SUWANEE, Ga., July 29, 2015 /PRNewswire/ -- ARRIS Group,
Inc. (NASDAQ: ARRS) today announced preliminary and unaudited
financial results for the second quarter 2015.
Second Quarter 2015 Financial Highlights
- Revenues were $1,260.1
million
- GAAP net income was $0.11 per
diluted share
- Adjusted net income (a non-GAAP measure) was $0.53 per diluted share
- End-of-quarter cash resources were $622.8 million
- Order backlog was $651.3
million
- Book-to-bill ratio was 0.94
"Sales, margins, and Non-GAAP earnings were all up quarter over
quarter, although not as much as we originally thought. These
results, as expected, are down compared with the second quarter of
last year when we were launching an unprecedented number of new
products. As we have highlighted, we are encountering
headwinds which we expect to continue through 2015, in particular
those related to industry consolidations and the strong US
dollar. With respect to the third quarter 2015, we expect
revenues will be in the range of $1,210
million to $1,260 million, with adjusted net income per
diluted share in the range of $0.52 to
$0.58 and GAAP net income per diluted share in the range of
$0.17 to $0.23," said Bob Stanzione, ARRIS Chairman and CEO. "I
remain confident about our future business prospects and the
pending Pace acquisition. The combination is proceeding as expected
and we continue to anticipate closing the transaction in the fourth
quarter of 2015."
Revenues in the second quarter 2015 of $1,260.1 million were down $169.0 million, or 11.8% as compared to second
quarter 2014 revenues of $1,429.1
million. Second quarter revenues were up $44.9 million or 3.7%, as compared to first
quarter 2015 revenues of $1,215.2
million.
Through the first two quarters of 2015, revenues of $2,475.2 million were down $178.9 million, or 6.7% as compared to the first
two quarters of 2014 revenues of $2,654.1
million.
Adjusted net income (a non-GAAP measure) in the second
quarter 2015 was $0.53 per diluted
share, as compared to $0.70 per
diluted share for the second quarter 2014, a decrease of
$0.17 per diluted share, or
24.3%. Adjusted net income increased $0.09 per diluted share, or 20.5% as compared to
the first quarter 2015 adjusted net income of $0.44 per diluted share.
Year to date, adjusted net income of $0.97 per diluted share for 2015 is a decrease of
$0.20, or 17.1%, as compared to the
first six months of 2014 adjusted net income of $1.17 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).
GAAP net income in the second quarter 2015 was
$0.11 per diluted share, as compared
to the second quarter 2014 GAAP net income of $0.26 per diluted share, a decrease of
$0.15 per diluted share, or
57.7%. GAAP net income decreased $0.02 per diluted share, or 15.4%, as compared to
the first quarter 2015 GAAP net income of $0.13 per diluted share. Year to date, GAAP
net income of $0.24 per diluted share
for 2015 is a decrease of $0.30, or
55.6%, as compared to the first six months of 2014 GAAP net income
of $0.54 per diluted share. A
reconciliation of adjusted net income to GAAP 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 2015 with $622.8
million of cash resources, which includes $619.8 million of cash, cash equivalents and
short-term investments, and $3.0
million of long-term marketable securities, as compared to
$631.6 million at the end of the
first quarter 2015, in the aggregate. The Company generated
$69.2 million of cash from operating
activities during the second quarter 2015, as compared to
$220.3 million generated during the
second quarter 2014. Through the first six months of 2015,
the Company generated $5.9 million of
cash from operating activities. This compares to $247.3 million generated during the same period
in 2014.
Order backlog at the end of the second quarter 2015 was
$651.3 million as compared to
$787.6 million and $725.7 million at the end of the second quarter
2014 and the first quarter 2015, respectively. The Company's
book-to-bill ratio in the second quarter 2015 was 0.94 as compared
to the second quarter 2014 of 0.85 and the first quarter 2015 of
1.08.
ARRIS management will conduct a conference call at 5:00 pm EDT, today, Wednesday, July 29, 2015, to discuss these
results in detail. You may participate in this conference call by
dialing 888-713-4217 or 617-213-4869 for international calls prior
to the start of the call and providing the ARRIS Group, Inc. name,
conference pass code 16046861 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 6, 2015, by dialing
888-286-8010 or 617-801-6888 for international calls and using the
pass code 35458106. A replay also will be made available for a
period of 12 months following the conference call on ARRIS' website
at www.arris.com.
