SUWANEE, Ga., Aug. 2, 2017 /PRNewswire/ -- ARRIS International plc (NASDAQ: ARRS) today announced preliminary and unaudited financial results for
the second quarter 2017.
Second Quarter 2017 Financial Highlights
- GAAP revenues were $1.664 billion
- Adjusted revenues (a non-GAAP measure) were $1.667 billion
- GAAP net income was $0.16 per diluted share
- Adjusted net income (a non-GAAP measure) was $0.63 per diluted share
- End-of-quarter cash resources were $1.385 billion
- Cash from operating activities was $243.6 million
- Order backlog was $1.326 billion
- Book-to-bill ratio was 1.01
"We entered the second quarter with significantly increased momentum across both our segments and exceeded our
expectations. Growing consumer internet usage delivering high value video content fuels the increasing investment in
broadband capacity. With respect to the third quarter 2017, we expect performance to improve further with revenues in a
range of $1.740 billion to $1.790 billion, GAAP net income per diluted share of $0.23 to $0.28, and adjusted net income per diluted share of $0.66 to
$0.71. We remain on track to achieve results within our full year 2017 guidance ranges provided at our investor day
in March," said Bruce McClelland, ARRIS CEO. "While slightly delayed, we anticipate closing
the Ruckus Networks acquisition early in the fourth quarter once regulatory approvals are complete. We expect the
acquisition to be accretive on a non-GAAP basis in 2018."
GAAP revenues in the second quarter 2017 of $1.664 billion were down $66 million, or 4%, as compared to second quarter 2016 revenues of $1.730
billion. Second quarter revenues were up $181 million, or 12%, as compared to first
quarter 2017 revenues of $1.483 billion. The second quarter 2017 revenues reflect a reduction
of $2.7 million related to outstanding warrants held by customers.
Through the first six months of 2017, revenues of $3.147 billion were down $198 million, or 6%, as compared to the first six months of 2016 revenues of $3.345
billion.
Adjusted revenues (a non-GAAP measure) in the second quarter 2017 were $1.667 billion as
compared to $1.734 billion for the second quarter 2016, and first quarter 2017 revenues of
$1.485 billion.
Year to date, adjusted revenues were $3.152 billion for 2017 as compared to the first six months
of 2016 adjusted revenues of $3.349 billion.
A reconciliation of adjusted revenue to GAAP revenue is attached to this release and also can be found on the Company's
website (www.arris.com).
GAAP net income in the second quarter 2017 was $0.16 per diluted share, as compared to
GAAP net income of $0.44 per diluted share in the second quarter of 2016 and a GAAP net loss of
$(0.21) per diluted share in the first quarter 2017.
Year to date, GAAP net loss was $(0.05) per diluted share for 2017, as compared to the first six
months of 2016 GAAP net loss of $(0.62) per diluted share.
Adjusted net income (a non-GAAP measure) in the second quarter 2017 was $0.63 per diluted
share, as compared to $0.84 per diluted share for the second quarter 2016, and the first quarter
2017 adjusted net income of $0.40 per diluted share.
Year to date, adjusted net income was $1.04 per diluted share for 2017 as compared to the first
six months of 2016 adjusted net income of $1.30 per diluted share.
A reconciliation of adjusted net income per diluted share to GAAP net income per diluted share is attached to this release and
also can be found on the Company's website (www.arris.com).
Cash & Cash Equivalents - The Company ended the second quarter 2017 with $1.385
billion of cash resources, as compared to $1.217 billion at the end of the first quarter
2017. The Company generated $243.6 million of cash from operating activities during the
second quarter 2017, as compared to $260.8 million during the second quarter of 2016. Through
the first six months of 2017, the Company generated $495.8 million of cash from operating
activities. This compares to $38.2 million generated during the same period in
2016.
The Company purchased 1.7 million ordinary shares for $43.9 million during the second
quarter. Through the first six months of 2017 the Company purchased 4.9 million ordinary shares for $127.0 million. As of June 30, 2017 the Company had $295.0 million remaining in available repurchase authorization.
Order backlog at the end of the second quarter 2017 was $1.326 billion as compared to
$1.239 billion and $1.304 billion at the end of the second quarter
2016 and the first quarter 2017, respectively. The Company's book-to-bill ratio in the second quarter 2017 was 1.01 as compared
to the second quarter 2016 of 0.94 and the first quarter 2017 of 1.13.
