EXHIBIT 99.2
FOR IMMEDIATE RELEASE CONTACT: Jim Bauer
Investor Relations
(678) 473-2647
jim.bauer@arrisi.com
ARRIS ANNOUNCES FOURTH QUARTER
AND FULL YEAR 2002 RESULTS
DULUTH, GA. (FEBRUARY 4, 2003) ARRIS (NASDAQ:ARRS) a global telecommunications
technology leader, today announced financial results for the fourth quarter and
full year 2002 that exceeded the Company's previously provided guidance range
for the quarter and were well ahead of consensus analyst earnings estimates.
The Company generated over $51 million of cash from operations during the
quarter and over $117 million during the full year 2002. The cash balance at
year end was $98.4 million, up from the third quarter level of $94.0 million.
During the quarter the Company redeemed $75.7 million of convertible notes and
at year end had $23.9 million of convertible notes outstanding, due May 15,
2003. The Company ended the year with no amounts outstanding on its revolving
credit facility and has not drawn on the facility since September 2001.
The Company has adopted SFAS 144 "Accounting for the Impairment or Disposal of
Long-Lived Assets" with respect to its Actives and Keptel product lines which
were sold in 2002. As a result, these two product lines have been accounted for
as discontinued operations and all current and historical results have been
reclassified accordingly. The Company has provided supplemental Consolidated
Statements of Operations for the fourth quarter 2002 and full year 2002, before
the implementation of SFAS 144, for comparative purposes.
FINANCIAL HIGHLIGHTS:
- - Revenue in the fourth quarter was $122.4 million ($137.4 million including the
discontinued operations), which was at the high end of the previously announced
guidance range. For the full year 2002 revenue was $651.9 million ($720.7
million including the discontinued operations) up 4% as compared to $628.3
million in 2001.
- - On a GAAP basis, net income (loss) per share for the fourth quarter was
$(1.14) and compares to $(0.18) in the fourth quarter 2001. For the full year
2002 net income (loss) per share was $(2.33) which compares to $(3.13) in
2001. Various unusual items, including goodwill impairment charges, are included
in net income (loss) for both the quarter and the year, the details of which are
described in an attached schedule.
- - Cash earnings (net income plus intangible amortization) per share, excluding
unusual items, were $0.02 in the fourth quarter, including foreign exchange
gains of approximately $0.02, exceeding the Company's previous guidance. For the
full year, cash earnings per share, excluding unusual items, were $0.28 in 2002
as compared to a loss of $(0.30) in 2001.
- - Cash on hand at year end was $98.4 million with zero drawn on the revolving
credit facility.
- - $75.7 million of convertible notes were redeemed in the fourth quarter,
leaving a year end balance of $23.9 million, due May 2003.
- - $51.3 million of cash from operations was generated in the fourth quarter,
$117.3 million for the full year 2002.
FINANCIAL DETAILS:
Fourth quarter revenues were $122.4 million ($137.4 million including the
discontinued operations) down from third quarter revenues of $180.6 million
($197.6 million including the discontinued operations). The decline reflects
lower purchases of the Company's Broadband products, specifically from
Comcast/AT&T Broadband. Revenues for the full year 2002 were $651.9 million
($720.7 million including the discontinued operations) which compares to $628.3
million in 2001, or up 4% year over year. On a GAAP basis, net income (loss) for
the fourth quarter was $(94.1) million or $(1.14) per share, as compared to
$0.04 per share in the third quarter and $(0.18) per share in the fourth quarter
2001. During the quarter, the Company posted unusual items aggregating $(87.0)
million, or $(1.05) per share comprised of: a charge for goodwill impairment in
accordance with SFAS 142 of $(70.2) million, net gains on the sales of the
Actives and Keptel product lines of $4.6 million, net gains related to the
redemption of convertible notes of $2.0 million, $(12.4) million of charges
related to the write-down to market of several investments in technology
start-ups and investments in marketable securities, and, severance, asset
impairment and other charges of $(11.0) million. GAAP net income (loss) for 2002
was $(191.2) million or $(2.33) per share which compares to $(3.13) per share in
2001. Included in the net loss for 2002 were unusual items aggregating $(179.4)
million, the most significant of which were charges related to goodwill
impairment aggregating $(128.2) million. Cash earnings (net income plus
intangible amortization) per share in the fourth quarter, before unusual items,
were $0.02, including a $0.02 foreign currency gain, exceeding the Company's
prior guidance and compare to $0.10 in the third quarter and $0.00 in the fourth
quarter 2001. Cash earnings per share, before unusual items, for 2002 were $0.28
and
compare to $(0.30) for 2001. Supplemental schedules detailing Unusual Items and
Cash Earnings are attached.