About ARRIS
ARRIS Group, Inc. (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. Together, we are inventing the future.
For more information, visit http://www.arrisi.com.
No Offer or Solicitation
This release is provided for informational purposes only and
does not constitute an offer to sell, or an invitation to subscribe
for, purchase or exchange any securities or the solicitation of any
vote or approval in any jurisdiction, nor shall there be any sale,
issuance, exchange or transfer of the securities referred to in
this document in any jurisdiction in contravention of applicable
law.
Forward-Looking Statements
Statements made in this press release, including those related
to:
- growth expectations and business prospects;
- revenues and net income for the third quarter 2015, and
beyond;
- expected sales levels and acceptance of new ARRIS products;
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 2015 as well as the
general outlook for 2015 and beyond are based on preliminary
estimates, assumptions and projections that management believes to
be reasonable at this time, but are largely beyond management's
control;
- ARRIS may fail to realize the expected benefits of announced
transactions, including the Active Video joint venture and the
acquisition of Pace; there may be negative effects relating to the
announcement of the transactions or any further announcements
relating to the transactions; and ARRIS may incur significant
transaction costs and/or unknown liabilities;
- completion of the Pace acquisition is subject to satisfaction
of a number of conditions outside of ARRIS' control, including
receipt of necessary regulatory approvals, and the approval of the
shareholders of ARRIS and Pace;
- the strengthening U.S. Dollar may adversely impact ARRIS'
international customer's ability or willingness to purchase
products and the pricing of ARRIS products;
- ARRIS' 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;
- because the market in which ARRIS operates 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; and
- termination of the previously proposed acquisition of Time
Warner by Comcast and the announced transactions within our
customer base, including the acquisition of DIRECTV by AT&T,
the proposed acquisition by Frontier Communications of several
properties owned by Verizon, the proposed acquisition of Suddenlink
by Altice, and the announced acquisition of Time Warner by Charter
may have an impact on the amount and/or timing of customer's
spending.
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; the impact of competition on product development and
pricing; the ability of ARRIS to react to changes in general
industry and market conditions including regulatory developments;
rights to intellectual property; 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 ARRIS' reports filed with the
Securities and Exchange Commission, including its Form 10-Q for the
year ended March 31, 2015. In
providing forward-looking statements, the Company expressly
disclaims any obligation to update publicly or otherwise these
statements, whether as a result of new information, future events
or otherwise, except as required by law.
Important Additional Information Regarding the Pace
Transaction Filed With the SEC
In connection with the proposed acquisition of Pace, it is
expected that the shares of New ARRIS to be issued by New ARRIS to
Pace shareholders under the scheme will be issued in reliance upon
the exemption from the registration requirements of the Securities
Act of 1933, as amended, provided by Section 3(a)(10) thereof. In
connection with the issuance of New ARRIS shares to ARRIS
stockholders pursuant to the merger that forms a part of the
transaction, New ARRIS has filed with the SEC a preliminary
registration statement on Form S-4 that contains a prospectus of
New ARRIS as well as a proxy statement of ARRIS relating to the
merger that forms a part of the combination, which we refer to
together as the Preliminary Form S-4/Proxy Statement. The
Preliminary Form S-4/Proxy Statement is not complete and will be
further amended.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PRELIMINARY
FORM S-4/PROXY STATEMENT AND OTHER DOCUMENTS FILED WITH THE SEC IN
CONNECTION WITH THE TRANSACTION CAREFULLY AND IN THEIR ENTIRETY,
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
TRANSACTION, THE PARTIES TO THE TRANSACTION AND THE RISKS
ASSOCIATED WITH THE TRANSACTION. Those documents, if and when
filed, as well as ARRIS' and New ARRIS' other public filings with
the SEC may be obtained without charge at the SEC's website at
www.sec.gov and at ARRIS' website at http://ir.arris.com. Security
holders and other interested parties will also be able to obtain,
without charge, a copy of the Preliminary Form S-4/Proxy Statement
and other relevant documents by directing a request by mail to
ARRIS Investor Relations, 3871 Lakefield Drive, Suwanee, GA 30024 or at http://ir.arris.com.
