`
`trodel that considers customer payment hlstory, recent customer press releases, bankruptcy filings, if any, Du.n & Bradstreet reports, and financial
`statement reviews. The Co:tq~any's calculation is reviewed by management to assess whether additional researeh is necessary, and if co:tq~lete,
`whether there needs to be an adjustm:nt to the reserve for uncollectible accounts. The reserve is established through a charge to the provision and
`represents atrounts of cummt and past due customer receivable balances of which management deem~ a loss to be both probable and esti!mble. In
`the past several years, two of our najor customers encountered significant financial difficulty due to the industry downturn and tightening financial
`markets.
`
`In the event that we are not able to predict changes in the financial condition of our customers, resulting in an une11pected problem with
`collectability of receivables and our actual bad debts differ ftomestin:Btes, or we adjust estin:Btes in future periods, our established allowances ~my
`be insufficient and we lillY be required to recozd additional allowances. Altematively, if we provided trore allowances than are ultimately required,
`we IIBy reverse a portion of such provisions in future periods based on our sctua1 collection e11perience. In the event we adjust our allowance
`estin:Btes, it could 1mterially affect our operating results and financial position.
`
`We also establish a reserve for sales returns and allowances. The reserve is an estin:Bte of the irqlact of potential returns based upon historic
`trends.
`
`Our reserves for uncollectible accounts and sales returns and allowances were $2.2 million and $4.0 million as ofDeceniler 31, 2009 and 2008,
`respectively.
`
`d)
`
`Inventory Valuation
`
`Inventory is reflected in our financial statements at the lower of average cost, approximating first-in, first-out, or market value.
`
`We continuously evaluate future usage of product and where supply eJ~;eeds demmd, we IIBY establish a reserve. In reviewing inventozy
`valuations, we also review for obsolete items. This evaluation requires us to estin:Bte future usage, which, in an industry where mpid technological
`changes and significant variations in capital spending by system operators are prevalent, is difficult. As a result, to the elltent that we have
`overestin:Bted future usage of inventory, the value of that inventory on our financial statements may be overstated. When we believe that we have
`overestin:Bted our future usage, we adjust for that overstatement through an increase in cost of sales in the period identified as the inventozy is
`written down to its net realizable value. Inherent in our valuations are certain management judgments and cstin:Btes, including :matkdowns,
`shrinkage, manufacturing schedules, possible alteroative uses and future sales forecasts, which can significantly impact ending inventozy valuation
`and gross IIIIIgin. The methodologies utili21ld by the Company in its application of the above methods are consistent for all periods presented.
`
`The Company conducts annual physical inventozy counts at all ARRIS locations to confirm the existence of its invcntozy.
`
`e) WaTTQnty
`
`We ofli:r Wl1Jl11Ilties of various lengths to our customers depending on product specifics and agreement terms with our customers. We provide,
`by a current charge to cost of sales in the period in which the related revenue is recognized, an esti!mte of future wmanty obligations. The estin:Bte
`is based upon historical Cllperience. The eoi>edded product base, failure mtes, cost to repair and wmanty periods are used as a basis for calculating
`the esti!mte. We also provide, via a charge to current cost of sales, estin:Bted e11pected costs associated with non-recurring product failures. In the
`event of a significant non-recurring product failure, the atrount of the reserve ~my not be sufficient. In the event that our hlstorical e11perience of
`product failure mtes and costs of correcting product failures change, our estin:Btes relating to probable losses resulting from a significant non(cid:173)
`recurring product failure changes, or to the extent that other non-recurring warnmty claims occur in the future, we ~my be required to recozd
`additional wammty reserves. Alteroatively, if we provided trore reserves than we needed, we IIBY reverse a portion of such provisions in future
`periods. In the event we change our warranty reserve esti!mtes, the resulting charge against future cost ofsales or reversal of previously recorded
`charges may ~mterially affect our opemting results and financial position.
