SUWANEE, Ga., May 3, 2017 /PRNewswire/ -- ARRIS
International plc (NASDAQ:ARRS) today announced preliminary
and unaudited financial results for the first quarter 2017.
First Quarter 2017 Financial Highlights
- Revenues were $1.483 billion
- Adjusted Revenues (a non-GAAP measure) were $1.485 billion
- GAAP net loss was ($0.21) per
diluted share
- Adjusted net income (a non-GAAP measure) was $0.40 per diluted share
- End-of-quarter cash resources were $1.217 billion
- Cash from operating activities was $250
million
- Order backlog was $1.304
billion
- Book-to-bill ratio was 1.13
- Repurchased approximately 3.3 million shares for $83 million
"We had a solid finish to Q1 on good order flow and
shipments. We expect the key technology trends that underpin
our business - fiber deep, DOCSIS® 3.1, advanced wireless
home networking, and 4K video - to gain momentum and result in
second-half growth. We believe that we remain on track to achieve
our full year targets. With respect to the second quarter
2017, we expect revenues will be in the range of $1.64 billion to $1.69 billion, GAAP net income
per diluted share in the range of $0.02 to
$0.07, and adjusted net income per diluted share in
the range of $0.55 to $0.60," said
Bruce McClelland, ARRIS CEO. "We are
making great progress with integration planning for our upcoming
Ruckus Networks acquisition, and continue to work towards a third
quarter close."
Revenues in the first quarter 2017 of $1.483 billion were down $132 million, or 8%, as compared to first quarter
2016 revenues of $1.615
billion. First quarter revenues were down $276 million, or 16%, as compared to fourth
quarter 2016 revenues of $1.759
billion.
Adjusted revenues (a non-GAAP measure) in the first
quarter 2017 were $1.485 billion
compared to first quarter 2016 adjusted revenues of $1.615 billion and fourth quarter 2016 adjusted
revenues of $1.775 billion.
GAAP net loss in the first quarter 2017 was ($0.21) per diluted share. First quarter
2016 GAAP net loss was $(1.06) per
diluted share, and fourth quarter 2016 GAAP net income was
$0.46 per diluted
share.
Adjusted net income (a non-GAAP measure) in the first
quarter 2017 was $0.40 per diluted
share, as compared to $0.47 per
diluted share for the first quarter 2016, and the fourth quarter
2016 adjusted net income of $0.79 per
diluted share.
A reconciliation of adjusted revenues and adjusted net income to
the most comparable GAAP measures is attached to this release and
can also be found on the Company's website (www.arris.com).
Cash Resources - The Company ended the first quarter 2017
with $1.217 billion of cash resources
as compared to $1.107 billion at the
end of the fourth quarter 2016. The Company generated
$250 million of cash from operating
activities during the first quarter 2017, as compared to consuming
$223 million during the first quarter
of 2016.
The company purchased 3.3 million ordinary shares for
$83 million during the first
quarter. Since the end of the first quarter, the Company has
purchased an additional 1.5 million ordinary shares for
$39 million. As of May 3, 2017, the Company has $300 million remaining in available repurchase
authorizations.
Order backlog at the end of the first quarter 2017 was
$1.304 billion, as compared to
$1.335 billion and $1.106 billion at the end of the first quarter
2016 and the fourth quarter 2016, respectively. The Company's
book-to-bill ratio in the first quarter 2017 was 1.13, as compared
to the first quarter 2016 of 1.24 and the fourth quarter 2016 of
1.04.
ARRIS management will conduct a conference call at 5:00 pm EDT, today, Wednesday, May 3, 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
and conference pass code 5272358. 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
May 10, 2017, by dialing 855-859-2056
or 404-537-3406 for international calls and using the pass code
5272358. A replay also will be made available for a period of 12
months following the conference call on ARRIS's website site at
(www.arris.com).