Security holders may also read and copy any reports, statements and
other information filed with the SEC at the SEC public reference
room at 100 F Street N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at
(800) 732-0330 or visit the SEC's website for further information
on its public reference room.
Participants in the Solicitation
ARRIS, its directors and certain of its executive officers may
be considered participants in the solicitation of proxies in
connection with the transactions contemplated by the Preliminary
Form S-4/Proxy Statement. Information about the directors and
executive officers of ARRIS is set forth in its Annual Report on
Form 10-K for the year ended December 31,
2014, which was filed with the SEC on February 27, 2015, and its proxy statement for
its 2015 annual meeting of shareholders, which was filed with the
SEC on April 9, 2015. Other
information regarding potential participants in the proxy
solicitations and a description of their direct and indirect
interests, by security holdings or otherwise, is contained in the
Preliminary Form S-4/Proxy Statement.
Pace and New ARRIS are each organized under the laws of
England and Wales. Some of the officers and directors of
Pace and New ARRIS are residents of countries other than
the United States. As a result, it
may not be possible to sue Pace, New ARRIS or such persons in a
non-US court for violations of US securities laws. It may be
difficult to compel Pace, New ARRIS and their respective affiliates
to subject themselves to the jurisdiction and judgment of a US
court or for investors to enforce against them the judgments of US
courts.
UK Takeover Code Directors' Confirmation
The statements above with respect to adjusted net income per
diluted share and GAAP net income per diluted share for the third
quarter 2015 constitute a profit forecast for the purposes of the
UK City Code on Takeovers and Mergers (the "Profit
Forecast"). The Profit Forecast has been prepared on a basis
consistent with ARRIS' accounting policies, which are in accordance
with U.S. GAAP.
The Profit Forecast is based on the following assumptions:
Factors outside the control of ARRIS:
- there will be no material changes to the conditions of the
markets in which ARRIS operates, including material changes in the
capital spending of ARRIS' customers during the third quarter;
- foreign currency exchange rates, interests rates and tax rates
in the geographic markets in which ARRIS operates remain materially
unchanged from the currently prevailing rates;
- there will be no material interruptions in the delivery of
components for the manufacture of ARRIS' products or the
delivery of finished products to customers;
- there will be no material adverse changes to existing global
macroeconomic or political conditions;
- there will be no material regulatory developments that affect
ARRIS' operations or the operations of its customers; and
- there will be no material adverse events that have a
significant impact on ARRIS' financial condition.
Factors within the control of ARRIS:
- there will be no material acquisitions or dispositions
completed by ARRIS prior to September 30,
2015;
- there will be no material change in the supplier base of
ARRIS;
- ARRIS's operational costs will not change materially prior to
September 30, 2015;
- there will be no material change in the business or operational
strategy of ARRIS; and
- there will be no material changes to the management of
ARRIS.
The Directors of ARRIS Group, Inc. confirm that the Profit
Forecast has been properly compiled on the basis of the assumptions
stated above and the basis of accounting used in preparing the
Profit Forecast is consistent with the accounting policies of ARRIS
Group, Inc.
ARRIS GROUP,
INC.
