ARRIS Announces Preliminary and Unaudited Fourth Quarter and Full Year 2018 Results

SUWANEE, Ga., Feb. 21, 2019 /PRNewswire/ -- ARRIS ARRS today announced preliminary and unaudited financial results for the fourth quarter and full year 2018.    

"We had a strong finish to 2018 generating $0.76 of non-GAAP earnings per share and $229 million of cash from operating activities in the fourth quarter," said Bruce McClelland ARRIS CEO.   "Led by strength in our Network and Cloud business, sales of our E6000 CCAP product were particularly strong with several customers increasing year end capital spend. CPE sales were higher than any other quarter over the last year, exceeding $1 billion.  Enterprise sales were disappointing with sales of Ruckus products below expectations in North America, due to higher channel inventory.  Looking forward, we anticipate 2019 to be a stronger year than 2018, with the first quarter expected to be the lowest quarter of the year.  We are on track to transition the majority of Broadband CPE production out of China by early second quarter to address US import tariffs, resulting in reduced sales in the first quarter. Additionally, we expect lower sales of Network and Cloud in Q1 due to strong end of year shipments, and flat Enterprise sales as channel inventory normalizes."

Revenues were $1.787 billion in the quarter and $6.743 billion for full year 2018. 

GAAP net income in the quarter was $0.25 per diluted share and $0.62 per diluted share year to date through December 31, 2018.       

Adjusted net income (a non-GAAP measure) in the quarter was $0.76 per diluted share and $2.89 per diluted share for full year 2018.

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 $229 million of cash from operating activities during the fourth quarter 2018 and ended the year with $735 million of cash resources.

Further details are attached to this release and full results will be filed in our 10K.

Forward-Looking Statements

Statements made in this press release, including those related to preliminary revenues and net income for the fourth quarter and full year 2018, 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 and beyond are based on preliminary estimates, assumptions and projections that management believes to be reasonable at this time, but are beyond management's control;
  • satisfaction of conditions for the completion of the proposed acquisition of ARRIS by CommScope Holding Company, Inc. (the "Acquisition"), including receipt of remaining required regulatory approvals, may be delayed or may not be satisfied at all;
  • delays in moving certain manufacturing from China or difficulties in commencing production in new locations as planned could materially impact revenues;
  • volatility in component pricing and supply could impact revenues and gross margins more than currently anticipated;
  • any increase in tariffs enacted on imports from China or an expansion of the products covered, could have a material adverse impact on our financial results;
  • volatility in currency fluctuation may adversely impact our international customers' ability or willingness to purchase products and the pricing of products;
  • impacts of the U.K. invoking Article 50 of the Lisbon Treaty to leave the European Union, could have an adverse impact on results of operations;
  • regulatory changes, including those related to recently completed changes to the U.S. income tax code, could have an adverse impact on operations and results of operations; 
  • the impact of litigation and similar regulatory proceedings that we are involved in or may become involved in, including the costs of such litigation; and
  • the Company's customers operate in a capital-intensive consumer-based industry, and volatility in the capital markets or changes in customer spending may adversely impact their ability or willingness to purchase the products that the Company offers.

These factors are not intended to be an all-encompassing list of risks and uncertainties that may affect the Company's business and results from operations. Additional information regarding these and other factors can be found in the Company's reports filed with the Securities and Exchange Commission, including its Form 10-Q for the quarter ended September 30, 2018. In providing forward-looking statements, the Company expressly disclaims any obligation to update these statements publicly or otherwise, whether as a result of new information, future events or otherwise, except as required by law.

About ARRIS

ARRIS 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:

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)

















































December 31,



September 30,



June 30,



March 31,



December 31,





2018



2018



2018



2018



2017























ASSETS











































Current assets:





















Cash and cash equivalents



$729,933



$480,757



$501,411



$506,240



$487,573

Short-term investments, at fair value



5,538



39,640



46,698



36,804



23,874

Total cash, cash equivalents and short term investments



735,471



520,397



548,109



543,044



511,447























Accounts receivable, net



1,225,975



1,117,641



1,183,360



1,034,608



1,218,089

Other receivables 



222,368



235,122



192,067



169,681



157,845

Inventories, net



740,205



717,272



803,217



849,069



825,211

Prepaid income taxes



17,391



17,717



10,406



26,409



28,351

Prepaids



26,978



34,125



40,290



36,308



26,644

Other current assets



144,251



201,111



196,014



172,993



145,953

Total current assets



3,112,639



2,843,385



2,973,463



2,832,112



2,913,540























Property, plant and equipment, net 



287,671



289,820



299,991



309,457



372,467

Goodwill



2,240,642



2,261,002



2,259,177



2,336,820



2,278,512

Intangible assets, net



1,403,659



1,488,580



1,580,393



1,583,299



1,771,362

Investments



45,295



71,747



69,902



69,858



71,082

Deferred income taxes



175,405



155,193



146,443



131,417



115,436

Other assets



62,558



76,878



72,155



103,525



101,858





$7,327,869



$7,186,605



$7,401,524



$7,366,488



$7,624,257













































LIABILITIES AND STOCKHOLDERS' EQUITY











































Current liabilities:





