As a result of the sale of the Company's Keptel and Actives product lines,
starting with the fourth quarter of 2002, revenues from the remaining product
lines within the Transmission, Optical & Outside Plant product category will now
be combined and reported with the Supplies & Services revenues. Supplies &
Services revenues during the quarter were $43.3 million and compare to $48.2
million in the prior quarter and primarily reflect lower purchases by
Comcast/AT&T Broadband of local power supplies for use with voiceports.
Broadband revenues were $79.1 million in the fourth quarter, down from the third
quarter level of $132.3 million reflecting the lower level of sales to
Comcast/AT&T Broadband during the quarter. International sales were $26.3
million in the quarter and compare to $34.0 million in the third quarter. The
decrease predominately relates to lower shipments to Cabovisao which is in the
process of restructuring its credit facility. However, the Company received
partial payment of its accounts receivable from Cabovisao in January 2003 and
has resumed shipments to it on a limited basis. The Company continues to monitor
the results of the financing efforts by Cabovisao. Sales to Comcast/AT&T
Broadband were $35.0 million in the quarter and compare to $89.5 million in the
third quarter. Backlog at year end 2002 was $43.9 million compared to $56.0
million at the end of the third quarter. Bookings in the fourth quarter were
$110.2 million as compared to $109.8 million in the third quarter.
Selling, general, administrative and development expenses from continuing
operations were $39.0 million in the quarter, down $7.1 million from the third
quarter. The decrease in expenses is the result of cost reduction activities
implemented in the last half of 2002 and the discontinuance of the agency fee
paid to Nortel Networks related to certain international customers.
"ARRIS has undergone a positive transformation during 2002 that positions us
strongly for the coming years" said Bob Stanzione, ARRIS President & CEO. "We
completed the outsourcing of all of our manufacturing, dramatically improved our
balance sheet, divested underperforming assets and at the same time have
demonstrated market leadership in new technologies such as Voice over IP and
next generation high speed data products. Although our industry experienced
considerable turmoil during the past year, we took the necessary actions to
lower our breakeven point and continued to aggressively invest in our future.
These investments and our markedly improved financial position gives us the
flexibility to continue to grow the business," concluded Stanzione.
Also during the quarter, the Company announced significant orders from Comcast
and Susquehanna Communications for its market leading Cadant(R) C-4(TM) cable
modem termination system (CMTS).
"We have clearly exceeded our goals in improving our balance sheet during 2002,"
said Larry Margolis, ARRIS EVP & CFO. "For the second year in a row we exited
the fourth quarter with no amounts owed under our revolving credit facility. At
the same time, we have repurchased almost all of our outstanding convertible
notes while maintaining our cash resources at an all time quarter-end high.
Although our industry appears to have begun to emerge from the uncertainties
that plagued 2002, it still remains difficult to forecast beyond the current
quarter. We now believe that first quarter 2003 revenues, adjusted for the sale
of the two product lines, should be in the range of $120 million to $130 million
with cash earnings (net income plus intangible amortization), excluding unusual
items, in a range of $(0.03) to $0.03 per share."
ARRIS management will conduct a conference call at 8:30am EST on Wednesday
February 5, 2003 to discuss these results in detail. You may participate in this
conference call by dialing (877) 691-0897 prior to the start of the call and
providing the ARRIS Group Inc. name and Jim Bauer as the moderator. Please note
that ARRIS will not accept any calls related to this earnings release during the
period between the 4:30pm EST release on February 4th and the completion of the
scheduled conference call at 8:30am EST on February 5, 2003.
ARRIS provides broadband local access networks with innovative high-speed data
and telephony systems for the delivery of voice, video and data to the home and
business. ARRIS complete solutions enhance the reliability and value of
converged services from the network to the subscriber. Headquartered in Duluth,
Georgia, USA, ARRIS has design, engineering, distribution, service and sales
office locations throughout the world. Information about ARRIS' products and
services is found at www.arrisi.com.