ARRIS management will conduct a conference call at 5:00 pm EDT, today, Wednesday, August 2, 2017, to discuss these results in detail. 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 and providing the ARRIS International
plc name, conference pass code 51622616# and Bob Puccini as the moderator. Please note that ARRIS
will not accept any calls related to this earnings release until after the conclusion of the conference call. A replay of the
conference call can be accessed approximately two hours after the call through August 9, 2017
8:00 pm/ET, by dialing 855-859-2056 or 404-537-3406 for international calls and using the pass code
51622616. 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 2017 and
beyond, the proposed acquisition of the Ruckus Networks business, and the general market outlook and industry trends are
forward-looking statements. These statements involve risks and uncertainties that may cause actual results to differ materially
from those set forth in these statements. Among other things:
- projected results for the third quarter 2017, as well as the general outlook for 2017, are based on preliminary estimates,
assumptions and projections that management believes to be reasonable at this time, but are beyond management's control;
- the proposed acquisition of the Ruckus Networks business may not be completed as a result of failure to obtain regulatory
approvals or other reasons;
- the anticipated benefits from the Ruckus Networks acquisition may not be realized;
- we may encounter significant transaction costs and unknown liabilities in connection with the Ruckus Networks
acquisition;
- volatility in currency fluctuation may adversely impact our international customers' ability or willingness to purchase
products and the pricing of our products;
- volatility in component pricing and supply could impact revenues and gross margins more than currently anticipated;
- impacts of the U.K. invoking Article 50 of the Lisbon Treaty to leave the European Union, could have an adverse impact on
our results of operations;
- regulatory changes, including those related to tax and the FCC, could have an adverse impact on our operations and results
of operations;
- the impact of litigation and similar regulatory proceedings that we are involved in or may become involved in, including
the costs of such litigation;
- our customers operate in a capital intensive consumer-based industry, and volatility in the capital markets or changes in
customer spending may adversely impact their ability or willingness to purchase the products that we offer; and
- because the market in which we operate is volatile, actions taken and contemplated may not achieve the desired impact
relative to changing market conditions and the success of these strategies will be dependent on the effective implementation of
those plans while minimizing organizational disruption.
In addition to the factors set forth elsewhere in this release, other factors that could cause results to differ from current
expectations include: the impact of rapidly changing technologies; market trends and the adoption of industry
standards. These factors are not intended to be an all-encompassing list of risks and uncertainties that may affect the
Company's business. Additional information regarding these and other factors can be found in the Company's reports filed with the
Securities and Exchange Commission, including its Form 10-Q for the quarter ended March 31, 2017. In providing
forward-looking statements, the Company expressly disclaims any obligation to update these statements publicly or otherwise,
whether as a result of new information, future events or otherwise, except as required by law.
About ARRIS
ARRIS International plc (NASDAQ: ARRS) is a world leader in entertainment and communications technology. Our
innovations combine hardware, software, and services across the cloud, network, and home to power TV and Internet for
millions of people around the globe. The people of ARRIS collaborate with the world's top service providers, content
providers, and retailers to advance the state of our industry and pioneer tomorrow's connected world. For more information, visit
www.arris.com.
For the latest ARRIS news:
- Check out our blog: ARRIS EVERYWHERE
- Follow us on Twitter: @ARRIS
