SUWANEE, Ga., Nov. 1, 2017 /PRNewswire/ -- ARRIS
International plc (NASDAQ:ARRS) today announced preliminary
and unaudited financial results for the third quarter 2017.
Third Quarter 2017 Financial Highlights
- GAAP revenues were $1.729
billion
- Adjusted revenues (a non-GAAP measure) were $1.732 billion
- GAAP net income was $0.47 per
diluted share
- Adjusted net income (a non-GAAP measure) was $0.80 per diluted share
- End-of-quarter cash resources were $1.413 billion
- Cash from operating activities was $116
million
- Order backlog was $1.083
billion
- Book-to-bill ratio was 0.86
"We entered the third quarter with good velocity in both of our
segments. In particular, momentum returned with strong demand
for our E6000® Converged Edge Router product line, and I am pleased
with our results. Operators continue to invest in broadband
capacity and connectivity which, combined with our pending Ruckus
Networks acquisition, positions us well to capitalize on service
providers' growth plans. With respect to the fourth quarter
2017, we expect revenues in a range of $1.675 billion to $1.750 billion, GAAP net income
per diluted share of $0.31 to $0.37,
and adjusted net income per diluted share of $0.74 to $0.80, excluding the pending
acquisition. As we have highlighted before, the fourth
quarter is often the most difficult to forecast, and that
variability is reflected in our guidance," said Bruce McClelland, ARRIS CEO.
GAAP revenues in the third quarter 2017 of $1.729 billion were up $4
million, or 0.2%, as compared to third quarter 2016 revenues
of $1.725 billion. Third
quarter 2017 revenues were up $65
million, or 4%, as compared to second quarter 2017 revenues
of $1.664 billion. Through the first
three quarters of 2017, revenues of $4.876
billion were down $194
million, or 4%, as compared to the first three quarters of
2016 revenues of $5.070
billion.
Adjusted revenues (a non-GAAP measure) in the third
quarter 2017 were $1.732 billion as
compared to $1.735 billion for the
third quarter 2016, and the second quarter 2017 revenue of
$1.667 billion. Year to date,
adjusted revenues were $4.884 billion
for 2017 as compared to the first nine months of 2016 adjusted
revenues of $5.084 billion.
Adjusted revenues reflect a $3
million increase for the third quarter 2017 and an
$8 million increase for the nine
months ended September 30, 2017, as a
result of the accounting for customer warrant programs. The
adjustments to revenues are non-cash in nature.
A reconciliation of adjusted revenue to GAAP revenue is attached
to this release and can be found on the Company's website
(www.arris.com).
GAAP net income in the third quarter 2017 was
$0.47 per diluted share, as compared
to GAAP net income of $0.25 per
diluted share in the third quarter 2016 and GAAP net income of
$0.16 per diluted share in the second
quarter 2017.
Year to date, GAAP net income is $0.42 per diluted share for 2017, as compared to
the first nine months of 2016 GAAP net loss of $(0.37) per diluted share.
Adjusted net income (a non-GAAP measure) in the third
quarter 2017 was $0.80 per diluted
share, as compared to $0.77 per
diluted share for the third quarter 2016, and the second quarter
2017 adjusted net income of $0.63 per
diluted share.
Year to date, adjusted net income was $1.83 per diluted share for 2017 as compared to
the first nine months of 2016 adjusted net income of $2.07 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 2017 with $1.413 billion of
cash resources, as compared to $1.385
billion at the end of the second quarter 2017. The
Company generated $116 million of
cash from operating activities during the third quarter 2017, as
compared to $289 million during the
third quarter 2016. Through the first nine months of 2017,
the Company generated $612 million of
cash from operating activities as compared to $327 million generated during the same period in
2016.
The Company purchased 0.7 million ordinary shares for
$20 million during the third quarter
of 2017. Through the first nine months of 2017 the Company
has purchased 5.7 million ordinary shares for $147 million. As of September 30, the Company had $275 million remaining in available repurchase
authorization.