Forward-looking statements:
Certain information and statements contained in this press release constitute
forward-looking statements with respect to the financial condition, results of
operations, and business of ARRIS. Statements that are based on current
expectations, estimates, forecasts, and projections about the markets in which
the Company operates and management's beliefs and assumptions regarding these
markets are forward-looking statements. The Company cautions that any
forward-looking statements made are not guarantees of future performance.
Statements made in this press release, including those related to:
- achievement and timing of results based on management's
actions;
- first quarter 2003 revenues and earnings;
- the general market outlook; and
- the timing of improvements in industry conditions
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 first quarter 2003 are based on
preliminary estimates, assumptions and projections that
management believes to be reasonable at this time, but are
beyond management's control;
- because the market in which ARRIS operates is volatile,
actions taken and contemplated may not achieve the desired
impact relative to changing market conditions and the success
of these strategies will be dependent on the effective
implementation of those plans while minimizing organizational
disruption; and
- several of the substantial participants in our industry are in
a weakened financial condition which could directly or
indirectly cause a reduced demand for our products or other
unexpected consequences, additionally, we cannot be certain if
or when the general uncertainty in our industry will stabilize
or improve.
In addition to the factors set forth elsewhere in this release, other factors
that could cause results to differ from current expectations include: the impact
of rapidly changing technologies; the impact of competition on product
development and pricing; the ability of ARRIS to react to changes in general
industry and market conditions including regulatory developments; rights to
intellectual property, market trends and the adoption of industry standards; and
consolidations within the telecommunications industry of both the customer and
supplier base. These factors are not intended to be an all-encompassing list of
risks and uncertainties that may affect the Company's business. Additional
information regarding these and other factors can be found in ARRIS' reports
filed with the Securities and Exchange Commission. In providing forward-looking
statements, the Company is not undertaking any obligation to update publicly or
otherwise these statements, whether as a result of new information, future
events or otherwise.
###
ARRIS GROUP, INC.
Consolidated Balance Sheets
(in thousands)
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31 DECEMBER 31,
2002 2002 2002 2002 2001
(UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ------------ ----------- ----------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 98,409 $ 94,037 $ 53,212 $ 27,357 $ 5,337
Accounts receivable, net 78,743 132,418 143,073 125,081 118,264
Accounts receivable from Nortel 2,212 2,930 3,177 8,299 18,857
Other receivables 3,154 3,766 6,292 12,525 10,049
Inventories 104,203 113,874 122,550 122,626 137,132
Income taxes recoverable -- -- 12,629 12,853 5,066
Investment held for resale 137 83 225 581 795
Current assets - discontinued operations -- 22,830 26,190 51,665 64,835
Other current assets 14,834 18,905 21,057 23,857 19,185
--------- --------- --------- --------- ---------
Total current assets 301,692 388,843 388,405 384,844 379,520
Property, plant and equipment, net 34,540 40,528 42,510 44,399 41,623
Goodwill 151,265 222,507 223,561 223,301 259,062
Intangibles 64,843 74,318 83,026 97,734 44,488
Investments 4,594 12,387 12,593 14,079 14,037
Deferred income taxes, net -- -- -- -- --
Other assets 6,478 10,721 10,078 11,154 13,385
--------- --------- --------- --------- ---------
$ 563,412 $ 749,304 $ 760,173 $ 775,511 $ 752,115
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 24,253 $ 43,383 $ 53,073 $ 41,806 $ 18,620
Accrued compensation, benefits and related taxes 23,423 27,238 25,181 28,272 32,747
Accounts payable and accrued expenses - Nortel 11,303 13,095 19,643 13,042 25,411
Current portion of long-term debt 23,887 99,598 99,598 -- --
Current portion of capital lease obligations 1,120 1,142 1,163 1,122 --
Other accrued liabilities 44,360 41,037 44,619 45,219 41,684
