SUWANEE, Ga., Feb. 14, 2018 /PRNewswire/ -- ARRIS
International plc (NASDAQ: ARRS) today announced preliminary
and unaudited financial results for the fourth quarter and full
year 2017.
Fourth Quarter 2017 Financial Highlights
- Revenues were $1.739 billion
- GAAP net income was $0.07 per
diluted share
- Adjusted net income (a non-GAAP measure) was $0.88 per diluted share
- End-of-quarter cash resources were $511
million
- $50 million of share
repurchases
- $822 million of cash resources
used to complete Ruckus Networks acquisition
- Order backlog was $1.1
billion
- Book-to-bill ratio was 1.02
"Our strong fourth quarter results capped a year in which we
made important strategic and financial strides in positioning ARRIS
for long-term profitable growth," said Bruce McClelland, ARRIS CEO. "A favorable
product mix helped drive record quarterly non-GAAP earnings, and we
achieved sequential profitability improvement throughout the year,
while returning nearly $200 million
in capital to shareholders via share repurchases. The
recently closed Ruckus acquisition is already contributing to
results and creates a more compelling, diversified platform for
growth as we deliver innovative connectivity solutions across the
enterprise and service provider markets."
"With respect to the first quarter 2018, we are estimating
revenues in the range of $1.575
billion to $1.625
billion. We expect GAAP net loss per diluted share in
the range of $(0.43) to $(0.38) and adjusted net income per diluted share
in the range of $0.50 to $0.55. For full year 2018, we expect
revenues to be in the range of $7.100
billion to $7.350 billion,
GAAP net income per diluted share in the range of $0.48 to $0.73, and
adjusted net income per diluted share to be in the range of
$2.80 to $3.05. We expect our 2018 performance to be
driven by our new Enterprise segment, expanded Network and Cloud
share, growing international sales, and continued shift to
broadband in our CPE business."
ARRIS will host its 2018 Investor Day on Wednesday, March 28, 2018 at The Westin New York
at Times Square. Registration for the event can
be found at the Company's website in the Investor Relations
section.
Revenues in the fourth quarter 2017 of $1.739 billion were down $20 million, or 1%, as compared to fourth quarter
2016 revenues of $1.759
billion. Fourth quarter 2017 revenues were up
$10 million, or 1%, as compared to
third quarter 2017 revenues of $1.729
billion. Full year 2017 revenues were $6.614 billion, down $215
million, or 3%, as compared to the full year 2016 revenues
of $6.829 billion.
GAAP net income in the fourth quarter 2017 was
$0.07 per diluted share, as compared
to GAAP net income of $0.46 per
diluted share in the fourth quarter 2016 and a GAAP net income of
$0.47 per diluted share in the third
quarter 2017.
Full year 2017 GAAP net income was $0.49 per diluted share, as compared to 2016 GAAP
net income of $0.09 per diluted
share.
Adjusted net income (a non-GAAP measure) in the fourth
quarter 2017 was $0.88 per diluted
share, as compared to $0.79 per
diluted share for the fourth quarter 2016, and third quarter 2017
adjusted net income of $0.80 per
diluted share.
Adjusted net income was $2.72 per
diluted share for 2017 as compared to 2016 adjusted net income of
$2.86 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
can be found on the Company's website (www.arris.com).
Cash & Cash Equivalents - The Company ended the
fourth quarter 2017 with $511 million
of cash resources, as compared to $1.413
billion at the end of the third quarter 2017.
The Company used $822 million of
cash resources to acquire the Ruckus Networks business and cash-out
unvested equity awards held by transferring employees during the
fourth quarter 2017, as required by the purchase
agreement.
The Company repurchased 1.9 million ordinary shares for
$50 million during the fourth quarter
of 2017. For full year 2017, the Company repurchased 7.5
million ordinary shares for $197
million. As of December 31,
2017, the Company had $225
million remaining in available repurchase authorization.
The Company consumed $77.8 million
of cash in operating activities during the fourth quarter 2017,
including $61.5 million of employee
equity payouts as part of the Ruckus Networks acquisition.
