ARRIS Announces Preliminary and Unaudited Fourth Quarter and Full Year 2018 Results
SUWANEE, Ga., Feb. 21, 2019 /PRNewswire/ -- ARRIS (NASDAQ: ARRS) today announced preliminary and unaudited financial results for the fourth quarter and full year 2018.
"We had a strong finish to 2018 generating $0.76 of non-GAAP earnings per share and $229 million of cash from operating activities in the fourth quarter," said Bruce McClelland ARRIS CEO. "Led by strength in our Network and Cloud business, sales of our E6000 CCAP product were particularly strong with several customers increasing year end capital spend. CPE sales were higher than any other quarter over the last year, exceeding $1 billion. Enterprise sales were disappointing with sales of Ruckus products below expectations in North America, due to higher channel inventory. Looking forward, we anticipate 2019 to be a stronger year than 2018, with the first quarter expected to be the lowest quarter of the year. We are on track to transition the majority of Broadband CPE production out of China by early second quarter to address US import tariffs, resulting in reduced sales in the first quarter. Additionally, we expect lower sales of Network and Cloud in Q1 due to strong end of year shipments, and flat Enterprise sales as channel inventory normalizes."
Revenues were $1.787 billion in the quarter and $6.743 billion for full year 2018.
GAAP net income in the quarter was $0.25 per diluted share and $0.62 per diluted share year to date through December 31, 2018.
Adjusted net income (a non-GAAP measure) in the quarter was $0.76 per diluted share and $2.89 per diluted share for full year 2018.
A reconciliation of adjusted net income per diluted share to GAAP net income per diluted share is attached to this release and can be found on the Company's website (www.ARRIS.com).
Cash & Cash Equivalents - The Company generated $229 million of cash from operating activities during the fourth quarter 2018 and ended the year with $735 million of cash resources.
Further details are attached to this release and full results will be filed in our 10K.
Forward-Looking Statements
Statements made in this press release, including those related to preliminary revenues and net income for the fourth quarter and full year 2018, are forward-looking statements. These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. Among other things:
-- projected results for the fourth quarter 2018 and beyond are based on
preliminary estimates, assumptions and projections that management
believes to be reasonable at this time, but are beyond management's
control;
-- satisfaction of conditions for the completion of the proposed
acquisition of ARRIS by CommScope Holding Company, Inc. (the
"Acquisition"), including receipt of remaining required regulatory
approvals, may be delayed or may not be satisfied at all;
-- delays in moving certain manufacturing from China or difficulties in
commencing production in new locations as planned could materially
impact revenues;
-- volatility in component pricing and supply could impact revenues and
gross margins more than currently anticipated;
-- any increase in tariffs enacted on imports from China or an expansion of
the products covered, could have a material adverse impact on our
financial results;
-- volatility in currency fluctuation may adversely impact our
international customers' ability or willingness to purchase products and
the pricing of products;
-- impacts of the U.K. invoking Article 50 of the Lisbon Treaty to leave
the European Union, could have an adverse impact on results of
operations;
-- regulatory changes, including those related to recently completed
changes to the U.S. income tax code, could have an adverse impact on
operations and results of operations;
-- the impact of litigation and similar regulatory proceedings that we are
involved in or may become involved in, including the costs of such
litigation; and
-- the Company's customers operate in a capital-intensive consumer-based
industry, and volatility in the capital markets or changes in customer
spending may adversely impact their ability or willingness to purchase
the products that the Company offers.
These factors are not intended to be an all-encompassing list of risks and uncertainties that may affect the Company's business and results from operations. Additional information regarding these and other factors can be found in the Company's reports filed with the Securities and Exchange Commission, including its Form 10-Q for the quarter ended September 30, 2018. In providing forward-looking statements, the Company expressly disclaims any obligation to update these statements publicly or otherwise, whether as a result of new information, future events or otherwise, except as required by law.
About ARRIS
ARRIS (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, the ARRIS logo and E6000 are trademarks of ARRIS International plc and/or its affiliates. All other marks are the property of their respective owners. © 2018 ARRIS Enterprises LLC. All rights reserved.
