ARRS
$26.07
Arris Group
($.28)
(1.06%)
Earnings Details
1st Quarter March 2018
Tuesday, May 01, 2018 4:03:00 PM
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Summary

Arris Guides In-line

Arris Group (ARRS) reported 1st Quarter March 2018 earnings of $0.64 per share on revenue of $1.6 billion. The consensus earnings estimate was $0.45 per share on revenue of $1.6 billion. Revenue grew 6.4% on a year-over-year basis.

The company said it expects second quarter non-GAAP earnings of $0.72 to $0.77 per share on revenue of $1.76 billion to $1.81 billion. The current consensus earnings estimate is $0.72 per share on revenue of $1.79 billion for the quarter ending June 30, 2018.

ARRIS Group Inc provides entertainment & communications solutions. It provides Customer Premises Equipment including set-top, gateway, DSL & cable modem; and Network & Cloud including video infrastructure, access & transport, & cloud solutions.

Results
Reported Earnings
$0.64
Earnings Whisper
-
Consensus Estimate
$0.45
Reported Revenue
$1.58 Bil
Revenue Estimate
$1.61 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

ARRIS Announces Preliminary and Unaudited First Quarter 2018 Results

SUWANEE, Ga., May 1, 2018 /PRNewswire/ -- ARRIS International plc (NASDAQ: ARRS) today announced preliminary and unaudited financial results for the first quarter 2018.

First Quarter 2018 Financial Highlights

  • Revenues were $1.578 billion
  • GAAP net loss was ($0.07) per diluted share
  • Adjusted net income (a non-GAAP measure) was $0.73 per diluted share
  • End-of-quarter cash resources were $543 million
  • Cash from operating activities was $96 million
  • Order backlog was $1.3 billion
  • Book-to-bill ratio was 1.11
  • Repurchased ~986,000 shares for $25 million

"We delivered strong profitability to start the year, led by a great quarter of E6000 DOCSIS® 3.1 capacity sales and Enterprise Networks' results," said Bruce McClelland, ARRIS CEO. "This marked the first full quarter for Enterprise Networks with better than expected results from both wired and wireless product lines.  Performance from Enterprise Networks and Network & Cloud more than offset a lower quarter in CPE sales.  Overall our results demonstrated good progress toward our goals of driving profitable growth by diversifying into higher-margin products, expanding internationally and broadening the capabilities of ARRIS to deliver innovative services to address the explosive demand for bandwidth capacity.

"With respect to the second quarter 2018, we expect revenues will be in the range of $1.760 billion to $1.810 billion, GAAP net income per diluted share in the range of $0.24 to $0.29, and adjusted net income per diluted share in the range of $0.72 to $0.77.  The strong start to the year creates good momentum to achieve our full year targets."

On December 1, 2017, the Company completed the acquisition of Ruckus Networks, and, as a result, comparisons to prior year periods are materially affected. 

Revenues in the first quarter 2018 of $1.578 billion were up $95 million, or 6%, as compared to first quarter 2017 revenues of $1.483 billion.  First quarter revenues were down $161 million, or 9%, as compared to fourth quarter 2017 revenues of $1.739 billion

GAAP net loss in the first quarter 2018 was ($0.07) per diluted share.  First quarter 2017 GAAP net loss was ($0.21) per diluted share, and fourth quarter 2017 GAAP net income was $0.07 per diluted share.    

Adjusted net income (a non-GAAP measure) in the first quarter 2018 was $0.73 per diluted share, as compared to $0.40 per diluted share for the first quarter 2017, and the fourth quarter 2017 adjusted net income of $0.88 per diluted share.  

A reconciliation of adjusted net income to GAAP net loss is attached to this release and can also be found on the Company's website (www.arris.com).

Cash resources of the Company at the end of the first quarter, 2018 were $543 million of cash resources as compared to $511 million at the end of the fourth quarter 2017.  The Company generated $96 million of cash from operating activities during the first quarter 2018, as compared to generating $250 million during the first quarter of 2017.

The Company repurchased approximately 986,000 ordinary shares for $25 million during the first quarter.  Since the end of the first quarter 2018, the Company has repurchased approximately 895,000 additional ordinary shares for $24 million.  As of May 1, 2018, the Company has $476 million remaining in available share repurchase authorization.

