SUWANEE, Ga., Nov. 8, 2018 /PRNewswire/ -- ARRIS (NASDAQ:
ARRS) today announced preliminary and unaudited financial
results for the third quarter 2018. In a separate release issued
today, ARRIS and CommScope (NASDAQ: COMM) announced an agreement
under which CommScope will acquire ARRIS in an all-cash transaction
for $31.75 per share, or a total
purchase price of approximately $7.4
billion, including the repayment of debt.
As a result of this announcement, ARRIS has cancelled the third
quarter 2018 earnings conference call scheduled for 5:00 PM EST today. ARRIS has also suspended any
previously issued guidance.
ARRIS and CommScope will host a joint conference call today at
8:30 a.m. EST to discuss the
transaction. The conference call can be accessed by dialing +1 884
397-6169 (U.S. / Canada) or +1
478-219-0508 (International) and giving the passcode
1458698.
A live webcast of the conference call will be available on the
investor relations section of ARRIS's website at
www.ARRIS.com. A replay will also be made available for
a limited period of time following the conference call on the ARRIS
website at www.ARRIS.com.
Third Quarter 2018 Financial Highlights
- Revenues were $1.651 billion
- GAAP net income was $0.26 per
diluted share
- Adjusted net income (a non-GAAP measure) was $0.68 per diluted share
- End-of-quarter cash resources were $520
million
Revenues were $1.651
billion in the quarter and $4.955
billion through the first nine months of 2018.
GAAP net income in the quarter was $0.26 per diluted share. Through the first
nine months of 2018, GAAP net income was $0.38 per diluted share.
Adjusted net income (a non-GAAP measure) in the quarter
was $0.68 per diluted share.
Through the first nine months of 2018, adjusted net income was
$2.14 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 generated
$221 million of cash from operating
activities during third quarter 2018 and ended the quarter with
$520 million of cash resources.
The Company repurchased approximately 13.9 million ordinary
shares for $353 million YTD through
November 7, 2018.
Full results will be filed in our 10Q following market
close.
Forward-Looking Statements
Statements made in this press release, including those related
to revenues and net income for the fourth quarter 2018, the
proposed ARRIS and CommScope transaction and 2019 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 fourth quarter 2018, as well as the
general outlook for 2019, 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 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.
Statements regarding the proposed ARRIS and CommScope
transaction are subject to various risks and uncertainties, many of
which are outside of the control of CommScope and the Company,
including, without limitation: failure to obtain applicable
regulatory approvals in a timely manner, on acceptable terms or at
all, or to satisfy the other closing conditions to the proposed
transactions; the risk that the Company will be required to pay a
termination fee under the acquisition agreement; the potential
impact of announcement or consummation of the proposed acquisition
on relationships with third parties, including customers, employees
and competitors; uncertainties as to the timing of the proposed
acquisition; the possibility that competing offers will be made;
any statements of belief and any statements of assumptions
underlying any of the foregoing; and other factors beyond the
control of CommScope and/or the Company.
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, 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.
Important Additional Information Regarding the Transaction
Will Be Filed With The SEC
In connection with the proposed ARRIS and CommScope transaction,
ARRIS will prepare a proxy statement to be filed with the
Securities and Exchange Commission (the "SEC"). When completed, a
definitive proxy statement and a form of proxy will be mailed to
the stockholders of ARRIS. INVESTORS AND SECURITY HOLDERS ARE URGED
TO READ THE PROXY STATEMENT AND OTHER DOCUMENTS FILED WITH THE SEC
IN CONNECTION WITH THE TRANSACTION CAREFULLY AND IN THEIR ENTIRETY,
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
TRANSACTION, THE PARTIES TO THE TRANSACTION AND THE RISKS
ASSOCIATED WITH THE TRANSACTION. Those documents, if and when
filed, as well as the Company's other public filings with the SEC
may be obtained without charge at the SEC's website at www.sec.gov
or at ARRIS' website at http://ir.arris.com. Security holders and
other interested parties will also be able to obtain, without
charge, a copy of the Proxy Statement and other relevant documents
(when available) by directing a request by mail to ARRIS Investor
Relations, 3871 Lakefield Drive, Suwanee,
GA 30024 or at http://ir.arris.com. Security holders may
also read and copy any reports, statements and other information
filed with the SEC at the SEC public reference room at 100 F Street
N.E., Room 1580, Washington, D.C.