`
`59
`
`
`
`61
`
`
`
`Table ofC4Jnteng
`
`f) Stock-Based Compe11Satio11
`
`AD sh&Ie-based paymmts to euployees, including grants of employee stock options, aie required to be recognized in the financial statements
`as compensation cost based on the fair value on the date of grant. In general, the Company determines fair value of such awards using the Black(cid:173)
`Scholes option pricing mJdel The Black -Scholes option pricing mJdel incorporates certain assumptions, such as risk-free interest rate, ~ected
`volatility, and ~ected life of options, in order to anive at a fair value estirnlte. Because changes in assumptions can materially affect the fair value
`estimate, the Black-Scholes mJdel may not provide a reliable single measure of the fair value of our sh&Ie-based paymmt awards. For certain
`perfo111111Ilce sh&Ies related to IIIIIket conditions, the fair value of such awards is determined using a lattice mJdel Management will continue to
`assess the assumptions and methodologies used to calculate estimated fair value of sh&Ie-based coupensation. Circumatances may change and
`additional data may become available over time, which could resuh in changes to these assutq~tions and methodologies and thereby materially
`:itq>act our fair value determination. If factors change and we employ different assumptions in determining the fair value in future periods, the
`compensation ~ense that we record may diffi:r significantly from what we have recorded in the cuuent period.
`
`Fontard-Looking Statements
`
`Certain inroiiiiiltion and statements contained in this Management's Discussion and Analysis ofFinancial Condition and Rcsuhs of
`Operations and other sections of this report, including statements using terma such as "may," "~ect," "anticipate," "intend,'' "estimate,'' ''believe,''
`"plan," "continue," "could be," or similar variations thereof; constitute forward-looking statements with respect to the financial condition, results of
`operations, and business of ARRIS, including statements that aie based on cum:nt eJIPectations, estirmtes, forecasts, and projections about the
`llllllkcts in which we operate and management's belie& and assumptions regarding these DBJkets. Any other statements in this document that are
`not statements about historical filets also aie forward-looking statements. We caution investors that forward-looking statements made by us aie not
`guamntees of future perfoiiiiilDce and that a variety of factors could cause our actual results to diffi:rmaterially from the anticipated resuhs or other
`CJ!Pectations ~res sed in our forward-looking statements. ~ortant factors that could cause resuhs or events to diffi:r from cuuent ~ectations aie
`described in the risk factors set forth in Item lA, "Risk Factors." These factors are not intended to be an all-encolll'assing list of risks and
`uncertainties that may affect the operations, perfoiiiiilDce, development and resuhs of our business, but instead are the risks that we currently
`perceive as potentially being material In providing furward-looking statements, ARRIS ellpressly disclailllll any obligation to update publicly or
`otherwise these statements, whether as a resuh of new infuiiiiiltion, future events or otherwise except to the extent required by law.
`
`ltem7A.
`
`Quantitative and Qualitatitle DisclosUTU .tf.bo'llt Market Risk
`
`We aie eJIPosed to various market risks, including interest rates and foreign cUireD.cy rates. The fullowing discussion of our risk-management
`activities includes "furward-looking statemmts" that involve risks and uncertainties. Actual results could differ materially from those projected in
`the furward-looking statements.
`
`We have an investment portfolio of auction rate securities that are classified as "available-fur-sale" securities. Ahhough these securities have
`maturity dates of 15 to 30 years, they have characteristics of short-term investments as the interest rates reset every 28 or 35 days and we have the
`potential to liquidate them in an auction process. Due to the short duration ofthese investments, a mJvement in llllllkct interest rates would not have
`a material :itq>act on our operating resuhs. However, it is possible that a security will fail to reprice at the scheduled auction date. In these instances,
`we aie entitled to receive a penahy interest rate above market and the auction rate security will be held until then~ scheduled auction date. At
`Decelliler 31, 2007 ARRIS had $30.3 million invested in auction rate securities. During 2008, we successfully liquidated. at par, a net of$25.3 million
`of the auction rate securities. However, one auction rate security of approximttely $5.0 million has continued to fail at auction, resuhing in ARRIS
`continuing to hold this security. Due to the cuuent market conditions and the failure ofthe auction rate security to reprice, beginning in the second
`quarter of2008, we recorded changes in the fair value of the instrument as an ilqlainnent charge in the Statement of Operations in the gain (loss) on
`investment line. ARRIS ny not be able to liquidate this security until a successful auction occurs, or ahematively, we have been provided the
`option to sell
`
`60
`
`
`
`62
`
`
`
`Table ofC4Jnteng
`
`the security to a major financial institution at par on June 30, 2010. During the year ended DecC!lDer 31,2009, we recorded changes in fuir value of
`$61 thousand.