This compares to $35.3 million
generated during the fourth quarter 2016. For full year 2017, the
Company generated $534 million of
cash from operating activities as compared to $362 million generated during the full year
2016.
Order backlog at the end of the fourth quarter 2017 was
$1.121 billion as compared to
$1.106 billion and $1.083 billion at the end of the fourth quarter
2016 and the third quarter 2017, respectively. The Company's
book-to-bill ratio in the fourth quarter 2017 was 1.02 as compared
to the fourth quarter 2016 of 1.04 and the third quarter 2017 of
0.86.
ARRIS management will conduct a conference call at 5:00 pm EDT, today, Wednesday, February 14, 2018, to discuss fourth
quarter 2017 results and first quarter and full year 2018 guidance.
You may participate in this conference call by dialing 888-655-5028
or 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 February 21, 2018, by dialing 855-859-2056 or
404-537-3406 for international calls and using the pass code
9197819. 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 first quarter and full year
2018, growth expectations, cost initiatives, 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 first quarter and full year 2018 are
based on preliminary estimates, assumptions and projections that
management believes to be reasonable at this time, but are beyond
management's control;
- the anticipated benefits from the Ruckus Networks acquisition
may not be realized;
- the Company may encounter significant integration costs and
unknown liabilities in connection with the Ruckus Networks
acquisition;
- volatility in component pricing and supply could impact
revenues and gross margins more than currently anticipated;
- failure to receive clearance from U.S. Customs and Border
Protection to allow the import and sale of certain products
currently subject to an ITC exclusion order could significantly
impact financial results;
- volatility in currency fluctuation may adversely impact our
international customers' ability or willingness to purchase
products and the pricing of products;
- impacts of the U.K. invoking Article 50 of the Lisbon Treaty to
leave the European Union, could have an adverse impact on results
of operations;
- regulatory changes, including those related to recently
completed changes to the U.S. income tax code, could have an
adverse impact on 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
- the Company's 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.
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 September 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 powering a smart,
connected world. The company's leading hardware, software and
services transform the way that people and businesses stay
informed, entertained and connected. 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, Inc. All other trademarks are the
property of their respective owners. © 2018 ARRIS
Enterprises, Inc. All rights reserved.
ARRIS
INTERNATIONAL PLC
|
|
PRELIMINARY