ARRIS INTERNATIONAL PLC
PRELIMINARY CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
December 31,
September 30,
June 30,
March 31,
December 31,
2018 2018 2018 2018 2017
ASSETS
Current assets:
Cash and cash equivalents $729,933 $480,757 $501,411 $506,240 $487,573
Short-term investments, at fair value 5,538 39,640 46,698 36,804 23,874
Total cash, cash equivalents and short term investments 735,471 520,397 548,109 543,044 511,447
Accounts receivable, net 1,225,975 1,117,641 1,183,360 1,034,608 1,218,089
Other receivables 222,368 235,122 192,067 169,681 157,845
Inventories, net 740,205 717,272 803,217 849,069 825,211
Prepaid income taxes 17,391 17,717 10,406 26,409 28,351
Prepaids 26,978 34,125 40,290 36,308 26,644
Other current assets 144,251 201,111 196,014 172,993 145,953
Total current assets 3,112,639 2,843,385 2,973,463 2,832,112 2,913,540
Property, plant and equipment, net 287,671 289,820 299,991 309,457 372,467
Goodwill 2,240,642 2,261,002 2,259,177 2,336,820 2,278,512
Intangible assets, net 1,403,659 1,488,580 1,580,393 1,583,299 1,771,362
Investments 45,295 71,747 69,902 69,858 71,082
Deferred income taxes 175,405 155,193 146,443 131,417 115,436
Other assets 62,558 76,878 72,155 103,525 101,858
$7,327,869 $7,186,605 $7,401,524 $7,366,488 $7,624,257
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,288,827 $1,100,901 $1,125,619 $1,010,812 $1,206,656
Accrued compensation, benefits and related taxes 141,565 146,964 140,387 113,029 155,966
Accrued warranty 36,988 40,772 38,651 42,434 44,507
Deferred revenue 111,254 115,989 123,590 143,740 115,224
Current portion of LT debt & financing lease obligations 83,862 83,785 83,709 83,633 83,559
Income taxes payable 2,964 4,182 2,094 4,937 6,244
Other accrued liabilities 302,307 356,002 361,315 316,206 321,113
Total current liabilities 1,967,767 1,848,595 1,875,365 1,714,791 1,933,269
Long-term debt & financing lease obligations, net of current portion 2,032,382 2,053,373 2,074,352 2,095,320 2,116,244
Accrued pension 25,303 32,371 31,889 43,443 42,637
Noncurrent deferred revenue 58,744 58,553 58,233 56,041 54,090
Noncurrent income taxes 119,047 112,259 120,988 159,148 144,665
Deferred income taxes 46,784 60,410 62,886 68,825 68,888
Other noncurrent liabilities 71,994 67,534 68,507 71,546 80,430
Total liabilities 4,322,021 4,233,095 4,292,220 4,209,114 4,440,223
Stockholders' equity:
Ordinary shares 2,623 2,621 2,722 2,769 2,768
Capital in excess of par value 3,468,728 3,439,476 3,424,905 3,392,415 3,387,128
Accumulated other comprehensive (loss) income (13,345) (8,655) (4,648) 12,545 4,552
Accumulated deficit (466,165) (494,706) (329,731) (266,264) (225,881)
Total ARRIS International plc stockholders' equity 2,991,841 2,938,736 3,093,248 3,141,465 3,168,567
Stockholders' equity attributable to noncontrolling interest 14,007 14,774 16,056 15,909 15,467
Total stockholders' equity 3,005,848 2,953,510 3,109,304 3,157,374 3,184,034
$7,327,869 $7,186,605 $7,401,524 $7,366,488 $7,624,257
ARRIS INTERNATIONAL PLC
PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
For the Three Months For the Twelve Months
Ended December 30, Ended December 31,
---
2018 2017 2018 2017
---
Net sales $1,787,143 $1,738,594 $6,742,640 $6,614,392
Cost of sales 1,307,910 1,244,124 4,823,781 4,948,153
---
Gross margin 479,233 494,470 1,918,859 1,666,239