--------- --------- --------- --------- ---------
Total current liabilities 128,346 225,493 243,277 129,461 118,462
Capital lease obligations, net of current portion 158 389 615 899 --
Long-term debt -- -- -- 115,000 115,000
--------- --------- --------- --------- ---------
Total liabilities 128,504 225,882 243,892 245,360 233,462
Membership interest - Nortel 114,518 111,768 109,110 106,610 104,110
--------- --------- --------- --------- ---------
Total liabilities & membership interest 243,022 337,650 353,002 351,970 337,572
Stockholders' equity:
Preferred stock -- -- -- -- --
Common stock 831 830 828 807 755
Capital in excess of par value 603,563 603,639 603,109 578,829 507,650
Unearned compensation (1,649) (2,010) (2,175) (2,618) (577)
Unrealized holding gain (loss) on marketable securities 227 (3,469) (3,656) (3,170) (3,211)
Unfunded pension losses (1,219) -- -- -- --
Retained earnings (281,329) (187,283) (190,769) (150,056) (90,162)
Cumulative translation adjustments (34) (53) (166) (251) 88
--------- --------- --------- --------- ---------
Total stockholders' equity 320,390 411,654 407,171 423,541 414,543
--------- --------- --------- --------- ---------
$ 563,412 $ 749,304 $ 760,173 $ 775,511 $ 752,115
========= ========= ========= ========= =========
ARRIS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
----------------------- -----------------------
2002 2001 2002 2001
--------- --------- --------- ----------
Net sales $ 122,407 $ 162,131 $ 651,883 $ 628,323
Cost of sales 79,682 108,608 425,231 479,663
--------- --------- --------- ---------
Gross profit 42,725 53,523 226,652 148,660
Operating expenses:
Selling, general, administrative and development 39,023 42,823 200,574 129,743
In-process R&D write-off -- -- -- 18,800
Restructuring and impairment charges 7,113 4,000 7,113 11,602
Impairment of goodwill 70,209 -- 70,209 --
Amortization of goodwill -- 780 -- 3,256
Amortization of intangibles 8,708 4,292 34,494 7,012
--------- --------- --------- ---------
125,053 51,895 312,390 170,413
--------- --------- --------- ---------
Operating income (loss) (82,328) 1,628 (85,738) (21,753)
Interest expense 966 1,819 5,524 9,296
Membership interest 2,750 2,501 10,409 4,110
Loss (gain) on debt retirement (1,974) -- 7,302 --
Loss (gain) on investments 12,423 (82) 14,894 767
Other (income) expense, net (776) 506 (2,654) 9,892
--------- --------- --------- ---------
Income (loss) from continuing operations before income taxes (95,717) (3,116) (121,213) (45,818)
Income tax expense (benefit) -- -- (6,800) 35,588
--------- --------- --------- ---------
Net income (loss) from continuing operations (95,717) (3,116) (114,413) (81,406)
Discontinued Operations:
Income (loss) from discontinued operations (including a net gain on
disposals of $4,577 for the three months ended 12/31/02 and a net
loss on disposals of $(3,959) for the twelve months ended 12/31/02) 1,671 (10,444) (18,794) (92,441)
Income tax expense (benefit) -- -- -- (7,969)
--------- --------- --------- ---------
Income (loss) from discontinued operations 1,671 (10,444) (18,794) (84,472)
--------- --------- --------- ---------
Net income (loss) before extraordinary loss and cumulative effect of
accounting change (94,046) (13,560) (133,207) (165,878)
Extraordinary loss -- -- -- 1,853
Cumulative effect of accounting change - goodwill -- -- 57,960 --
--------- --------- --------- ---------
Net income (loss) $ (94,046) $ (13,560) $(191,167) $(167,731)
========= ========= ========= =========
Net income (loss) per common share:
Basic: Income (loss) from continuing operations $ (1.16) $ (0.04) $ (1.40) $ (1.52)
Income (loss) from discontinued operations 0.02 (0.14) (0.23) (1.58)
Extraordinary loss -- -- -- (0.03)
Cumulative effect of accounting change -- -- (0.71) --
--------- --------- --------- ---------
Basic: Net income (loss) $ (1.14) $ (0.18) $ (2.33) $ (3.13)
========= ========= ========= =========
Diluted: Income (loss) from continuing operations $ (1.16) $ (0.04) $ (1.40) $ (1.52)
Income (loss) from discontinued operations 0.02 (0.14) (0.23) (1.58)
Extraordinary loss -- -- -- (0.03)
Cumulative effect of accounting change -- -- (0.71) --
--------- --------- --------- ---------
Diluted: Net income (loss) $ (1.14) $ (0.18) $ (2.33) $ (3.13)
========= ========= ========= =========
Weighted average common shares:
Basic 82,666 75,398 81,934 53,624
========= ========= ========= =========
Diluted 82,666 75,398 81,934 53,624