CONSOLIDATED BALANCE SHEETS
|
|
(in
thousands)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
|
2017
|
|
2017
|
|
2017
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$487,573
|
|
$1,379,827
|
|
$1,346,028
|
|
$1,126,248
|
|
$980,123
|
Short-term
investments, at fair value
|
|
23,874
|
|
33,309
|
|
38,759
|
|
90,673
|
|
115,553
|
Total cash, cash
equivalents and short term investments
|
|
511,447
|
|
1,413,136
|
|
1,384,787
|
|
1,216,921
|
|
1,095,676
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable,
net
|
|
1,218,088
|
|
1,056,225
|
|
991,539
|
|
1,069,771
|
|
1,359,430
|
Other
receivables
|
|
158,970
|
|
145,658
|
|
132,742
|
|
57,454
|
|
73,193
|
Inventories,
net
|
|
819,373
|
|
775,142
|
|
657,881
|
|
556,264
|
|
551,541
|
Prepaid income
taxes
|
|
28,351
|
|
41,780
|
|
16,354
|
|
21,845
|
|
51,476
|
Prepaids
|
|
26,644
|
|
27,954
|
|
32,149
|
|
27,898
|
|
21,163
|
Other current
assets
|
|
145,953
|
|
109,567
|
|
119,405
|
|
132,338
|
|
127,593
|
Total current
assets
|
|
2,908,826
|
|
3,569,462
|
|
3,334,857
|
|
3,082,491
|
|
3,280,072
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
372,467
|
|
347,506
|
|
355,033
|
|
354,050
|
|
353,377
|
Goodwill
|
|
2,278,512
|
|
2,016,580
|
|
2,014,550
|
|
2,018,012
|
|
2,016,169
|
Intangible assets,
net
|
|
1,771,363
|
|
1,406,591
|
|
1,491,103
|
|
1,586,187
|
|
1,677,178
|
Investments
|
|
71,082
|
|
73,199
|
|
61,047
|
|
65,035
|
|
72,932
|
Deferred income
taxes
|
|
115,435
|
|
193,703
|
|
199,102
|
|
190,037
|
|
298,757
|
Other
assets
|
|
101,858
|
|
57,246
|
|
54,843
|
|
58,919
|
|
59,877
|
|
|
$7,619,543
|
|
$7,664,287
|
|
$7,510,535
|
|
$7,354,731
|
|
$7,758,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$1,201,094
|
|
$1,266,214
|
|
$1,201,883
|
|
$1,020,234
|
|
$1,048,904
|
Accrued compensation,
benefits and related taxes
|
|
155,966
|
|
102,222
|
|
81,355
|
|
73,220
|
|
139,794
|
Accrued
warranty
|
|
44,507
|
|
45,036
|
|
44,812
|
|
46,330
|
|
49,618
|
Deferred
revenue
|
|
115,223
|
|
118,598
|
|
130,454
|
|
145,197
|
|
132,128
|
Current portion of LT
debt & financing lease obligations
|
|
83,559
|
|
89,156
|
|
89,336
|
|
82,767
|
|
82,734
|
Income taxes
payable
|
|
6,897
|
|
4,420
|
|
9,487
|
|
20,278
|
|
23,133
|
Other accrued
liabilities
|
|
320,211
|
|
327,099
|
|
303,013
|
|
300,861
|
|
357,823
|
Total current
liabilities
|
|
1,927,458
|
|
1,952,745
|
|
1,860,340
|
|
1,688,887
|
|
1,834,134
|
Long-term debt &
financing lease obligations, net of current portion
|
|
2,116,244
|
|
2,112,494
|
|
2,134,506
|
|
2,159,300
|
|
2,180,009
|
Accrued
pension
|
|
42,637
|
|
54,867
|
|
55,532
|
|
54,809
|
|
52,652
|
Noncurrent income
taxes
|
|
144,665
|
|
115,434
|
|
114,187
|
|
120,493
|
|
123,344
|
Deferred income
taxes
|
|
68,888
|
|
83,058
|
|
83,516
|
|
89,260
|
|
223,529
|
Other noncurrent
liabilities
|
|
134,519
|
|
118,420
|
|
120,381
|
|
112,977
|
|
117,957
|
Total
liabilities
|
|
4,434,412
|
|
4,437,018
|
|
4,368,462
|
|
4,225,726
|
|
4,531,625
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
