SUWANEE, Ga., Aug. 1, 2018 /PRNewswire/ -- ARRIS
International plc (NASDAQ: ARRS) today announced preliminary
and unaudited financial results for the second quarter 2018.
Second Quarter 2018 Financial Highlights
- Revenues were $1.727 billion
- GAAP net income was $0.19 per
diluted share
- Adjusted net income (a non-GAAP measure) was $0.72 per diluted share
- End-of-quarter cash resources were $548
million
- $100 million of share repurchases
($175 million YTD as of
8/1/2018)
- Order backlog was $1.3
billion
- Book-to-bill ratio was 0.98
"ARRIS posted a solid second quarter, with non-GAAP earnings
growing 14% year-over-year to $0.72
per share with continued strong performance from our higher margin
Network & Cloud and Enterprise businesses," said Bruce McClelland, ARRIS CEO. "Revenue grew
by 4% year-over-year with the addition of Ruckus and increased
E6000 CCAP sales. We have been active buyers of our stock in
2018 and intend to allocate the majority of our free cash flow to
stock repurchases for the remainder of the year, targeting a
minimum of $400 million for the
year."
"For the third quarter 2018, we are estimating revenues in the
range of $1.680 billion to
$1.730 billion. We expect GAAP
net income per diluted share in the range of $0.20 to $0.25 and
adjusted net income per diluted share in the range of $0.65 to $0.70. For full year 2018, we now expect
sales to be in the range of $6.850
billion to $7.0 billion, GAAP
net income per diluted share in the range of $0.68 to $0.83 and
adjusted net income per diluted share in the range of $2.85 to $3.00."
Revenues in the second quarter 2018 of $1.727 billion were up $63
million, or 4%, as compared to second quarter 2017 revenues
of $1.664 billion and up $149 million, or 9%, as compared to first quarter
2018 revenues of $1.578 billion.
Through the first six months of 2018, revenues were $3.304 billion, up $157
million, or 5%, as compared to the first six months of 2017
revenues of $3.147 billion.
GAAP net income in the second quarter 2018 was
$0.19 per diluted share, as compared
to GAAP net income of $0.16 per
diluted share in the second quarter 2017 and a GAAP net loss of
$(0.07) per diluted share in the
first quarter 2018.
Year to date 2018 GAAP net income was $0.12 per diluted share, as compared to the first
six months of 2017 GAAP net loss of $(0.05) per diluted share.
Adjusted net income (a non-GAAP measure) in the second
quarter 2018 was $0.72 per diluted
share, as compared to $0.63 per
diluted share for the second quarter 2017, and first quarter 2018
adjusted net income of $0.73 per
diluted share.
Year to date adjusted net income was $1.45 per diluted share for 2018 as compared to
the first six months of 2017 adjusted net income of $1.04 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
second quarter 2018 with $548 million
of cash resources, as compared to $543
million at the end of the first quarter 2018. The
Company generated $103 million of
cash from operating activities during the second quarter 2018, as
compared to $246 million during the
second quarter of 2017. Through the first six months of 2018
the company generated $199 million of
cash from operating activities. This compares to $496 million during the same period in 2017.
The Company repurchased approximately 4.0 million ordinary
shares for $100 million during the
second quarter of 2018. Since the end of the second quarter,
the Company has repurchased approximately 2.0 million additional
ordinary shares for $50
million. Through August 1,
2018, the Company has repurchased 6.9 million ordinary
shares for $175 million. As of
August 1, 2018, the Company has
$350 million remaining in available
repurchase authorization.
Order backlog at the end of the second quarter 2018 was
$1.258 billion as compared to
$1.326 billion and $1.293 billion at the end of the second quarter
2017 and the first quarter 2018, respectively. The Company's
book-to-bill ratio in the second quarter 2018 was 0.98 as compared
to the second quarter 2017 of 1.01 and the first quarter 2018 of
1.11.
ARRIS management will conduct a conference call at 5:00 pm EDT, today, Wednesday, August 1, 2018, to discuss second
quarter 2018 results. 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
August 8, 2018, by dialing
855-859-2056 or 404-537-3406 for international calls and using the
pass code 4368658. 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 third quarter and full year
2018, growth expectations, share repurchases, 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 third quarter 2018, as well as the
general outlook for 2018, 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 component pricing and supply could impact
revenues and gross margins more than currently anticipated;
- fluctuations in share price or reductions in free cash flow may
impact the volume of share repurchases;
- recently enacted tariffs on imports from China and the proposed 10% tariff on
additional products imported from China could have a material adverse impact on
our financial results;
- the anticipated benefits from the Ruckus Networks acquisition
may not be realized;
- 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 March 31, 2018. 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, LLC. All other trademarks are the property of
their respective owners. © 2018 ARRIS Enterprises, Inc. All
rights reserved.