Order backlog at the end of the third quarter 2017 was
$1.083 billion as compared to
$1.034 billion and $1.326 billion at the end of the third quarter
2016 and the second quarter 2017, respectively. The Company's
book-to-bill ratio in the third quarter 2017 was 0.86 as compared
to the third quarter 2016 of 0.88 and the second quarter 2017 of
1.01.
ARRIS management will conduct a conference call at 5:00 pm EDT, today, Wednesday, November 1, 2017, to discuss these
results in detail. You may participate in this conference call by
dialing 1-888-655-5028 or 1-503-343-6025 for international calls
prior to the start of the call. 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 8, 2017, by dialing
1-855-859-2056 or 1-404-537-3406 for international calls and using
the pass code 1483380. A replay also will be made available for a
period of 12 months following the conference call on the 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 2017, the
proposed acquisition of the Ruckus Networks business, component
pricing, 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 2017, are based on
preliminary estimates, assumptions and projections that management
believes to be reasonable at this time, but are beyond management's
control;
- the proposed acquisition of the Ruckus Networks business may
not be completed as a result of failure to obtain regulatory
approvals or other reasons and, if completed, the anticipated
benefits from the Ruckus Networks acquisition may not be
realized;
- we may encounter significant transaction costs and unknown
liabilities in connection with the Ruckus Networks
acquisition;
- volatility in currency fluctuation may adversely impact our
international customers' ability or willingness to purchase
products and the pricing of our products;
- volatility in component pricing and supply could impact
revenues and gross margins more than currently anticipated;
- impacts of the U.K. invoking Article 50 of the Lisbon
Treaty to leave the European Union, could have an adverse impact on
our results of operations;
- regulatory changes, including those related to tax, could have
an adverse impact on our operations and results of operations;
- the impact of litigation and similar regulatory proceedings
that we are involved in or may become involved in, including the
costs of such litigation; and
- 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.
These factors are not intended to be an all-encompassing list of
risks and uncertainties that may affect the Company's business and
results from operations. 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, 2017. In providing forward-looking
statements, the Company expressly disclaims any obligation to
update these statements publicly or otherwise, whether as a result
of new information, future events or otherwise, except as required
by law.
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. © 2017 ARRIS Enterprises, LLC. All rights
reserved.
|
ARRIS
INTERNATIONAL PLC
|
|
|
PRELIMINARY
CONSOLIDATED BALANCE SHEETS
|
|
|
(in
thousands)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
|
|
2017
|
|
2017
|
|
2017
|
|
2016
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$1,379,827
|
|
$1,346,028
|
|
$1,126,248
|
|
$980,123
|
|
$1,031,978
|
|
Short-term
investments, at fair value
|
|
33,309
|
|
38,759
|
|
90,673
|
|
115,554
|
|
67,568
|
|
Total cash, cash
equivalents and short term investments
|
|
1,413,136
|
|
1,384,787
|
|
1,216,921
|
|
1,095,677
|
|
1,099,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable,
net
|
|
1,056,225
|
|
991,539
|
|
1,018,108
|
(1)
|
1,359,430