`
`A significant portion of our products are manufuctured or as sC!lDied in Olina, Mexico, Ireland, Taiwan, and other countries outside the United
`States. Our sales into international DBrlrets have been and are Cllpected in the future to be an il:q!ortant part of our business. These foreign
`operations are subject to the usual risks inherent in conducting business abroad, including risks with respect to currency ~hange rates, economic
`and polit:ical destabilimtion, restrictive actions and tuation by foreign governmmts, nationalimtion, the laws and policies of the United States
`affecting trade, foreign investment and loans, and foreign tax laws.
`
`We have certain international custoi!IIm who are billed in their local currency. Changes in the monetary exchange rates IIIIIY adversely affect
`our results of operations and financial condition. To manage the volatility relating to these typical business CJIIIOSures, we may enter into various
`derivative transactions, when appropriate. We do not hold or is sue derivative instruments fur trading or other speculative pUiposes. The euro is the
`predominant cuuency of the custoi!IIm who are billed in their local cuuency. Taking into account the effects of foreign currency fluctuations of the
`euro and pesos versus the dollar, a hypothetical10"/o weakening of the U.S. dollar (as ofDecenDer 31, 2009) would provide a gain on foreign
`cwrency of approximately $1.6 million. Conversely, a hypothetica110"/o strengthening of the U.S. dollar would provide a loss on foreign currency of
`approximately $1.6 million. As ofDecC!lDer 31, 2009, we had no material contracts, other than accounts receivable, denonmated in foreign cuuencies.
`
`We regularly review our forecasted sales in euros and enter into option contracts when appropriate. In the event that we determine a hedge to
`be ineffective prior to Cllpirations earnings may be effected by the change in the hedge value. As ofDecC!lDer 31,2009, we had option collars
`outstanding with notional amounts totaling 6.0 million euros, which I!lllture through 2010. As ofDecelliler 31,2009, we had forward contracts
`outstanding with notional amounts totaling 9.0 million euros, which mature through 2010. The fuir value of these option collars and forward contracts
`was approximltely a loss of$0.5 million.
`
`ItemS.
`
`The report of our independent registered public accounting firm and consolidated financial statem::nts and notes thereto for the Co!ll)any are
`included in this Report and are listed in the Index to Consolidated Financial Statem::nts.
`
`ltem9.
`
`N/A
`
`ltem9A.
`
`Collhols and Proced11res
`
`(a) Evaluation of Disclosure Controls and Procedures. Our principal ellllcutive officer and principal financial officer evaluated the
`effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities &change Act of 1934 as of
`the end of the period covered by this report (the "Evaluation Date"). Based on that evaluation, such officers concluded that, as ofthe Evaluation
`Date, our disclosure controls and procedures were efl'ective as conterqllated by the Act.
`
`(b) Changes in Internal Control over Financial Reporting. Our principal el!lleutive officer and principal financial officer evaluated the
`changes in our internal control over financial reporting that occurred during the most recent fiscal quarter. Based on that evaluation, our principal
`el!llcutive officer and principal financial officer concluded that there had been no change in our internal control over financial reporting during the
`most recent fiscal quarter that has IIBterially affected, or is reasonably likely to IIBterially affect, our internal control over financial reporting.
`
`ltem9B.
`
`N/A
`
`61
`
`
`
`63
`
`
`
`Table ofC4Jnteng
`
`MANAG&\1ENT'S RIPORT ON INTERNAL CONTROL OVER FlNANCJAL RIPORTING
`
`ARRIS' mmagement is responsible fur establishing and maintaining an adequate systemofintemal control over financial reporting as required
`by the Sarbanes-OJdey Act of2002 and as defined in &change Act Rule 13a-15(f). A control system can provide only reasonable, not absolute,
`assurance that the objectives of the controls ystem are Imt.