20549. Please call the SEC at (800) 732-0330 or visit the SEC's
website for further information on its public reference room.
Participants in the Solicitation
ARRIS, its directors and certain of its executive officers may
be considered participants in the solicitation of proxies in
connection with the transactions contemplated by the Proxy
Statement. Information about the directors and executive officers
of ARRIS is set forth in its Annual Report on Form 10-K for the
year ended December 31, 2017, which
was filed with the SEC on March 1,
2018, and its proxy statement for its 2018 annual meeting of
shareholders, which was filed with the SEC on March 23, 2018. Other information regarding
potential participants in the proxy solicitations and a description
of their direct and indirect interests, by security holdings or
otherwise, will be contained in the Proxy Statement when it is
filed.
The Company is organized under the laws of England and Wales. Some of the officers and directors of
ARRIS are residents of countries other than the United States. As a result, it may not be
possible to sue ARRIS or such persons in a non-US court for
violations of US securities laws. It may be difficult to ARRIS and
its affiliates to subject themselves to the jurisdiction and
judgment of a US court or for investors to enforce against them the
judgments of US courts.
About ARRIS
ARRIS (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, the ARRIS logo and E6000 are trademarks of ARRIS
International plc and/or its affiliates. All other marks are the
property of their respective owners. © 2018 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,
|
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$480,756
|
|
$501,410
|
|
$506,240
|
|
$487,573
|
|
$1,379,827
|
Short-term
investments, at fair value
|
|
39,640
|
|
46,698
|
|
36,804
|
|
23,874
|
|
33,309
|
Total cash, cash
equivalents and short term investments
|
520,397
|
|
548,109
|
|
543,044
|
|
511,447
|
|
1,413,136
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable,
net
|
|
1,117,641
|
|
1,183,360
|
|
1,034,608
|
|
1,218,089
|
|
1,056,225
|
Other
receivables
|
|
235,122
|
|
192,067
|
|
169,681
|
|
157,845
|
|
145,658
|
Inventories,
net
|
|
717,271
|
|
803,217
|
|
849,069
|
|
825,211
|
|
775,142
|
Prepaid income
taxes
|
|
17,717
|
|
10,406
|
|
26,409
|
|
28,351
|
|
41,780
|
Prepaids
|
|
34,125
|
|
40,290
|
|
36,308
|
|
26,644
|
|
27,954
|
Other current
assets
|
|
201,111
|
|
196,014
|
|
172,993
|
|
145,953
|
|
109,567
|
Total current
assets
|
|
2,843,385
|
|
2,973,463
|
|
2,832,112
|
|
2,913,540
|
|
3,569,462
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
289,820
|
|
299,991
|
|
309,457
|
|
372,467
|
|
347,506
|
Goodwill
|
|
2,261,002
|
|
2,259,177
|
|
2,336,820
|
|
2,278,512
|
|
2,016,580
|
Intangible assets,
net
|
|
1,488,580
|
|
1,580,393
|
|
1,583,299
|
|
1,771,362
|
|
1,406,591
|
Investments
|
|
71,747
|
|
69,902
|
|
69,858
|
|
71,082
|
|
73,199
|
Deferred income
taxes
|
|
155,193
|
|
146,443
|
|
131,417
|
|
115,436
|
|
193,703
|