Forward-Looking Statements
Statements made in this press release, including those related
to revenues and net income for the second 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 second 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 acquisition may not be
realized;
- we may encounter significant transaction costs and unknown
liabilities in connection with the acquisition;
- volatility in currency fluctuation may adversely impact our
international customer's ability or willingness to purchase
products and the pricing of our products;
- volatility in component pricing could impact 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 outstanding warrants held by customers will result in
fluctuations in our GAAP revenues and GAAP net income per diluted
share as a result of the required accounting adjustments;
- 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: rights to intellectual property,
including related litigation; 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-K for the
year ended December 31, 2016. 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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
|
2017
|
|
2016
|
|
2016
|
|
2016
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$1,126,248
|
|
$980,123
|
|
$1,031,978
|
|
$870,992
|
|
$659,181
|
Short-term
investments, at fair value
|
|
90,673
|
|
115,553
|
|
67,567
|
|
21,882
|
|
17,069
|
Total cash, cash
equivalents and short term investments
|
|
1,216,921
|
|
1,095,676
|
|
1,099,545
|
|
892,874
|
|
676,250
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable,
net
|
|
1,069,771
|
|
1,359,430
|
|
1,104,596
|
|
1,053,760
|
|
972,540
|
Other
receivables
|
|
57,454
|
|
73,193
|
|
45,456
|
|
55,698
|
|
31,868
|
Inventories,
net
|
|
556,264
|
|
551,541
|
|
598,105
|
|
647,497
|
|
662,287
|
Prepaid income
taxes
|
|
21,845
|
|
51,476
|
|
30,123
|
|
29,797
|
|
22,349
|
Prepaids
|
|
27,898
|
|
21,163
|
|
30,992
|
|
39,388
|
|
37,285
|
Other current
assets
|
|
132,338
|
|
127,593
|
|
140,894
|
|
136,177
|
|
123,858
|
Total current
assets
|
|
3,082,491
|
|
3,280,072
|
|
3,049,711
|
|
2,855,191
|
|
2,526,437
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
354,050
|
|
353,377
|
|
352,380
|
|
367,696
|
|
369,255
|
Goodwill
|
|
2,018,012
|
|
2,016,169
|
|
2,083,567
|
|
2,089,840
|
|
2,068,274
|
Intangible assets,
net
|
|
1,586,187
|
|
1,677,178
|
|
1,772,243
|
|
1,902,864
|
|
2,036,791
|
Investments
|
|
65,035
|
|
72,932
|
|
80,914
|
|
77,749
|
|
72,115
|
Noncurrent deferred
income tax assets
|
|
190,037
|
|
298,757
|
|
269,011
|
|
224,889
|
|
221,315
|
Other
assets
|
|
58,919
|
|
59,877
|
|
43,990
|
|
21,626
|
|
18,849
|
|
|
$7,354,731
|
|
$7,758,362
|
|
$7,651,816
|
|
$7,539,853
|
|
$7,313,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$1,020,234
|
|
$1,048,904
|
|
$1,010,152
|
|
$1,016,956
|
|
$818,494
|
Accrued compensation,
benefits and related taxes
|
|
73,220
|
|
139,794
|
|
123,449
|
|
97,273
|
|
97,346
|
Accrued
warranty
|
|
46,330
|
|
49,618
|
|
56,795
|
|
66,568
|
|
58,812
|
Deferred
revenue
|
|
145,197
|
|
132,128
|
|
160,899
|
|
147,284
|
|
144,603
|
Current portion of LT
debt & financing lease obligations
|
|
82,767
|
|
82,734
|
|
82,762
|
|
94,217
|
|
94,119
|
Current income taxes
liability
|
|
20,278
|
|
23,133
|
|
1,434
|
|
2,892
|
|
65,543
|
Other accrued
liabilities
|
|
300,861
|
|
357,823
|
|
317,638
|
|
262,603
|
|
248,812