Order backlog at the end of the first quarter 2018 was $1.293 billion, as compared to $1.304 billion and $1.121 billion at the end of the first quarter 2017 and the fourth quarter 2017, respectively. The Company's book-to-bill ratio in the first quarter 2018 was 1.11, as compared to the first quarter 2017 of 1.13 and the fourth quarter 2017 of 1.02.

ARRIS management will conduct a conference call at 5:00 pm EDT, today, Tuesday, May 1, 2018, 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. 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 8, 2018, by dialing 855-859-2056 or 404-537-3406 for international calls and using passcode 3398479.  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 and full year 2018, growth expectations, cost initiatives, the general market outlook and industry trends are forward-looking statements. These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements.  Among other things:

  • projected results for the second quarter 2018, as well as the general outlook for 2018, are based on preliminary estimates, assumptions and projections that management believes to be reasonable at this time, but are beyond management's control;
  • volatility in component pricing and supply could impact revenues and gross margins more than currently anticipated;
  • the anticipated benefits from the Ruckus Networks acquisition may not be realized;
  • proposed tariffs on the import of certain products into the U.S., and any retaliatory tariffs imposed on U.S. products, could have a material adverse result on our financials 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-K for the year ended December 31, 2017. In providing forward-looking statements, the Company expressly disclaims any obligation to update these statements publicly or otherwise, whether as a result of new information, future events or otherwise, except as required by law.

About ARRIS
ARRIS International plc (NASDAQ: ARRS) is 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 and the ARRIS Logo are trademarks or registered trademarks of ARRIS Enterprises, LLC. All other trademarks are the property of their respective owners. © 2018 ARRIS Enterprises, Inc.  All rights reserved.

ARRIS INTERNATIONAL PLC


PRELIMINARY CONSOLIDATED BALANCE SHEETS


(in thousands)


(unaudited)


























March 31,


December 31,


September 30,


June 30,


March 31,



2018


2017


2017


2017


2017












ASSETS






















Current assets:











Cash and cash equivalents


$506,240


$487,573


$1,379,827


$1,346,028


$1,126,248

Short-term investments, at fair value


36,804


23,874


33,309


38,759


90,673

Total cash, cash equivalents and short term investments


543,044


511,447


1,413,136


1,384,787


1,216,921












Accounts receivable, net


1,008,603


1,218,089


1,056,225


991,539


1,018,108

Other receivables 


169,681


157,845


145,658


132,742


109,117

Unbilled receivables 


26,005


-


-


-


-

Inventories, net


849,069


825,211


775,142


657,881


556,264

Prepaid income taxes


26,409


28,351


41,780


16,354


21,845

Prepaids


36,308


26,644


27,954


32,149


27,898

Other current assets


172,993


145,953


109,567


119,405


132,339

Total current assets


2,832,112


2,913,540


3,569,462


3,334,857


3,082,491












Property, plant and equipment, net 


309,457


372,467


347,506


355,033


354,050

Goodwill


2,336,820


2,278,512


2,016,580


2,014,550


2,018,012

Intangible assets, net


1,583,299


1,771,362


1,406,591


1,491,103


1,586,187

Investments


69,858


71,082


73,199


61,047


65,035

Deferred income taxes


131,417


115,436


193,703


199,102


190,037

Other assets


103,525


101,858


57,246


54,843


58,919



$7,366,488


$7,624,257


$7,664,287


$7,510,535


$7,354,731























LIABILITIES AND STOCKHOLDERS' EQUITY






















Current liabilities:











Accounts payable


$1,010,812


$1,206,656


$1,266,214


$1,201,883


$1,020,234

Accrued compensation, benefits and related taxes


113,029


155,966


102,222


81,355


73,220

Accrued warranty


42,434


44,507


45,036


44,812


46,330

Deferred revenue


143,740


115,224


118,598


130,454


145,197

Current portion of LT debt & financing lease obligations


83,633


83,559


89,156


89,336


82,767

Income taxes payable


4,937


6,244


4,420


9,487


20,278

Other accrued liabilities


316,206


321,113


327,099


303,013


300,860

Total current liabilities


1,714,791


1,933,269


1,952,745


1,860,339


1,688,887

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


2,095,320


2,116,244


2,112,494


2,134,506


2,159,300

Accrued pension


43,443


42,637


54,867


55,532


54,809

Noncurrent income taxes


159,148


144,665


115,433


114,187


120,493

Deferred income taxes


68,825


68,888


83,058


83,516


89,260

Other noncurrent liabilities


127,587


134,520


118,420


120,381


112,977

Total liabilities


4,209,114


4,440,223


4,437,017


4,368,461


4,225,726












Stockholders' equity:











Ordinary shares


2,769


2,768


2,788


2,786


2,802

Capital in excess of par value


3,392,415


3,387,128


3,367,939


3,356,183


3,322,803

Accumulated other comprehensive income


12,545


4,552


8,838


2,211


10,628

Accumulated deficit


(266,264)


(225,881)


(188,375)


(256,705)


(243,207)

         Total ARRIS International plc stockholders' equity


3,141,465


3,168,567


3,191,191


3,104,475


3,093,026

Stockholders' equity attributable to noncontrolling interest


15,909


15,467


36,078


37,598


35,979

Total stockholders' equity


3,157,374


3,184,034


3,227,269


3,142,073


3,129,005



$7,366,488


$7,624,257


$7,664,287


$7,510,534


$7,354,731












 





 ARRIS INTERNATIONAL PLC

 PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)






For the Three Months


Ended March 31,


2018


2017





Net sales

$1,577,710


$1,483,105

Cost of sales

1,102,027


1,145,848

Gross margin

475,683


337,257

Operating expenses:




Selling, general, and administrative expenses

161,204


104,638

Research and development expenses

169,797


132,962

Amortization of intangible assets

114,708


93,646

Impairment of goodwill 

3,400


-

Integration, acquisition, restructuring and other costs

13,655


10,095


462,764


341,341

Operating income (loss) 

12,919


(4,084)

Other expense (income):




Interest expense

22,525


19,683

Loss on investments

527


4,530

Loss on foreign currency

4,833


4,740

Interest income

(1,532)


(1,922)

Other (income) expense, net

109


(85)

Loss before income taxes

(13,543)


(31,030)

Income tax expense 

3,489


10,001

Consolidated net loss

(17,032)


(41,031)

Net loss attributable to noncontrolling interests

(3,432)


(1,933)

Net loss attributable to ARRIS International plc

($13,600)


($39,098)





Net loss per ordinary share (1):




Basic

$         (0.07)


$             (0.21)

Diluted

$         (0.07)


$             (0.21)





Weighted average ordinary shares:




Basic

184,805


189,796

Diluted

184,805


189,796





(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,










2018


2017













Operating Activities:










Consolidated net loss






$        (17,032)


$        (41,031)



Depreciation






22,874


21,313



Amortization of acquired intangible assets






116,595


95,306



Amortization of deferred finance fees and debt discount






1,215


1,903



Impairment of goodwill 






3,400


-



Deferred income taxes






(13,327)


(15,667)



Foreign currency remeasurement of deferred income taxes






3,697


2,112



Stock compensation expense






19,256


19,415



Provision for non-cash warrants






-


2,423



Provision (recovery) for doubtful accounts






(292)


(179)



Loss on disposal of plant, property and equipment and other






156


292



Loss on investments and others






662


4,530


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











Accounts receivable






209,405


343,960



Other receivables






(11,836)


(35,924)



Unbilled receivables






(25,829)


-



Inventories






(24,397)


(3,152)



Accounts payable and accrued liabilities






(228,151)


(144,640)



Prepaids and other, net






39,517


(601)




Net cash provided by operating activities






95,913


250,060













Investing Activities:










Purchases of investments






(26,500)


(55,879)


Sales of investments






11,000


91,885


Purchases of property, plant & equipment, net






(15,196)


(21,867)


Deposit proceeds for sale of property, plant and equipment






10,000


-


Other, net






171


826




Net cash (used in) provided by investing activities






(20,525)


14,965













Financing Activities:










Payment of financing lease obligation






(190)


(204)


Payment of debt obligations






(21,875)


(22,375)


Repurchase of shares 






(25,000)


(83,110)


Repurchase of shares to satisfy employee minimum tax withholdings






(13,976)


(13,754)


