ARRIS Announces Preliminary and Unaudited First Quarter 2018 Results
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:
-- Check out our blog: ARRIS EVERYWHERE
-- Follow us on Twitter: @ARRIS
ARRIS and the ARRIS Logo are trademarks or registered trademarks of ARRIS Enterprises, LLC. All other trademarks are the property of their respective owners. © 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 Amount Per Amount Per
Diluted Diluted Diluted
Share Share Share
--- --- -----
Sales $1,483,105 $1,738,593 $1,577,710
----- ---------- ---------- ----------
Highlighted items: 2,423 (8,145) -
Adjustment to revenue related to warrants
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 & CPE Enterprise Corp/ Other Total
Cloud
-----
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 & CPE Enterprise Corp/ Other Total
Cloud
-----
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.
CONTACT: Bob Puccini, Investor Relations, +1.720.895.7787
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