Operating expenses:
Selling, general, and administrative expenses 169,789 142,403 667,053 475,369
Research and development expenses 150,932 141,442 644,038 539,094
Amortization of intangible assets 90,062 100,588 383,561 375,407
Impairment of goodwill and intangible assets 55,000 3,400 55,000
Gain on disposal of fixed assets (13,346) (13,346) -
Integration, acquisition, restructuring and other costs 13,722 67,734 55,268 98,357
411,160 507,168 1,739,974 1,543,227
---
Operating income 68,073 (12,699) 178,885 123,012
Other expense (income):
Interest expense 24,945 23,850 95,086 87,088
Loss on investments 2,025 2,088 308 11,066
(Gain) loss on foreign currency (2,201) 4,188 3,834 9,757
Interest income (3,253) (1,978) (8,341) (7,975)
Other expense (income), net 5,082 (402) 5,056 1,873
---
Income (loss) before income taxes 41,474 (40,443) 82,942 21,203
Income tax benefit (2,238) (32,309) (24,344) (44,921)
---
Consolidated net income (loss) 43,712 (8,136) 107,286 66,124
Net loss attributable to noncontrolling interests (795) (20,604) (6,454) (25,903)
---
Net income attributable to ARRIS International plc $44,507 $12,469 $113,740 $92,027
===
Net income per ordinary share (1):
Basic $0.26 $0.07 $0.63 $0.49
Diluted $0.25 $0.07 $0.62 $0.49
Weighted average ordinary shares:
Basic 173,726 186,548 180,147 187,133
===
Diluted 176,248 188,829 182,041 189,616
===
(1) Calculated based on net income
attributable to shareowners of
ARRIS International plc
ARRIS INTERNATIONAL PLC
PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
For the Three Months For the Twelve Months
Ended December 31, Ended December 31,
2018 2017 2018 2017
Operating Activities:
Consolidated net income (loss) $43,712 $(8,134) $107,286 $66,124
Depreciation 18,147 22,855 83,686 88,195
Amortization of acquired intangible assets 91,938 102,455 391,074 382,416
Amortization of deferred finance fees and debt discount 1,191 2,339 4,811 7,960
Impairment of goodwill and intangible assets 55,000 3,400 55,000
Deferred income taxes (14,228) (43,041) (72,669) (74,465)
Foreign currency remeasurement of deferred taxes (1,007) 851 (477) 9,360
Stock compensation expense 22,146 18,706 85,233 81,557
Provision for non-cash warrants (8,145)
Recovery for doubtful accounts (25) (7) (462) (566)
(Gain) loss on sale and disposal of plant, property and
equipment and other (12,535) 1,187 (10,774) 7,063
Loss on investments and others 2,025 2,088 517 11,066
Changes in operating assets & liabilities, net of effects of
acquisitions and disposals:
Accounts receivable (107,774) (129,282) (22,138) 175,930
Other receivables 12,754 (12,187) (64,523) (84,652)
Inventories (22,755) (1,849) 81,815 (224,582)
Accounts payable and accrued liabilities 174,745 (82,449) 24,948 49,988
Prepaids and other, net 20,428 1,770 37,275 (16,583)
Net cash provided by (used in) operating activities 228,762 (77,843) 649,002 533,811
Investing Activities:
Purchases of investments (243) (64,454) (68,493)
Sales of investments 33,835 10,000 79,473 165,301
Proceeds from dividend declared on equity investment 9,800 9,966 826
Purchases of property, plant & equipment, net (17,995) (15,683) (63,616) (78,072)
Proceeds from sale of property, plant & equipment, net of
deposits 24,420 74,425 -
Purchases of intangible assets (423) (6,422)
Acquisitions, net of cash acquired (1,152) (760,802) (1,152) (760,802)