Ordinary
shares
|
|
2,768
|
|
2,788
|
|
2,786
|
|
2,802
|
|
2,831
|
Capital in excess of
par value
|
|
3,387,128
|
|
3,367,940
|
|
3,356,183
|
|
3,322,803
|
|
3,314,707
|
Accumulated other
comprehensive loss
|
|
4,552
|
|
8,838
|
|
2,211
|
|
10,628
|
|
3,291
|
Accumulated
deficit
|
|
(224,784)
|
|
(188,375)
|
|
(256,705)
|
|
(243,207)
|
|
(132,013)
|
Total ARRIS International plc stockholders' equity
|
|
3,169,664
|
|
3,191,191
|
|
3,104,475
|
|
3,093,026
|
|
3,188,816
|
Stockholders' equity
attributable to noncontrolling interest
|
|
15,467
|
|
36,078
|
|
37,598
|
|
35,979
|
|
37,921
|
Total stockholders'
equity
|
|
3,185,131
|
|
3,227,269
|
|
3,142,073
|
|
3,129,005
|
|
3,226,737
|
|
|
$7,619,543
|
|
$7,664,287
|
|
$7,510,535
|
|
$7,354,731
|
|
$7,758,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(in thousands,
except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
For the Three
Months
|
|
For the Twelve
Months
|
|
Ended December
31,
|
|
Ended December
31,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
Net sales
|
$1,738,593
|
|
$1,759,223
|
|
$6,614,392
|
|
$6,829,118
|
Cost of
sales
|
1,244,124
|
|
1,323,222
|
|
4,948,153
|
|
5,121,501
|
Gross
margin
|
494,469
|
|
436,001
|
|
1,666,239
|
|
1,707,617
|
Operating
expenses:
|
|
|
|
|
|
|
|
Selling, general, and
administrative expenses
|
140,653
|
|
115,597
|
|
473,619
|
|
454,190
|
Research and
development expenses
|
141,441
|
|
132,401
|
|
539,094
|
|
584,909
|
Amortization of
intangible assets
|
100,588
|
|
100,046
|
|
375,407
|
|
397,464
|
Integration,
acquisition, restructuring and other costs
|
67,734
|
|
15,450
|
|
98,356
|
|
160,337
|
Impairment of
goodwill and intangible assets
|
55,000
|
|
-
|
|
55,000
|
|
-
|
|
505,417
|
|
363,494
|
|
1,541,477
|
|
1,596,900
|
Operating (loss)
income
|
(10,948)
|
|
72,507
|
|
124,762
|
|
110,717
|
Other expense
(income):
|
|
|
|
|
|
|
|
Interest
expense
|
23,850
|
|
20,985
|
|
87,088
|
|
79,817
|
Loss on
investments
|
2,088
|
|
7,788
|
|
11,066
|
|
21,194
|
Loss (gain) on
foreign currency
|
4,188
|
|
(22,151)
|
|
9,757
|
|
(13,982)
|
Interest
income
|
(1,978)
|
|
(1,623)
|
|
(7,976)
|
|
(4,395)
|
Other (income)
expense, net
|
(402)
|
|
(7,601)
|
|
1,873
|
|
3,991
|
Income (loss) before
income taxes
|
(38,693)
|
|
75,109
|
|
22,952
|
|
24,092
|
Income tax (benefit)
expense
|
(31,656)
|
|
(10,937)
|
|
(44,268)
|
|
15,131
|
Consolidated net
(loss) income
|
(7,038)
|
|
86,046
|
|
67,221
|
|
8,961
|
Net loss attributable
to noncontrolling interests
|
(20,604)
|
|
(2,237)
|
|
(25,903)
|
|
(9,139)
|
Net income
attributable to ARRIS International plc
|
$13,566
|
|
$88,283
|
|
$93,124
|
|
$18,100
|
|
|
|
|
|
|
|
|
Net income per
ordinary share (1):
|
|
|
|
|
|
|
|
Basic
|
$
0.07
|
|
$
0.46
|
|
$
0.50
|
|
$
0.09
|
Diluted
|
$
0.07
|
|
$
0.46
|
|
$
0.49
|
|
$
0.09
|
|
|
|
|
|
|
|
|
Weighted average
ordinary shares:
|
|
|
|
|
|
|
|
Basic
|
186,548
|
|
190,145
|
|
187,133
|
|
190,701
|
Diluted
|
188,829
|
|
192,400
|
|
189,616
|
|
192,185