Proceeds from issuance of shares, net






22


23


Contribution from noncontrolling interest






1,207


-




Net cash used in financing activities






(59,812)


(119,420)













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




3,791


597

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






19,367


146,202

Cash, cash equivalents and restricted cash at beginning of period






489,116


981,692

Cash, cash equivalents and restricted cash at end of period






$       508,483


$    1,127,894

























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














Cash and cash equivalents






$       506,240


$    1,126,248


Restricted cash included in other current assets






1,491


162


Restricted cash included in other assets






752


1,484


Total







$       508,483


$    1,127,894













 

ARRIS INTERNATIONAL PLC

PRELIMINARY ADJUSTED SALES & NET INCOME RECONCILIATION

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

















Q1 2017


Q4 2017


Q1 2018


Amount

Per
Diluted
Share


Amount

Per
Diluted
Share


Amount

Per
Diluted
Share

Sales

$1,483,105



$1,738,593



$1,577,710


Highlighted items:
    Adjustment to revenue related to warrants

2,423



(8,145)



-


Acquisition accounting impacts of deferred revenue

-



1,120



5,694


Adjusted sales 

$1,485,528



$1,731,568



$1,583,404











Net income (loss) attributable to ARRIS International plc

$       (39,098)

$   (0.21)


$         12,469

$    0.07


$       (13,600)

$   (0.07)

Highlighted Items:
Impacting gross margin:









Stock compensation expense

3,252

0.02


3,303

0.02


3,253

0.02

Adjustment to revenue related to warrants

2,423

0.01


(8,145)

(0.04)


Acquisition accounting impacts of deferred revenue


1,120

0.01


5,694

0.03

Acquisition accounting impacts of fair valuing inventory

908

0.00


7,560

0.04


16,971

0.09

Impacting operating expenses:









Integration, acquisition, restructuring and other costs

10,095

0.05


67,736

0.36


13,655

0.07

Amortization of intangible assets

93,646

0.49


100,588

0.53


114,708

0.61

Impairment on goodwill and intangible assets


55,000

0.29


3,400

0.02

Stock compensation expense

16,163

0.08


15,403

0.08


16,003

0.09

Noncontrolling interest share of non-GAAP adj

(804)


(20,026)

(0.11)


(2,321)

(0.01)

Impacting other (income)/expense:









Impairment (gain) on investments

2,750

0.01



Debt amendment fees


3,069

0.02


Remeasurement of certain deferred tax liabilities

2,112

0.01


852


3,697

0.02

Impacting income tax expense:









Net tax items

(13,333)

(0.07)


(73,267)

(0.39)


(24,541)

(0.13)

Total highlighted items

117,212

0.61


153,193

0.81


150,519

0.80

Adjusted net income 

$         78,114

$    0.40


$      165,662

$    0.88


$      136,919

$    0.73

Weighted average ordinary shares - basic


189,796



186,548



184,805

Weighted average ordinary shares - diluted


192,879



188,829



187,175



















 

ARRIS INTERNATIONAL PLC

PRELIMINARY SUPPLEMENTAL GAAP TO ADJUSTED SALES & GROSS MARGIN RECONCILIATION

(in thousands)

(unaudited)









Q1 2017


Q4 2017


Q1 2018


Sales - GAAP

1,483,105


1,738,593


1,577,710


Adjustment to revenue related to warrants

2,423


(8,145)


-


Acquisition accounting impacts of deferred revenue

-


1,120


5,694


Adjusted Sales - Non-GAAP

1,485,528


1,731,569


1,583,404









GAAP Gross Margin

337,257


494,469


475,683


Acquisition accounting impacts of fair valuing inventory

908


7,560


16,971


Acquisition accounting impacts of deferred revenue

-


1,120


5,694


Stock compensation expense

3,252


3,303


3,253


Adjustment to revenue related to warrants

2,423


(8,145)


-


Adjusted Gross Margin - Non-GAAP

343,840


498,307


501,601









GAAP Gross Margin - %

22.7%


28.4%


30.2%


Adjusted Gross Margin - Non-GAAP -  %

23.1%


28.8%


31.7%


 

ARRIS INTERNATIONAL PLC

PRELIMINARY SUPPLEMENTAL GAAP TO ADJUSTED SALES & ADJUSTED DIRECT CONTRIBUTION RECONCILIATION

(in thousands)