|
|
1,104,596
|
|
Other
receivables
|
|
145,658
|
|
132,742
|
|
109,117
|
(1)
|
73,193
|
|
45,456
|
|
Inventories,
net
|
|
775,142
|
|
657,881
|
|
556,264
|
|
551,541
|
|
598,105
|
|
Prepaid income
taxes
|
|
41,780
|
|
16,354
|
|
21,845
|
|
51,476
|
|
30,123
|
|
Prepaids
|
|
27,954
|
|
32,149
|
|
27,898
|
|
21,163
|
|
30,992
|
|
Other current
assets
|
|
109,567
|
|
119,406
|
|
132,340
|
|
127,593
|
|
140,894
|
|
Total current
assets
|
|
3,569,462
|
|
3,334,857
|
|
3,082,491
|
|
3,280,072
|
|
3,049,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
347,506
|
|
355,033
|
|
354,050
|
|
353,378
|
|
352,380
|
|
Goodwill
|
|
2,016,580
|
|
2,014,550
|
|
2,018,012
|
|
2,016,169
|
|
2,083,567
|
|
Intangible assets,
net
|
|
1,406,592
|
|
1,491,103
|
|
1,586,187
|
|
1,677,178
|
|
1,772,243
|
|
Investments
|
|
73,199
|
|
61,047
|
|
65,035
|
|
72,932
|
|
80,914
|
|
Noncurrent deferred
income tax assets
|
|
193,703
|
|
199,102
|
|
190,037
|
|
298,757
|
|
269,011
|
|
Other
assets
|
|
57,246
|
|
54,843
|
|
58,920
|
|
59,878
|
|
43,990
|
|
|
|
$7,664,287
|
|
$7,510,535
|
|
$7,354,732
|
|
$7,758,362
|
|
$7,651,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$1,266,214
|
|
$1,201,883
|
|
$1,020,234
|
|
$1,048,904
|
|
$1,010,152
|
|
Accrued compensation,
benefits and related taxes
|
|
102,222
|
|
81,356
|
|
73,221
|
|
139,795
|
|
123,449
|
|
Accrued
warranty
|
|
45,036
|
|
44,812
|
|
46,330
|
|
49,618
|
|
56,795
|
|
Deferred
revenue
|
|
118,598
|
|
130,454
|
|
145,197
|
|
132,128
|
|
160,899
|
|
Current portion of LT
debt & financing lease obligations
|
|
89,156
|
|
89,336
|
|
82,767
|
|
82,734
|
|
82,762
|
|
Current income taxes
liability
|
|
4,420
|
|
9,487
|
|
20,278
|
|
23,134
|
|
1,434
|
|
Other accrued
liabilities
|
|
327,099
|
|
303,013
|
|
300,861
|
|
357,823
|
|
317,638
|
|
Total current
liabilities
|
|
1,952,745
|
|
1,860,341
|
|
1,688,888
|
|
1,834,135
|
|
1,753,129
|
|
Long-term debt &
financing lease obligations, net of current portion
|
|
2,112,494
|
|
2,134,506
|
|
2,159,300
|
|
2,180,009
|
|
2,200,642
|
|
Accrued
pension
|
|
54,867
|
|
55,532
|
|
54,808
|
|
52,652
|
|
51,878
|
|
Noncurrent income
taxes payable
|
|
115,433
|
|
114,187
|
|
120,493
|
|
123,344
|
|
109,955
|
|
Noncurrent deferred
income tax liabilities
|
|
83,058
|
|
83,516
|
|
89,261
|
|
223,529
|
|
337,582
|
|
Other noncurrent
liabilities
|
|
118,420
|
|
120,381
|
|
112,977
|
|
117,957
|
|
138,227
|
|
Total
liabilities
|
|
4,437,018
|
|
4,368,462
|
|
4,225,727
|
|
4,531,626
|
|
4,591,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary
shares
|
|
2,788
|
|
2,786
|
|
2,802
|
|
2,831
|
|
2,825
|
|
Capital in excess of
par value
|
|
3,367,940
|
|
3,356,184
|
|
3,322,803
|
|
3,314,707
|
|
3,259,143
|
|
Accumulated other
comprehensive loss
|
|
8,838
|
|
2,211
|
|
10,628
|
|
3,291
|
|
(21,410)
|
|
Retained earnings
(deficit)
|
|
(188,375)
|
|
(256,705)
|
|
(243,207)
|
|
(132,013)
|
|
(220,296)
|
|
Total ARRIS International plc stockholders' equity
|
|
3,191,191
|
|
3,104,474
|
|
3,093,026
|
|
3,188,816
|
|
3,020,263
|
|
Stockholders' equity
attributable to noncontrolling interest
|
|
36,078
|
|
37,599
|
|
35,979
|
|
37,921
|
|
40,141
|
|
Total stockholders'
equity
|
|
3,227,269
|
|
3,142,073
|
|
3,129,005
|
|
3,226,737
|
|
3,060,404
|
|
|
|
$7,664,287
|
|
$7,510,535
|
|
$7,354,732
|
|
$7,758,362
|
|
$7,651,816
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The presentation of
accounts receivable and other receivables has been revised as of
March 31, 2017, to classify approximately $51 million of other
receivable previously reflected in trade accounts
receivable.