|
Total current
liabilities
|
|
1,688,887
|
|
1,834,134
|
|
1,753,129
|
|
1,687,793
|
|
1,527,729
|
Long-term debt &
financing lease obligations, net of current portion
|
|
2,159,300
|
|
2,180,009
|
|
2,200,642
|
|
2,221,383
|
|
2,242,071
|
Accrued
pension
|
|
54,808
|
|
52,652
|
|
51,878
|
|
55,742
|
|
55,287
|
Noncurrent income
taxes payable
|
|
120,493
|
|
123,344
|
|
109,955
|
|
84,694
|
|
68,974
|
Noncurrent deferred
income tax liabilities
|
|
89,261
|
|
223,529
|
|
337,582
|
|
348,378
|
|
385,690
|
Other noncurrent
liabilities
|
|
112,977
|
|
117,957
|
|
138,227
|
|
138,013
|
|
126,330
|
Total
liabilities
|
|
4,225,726
|
|
4,531,625
|
|
4,591,413
|
|
4,536,004
|
|
4,406,080
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
Ordinary
shares
|
|
2,802
|
|
2,831
|
|
2,825
|
|
2,834
|
|
2,824
|
Capital in excess of
par value
|
|
3,322,803
|
|
3,314,707
|
|
3,259,143
|
|
3,227,758
|
|
3,204,853
|
Accumulated other
comprehensive income (loss)
|
|
10,628
|
|
3,291
|
|
(21,410)
|
|
(28,973)
|
|
(20,476)
|
Retained
deficit
|
|
(243,207)
|
|
(132,013)
|
|
(220,296)
|
|
(240,424)
|
|
(324,667)
|
Total ARRIS International plc stockholders' equity
|
|
3,093,026
|
|
3,188,816
|
|
3,020,263
|
|
2,961,195
|
|
2,862,534
|
Stockholders' equity
attributable to noncontrolling interest
|
|
35,979
|
|
37,921
|
|
40,141
|
|
42,655
|
|
44,421
|
Total stockholders'
equity
|
|
3,129,005
|
|
3,226,737
|
|
3,060,404
|
|
3,003,850
|
|
2,906,954
|
|
|
$7,354,732
|
|
$7,758,362
|
|
$7,651,816
|
|
$7,539,853
|
|
$7,313,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(in thousands,
except per share data)
|
(unaudited)
|
|
|
|
|
|
For the Three
Months
|
|
Ended March 31,
|
|
2017
|
|
2016
|
|
|
|
|
Net sales
|
$1,483,105
|
|
$1,614,706
|
Cost of
sales
|
1,145,848
|
|
1,230,674
|
Gross
margin
|
337,257
|
|
384,032
|
Operating
expenses:
|
|
|
|
Selling, general, and
administrative expenses
|
104,638
|
|
119,963
|
Research and
development expenses
|
132,962
|
|
161,147
|
Amortization of
intangible assets
|
93,646
|
|
98,493
|
Integration,
acquisition, restructuring and other costs
|
10,095
|
|
90,919
|
|
341,341
|
|
470,522
|
Operating
loss
|
(4,084)
|
|
(86,490)
|
Other expense
(income):
|
|
|
|
Interest
expense
|
19,683
|
|
19,626
|
Loss on
investments
|
4,530
|
|
1,959
|
Loss on foreign
currency
|
4,740
|
|
12,241
|
Interest
income
|
(1,922)
|
|
(783)
|
Other (income)
expense, net
|
(85)
|
|
(350)
|
Loss before income
taxes
|
(31,030)
|
|
(119,183)
|
Income tax
expense
|
10,001
|
|
86,013
|
Consolidated net
loss
|
(41,031)
|
|
(205,196)
|
Net loss attributable
to noncontrolling interests
|
(1,933)
|
|
(2,623)
|
Net loss attributable
to ARRIS International plc
|
($39,098)
|
|
($202,573)
|
|
|
|
|
Net loss per ordinary
share (1):
|
|
|
|
Basic
|
$
(0.21)
|
|
$
(1.06)
|
Diluted
|
$
(0.21)
|
|
$
(1.06)
|
|
|
|
|
Weighted average
ordinary shares:
|
|
|
|
Basic
|
189,796
|
|
191,743
|
Diluted
|
189,796
|
|
191,743
|
|
|
|
|
(1)
Calculated based on net loss attributable to shareowners of ARRIS
International plc
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
For the Three
Months
|
|
|
|
|
|
|
|
|
|
|
Ended March 31,
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
|
|
Consolidated net
loss
|
|
|
|
|
|
$
(41,031)
|
|
$
(205,196)
|
|
|
|
Depreciation
|
|
|
|
|
|
21,313
|
|
23,871
|
|
|
|
Amortization of
intangible assets
|
|
|
|
|
|
95,306
|
|
99,766