(unaudited)








Q1 2018


Network &
Cloud

CPE

Enterprise

Corp/ Other

Total

Net Sales

538,264

875,226

169,914

(5,694)

1,577,710

Non GAAP Adjustments (1)

-

-

-

5,694

5,694

Adjusted Net Sales

538,264

875,226

169,914

0

1,583,404







Direct Contribution(2)

228,538

49,761

25,528

(159,145)

144,683

Adjusted Direct Contribution (3)

214,717

43,154

25,927

(96,980)

186,818

Adjusted Direct Contribution % of sales

39.9%

4.9%

15.3%


11.8%







Other Items






Amortization of intangibles

25,135

63,248

25,510

815

114,708

Impairment of goodwill

3,400

-

-

-

3,400

Integration,acquisition, restructuring and other costs

-

-

3,066

10,589

13,655

Depreciation expense

6,900

7,716

3,565

4,698

22,880

Equity compensation expense

7,771

5,298

2,387

3,801

19,256







(1)  Impact of adjustment related to acquisition accounting impacts

(2) Defined as gross margin less direct operating expenses, excluding amortization of intangible assets, restructuring charges, acquisition,
integration and other costs.


(3) Defined as direct contribution less allocated facility costs, service provider sales and marketing costs plus equity compensation and depreciation
expense

 

ARRIS INTERNATIONAL PLC

PRELIMINARY SUPPLEMENTAL DIRECT CONTRIBUTION TO ADJUSTED DIRECT CONTRIBUTION RECONCILIATION

(in thousands)

(unaudited)








Q1 2018


Network &
Cloud

CPE

Enterprise

Corp/ Other

Total

Direct Contribution(1)

228,538

49,761

25,528

(159,145)

144,683

Allocated costs (2)

(28,492)

(19,622)

(5,553)

53,666

-

Direct Contribution after allocation

200,046

30,139

19,976

(105,479)

144,683

Equity compensation expense

7,771

5,298

2,387

3,801

19,256

Depreciation expense

6,900

7,716

3,565

4,698

22,880

Adjusted Direct Contribution 

214,717

43,154

25,927

(96,980)

186,818













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


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

 

ARRIS INTERNATIONAL PLC



PRELIMINARY SUPPLEMENTAL GAAP TO ADJUSTED EPS GUIDANCE RECONCILIATION 



(in millions, except per share data)








Q2 2018 Guidance 


FY 2018 Guidance 

Estimated GAAP EPS 

$ 0.24 - $ 0.29


$ 0.73 - $ 0.98

Reconciling Items:




Amortization of intangibles

0.47


1.98

Stock compensation expense

0.13


0.50

Integration, acquisition, restructuring and other costs

0.05


0.13

Purchase accounting Items

0.01


0.16

Impairment of goodwill

0.00


0.02

Net Tax items

(0.18)


(0.72)

Subtotal

0.48


2.07

Estimated Adjusted (Non-GAAP) EPS

$ 0.72 - $ 0.77


$ 2.80 - $ 3.05

 Notes to GAAP to Adjusted Non-GAAP Financial Measures

The Company reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP" or referred to herein as "reported"). However, management believes that certain non-GAAP financial measures provide management and other users with additional meaningful financial information that should be considered when assessing our ongoing performance. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the factors management uses in planning for and forecasting future periods.  Non-GAAP financial measures should be viewed in addition to, and not as an alternative to, the Company's reported results prepared in accordance with GAAP.  Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:

Reduction in Revenue Related to Warrants:    We entered into agreements with two customers for the issuance of warrants to purchase up to 14.0 million of ARRIS's ordinary shares. Vesting of the warrants is subject to certain purchase volume commitments, and therefore the accounting guidance requires that we record any change in the fair value of warrants as a reduction in revenue. Until final vesting, changes in the fair value of the warrants will be marked to market and any adjustment recorded in revenue. We have excluded the effect of the implied fair value in calculating our non-GAAP financial measures. We believe it is useful to understand the effects of these items on our total revenues and gross margin.