|
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,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
Net sales
|
$1,728,524
|
|
$1,725,145
|
|
$4,875,799
|
|
$5,069,895
|
Cost of
sales
|
1,297,369
|
|
1,282,295
|
|
3,704,029
|
|
3,798,278
|
Gross
margin
|
431,155
|
|
442,850
|
|
1,171,770
|
|
1,271,617
|
Operating
expenses:
|
|
|
|
|
|
|
|
Selling, general, and
administrative expenses
|
114,407
|
|
112,883
|
|
332,966
|
|
338,593
|
Research and
development expenses
|
131,593
|
|
138,781
|
|
397,653
|
|
452,508
|
Amortization of
intangible assets
|
90,162
|
|
89,042
|
|
274,819
|
|
297,417
|
Integration,
acquisition, restructuring and other costs
|
10,836
|
|
10,831
|
|
30,622
|
|
144,888
|
|
346,998
|
|
351,537
|
|
1,036,060
|
|
1,233,406
|
Operating
income
|
84,157
|
|
91,313
|
|
135,710
|
|
38,211
|
Other expense
(income):
|
|
|
|
|
|
|
|
Interest
expense
|
20,211
|
|
20,104
|
|
63,238
|
|
58,832
|
Loss (gain) on
investments
|
839
|
|
5,058
|
|
8,978
|
|
13,406
|
Loss (gain) on
foreign currency
|
(8,543)
|
|
5,729
|
|
5,570
|
|
8,169
|
Interest
income
|
(2,288)
|
|
(804)
|
|
(5,997)
|
|
(2,772)
|
Other (income)
expense, net
|
1,434
|
|
6,723
|
|
2,275
|
|
11,592
|
Income (loss) before
income taxes
|
72,503
|
|
54,502
|
|
61,646
|
|
(51,016)
|
Income tax (benefit)
expense
|
(14,311)
|
|
8,851
|
|
(12,613)
|
|
26,069
|
Consolidated net
income (loss)
|
86,815
|
|
45,651
|
|
74,258
|
|
(77,085)
|
Net loss attributable
to noncontrolling interests
|
(1,505)
|
|
(2,510)
|
|
(5,299)
|
|
(6,902)
|
Net income (income)
attributable to ARRIS International plc
|
$88,320
|
|
$48,161
|
|
$79,558
|
|
($70,183)
|
|
|
|
|
|
|
|
|
Net income (loss) per
ordinary share (1):
|
|
|
|
|
|
|
|
Basic
|
$
0.47
|
|
$
0.25
|
|
$
0.42
|
|
$
(0.37)
|
Diluted
|
$
0.47
|
|
$
0.25
|
|
$
0.42
|
|
$
(0.37)
|
|
|
|
|
|
|
|
|
Weighted average
ordinary shares:
|
|
|
|
|
|
|
|
Basic
|
187,064
|
|
190,515
|
|
187,878
|
|
190,888
|
Diluted
|
188,941
|
|
191,508
|
|
190,264
|
|
190,888
|
|
|
|
|
|
|
|
|
(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,
|
|
|
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
|
|
Consolidated net
income (loss)
|
|
|
$
86,815
|
|
$
45,652
|
|
$
74,258
|
|
$
(77,085)
|
|
|
Depreciation
|
|
|
22,337
|
|
22,770
|
|
65,340
|
|
68,813
|
|
|
Amortization of
intangible assets
|
|
|
91,983
|
|
90,521
|
|
279,961
|
|
301,828
|
|
|
Amortization of
deferred finance fees and debt discount
|
|
|
1,730
|
|
1,926
|
|
5,621
|
|
5,790
|
|
|
Impairment of
intangibles
|
|
|
-
|
|
(100)
|
|
-
|
|
2,200
|
|
|
Deferred income tax
(benefit) provision
|
|
|
983
|
|
(15,481)
|
|
(36,540)
|
|
(94,818)
|
|
|
Foreign currency
remeasurement of certain income tax accounts
|
|
|
2,979
|
|
-
|
|
10,170
|
|
-
|
|
|
Share-based
compensation expense
|
|
|
20,213
|
|
17,875
|
|
61,953
|
|
44,052
|
|
|
Provision for
non-cash warrants
|
|
|
3,064
|
|
9,611
|
|
8,145
|
|
13,894
|
|
|
Provision for
doubtful accounts
|
|
|
(311)
|
|
86
|
|
(559)
|
|
1,140
|
|
|
Loss on disposal of
plant, property and equipment and other
|
|
|
4,286
|
|
949
|
|
5,876
|
|
4,878
|
|
|
Loss/impairment on