|
|
|
|
Amortization of
deferred finance fees and debt discount
|
|
|
|
|
|
1,903
|
|
1,929
|
|
|
|
Deferred income tax
benefit
|
|
|
|
|
|
(20,783)
|
|
(36,913)
|
|
|
|
Foreign currency
remeasurement of certain income tax accounts
|
|
|
|
|
|
3,131
|
|
-
|
|
|
|
Share-based
compensation expense
|
|
|
|
|
|
19,415
|
|
14,276
|
|
|
|
Provision for
non-cash warrants
|
|
|
|
|
|
2,423
|
|
-
|
|
|
|
(Recovery) provision
for doubtful accounts
|
|
|
|
|
|
(179)
|
|
845
|
|
|
|
Loss (gain) on
disposal of plant, property and equipment and other
|
|
|
|
|
|
292
|
|
(16)
|
|
|
|
Loss/impairment on
investments
|
|
|
|
|
|
4,530
|
|
1,959
|
|
|
|
Excess tax benefits
from stock-based compensation plans
|
|
|
|
|
|
-
|
|
(2,354)
|
|
|
Changes in operating
assets & liabilities, net of effects of acquisitions and
disposals:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
|
|
|
292,297
|
|
130,461
|
|
|
|
Other
receivables
|
|
|
|
|
|
15,739
|
|
9,263
|
|
|
|
Inventory
|
|
|
|
|
|
(3,152)
|
|
166,177
|
|
|
|
Accounts payable and
accrued liabilities
|
|
|
|
|
|
(144,640)
|
|
(535,651)
|
|
|
|
Prepaids and other,
net
|
|
|
|
|
|
3,419
|
|
109,048
|
|
|
|
|
Net cash provided
by (used in) operating activities
|
|
|
|
|
|
249,983
|
|
(222,535)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
|
|
|
|
(55,879)
|
|
(4,778)
|
|
|
Sales of
investments
|
|
|
|
|
|
91,885
|
|
2,093
|
|
|
Purchases of
property, plant & equipment, net
|
|
|
|
|
|
(21,867)
|
|
(9,140)
|
|
|
Acquisitions, net of
cash acquired
|
|
|
|
|
|
-
|
|
(340,118)
|
|
|
Purchases of
intangible assets
|
|
|
|
|
|
-
|
|
(1,310)
|
|
|
Other, net
|
|
|
|
|
|
826
|
|
2,932
|
|
|
|
|
Net cash provided
by (used in) investing activities
|
|
|
|
|
|
14,965
|
|
(350,321)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds from
issuance of debt
|
|
|
|
|
|
-
|
|
800,000
|
|
|
Payment of accounts
receivable financing facility
|
|
|
|
|
|
-
|
|
(12,042)
|
|
|
Payment of financing
lease obligation
|
|
|
|
|
|
(204)
|
|
(164)
|
|
|
Payment of debt
obligations
|
|
|
|
|
|
(22,375)
|
|
(252,625)
|
|
|
Payment for deferred
financing costs and debt discount
|
|
|
|
|
|
-
|
|
(2,304)
|
|
|
Repurchase of
shares
|
|
|
|
|
|
(83,110)
|
|
(150,003)
|
|
|
Excess income tax
benefits from stock-based compensation plans
|
|
|
|
|
|
-
|
|
2,354
|
|
|
Repurchase of shares
to satisfy employee minimum tax withholdings
|
|
|
|
|
|
(13,754)
|
|
(14,045)
|
|
|
Proceeds from (cost
of) issuance of shares, net
|
|
|
|
|
|
23
|
|
(2,716)
|
|
|
|
|
Net cash (used in)
provided by financing activities
|
|
|
|
|
|
(119,420)
|
|
368,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
|
|
|
|
597
|
|
-
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
|
|
|
|
146,125
|
|
(204,401)
|
|
Cash and cash
equivalents at beginning of period
|
|
|
|
|
|
980,123
|
|
863,582
|
|
Cash and cash
equivalents at end of period
|
|
|
|
|
|
$
1,126,248
|
|
$
659,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
ADJUSTED SALES & NET INCOME RECONCILIATION
|
(in thousands,
except per share data) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
2017
|
Q4
2016
|
Q1
2016
|
|
Amount
|
Per Diluted
Share
|
Amount
|
Per Diluted
Share
|
Amount
|
Per Diluted
Share
|
Sales
|
$
1,483,105
|
|
$
1,759,223
|
|
$
1,614,706
|
|
Highlighted
items:
Reduction in revenue related to
warrants
|
2,423
|
|
16,265
|
|
-
|
|
Sales excluding
highlighted items