|
|
|
|
|
|
|
|
|
(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 Twelve
Months
|
|
|
|
|
|
|
Ended December
31,
|
|
Ended December
31,
|
|
|
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
|
|
Consolidated net
(loss) income
|
|
|
$
(7,038)
|
|
$
86,046
|
|
$
67,221
|
|
$
8,961
|
|
|
Depreciation
|
|
|
22,855
|
|
21,764
|
|
88,195
|
|
90,577
|
|
|
Amortization of
acquired intangible assets
|
|
|
102,455
|
|
102,647
|
|
382,416
|
|
404,475
|
|
|
Amortization of
deferred finance fees and debt discount
|
|
|
2,339
|
|
1,915
|
|
7,960
|
|
7,705
|
|
|
Impairment of
goodwill and intangible assets
|
|
|
55,000
|
|
-
|
|
55,000
|
|
2,200
|
|
|
Deferred income
taxes
|
|
|
(29,449)
|
|
(53,600)
|
|
(65,989)
|
|
(148,418)
|
|
|
Foreign currency
remeasurement of deferred income taxes
|
|
|
320
|
|
(16,356)
|
|
10,490
|
|
(16,356)
|
|
|
Stock compensation
expense
|
|
|
18,706
|
|
15,997
|
|
81,557
|
|
60,049
|
|
|
Provision for
non-cash warrants
|
|
|
(8,145)
|
|
16,265
|
|
-
|
|
30,159
|
|
|
Provision for
doubtful accounts
|
|
|
(7)
|
|
246
|
|
(566)
|
|
1,386
|
|
|
Loss on disposal of
plant, property and equipment and other
|
|
|
1,187
|
|
3,828
|
|
7,063
|
|
8,706
|
|
|
Loss on investments
and others
|
|
|
2,088
|
|
7,788
|
|
11,065
|
|
21,194
|
|
|
Excess tax benefits
from stock-based compensation plans
|
|
|
-
|
|
(16,525)
|
|
-
|
|
(20,085)
|
|
Changes in operating
assets & liabilities, net of effects of acquisitions and
disposals:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(129,282)
|
|
(256,788)
|
|
175,930
|
|
(258,677)
|
|
|
Other
receivables
|
|
|
(13,312)
|
|
(27,737)
|
|
(85,777)
|
|
(31,517)
|
|
|
Inventories
|
|
|
3,989
|
|
51,515
|
|
(218,744)
|
|
282,644
|
|
|
Accounts payable and
accrued liabilities
|
|
|
(88,913)
|
|
69,859
|
|
43,524
|
|
(178,086)
|
|
|
Prepaids and other,
net
|
|
|
(10,568)
|
|
28,435
|
|
(25,508)
|
|
97,578
|
|
|
|
Net cash (used in)
provided by operating activities
|
|
|
(77,775)
|
|
35,299
|
|
533,837
|
|
362,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
|
(243)
|
|
(71,688)
|
|
(68,493)
|
|
(141,543)
|
|
Sales of
investments
|
|
|
10,000
|
|
22,605
|
|
165,301
|
|
25,931
|
|
Purchases of
property, plant & equipment, net
|
|
|
(15,683)
|
|
(26,114)
|
|
(78,072)
|
|
(66,760)
|
|
Acquisitions, net of
cash acquired
|
|
|
(760,802)
|
|
-
|
|
(760,802)
|
|
(340,118)
|
|
Purchases of
intangible assets
|
|
|
-
|
|
(2,216)
|
|
(6,422)
|
|
(5,526)
|
|
Other, net
|
|
|
-
|
|
-
|
|
826
|
|
3,507
|
|
|
|
Net cash used in
investing activities
|
|
|
(766,728)
|
|
(77,413)
|
|
(747,662)
|
|
(524,509)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds from
issuance of debt
|
|
|
145,533
|
|
-
|
|
175,847
|
|
800,000
|
|
Payment of accounts
receivable financing facility
|
|
|
-
|
|
-
|
|
-
|
|
(23,546)
|
|
Payment of financing
lease obligation
|
|
|
(187)
|
|
(201)
|
|
(777)
|
|
(758)
|
|
Payment of debt
obligations
|
|
|
(145,033)
|
|
(22,375)
|
|
(244,009)
|
|
(319,750)
|
|
Payment for deferred