========= ========= ========= =========
SUPPLEMENTAL INFORMATION TO THE STATEMENTS OF OPERATIONS:
Excluding the effects of unusual items - see attached page for details
Gross profit $ 42,831 $ 56,302 $ 229,886 $ 161,248
========= ========= ========= =========
Operating income (loss) $ (3,548) $ 8,407 $ 13,669 $ 24,993
========= ========= ========= =========
Net income (loss) from continuing operations $ (6,488) $ 3,581 $ (428) $ 1,808
========= ========= ========= =========
Net income (loss) from discontinued operations $ (528) $ (8,835) $ (11,365) $ (30,039)
========= ========= ========= =========
Net income (loss) before extraordinary loss and cumulative effect
of accounting change (7,016) (5,254) (11,793) (28,231)
========= ========= ========= =========
Net income (loss) $ (7,016) $ (5,254) $ (11,793) $ (28,231)
========= ========= ========= =========
Net loss per common share:
Basic and diluted $ (0.08) $ (0.07) $ (0.14) $ (0.53)
========= ========= ========= =========
Net cash income (loss) per diluted common share:
Including the effect of unusual items $ (1.03) $ (0.11) $ (1.91) $ (2.91)
========= ========= ========= =========
Excluding the effect of unusual items $ 0.02 $ (0.00) $ 0.28 $ (0.30)
========= ========= ========= =========
ARRIS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FOR THE THREE MONTHS ENDED FOR THE TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
2002 2001 2002 2001
--------- --------- --------- ---------
OPERATING ACTIVITIES:
Net income (loss) $ (94,046) $ (13,560) $(191,167) $(167,731)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation 4,741 5,346 20,400 18,089
Amortization of goodwill -- 1,184 -- 4,872
Amortization of intangibles 8,708 4,292 34,494 7,012
Amortization of deferred finance fees 893 687 2,859 1,772
Amortization of unearned compensation 354 168 1,658 1,076
Loss from equity investment -- -- -- 8,607
Provision for doubtful accounts 2,678 1,724 29,744 5,820
Loss (gain) on disposal of fixed assets 5 -- 322 (448)
Deferred income taxes -- -- -- 19,273
Loss (gain) on investments 12,423 (82) 14,894 788
Write-off of acquired in-process R&D -- -- -- 18,800
Impairment of goodwill 70,209 -- 70,209 5,877
Impairment of fixed assets -- -- -- 14,722
Write-down of inventories -- -- -- 31,970
Sale of Powering product line -- 9,225 -- 9,225
Loss (gain) on debt retirement (1,974) -- 7,302 --
Loss (gain) on sale of Keptel product line (2,378) -- 6,158 --
Gain on sale of Actives product line (2,199) -- (2,199) --
Cumulative effect of accounting change - goodwill -- -- 57,960 --
Changes in operating assets & liabilities, net of effects
of acquisitions and disposals:
Accounts receivable 51,715 (4,250) 26,422 17,771
Other receivables 612 (4,104) 6,895 (10,049)
Inventory 12,331 50,927 53,431 125,891
Accounts payable & accrued liabilities (24,254) (21,443) (36,628) (24,644)
Income taxes recoverable -- -- 5,066 17,895
Accrued membership interest 2,750 4,110 10,409 4,110
Other, net 8,725 (1,983) (897) 795
--------- --------- --------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 51,293 32,241 117,332 111,493
INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (1,391) (2,114) (7,923) (9,556)
Cash proceeds from sale of property & equipment -- -- -- 1,061
Cash proceeds from sale of Keptel product line -- -- 30,000 --
Cash proceeds from sale of Actives product line 30,000 -- 30,000 --
Cash paid for acquisition -- 841 (874) (6,852)
Cash proceeds from sale of investment -- -- 60 --
Other (50) (2,430) (50) (3,930)
--------- --------- --------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 28,559 (3,703) 51,213 (19,277)
FINANCING ACTIVITIES:
Borrowings under credit facilities -- 108,959 -- 302,726
Reductions in borrowings under credit facilities -- (136,222) -- (391,726)
Payments on capital lease obligations (253) -- (903) --
Payments on debt obligations (73,737) -- (73,737) --
Deferred finance costs paid (1,375) (1,186) (1,725) (7,813)
Repurchase of stock units (115) -- (115) --
Proceeds from issuance of stock -- 253 1,007 1,146
--------- --------- --------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (75,480) (28,196) (75,473) (95,667)
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,372 342 93,072 (3,451)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 94,037 4,995 5,337 8,788
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 98,409 $ 5,337 $ 98,409 $ 5,337
========= ========= ========= =========
ARRIS GROUP, INC.