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.
Acquisition Accounting Impacts Related to Deferred
Revenue: In connection with the accounting
related to our acquisitions, business combination rules require us
to account for the fair values of deferred revenue arrangements for
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 as if these purchase accounting
adjustments had not been applied. We believe the adjustment to
these revenues is useful as a measure of the ongoing performance of
our business. We historically have 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 their
contracts.
Stock-Based Compensation Expense: We have
excluded the effect of stock-based compensation expenses in
calculating our non-GAAP operating expenses and net income (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 the 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 measures. We incurred expenses in
connection with the Pace and Ruckus Networks 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 expenses consist of
employee severance, abandoned facilities, product line disposition
and other exit costs. We believe it is useful to understand the
effects of these items on our total operating expenses.
Impairment of Goodwill and Intangible Assets: 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 business, 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.
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
Income 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 Statements 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 on Investments: We have
excluded the effect 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 maturities of certain loan facilities. 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).
Remeasurement of Deferred Taxes: The
Company records foreign currency remeasurement gains and losses
related to deferred tax liabilities in the United Kingdom. The foreign currency
remeasurement gains and losses derived from the remeasurement of
the deferred income taxes from GBP to USD. We have excluded the
impact of these gains and losses in the calculation of our non-GAAP
measures. We believe it is useful to understand the effects of this
item on our total other expense (income).
Income Tax Expense (Benefit): We have
excluded the tax effect of the non-GAAP items mentioned above.
Additionally, we have excluded the effects of certain tax
adjustments related to tax and legal restructuring, state and
non-US valuation allowances, benefits for releases of uncertain tax
positions due to settlement, change in law or statute of
limitations and provision to return differences.
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
CONSOLIDATED BALANCE SHEETS
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
|
2018
|
|
2018
|
|
2017
|
|
2017
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$501,410
|
|
$506,240
|
|
$487,573
|
|
$1,379,827
|
|
$1,346,028
|
Short-term
investments, at fair value
|
|
46,698
|
|
36,804
|
|
23,874
|
|
33,309
|
|
38,759
|
Total cash, cash
equivalents and short term investments
|
|
548,109
|
|
543,044
|
|
511,447
|
|
1,413,136
|
|
1,384,787
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable,
net
|
|
1,183,360
|
|
1,034,608
|
|
1,218,089
|
|
1,056,225
|
|
991,539
|
Other
receivables
|
|
192,067
|
|
169,681
|
|
157,845