Other
assets
|
|
76,878
|
|
72,155
|
|
103,525
|
|
101,858
|
|
57,246
|
|
|
$7,186,605
|
|
$7,401,524
|
|
$7,366,488
|
|
$7,624,257
|
|
$7,664,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$1,100,901
|
|
$1,125,619
|
|
$1,010,812
|
|
$1,206,656
|
|
$1,266,214
|
Accrued compensation,
benefits and related taxes
|
146,964
|
|
140,387
|
|
113,029
|
|
155,966
|
|
102,222
|
Accrued
warranty
|
|
40,772
|
|
38,651
|
|
42,434
|
|
44,507
|
|
45,036
|
Deferred
revenue
|
|
115,989
|
|
123,590
|
|
143,740
|
|
115,224
|
|
118,598
|
Current portion of LT
debt & financing lease obligations
|
83,785
|
|
83,709
|
|
83,633
|
|
83,559
|
|
89,156
|
Income taxes
payable
|
|
4,182
|
|
2,093
|
|
4,937
|
|
6,244
|
|
4,420
|
Other accrued
liabilities
|
|
356,002
|
|
361,315
|
|
316,206
|
|
321,113
|
|
327,099
|
Total current
liabilities
|
|
1,848,594
|
|
1,875,365
|
|
1,714,791
|
|
1,933,269
|
|
1,952,745
|
Long-term debt &
financing lease obligations, net of current portion
|
2,053,373
|
|
2,074,352
|
|
2,095,320
|
|
2,116,244
|
|
2,112,494
|
Accrued
pension
|
|
32,371
|
|
31,889
|
|
43,443
|
|
42,637
|
|
54,867
|
Noncurrent deferred
revenue
|
|
58,553
|
|
58,233
|
|
56,041
|
|
54,090
|
|
34,569
|
Noncurrent income
taxes
|
|
112,259
|
|
120,987
|
|
159,148
|
|
144,665
|
|
115,434
|
Deferred income
taxes
|
|
60,410
|
|
62,886
|
|
68,825
|
|
68,888
|
|
83,058
|
Other noncurrent
liabilities
|
|
67,534
|
|
68,507
|
|
71,546
|
|
80,430
|
|
83,852
|
Total
liabilities
|
|
4,233,095
|
|
4,292,219
|
|
4,209,114
|
|
4,440,223
|
|
4,437,018
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
Ordinary
shares
|
|
2,621
|
|
2,722
|
|
2,769
|
|
2,768
|
|
2,788
|
Capital in excess of
par value
|
|
3,439,476
|
|
3,424,906
|
|
3,392,415
|
|
3,387,128
|
|
3,367,940
|
Accumulated other
comprehensive (loss) income
|
(8,655)
|
|
(4,649)
|
|
12,545
|
|
4,552
|
|
8,838
|
Accumulated
deficit
|
|
(494,706)
|
|
(329,731)
|
|
(266,264)
|
|
(225,881)
|
|
(188,375)
|
Total ARRIS
International plc stockholders' equity
|
2,938,737
|
|
3,093,248
|
|
3,141,465
|
|
3,168,567
|
|
3,191,191
|
Stockholders' equity
attributable to noncontrolling interest
|
14,774
|
|
16,056
|
|
15,909
|
|
15,467
|
|
36,078
|
Total stockholders'
equity
|
|
2,953,511
|
|
3,109,304
|
|
3,157,374
|
|
3,184,034
|
|
3,227,269
|
|
|
$7,186,605
|
|
$7,401,524
|
|
$7,366,488
|
|
$7,624,257
|
|
$7,664,287
|
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,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
Net sales
|
$1,651,248
|
|
$1,728,524
|
|
$4,955,498
|
|
$4,875,799
|
Cost of
sales
|
1,186,059
|
|
1,297,369
|
|
3,515,871
|
|
3,704,029
|
Gross
margin
|
465,189
|
|
431,155
|
|
1,439,627
|
|
1,171,770
|
Operating
expenses:
|
|
|
|
|
|
|
|
Selling, general, and
administrative expenses
|
162,707
|
|
114,407
|
|
497,263
|
|
332,966
|
Research and
development expenses
|
156,109
|
|
131,593
|
|
493,106
|
|
397,653
|
Amortization of
intangible assets
|
88,306
|
|
90,162
|
|
293,499
|
|
274,819
|
Impairment of
goodwill
|
-
|
|
-
|
|
3,400
|
|
-
|
Integration,