|
PRELIMINARY
CONSOLIDATED BALANCE SHEETS
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
|
2015
|
|
2015
|
|
2014
|
|
2014
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$490,939
|
|
$499,482
|
|
$565,790
|
|
$526,999
|
|
$483,277
|
Short-term
investments, at fair value
|
|
128,852
|
|
129,073
|
|
126,748
|
|
66,817
|
|
68,586
|
Total cash, cash
equivalents and short term investments
|
|
619,791
|
|
628,555
|
|
692,538
|
|
593,816
|
|
551,863
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
50
|
|
-
|
|
-
|
|
1,022
|
|
1,096
|
Accounts receivable,
net
|
|
802,329
|
|
819,918
|
|
598,603
|
|
684,722
|
|
723,527
|
Other
receivables
|
|
11,268
|
|
15,054
|
|
10,640
|
|
18,227
|
|
14,610
|
Inventories,
net
|
|
389,556
|
|
372,379
|
|
401,165
|
|
368,628
|
|
297,848
|
Prepaid income
taxes
|
|
26,413
|
|
13,380
|
|
11,023
|
|
4,431
|
|
32,802
|
Prepaids
|
|
39,001
|
|
31,814
|
|
27,497
|
|
34,311
|
|
33,715
|
Current deferred
income tax assets
|
|
105,384
|
|
115,926
|
|
113,390
|
|
64,948
|
|
79,070
|
Other current
assets
|
|
91,624
|
|
80,943
|
|
61,450
|
|
78,283
|
|
72,069
|
Total current
assets
|
|
2,085,416
|
|
2,077,969
|
|
1,916,306
|
|
1,848,388
|
|
1,806,600
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
324,154
|
|
325,727
|
|
366,431
|
|
371,496
|
|
376,509
|
Goodwill
|
|
1,017,430
|
|
938,645
|
|
936,067
|
|
938,265
|
|
944,115
|
Intangible assets,
net
|
|
923,837
|
|
919,876
|
|
943,388
|
|
1,000,441
|
|
1,057,557
|
Investments
|
|
75,381
|
|
76,492
|
|
77,640
|
|
74,985
|
|
68,852
|
Noncurrent deferred
income tax assets
|
|
87,291
|
|
88,366
|
|
71,686
|
|
12,567
|
|
20,468
|
Other
assets
|
|
45,166
|
|
45,711
|
|
54,127
|
|
59,102
|
|
56,719
|
|
|
$4,558,675
|
|
$4,472,786
|
|
$4,365,645
|
|
$4,305,244
|
|
$4,330,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$608,133
|
|
$594,690
|
|
$480,150
|
|
$577,318
|
|
$636,283
|
Accrued compensation,
benefits and related taxes
|
|
78,333
|
|
75,849
|
|
145,278
|
|
130,116
|
|
101,644
|
Accrued
warranty
|
|
29,176
|
|
36,824
|
|
42,763
|
|
51,277
|
|
54,546
|
Deferred
revenue
|
|
107,632
|
|
107,230
|
|
92,772
|
|
102,717
|
|
114,489
|
Current portion of
long-term debt & financing lease obligations
|
|
48,594
|
|
82,787
|
|
73,956
|
|
67,062
|
|
60,171
|
Current income taxes
payable
|
|
9,587
|
|
13,092
|
|
10,610
|
|
15,344
|
|
19,672
|
Other accrued
liabilities
|
|
155,482
|
|
167,430
|
|
164,341
|
|
178,100
|
|
192,345
|
Total current
liabilities
|
|
1,036,937
|
|
1,077,902
|
|
1,009,870
|
|
1,121,934
|
|
1,179,150
|
Long-term debt &
financing lease obligations, net of current portion
|
|
1,537,641
|
|
1,505,073
|
|
1,467,370
|
|
1,487,585
|
|
1,507,796
|
Accrued
pension
|
|
68,865
|
|
68,060
|
|
64,917
|
|
59,667
|
|
59,552
|
Noncurrent income
taxes payable
|
|
43,586
|
|
42,282
|
|
41,082
|
|
31,141
|
|
22,597
|
Noncurrent deferred
income tax liabilities
|
|
332
|
|
412
|
|
274
|
|
42,926
|
|
74,297
|
Other noncurrent
liabilities
|
|
92,544
|
|
90,428
|
|
91,371
|
|
71,882
|
|
68,512
|
Total
liabilities
|
|
2,779,905
|
|
2,784,157
|
|
2,674,884
|
|
2,815,135
|
|
2,911,904
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Common
stock
|
|
1,814
|
|
1,811
|
|
1,796
|
|
1,792
|
|
1,795
|
Capital in excess of
par value
|
|
1,765,804
|
|
1,745,345
|
|
1,739,700
|
|
1,725,383
|
|
1,710,845
|
Treasury stock at
cost
|
|
(331,329)
|
|
(331,329)
|
|
(306,330)
|
|
(306,330)
|
|
(306,330)
|
Accumulated other
comprehensive income (loss)
|
|
(12,664)
|
|
(12,966)
|
|
(11,047)
|
|
(4,617)
|
|
(6,649)
|
Retained
earnings
|
|
302,525
|
|
285,768
|
|
266,642
|
|
73,881
|
|
19,255
|
Total ARRIS Group,
Inc. stockholders' equity
|
|
1,726,150
|
|
1,688,629
|
|
1,690,761
|
|
1,490,109
|
|
1,418,916
|
Stockholders' equity
attributable to noncontrolling interest
|
|
52,620
|
|
-
|
|
-
|
|
-
|
|
-
|
Total stockholders'
equity
|
|
1,778,770
|
|
1,688,629
|
|
1,690,761
|
|
1,490,109
|
|
1,418,916
|
|
|
$4,558,675
|
|
$4,472,786
|
|
$4,365,645
|
|
$4,305,244
|
|
$4,330,820
|
ARRIS GROUP,
INC.