|
|
145,658
|
|
132,742
|
Inventories,
net
|
|
803,217
|
|
849,069
|
|
825,211
|
|
775,142
|
|
657,881
|
Prepaid income
taxes
|
|
10,406
|
|
26,409
|
|
28,351
|
|
41,780
|
|
16,354
|
Prepaids
|
|
40,290
|
|
36,308
|
|
26,644
|
|
27,954
|
|
32,149
|
Other current
assets
|
|
196,014
|
|
172,993
|
|
145,953
|
|
109,567
|
|
119,405
|
Total current
assets
|
|
2,973,463
|
|
2,832,112
|
|
2,913,540
|
|
3,569,462
|
|
3,334,857
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
299,991
|
|
309,457
|
|
372,467
|
|
347,506
|
|
355,033
|
Goodwill
|
|
2,259,177
|
|
2,336,820
|
|
2,278,512
|
|
2,016,580
|
|
2,014,550
|
Intangible assets,
net
|
|
1,580,393
|
|
1,583,299
|
|
1,771,362
|
|
1,406,591
|
|
1,491,103
|
Investments
|
|
69,902
|
|
69,858
|
|
71,082
|
|
73,199
|
|
61,047
|
Deferred income
taxes
|
|
146,443
|
|
131,417
|
|
115,436
|
|
193,703
|
|
199,102
|
Other
assets
|
|
72,155
|
|
103,525
|
|
101,858
|
|
57,246
|
|
54,843
|
|
|
$7,401,524
|
|
$7,366,488
|
|
$7,624,257
|
|
$7,664,287
|
|
$7,510,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$1,125,619
|
|
$1,010,812
|
|
$1,206,656
|
|
$1,266,214
|
|
$1,201,883
|
Accrued compensation,
benefits and related taxes
|
|
140,387
|
|
113,029
|
|
155,966
|
|
102,222
|
|
81,355
|
Accrued
warranty
|
|
38,651
|
|
42,434
|
|
44,507
|
|
45,036
|
|
44,812
|
Deferred
revenue
|
|
123,590
|
|
143,740
|
|
115,224
|
|
118,598
|
|
130,454
|
Current portion of LT
debt & financing lease obligations
|
|
83,709
|
|
83,633
|
|
83,559
|
|
89,156
|
|
89,336
|
Income taxes
payable
|
|
2,093
|
|
4,937
|
|
6,244
|
|
4,420
|
|
9,487
|
Other accrued
liabilities
|
|
361,315
|
|
316,206
|
|
321,113
|
|
327,099
|
|
303,013
|
Total current
liabilities
|
|
1,875,365
|
|
1,714,791
|
|
1,933,269
|
|
1,952,745
|
|
1,860,340
|
Long-term debt &
financing lease obligations, net of current portion
|
|
2,074,352
|
|
2,095,320
|
|
2,116,244
|
|
2,112,494
|
|
2,134,506
|
Accrued
pension
|
|
31,889
|
|
43,443
|
|
42,637
|
|
54,867
|
|
55,532
|
Noncurrent deferred
revenue
|
|
58,233
|
|
56,041
|
|
54,090
|
|
34,569
|
|
36,855
|
Noncurrent income
taxes
|
|
120,987
|
|
159,148
|
|
144,665
|
|
115,434
|
|
114,187
|
Deferred income
taxes
|
|
62,886
|
|
68,825
|
|
68,888
|
|
83,058
|
|
83,516
|
Other noncurrent
liabilities
|
|
68,507
|
|
71,546
|
|
80,430
|
|
83,852
|
|
83,526
|
Total
liabilities
|
|
4,292,219
|
|
4,209,114
|
|
4,440,223
|
|
4,437,018
|
|
4,368,462
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
Ordinary
shares
|
|
2,722
|
|
2,769
|
|
2,768
|
|
2,788
|
|
2,786
|
Capital in excess of
par value
|
|
3,424,906
|
|
3,392,415
|
|
3,387,128
|
|
3,367,940
|
|
3,356,183
|
Accumulated other
comprehensive loss
|
|
(4,649)
|
|
12,545
|
|
4,552
|
|
8,838
|
|
2,211
|
Accumulated
deficit
|
|
(329,731)
|
|
(266,264)
|
|
(225,881)
|
|
(188,375)
|
|
(256,705)
|
Total ARRIS
International plc stockholders' equity
|
|
3,093,248
|
|
3,141,465
|
|
3,168,567
|
|
3,191,191
|
|
3,104,475
|
Stockholders' equity
attributable to noncontrolling interest
|
|
16,056
|
|
15,909
|
|
15,467
|
|
36,078
|
|
37,598
|
Total
stockholders' equity
|
|
3,109,304
|
|
3,157,374
|
|
3,184,034
|
|
3,227,269
|
|
3,142,073
|
|
|
$7,401,524
|
|
$7,366,488
|
|
$7,624,257
|
|
$7,664,287
|
|
$7,510,535
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(in thousands,