ARRIS and the ARRIS Logo are trademarks or registered trademarks of ARRIS Enterprises, LLC. All other trademarks are the
property of their respective owners. © ARRIS Enterprises, LLC. 2017. All rights reserved.
|
ARRIS INTERNATIONAL PLC
|
|
|
PRELIMINARY CONSOLIDATED BALANCE SHEETS
|
|
|
(in thousands)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
|
June 30,
|
|
|
|
2017
|
|
2017
|
|
2016
|
|
2016
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$1,346,028
|
|
$1,126,248
|
|
$980,123
|
|
$1,031,978
|
|
$870,992
|
|
Short-term investments, at fair value
|
|
38,759
|
|
90,673
|
|
115,553
|
|
67,568
|
|
21,882
|
|
Total cash, cash equivalents and short term investments
|
|
1,384,787
|
|
1,216,921
|
|
1,095,676
|
|
1,099,546
|
|
892,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
991,539
|
|
1,018,108
|
(1)
|
1,359,430
|
|
1,104,596
|
|
1,053,760
|
|
Other receivables
|
|
132,742
|
|
109,117
|
(1)
|
73,193
|
|
45,456
|
|
55,698
|
|
Inventories, net
|
|
657,881
|
|
556,264
|
|
551,541
|
|
598,105
|
|
647,497
|
|
Prepaid income taxes
|
|
16,354
|
|
21,845
|
|
51,476
|
|
30,123
|
|
29,797
|
|
Prepaids
|
|
32,149
|
|
27,898
|
|
21,163
|
|
30,992
|
|
39,388
|
|
Other current assets
|
|
119,405
|
|
132,340
|
|
127,593
|
|
140,894
|
|
136,177
|
|
Total current assets
|
|
3,334,857
|
|
3,082,491
|
|
3,280,071
|
|
3,049,712
|
|
2,855,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
355,033
|
|
354,050
|
|
353,378
|
|
352,380
|
|
367,696
|
|
Goodwill
|
|
2,014,550
|
|
2,018,012
|
|
2,016,169
|
|
2,083,567
|
|
2,089,840
|
|
Intangible assets, net
|
|
1,491,103
|
|
1,586,187
|
|
1,677,178
|
|
1,772,243
|
|
1,902,864
|
|
Investments
|
|
61,047
|
|
65,035
|
|
72,932
|
|
80,914
|
|
77,749
|
|
Deferred income taxes
|
|
199,102
|
|
190,037
|
|
298,757
|
|
269,011
|
|
224,889
|
|
Other assets
|
|
54,843
|
|
58,920
|
|
59,878
|
|
43,990
|
|
21,626
|
|
|
|
$7,510,535
|
|
$7,354,732
|
|
$7,758,362
|
|
$7,651,816
|
|
$7,539,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$1,201,883
|
|
$1,020,234
|
|
$1,048,904
|
|
$1,010,152
|
|
$1,016,956
|
|
Accrued compensation, benefits and related taxes
|
|
81,355
|
|
73,221
|
|
139,795
|
|
123,449
|
|
97,273
|
|
Accrued warranty
|
|
44,812
|
|
46,330
|
|
49,618
|
|
56,795
|
|
66,568
|
|
Deferred revenue
|
|
130,454
|
|
145,197
|
|
132,128
|
|
160,899
|
|
147,284
|
|
Current portion of LT debt & financing lease obligations
|
|
89,336
|
|
82,767
|
|
82,734
|
|
82,762
|
|
94,217
|
|
Current income taxes liability
|
|
9,487
|
|
20,278
|
|
23,134
|
|
1,434
|
|
2,892
|
|
Other accrued liabilities
|
|
303,013
|
|
300,861
|
|
357,823
|
|
317,638
|
|
262,603
|
|
Total current liabilities
|
|
1,860,340
|
|
1,688,888
|
|
1,834,135
|
|
1,753,129
|
|
1,687,793
|
|
Long-term debt & financing lease obligations, net of current
portion
|
|
2,134,506
|
|
2,159,300
|
|
2,180,009
|
|
2,200,642
|
|
2,221,383
|
|
Accrued pension
|
|
55,532
|
|
54,808
|
|
52,652
|
|
51,878
|
|
55,742
|
|
Noncurrent income taxes
|
|
114,187
|
|
120,493
|
|
123,344
|
|
109,955
|
|
84,694
|
|
Deferred income taxes
|
|
83,516
|
|
89,261
|
|
223,529
|
|
337,582
|
|
348,378
|
|
Other noncurrent liabilities
|
|
120,381
|
|
112,977
|
|
117,957
|
|
138,227
|
|
138,013
|
|
Total liabilities
|
|
4,368,462
|
|
4,225,726
|
|
4,531,626
|
|
4,591,413
|
|
4,536,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares
|
|
2,786
|
|
2,802
|
|
2,831
|
|
2,825
|
|
2,834
|
|
Capital in excess of par value
|
|
3,356,184
|
|
3,322,803
|
|
3,314,707
|
|
3,259,143
|
|
3,227,758
|
|
Accumulated other comprehensive loss
|
|
2,211
|
|
10,628
|
|
3,291
|
|
(21,410)
|
|
(28,973)
|
|
Retained earnings (deficit)
|
|
(256,705)
|
|
(243,207)
|
|
(132,013)
|
|
(220,296)
|
|
(240,424)
|
|
Total ARRIS International
plc stockholders' equity
|
|
3,104,475
|
|
3,093,025
|
|
3,188,816
|
|
3,020,263
|
|
2,961,195
|
|
Stockholders' equity attributable to noncontrolling interest
|
|
37,598
|
|
35,980
|
|
37,921
|
|
40,141
|
|
42,655
|
|
Total stockholders' equity
|
|
3,142,073
|
|
3,129,005
|
|
3,226,737
|
|
3,060,404
|
|
3,003,850
|
|
|
|
$7,510,535
|
|
$7,354,732
|
|
$7,758,362
|
|
$7,651,816
|
|
$7,539,853
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The presentation of accounts receivable and other receivables has been
revised as of March 31, 2017, to classify approximately $51 million of other receivable previously reflected in trade
accounts receivable.