|
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,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$1,260,077
|
|
$1,429,071
|
|
$2,475,234
|
|
$2,654,088
|
Cost of
sales
|
|
895,716
|
|
1,009,659
|
|
1,774,318
|
|
1,887,901
|
Gross
margin
|
|
364,361
|
|
419,412
|
|
700,917
|
|
766,187
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Selling, general, and
administrative expenses
|
|
107,209
|
|
112,362
|
|
207,534
|
|
211,494
|
Research and
development expenses
|
|
136,260
|
|
144,121
|
|
268,729
|
|
278,274
|
Amortization of
intangible assets
|
|
56,783
|
|
58,735
|
|
113,930
|
|
122,736
|
Integration,
acquisition, restructuring and other costs
|
|
12,566
|
|
12,518
|
|
13,464
|
|
24,020
|
|
|
312,818
|
|
327,736
|
|
603,657
|
|
636,524
|
Operating
income
|
|
51,543
|
|
91,676
|
|
97,260
|
|
129,663
|
Other expense
(income):
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
28,454
|
|
18,225
|
|
41,821
|
|
34,823
|
Loss on
investments
|
|
1,410
|
|
3,236
|
|
3,119
|
|
4,911
|
(Gain) loss on
foreign currency
|
|
(6,659)
|
|
1,332
|
|
(6,639)
|
|
653
|
Interest
income
|
|
(558)
|
|
(701)
|
|
(1,280)
|
|
(1,284)
|
Other expense,
net
|
|
934
|
|
4,422
|
|
7,997
|
|
6,594
|
Income before income
taxes
|
|
27,962
|
|
65,162
|
|
52,242
|
|
83,966
|
Income tax
expense
|
|
12,819
|
|
26,138
|
|
17,973
|
|
4,142
|
Consolidated net
income
|
|
15,143
|
|
39,024
|
|
34,269
|
|
79,824
|
Net loss attributable
to noncontrolling interests
|
|
(1,615)
|
|
-
|
|
(1,615)
|
|
-
|
Net income
attributable to ARRIS Group, Inc.
|
|
$16,758
|
|
$39,024
|
|
$35,884
|
|
$79,824
|
|
|
|
|
|
|
|
|
|
Net income per common
share (1):
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.11
|
|
|
$
|
0.27
|
|
$
|
0.25
|
|
$
|
0.56
|
Diluted
|
|
$
|
0.11
|
|
$
|
0.26
|
|
$
|
0.24
|
|
$
|
0.54
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares:
|
|
|
|
|
|
|
|
|
Basic
|
|
146,293
|
|
144,415
|
|
145,823
|
|
143,637
|
Diluted
|
|
149,276
|
|
148,063
|
|
149,132
|
|
147,610
|
|
|
|
|
|
|
|
|
|
(1) Calculated
based on net income attributable to shareowners of ARRIS Group,
Inc.
|
|
ARRIS GROUP,
INC.