except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
For the Three
Months
|
|
For the Six
Months
|
|
Ended June
30,
|
|
Ended June
30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
Net sales
|
$1,726,540
|
|
$1,664,170
|
|
$3,304,250
|
|
$3,147,276
|
Cost of
sales
|
1,227,785
|
|
1,260,813
|
|
2,329,812
|
|
2,406,661
|
Gross
margin
|
498,755
|
|
403,357
|
|
974,438
|
|
740,615
|
Operating
expenses:
|
|
|
|
|
|
|
|
Selling, general, and
administrative expenses
|
173,353
|
|
113,921
|
|
334,557
|
|
218,560
|
Research and
development expenses
|
167,200
|
|
133,098
|
|
336,997
|
|
266,060
|
Amortization of
intangible assets
|
90,485
|
|
91,012
|
|
205,193
|
|
184,657
|
Impairment of
goodwill
|
-
|
|
-
|
|
3,400
|
|
-
|
Integration,
acquisition, restructuring and other costs
|
22,844
|
|
9,690
|
|
36,500
|
|
19,785
|
|
453,882
|
|
347,721
|
|
916,647
|
|
689,062
|
Operating
income
|
44,873
|
|
55,636
|
|
57,792
|
|
51,553
|
Other expense
(income):
|
|
|
|
|
|
|
|
Interest
expense
|
23,647
|
|
23,344
|
|
46,173
|
|
43,027
|
(Gain) loss on
investments
|
(844)
|
|
3,609
|
|
(317)
|
|
8,139
|
(Gain) loss on
foreign currency
|
(824)
|
|
9,373
|
|
4,009
|
|
14,113
|
Interest
income
|
(1,792)
|
|
(1,788)
|
|
(3,324)
|
|
(3,709)
|
Other (income)
expense, net
|
(169)
|
|
926
|
|
(61)
|
|
841
|
Income (loss) before
income taxes
|
24,855
|
|
20,172
|
|
11,312
|
|
(10,858)
|
Income tax (benefit)
expense
|
(9,944)
|
|
(8,302)
|
|
(6,454)
|
|
1,699
|
Consolidated net
income (loss)
|
34,799
|
|
28,474
|
|
17,766
|
|
(12,557)
|
Net loss attributable
to noncontrolling interests
|
(955)
|
|
(1,862)
|
|
(4,388)
|
|
(3,795)
|
Net income (loss)
attributable to ARRIS International plc
|
$35,754
|
|
$30,336
|
|
$22,154
|
|
($8,762)
|
|
|
|
|
|
|
|
|
Net net (loss) per
ordinary share (1):
|
|
|
|
|
|
|
|
Basic
|
$
0.19
|
|
$
0.16
|
|
$
0.12
|
|
$
(0.05)
|
Diluted
|
$
0.19
|
|
$
0.16
|
|
$
0.12
|
|
$
(0.05)
|
|
|
|
|
|
|
|
|
Weighted average
ordinary shares:
|
|
|
|
|
|
|
|
Basic
|
184,216
|
|
186,803
|
|
184,376
|
|
188,291
|
Diluted
|
185,669
|
|
189,002
|
|
186,288
|
|
188,291
|
|
|
|
|
|
|
|
|
(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 Six
Months
|
|
|
|
|
|
|
|
|
|
Ended June
30,
|
|
Ended June
30,
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net
income (loss)
|
|
|
|
|
|
$
34,799
|
|
$
28,474
|
|
$
17,766
|
|
$
(12,557)
|
|
|
Depreciation
|
|
|
|
|
|
21,235
|
|
21,690
|
|
44,109
|
|
43,003
|
|
|
Amortization of
acquired intangible assets
|
|
|
|
|
|
92,360
|
|
92,672
|
|
208,955
|
|
187,978
|
|
|
Amortization of
deferred finance fees and debt discount
|
|
|
|
|
|
1,207
|
|
1,988
|
|
2,422
|
|
3,891
|
|
|
Impairment of
goodwill
|
|
|
|
|
|
-
|
|
-
|
|
3,400
|
|
-
|
|
|
Deferred income
taxes
|
|
|
|
|
|
(32,750)
|
|
(16,740)
|
|
(46,077)
|
|
(37,523)
|
|
|
Foreign currency
remeasurement of deferred income taxes
|
|
|
|
|
|
(3,676)
|
|
4,060
|
|
21
|
|
7,191
|
|
|
Stock compensation
expense
|
|
|
|
|
|
23,503
|
|
22,325
|
|
42,759
|
|
41,740
|
|
|
Provision for
non-cash warrants
|
|
|
|
|
|
-
|
|
2,658
|
|
-
|
|
5,081
|
|
|
Provision (recovery)
for doubtful accounts
|
|
|
|
|
|
-
|
|
(69)
|
|
(292)
|
|
(248)
|
|
|
Loss on disposal of
plant, property and equipment and other
|
|
|
|
|
|
66
|
|
1,298
|
|
222
|
|
1,590
|
|
|
Loss on investments
and others
|
|
|
|
|
|
(844)
|
|
3,609
|
|
(182)
|