|
|
|
|
|
|
|
|
|
ARRIS INTERNATIONAL PLC
|
PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS
|
(in thousands, except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
For the Three Months
|
|
For the Six Months
|
|
Ended June 30,
|
|
Ended June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
Net sales
|
$1,664,170
|
|
$1,730,044
|
|
$3,147,276
|
|
$3,344,750
|
Cost of sales
|
1,260,813
|
|
1,285,310
|
|
2,406,661
|
|
2,515,983
|
Gross margin
|
403,357
|
|
444,734
|
|
740,615
|
|
828,766
|
Operating expenses:
|
|
|
|
|
|
|
|
Selling, general, and administrative expenses
|
113,921
|
|
105,746
|
|
218,559
|
|
225,711
|
Research and development expenses
|
133,098
|
|
152,580
|
|
266,060
|
|
313,728
|
Amortization of intangible assets
|
91,012
|
|
109,883
|
|
184,657
|
|
208,377
|
Integration, acquisition, restructuring and other costs
|
9,690
|
|
43,137
|
|
19,785
|
|
134,057
|
|
347,721
|
|
411,346
|
|
689,062
|
|
881,871
|
Operating income (loss)
|
55,636
|
|
33,388
|
|
51,553
|
|
(53,104)
|
Other expense (income):
|
|
|
|
|
|
|
|
Interest expense
|
23,344
|
|
19,102
|
|
43,027
|
|
38,728
|
Loss on investments
|
3,609
|
|
6,389
|
|
8,138
|
|
8,347
|
Loss (gain) on foreign currency
|
9,373
|
|
(9,801)
|
|
14,113
|
|
2,440
|
Interest income
|
(1,788)
|
|
(1,185)
|
|
(3,709)
|
|
(1,968)
|
Other (income) expense, net
|
926
|
|
5,219
|
|
841
|
|
4,868
|
Income (loss) before income taxes
|
20,172
|
|
13,664
|
|
(10,858)
|
|
(105,521)
|
Income tax (benefit) expense
|
(8,302)
|
|
(68,795)
|
|
1,699
|
|
17,218
|
Consolidated net income (loss)
|
28,474
|
|
82,459
|
|
(12,557)
|
|
(122,738)
|
Net loss attributable to noncontrolling interests
|
(1,862)
|
|
(1,769)
|
|
(3,795)
|
|
(4,392)
|
Net income (loss) attributable to ARRIS International plc
|
$30,336
|
|
$84,228
|
|
($8,762)
|
|
($118,346)
|
|
|
|
|
|
|
|
|
Net income (loss) per ordinary share (1):
|
|
|
|
|
|
|
|
Basic
|
$ 0.16
|
|
$ 0.44
|
|
$ (0.05)
|
|
$ (0.62)
|
Diluted
|
$ 0.16
|
|
$ 0.44
|
|
$ (0.05)
|
|
$ (0.62)
|
|
|
|
|
|
|
|
|
Weighted average ordinary shares:
|
|
|
|
|
|
|
|
Basic
|
186,803
|
|
190,409
|
|
188,291
|
|
191,076
|
Diluted
|
189,002
|
|
191,250
|
|
190,932
|
|
191,076
|
|
|
|
|
|
|
|
|
(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,
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income (loss)
|
|
|
|
|
|
$ 28,474
|
|
$ 82,459
|
|
(12,557)
|
|
$ (122,737)
|
|
|
Depreciation
|
|
|
|
|
|
21,690
|
|
22,172
|
|
43,003
|
|
46,043
|
|
|
Amortization of intangible assets
|
|
|
|
|
|
92,672
|
|
111,541
|
|
187,978
|
|
211,307
|
|
|
Amortization of deferred finance fees and debt discount
|
|
|
|
|
|
1,988
|
|
1,935
|
|
3,891
|
|
3,864
|
|
|
Impairment of intangibles
|
|
|
|
|
|
-
|
|
2,300
|
|
-
|
|
2,300
|
|
|
Deferred income tax (benefit) provision
|
|
|
|
|
|
(16,740)
|
|
(42,424)
|
|
(37,523)
|
|
(79,337)
|
|
|
Foreign currency remeasurement of certain income tax accounts
|
|
|
|
|
|
4,060
|
|
-
|
|
7,191
|
|
-
|
|
|
Share-based compensation expense
|
|
|
|
|
|
22,325
|
|
11,901
|
|
41,740
|
|
26,177
|
|
|
Provision for non-cash warrants
|
|
|
|
|
|
2,658
|
|
4,283
|
|
5,081
|
|
4,283
|
|
|
Provision for doubtful accounts
|
|
|
|
|
|
(69)
|
|
209
|
|
(248)
|
|
1,054
|
|
|
Loss on disposal of plant, property and equipment and other
|
|
|
|
|
|
1,298
|
|
3,945
|
|
1,590
|
|
3,929
|
|
|
Loss/impairment on investments
|
|
|
|
|
|
3,609
|
|
6,389
|
|
8,139
|
|
8,348
|
|
|
Excess tax benefits from stock-based compensation plans
|
|
|
|
|
|
-
|
|
-
|
|
-
|
|
(2,354)
|
|
Changes in operating assets & liabilities, net of effects of
acquisitions and
disposals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
|
|
|
24,060
|
(1)
|
(81,428)
|
|
368,020
|
|
49,033
|
|
|
Other receivables
|
|
|
|
|
|
(23,625)
|
(1)
|
(23,285)
|
|
(59,549)
|
|
(14,022)
|
|
|
Inventory
|
|
|
|
|
|
(103,689)
|
|
15,560
|
|
(106,841)
|
|
181,737
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
|
179,608
|
|
208,067