acquisition, restructuring and other costs
|
5,046
|
|
10,836
|
|
41,546
|
|
30,622
|
|
412,168
|
|
346,998
|
|
1,328,814
|
|
1,036,060
|
Operating
income
|
53,021
|
|
84,157
|
|
110,813
|
|
135,710
|
Other expense
(income):
|
|
|
|
|
|
|
|
Interest
expense
|
23,969
|
|
20,211
|
|
70,141
|
|
63,238
|
(Gain) loss on
investments
|
(1,400)
|
|
839
|
|
(1,718)
|
|
8,978
|
Loss (gain) on
foreign currency
|
2,025
|
|
(8,543)
|
|
6,034
|
|
5,570
|
Interest
income
|
(1,764)
|
|
(2,288)
|
|
(5,088)
|
|
(5,997)
|
Other (income)
expense, net
|
35
|
|
1,434
|
|
(25)
|
|
2,275
|
Income (loss) before
income taxes
|
30,156
|
|
72,504
|
|
41,468
|
|
61,646
|
Income tax
benefit
|
(15,652)
|
|
(14,311)
|
|
(22,106)
|
|
(12,613)
|
Consolidated net
income
|
45,808
|
|
86,816
|
|
63,574
|
|
74,259
|
Net loss attributable
to noncontrolling interests
|
(1,271)
|
|
(1,505)
|
|
(5,659)
|
|
(5,299)
|
Net income
attributable to ARRIS International plc
|
$47,079
|
|
$88,321
|
|
$69,233
|
|
$79,558
|
|
|
|
|
|
|
|
|
Net income per
ordinary share (1):
|
|
|
|
|
|
|
|
Basic
|
$
0.26
|
|
$
0.47
|
|
$
0.38
|
|
$
0.42
|
Diluted
|
$
0.26
|
|
$
0.47
|
|
$
0.38
|
|
$
0.42
|
|
|
|
|
|
|
|
|
Weighted average
ordinary shares:
|
|
|
|
|
|
|
|
Basic
|
178,106
|
|
187,064
|
|
182,132
|
|
187,878
|
Diluted
|
179,337
|
|
188,941
|
|
183,817
|
|
190,264
|
|
|
|
|
|
|
|
|
(1)
Calculated based on net income 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,
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
Consolidated net
income
|
$
45,808
|
|
$
86,815
|
|
$
63,574
|
|
$
74,259
|
|
|
Depreciation
|
21,430
|
|
22,337
|
|
65,539
|
|
65,340
|
|
|
Amortization of
acquired intangible assets
|
90,181
|
|
91,983
|
|
299,136
|
|
279,961
|
|
|
Amortization of
deferred finance fees and debt discount
|
1,198
|
|
1,730
|
|
3,620
|
|
5,621
|
|
|
Impairment of
goodwill
|
-
|
|
-
|
|
3,400
|
|
-
|
|
|
Deferred income
taxes
|
(12,288)
|
|
983
|
|
(58,365)
|
|
(36,540)
|
|
|
Foreign currency
remeasurement of deferred income taxes
|
509
|
|
2,979
|
|
530
|
|
10,170
|
|
|
Stock compensation
expense
|
20,328
|
|
21,111
|
|
63,087
|
|
62,851
|
|
|
Provision for
non-cash warrants
|
-
|
|
3,064
|
|
-
|
|
8,145
|
|
|
Recovery for doubtful
accounts
|
(145)
|
|
(311)
|
|
(437)
|
|
(559)
|
|
|
Loss on disposal of
plant, property and equipment and other
|
1,539
|
|
4,286
|
|
1,761
|
|
5,876
|
|
|
(Gain) loss on
investments and others
|
(1,400)
|
|
838
|
|
(1,582)
|
|
8,977
|
|
Changes in operating
assets & liabilities, net of effects of acquisitions and
disposals:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
64,774
|
|
(62,808)
|
|
85,636
|
|
305,212
|
|
|
Other
receivables
|
(43,055)
|
|
(12,916)
|
|
(77,277)
|
|
(72,465)
|
|
|
Inventories
|
85,150
|
|
(115,892)
|
|
104,570
|
|
(222,733)
|
|
|
Accounts payable and
accrued liabilities
|
(45,327)
|
|
95,556
|
|
(149,797)
|
|
132,437
|
|
|
Prepaids and other,
net
|
(7,712)
|
|
(24,021)
|
|
16,845
|
|
(14,898)
|
|
|
|
Net cash provided
by operating activities
|
220,990
|
|
115,734
|
|
420,240
|
|