Other, net 9,352 9,352
Net cash provided by (used in) investing activities 58,260 (766,728) 43,571 (747,662)
Financing Activities:
Proceeds from issuance of debt 145,533 175,847
Payment of financing lease obligation (230) (187) (870) (777)
Payment of debt obligations (21,875) (145,033) (87,500) (244,009)
Payment for deferred financing costs and debt discount (4,499) (5,961)
Repurchase of shares (21,457) (50,000) (353,079) (196,965)
Repurchase of shares to satisfy employee minimum tax
withholdings (3,864) (214) (23,781) (26,573)
Proceeds from issuance of shares, net 10,980 8,846 20,186 17,469
Contribution from noncontrolling interest 2,257 3,500
Net cash used in financing activities (36,446) (45,554) (442,787) (277,469)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (3,503) (2,197) (7,520) (1,256)
Net (decrease) increase in cash, cash equivalents and restricted cash 247,073 (892,322) 242,266 (492,576)
Cash, cash equivalents and restricted cash at beginning of period 484,309 1,381,438 489,116 981,692
Cash, cash equivalents and restricted cash at end of period $731,382 $489,116 $731,382 $489,116
Reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets
Cash and cash equivalent 729,933 487,573
Restricted cash included in other current assets 776 23
Restricted cash included in other assets 673 1,520
Total 731,382 489,116
ARRIS INTERNATIONAL PLC
PRELIMINARY ADJUSTED SALES & NET INCOME RECONCILIATION
(in thousands, except per share data) (unaudited)
Q4 2017 Q3 2018 Q4 2018 DEC YTD 2017 DEC YTD 2018
Amount
Per
Amount
Per
Amount
Per
Amount
Per
Amount
Per
Diluted Diluted Diluted Diluted Diluted
Share Share Share Share Share
---
Sales $1,738,593 $1,651,248 $1,787,143 $6,614,392 $6,742,640
Highlighted items: (8,145)
-
Reduction in revenue related to warrants
Acquisition accounting impacts of deferred revenue 1,120 2,400 1,700 1,120 13,101
---
Adjusted sales $1,730,448 $1,653,648 $1,788,843 $6,614,392 $6,755,741
---
Net income attributable to ARRIS International plc $12,469 $0.07 $47,079 $0.26 $44,507 $0.25 $92,027 $0.49 $113,740 $0.62
Highlighted Items:
Impacting gross margin:
Stock compensation expense 3,303 0.02 3,660 0.02 3,577 0.02 13,947 0.07 14,299 0.08
Reduction in revenue related to warrants (8,145) (0.04)
-
-
-
-
-
-
-
-
Acquisition accounting impacts of deferred revenue 1,120 0.01 2,400 0.01 1,700 0.01 1,120 0.01 13,101 0.07
Acquisition accounting impacts of fair valuing inventory 7,560 0.04
-
-
-
- 8,468 0.04 16,971 0.09
Impacting operating expenses:
Integration, acquisition, restructuring and other costs 67,736 0.36 5,046 0.03 13,722 0.08 98,357 0.52 55,267 0.30
Amortization of intangible assets 100,588 0.53 88,305 0.49 90,062 0.51 375,407 1.98 383,560 2.11
Impairment of goodwill and intangible assets 55,000 0.29
-
-
-
- 55,000 0.29 3,400 0.02
Stock compensation expense 15,403 0.08 16,668 0.09 18,569 0.11 66,711 0.35 70,934 0.39
Gain on sale of fixed assets
-
-
-
- (13,346) (0.08)
-
- (13,346) (0.07)
Noncontrolling interest share of non-GAAP adj (20,026) (0.11) (885) (0.00) (849)
- (22,352) (0.12) (4,922) (0.03)
Impacting other (income)/expense:
Impairment on investments
-
-
-
-
-
- 929
-
-
-
Debt amendment fees 3,069 0.02
-
-
-
- 5,851 0.03
-
-
Pension settlement and curtailment
-
-
-
- 5,665 0.03
-
- 5,665 0.03