Accounts payable



$1,288,827



$1,100,901



$1,125,619



$1,010,812



$1,206,656

Accrued compensation, benefits and related taxes



141,565



146,964



140,387



113,029



155,966

Accrued warranty



36,988



40,772



38,651



42,434



44,507

Deferred revenue



111,254



115,989



123,590



143,740



115,224

Current portion of LT debt & financing lease obligations



83,862



83,785



83,709



83,633



83,559

Income taxes payable



2,964



4,182



2,094



4,937



6,244

Other accrued liabilities



302,307



356,002



361,315



316,206



321,113

Total current liabilities



1,967,767



1,848,595



1,875,365



1,714,791



1,933,269

Long-term debt & financing lease obligations, net of current portion



2,032,382



2,053,373



2,074,352



2,095,320



2,116,244

Accrued pension



25,303



32,371



31,889



43,443



42,637

Noncurrent deferred revenue



58,744



58,553



58,233



56,041



54,090

Noncurrent income taxes



119,047



112,259



120,988



159,148



144,665

Deferred income taxes



46,784



60,410



62,886



68,825



68,888

Other noncurrent liabilities



71,994



67,534



68,507



71,546



80,430

Total liabilities



4,322,021



4,233,095



4,292,220



4,209,114



4,440,223























Stockholders' equity:





















Ordinary shares



2,623



2,621



2,722



2,769



2,768

Capital in excess of par value



3,468,728



3,439,476



3,424,905



3,392,415



3,387,128

Accumulated other comprehensive (loss) income



(13,345)



(8,655)



(4,648)



12,545



4,552

Accumulated deficit



(466,165)



(494,706)



(329,731)



(266,264)



(225,881)

         Total ARRIS International plc stockholders' equity



2,991,841



2,938,736



3,093,248



3,141,465



3,168,567

Stockholders' equity attributable to noncontrolling interest



14,007



14,774



16,056



15,909



15,467

Total stockholders' equity



3,005,848



2,953,510



3,109,304



3,157,374



3,184,034





$7,327,869



$7,186,605



$7,401,524



$7,366,488



$7,624,257

 

 

 ARRIS INTERNATIONAL PLC

 PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)



















For the Three Months



For the Twelve Months



Ended December 30,



Ended December 31,



2018



2017



2018



2017

















Net sales

$1,787,143



$1,738,594



$6,742,640



$6,614,392

Cost of sales

1,307,910



1,244,124



4,823,781



4,948,153

Gross margin

479,233



494,470



1,918,859



1,666,239

Operating expenses:















Selling, general, and administrative expenses

169,789



142,403



667,053



475,369

Research and development expenses

150,932



141,442



644,038



539,094

Amortization of intangible assets

90,062



100,588



383,561



375,407

Impairment of goodwill and intangible assets

-



55,000



3,400



55,000

Gain on disposal of fixed assets

(13,346)



-



(13,346)



-

Integration, acquisition, restructuring and other costs

13,722



67,734



55,268



98,357



411,160



507,168



1,739,974



1,543,227

Operating income 

68,073



(12,699)



178,885



123,012

Other expense (income):















Interest expense

24,945



23,850



95,086



87,088

Loss on investments

2,025



2,088



308



11,066

(Gain) loss on foreign currency

(2,201)



4,188



3,834



9,757

Interest income

(3,253)



(1,978)



(8,341)



(7,975)

Other expense (income), net

5,082



(402)



5,056



1,873

Income (loss) before income taxes

41,474



(40,443)



82,942



21,203

Income tax benefit

(2,238)



(32,309)



(24,344)



(44,921)

Consolidated net income (loss) 

43,712



(8,136)



107,286



66,124

Net loss attributable to noncontrolling interests

(795)



(20,604)



(6,454)



(25,903)

Net income attributable to ARRIS International plc

$44,507



$12,469



$113,740



$92,027

















Net income per ordinary share (1):