611,654
|
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
(27,145)
|
|
(6,000)
|
|
(64,454)
|
|
(68,250)
|
|
Sales of
investments
|
34,089
|
|
5,000
|
|
45,638
|
|
155,301
|
|
Purchases of
property, plant & equipment, net
|
(16,975)
|
|
(19,489)
|
|
(45,621)
|
|
(62,389)
|
|
Deposit proceeds for
sale of property, plant and equipment
|
20,000
|
|
-
|
|
50,000
|
|
-
|
|
Purchases of
intangible assets
|
-
|
|
(6,000)
|
|
(423)
|
|
(6,422)
|
|
Other, net
|
-
|
|
-
|
|
171
|
|
826
|
|
|
|
Net cash provided
by (used in) investing activities
|
9,969
|
|
(26,489)
|
|
(14,689)
|
|
19,066
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
Proceeds from
issuance of debt
|
-
|
|
-
|
|
-
|
|
30,314
|
|
Payment of financing
lease obligation
|
(226)
|
|
(185)
|
|
(640)
|
|
(590)
|
|
Payment of debt
obligations
|
(21,875)
|
|
(23,737)
|
|
(65,625)
|
|
(98,976)
|
|
Payment for deferred
financing costs and debt discount
|
-
|
|
-
|
|
-
|
|
(1,462)
|
|
Repurchase of
shares
|
(220,378)
|
|
(20,000)
|
|
(331,622)
|
|
(146,965)
|
|
Repurchase of shares
to satisfy employee minimum tax withholdings
|
(5,938)
|
|
(12,477)
|
|
(19,917)
|
|
(26,359)
|
|
Proceeds from
issuance of shares, net
|
188
|
|
70
|
|
9,206
|
|
8,623
|
|
Contribution from
noncontrolling interest
|
-
|
|
-
|
|
2,257
|
|
3,500
|
|
|
|
Net cash used in
financing activities
|
(248,229)
|
|
(56,329)
|
|
(406,341)
|
|
(231,915)
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash, cash equivalents and restricted
cash
|
(1,368)
|
|
794
|
|
(4,017)
|
|
941
|
Net (decrease)
increase in cash, cash equivalents and restricted
cash
|
(18,638)
|
|
33,710
|
|
(4,807)
|
|
399,746
|
Cash, cash
equivalents and restricted cash at beginning of
period
|
502,947
|
|
1,347,728
|
|
489,116
|
|
981,692
|
Cash, cash
equivalents and restricted cash at end of period
|
$
484,309
|
|
$
1,381,438
|
|
$
484,309
|
|
$
1,381,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
cash, cash equivalents and restricted cash reported within the
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalent
|
480,757
|
|
1,379,827
|
|
|
|
|
|
Restricted cash
included in other current assets
|
760
|
|
23
|
|
|
|
|
|
Restricted cash
included in other assets
|
2,792
|
|
1,588
|
|
|
|
|
|
Total
|
|
484,309
|
|
1,381,438
|
|
|
|
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
ADJUSTED SALES & NET INCOME RECONCILIATION
|
(in thousands,
except per share data) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3
2017
|
|
Q2
2018
|
|
Q3
2018
|
|
SEP YTD
2017
|
|
SEP YTD
2018
|
|
|
Amount
|
Per Diluted
Share
|
|
Amount
|
Per Diluted
Share
|
|
Amount
|
Per Diluted
Share
|
|
Amount
|
Per Diluted
Share
|
|
Amount
|
Per Diluted
Share
|
|
Sales
|
$1,728,524
|
|
|
$1,726,540
|
|
|
$1,651,248
|
|
|
$4,875,799
|
|
|
$4,955,498
|
|
|
Highlighted
items:
Reduction in revenue related to
warrants
|
3,064
|
|
|
-
|
|
|
-
|
|
|
8,145
|
|
|
–
|
|
|
Acquisition
accounting impacts of deferred revenue
|
-
|
|
|
3,307
|
|
|
2,400
|
|
|
-
|
|
|
11,401
|
|
|
Adjusted
sales
|
$1,731,588
|
|
|