|
$
1,485,528
|
|
$
1,775,488
|
|
$
1,614,706
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to ARRIS International plc
|
$
(39,098)
|
$
(0.21)
|
$
88,283
|
$
0.46
|
$
(202,573)
|
$
(1.06)
|
Highlighted
Items:
Impacting gross margin:
|
|
|
|
|
|
|
Stock compensation
expense
|
3,252
|
0.02
|
2,388
|
0.01
|
2,239
|
0.01
|
Reduction in revenue
related to warrants
|
2,423
|
0.01
|
16,265
|
0.08
|
–
|
–
|
Acquisition accounting
impacts of fair valuing inventory
|
908
|
–
|
581
|
–
|
30,292
|
0.16
|
Impacting
operating expenses:
|
|
|
|
|
|
|
Integration,
acquisition, restructuring and other costs
|
10,095
|
0.05
|
7,922
|
0.04
|
90,919
|
0.47
|
Amortization of
intangible assets
|
93,646
|
0.49
|
100,047
|
0.52
|
98,493
|
0.51
|
Stock compensation
expense
|
16,163
|
0.08
|
13,608
|
0.07
|
12,037
|
0.06
|
Noncontrolling
interest share of Non-GAAP adjustments
|
(804)
|
–
|
(807)
|
–
|
(776)
|
–
|
Impacting other
(income)/expense:
|
|
|
|
|
|
|
Impairment of
Investments
|
2,750
|
0.02
|
4,446
|
0.02
|
–
|
–
|
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
|
(16,356)
|
–
|
–
|
–
|
France R&D tax
credit
|
–
|
–
|
(4,992)
|
(0.03)
|
–
|
–
|
Impacting income
tax expense:
|
|
|
|
|
|
|
Foreign withholding
tax
|
–
|
–
|
–
|
–
|
54,741
|
0.28
|
France R&D tax
credit
|
–
|
–
|
4,992
|
0.03
|
–
|
–
|
Net tax
items
|
(13,333)
|
(0.07)
|
(63,505)
|
(0.33)
|
3,417
|
0.02
|
Total highlighted
items
|
117,212
|
0.61
|
64,589
|
0.34
|
292,963
|
1.51
|
Net income excluding
highlighted items
|
$
78,114
|
$
0.40
|
$
152,872
|
$
0.79
|
$
90,390
|
$
0.47
|
Weighted average
ordinary shares - basic
|
|
189,796
|
|
190,145
|
|
191,743
|
Weighted average
ordinary shares - diluted
|
|
192,879
|
|
192,400
|
|
193,591
|
|
|
|
|
|
|
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
SUPPLEMENTAL GAAP TO ADJUSTED SALES & GROSS MARGIN
RECONCILIATION
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
Q1
2017
|
|
Q4
2016
|
|
Q1
2016
|
Sales -
GAAP
|
1,483,105
|
|
1,759,223
|
|
1,614,706
|
Fair Value of
Warrants Adjustment
|
2,423
|
|
16,265
|
|
-
|
Adjusted Sales - Non-
GAAP
|
1,485,528
|
|
1,775,488
|
|
1,614,706
|
|
|
|
|
|
|
GAAP Gross
Margin
|
337,257
|
|
436,000
|
|
384,032
|
Fair Value of
Inventory Adjustment
|
908
|
|
581
|
|
30,292
|
Equity
Compensation
|
3,252
|
|
2,388
|
|
2,239
|
Fair Value of
Warrants Adjustment
|
2,423
|
|
16,265
|
|
-
|
Adjusted Gross Margin
- Non-GAAP
|
343,840
|
|
455,234
|
|
416,563
|
|
|
|
|
|
|
GAAP Gross Margin -
%
|
22.7%
|
|
24.8%
|
|
23.8%
|
Adjusted Gross Margin
- Non-GAAP - %
|
23.1%
|
|
25.6%
|
|
25.8%
|
|
|
|
|
|
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
SUPPLEMENTAL GAAP TO ADJUSTED SALES & DIRECT CONTRIBUTION
RECONCILIATION
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
Q1
2017
|
|
Network
&
Cloud
|
CPE
|
Corp/
Other
|
Total
|
Net Sales
|
430,436
|
1,055,056
|
(2,387)
|
1,483,105
|
Non GAAP Adjustments
(1)
|
-
|
-
|
2,423
|
2,423
|
Adjusted Net
Sales
|
430,436
|
1,055,056
|
36
|
1,485,528
|
|
|
|
|
|
Direct
Contribution(2)
|
131,718
|
118,415
|
(150,476)
|
99,657
|
Non GAAP Adjustments
(3)
|
-
|
-
|
22,746
|
22,746
|
Adjusted Direct
Contribution
|
131,718
|
118,415
|
(127,730)
|
122,403
|
Direct Contribution %
of sales
|
30.6%
|
11.2%
|
|
8.2%
|
|
|
|
|
|
(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, adjustments related to the acquisition
accounting impacts and warrants adjustment.