|
|
36,881
|
|
(327,584)
|
|
|
Prepaids and other, net
|
|
|
|
|
|
5,247
|
|
(62,860)
|
|
8,993
|
|
46,188
|
|
|
|
Net cash provided by operating activities
|
|
|
|
|
|
243,566
|
|
260,764
|
|
495,789
|
|
38,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of investments
|
|
|
|
|
|
(6,371)
|
|
(17,470)
|
|
(62,250)
|
|
(22,248)
|
|
Sales of investments
|
|
|
|
|
|
58,416
|
|
348
|
|
150,301
|
|
2,441
|
|
Purchases of property, plant & equipment, net
|
|
|
|
|
|
(21,033)
|
|
(14,612)
|
|
(42,900)
|
|
(23,752)
|
|
Proceeds from sale-leaseback transaction
|
|
|
|
|
|
-
|
|
-
|
|
826
|
|
-
|
|
Acquisitions, net of cash acquired
|
|
|
|
|
|
-
|
|
-
|
|
-
|
|
(340,118)
|
|
Purchases of intangible assets
|
|
|
|
|
|
(422)
|
|
(2,000)
|
|
(422)
|
|
(3,310)
|
|
Other, net
|
|
|
|
|
|
-
|
|
575
|
|
-
|
|
3,507
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
|
|
|
30,590
|
|
(33,159)
|
|
45,555
|
|
(383,480)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of debt
|
|
|
|
|
|
30,314
|
|
-
|
|
30,314
|
|
800,000
|
|
Proceeds from sale-leaseback financing transaction
|
|
|
|
|
|
-
|
|
-
|
|
(204)
|
|
-
|
|
Payment of accounts receivable financing facility
|
|
|
|
|
|
-
|
|
-
|
|
-
|
|
(12,042)
|
|
Payment of financing lease obligation
|
|
|
|
|
|
(201)
|
|
(150)
|
|
(201)
|
|
(314)
|
|
Payment of debt obligations
|
|
|
|
|
|
(52,864)
|
|
(22,375)
|
|
(75,239)
|
|
(275,000)
|
|
Payment for deferred financing costs and debt discount
|
|
|
|
|
|
(1,462)
|
|
-
|
|
(1,462)
|
|
(2,304)
|
|
Repurchase of shares
|
|
|
|
|
|
(43,855)
|
|
-
|
|
(126,965)
|
|
(150,003)
|
|
Excess income tax benefits from stock-based compensation plans
|
|
|
|
|
|
-
|
|
-
|
|
-
|
|
2,354
|
|
Repurchase of shares to satisfy employee minimum tax
withholdings
|
|
|
|
|
|
(128)
|
|
(148)
|
|
(13,882)
|
|
(14,193)
|
|
Proceeds from issuance of shares, net
|
|
|
|
|
|
8,530
|
|
6,879
|
|
8,553
|
|
4,163
|
|
Contribution from noncontrolling interest
|
|
|
|
|
|
3,500
|
|
-
|
|
3,500
|
|
-
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
|
|
|
(56,166)
|
|
(15,794)
|
|
(175,586)
|
|
352,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
|
|
|
1,790
|
|
-
|
|
147
|
|
-
|
Net increase in cash and cash equivalents
|
|
|
|
|
|
219,780
|
|
211,811
|
#
|
365,905
|
|
7,410
|
Cash and cash equivalents at beginning of period
|
|
|
|
|
|
1,126,248
|
|
659,181
|
|
980,123
|
|
863,582
|
Cash and cash equivalents at end of period
|
|
|
|
|
|
$ 1,346,028
|
|
$ 870,992
|
|
$ 1,346,028
|
|
$ 870,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The presentation of accounts receivable and other receivables has been
revised as of March 31, 2017, to classify approximately $51 million of other receivable previously reflected in trade
accounts receivable.
|
ARRIS INTERNATIONAL PLC
|
PRELIMINARY ADJUSTED SALES & NET INCOME RECONCILIATION
|
(in thousands, except per share data) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q2 2016
|
|
Q1 2017
|
|
Q2 2017
|
|
JUN YTD 2016
|
|
JUN YTD 2017
|
|
|
Amount
|
Per
Diluted
Share
|
|
Amount
|
Per
Diluted
Share
|
|
Amount
|
Per
Diluted
Share
|
|
Amount
|
Per
Diluted
Share
|
|
Amount
|
Per
Diluted
Share
|
|
Sales
|
$1,730,044
|
|
|
$1,483,106
|
|
|
$1,664,170
|
|
|
$3,344,750
|
|
|
$3,147,276
|
|
|
Highlighted items:
Reduction in revenue related to warrants
|
4,283
|
|
|
2,423
|
|
|
2,658
|
|
|
4,283
|
|
|
5,081
|
|
|
Adjusted sales
|
$1,734,327
|
|
|
$1,485,529
|
|
|
$1,666,828
|
|
|
$3,349,033
|
|
|
$3,152,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to ARRIS International plc
|
84,228
|
0.44
|
|
(39,098)
|
(0.21)
|
|
30,336
|
0.16
|
|
(118,345)
|
(0.62)
|
|
(8,762)
|
(0.05)
|
|
Highlighted Items:
Impacting gross margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation expense
|
1,997
|
0.01
|
|
3,252
|
0.02
|
|
3,495
|
0.02
|
|
4,236
|
0.02
|
|
6,747
|
$0.04
|
|
Reduction in revenue related to warrants
|
4,283
|
0.02
|
|
2,423
|
0.01
|
|
2,658
|
0.01
|
|
4,283
|