investments
|
|
|
838
|
|
5,059
|
|
8,977
|
|
13,407
|
|
|
Excess tax benefits
from stock-based compensation plans
|
|
|
-
|
|
(1,206)
|
|
-
|
|
(3,560)
|
|
Changes in operating
assets & liabilities, net of effects of acquisitions and
disposals:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(62,808)
|
|
(50,922)
|
|
305,212
|
(1)
|
(1,889)
|
|
|
Other
receivables
|
|
|
(12,916)
|
|
10,242
|
|
(72,465)
|
(1)
|
(3,780)
|
|
|
Inventory
|
|
|
(115,892)
|
|
49,392
|
|
(222,733)
|
|
231,129
|
|
|
Accounts payable and
accrued liabilities
|
|
|
96,454
|
|
79,639
|
|
133,335
|
|
(247,945)
|
|
|
Prepaids and other,
net
|
|
|
(23,932)
|
|
22,954
|
|
(14,939)
|
|
69,142
|
|
|
|
Net cash provided
by operating activities
|
|
|
115,823
|
|
288,967
|
|
611,612
|
|
327,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
|
(6,000)
|
|
(47,607)
|
|
(68,250)
|
|
(69,855)
|
|
Sales of
investments
|
|
|
5,000
|
|
885
|
|
155,301
|
|
3,326
|
|
Purchases of
property, plant & equipment, net
|
|
|
(19,489)
|
|
(16,894)
|
|
(62,389)
|
|
(40,646)
|
|
Proceeds from
sale-leaseback transaction
|
|
|
-
|
|
-
|
|
826
|
|
-
|
|
Acquisitions, net of
cash acquired
|
|
|
-
|
|
-
|
|
-
|
|
(340,118)
|
|
Purchases of
intangible assets
|
|
|
(6,000)
|
|
-
|
|
(6,422)
|
|
(3,310)
|
|
Other, net
|
|
|
-
|
|
-
|
|
-
|
|
3,507
|
|
|
|
Net cash (used in)
provided by investing activities
|
|
|
(26,489)
|
|
(63,616)
|
|
19,066
|
|
(447,096)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds from
issuance of debt
|
|
|
-
|
|
-
|
|
30,314
|
|
800,000
|
|
Payment of accounts
receivable financing facility
|
|
|
-
|
|
(11,549)
|
|
-
|
|
(23,546)
|
|
Payment of financing
lease obligation
|
|
|
(185)
|
|
(198)
|
|
(590)
|
|
(557)
|
|
Payment of debt
obligations
|
|
|
(23,737)
|
|
(22,375)
|
|
(98,976)
|
|
(297,375)
|
|
Payment for deferred
financing costs and debt discount
|
|
|
-
|
|
-
|
|
(1,462)
|
|
(2,304)
|
|
Repurchase of
shares
|
|
|
(20,000)
|
|
(28,032)
|
|
(146,965)
|
|
(178,035)
|
|
Excess income tax
benefits from stock-based compensation plans
|
|
|
-
|
|
1,206
|
|
-
|
|
3,560
|
|
Repurchase of shares
to satisfy employee minimum tax withholdings
|
|
|
(12,477)
|
|
(3,569)
|
|
(26,359)
|
|
(17,762)
|
|
Proceeds from
issuance of shares, net
|
|
|
70
|
|
152
|
|
8,623
|
|
4,315
|
|
Contribution from
noncontrolling interest
|
|
|
-
|
|
-
|
|
3,500
|
|
-
|
|
|
|
Net cash (used in)
provided by financing activities
|
|
|
(56,329)
|
|
(64,365)
|
|
(231,915)
|
|
288,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
|
794
|
|
-
|
|
941
|
|
-
|
Net increase in
cash and cash equivalents
|
|
|
33,799
|
|
160,986
|
|
399,704
|
|
168,396
|
Cash and cash
equivalents at beginning of period
|
|
|
1,346,028
|
|
870,992
|
|
980,123
|
|
863,582
|
Cash and cash
equivalents at end of period
|
|
|
$
1,379,827
|
|
$
1,031,978
|
|
$
1,379,827
|
|
$
1,031,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The presentation of
accounts receivable and other receivables has been revised as of
March 31, 2017, to classify approximately $51 million of other
receivable previously reflected in trade accounts
receivable.