|
PRELIMINARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months
|
|
For the Six
Months
|
|
|
|
|
|
|
|
|
|
Ended June
30,
|
|
Ended June
30,
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net
income
|
|
|
|
|
$
|
15,143
|
$
|
39,024
|
$
|
34,269
|
$
|
79,824
|
|
|
Depreciation
|
|
|
|
|
|
17,053
|
|
19,681
|
|
36,937
|
|
39,675
|
|
|
Amortization of
intangible assets
|
|
|
|
|
|
57,849
|
|
58,735
|
|
115,701
|
|
122,736
|
|
|
Amortization of
deferred finance fees and debt discount
|
|
|
|
|
|
4,112
|
|
4,863
|
|
6,293
|
|
7,194
|
|
|
Deferred income tax
provision (benefit)
|
|
|
|
|
|
11,399
|
|
(5,644)
|
|
(6,789)
|
|
(14,029)
|
|
|
Stock compensation
expense
|
|
|
|
|
|
16,293
|
|
15,284
|
|
30,267
|
|
26,317
|
|
|
Provision for
doubtful accounts
|
|
|
|
|
|
1,982
|
|
1,237
|
|
2,249
|
|
1,244
|
|
|
Loss on disposal of
property, plant & equipment
|
|
|
|
|
|
145
|
|
2,774
|
|
6,022
|
|
3,186
|
|
|
Loss (gain) on
investments
|
|
|
|
|
|
1,410
|
|
3,237
|
|
3,119
|
|
4,911
|
|
|
Excess tax benefits
from stock-based compensation plans
|
|
|
|
|
|
3,595
|
|
(868)
|
|
(12,842)
|
|
(11,325)
|
|
Changes in operating
assets & liabilities, net of effects of acquisitions and
disposals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
|
|
|
16,762
|
|
(9,528)
|
|
(204,820)
|
|
(104,036)
|
|
|
Other
receivables
|
|
|
|
|
|
4,308
|
|
(793)
|
|
(2,687)
|
|
(8,047)
|
|
|
Inventory
|
|
|
|
|
|
(17,177)
|
|
(11,790)
|
|
11,609
|
|
32,281
|
|
|
Income taxes
payable/recoverable
|
|
|
|
|
|
(15,346)
|
|
25,834
|
|
(16,755)
|
|
(1,585)
|
|
|
Accounts payable and
accrued liabilities
|
|
|
|
|
|
(27,771)
|
|
102,749
|
|
28,917
|
|
62,050
|
|
|
Prepaids and other,
net
|
|
|
|
|
|
(20,597)
|
|
(24,487)
|
|
(25,593)
|
|
6,905
|
|
|
|
Net cash provided
by operating activities
|
|
|
|
|
|
69,160
|
|
220,308
|
|
5,897
|
|
247,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
|
|
|
|
(20,040)
|
|
(1,920)
|
|
(31,103)
|
|
(23,160)
|
|
Sales of
investments
|
|
|
|
|
|
19,446
|
|
13,506
|
|
29,615
|
|
24,681
|
|
Purchases of
property, plant & equipment, net
|
|
|
|
|
|
(13,402)
|
|
(13,368)
|
|
(24,321)
|
|
(26,292)
|
|
Proceeds from
sale-leaseback transaction
|
|
|
|
|
|
-
|
|
-
|
|
24,960
|
|
-
|
|
Acquisition, net of
cash acquired
|
|
|
|
|
|
(97,905)
|
|
84
|
|
(97,905)
|
|
84
|
|
Purchases of
intangible assets
|
|
|
|
|
|
-
|
|
-
|
|
(34,340)
|
|
-
|
|
Other, net
|
|
|
|
|
|
-
|
|
2
|
|
2,904
|
|
19
|
|
|
|
Net cash used in
investing activities
|
|
|
|
|
|
(111,901)
|
|
(1,696)
|
|
(130,190)
|
|
(24,668)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from
sales-leaseback financing transaction
|
|
|
|
|
|
-
|
|
-
|
|
58,729
|
|
-
|
|
Payment of financing
lease obligation
|
|
|
|
|
|
(105)
|
|
-
|
|
(105)
|
|
-
|
|
Payment of debt
obligations
|
|
|
|
|
|
(15,000)
|
|
(168,403)
|
|
(28,750)
|
|
(182,153)
|
|
Payment for debt
discount
|
|
|
|
|
|
(2,309)
|
|
-
|
|
(2,309)
|
|
-
|
|
Payment for deferred
financing costs
|
|
|
|
|
|
(3,234)
|
|
-
|
|
(3,234)
|
|
-
|
|
Repurchase of common
stock
|
|
|
|
|
|
-
|
|
-
|
|
(24,999)
|
|
-
|
|
Excess income tax
benefits from stock-based compensation plans
|
|
|
|
|
|
(3,595)
|
|
868
|
|
12,842
|
|
11,325
|
|
Repurchase of shares
to satisfy employee tax withholdings
|
|
|
|
|
|
(3,792)
|
|
(16,173)
|
|
(24,986)
|
|
(22,412)
|
|
Proceeds from
issuance of common stock, net
|
|
|
|
|
|
7,983
|
|
7,666
|
|
8,004
|
|
11,446
|
|
Contribution from
noncontrolling interest
|
|
|
|
|
|
54,250
|
|
-
|
|
54,250
|
|
-
|
|
|
|
Net cash (used in)
provided by financing activities
|
|
|
|
|
|
34,198
|
|
(176,042)
|
|
49,442
|
|
(181,794)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease)
increase in cash and cash equivalents
|
|
|
|
|
|
(8,543)
|
|
42,570
|
|
(74,851)
|
|
40,839
|
Cash and cash
equivalents at beginning of period
|
|
|
|
|
|
499,482
|
|
440,707
|
|
565,790
|
|
442,438
|
Cash and cash
equivalents at end of period
|
|
|
|
|
|
$
|
490,939
|
|
$
|
483,277
|
|
$
|
490,939
|
|
$
|
483,277
|
ARRIS GROUP,
INC.