0.02
|
|
5,081
|
$0.03
|
|
Acquisition accounting impacts of fair valuing
inventory
|
20,039
|
0.10
|
|
908
|
–
|
|
–
|
–
|
|
50,331
|
0.26
|
|
908
|
–
|
|
Impacting operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Integration, acquisition, restructuring and other costs
|
43,137
|
0.23
|
|
10,095
|
0.05
|
|
9,690
|
0.05
|
|
134,057
|
0.70
|
|
19,785
|
$0.10
|
|
Amortization of intangible assets
|
109,883
|
0.57
|
|
93,646
|
0.49
|
|
91,012
|
0.48
|
|
208,375
|
1.08
|
|
184,658
|
$0.97
|
|
Stock compensation expense
|
9,905
|
0.05
|
|
16,163
|
0.08
|
|
18,829
|
0.10
|
|
21,942
|
0.11
|
|
34,992
|
$0.18
|
|
Noncontrolling interest share of Non-GAAP adjustments
|
(776)
|
–
|
|
(804)
|
–
|
|
(811)
|
–
|
|
(1,552)
|
(0.01)
|
|
(1,615)
|
(0.01)
|
|
Impacting other (income)/expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Investments
|
5,000
|
0.03
|
|
2,750
|
0.01
|
|
–
|
–
|
|
5,000
|
0.03
|
|
2,750
|
$0.01
|
|
Debt amendment fees
|
–
|
–
|
|
–
|
–
|
|
2,782
|
0.01
|
|
–
|
–
|
|
2,782
|
$0.01
|
|
Credit facility - ticking fees
|
–
|
–
|
|
–
|
–
|
|
–
|
–
|
|
(9)
|
–
|
|
–
|
–
|
|
Foreign exchange contract losses related to cash consideration of Pace
acquisition
|
–
|
–
|
|
–
|
–
|
|
–
|
–
|
|
1,610
|
0.01
|
|
–
|
–
|
|
Remeasurement of certain deferred tax liabilities
|
–
|
–
|
|
2,112
|
0.01
|
|
2,828
|
0.01
|
|
–
|
–
|
|
4,940
|
$0.03
|
|
Impacting income tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign withholding tax
|
–
|
–
|
|
–
|
–
|
|
–
|
–
|
|
54,741
|
0.28
|
|
–
|
–
|
|
Net tax items
|
(117,291)
|
(0.61)
|
|
(13,333)
|
(0.07)
|
|
(40,853)
|
(0.22)
|
|
(113,874)
|
(0.59)
|
|
(54,270)
|
(0.28)
|
|
Total highlighted items
|
76,177
|
0.40
|
|
117,212
|
0.61
|
|
89,630
|
0.47
|
|
369,140
|
1.92
|
|
206,758
|
$1.08
|
|
Adjusted net income
|
160,405
|
0.84
|
|
78,114
|
0.40
|
|
119,966
|
0.63
|
|
250,795
|
1.30
|
|
197,996
|
$1.04
|
|
Weighted average ordinary shares - basic
|
|
190,409
|
|
|
189,796
|
|
|
186,803
|
|
|
191,076
|
|
|
188,291
|
|
Weighted average ordinary shares - diluted
|
|
191,250
|
|
|
192,879
|
|
|
189,002
|
|
|
192,421
|
|
|
190,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRIS INTERNATIONAL PLC
|
PRELIMINARY SUPPLEMENTAL GAAP TO ADJUSTED SALES & GROSS MARGIN
RECONCILIATION
|
(in thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Q2 2016
|
|
Q1 2017
|
|
Q2 2017
|
|
Jun YTD 2016
|
|
Jun YTD 2017
|
Sales - GAAP
|
1,730,044
|
|
1,483,105
|
|
1,664,170
|
|
3,344,750
|
|
3,147,276
|
Fair Value of Warrants Adjustment
|
4,283
|
|
2,423
|
|
2,658
|
|
4,283
|
|
5,081
|
Adjusted Sales - Non- GAAP
|
1,734,327
|
|
1,485,528
|
|
1,666,828
|
|
3,349,033
|
|
3,152,357
|
|
|
|
|
|
|
|
|
|
|
GAAP Gross Margin
|
444,734
|
|
337,257
|
|
403,357
|
|
828,766
|
|
740,615
|
Fair Value of Inventory Adjustment
|
20,039
|
|
908
|
|
-
|
|
50,331
|
|
908
|
Equity Compensation
|
1,997
|
|
3,252
|
|
3,495
|
|
4,236
|
|
6,747
|
Fair Value of Warrants Adjustment
|
4,283
|
|
2,423
|
|
2,658
|
|
4,283
|
|
5,082
|
Adjusted Gross Margin - Non-GAAP
|
471,054
|
|
343,840
|
|
409,511
|
|
887,617
|
|
753,351
|
|
|
|
|
|
|
|
|
|
|
GAAP Gross Margin - %
|
25.7%
|
|
22.7%
|
|
24.2%
|
|
24.8%
|
|
23.5%
|
Adjusted Gross Margin - Non-GAAP - %
|
27.2%
|
|
23.1%
|
|
24.6%
|
|
26.5%
|
|
23.9%
|
ARRIS INTERNATIONAL PLC
|
PRELIMINARY SUPPLEMENTAL GAAP TO ADJUSTED SALES & DIRECT
CONTRIBUTION RECONCILIATION
|
(in thousands)
|
(unaudited)
|
|
|
|
|
|
|
Q2 2017
|
|
Network &
Cloud
|
CPE
|
Corp/ Other
|
Total
|
Net Sales
|
510,972
|
1,155,883
|
(2,685)
|
1,664,170
|
Non GAAP Adjustments (1)
|
-
|
-
|
2,658
|
2,658
|
Adjusted Net Sales
|
510,972
|
1,155,883
|
(27)
|
1,666,828
|
|
|
|
|
|
Direct Contribution(2)
|
192,775
|
123,724
|
(160,161)
|
156,338
|
Non GAAP Adjustments (3)
|
-
|
-
|
24,983
|
24,983
|
Adjusted Direct Contribution
|
192,775
|
123,724
|
(135,179)
|
181,321
|
Direct Contribution % of sales
|
37.7%
|
10.7%
|
|
10.9%
|
|
|
|
|
|
(1) Impact of warrants adjustment.