Acquisition Accounting Impacts Related to Deferred Revenue:    In connection with the accounting related to our acquisitions, business combination rules require us to account for the fair values of deferred revenue arrangements for post contract support in our purchase accounting. The non-GAAP adjustment to our sales and cost of sales is intended to include the full amounts of such revenues as if these purchase accounting adjustments had not been applied. We believe the adjustment to these revenues is useful as a measure of the ongoing performance of our business. We historically have experienced high renewal rates related to our support agreements, and our objective is to increase the renewal rates on acquired post contract support agreements. However, we cannot be certain that our customers will renew their contracts.

Stock-Based Compensation Expense:    We have excluded the effect of stock-based compensation expenses in calculating our non-GAAP operating expenses and net income (loss) measures. Although stock-based compensation is a key incentive offered to our employees, we continue to evaluate our business performance excluding stock-based compensation expenses. We record non-cash compensation expense related to grants of restricted stock units. Depending upon the size, timing and the terms of the grants, the non-cash compensation expense may vary significantly but will recur in future periods.

Acquisition Accounting Impacts Related to Inventory Valuation:    In connection with the accounting related to our acquisitions, business combinations rules require the acquired inventory be recorded at fair value on the opening balance sheet. This is different from historical cost. Essentially, we are required to write the inventory up to the end customer price less a reasonable margin as a distributor. We have excluded the resulting adjustments in inventory and cost of goods sold as the historic and forward gross margin trends will differ as a result of the adjustments. We believe it is useful to understand the effects of this on cost of goods sold and margin.

Integration, Acquisition, Restructuring and Other Costs:    We have excluded the effect of acquisition, integration, and other expenses and the effect of restructuring expenses in calculating our non-GAAP operating expenses and net income measures. We incurred expenses in connection with the Pace and Ruckus Networks acquisitions, which we generally would not otherwise incur in the periods presented as part of our continuing operations. Acquisition and integration expenses consist of transaction costs, costs for transitional employees, other acquired employee related costs, and integration related outside services. Restructuring expenses consist of employee severance, abandoned facilities, product line disposition and other exit costs. We believe it is useful to understand the effects of these items on our total operating expenses.

Impairment of Goodwill and Intangible Assets:  We have excluded the effect of the estimated impairment of goodwill and intangible assets in calculating our non-GAAP operating expenses and net income measures.  Although an impairment does not directly impact the Company's current cash position, such expense represents the declining value of the business, technology and other intangible assets that were acquired.  We exclude these impairments when significant and they are not reflective of ongoing business and operating results.

Amortization of Intangible Assets:    We have excluded the effect of amortization of intangible assets in calculating our non-GAAP operating expenses and net income (loss) measures. Amortization of intangible assets is non-cash, and is inconsistent in amount and frequency and is significantly affected by the timing and size of our acquisitions. Investors should note that the use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well. Amortization of intangible assets will recur in future periods.

Noncontrolling Interest share of Non-GAAP Adjustments:    The joint venture formed for the ActiveVideo acquisition is accounted for by ARRIS under the consolidation method. As a result, the consolidated Statements of Income include the revenues, expenses, and gains and losses of the noncontrolling interest. The amount of net income (loss) related to the noncontrolling interest are reported and presented separately in the consolidated Statements of Operations. We have excluded the noncontrolling share of any non- GAAP adjusted measures recorded by the venture, as we believe it is useful to understand the effect of excluding this item when evaluating our ongoing performance.

Impairment (Gain) 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 and 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 new term loan facility. We have excluded the effect of the associated fees in calculating our non-GAAP financial measures. We believe it is useful to understand the effect of this item in our other expense (income).

Remeasurement of Deferred Taxes:    The Company records foreign currency remeasurement gains and losses related to deferred tax liabilities in the United Kingdom. The foreign currency remeasurement gains and losses derived from the remeasurement of the deferred income taxes from GBP to USD. We have excluded the impact of these gains and losses in the calculation of our non-GAAP measures. We believe it is useful to understand the effects of this item on our total other expense (income).

Income Tax Expense (Benefit):    We have excluded the tax effect of the non-GAAP items mentioned above. Additionally, we have excluded the effects of certain tax adjustments related to tax and legal restructuring, state and non-US valuation allowances, benefits for releases of uncertain tax positions due to settlement, change in law or statute of limitations and provision to return differences.

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SOURCE ARRIS