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
ADJUSTED SALES & NET INCOME RECONCILIATION
|
(in thousands,
except per share data) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3
2016
|
|
Q2
2017
|
|
Q3
2017
|
|
SEPT YTD
2016
|
|
SEPT YTD
2017
|
|
|
Amount
|
Per Diluted
Share
|
|
Amount
|
Per Diluted
Share
|
|
Amount
|
Per Diluted
Share
|
|
Amount
|
Per Diluted
Share
|
|
Amount
|
Per
Diluted
Share
|
|
Sales
|
$1,725,145
|
|
|
$1,664,170
|
|
|
$1,728,524
|
|
|
$5,069,895
|
|
|
$4,875,799
|
|
|
Highlighted
items:
Reduction in revenue related to
warrants
|
9,611
|
|
|
2,658
|
|
|
3,064
|
|
|
13,894
|
|
|
8,145
|
|
|
Adjusted
sales
|
$1,734,756
|
|
|
$1,666,828
|
|
|
$1,731,588
|
|
|
$5,083,789
|
|
|
$4,883,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to ARRIS International plc
|
$
48,162
|
$
0.25
|
|
$
30,336
|
$
0.16
|
|
$
88,320
|
$
0.47
|
|
$
(70,183)
|
$
(0.37)
|
|
$
79,558
|
$
0.42
|
|
Highlighted
Items:
Impacting gross margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation
expense
|
2,773
|
0.01
|
|
3,495
|
0.02
|
|
3,897
|
0.02
|
|
7,009
|
0.04
|
|
10,644
|
0.06
|
|
Reduction in revenue
related to warrants
|
9,611
|
0.05
|
|
2,658
|
0.01
|
|
3,064
|
0.02
|
|
13,894
|
0.07
|
|
8,145
|
0.04
|
|
Acquisition
accounting impacts of fair valuing inventory
|
493
|
0.00
|
|
–
|
–
|
|
–
|
–
|
|
50,824
|
0.26
|
|
908
|
0.00
|
|
Impacting
operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Integration,
acquisition, restructuring and other costs
|
10,831
|
0.06
|
|
9,690
|
0.05
|
|
10,836
|
0.06
|
|
144,888
|
0.75
|
|
30,621
|
0.16
|
|
Amortization of
intangible assets
|
89,042
|
0.46
|
|
91,012
|
0.48
|
|
90,162
|
0.48
|
|
297,417
|
1.55
|
|
274,819
|
1.44
|
|
Stock compensation
expense
|
15,102
|
0.08
|
|
18,829
|
0.10
|
|
16,316
|
0.09
|
|
37,044
|
0.19
|
|
51,308
|
0.27
|
|
Noncontrolling
interest share of non-GAAP adj
|
(776)
|
–
|
|
(811)
|
–
|
|
(711)
|
–
|
|
(2,328)
|
(0.01)
|
|
(2,326)
|
(0.01)
|
|
Impacting other
(income)/expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment (gain) on
investments
|
2,851
|
0.01
|
|
–
|
–
|
|
(1,821)
|
(0.01)
|
|
7,851
|
0.04
|
|
929
|
0.00
|
|
Debt amendment
fees
|
(237)
|
–
|
|
2,782
|
0.01
|
|
–
|
–
|
|
(237)
|
–
|
|
2,782
|
0.01
|
|
Credit facility -
ticking fees
|
–
|
–
|
|
–
|
–
|
|
–
|
–
|
|
(9)
|
–
|
|
–
|
–
|
|
FX contract losses
related to cash consideration of Pace acquisition
|
–
|
–
|
|
–
|
–
|
|
–
|
–
|
|
1,610
|
0.01
|
|
–
|
–
|
|
Remeasurement of
certain deferred tax liabilities
|
–
|
–
|
|
2,828
|
0.01
|
|
3,569
|
0.02
|
|
–
|
–
|
|
8,508
|
0.04
|
|
France R&D tax
credit
|
4,992
|
0.03
|
|
–
|
–
|
|
