EXHIBIT 99.3
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined balance sheet is presented
to give effect to the acquisition of certain assets and liabilities of Cadant,
Inc. by ARRIS Group, Inc. The unaudited pro forma combined balance sheet has
been prepared to reflect the transaction as of September 30, 2001. The
unaudited pro forma combined statements of operations combine the results of
operations of ANTEC, Arris Interactive and Cadant for the year ended December
31, 2000 and the results of operations of ANTEC, Arris Interactive, Arris
Group, Inc. and Cadant for the nine months ended September 30, 2001 as if the
acquisition of Arris Interactive, which closed on August 3, 2001, and the
acquisition of Cadant, occurred on January 1, 2000. The pro forma information
was prepared based on the historical financial statements and related notes of
ANTEC and Arris Interactive, collectively, ARRIS Group, Inc., and Cadant.
The unaudited pro forma combined financial statements and the notes
thereto should be read in conjunction with the historical financial statements
and related notes of ANTEC, Arris Interactive, ARRIS Group, Inc. and Cadant.
These unaudited pro forma combined financial statements were prepared in
accordance with rules and regulations established by the Securities and
Exchange Commission and are not necessarily reflective of the actual or future
results of operations or the financial position of ARRIS Group, Inc
The Arris Interactive acquisition was consummated on August 3, 2001
and involved the creation of a new holding company, Broadband Parent
Corporation, and two integrated, concurrent transactions. In one transaction, a
wholly-owned subsidiary of Broadband Parent merged with and into ANTEC. As a
result of this transaction, ANTEC continued to exist, retaining its historical
assets and liabilities, but rather than being an independent, publicly traded
company, it was instead a subsidiary of Broadband Parent. ANTEC stockholders
received one share of Broadband Parent common stock in exchange for each share
of ANTEC common stock. In the other transaction, Broadband Parent acquired
Nortel Network's interest in Arris Interactive in return for 37 million shares
of Broadband Parent common stock valued at approximately $227.2 million based
on a closing price of $6.14 for ANTEC common stock on April 9, 2001, the
definitive agreement date. Indebtedness of Arris Interactive to Nortel Networks
and ANTEC of approximately $124 million was canceled as a contribution to the
capital of Arris Interactive. Additionally, indebtedness of Arris Interactive
to Nortel Networks of approximately $100 million was converted into a new
membership interest in Arris Interactive that was issued to Nortel Networks. At
the time of these transactions, Broadband Parent was renamed Arris Group, Inc.
The transaction was accounted for using the purchase method of accounting and,
following the closing of the transaction on August 3, 2001, the results of
operations of Arris Interactive have been included in the results of Arris
Group, Inc.
On January 8, 2002, ARRIS Group, Inc. acquired substantially all of
the assets and certain liabilities of Cadant in exchange for 5.25 million common
shares and the assumption of approximately $17 million of indebtedness. The
transaction ill be accounted for using the purchase method of accounting and,
following the closing of the transaction, the results of operations of Cadant
will be included in the results of ARRIS Group, Inc.
For purposes of this pro forma information, the purchase price for
Cadant has been allocated to the assets of Cadant based on the information
available at the time of the printing of this Form 8-K/A. The excess of the
purchase price over the fair value of the net tangible and intangible assets
acquired has been allocated to goodwill. Although the purchase price and its
allocation are not final, it is anticipated that a portion of the purchase
price will be allocated to existing technology. This allocation is subject to
change pending the completion of the final analysis of the total purchase price
and completion of certain appraisals of the fair values of the assets acquired
and liabilities assumed. The final allocation may differ from that used in the
unaudited pro forma combined financial statements.
The unaudited pro forma combined financial statements are based on the
estimates and assumptions set forth in the notes to such statements, which are
preliminary as they relate to Cadant and have been made solely for the purpose
of developing such pro forma information. The amortization of existing
technology related to Cadant is reflected in the unaudited pro forma combined
statements of operations using an estimated useful life of 3 years. The
goodwill related to the Cadant acquisition is not being amortized as the Cadant
acquisition occurred subsequent to the adoption of Financial Accounting
Standards Board Statement No. 142, Goodwill and Other Intangible Assets which
requires companies to cease amortizing goodwill.
Changes in the allocations of the purchase price for Cadant and the
related useful life of intangible assets could change operating income (loss),
net income (loss) and net income (loss) per share and the impact of any of
these changes could be material.