financing costs and debt discount
|
|
|
(4,499)
|
|
-
|
|
(5,961)
|
|
(2,304)
|
|
Repurchase of
shares
|
|
|
(50,000)
|
|
-
|
|
(196,965)
|
|
(178,035)
|
|
Excess income tax
benefits from stock-based compensation plans
|
|
|
-
|
|
16,525
|
|
-
|
|
20,085
|
|
Repurchase of shares
to satisfy employee minimum tax withholdings
|
|
|
(214)
|
|
(163)
|
|
(26,573)
|
|
(17,925)
|
|
Proceeds from
issuance of shares, net
|
|
|
8,846
|
|
8,570
|
|
17,469
|
|
12,885
|
|
Contribution from
noncontrolling interest
|
|
|
-
|
|
-
|
|
3,500
|
|
-
|
|
|
|
Net cash (used in)
provided by financing activities
|
|
|
(45,554)
|
|
2,356
|
|
(277,469)
|
|
290,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
|
(2,197)
|
|
(12,097)
|
|
(1,256)
|
|
(12,097)
|
Net (decrease)
increase in cash and cash equivalents
|
|
|
(892,254)
|
|
(51,855)
|
|
(492,550)
|
|
116,541
|
Cash and cash
equivalents at beginning of period
|
|
|
1,379,827
|
|
1,031,978
|
|
980,123
|
|
863,582
|
Cash and cash
equivalents at end of period
|
|
|
$
487,573
|
|
$
980,123
|
|
$
487,573
|
|
$
980,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
ADJUSTED SALES & NET INCOME RECONCILIATION
|
(in thousands,
except per share data) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4
2016
|
|
Q3
2017
|
|
Q4
2017
|
|
DEC YTD
2016
|
|
DEC YTD
2017
|
|
|
Amount
|
Per Diluted
Share
|
|
Amount
|
Per Diluted
Share
|
|
Amount
|
Per Diluted
Share
|
|
Amount
|
Per Diluted
Share
|
|
Amount
|
Per Diluted
Share
|
|
Sales
|
$1,759,223
|
|
|
$1,728,524
|
|
|
$1,738,593
|
|
|
$6,829,118
|
|
|
$6,614,392
|
|
|
Highlighted
items:
Reduction in revenue related to
warrants
|
16,265
|
|
|
3,064
|
|
|
(8,145)
|
|
|
30,159
|
|
|
–
|
|
|
Acquisition
accounting impacts of deferred revenue
|
-
|
|
|
|
|
|
1,120
|
|
|
-
|
|
|
1,120
|
|
|
Adjusted
sales
|
$1,775,488
|
|
|
$1,731,588
|
|
|
$1,731,568
|
|
|
$6,859,277
|
|
|
$6,615,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to ARRIS International plc
|
$
88,283
|
$
0.46
|
|
$
88,320
|
$
0.47
|
|
$
13,566
|
$
0.07
|
|
$
18,100
|
$
0.09
|
|
$
93,124
|
$
0.49
|
|
Highlighted
Items:
Impacting gross margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation
expense
|
2,388
|
0.01
|
|
3,897
|
0.02
|
|
3,303
|
0.02
|
|
9,397
|
0.05
|
|
13,947
|
0.07
|
|
Reduction in revenue
related to warrants
|
16,265
|
0.08
|
|
3,064
|
0.02
|
|
(8,145)
|
(0.04)
|
|
30,159
|
0.16
|
|
–
|
–
|
|
Acquisition
accounting impacts of deferred revenue
|
–
|
–
|
|
–
|
–
|
|
1,120
|
0.01
|
|
–
|
–
|
|
1,120
|
0.01
|
|
Acquisition
accounting impacts of fair valuing inventory
|
581
|
0.00
|
|
–
|
–
|
|
7,560
|
0.04
|
|
51,405
|
0.27
|
|
8,468
|
0.04
|
|
Impacting
operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Integration,
acquisition, restructuring and other costs
|
7,922
|
0.04
|
|
10,836
|
0.06
|
|
67,734
|
0.36
|
|
152,810
|
0.80
|
|
98,356
|
0.52
|
|
Amortization of
intangible assets
|
100,046
|
0.52
|
|
90,162
|
0.48
|
|
100,588
|
0.53
|
|
397,464
|
2.07
|
|
375,407
|
1.98
|
|
Impairment on
goodwill and intangible assets