|
ARRIS
INTERNATIONAL PLC
|
|
|
PRELIMINARY
SUPPLEMENTAL GAAP TO ADJUSTED EPS GUIDANCE RECONCILIATION
(2)
|
|
|
(in millions,
except per share data)
|
|
|
|
|
|
|
|
Q2 2017
Guidance
|
|
Full Year 2017
Guidance
|
|
|
|
|
Estimated GAAP Sales
- $M
|
1,637 -
1,687
|
|
6,600 -
6,800
|
Warrants -
$M(1)
|
3
|
|
15 - 30
|
Estimated Adjusted
(Non-GAAP) Sales - $M
|
1,640 -
1,690
|
|
6,615 -
6,830
|
|
|
|
|
|
|
|
|
Estimated GAAP
EPS
|
$ 0.02 - $
0.07
|
|
$ 0.70 - $
0.90
|
Reconciling
Items:
|
|
|
|
Amortization of
Intangibles
|
0.49
|
|
1.92
|
Stock Compensation
Expense
|
0.12
|
|
0.43
|
Integration and Other
Costs
|
0.06
|
|
0.14
|
Warrants
(1)
|
0.02
|
|
0.07
|
Net tax
items
|
(0.16)
|
|
(0.86)
|
Subtotal
|
0.53
|
|
1.70
|
Estimated Adjusted
(Non-GAAP) EPS
|
$ 0.55 - $
0.60
|
|
$ 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' 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, and Restructuring 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 and the Pace
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 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 with Charter 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).
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 effects of this item on our total
other expense (income).
France R&D Tax Credit: France R&D tax credits were
recorded as an other asset on the date of our acquisition of Pace,
as Pace France, a subsidiary of Pace, had a history of losses and
did not expect to utilize their R&D Tax Credits against a
future France income tax liability
but rather expected to use the credits to offset non-income taxes.
Our restructuring in France
required a reclassification of the R&D tax credits from other
assets to deferred tax assets prior to the utilization of the tax
credits. This impact of the reclassification was a charge to
other expense with an offsetting tax benefit. We have
excluded the effect of the other expense and tax benefit in the
calculation of our non-GAAP financial measures. We believe it
is useful to understand the effects of this event on our total
other expense (income) and income tax.
Foreign Withholding Tax: In connection with our
acquisition of Pace, ARRIS US Holdings, Inc. transferred shares of
its subsidiary ARRIS Financing II Sarl to ARRIS International
plc. Under U.S. tax law, based on the best available
information, we believe the transfer constituted a deemed
distribution from ARRIS U.S. Holdings Inc. to ARRIS International
plc that is treated as a dividend for U.S. tax purposes. A
deemed dividend of this type is subject to U.S. withholding
tax to the extent of the current and accumulated earnings and
profits (as computed for tax purposes) ("E&P") of ARRIS U.S.
Holdings Inc., which include the E&P of the former ARRIS Group,
Inc. and subsidiaries through December
31, 2016. Accordingly, ARRIS U.S. Holdings Inc.
remitted U.S. withholding tax in the amount of $55 million based upon its estimated E&P of
$1.1 billion and the U.S. dividend
withholding tax rate of 5 percent (as provided in Article 10
(Dividends) of the United Kingdom-United States Tax Treaty).
We have excluded the withholding tax in calculating our non-GAAP
financial measures.
Income Tax Expense (Benefit): We have
excluded the tax effect of the non-GAAP items mentioned above.
Additionally, we have excluded the effects of certain tax
adjustments related to tax and legal restructuring, state valuation
allowances, research and development tax credits and provision to
return differences.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/arris-announces-preliminary-and-unaudited-first-quarter-2017-results-300450912.html
SOURCE ARRIS