The unaudited pro forma combined financial statements are not
necessarily indicative of the results that would have been achieved had such
transactions been consummated as of the dates indicated, or that may be
achieved in the future, or the results that would have been realized had the
entities been a single entity during these periods. These unaudited pro forma
combined financial statements should be read together with the audited and
unaudited historical financial statements and related notes of ANTEC, Arris
Interactive L.L.C., Arris Group, Inc. and Cadant, and other financial
information pertaining to ANTEC, Arris Interactive L.L.C., Arris Group, Inc.
and Cadant including ANTEC's Form 10-K/A for the year ended December 31, 2000,
Arris Group's Form 10-Q for the quarter ended September 30, 2001, and Broadband
Parent's Registration Statement on Form S-4, as amended, SEC File No. 333-67524
which includes the Arris Interactive, L.L.C. financial statements.
ARRIS GROUP, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ARRIS GROUP,
INC.
(A) ARRIS PRO FORMA PRO FORMA PRO FORMA PRO FORMA
ANTEC INTERACTIVE ADJUSTMENTS COMBINED CADANT, INC. ADJUSTMENTS COMBINED
-------- ----------- ----------- ------------ ------------ ----------- -----------
Net Sales $998,730 $ 561,468 $(266,596)C $1,293,602 $ -- $ -- $ 1,293,602
Cost of Sales 812,958 423,388 (266,596)C 940,757 -- -- 940,757
(3,733)E --
(25,260)H --
-------- --------- --------- ---------- -------- -------- -----------
Gross profit 185,772 138,080 28,993 352,845 -- -- 352,845
Operating Expenses:
Selling, general and administrative 110,555 23,926 -- 134,481 12,654 -- 147,135
Research and development 23,434 76,804 -- 100,238 10,727 -- 110,965
Amortization of intangibles 4,916 -- 17,167 F 22,083 -- 17,333D 39,416
-------- --------- --------- ---------- -------- -------- -----------
Total operating expenses 138,905 100,730 17,167 256,802 23,381 17,333 297,516
-------- --------- --------- ---------- -------- -------- -----------
Operating income (loss) 46,867 37,350 11,826 96,043 (23,381) (17,333) 55,329
Other expense (income):
Interest expense 11,053 9,884 (670)C 11,053 281 -- 11,334
(9,214)J --
Other expenses (income), net 87 (1,939) 670 C (1,182) (547) -- (1,729)
Loss (Gain) on marketable securities 773 -- -- 773 -- -- 773
-------- --------- --------- ---------- -------- -------- -----------
Income (loss) before income tax
expense (benefit) 34,954 29,405 21,040 85,399 (23,115) (17,333) 44,951
Income tax expense (benefit) 14,285 -- 11,292 G 33,656 -- (8,784)N 24,872
8,079 I
-------- --------- --------- ---------- -------- -------- -----------
Net income (loss) 20,669 29,405 1,669 51,743 (23,115) (8,549) 20,079
Deductions for accretion dividends (3,068) (3,068)
Return on new membership interest -- -- (262)K (262) -- -- (262)
-------- --------- --------- ---------- -------- -------- -----------
Net income (loss) attributable to
common stock $ 20,669 $ 29,405 $ 1,407 $ 51,481 $(26,183) $ (8,549) 16,749
======== ========= ========= ========== ======== ======== ===========
Net income per common share:
Basic $ 0.54 $ 0.69 $ .21
======== ========== ===========
Diluted $ 0.52 $ 0.67 $ .20
======== ========== ===========
Weighted average common shares:
Basic 37,965 37,000 M 74,965 5,250B 80,215
====== ====== ====== ===== ===========
Diluted 39,571 37,000 M 76,571 5,250 81,821
====== ====== ====== ===== ===========
ARRIS GROUP, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(IN THOUSANDS EXCEPT PER SHARE DATA)
ARRIS GROUP,
INC.