|
–
|
–
|
|
–
|
–
|
|
55,000
|
0.29
|
|
–
|
–
|
|
55,000
|
0.29
|
|
Stock compensation
expense
|
13,608
|
0.07
|
|
16,316
|
0.09
|
|
15,403
|
0.08
|
|
50,652
|
0.26
|
|
66,711
|
0.35
|
|
Noncontrolling
interest share of non-GAAP adj
|
(807)
|
–
|
|
(711)
|
–
|
|
(20,026)
|
(0.11)
|
|
(3,145)
|
(0.02)
|
|
(22,352)
|
(0.12)
|
|
Impacting other
(income)/expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment (gain) on
investments
|
4,446
|
0.02
|
|
(1,821)
|
(0.01)
|
|
–
|
–
|
|
12,297
|
0.06
|
|
929
|
0.00
|
|
Debt amendment
fees
|
–
|
–
|
|
–
|
–
|
|
3,069
|
0.02
|
|
(237)
|
–
|
|
5,851
|
0.03
|
|
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
|
(16,356)
|
(0.09)
|
|
3,569
|
0.02
|
|
851
|
–
|
|
(16,356)
|
(0.09)
|
|
9,359
|
0.05
|
|
France R&D tax
credit
|
(4,992)
|
(0.03)
|
|
–
|
–
|
|
–
|
–
|
|
–
|
–
|
|
–
|
–
|
|
Impacting income
tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign withholding
tax
|
–
|
–
|
|
–
|
–
|
|
–
|
–
|
|
54,741
|
0.28
|
|
–
|
–
|
|
Net tax
items
|
(58,513)
|
(0.30)
|
|
(62,698)
|
(0.33)
|
|
(73,038)
|
(0.39)
|
|
(208,524)
|
(1.09)
|
|
(189,884)
|
(1.00)
|
|
Total highlighted
items
|
64,588
|
0.34
|
|
62,614
|
0.33
|
|
153,419
|
0.81
|
|
532,264
|
2.77
|
|
422,912
|
2.23
|
|
Adjusted net
income
|
$
152,871
|
$
0.79
|
|
$
150,934
|
$
0.80
|
|
$
166,985
|
$
0.88
|
|
$
550,364
|
$
2.86
|
|
$
516,036
|
$
2.72
|
|
Weighted average
ordinary shares - basic
|
|
190,145
|
|
|
187,064
|
|
|
186,548
|
|
|
190,701
|
|
|
187,133
|
|
Weighted average
ordinary shares - diluted
|
|
192,400
|
|
|
188,941
|
|
|
188,829
|
|
|
192,185
|
|
|
189,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
SUPPLEMENTAL GAAP TO ADJUSTED SALES & GROSS MARGIN
RECONCILIATION
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Q4
2016
|
|
Q3
2017
|
|
Q4
2017
|
|
FY
2016
|
|
FY
2017
|
Sales -
GAAP
|
1,759,220
|
|
1,728,524
|
|
1,738,593
|
|
6,829,110
|
|
6,614,392
|
Fair Value of
Warrants Adjustment
|
16,264
|
|
3,064
|
|
(8,145)
|
|
30,159
|
|
-
|
Fair Value of
Deferred Revenue Adjustment
|
-
|
|
-
|
|
1,120
|
|
|
|
1,120
|
Adjusted Sales - Non-
GAAP
|
1,775,485
|
|
1,731,588
|
|
1,731,569
|
|
6,859,270
|
|
6,615,513
|
|
|
|
|
|
|
|
|
|
|
GAAP Gross
Margin
|
435,997
|
|
431,155
|
|
494,469
|
|
1,707,609
|
|
1,666,239
|
Fair Value of
Inventory Adjustment
|
580
|
|
-
|
|
7,560
|
|
51,405
|
|
8,468
|
Fair Value of
Deferred Revenue Adjustment
|
-
|
|
-
|
|
1,120
|
|
-
|
|
1,120
|
Equity
Compensation
|
2,388
|
|
3,897
|
|
3,303
|
|
9,397
|
|
13,947
|
Fair Value of
Warrants Adjustment
|
16,264
|
|
3,064
|
|
(8,145)
|
|
30,159
|
|
-
|
Adjusted Gross Margin
- Non-GAAP
|
455,229
|
|
438,116
|
|
498,307
|
|
1,798,569
|
|
1,689,774
|
|
|
|
|
|
|
|
|
|
|
GAAP Gross Margin -
%
|
24.8%
|
|
24.9%
|
|
28.4%
|
|
25.0%
|
|
25.2%
|
Adjusted Gross Margin
- Non-GAAP - %
|
25.6%
|
|
25.3%
|
|
28.8%
|
|
26.2%
|
|
25.5%
|
|
|
|
|
|
|
|
|
|
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
SUPPLEMENTAL GAAP TO ADJUSTED SALES & DIRECT CONTRIBUTION
RECONCILIATION