`
`Undermmagement's supervision, an evaluation of the design and effectiveness of ARRIS' intemal control over financial reporting was
`conducted based on the fram:work in Internal Control- Integrated Framework issued by the Comnittee of Sponsoring Orgacimtions of the
`Treadway Conmission (WSO). Based on this evaluation, mmagement concluded that ARRIS' internal control over financial reporting was effective
`as ofDeceo:ber 31, 2009.
`
`The effectiveness of ARRIS' internal control over financial reporting as of December 31,2009 has been audited by Fmst & Young liP, an
`independent registered public accounting finn retained as auditors of ARRIS <:roup, Inc.'s financial statement, as stated in their report which is
`included herein.
`
`/s/ R 1 STANZIONE
`Robert J. Stanzione
`ClliefEl!ecutive Officer, Cb.airman
`
`/s/ DAVID B, POTTS
`David B. Potts
`Ezcutive Vice President, CbiefFinancial Officer,
`Chief Accounting Officer,
`and Chieflnformation Officer
`
`Februazy 26,2010
`
`62
`
`
`
`64
`
`
`
`Table ofC4Jnteng
`
`Report of Independent Regittered Puliic Acconnting Firm
`
`The Boanl ofDirectors and Stockholders of ARRIS Group, Inc.
`
`We have audited ARRIS G'oup, Inc.'s internal control over financial reporting as ofDeceniJer 31, 2009, based on criteria established in
`Internal Control-Integrated Framework issued by the CoiiiiDittce of Sponsoring Organi2ations of the Treadway Coillliiission (the COSO criteria).
`ARRIS G'oup, Inc.'s management is responsible fur maintaining effective internal control over financial reporting, and for its assessment of the
`effectiveness of internal control over financial reporting included in the acco~q~anying Management's Report On Internal Control Over Financial
`Reporting. Our responsibility is to ellpress an opinion on the coiqJany's internal control over financial reporting based on our audit.
`
`We conducted our audit in accordance with the standanls of the Public Company Accounting Oversight Boanl (United States). Those
`standanls require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
`was maintained in all material respects. Our audit included obtaining an understanding of intemal control over financial reporting, assessing the risk
`that a material weakness ~ts, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
`perfunning such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
`opinion.
`
`A co~q~any's internal control over financial reporting is a process designed to provide reasonable assurance reganling the reliability of
`financial reporting and the preparation of financial statements fur Clllernal purposes in accordance with generally accepted accounting principles. A
`company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
`reasonable detail, accumtely and fitirly reflect the transactions and dispositions of the assets of the co~q~any; (2) provide reasonable assurance that
`transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
`and that receipts and expenditures ofthe coiqJany are being made only in accordance with authori2ations ofmmagement and directOJs ofthe
`company; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthori2l:d acquisition, use, or disposition of the
`company's assets that could have amaterialetlect on the financial statements.
`
`Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
`evalnation of effectiveness to future periods are subject to the risk that controls may becollll: inadequate because of changes in conditions, or that
`the degree ofcoiqJliance with the policies or procedures may deteriorate.
`
`In our opinion, ARRIS G'oup, Inc. maintained, in all material respects, effective intemal control over financial reporting as ofDeceniJer 31,
`2009, based on the COSO criteria.
`
`We also have audited, in accordance with the standards of the Public CoiqJany Accounting Oversight Boanl (United States), the consolidated
`balance sheets of ARRIS Group, Inc. as ofDeceniJer 31,2009 and 2008, and the related consolidated statements of operations, stockholder's equity,
`and cash flows for each of the three years in the period ended Deceniler 31, 2009, and our report dated February 26,2010 expressed an unqualified
`opinion thereon.
`
`Atlanta, Georgia
`February 26, 2010
`
`Is/ FANsT & YoUNG ILP
`
`63
`
`
`
`65
`
`
`
`INDEX TO CONSOLIDATI!D FINANCIAL STA'IE.\DNl'S
`
`Rc;port ofJnde.pendent Registered Public Accounting Firm
`Consolidated Balance Sheets at December 31. 2009 and 2008
`Consolidated Statemmts ofQpemtions for the years ended Deceoiler 31.2009.2008 and 2007
`Consolidated Stat!WJ5Wts of Cash Flows fur the years ended Deceoilq 31 2009 20()8 and 2007
`Consolidated Statem;nts of Stockholders' Eauity for the years ended Deceoiler 31. 20Q9. 2008 and 2007
`Notes to the Consolidated Financial Statemmts
`
`64
`
`!!.&!