(A) ARRIS PRO FORMA PRO FORMA PRO FORMA PRO FORMA
ANTEC INTERACTIVE ADJUSTMENTS COMBINED CADANT, INC. ADJUSTMENTS COMBINED
--------- ----------- ----------- ------------ ------------ ----------- ---------
Net Sales $ 564,132 $ 154,618 (113,104)C $ 605,646 $ 106 $ -- $ 605,752
Cost of Sales 495,504 140,950 (113,104)C 511,870 83 -- 511,953
(3,965)E --
(7,515)H --
--------- --------- -------- --------- -------- -------- ---------
Gross profit 68,628 13,668 11,480 93,776 23 -- 93,799
Operating Expenses:
Selling, general and administrative 126,503 14,325 -- 140,828 11,579 -- 152,407
Research and development 40,906 39,053 -- 79,959 13,061 -- 93,020
Amortization of intangibles 6,408 -- 12,879 F 19,287 -- 13,000 D 32,287
--------- --------- -------- --------- -------- -------- ---------
Total operating expenses 173,817 53,378 12,879 240,074 24,640 13,000 277,714
--------- --------- -------- --------- -------- -------- ---------
Operating loss (105,189) (39,710) (1,399) (146,298) (24,617) (13,000) (183,915)
Other expense (income):
Interest expense 9,099 6,633 (410)C 9,099 5,216 -- 14,315
(6,223)J --
Other expenses (income), net 11,415 (437) 410 C 2,781 (104) -- 2,677
(8,607)L --
Loss on marketable securities 849 -- -- 849 849
--------- --------- -------- --------- -------- -------- ---------
Income (loss) before income tax
expense (126,552) (45,906) 13,431 (159,027) (29,729) (13,000) (201,756)
Income tax expense 27,619 -- -- 27,619 -- -- 27,619
--------- --------- -------- --------- -------- -------- ---------
Net income (loss) (154,171) (45,906) 13,431 (186,646) (29,729) (13,000) (229,375)
Return on new membership interest -- -- (4,804)K (4,804) -- -- (4,804)
--------- --------- -------- --------- -------- -------- ---------
Net loss attributable to
common stock $(154,171) $ (45,906) $ 8,627 $(191,450) $(29,729) $(13,000) $(234,179)
========= ========= ======== ========= ======== ======== =========
Net loss per common share:
Basic $ (4.03) $ (2.54) $ (2.91)
Diluted $ (4.03) $ (2.54) $ (2.91)
Weighted average common shares:
Basic 38,271 37,000 M 75,277 5,250 B 80,527
========= ======== ========= ======== =========
Diluted 38,271 37,000 M 75,277 5,250 80,527
========= ======== ========= ======== =========
ARRIS GROUP, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AT SEPTEMBER 30, 2001
(IN THOUSANDS)
PRO FORMA
ARRIS GROUP INC. CADANT, INC. COMBINED
---------------- ------------ ---------
ASSETS:
Current Assets:
Cash and cash equivalents $ 4,995 $ -- $ 4,995
Accounts receivable, net of allowance 141,969 148 B 142,117
Inventories 248,123 -- 248,123
Deferred income taxes 5,066 -- 5,066
Investments held for resale 713 -- 713
Other current assets 22,098 159 B 22,257
--------- --------- ---------
Total current assets 422,964 307 423,271
--------- --------- ---------
Property, plant & equipment, net of accumulated depreciation 55,926 4,281 B 60,207
Intangible assets:
Goodwill, net of accumulated amortization 243,648 16,864 B 260,512
Other intangibles, net of accumulated amortization 48,780 52,000 B 100,780
Investments 12,309 -- 12,309
Deferred financing costs, net of accumulated amortization 6,062 -- 6,062
Other assets 10,962 -- 10,962
--------- --------- ---------
$ 800,651 $ 73,452 $ 874,103
========= ========= =========
LIABILITIES & STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 51,748 $ 6,373 B $ 58,121
Accrued compensation; benefits & related taxes 34,188 -- 34,188
Other accrued liabilities 58,557 2,100 B 60,657
Current portion of capital lease obligations -- 2,864 B 2,864
Current portion of long-term debt -- 3,872 B 3,872
--------- --------- ---------
Total current liabilities 144,493 15,209 159,702
Long-term debt 142,263 2,430 B 144,693
--------- --------- ---------
Total liabilities 286,756 17,639 304,395
New membership interest in Arris 100,000 -- 100,000
Stockholders' equity:
Preferred stock -- -- --
Common stock 754 53 B 807
Capital in excess of par 493,381 55,760 B 549,141
Retained earnings (deficit) (76,602) -- (76,602)
Unrealized holding loss on marketable securities (2,685) -- (2,685)
Unearned compensation (745) -- (745)
Cumulative translation adjustments (208) -- (208)
--------- --------- ---------
Total stockholders' equity 413,895 55,813 469,708
--------- --------- ---------
$ 800,651 $ 73,452 $ 874,103
========= ========= =========
ARRIS GROUP, INC.
PRO FORMA ADJUSTMENTS (IN THOUSANDS)
Pro Forma adjustments are as follows:
(A) This column represents the historical results of operations of ANTEC
except that research and development expenses, which are normally
included with selling, general and administrative expenses, have been
separately disclosed for the purposes of these statements.