$1,729,847
|
|
|
$1,653,648
|
|
|
$4,883,944
|
|
|
$4,966,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to ARRIS International plc
|
$
88,320
|
$
0.47
|
|
$
35,754
|
$
0.19
|
|
$
47,079
|
$
0.26
|
|
$
79,558
|
$
0.42
|
|
$
69,233
|
$
0.38
|
|
Highlighted
Items:
Impacting gross margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation
expense
|
3,897
|
0.02
|
|
3,809
|
0.02
|
|
3,660
|
0.02
|
|
10,644
|
0.06
|
|
10,722
|
0.06
|
|
Reduction in revenue
related to warrants
|
3,064
|
0.01
|
|
–
|
–
|
|
–
|
–
|
|
8,145
|
0.04
|
|
–
|
–
|
|
Acquisition
accounting impacts of deferred revenue
|
–
|
–
|
|
3,307
|
0.02
|
|
2,400
|
0.02
|
|
–
|
–
|
|
11,401
|
0.06
|
|
Acquisition
accounting impacts of fair valuing inventory
|
–
|
–
|
|
–
|
–
|
|
–
|
–
|
|
908
|
–
|
|
16,971
|
0.09
|
|
Impacting
operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Integration,
acquisition, restructuring and other costs
|
10,836
|
0.06
|
|
22,844
|
0.12
|
|
5,046
|
0.03
|
|
30,622
|
0.16
|
|
41,545
|
0.23
|
|
Amortization of
intangible assets
|
90,162
|
0.48
|
|
90,485
|
0.49
|
|
88,305
|
0.49
|
|
274,819
|
1.44
|
|
293,498
|
1.60
|
|
Impairment on
goodwill and intangible assets
|
–
|
–
|
|
–
|
–
|
|
–
|
–
|
|
–
|
–
|
|
3,400
|
0.02
|
|
Stock compensation
expense
|
16,316
|
0.08
|
|
19,694
|
0.11
|
|
16,668
|
0.09
|
|
51,308
|
0.27
|
|
52,365
|
0.28
|
|
Noncontrolling
interest share of non-GAAP adj
|
(711)
|
–
|
|
(867)
|
(0.00)
|
|
(885)
|
–
|
|
(2,326)
|
(0.01)
|
|
(4,073)
|
(0.02)
|
|
Impacting other
(income)/expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment (gain) on
investments
|
(1,821)
|
(0.01)
|
|
–
|
–
|
|
–
|
–
|
|
929
|
–
|
|
–
|
–
|
|
Debt amendment
fees
|
–
|
–
|
|
–
|
–
|
|
–
|
–
|
|
2,782
|
0.02
|
|
–
|
–
|
|
Remeasurement of
certain deferred tax liabilities
|
3,569
|
0.02
|
|
(3,676)
|
(0.02)
|
|
519
|
–
|
|
8,508
|
0.04
|
|
540
|
0.00
|
|
Impacting income
tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net tax
items
|
(62,698)
|
(0.33)
|
|
(37,387)
|
(0.20)
|
|
(40,666)
|
(0.23)
|
|
(116,884)
|
(0.61)
|
|
(102,594)
|
(0.56)
|
|
Total highlighted
items
|
62,614
|
0.33
|
|
98,209
|
0.53
|
|
75,047
|
0.42
|
|
269,455
|
1.41
|
|
323,775
|
1.76
|
|
Adjusted net
income
|
$
150,934
|
$
0.80
|
|
$
133,963
|
$
0.72
|
|
$
122,126
|
$
0.68
|
|
$
349,013
|
$
1.83
|
|
$
393,008
|
$
2.14
|
|
Weighted average
ordinary shares - basic
|
|
187,064
|
|
|
184,216
|
|
|
178,106
|
|
|
187,878
|
|
|
182,132
|
|
Weighted average
ordinary shares - diluted
|
|
188,941
|
|
|
185,669
|
|
|
179,337
|
|
|
190,264
|
|
|
183,817
|
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
SUPPLEMENTAL GAAP TO ADJUSTED SALES & GROSS MARGIN
RECONCILIATION
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Q3
2017
|
|
Q2
2018
|
|
Q3
2018
|
|
Sep YTD
2017
|
|
Sep YTD
2018
|
Sales -
GAAP
|
1,728,524
|
|
1,726,540
|
|
1,651,248
|
|
4,875,799
|
|
4,955,498
|
Adjustment to revenue
related to warrants
|
3,064
|
|
-
|
|
-
|
|
8,145
|
|
-
|
Acquisition
accounting impacts of deferred revenue
|
-
|
|
3,307
|
|
2,400