`65
`66
`67
`68
`70
`71
`
`
`
`66
`
`
`
`Table ofC4Jnteng
`
`The Board ofDirectors and Stockholders of ARRIS Group, Inc.
`
`Report of Independent Regiltered PnHic Accounting Firm
`
`We have audited the accompanying consolidated balance sheets of ARRIS Goup, Inc. as of December 31, 2009 and 2008 and the related
`consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended Deceniler 31,2009. Our
`audits also included the financial statement schedule listed in the lndexat Item 15(a). These financial statements and schedule are the responsibility
`of ARRIS' management. Our responsibility is to ~ress an opinion on these financial statements and schedule based on our audits.
`
`We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
`standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are tree of material
`misstatement. An audit includes elllllllining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
`also includes assessing the accounting principles used and significant estiJmtes made by management, as weD as evaluating the overall financial
`statement presentation. We believe that our audits provide a reasonable basis for our opinion.
`
`In our opinion, the consolidated financial statements referred to above present fairly, in aD material respects, the consolidated financial position
`of ARRIS Group, Inc. at Deceniler 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the three years in
`the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial
`statement schedule, when considered in relation to the basic financial statements taken as a whole, presents :fitidy, in all material respects, the
`information set forth therein.
`
`As discussed in Notes 16 and 14 to the Consolidated Financial Statem:mts, the Company adopted FASB lntexpretation No. 48, Accounting for
`Uncertainty in Income Taxe.r- an interpretation ofFASB Statement No. 109, Accounting for Income Taxes (codified in ASC Topic 740), in 2007
`and adopted FASB Staff Position No. APB 14-1,Accountingfor Convertible Debt In.rtrumenu That May Be Settled in Ca.rh upon Converaion
`(codified in ASC Topic 470-20, Debt with Converaion and Other Options), in 2009.
`
`We also have audited, in accordance with the standards of the Public Company Accounting Ovemight Board (United States), ARRIS Group,
`Inc.'s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control-Integrated Frameworlc
`issued by the Committee of Sponsoring Organizations ofthe Treadway Commission and our report dated February 26,2010 ~ressed an unqualified
`opinion thereon.
`
`Atlanta, Georgia
`February 26, 2010
`
`/s/ FJINST & YOUNG ill'
`
`6S
`
`
`
`67
`
`
`
`Table ofC4Jnteng
`
`ARRlS GROUP, INC.
`
`CONSOLIDATID BALANCESIIEEI'S
`
`ASSErS
`Current assets:
`Cash and cash equivalents
`Short-term invest:ments, at fair value
`Total cash, c:ash equivalents and short-term investments
`Restricted cash
`Acanmts mx:ivablc (net of allowaru:e~ for doubtful aK:alllllts of $2, 168 in 2009 and $3,988 in 2008)
`Other mx:ivablcs
`Inventories (net of reserves of$22,151 in 2009 and $18,811 in 2008)
`Prep aids
`Current dcfcmxl income tiiX as seta
`Other curnm.t assets
`Total current usets
`Property, plant and equiptna~t (net of ac:cumulated depreciation of$106,744 in 2009 and $100,313 in 2008)
`Goodwill
`Int!JD81.bleassets (net ofiWCIIllllllated amortization of$190,722 in2009 and $153,362 in2008)
`Investments
`Noncurrent defc:rred inaJme ti!Xassets
`Other assets
`
`UABIUTIE!I AND STOCKHOlDERS' DJUITY
`Current liabilities:
`Accounts payable
`Accrued romp COllation, benefits and related tllliCI
`Accrued warranty
`Defcued revenue
`Current portion of Iona-term debt
`Current def\:m:d inaJme tiiX liabilities
`Other a=ued liabilities
`Total current liabilities
`Long-term debt, net of cum::nt portion
`Accrued pension
`Noncurrent inoomc tiiXI:II payable
`Noncurrent defc:rred inaJme tiiXliabilities
`Other nODCUII'alt liabilities
`Total liabilities
`
`Stockholders' equity:
`Prefcm:d stoclc, par value $1.00 pCI" shan:, 5.0 million llharea authorized; none ill sued and outstanding
`Colm1on stoclc, par value $0.01 pCI' share, 320.0 million sbaral authorized; 125.6 million and 123.1 million sbaral issued and
`outstanding in 2009 and 2008, re~pectively
`Capital in CX~:CSS of par value
`Treasury stoc:k at a>st, 13 million sbaral in 2009 arui 2008
`Aocwnulated deficit
`Unrealized gain (loss) on marketable securities
`Unfunded pension liability, including income tax impact of
`$1,169 md $2,778 in 2009 and 2008, reapectively
`Cumulative translation adjustments
`
`Total stockholders' equity
`
`See aeeotl1'anying notes to the eonsolidated financial statements.