–
|
–
|
|
4,992
|
0.03
|
|
–
|
–
|
|
Impacting income
tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign withholding
tax
|
–
|
–
|
|
–
|
–
|
|
–
|
–
|
|
54,741
|
0.28
|
|
–
|
–
|
|
Net tax
items
|
(36,140)
|
(0.19)
|
|
(40,937)
|
(0.22)
|
|
(62,698)
|
(0.33)
|
|
(150,014)
|
(0.78)
|
|
(116,884)
|
(0.61)
|
|
Total highlighted
items
|
98,542
|
0.51
|
|
89,546
|
0.47
|
|
62,614
|
0.33
|
|
467,682
|
2.43
|
|
269,454
|
1.42
|
|
Adjusted net
income
|
$
146,704
|
$
0.77
|
|
$
119,882
|
$
0.63
|
|
$
150,934
|
$
0.80
|
|
$
397,499
|
$
2.07
|
|
$
349,012
|
$
1.83
|
|
Weighted average
ordinary shares - basic
|
|
190,515
|
|
|
186,803
|
|
|
187,064
|
|
|
190,888
|
|
|
187,878
|
|
Weighted average
ordinary shares - diluted
|
|
191,508
|
|
|
189,002
|
|
|
188,941
|
|
|
192,115
|
|
|
190,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
SUPPLEMENTAL GAAP TO ADJUSTED SALES & GROSS MARGIN
RECONCILIATION
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Q3
2016
|
|
Q2
2017
|
|
Q3
2017
|
|
Sep YTD
2016
|
|
Sep YTD
2017
|
Sales -
GAAP
|
1,725,145
|
|
1,664,170
|
|
1,728,524
|
|
5,069,890
|
|
4,875,799
|
Fair Value of
Warrants Adjustment
|
9,611
|
|
2,658
|
|
3,064
|
|
13,894
|
|
8,145
|
Adjusted Sales - Non-
GAAP
|
1,734,756
|
|
1,666,828
|
|
1,731,587
|
|
5,083,785
|
|
4,883,946
|
|
|
|
|
|
|
|
|
|
|
GAAP Gross
Margin
|
442,850
|
|
403,357
|
|
431,155
|
|
1,271,611
|
|
1,171,770
|
Fair Value of
Inventory Adjustment
|
494
|
|
-
|
|
-
|
|
50,825
|
|
908
|
Equity
Compensation
|
2,773
|
|
3,495
|
|
3,897
|
|
7,008
|
|
10,644
|
Fair Value of
Warrants Adjustment
|
9,611
|
|
2,658
|
|
3,064
|
|
13,894
|
|
8,145
|
Adjusted Gross Margin
- Non-GAAP
|
455,727
|
|
409,511
|
|
438,116
|
|
1,343,339
|
|
1,191,467
|
|
|
|
|
|
|
|
|
|
|
GAAP Gross Margin -
%
|
25.7%
|
|
24.2%
|
|
24.9%
|
|
25.1%
|
|
24.0%
|
Adjusted Gross Margin
- Non-GAAP - %
|
26.3%
|
|
24.6%
|
|
25.3%
|
|
26.4%
|
|
24.4%
|
|
|
|
|
|
|
|
|
|
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
SUPPLEMENTAL GAAP TO ADJUSTED SALES & DIRECT CONTRIBUTION
RECONCILIATION
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
Q3
2017
|
|
Network
&
Cloud
|
CPE
|
Corp/
Other
|
Total
|
Net Sales
|
556,863
|
1,174,725
|
(3,064)
|
1,728,524
|
Non GAAP Adjustments
(1)
|
-
|
-
|
3,064
|
3,064
|
Adjusted Net
Sales
|
556,863
|
1,174,725
|
(0)
|
1,731,587
|
|
|
|
|
|
Direct
Contribution(2)
|
218,995
|
132,168
|
(166,007)
|
185,156
|
Non GAAP Adjustments
(3)
|
-
|
-
|
23,277
|
23,277
|
Adjusted Direct
Contribution
|
218,995
|
132,168
|
(142,730)
|
208,433
|
Direct Contribution %
of sales
|
39.3%
|
11.3%
|
|
12.0%
|
|
|
|
|
|
(1) Impact of
warrants adjustment.