Remeasurement of certain deferred tax liabilities 852
- 519
- (1,017) (0.01) 9,360 0.05 (477)
-
Impacting income tax expense:
Net tax items (73,267) (0.39) (40,666) (0.23) (29,513) (0.17) (190,151) (1.00) (132,107) (0.73)
Total highlighted items 153,193 0.81 75,047 0.42 88,570 0.50 422,647 2.23 412,345 2.27
---
Adjusted net income $165,662 $0.88 $122,126 $0.68 $133,077 $0.76 $514,674 $2.71 $526,085 $2.89
---
Weighted average ordinary shares - basic 186,548 178,106 173,726 187,133 180,147
---
Weighted average ordinary shares - diluted 188,829 179,337 176,248 189,616 182,041
---
ARRIS INTERNATIONAL PLC
PRELIMINARY SUPPLEMENTAL GAAP TO ADJUSTED SALES & GROSS MARGIN RECONCILIATION
(in thousands)
(unaudited)
Q4 2017
Q3 2018
Q4 2018
Dec YTD 2017
Dec YTD 2018
---
Sales - GAAP $1,738,593 $1,651,248 $1,787,143 $6,614,392 $6,742,640
Adjustment to revenue related to warrants (8,145) -
Acquisition accounting impacts of deferred revenue 1,120 2,400 1,700 1,120 13,101
Adjusted Sales - Non-GAAP $1,731,568 $1,653,648 $1,788,843 $6,615,512 $6,755,741
GAAP Gross Margin $494,469 $465,189 $479,233 $1,666,239 $1,918,859
Acquisition accounting impacts of fair valuing inventory 7,560 8,468 16,971
Acquisition accounting impacts of deferred revenue 1,120 2,400 1,700 1,120 13,101
Stock compensation expense 3,303 3,660 3,577 13,947 14,299
Adjustment to revenue related to warrants (8,145) -
Adjusted Gross Margin - Non-GAAP $498,307 $471,249 $484,510 $1,689,774 $1,963,230
===
GAAP Gross Margin - % 28.4% 28.2% 26.8% 25.2% 28.5%
Adjusted Gross Margin - Non-GAAP - % 28.8% 28.5% 27.1% 25.5% 29.1%
ARRIS INTERNATIONAL PLC
PRELIMINARY SUPPLEMENTAL OPERATING INCOME TO ADJUSTED DIRECT CONTRIBUTION RECONCILIATION
(in thousands)
(unaudited)
Q4 2018
Year 2018
---
Network &
CPE Enterprise
Corp/
Total Network &
CPE Enterprise
Corp/
Total
Cloud Other Cloud Other
---
Sales $536,782 $1,099,068 $153,039 $(1,746) $1,787,143 $2,156,577 $3,923,894 $675,352 $(13,183) $6,742,640
Add:
Acquisition accounting impacts of deferred revenue - 1,700 1,700 13,101 13,101
Adjusted sales $536,782 $1,099,068 $154,739 $(1,746) $1,788,843 $2,156,577 $3,923,894 $688,453 $(13,183) $6,755,741
===
Operating income (loss) $191,318 $38,775 $(14,980) $(147,040) $68,073 $732,529 $50,766 $(16,111) $(588,299) $178,885
Add:
Amortization of intangible assets 24,707 46,840 17,697 818 90,062 99,316 207,804 73,176 3,265 383,561
Impairment of goodwill and intangible assets - 3,400 3,400
Gain on sale of fixed assets - (13,346) (13,346) (13,346) (13,346)
Integration, acquisition, restructuring & other costs 3,955 605 2,254 6,909 13,723 13,693 25,286 7,602 8,687 55,268
Direct contribution(1) 219,980 72,874 4,971 (139,313) 158,512 848,938 270,510 64,667 (576,347) 607,768
Adjustments:
Allocated costs (2) (27,868) (19,099) (6,275) 53,242 (114,036) (77,993) (22,917) 214,946 -
Stock compensation expense 8,150 5,043 4,057 4,896 22,146 32,485 21,566 14,272 16,910 85,233
Depreciation expense 6,711 6,919 1,017 3,500 18,147 27,181 28,701 10,889 16,915 83,686
Adjusted direct contribution $206,973 $65,737 $3,770 $(77,675) $198,805 $794,568 $242,784 $66,911 $(327,576) $776,687
===
(1) Defined as gross margin less direct operating expenses, excluding amortization of intangible assets, impairments, gain on sale of fixed assets, integration, acquisition, restructuring, and other costs.