`
`66
`
`December 311
`2008
`1009
`(ID tbOUiaDcb neept 1hare
`aud per 1hare data)
`
`s 500,565
`125,031
`
`s 409,894
`17,371
`
`625,596
`4,475
`143,708
`6,113
`95,851
`11,675
`35,994
`18,896
`
`942,308
`57,195
`235,388
`204,572
`20,618
`6,759
`8,776
`
`427,265
`5,673
`159,443
`4,749
`129,752
`8,004
`44,004
`19,782
`
`798,672
`59,204
`231,684
`227,348
`14,681
`12,157
`6,575
`
`$ 1,475,616
`
`$1,350,321
`
`$
`
`53,979
`36,936
`4,265
`47,044
`124
`
`46,203
`
`188,551
`211,248
`16,408
`14,815
`37,204
`16,021
`
`484,247
`
`$
`
`75,863
`27,024
`5,652
`44,461
`146
`1,059
`25,410
`
`179,615
`211,870
`18,820
`9,6!Yl
`41,598
`15,343
`
`476,853
`
`1,388
`1,183,872
`(75,960)
`(ll1,734)
`28
`
`1,362
`1,159,097
`(75,960)
`(202,503)
`(274)
`
`(6,041)
`(184)
`
`(8,070)
`(184)
`
`991,369
`
`873,468
`
`$ 1,475,616
`
`$1,350,321
`
`
`
`68
`
`
`
`Table ofC4Jnteng
`
`ARRlS GROUP, INC.
`
`CONSOLIDATID STADMtNl'S OF OPERATIONS
`
`Net sales:
`Products
`Services
`Total net sales
`Cost of sales:
`Products
`Services
`Total cost of sales
`G-on omgin
`cross omgin%
`Operating e:JPenses:
`Selling, general, and administrative ell()enses
`Resean:h and development CllpCD.Ses
`bopaUnEntofgood~
`Acquired in-process research and development charge
`Amutization of intangible assets
`Restructuring charges
`Total operating ellpens es
`Operating incom: (loss)
`Other e:JPense {incomc ):
`Interest e:JPense
`Glin on teminated acquisition, net of ell()enses
`GLin on debt retirement
`I.Dss {gain) on investmcnts and notes receivable
`Loss {gain) on fureign cum:ncy
`Interest income
`Other ell()ense {income), net
`IncoiDil (loss) from continuing operations befure income tlllles
`IncoiDil taxell()ense
`Net incomc (loss) from continuing operations
`IncoiDil from discontinued operations
`Net income (loss)
`Net incomc (loss) per comnon shan: -basic:
`Income (loss) from continuing operations
`Income {loss) from discontinued operations
`Net incomc (loss)
`Net incomc (loss) per comnon shan: -diluted:
`Income {loss) from continuing operations
`Incomc (loss) from discontinued operations
`Net incom: (Ion)
`Weighted average comnon shares -basic
`Weighted average common shares -diluted
`
`For the Yean J!Dded December 31,
`2009
`2008
`2007
`(ia thou1aadl, except per 1hare data)
`
`$
`
`998,734
`109,072
`1,107,806
`
`$ 1,064,837
`79,m
`1,144,565
`
`$ 950,013
`42,181
`$ 992,194
`
`594,133
`50,910
`645,043
`462,763
`41.8%
`
`148,403
`124,550
`
`37,361
`3,702
`314,016
`148,747
`
`17,670
`
`(4,152)
`(711)
`3,445
`(1,409)
`(714)
`134,618
`43,849
`90,769
`
`709,657
`41,779
`751,436
`393,129
`34.3%
`
`143,997
`112,542
`209,297
`
`44,195
`1,211
`Sll,242
`(118,113)
`
`17,123
`
`717
`{422)
`(7,224)
`{1,043)
`(127,264)
`2,375
`(129,639)
`
`$
`
`$
`
`$
`
`$
`
`$
`
`90,769
`
`$ {129,639)
`
`0.73
`