|
8,139
|
|
Changes in operating
assets & liabilities, net of effects of acquisitions and
disposals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
|
|
|
(162,538)
|
|
24,060
|
|
20,862
|
|
368,020
|
|
|
Other
receivables
|
|
|
|
|
|
(22,386)
|
|
(23,625)
|
|
(34,222)
|
|
(59,549)
|
|
|
Inventories
|
|
|
|
|
|
43,817
|
|
(103,689)
|
|
19,420
|
|
(106,841)
|
|
|
Accounts payable and
accrued liabilities
|
|
|
|
|
|
123,764
|
|
181,521
|
|
(104,470)
|
|
36,881
|
|
|
Prepaids and other,
net
|
|
|
|
|
|
(15,220)
|
|
5,628
|
|
24,557
|
|
9,124
|
|
|
|
Net cash provided
by operating activities
|
|
|
|
|
|
103,337
|
|
245,860
|
|
199,250
|
|
495,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
|
|
|
|
(10,809)
|
|
(6,371)
|
|
(37,309)
|
|
(62,250)
|
|
Sales of
investments
|
|
|
|
|
|
549
|
|
58,416
|
|
11,549
|
|
150,301
|
|
Purchases of
property, plant & equipment, net
|
|
|
|
|
|
(13,450)
|
|
(21,033)
|
|
(28,646)
|
|
(42,900)
|
|
Deposit proceeds for
sale of property, plant and equipment
|
|
|
|
|
|
20,000
|
|
-
|
|
30,000
|
|
-
|
|
Purchases of
intangible assets
|
|
|
|
|
|
(423)
|
|
(422)
|
|
(423)
|
|
(422)
|
|
Other, net
|
|
|
|
|
|
-
|
|
-
|
|
171
|
|
826
|
|
|
|
Net cash (used in)
provided by investing activities
|
|
|
|
|
|
(4,133)
|
|
30,590
|
|
(24,658)
|
|
45,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from
issuance of debt
|
|
|
|
|
|
-
|
|
30,314
|
|
-
|
|
30,314
|
|
Payment of financing
lease obligation
|
|
|
|
|
|
(224)
|
|
(201)
|
|
(414)
|
|
(405)
|
|
Payment of debt
obligations
|
|
|
|
|
|
(21,875)
|
|
(52,864)
|
|
(43,750)
|
|
(75,239)
|
|
Payment for deferred
financing costs and debt discount
|
|
|
|
|
|
-
|
|
(1,462)
|
|
-
|
|
(1,462)
|
|
Repurchase of
shares
|
|
|
|
|
|
(86,244)
|
|
(43,855)
|
|
(111,244)
|
|
(126,965)
|
|
Repurchase of shares
to satisfy employee minimum tax withholdings
|
|
|
|
|
|
(3)
|
|
(128)
|
|
(13,979)
|
|
(13,882)
|
|
Proceeds from
issuance of shares, net
|
|
|
|
|
|
8,996
|
|
8,530
|
|
9,018
|
|
8,553
|
|
Contribution from
noncontrolling interest
|
|
|
|
|
|
1,050
|
|
3,500
|
|
2,257
|
|
3,500
|
|
|
|
Net cash used in
financing activities
|
|
|
|
|
|
(98,300)
|
|
(56,166)
|
|
(158,112)
|
|
(175,586)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash, cash equivalents and restricted
cash
|
|
|
|
(6,440)
|
|
(450)
|
|
(2,649)
|
|
147
|
Net (decrease)
increase in cash, cash equivalents and restricted
cash
|
|
|
|
|
|
(5,536)
|
|
219,834
|
|
13,831
|
|
366,036
|
Cash, cash
equivalents and restricted cash at beginning of
period
|
|
|
|
|
|
508,483
|
|
1,127,894
|
|
489,116
|
|
981,692
|
Cash, cash
equivalents and restricted cash at end of period
|
|
|
|
|
|
$
502,947
|
|
$
1,347,728
|
|
$
502,947
|
|
$
1,347,728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
cash, cash equivalents and restricted cash reported within the
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalent
|
|
|
|
|
|
501,410
|
|
1,346,028
|
|
|
|
|
|
Restricted cash
included in other current assets
|
|
|
|
|
|
820
|
|
165
|
|
|
|
|
|
Restricted cash
included in other assets
|
|
|
|
|
|
717
|
|
1,535
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
502,947
|
|
1,347,728
|
|
|
|
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
ADJUSTED SALES & NET INCOME RECONCILIATION
|
(in thousands,