(2) Allocated facility costs and service provider sales and marketing costs
ARRIS INTERNATIONAL PLC
PRELIMINARY ADJUSTED EBITDA RECONCILIATION
(in millions)
(unaudited)
Q1 2018 Q2 2018 Q3 2018
Q4 2018 Year 2018
Net income (loss) as reported $(17) $35 $46 $44 $107
Income tax expense (benefit) 3 (10) (16) (2) (24)
Interest income (2) (2) (2) (3) (8)
Interest expense 23 24 24 25 95
Depreciation expense 23 21 22 18 84
Amortization of intangible assets 115 90 88 90 384
EBITDA 145 158 162 171 637
Adjustments
Stock-based compensation expense 19 24 20 22 85
Integration, acquisition, restructuring and other costs 14 23 5 14 55
Pension settlement and curtailment - 6 6
Gain on disposal of fixed assets - (13) (13)
Impairment on goodwill and intangible assets 3 3
Acquisition accounting impacts of deferred revenue 6 3 2 2 13
Acquisition accounting impacts of fair valuing inventory 17 17
Remeasurement of deferred taxes 4 (4) 1 (1) (0)
Adjusted EBITDA - Non-GAAP $208 $204 $191 $200 $803
===
Notes to GAAP to Adjusted Non-GAAP Financial Measures
The Company reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP" or referred to herein as "reported"). However, management believes that certain non-GAAP financial measures provide management and other users with additional meaningful financial information that should be considered when assessing our ongoing performance. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the factors management uses in planning for and forecasting future periods. Non-GAAP financial measures should be viewed in addition to, and not as an alternative to, the Company's reported results prepared in accordance with GAAP. Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:
Reduction in Revenue Related to Warrants: We entered into agreements with two customers for the issuance of warrants to purchase up to 14.0 million of ARRIS's ordinary shares. Vesting of the warrants is subject to certain purchase volume commitments, and therefore the accounting guidance requires that we record any change in the fair value of warrants as a reduction in revenue. Until final vesting, changes in the fair value of the warrants will be marked to market and any adjustment recorded in revenue. We have excluded the effect of the implied fair value in calculating our non-GAAP financial measures. We believe it is useful to understand the effects of these items on our total revenues and gross margin.
Acquisition Accounting Impacts Related to Deferred Revenue: In connection with the accounting related to our acquisitions, business combination rules require us to account for the fair values of deferred revenue arrangements for post contract support in our purchase accounting. The non-GAAP adjustment to our sales and cost of sales is intended to include the full amounts of such revenues as if these purchase accounting adjustments had not been applied. We believe the adjustment to these revenues is useful as a measure of the ongoing performance of our business. We historically have experienced high renewal rates related to our support agreements, and our objective is to increase the renewal rates on acquired post contract support agreements. However, we cannot be certain that our customers will renew their contracts.
Stock-Based Compensation Expense: We have excluded the effect of stock-based compensation expenses in calculating our non-GAAP operating expenses and net income (loss) measures. Although stock-based compensation is a key incentive offered to our employees, we continue to evaluate our business performance excluding stock-based compensation expenses. We record non-cash compensation expense related to grants of restricted stock units. Depending upon the size, timing and the terms of the grants, the non-cash compensation expense may vary significantly but will recur in future periods.