`0.73
`
`0.71
`
`0.71
`124,716
`128,085
`
`$
`
`$
`
`$
`
`$
`
`(1.04)
`
`(1.04)
`
`(1.04)
`
`(1.04)
`124,878
`124,878
`
`695,119
`23,193
`718,312
`273,882
`27.6"/o
`
`99,879
`71,233
`
`6,120
`2,278
`460
`179,970
`93,912
`
`16,188
`(22,835)
`
`{4,596)
`48
`(24,776)
`370
`129,513
`37,370
`92,143
`204
`$ 92,347
`
`$
`
`$
`
`$
`
`$
`
`0.83
`
`0.83
`
`0.82
`
`0.82
`110,843
`113,027
`
`See accon:panying notes to the consolidated financial statements.
`
`67
`
`
`
`69
`
`
`
`Table ofC4Jnteng
`
`ARRlS GROUP, INC.
`
`CONSOLIDATID STA~ OFCASHFLOWS
`
`Operating activities:
`Net incom: (loss)
`Depreciation
`Almrtimtion of intangible assets
`Almrtimt:ion of deterred finance tees
`Goodwill ilqlairm:nt
`Deferred incom: tax provision
`Deferred in com: tax related to goodwill ilqlairm:nt
`Stock co~ensation ellpense
`Provision for doubtful accounts
`Gain related to previously mten off receivables
`Gain on debt retirelrent
`Non cash interest ellpense
`Loss on disposal of fixed assets
`Loss (gain) on investm:nts and notes receivable
`lncom: from discontinued operations
`Gain related to terminated acquisition, net of ellpenses
`Acquired in-process research and develop:ment charge
`Elr;:ess incom: tax benefits from stock-based compensation plans
`Changes in opemting assets and liabilities, net of effect of acquisitions and dispositions:
`Accounts receivable
`Other receivables
`Inventories
`Accounts payable and accrued liabilities
`Other, net
`Net cash provided by opemting activities
`Investing activities:
`Pure has es of short-term inves tm:nts
`Sales ofshort-terminvc:stm:nts
`Purchases ofproperty,plant and equip:ment
`Cash proceeds from sak: of property, plant, and equip:ment
`Cash paid for acquisition, net of cash acquired
`Cash paid for hedge related to terminated acquisition
`Cash proceeds from hedge related to tenninated acquisition
`Cash received related to tenninated acquisition, net ofpay:ments
`Net cash provided by (used in) investing activities
`
`2009
`
`Yean I!Aded December 31,
`2008
`(ia thou1aadl)
`
`2007
`
`$
`
`90,769
`20,862
`37,361
`728
`
`13,052
`
`15,921
`(1,280)
`
`(4,152)
`11,136
`428
`(711)
`
`$ (129,639)
`20,915
`44,195
`7f/J
`209.)97
`7,963
`(24,725)
`11,217
`819
`
`10,736
`14
`717
`
`(3,007)
`
`(56)
`
`21,704
`(2,383)
`38,906
`4,707
`~.064)
`240,m
`
`(216,704)
`104,488
`(18,663)
`210
`(22,734)
`
`8,579
`(471)
`4,023
`38,800
`(14,131)
`189,073
`
`(113,734)
`155,114
`(21,352)
`250
`(10,500)
`
`(153,403)
`
`9,778
`
`$ 92,347
`10,852
`2.)78
`764
`
`825
`
`10,903
`279
`(371)
`
`9,925
`182
`(4,604)
`(204)
`(22,835)
`6,120
`(9,157)
`
`(17,498)
`(1,774)
`(9,502)
`(9,906)
`4,806
`63,424
`
`(356,366)
`412,217
`(15,072)
`3
`(285,284)
`(26,469)
`38,750
`10,554
`(221,667)
`
`See acco~anying notes to the consolidated financial statem:nts.
