
|
1.12
|
|
467,682
|
|
2.43
|
|
Net income excluding
highlighted items
|
$
83,681
|
|
$
0.56
|
|
$
160,405
|
|
$
0.84
|
|
$
146,704
|
|
$
0.77
|
|
$
228,601
|
|
$
1.53
|
|
$
397,499
|
|
$
2.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares - basic
|
|
|
146,781
|
|
|
|
190,409
|
|
|
|
190,515
|
|
|
|
146,146
|
|
|
|
190,888
|
|
Weighted average
common shares - diluted
|
|
|
149,313
|
|
|
|
191,250
|
|
|
|
191,508
|
|
|
|
149,196
|
|
|
|
192,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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:
Reduction in Revenue Related to Warrants: We entered into
agreements with customers for the issuance of warrants to purchase
up to 14.0 million of ARRIS' ordinary shares. Vesting of the
warrants is subject to certain purchase volume commitments, and
therefore the accounting guidance requires that we record the
change in the fair value of warrants as a reduction in revenue.
Until final vesting, changes in the fair value of the
warrants will be marked to market and any adjustment recorded in
revenue. 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 gross margin.
Stock-Based Compensation Expense: We have excluded the effect of
stock-based compensation expenses in calculating our non-GAAP
operating expenses and net income (loss) 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 restricted stock units.
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.
Acquisition Accounting Impacts Related to Inventory
Valuation: In connection with the accounting related to our
acquisitions, business combinations rules require the inventory be
recorded at fair value on the opening balance
sheet. This is different from historical
cost. Essentially we are required to write the inventory
up to end customer price less a reasonable margin as a
distributor. We have excluded the resulting adjustments in
inventory and cost of goods sold as the historic and forward gross
margin trends will differ as a result of the adjustments. We
believe it is useful to understand the effects of this on cost of
goods sold and margin.
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 (loss) measures. We
incurred expenses in connection with the ActiveVideo and the Pace
acquisitions, 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 consists of
employee severance and abandoned facilities. 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 (loss) 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: The
joint venture formed with Charter for the acquisition of
ActiveVideo 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 Investments: 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 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.
We have excluded the effect of the associated fees in
calculating our non-GAAP financial measures. We believe it is
useful to understand the effect of this item in our other expense
(income).
Credit Facility - Ticking Fees: In connection with our
acquisition of Pace, 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 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).
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).
France R&D Tax Credit: France R&D tax credits were
recorded as an other asset on the date of our acquisition of Pace,
as Pace France had a history of losses and did not expect to
utilize their R&D Tax Credits against a future France income tax liability. Our
restructuring in France required a
reclassification of the R&D tax credits from other assets to
deferred tax assets prior to the utilization of the tax
credits. This impact of the reclassification was a charge to
other expense with an offsetting tax benefit. We have
excluded the effect of the other expense and tax benefit in the
calculation of our non-GAAP financial measures. We believe it
is useful to understand the effects of this event on our total
other expense (income) and income tax.
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.
Foreign Withholding Tax: In connection with our
acquisition of Pace, ARRIS US Holdings, Inc. transferred shares of
its subsidiary ARRIS Financing II Sarl to ARRIS International
plc. Under U.S. tax law, based on the best available
information, we believe the transfer constituted a deemed
distribution from ARRIS U.S. Holdings Inc. to ARRIS International
plc that is treated as a dividend for U.S. tax purposes. A
deemed dividend of this type is subject to U.S. withholding
tax to the extent of the current and accumulated earnings and
profits (as computed for tax purposes) ("E&P") of ARRIS U.S.
Holdings Inc., which include the E&P of the former ARRIS Group,
Inc. and subsidiaries through December
31, 2016. Accordingly, ARRIS U.S. Holdings Inc.
remitted U.S. withholding tax in the amount of $55 million based upon its estimated E&P of
$1.1 billion and the U.S. dividend
withholding tax rate of 5 percent (as provided in Article 10
(Dividends) of the United Kingdom-United States Tax Treaty).
We have excluded the withholding tax in calculating our non-GAAP
financial measures.
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.
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SOURCE ARRIS