except per share data) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q2
2017
|
|
Q1
2018
|
|
Q2
2018
|
|
JUN YTD
2017
|
|
JUN YTD
2018
|
|
Amount
|
Per
Diluted
Share
|
|
Amount
|
Per
Diluted
Share
|
|
Amount
|
Per
Diluted
Share
|
|
Amount
|
Per
Diluted
Share
|
|
Amount
|
Per
Diluted
Share
|
Sales
|
$1,664,170
|
|
|
$1,577,710
|
|
|
$1,726,540
|
|
|
$3,147,276
|
|
|
$3,304,250
|
|
Highlighted
items:
Reduction in revenue related to
warrants
|
2,658
|
|
|
-
|
|
|
-
|
|
|
5,081
|
|
|
–
|
|
Acquisition accounting impacts of deferred revenue
|
-
|
|
|
5,694
|
|
|
3,307
|
|
|
-
|
|
|
9,002
|
|
Adjusted
sales
|
$1,666,828
|
|
|
$1,583,404
|
|
|
$1,729,847
|
|
|
$3,152,357
|
|
|
$3,313,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to ARRIS International plc
|
$
30,336
|
$
0.16
|
|
$
(13,600)
|
$
(0.07)
|
|
$
35,754
|
$
0.19
|
|
$
(8,762)
|
$
(0.05)
|
|
$
22,154
|
$
0.12
|
Highlighted
Items:
Impacting gross margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation
expense
|
3,495
|
0.02
|
|
3,253
|
0.02
|
|
3,809
|
0.02
|
|
6,747
|
0.04
|
|
7,062
|
0.04
|
Reduction in revenue
related to warrants
|
2,658
|
0.01
|
|
–
|
–
|
|
–
|
–
|
|
5,081
|
0.03
|
|
–
|
–
|
Acquisition
accounting impacts of deferred revenue
|
–
|
–
|
|
5,694
|
0.03
|
|
3,307
|
0.02
|
|
–
|
–
|
|
9,002
|
0.05
|
Acquisition
accounting impacts of fair valuing inventory
|
–
|
–
|
|
16,971
|
0.09
|
|
–
|
–
|
|
908
|
0.00
|
|
16,971
|
0.09
|
Impacting
operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Integration,
acquisition, restructuring and other costs
|
9,690
|
0.05
|
|
13,655
|
0.07
|
|
22,844
|
0.12
|
|
19,785
|
0.10
|
|
36,499
|
0.20
|
Amortization of
intangible assets
|
91,012
|
0.48
|
|
114,708
|
0.61
|
|
90,485
|
0.49
|
|
184,657
|
0.97
|
|
205,193
|
1.10
|
Impairment on
goodwill and intangible assets
|
–
|
–
|
|
3,400
|
0.02
|
|
–
|
–
|
|
–
|
–
|
|
3,400
|
0.02
|
Stock compensation
expense
|
18,829
|
0.10
|
|
16,003
|
0.09
|
|
19,694
|
0.11
|
|
34,992
|
0.18
|
|
35,697
|
0.19
|
Noncontrolling
interest share of non-GAAP adj
|
(811)
|
–
|
|
(2,321)
|
(0.01)
|
|
(867)
|
(0.00)
|
|
(1,615)
|
(0.01)
|
|
(3,188)
|
(0.02)
|
Impacting other
(income)/expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment on
investments
|
2,782
|
0.01
|
|
–
|
–
|
|
–
|
–
|
|
2,750
|
0.01
|
|
–
|
–
|
Debt amendment
fees
|
–
|
–
|
|
–
|
–
|
|
–
|
–
|
|
2,782
|
0.01
|
|
–
|
–
|
Remeasurement of
deferred taxes
|
2,828
|
0.01
|
|
3,697
|
0.02
|
|
(3,676)
|
(0.02)
|
|
4,940
|
0.03
|
|
20
|
0.00
|
Impacting income
tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net tax
items
|
(40,937)
|
(0.22)
|
|
(24,541)
|
(0.13)
|
|
(37,387)
|
(0.20)
|
|
(54,270)
|
(0.28)
|
|
(61,928)
|
(0.33)
|
Total highlighted
items
|
89,546
|
0.47
|
|
150,519
|
0.80
|
|
98,209
|
0.53
|
|
206,757
|
1.08
|
|
248,728
|
1.34
|
Adjusted net
income
|
$
119,882
|
$
0.63
|
|
$
136,919
|
$
0.73
|
|
$
133,963
|
$
0.72
|
|
$
197,995
|
$
1.04
|
|
$
270,882
|
$
1.45
|
Weighted average
ordinary shares - basic
|
|
186,803
|
|
|
184,805
|
|
|
184,216
|
|
|
188,291
|
|
|
184,376
|
Weighted average
ordinary shares - diluted
|
|
189,002
|
|
|
187,175
|
|
|
185,669
|
|
|
190,932
|
|
|
186,288
|
ARRIS
INTERNATIONAL PLC
|
|
|
|
PRELIMINARY
SUPPLEMENTAL GAAP TO ADJUSTED SALES & GROSS MARGIN
RECONCILIATION
|
|
|
|
(in
thousands)
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q2
2017
|