|
(2) Defined as gross margin less direct operating expenses, excluding
amortization of intangible assets, restructuring charges, acquisition, integration and other costs.
|
(3) Equity compensation expense and warrants adjustment.
|
ARRIS INTERNATIONAL PLC
|
|
|
PRELIMINARY SUPPLEMENTAL GAAP TO ADJUSTED EPS GUIDANCE RECONCILIATION
(2)
|
|
|
(in millions, except per share data)
|
|
|
|
|
|
|
|
Q3 2017 Guidance
|
|
Full Year 2017 Guidance
|
|
|
|
|
Estimated GAAP Sales - $M
|
1.736 - 1,786
|
|
6,610 - 6,810
|
Warrants - $M(1)
|
4
|
|
5 - 20
|
Estimated Adjusted (Non-GAAP) Sales - $M
|
1,740 - 1,790
|
|
6,615 - 6,830
|
|
|
|
|
|
|
|
|
Estimated GAAP EPS
|
$ 0.23 - $ 0.28
|
|
$ 0.61 - $ 0.81
|
Reconciling Items:
|
|
|
|
Amortization of Intangibles
|
0.48
|
|
1.93
|
Stock Compensation Expense
|
0.10
|
|
0.43
|
Integration and Other Costs
|
0.06
|
|
0.21
|
Warrants (1)
|
0.02
|
|
0.06
|
Net tax items
|
(0.23)
|
|
(0.84)
|
Subtotal
|
0.43
|
|
1.79
|
Estimated Adjusted (Non-GAAP) EPS
|
$ 0.66 - $ 0.71
|
|
$ 2.40 - $ 2.60
|
(1) GAAP sales and EPS will be impacted by the fair value of
warrants issued which can vary depending upon the ultimate volumes, product mix and fair value calculation.
|
|
|
|
|
|
|
|
|
(2) Excludes pending Ruckus Acquisition
|
|
|
|
Notes to GAAP to Adjusted Non-GAAP Financial Measures
The Company reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP" or referred to herein as "reported"). However, management believes that certain
non-GAAP financial measures provide management and other users with additional meaningful financial information that should be
considered when assessing our ongoing performance. Our management regularly uses our supplemental non-GAAP financial measures
internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the
factors management uses in planning for and forecasting future periods. Non-GAAP financial measures should be viewed in
addition to, and not as an alternative to, the Company's reported results prepared in accordance with GAAP. Our non-GAAP
financial measures reflect adjustments based on the following items, as well as the related income tax effects:
Reduction in Revenue Related to Warrants: We entered into agreements with two
customers for the issuance of warrants to purchase up to 14.0 million of ARRIS's ordinary shares. Vesting of the warrants is
subject to certain purchase volume commitments, and therefore the accounting guidance requires that we record any change in the
fair value of warrants as a reduction in revenue. Until final vesting, changes in the fair value of the warrants will be marked
to market and any adjustment recorded in revenue. We have excluded the effect of the implied fair value in calculating our
non-GAAP financial measures. We believe it is useful to understand the effects of these items on our total revenues and gross
margin.
Stock-Based Compensation Expense: We have excluded the effect of stock-based compensation expenses in
calculating our non-GAAP operating expenses and net income (loss) measures. Although stock-based compensation is a key incentive
offered to our employees, we continue to evaluate our business performance excluding stock-based compensation expenses. We record
non-cash compensation expense related to grants of restricted stock units. Depending upon the size, timing and the terms of the
grants, the non-cash compensation expense may vary significantly but will recur in future periods.
Acquisition Accounting Impacts Related to Inventory Valuation: In connection
with the accounting related to our acquisitions, business combinations rules require the acquired inventory be recorded at fair
value on the opening balance sheet. This is different from historical cost. Essentially we are required to write the
inventory up to end customer price less a reasonable margin as a distributor. We have excluded the resulting adjustments in
inventory and cost of goods sold as the historic and forward gross margin trends will differ as a result of the adjustments. We
believe it is useful to understand the effects of this on cost of goods sold and margin.