`
`68
`
`
`
`70
`
`
`
`Table ofC4Jnteng
`
`ARR1S GROUP, INC.
`
`CONSOLIDATID STATI!MENTS OF CASH FLOWS- (Continued)
`
`2009
`
`Yean I!Aded December 31,
`2008
`(ia thou1aadl)
`
`2007
`
`Financing activities:
`Proceeds from issuance of commn stock
`~urohase ofcomrmn stock
`Payment of debt and capital lease obligations
`Elc:ess income tax benefits from stock-based compensation plans
`~urohase of shares to satisfY elqlloyee taxwithholdings
`Net cash provided by (used in) financing activities
`Net increase (decrease) in cash and cash equivalents
`Cuh and cash equivalents at beginning of year
`Cash and cash equivalents at end of year
`
`Supplemental investing activity information:
`Net tangible assets acquired, ex:luding cash
`Intangible assets acquired, including goodwill and adjustments
`Prior investment in acquired colqlany
`Equity issued for acquisition, including filirvalue of assumed stock options
`Cash paid for acquisition, net of cash acquired
`Landlord funded leasehold ilqlmvements
`Supple~m~ntal cash flow information:
`Interest paid during the year
`
`Income Um:s paid during the year
`
`$
`
`$
`
`$
`$
`
`$
`$
`
`See acconpanying notes to the consolidated financial statements.
`
`69
`
`$
`
`12,984
`
`(10,714)
`3,007
`(2,180)
`3,097
`90,671
`409,894
`500,565
`
`$
`
`49
`(75,960)
`(35,864)
`56
`(1,035)
`(112,754)
`86,097
`323,797
`$ 409,894
`
`2,383
`20,351
`
`$
`
`23,108
`(12,608)
`
`$ 14,377
`
`(19)
`9,157
`(3,093)
`20,422
`(137,821)
`461,618
`$ 323,797
`
`$ 11,645
`582,847
`(5,973)
`(303,235)
`$ 285,284
`85
`$
`
`10,500
`
`22,734
`50
`
`5,483
`30,878
`
`$
`$
`
`$
`$
`
`5,800
`19,834
`
`6,182
`$
`$ 22,687
`
`
`
`71
`
`
`
`Table ofC4Jnteng
`
`ARRlS GROUP, INC.
`
`CONSOLIDADD STA'IlMENI'S OF STOCKHOLDIRS' EQtn'Y
`
`_,.
`c..,._
`
`C~olbo
`
`....._.,
`Acc1IID:IIded.
`Tr.MIII'J
`ParV- ~ DdkM
`
`u .......
`u .. ..-
`u.r ..... d
`(La->Gaoa
`c.ddiR
`Gobo
`<L-l ..
`p .....
`Mar .. tololo
`'lnmlollno
`I lK - ~ Der........, A1_ ...
`(Io--.do)
`$(164,716) $
`1,297 $(4,462) $
`
`(551) $
`
`(184) $ 647,072
`
`Balaace, Jaauary 1, 1007
`Comprehensive income:
`Net income
`Unrealized Ioiii! on marketable securities
`Unrealized pin on derivative in:ltnm!ents
`Change in unfunded penaion liability, net of
`$665 of income tax impact
`Comprehensive income
`Compensation under stock award plans
`Adoption of FIN 48
`Income tax benefit related to exerci8C of stock
`options
`Fair valoe of stock options related to C-OOR
`acquisition
`IIIIBD.ce of common stock related to C-COR
`acquisition
`Iaamnce of common stock and other
`Balaace, December 31, 2007
`Comprehensive income (loss):
`Net Lon
`Unrealized loss on marketable 8Ccurities
`Chansc in unfunded pension liability, net of
`$2,778 of income tax impact
`Comprehensive loss
`Service colt, interest cost, and expected return on
`plan assets for Oct 1 -Dec 31,