|
|
-
|
|
11,401
|
Adjusted Sales -
Non-GAAP
|
1,731,588
|
|
1,729,847
|
|
1,653,648
|
|
4,883,944
|
|
4,966,899
|
|
|
|
|
|
|
|
|
|
|
GAAP Gross
Margin
|
431,155
|
|
498,755
|
|
465,189
|
|
1,171,770
|
|
1,439,627
|
Acquisition
accounting impacts of fair valuing inventory
|
-
|
|
-
|
|
-
|
|
908
|
|
16,971
|
Acquisition
accounting impacts of deferred revenue
|
-
|
|
3,307
|
|
2,400
|
|
-
|
|
11,401
|
Stock compensation
expense
|
3,897
|
|
3,809
|
|
3,660
|
|
10,644
|
|
10,722
|
Adjustment to revenue
related to warrants
|
3,064
|
|
-
|
|
-
|
|
8,145
|
|
-
|
Adjusted Gross Margin
- Non-GAAP
|
438,116
|
|
505,871
|
|
471,249
|
|
1,191,467
|
|
1,478,721
|
|
|
|
|
|
|
|
|
|
|
GAAP Gross Margin -
%
|
24.9%
|
|
28.9%
|
|
28.2%
|
|
24.0%
|
|
29.1%
|
Adjusted Gross Margin
- Non-GAAP - %
|
25.3%
|
|
29.2%
|
|
28.5%
|
|
24.4%
|
|
29.8%
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
SUPPLEMENTAL OPERATING INCOME TO ADJUSTED DIRECT CONTRIBUTION
RECONCILIATION
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
Q3
2018
|
|
Network &
Cloud
|
CPE
|
Enterprise
|
Corp/
Other
|
Total
|
Operating income
(loss)
|
173,577
|
12,233
|
103
|
(132,892)
|
53,021
|
|
|
|
|
|
|
Add:
|
|
|
|
|
|
Amortization of
intangible assets
|
24,724
|
47,096
|
15,669
|
817
|
88,306
|
Integration,
acquisition, restructuring & other costs
|
836
|
2,823
|
623
|
764
|
5,046
|
|
|
|
|
|
|
Direct
contribution(1)
|
199,137
|
62,152
|
16,395
|
(131,311)
|
146,373
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
Allocated costs
(2)
|
(28,662)
|
(19,344)
|
(5,533)
|
53,539
|
-
|
Stock compensation
expense
|
7,917
|
5,298
|
3,343
|
3,770
|
20,328
|
Depreciation
expense
|
7,000
|
7,107
|
3,149
|
4,174
|
21,431
|
Adjusted direct
contribution
|
185,393
|
55,213
|
17,354
|
(69,828)
|
188,131
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
ADJUSTED EBITDA RECONCILIATION
|
|
(in
millions)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
Q4
2017
|
Q1
2018
|
Q2
2018
|
Q3
2018
|
Last Twelve
Months
|
Net income (loss) as
reported
|
$
(8)
|
$
(17)
|
$
35
|
$
46
|
$
55
|
Income tax expense
(benefit)
|
(32)
|
3
|
(10)
|
(16)
|
(54)
|
Interest
income
|
(2)
|
(2)
|
(2)
|
(2)
|
(7)
|
Interest
expense
|
24
|
23
|
24
|
24
|
94
|
Depreciation
expense
|
23
|
23
|
21
|
22
|
89
|
Amortization of
intangible assets
|
101
|
115
|
90
|
88
|
394
|
EBITDA
|
105
|
145
|
158
|
162
|
571
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
Stock-based
compensation expense
|
19
|
19
|
24
|
20
|
82
|
Integration,
acquisition, restructuring and other costs
|
68
|
14
|
23
|
5
|
109
|
Impairment on
goodwill and intangible assets
|
55
|
3
|
-
|
-
|
58
|
Acquisition
accounting impacts of deferred revenue
|
(7)
|
6
|
3
|
2
|
4
|
Acquisition
accounting impacts of fair valuing inventory
|
8
|
17
|
-
|
-
|
25
|
Remeasurement of
deferred taxes
|
1
|
4
|
(4)
|
1
|
1
|
Adjusted EBITDA -
Non-GAAP
|
$
248
|
$
208
|
$
204
|
$
191
|
$
850
|
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.
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SOURCE ARRIS