|
Q1
2018
|
|
Q2
2018
|
|
Jun YTD
2017
|
|
Jun YTD
2018
|
Sales -
GAAP
|
1,664,170
|
|
1,577,710
|
|
1,726,540
|
|
3,147,276
|
|
3,304,250
|
Adjustment to revenue
related to warrants
|
2,658
|
|
-
|
|
-
|
|
5,081
|
|
-
|
Acquisition
accounting impacts of deferred revenue
|
-
|
|
5,694
|
|
3,307
|
|
-
|
|
9,002
|
Adjusted Sales -
Non-GAAP
|
1,666,828
|
|
1,583,404
|
|
1,729,847
|
|
3,152,357
|
|
3,313,252
|
|
|
|
|
|
|
|
|
|
|
GAAP Gross
Margin
|
403,357
|
|
475,683
|
|
498,755
|
|
740,615
|
|
974,438
|
Acquisition
accounting impacts of fair valuing inventory
|
-
|
|
16,971
|
|
-
|
|
908
|
|
16,971
|
Acquisition
accounting impacts of deferred revenue
|
-
|
|
5,694
|
|
3,307
|
|
-
|
|
9,002
|
Stock compensation
expense
|
3,495
|
|
3,253
|
|
3,809
|
|
6,747
|
|
7,062
|
Adjustment to revenue
related to warrants
|
2,658
|
|
-
|
|
-
|
|
5,081
|
|
-
|
Adjusted Gross Margin
- Non-GAAP
|
409,510
|
|
501,601
|
|
505,871
|
|
753,351
|
|
1,007,473
|
|
|
|
|
|
|
|
|
|
|
GAAP Gross Margin -
%
|
24.2%
|
|
30.2%
|
|
28.9%
|
|
23.5%
|
|
29.5%
|
Adjusted Gross Margin
- Non-GAAP - %
|
24.6%
|
|
31.7%
|
|
29.2%
|
|
23.9%
|
|
30.4%
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
SUPPLEMENTAL GAAP TO ADJUSTED SALES & ADJUSTED DIRECT
CONTRIBUTION RECONCILIATION
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
Q2
2018
|
|
Network &
Cloud
|
CPE
|
Enterprise
|
Corp/
Other
|
Total
|
Net Sales
|
549,496
|
1,008,131
|
172,240
|
(3,327)
|
1,726,540
|
Non GAAP Adjustments
(1)
|
-
|
-
|
-
|
3,307
|
3,307
|
Adjusted Net
Sales
|
549,496
|
1,008,131
|
172,240
|
(20)
|
1,729,847
|
|
|
|
|
|
|
Direct
Contribution(2)
|
201,282
|
85,723
|
17,774
|
(146,577)
|
158,202
|
Adjusted Direct
Contribution (3)
|
187,886
|
78,946
|
19,194
|
(83,092)
|
202,934
|
Adjusted Direct
Contribution % of sales
|
34.2%
|
7.8%
|
11.1%
|
|
11.7%
|
|
|
|
|
|
|
Other
Items
|
|
|
|
|
|
Amortization of
intangibles
|
24,749
|
50,621
|
14,300
|
815
|
90,485
|
Integration,acquisition, restructuring and other
costs
|
6,427
|
14,589
|
1,650
|
179
|
22,845
|
Depreciation
expense
|
6,571
|
6,958
|
3,158
|
4,543
|
21,230
|
Equity compensation
expense
|
8,647
|
5,927
|
4,485
|
4,444
|
23,503
|
|
|
|
|
|
|
(1) Impact of
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) Defined as direct
contribution less allocated facility costs, service provider sales
and marketing costs plus equity compensation and depreciation
expense
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
SUPPLEMENTAL DIRECT CONTRIBUTION TO ADJUSTED DIRECT CONTRIBUTION
RECONCILIATION
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
Q2
2018
|
|
Network &
Cloud
|
CPE
|
Enterprise
|
Corp/
Other
|
Total
|
Direct
Contribution(1)
|
201,282
|
85,723
|
17,774
|
(146,577)
|
158,202
|
Allocated costs
(2)
|
(28,614)
|
(19,622)
|
(6,223)
|
54,499
|
40,446
|
Direct Contribution
after allocation
|
172,668
|
66,101
|
11,551
|
(92,078)
|
158,242
|
Equity compensation
expense
|
8,647
|
5,927
|
4,485
|
4,444
|
23,503
|
Depreciation
expense
|
6,571
|
6,958
|
3,158
|
4,543
|
21,230
|
Adjusted Direct
Contribution
|
187,886
|
78,986
|
19,194
|
(83,091)
|
202,975
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Defined as gross
margin less direct operating expenses, excluding amortization of
intangible assets, restructuring charges, acquisition, integration
and other costs.