|
PRELIMINARY
SUPPLEMENTAL SALES & NET INCOME RECONCILIATION
|
(in thousands,
except per share data) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q2 2014
|
|
Q1 2015
|
|
Q2 2015
|
|
YTD 2014
|
|
YTD 2015
|
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Amount
|
|
|
|
Amount
|
|
|
|
Sales
|
$ 1,429,071
|
|
|
|
$ 1,215,158
|
|
|
|
$ 1,260,077
|
|
|
|
$ 2,654,088
|
|
|
|
$ 2,475,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Highlighted
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition
accounting impacts of deferred revenue
|
3,489
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
3,695
|
|
|
|
$
|
-
|
|
|
|
Sales excluding
highlighted items
|
$ 1,432,560
|
|
|
|
$ 1,215,158
|
|
|
|
$ 1,260,077
|
|
|
|
$ 2,657,783
|
|
|
|
$ 2,475,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q2 2014
|
|
Q1 2015
|
|
Q2 2015
|
|
YTD 2014
|
|
YTD 2015
|
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
|
Per
Diluted
|
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Amount
|
|
Share
|
|
Net income
attributable to ARRIS Group, Inc.
|
$
|
39,024
|
|
$
|
0.26
|
|
$
|
19,126
|
|
$
|
0.13
|
|
$
|
16,758
|
|
$
|
0.11
|
|
$
|
79,824
|
|
$
|
0.54
|
|
$
|
35,884
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Highlighted
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impacting gross
margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation
expense
|
1,835
|
|
0.01
|
|
1,791
|
|
0.01
|
|
2,214
|
|
0.01
|
|
3,110
|
|
0.02
|
|
4,005
|
|
0.03
|
|
Acquisition
accounting impacts of deferred revenue
|
2,802
|
|
0.02
|
|
-
|
|
-
|
|
-
|
|
-
|
|
3,001
|
|
0.02
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impacting
operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Integration,
acquisition, restructuring and other costs
|
12,518
|
|
0.08
|
|
898
|
|
0.01
|
|
12,566
|
|
0.08
|
|
24,020
|
|
0.16
|
|
13,464
|
|
0.09
|
|
Amortization of
intangible assets
|
58,735
|
|
0.40
|
|
57,147
|
|
0.38
|
|
56,783
|
|
0.38
|
|
122,736
|
|
0.83
|
|
113,930
|
|
0.76
|
|
Stock compensation
expense
|
13,449
|
|
0.09
|
|
12,183
|
|
0.08
|
|
14,079
|
|
0.09
|
|
23,207
|
|
0.16
|
|
26,262
|
|
0.18
|
|
Noncontrolling
interest share of non-GAAP adjustments
|
-
|
|
-
|
|
-
|
|
-
|
|
(799)
|
|
(0.01)
|
|
|
|
-
|
|
(799)
|
|
(0.01)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impacting other
(income) / expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment on
investments
|
3,000
|
|
0.02
|
|
-
|
|
-
|
|
150
|
|
-
|
|
3,000
|
|
0.02
|
|
150
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impacting other
(income) / expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt amendment
fees
|
-
|
|
-
|
|
-
|
|
-
|
|
14,382
|
|
0.10
|
|
-
|
|
-
|
|
14,382
|
|
0.10
|
|
Asset held for sale
impairment
|
2,125
|
|
0.01
|
|
-
|
|
-
|
|
-
|
|
-
|
|
2,125
|
|
0.01
|
|
-
|
|
-
|
|
FX contract gains
related to cash consideration of Pace acquisition
|
-
|
|
-
|
|
-
|
|
-
|
|
(6,845)
|
|
(0.05)
|
|
-
|
|
-
|
|
(6,845)
|
|
(0.05)
|
|
Loss on sale of
building
|
-
|
|
-
|
|
5,142
|
|
0.03
|
|
-
|
|
-
|
|
-
|
|
-
|
|
5,142
|
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Net tax
items
|
(29,204)
|
|
(0.20)
|
|
(30,533)
|
|
(0.20)
|
|
(30,122)
|
|
(0.20)
|
|
(88,054)
|
|
(0.60)
|
|
(60,655)
|
|
(0.41)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total highlighted
items
|
65,260
|
|
0.44
|
|
46,628
|
|
0.31
|
|
62,408
|
|
0.42
|
|
93,145
|
|
0.63
|
|
109,036
|
|
0.73
|
|
Net income excluding
highlighted items
|
$
|
104,284
|
|
$
|
0.70
|
|
$
|
65,754
|
|
$
|
0.44
|
|
$
|
79,166
|
|
$
|
0.53
|
|
$
|
172,969
|
|
$
|
1.17
|
|
$
|
144,920
|
|
$
|
0.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares - diluted
|
|
|
148,063
|
|
|
|
148,986
|
|
|
|
149,276
|
|
|
|
147,610
|
|
|
|
149,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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:
Acquisition Accounting Impacts Related to Deferred
Revenue: In connection with our acquisitions of Motorola
Home, business combination rules require us to account for the fair
values of arrangements for which acceptance has not been obtained,
and 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. We believe the
adjustment to these revenues is useful as a measure of the ongoing
performance of our business. We have historically 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 our 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 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 options and restricted
stock. 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.
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 Active
Video Joint Venture, the Motorola Home acquisition, the anticipated
Pace acquisition and, 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, and
other exit costs. 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 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: In
the second quarter of 2015, ARRIS and Charter formed a joint
venture that acquired Active Video Networks, Inc.. ARRIS and
Charter own 65% and 35%, respectively, of the joint venture.
The joint venture is accounted for by ARRIS under the consolidation
method. As a result, the consolidated statement of operations
include the revenues, expenses, and gains and losses of the
noncontolling 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 joint venture, as we believe it is useful
to understand the effect of excluding this item when evaluating our
ongoing performance.
Impairment of Investment: 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 the second quarter of 2015,
the Company amended its credit agreement. This debt
modification allowed us to improve the terms and conditions of the
credit agreement, extend the maturities of certain loan facilities,
increase the amount of the revolving credit facility, and add a new
term A-1 loan facility. It is our intent that the new term A-1 loan
facility be funded upon the closing of the Pace Acquisition. If the
Pace acquisition does not close, the entire facility is available
to ARRIS so long as the first $400
million drawn is used to reduce other debt; the remaining
$400 million can be used for general
corporate purposes. Certain fees related to the debt modification
have already been paid, and other fees related to the new term A-1
loan facility will be paid upon funding. We believe it is
useful to understand the effect of this on our other expense
(income).
Asset Held for Sale Impairment: In the second
quarter of 2014, we entered into a contract to facilitate the sale
of a building at less than its carrying value. The asset has been
reclassified as held for sale and was measured at the lower of its
carrying amount or fair value less cost to sell. We have
recorded an initial impairment charge to reduce the assets carrying
amount to its fair value less costs to sell in the period the held
for sale criteria were met. We have excluded the effect of the
asset held for sale impairment 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).
Foreign Exchange Contract Gains 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).
Loss on Sale of Building: In the first quarter of
2015, the Company sold land and a building that qualified for
sale-leaseback accounting and was classified as an operating
lease. A loss has been recorded on the sale. We have
excluded the effect of the loss on sale of property in calculating
our non-GAAP financial measures. We believe it is useful to
understand the effect of excluding this item when evaluating our
ongoing performance.
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-second-quarter-2015-results-300120772.html
SOURCE ARRIS Group, Inc.