Basic

$          0.26



$              0.07



$           0.63



$         0.49

Diluted

$          0.25



$              0.07



$           0.62



$         0.49

















Weighted average ordinary shares:















Basic

173,726



186,548



180,147



187,133

Diluted

176,248



188,829



182,041



189,616



(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 Twelve Months



















Ended December 31,



Ended December 31,



















2018



2017



2018



2017

































Operating Activities:



























Consolidated net income (loss)











$         43,712



$         (8,134)



$      107,286



$       66,124





Depreciation











18,147



22,855



83,686



88,195





Amortization of acquired intangible assets











91,938



102,455



391,074



382,416





Amortization of deferred finance fees and debt discount











1,191



2,339



4,811



7,960





Impairment of goodwill and intangible assets











-



55,000



3,400



55,000





Deferred income taxes











(14,228)



(43,041)



(72,669)



(74,465)





Foreign currency remeasurement of deferred taxes











(1,007)



851



(477)



9,360





Stock compensation expense











22,146



18,706



85,233



81,557





Provision for non-cash warrants











-



(8,145)



-



-





Recovery for doubtful accounts











(25)



(7)



(462)



(566)





(Gain) loss on sale and disposal of plant, property and equipment and other









(12,535)



1,187



(10,774)



7,063





Loss on investments and others











2,025



2,088



517



11,066



Changes in operating assets & liabilities, net of effects of acquisitions and disposals:





























Accounts receivable











(107,774)



(129,282)



(22,138)



175,930





Other receivables











12,754



(12,187)



(64,523)



(84,652)





Inventories











(22,755)



(1,849)



81,815



(224,582)





Accounts payable and accrued liabilities











174,745



(82,449)



24,948



49,988





Prepaids and other, net











20,428



1,770



37,275



(16,583)







Net cash provided by (used in) operating activities











228,762



(77,843)



649,002



533,811

































Investing Activities:



























Purchases of investments











-



(243)



(64,454)



(68,493)



Sales of investments











33,835



10,000



79,473



165,301



Proceeds from dividend declared on equity investment











9,800



-



9,966



826



Purchases of property, plant & equipment, net











(17,995)



(15,683)



(63,616)



(78,072)



Proceeds from sale of property, plant & equipment, net of deposits











24,420



-



74,425



-



Purchases of intangible assets











-



-



(423)



(6,422)



Acquisitions, net of cash acquired











(1,152)



(760,802)



(1,152)



(760,802)



Other, net











9,352







9,352











Net cash provided by (used in) investing activities











58,260



(766,728)



43,571



(747,662)

































Financing Activities:



























Proceeds from issuance of debt











-



145,533



-



175,847



Payment of financing lease obligation











(230)



(187)



(870)



(777)



Payment of debt obligations











(21,875)



(145,033)



(87,500)



(244,009)



Payment for deferred financing costs and debt discount











-



(4,499)



-



(5,961)



Repurchase of shares











(21,457)



(50,000)



(353,079)



(196,965)



Repurchase of shares to satisfy employee minimum tax withholdings











(3,864)



(214)



(23,781)



(26,573)



Proceeds from issuance of shares, net











10,980



8,846



20,186



17,469



Contribution from noncontrolling interest











-



-



2,257



3,500







Net cash used in financing activities











(36,446)



(45,554)



(442,787)



(277,469)

































Effect of exchange rate changes on cash, cash equivalents and restricted cash







(3,503)



(2,197)



(7,520)



(1,256)

Net (decrease) increase in cash, cash equivalents and restricted cash











247,073



(892,322)



242,266



(492,576)

Cash, cash equivalents and restricted cash at beginning of period











484,309



1,381,438



489,116



981,692

Cash, cash equivalents and restricted cash at end of period











$       731,382



$       489,116



$      731,382



$      489,116

































































Reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets











































Cash and cash equivalent











729,933



487,573











Restricted cash included in other current assets











776



23











Restricted cash included in other assets











673



1,520











Total













731,382



489,116









 

 

ARRIS INTERNATIONAL PLC

PRELIMINARY ADJUSTED SALES & NET INCOME RECONCILIATION

(in thousands, except per share data) (unaudited)































Q4 2017



Q3 2018



Q4 2018



DEC YTD 2017



DEC YTD 2018



Amount

Per

Diluted

Share



Amount

Per

Diluted

Share



Amount

Per

Diluted

Share



Amount

Per

Diluted

Share



Amount

Per

Diluted

Share

Sales

$1,738,593





$1,651,248





$1,787,143





$6,614,392





$6,742,640



Highlighted items:

    Reduction in revenue related to warrants

(8,145)





-





-





-







Acquisition accounting impacts of deferred revenue

1,120





2,400





1,700





1,120





13,101



Adjusted sales

$1,730,448





$1,653,648





$1,788,843





$6,614,392





$6,755,741

































Net income attributable to ARRIS International plc

$            12,469

$    0.07



$         47,079

$    0.26



$         44,507

$    0.25



$         92,027

$    0.49



$      113,740

$           0.62

Highlighted Items:

Impacting gross margin:





























Stock compensation expense

3,303

0.02



3,660

0.02



3,577

0.02



13,947

0.07



14,299

0.08

Reduction in revenue related to warrants

(8,145)

(0.04)









Acquisition accounting impacts of deferred revenue

1,120

0.01



2,400

0.01



1,700

0.01



1,120

0.01



13,101

0.07

Acquisition accounting impacts of fair valuing inventory

7,560

0.04







8,468

0.04



16,971

0.09

Impacting operating expenses:





























Integration, acquisition, restructuring and other costs

67,736

0.36



5,046

0.03



13,722

0.08



98,357

0.52



55,267

0.30

Amortization of intangible assets

100,588

0.53



88,305

0.49



90,062

0.51



375,407

1.98



383,560

2.11

Impairment of goodwill and intangible assets

55,000

0.29







55,000

0.29



3,400

0.02

Stock compensation expense

15,403

0.08



16,668

0.09



18,569

0.11



66,711

0.35



70,934

0.39

Gain on sale of fixed assets





(13,346)

(0.08)





(13,346)

(0.07)

Noncontrolling interest share of non-GAAP adj

(20,026)

(0.11)



(885)

(0.00)



(849)



(22,352)

(0.12)



(4,922)

(0.03)

Impacting other (income)/expense:





























Impairment on investments







929



Debt amendment fees

3,069

0.02







5,851

0.03



Pension settlement and curtailment





5,665

0.03





5,665

0.03

Remeasurement of certain deferred tax liabilities

852



519



(1,017)

(0.01)



9,360

0.05



(477)

Impacting income tax expense:





























Net tax items

(73,267)

(0.39)



(40,666)

(0.23)



(29,513)

(0.17)



(190,151)

(1.00)



(132,107)

(0.73)

Total highlighted items

153,193

0.81



75,047

0.42



88,570

0.50



422,647

2.23



412,345

2.27

Adjusted net income

$          165,662

$    0.88



$      122,126

$    0.68



$      133,077

$    0.76



$      514,674

$    2.71



$      526,085

$           2.89

Weighted average ordinary shares - basic



186,548





178,106





173,726





187,133





180,147

Weighted average ordinary shares - diluted



188,829





179,337





176,248





189,616





182,041































 

 

ARRIS INTERNATIONAL PLC

PRELIMINARY SUPPLEMENTAL GAAP TO ADJUSTED SALES & GROSS MARGIN RECONCILIATION

(in thousands)

(unaudited)























Q4 2017



Q3 2018



Q4 2018



Dec YTD 2017



Dec YTD 2018

Sales - GAAP

$1,738,593



$  1,651,248



$  1,787,143



$  6,614,392



$       6,742,640

Adjustment to revenue related to warrants

(8,145)



-



-



-



-

Acquisition accounting impacts of deferred revenue

1,120



2,400



1,700



1,120



13,101

Adjusted Sales - Non-GAAP

$1,731,568



$  1,653,648



$  1,788,843



$  6,615,512



$       6,755,741





















GAAP Gross Margin

$   494,469



$     465,189



$     479,233



$  1,666,239



$       1,918,859

Acquisition accounting impacts of fair valuing inventory

7,560



-



-



8,468



16,971

Acquisition accounting impacts of deferred revenue

1,120



2,400



1,700



1,120



13,101

Stock compensation expense

3,303



3,660



3,577



13,947



14,299

Adjustment to revenue related to warrants

(8,145)



-



-



-



-

Adjusted Gross Margin - Non-GAAP

$   498,307



$     471,249



$     484,510



$  1,689,774



$       1,963,230





















GAAP Gross Margin - %

28.4%



28.2%



26.8%



25.2%



28.5%

Adjusted Gross Margin - Non-GAAP -  %

28.8%



28.5%



27.1%



25.5%



29.1%

 

 