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
Q4
2017
|
|
Network
&
Cloud
|
CPE
|
Enterprise
|
Corp/
Other
|
Total
|
Net Sales
|
595,842
|
1,089,981
|
45,749
|
7,021
|
1,738,593
|
Non GAAP Adjustments
(1)
|
-
|
-
|
-
|
(7,021)
|
(7,021)
|
Adjusted Net
Sales
|
595,842
|
1,089,981
|
45,749
|
0
|
1,731,572
|
|
|
|
|
|
|
Direct
Contribution(2)
|
262,868
|
123,678
|
6,094
|
(180,265)
|
212,375
|
Non GAAP Adjustments
(3)
|
-
|
-
|
-
|
19,241
|
19,241
|
Adjusted Direct
Contribution
|
262,868
|
123,678
|
6,094
|
(161,024)
|
231,616
|
Direct Contribution %
of sales
|
44.1%
|
11.3%
|
13.3%
|
|
13.4%
|
|
|
|
|
|
|
(1) Impact of
warrants adjustment and adjustment related to acquisition
accounting impacts
|
(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, adjustments related to the acquisition
accounting impacts and warrants adjustment
|
ARRIS
INTERNATIONAL PLC
|
|
|
PRELIMINARY
SUPPLEMENTAL GAAP TO ADJUSTED EPS GUIDANCE
RECONCILIATION
|
|
|
(in millions,
except per share data)
|
|
|
|
|
|
|
|
Q1 2018
Guidance
|
|
FY 2018
Guidance
|
Estimated GAAP
EPS
|
$ (0.43) - $
(0.38)
|
|
$ 0.48 - $
0.73
|
Reconciling
Items:
|
|
|
|
Amortization of
Intangibles
|
0.63
|
|
2.12
|
Stock Compensation
Expense
|
0.11
|
|
0.50
|
Integration and Other
Costs
|
0.12
|
|
0.15
|
Purchase Accounting
Items
|
0.15
|
|
0.20
|
Impairment of
Goodwill and Intangible assets
|
0.04
|
|
0.04
|
Net Tax
items
|
(0.12)
|
|
(0.69)
|
Subtotal
|
0.93
|
|
2.32
|
Estimated Adjusted
(Non-GAAP) EPS
|
$ 0.50 - $
0.55
|
|
$ 2.80 - $
3.05
|
|
|
|
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 Deferred
Revenue: In connection with our acquisition of Ruckus
Networks, 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
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.
Impairment of Goodwill and Intangibles: We have excluded
the effect of the estimated impairment of goodwill and intangible
assets in calculating our non-GAAP operating expenses and net
income measures. Although an impairment does not directly
impact the Company's current cash position, such expense represents
the declining value of the technology and other intangible assets
that were acquired. We exclude these impairments when
significant and they are not reflective of ongoing business and
operating results.
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).
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, a subsidiary of Pace, had a history of losses and
did not expect to utilize their R&D Tax Credits against a
future France income tax liability
but rather expected to use the credits to offset non-income taxes.
In the third quarter of 2016, 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. However, during the fourth quarter of 2016, the
Company determined that the original classification within income
taxes was more appropriate and therefore the reclassification from
the third quarter of 2016 reversed. 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.
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