Acquisition Accounting Impacts Related to Inventory Valuation: In connection with the accounting related to our acquisitions, business combinations rules require the acquired inventory be recorded at fair value on the opening balance sheet. This is different from historical cost. Essentially, we are required to write the inventory up to the end customer price less a reasonable margin as a distributor. We have excluded the resulting adjustments in inventory and cost of goods sold as the historic and forward gross margin trends will differ as a result of the adjustments. We believe it is useful to understand the effects of this on cost of goods sold and margin.
Integration, Acquisition, Restructuring and Other Costs: We have excluded the effect of acquisition, integration, and other expenses and the effect of restructuring expenses in calculating our non-GAAP operating expenses and net income measures. We incurred expenses in connection with the Pace and Ruckus Networks acquisitions, which we generally would not otherwise incur in the periods presented as part of our continuing operations. Acquisition and integration expenses consist of transaction costs, costs for transitional employees, other acquired employee related costs, and integration related outside services. Restructuring expenses consist of employee severance, abandoned facilities, product line disposition and other exit costs. We believe it is useful to understand the effects of these items on our total operating expenses.
Impairment of Goodwill and Intangible Assets: We have excluded the effect of the estimated impairment of goodwill and intangible assets in calculating our non-GAAP operating expenses and net income measures. Although an impairment does not directly impact the Company's current cash position, such expense represents the declining value of the business, technology and other intangible assets that were acquired. We exclude these impairments when significant and they are not reflective of ongoing business and operating results.
Amortization of Intangible Assets: We have excluded the effect of amortization of intangible assets in calculating our non-GAAP operating expenses and net income (loss) measures. Amortization of intangible assets is non-cash, and is inconsistent in amount and frequency and is significantly affected by the timing and size of our acquisitions. Investors should note that the use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well. Amortization of intangible assets will recur in future periods.
Gain on Disposal of Property, Plant & Equipment: We have excluded the effect of a gain on the sale of our manufacturing facility and certain manufacturing fixed assets in Taiwan in calculating our non-GAAP financial measures. We believe it is useful to understand the effect of this item in our other expense (income).
Noncontrolling Interest share of Non-GAAP Adjustments: The joint venture formed for the ActiveVideo acquisition is accounted for by ARRIS under the consolidation method. As a result, the consolidated Statements of Income include the revenues, expenses, and gains and losses of the noncontrolling interest. The amount of net income (loss) related to the noncontrolling interest are reported and presented separately in the consolidated Statements of Operations. We have excluded the noncontrolling share of any non- GAAP adjusted measures recorded by the venture, as we believe it is useful to understand the effect of excluding this item when evaluating our ongoing performance.
Impairment on Investments: We have excluded the effect of other-than-temporary impairments and certain gains on investments in calculating our non-GAAP financial measures. We believe it is useful to understand the effect of this non-cash item in our other expense (income).
Debt Amendment Fees: In 2017, the Company amended its credit agreement. This debt modification allowed us to improve the terms and conditions of the credit agreement and extend the maturities of certain loan facilities. We have excluded the effect of the associated fees in calculating our non-GAAP financial measures. We believe it is useful to understand the effect of this item in our other expense (income).
Pension Settlement Charge and Curtailment: We have excluded the effect of the deferred actuarial gains and losses remaining in accumulated other comprehensive income related to the termination of our pension benefit plans in calculating our non-GAAP financial measures. We believe it is useful to understand the effect of this non-cash item in our other expense (income).
Remeasurement of Deferred Taxes: The Company records foreign currency remeasurement gains and losses related to deferred tax liabilities in the United Kingdom. The foreign currency remeasurement gains and losses derived from the remeasurement of the deferred income taxes from GBP to USD. We have excluded the impact of these gains and losses in the calculation of our non-GAAP measures. We believe it is useful to understand the effects of this item on our total other expense (income).
Income Tax Expense (Benefit): We have excluded the tax effect of the non-GAAP items mentioned above. Additionally, we have excluded the effects of certain tax adjustments related to tax and legal restructuring, state and non-US valuation allowances, benefits for releases of uncertain tax positions due to settlement, change in law or statute of limitations and provision to return differences.
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SOURCE ARRIS