|
(2) Allocated
facility costs and service provider sales and marketing
costs
|
ARRIS
INTERNATIONAL PLC
|
|
|
PRELIMINARY
SUPPLEMENTAL GAAP TO ADJUSTED EPS GUIDANCE
RECONCILIATION
|
|
|
(in millions,
except per share data)
|
|
|
|
|
|
|
|
Q3 2018
Guidance
|
|
FY 2018
Guidance
|
Estimated GAAP
EPS
|
$ 0.20 - $
0.25
|
|
$ 0.68 - $
0.83
|
Reconciling
Items:
|
|
|
|
Amortization of
intangibles
|
0.48
|
|
2.09
|
Stock compensation
expense
|
0.13
|
|
0.49
|
Integration,
acquisition, restructuring and other costs
|
0.02
|
|
0.13
|
Purchase accounting
Items
|
0.01
|
|
0.16
|
Impairment of
goodwill
|
-
|
|
0.02
|
Net Tax
items
|
(0.19)
|
|
(0.72)
|
Subtotal
|
0.45
|
|
2.17
|
Estimated Adjusted
(Non-GAAP) EPS
|
$ 0.65 - $
0.70
|
|
$ 2.85 - $
3.00
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
ADJUSTED SALES & EBITDA RECONCILIATION
|
(in
millions)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q2
2015
|
Q3
2015
|
Q4
2015
|
Q1
2016
|
Q2
2016
|
Q3
2016
|
Q4
2016
|
Q1
2017
|
Q2
2017
|
Q3
2017
|
Q4
2017
|
Q1
2018
|
Q2
2018
|
Sales
|
$
1,260
|
$
1,221
|
$
1,102
|
$
1,615
|
$
1,730
|
$
1,725
|
$
1,759
|
$
1,483
|
$
1,664
|
$
1,729
|
$
1,739
|
$
1,578
|
$
1,727
|
Highlighted
items:
Reduction in revenue related to
warrants
|
-
|
-
|
-
|
-
|
4
|
10
|
16
|
2
|
3
|
3
|
(8)
|
-
|
-
|
Acquisition accounting impacts of deferred revenue
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1
|
6
|
3
|
Adjusted
sales
|
1,260
|
1,221
|
1,102
|
1,615
|
1,734
|
1,735
|
1,775
|
1,486
|
1,667
|
1,732
|
1,732
|
1,583
|
1,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trailing Twelve
Months Adjusted Sales
|
|
|
|
$
5,198
|
$
5,672
|
$
6,185
|
$
6,859
|
$
6,730
|
$
6,663
|
$
6,659
|
$
6,616
|
$
6,713
|
$
6,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) as
reported
|
$
15
|
$
23
|
$
27
|
$
(205)
|
$
82
|
$
46
|
$
86
|
$
(41)
|
$
28
|
$
87
|
$
(8)
|
$
(17)
|
$
35
|
Income tax expense
(benefit)
|
13
|
12
|
(7)
|
86
|
(69)
|
9
|
(11)
|
10
|
(8)
|
(14)
|
(32)
|
3
|
(10)
|
Interest
income
|
(1)
|
(1)
|
(1)
|
(1)
|
(1)
|
(1)
|
(2)
|
(2)
|
(2)
|
(2)
|
(2)
|
(2)
|
(2)
|
Interest
expense
|
28
|
15
|
14
|
20
|
19
|
20
|
21
|
20
|
23
|
20
|
24
|
23
|
24
|
Depreciation
expense
|
17
|
17
|
18
|
24
|
22
|
23
|
22
|
21
|
22
|
22
|
23
|
23
|
21
|
Amortization of
intangible assets
|
57
|
57
|
56
|
98
|
110
|
89
|
100
|
94
|
91
|
90
|
101
|
115
|
90
|
EBITDA
|
130
|
124
|
107
|
22
|
164
|
186
|
216
|
102
|
154
|
203
|
105
|
145
|
158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
16
|
16
|
18
|
14
|
12
|
18
|
16
|
19
|
22
|
20
|
19
|
19
|
24
|
Integration,
acquisition, restructuring and other costs
|
13
|
8
|
8
|
91
|
41
|
11
|
8
|
10
|
10
|
11
|
68
|
14
|
23
|
Impairment on
goodwill and intangible assets
|
-
|
-
|
-
|
-
|
2
|
-
|
-
|
-
|
-
|
-
|
55
|
3
|
-
|
Reduction in revenue
related to warrants
|
-
|
-
|
-
|
-
|
4
|
10
|
16
|
-
|
-
|
-
|
-
|
-
|
-
|
Acquisition
accounting impacts of deferred revenue
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
2
|
3
|
3
|
(7)
|
6
|
3
|
Acquisition
accounting impacts of fair valuing inventory
|
-
|
-
|
-
|
30
|
20
|
-
|
1
|
1
|
-
|
-
|
8
|
17
|
-
|
Impairment (gain) on
investments
|
0
|
-
|
(0)
|
-
|
5
|
3
|
4
|
3
|
-
|
(2)
|
-
|
-
|
-
|
Credit facility -
ticking fees
|
-
|
1
|
1
|
(0)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
FX contract losses
related to acquisition
|
(7)
|
15
|
14
|
2
|
-
|
-
|
(16)
|
-
|
-
|
-
|
-
|
-
|
-
|
Adjustment to
liability related to foreign tax credit
|
-
|
(4)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Remeasurement of
deferred taxes
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
2
|
3
|
4
|
1
|
4
|
(4)
|
Adjusted EBITDA -
Non-GAAP
|
$
152
|
$
160
|
$
148
|
$
159
|
$
248
|
$
227
|
$
245
|
$
139
|
$
192
|
$
239
|
$
248
|
$
208
|
$
204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trailing Twelve
Months Adjusted EBITDA
|
|
|
|
$
619
|
$
715
|
$
782
|
$
879
|
$
859
|
$
803
|
$
815
|
$
818
|
$
886
|
$
899
|
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SOURCE ARRIS