ARRIS INTERNATIONAL PLC

PRELIMINARY SUPPLEMENTAL OPERATING INCOME TO ADJUSTED DIRECT CONTRIBUTION RECONCILIATION

(in thousands)

(unaudited)



























Q4 2018



Year 2018



Network &

Cloud

CPE

Enterprise

Corp/

Other

Total



Network &

Cloud

CPE

Enterprise

Corp/

Other

Total

























Sales

$  536,782

$    1,099,068

$  153,039

$    (1,746)

$      1,787,143



$2,156,577

$    3,923,894

$  675,352

$     (13,183)

$      6,742,640

Add:























Acquisition accounting impacts of deferred revenue

-

-

1,700

-

1,700



-

-

13,101

-

13,101

Adjusted sales 

$  536,782

$    1,099,068

$  154,739

$    (1,746)

$      1,788,843



$2,156,577

$    3,923,894

$  688,453

$     (13,183)

$      6,755,741

























Operating income (loss)

$  191,318

$        38,775

$   (14,980)

$ (147,040)

$          68,073



$   732,529

$        50,766

$   (16,111)

$   (588,299)

$         178,885

























Add:























Amortization of intangible assets

24,707

46,840

17,697

818

90,062



99,316

207,804

73,176

3,265

383,561

Impairment of goodwill and intangible assets

-

-

-

-

-



3,400

-

-

-

3,400

Gain on sale of fixed assets

-

(13,346)

-

-

(13,346)



-

(13,346)

-

-

(13,346)

Integration, acquisition, restructuring & other costs

3,955

605

2,254

6,909

13,723



13,693

25,286

7,602

8,687

55,268

























Direct contribution(1)

219,980

72,874

4,971

(139,313)

158,512



848,938

270,510

64,667

(576,347)

607,768

























Adjustments:























Allocated costs (2)

(27,868)

(19,099)

(6,275)

53,242

-



(114,036)

(77,993)

(22,917)

214,946

-

Stock compensation expense

8,150

5,043

4,057

4,896

22,146



32,485

21,566

14,272

16,910

85,233

Depreciation expense

6,711

6,919

1,017

3,500

18,147



27,181

28,701

10,889

16,915

83,686

Adjusted direct contribution 

$  206,973

$        65,737

$     3,770

$   (77,675)

$         198,805



$   794,568

$       242,784

$    66,911

$   (327,576)

$         776,687

















































(1) Defined as gross margin less direct operating expenses, excluding amortization of intangible assets, impairments, gain on sale of fixed assets, integration, acquisition, restructuring, and other costs.

(2) Allocated facility costs and service provider sales and marketing costs 













 

 

ARRIS INTERNATIONAL PLC

PRELIMINARY ADJUSTED EBITDA RECONCILIATION

(in millions)

(unaudited)















Q1 2018

Q2 2018

Q3 2018

Q4 2018

Year 2018

Net income (loss) as reported

$          (17)

$           35

$           46

$             44

$           107

Income tax expense (benefit)

3

(10)

(16)

(2)

(24)

Interest income

(2)

(2)

(2)

(3)

(8)

Interest expense

23

24

24

25

95

Depreciation expense

23

21

22

18

84

Amortization of intangible assets

115

90

88

90

384

EBITDA

145

158

162

171

637













Adjustments











Stock-based compensation expense

19

24

20

22

85

Integration, acquisition, restructuring and other costs

14

23

5

14

55

Pension settlement and curtailment

-

-

-

6

6

Gain on disposal of fixed assets

-

-

-

(13)

(13)

Impairment on goodwill and intangible assets

3

-

-

-

3

Acquisition accounting impacts of deferred revenue

6

3

2

2

13

Acquisition accounting impacts of fair valuing inventory

17

-

-

-

17

Remeasurement of deferred taxes

4

(4)

1

(1)

(0)

Adjusted EBITDA - Non-GAAP

$          208

$         204

$         191

$           200

$           803

 

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.

Gain on Disposal of Property, Plant & Equipment:    We have excluded the effect of a gain on the sale of our manufacturing facility and certain manufacturing fixed assets in Taiwan in calculating our non-GAAP financial measures. We believe it is useful to understand the effect of this item in our other expense (income).

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).

Pension Settlement Charge and Curtailment:    We have excluded the effect of the deferred actuarial gains and losses remaining in accumulated other comprehensive income related to the termination of our pension benefit plans 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).

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.

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/arris-announces-preliminary-and-unaudited-fourth-quarter-and-full-year-2018-results-300799336.html

SOURCE ARRIS

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
Posted In: EarningsPress Releases
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!