|
(2) Defined as gross
margin less direct operating expenses, excluding amortization of
intangible assets, restructuring charges, acquisition, integration
and other costs.
|
(3) Equity
compensation expense and warrants adjustment.
|
ARRIS
INTERNATIONAL PLC
|
|
PRELIMINARY
SUPPLEMENTAL GAAP TO ADJUSTED EPS GUIDANCE RECONCILIATION
(2)
|
|
(in millions,
except per share data)
|
|
|
|
|
|
Q4 2017
Guidance
|
|
|
|
|
Estimated GAAP Sales
- $M
|
1,670 -
1,745
|
|
Warrants - $M
(1)
|
5
|
|
Estimated Adjusted
(Non-GAAP) Sales - $M
|
1,675 -
1,750
|
|
|
|
|
|
|
|
Estimated GAAP
EPS
|
$ 0.31 - $
0.37
|
|
Reconciling
Items:
|
|
|
Amortization of
Intangibles
|
0.48
|
|
Stock Compensation
Expense
|
0.10
|
|
Integration and Other
Costs
|
0.09
|
|
Warrants
(1)
|
0.02
|
|
Net tax
items
|
(0.26)
|
|
Subtotal
|
0.43
|
|
Estimated Adjusted
(Non-GAAP) EPS
|
$ 0.74 - $
0.80
|
|
(1) GAAP
sales and EPS will be impacted by the fair value of warrants issued
which can vary depending upon the ultimate volumes, product mix and
fair value calculation.
|
|
(2)
Excludes pending Ruckus Acquisition
|
|
|
|
|
|
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
two customers for the issuance of warrants to purchase up to
14.0 million of ARRIS's ordinary shares. Vesting of the
warrants is subject to certain purchase volume commitments, and
therefore the accounting guidance requires that we record any
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 acquired 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 Costs 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, Pace Combination and pending Ruckus Networks
acquisition, 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 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 for the ActiveVideo acquisition is accounted for by
ARRIS under the consolidation method. As a result, the
consolidated statements 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 venture, as we believe it is useful to understand the effect
of excluding this item when evaluating our ongoing
performance.
Impairment (Gain) on Investments: We have
excluded the effects of other-than-temporary impairments and
certain gains on investments 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 2017, the Company amended
its credit agreement. This debt modification allowed us to
improve the terms and conditions of the credit agreement and extend
the maturitity of the Term Loan B. 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 interest expense.
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 was
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 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).
Remeasurement of Certain Deferred Tax
Liabilities: The Company recorded a foreign
currency remeasurement (gain) loss related to a deferred income tax
liability, in the United Kingdom,
arising from the assignment of intangibles acquired in the Pace
acquisition. This deferred income tax liability is denominated in
GBP. The foreign currency remeasurement gain derives from the
remeasurement of the GBP deferred income tax liability to the USD,
since the date of the acquisition. We have excluded the impact of
this gain in the calculation of our non-GAAP measures. We believe
it is useful to understand the effect of this item on our total
other expense (income).
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