(B) This adjustment is to record ARRIS Group, Inc.'s purchase of
substantially all of Cadant's assets and certain liabilities for 5.25
million shares of ARRIS' common stock on January 8, 2002 at $10.63 per
common share as quoted on the Nasdaq national market system. In
addition, transaction costs were estimated to be approximately $600,
principally for due diligence, legal, and accounting fees.
5,250,000 shares of ARRIS Group, Inc.'s $0.01 par value
common stock at $10.63 per common share $55,813
Acquisition costs (i.e. due diligence, legal fees, and
accounting fees, etc.) 600
Assumption of certain liabilities of Cadant, Inc. 17,039
-------
$73,452
This adjustment is to allocate the purchase price:
Net tangible assets acquired $ 4,588
Intangible Assets:
Existing Technology 52,000
Goodwill 16,864
-------
$73,452
(C) This adjustment is to record the intercompany eliminations between
ANTEC and Arris Interactive as follows:
Nine Months
Year Ended Ended
December 31, 2000 September 30, 2001
----------------- ------------------
Sales and related costs of sales by Arris Interactive to ANTEC $(266,596) $(113,104)
Interest expense recorded by Arris Interactive to ANTEC (670) (410)
(D) These adjustments are to record the amortization expense related to
the existing technology acquired from Cadant in the amount of $13,000
and $17,333 for the nine month period ended September 30, 2001 and the
year ended December 31, 2000, respectively. The existing technology is
being amortized over its estimated useful life of 3 years. As the
acquisition of Cedant occurred subsequent to the adoption of FASB
Statement No. 142, goodwill is not being amortized.
(E) These adjustments are to reflect the change in gross profit included
in ending inventory of ANTEC for products purchased from Arris
Interactive totaling $3,965 and $3,733 for the period ended August
3, 2001 and the year ended December 31, 2000, respectively.
(F) These adjustments are to record the amortization of the intangible
assets acquired from Arris Interactive, primarily the existing
technology, in the amounts of $12,879 and $17,167 for the nine months
ended September 30, 2001 and the year ended December 31, 2000,
respectively. The existing technology is being amortized over its
estimated useful life of three years.
FASB Statement No. 142 is effective for all business combinations that
are completed after June 30, 2001. Statement 142 requires a
non-amortization, impairment-only approach for accounting for
goodwill, which includes the workforce. As this transaction closed
after June 30, 2001, the goodwill acquired in this transaction will
not be amortized.
(G) This adjustment of $11,292 is to tax effect Arris Interactive's (loss)
income before tax for the year ended December 31, 2000, respectively,
as ARRIS Interactive is a limited liability company and is therefore
not subject to income tax.
(H) This adjustment is to eliminate the $7,515 and $25,260 of royalty
expense incurred by Arris Interactive during the period ended August
3, 2001 and the year ended December 31, 2000, respectively. These
royalties are paid to Nortel Networks for Cornerstone products
manufactured at non-Nortel Networks facilities. As a result of the
Arris Interactive acquisition, these royalties will cease to be
incurred.
(I) The $8,079 adjustment reflects the tax effect of the pro forma
adjustments to (loss) income before taxes for the period ended
December 31, 2000 related to the Arris Interactive
acquisition.
(J) This adjustment is to eliminate $6,223 and $9,214 of interest expense
incurred on Arris Interactive's note payable to Nortel Networks during
the period ended August 3, 2001 and the year ended December 31, 2000,
respectively, as the note and accrued interest were contributed to
Arris Interactive as a result of the Arris Interactive acquisition.
(K) This adjustment is to record the payment-in-kind dividends earned on
the $100 million of accounts payable due from Arris Interactive to
Nortel Networks that were converted into a new membership interest in
Arris Interactive. The new membership interest is entitled to a return
of 10% per annum. The $4,804 and $262 of dividends earned for the
period ended August 3, 2001 and year ended December 31, 2000,
respectively, were calculated based on the average outstanding
balances during the respective periods.
(L) This adjustment is to reverse the loss recognized by ANTEC related to
their equity pickup of income/loss from their equity ownership
interest in ARRIS Interactive before the Arris Interactive
acquisition.
(M) This adjustment is to record ANTEC's purchase of Nortel Network's
ownership interest in Arris Interactive for 37,000,000 shares of ANTEC
common stock on April 9, 2001 at $6.14 per share as quoted on the
Nasdaq National Market System.
(N) This adjustment of $8,784 is to tax effect Cadant's loss before income
tax expense (benefit) for the year ended December 31, 2000.