Integration, Acquisition, Restructuring Costs and Other Costs: We have excluded the effect of
acquisition, integration, and other expenses and the effect of restructuring expenses in calculating our non-GAAP operating
expenses and net income (loss) measures. We incurred expenses in connection with the ActiveVideo, Pace Combination and pending
Ruckus Networks acquisition, which we generally would not otherwise incur in the periods presented as part of our continuing
operations. Acquisition and integration expenses consist of transaction costs, costs for transitional employees, other acquired
employee related costs, and integration related outside services. Restructuring expenses consist of employee severance and
abandoned facilities. We believe it is useful to understand the effects of these items on our total operating expenses.
Amortization of Intangible Assets: We have excluded the effect of amortization of intangible assets in
calculating our non-GAAP operating expenses and net income (loss) measures. Amortization of intangible assets is non-cash, and is
inconsistent in amount and frequency and is significantly affected by the timing and size of our acquisitions. Investors should
note that the use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our
future period revenues as well. Amortization of intangible assets will recur in future periods.
Noncontrolling Interest share of Non-GAAP Adjustments: The joint venture formed for the ActiveVideo
acquisition is accounted for by ARRIS under the consolidation method. As a result, the consolidated statements of
operations include the revenues, expenses, and gains and losses of the noncontrolling interest. The amount of net income
(loss) related to the noncontrolling interest are reported and presented separately in the consolidated statement of
operations. We have excluded the noncontrolling share of any non GAAP adjusted measures recorded by the venture, as we
believe it is useful to understand the effect of excluding this item when evaluating our ongoing performance.
Impairment of Investments: We have excluded the effect of an
other-than-temporary impairment of a cost method investment in calculating our non-GAAP financial measures. We believe it is
useful to understand the effect of this non-cash item in our other expense (income).
Debt Amendment Fees: In 2017, the Company amended its credit agreement. This debt
modification allowed us to improve the terms and conditions of the credit agreement and extend the maturitity of the Term Loan
B. We have excluded the effect of the associated fees in calculating our non-GAAP financial measures. We
believe it is useful to understand the effect of this item in our interest expense.
Credit Facility - Ticking Fees: In connection with our acquisition of Pace, the cash portion of
the consideration was funded through debt financing commitments. A ticking fee was paid to our banks to compensate for the
time lag between the commitment allocation on a loan and the actual funding. We have excluded the effect of the ticking fee in
calculating our non-GAAP financial measures. We believe it is useful to understand the effect of this item in our other expense
(income).
Foreign Exchange Contract Losses Related to Cash Consideration of Pace Acquisition: In the second
quarter of 2015, the Company announced its intent to acquire Pace plc in exchange for stock and cash. We subsequently
entered into foreign exchange forward contracts in order to hedge the foreign currency risk associated with the cash
consideration of the Pace acquisition. These foreign exchange forward contracts were not designated as hedges, and
accordingly, all changes in the fair value of these instruments are recognized as a loss (gain) on foreign currency in the
Consolidated Statements of Operations. We believe it is useful to understand the effect of this on our other expense
(income).
Remeasurement of Certain Deferred Tax Liabilities: The Company recorded a
foreign currency remeasurement (gain) loss related to a deferred income tax liability, in the United
Kingdom, arising from the assignment of intangibles acquired in the Pace acquisition. This deferred income tax liability
is denominated in GBP. The foreign currency remeasurement gain derives from the remeasurement of the GBP deferred income tax
liability to the USD, since the date of the acquisition. We have excluded the impact of this gain in the calculation of our
non-GAAP measures. We believe it is useful to understand the effect of this item on our total other expense (income).
Foreign Withholding Tax: In connection with our acquisition of Pace, ARRIS US Holdings, Inc.
transferred shares of its subsidiary ARRIS Financing II Sarl to ARRIS International plc. Under U.S. tax law, based on the
best available information, we believe the transfer constituted a deemed distribution from ARRIS U.S. Holdings Inc. to ARRIS
International plc that is treated as a dividend for U.S. tax purposes. A deemed dividend of this type is subject to
U.S. withholding tax to the extent of the current and accumulated earnings and profits (as computed for tax purposes) ("E&P")
of ARRIS U.S. Holdings Inc., which include the E&P of the former ARRIS Group, Inc. and subsidiaries through December 31, 2016. Accordingly, ARRIS U.S. Holdings Inc. remitted U.S. withholding tax in the amount of
$55 million based upon its estimated E&P of $1.1 billion and the
U.S. dividend withholding tax rate of 5 percent (as provided in Article 10 (Dividends) of the United Kingdom-United States Tax
Treaty). We have excluded the withholding tax in calculating our non-GAAP financial measures.
Income Tax Expense (Benefit): We have excluded the tax effect of the non-GAAP
items mentioned above. Additionally, we have excluded the effects of certain tax adjustments related to tax and legal
restructuring, state valuation allowances, research and development tax credits and provision to return differences.
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SOURCE ARRIS