SCHEDULE OF UNUSUAL ITEMS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
2002 2001 2002 2001
-------- -------- --------- ---------
NET INCOME (LOSS), INCLUDING UNUSUAL ITEMS $(94,046) $(13,560) $(191,167) $(167,731)
UNUSUAL ITEMS:
Impacting gross profit
Inventory write-offs -- -- 2,144 8,534
Severance related to workforce reduction 106 -- 1,090 1,275
Gigared write-off -- 2,779 -- 2,779
Impacting operating (loss) income
Restructuring and impairment charges 7,113 4,000 7,113 11,602
Write-off of acquired in-process R&D -- -- -- 18,800
Severance related to workforce reduction 1,352 -- 3,959 3,756
Allowance for Adelphia receivable -- -- 18,893 --
Gain from sale of Adelphia receivables -- -- (4,001) --
Impairment of goodwill 70,209 -- 70,209 --
Impacting discontinued operations
Inventory write-offs -- -- -- 25,134
Gigared write-off -- 1,609 -- 1,609
One-time warranty expense for specific product -- -- -- 4,700
Restructuring and impairment charges 2,378 -- 2,378 24,939
Severance related to workforce reduction -- -- 67 --
Loss (gain) on sale of Keptel product line (2,378) -- 6,158 --
Gain on sale of Actives product line (2,199) -- (2,199) --
Allowance for Adelphia receivable -- -- 1,301 --
Gain from sale of Adelphia receivables -- -- (276) --
Related tax effect on all items -- -- -- (1,949)
Impacting net (loss) income
(Gain) loss on debt retirement (1,974) -- 7,302 --
Losses on investments 12,423 (82) 14,076 767
Write-off of deferred finance fees -- -- -- 1,853
Valuation reserves adjustment for deferred taxes -- -- -- 38,117
Related tax effect on all items -- -- -- (2,416)
Cumulative effect of accounting change - goodwill -- -- 57,960 --
Income tax benefit due to change in tax law -- -- (6,800) --
-------- -------- --------- ---------
NET EFFECT OF UNUSUAL ITEMS 87,030 8,306 179,374 139,500
-------- -------- --------- ---------
NET INCOME (LOSS), EXCLUDING UNUSUAL ITEMS $ (7,016) $ (5,254) $ (11,793) $ (28,231)
======== ======== ========= =========
ARRIS GROUP, INC.
SCHEDULE OF CASH EARNINGS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
FOR THE THREE MONTHS ENDED FOR THE TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
----------------------- ---------------------------
2002 2001 2002 2001
-------- -------- --------- ---------
INCLUDING UNUSUAL ITEMS
Net income (loss) $(94,046) $(13,560) $(191,167) $(167,731)
Amortization of goodwill and intangibles 8,708 5,476 34,494 11,884
-------- -------- --------- ---------
Cash earnings $(85,338) $ (8,084) $(156,673) $(155,847)
======== ======== ========= =========
Cash EPS, including unusual items $ (1.03) $ (0.11) $ (1.91) $ (2.91)
======== ======== ========= =========
Weighted average common shares - diluted 82,666 75,398 81,934 53,624
======== ======== ========= =========
EXCLUDING UNUSUAL ITEMS
Net income (loss) $(94,046) $(13,560) $(191,167) $(167,731)
Unusual items, net of taxes:
Allowance for Adelphia receivables -- -- 20,194 --
Gain on sale of Adelphia receivables -- -- (4,277) --
Severance related to workforce reduction 1,458 -- 5,116 5,031
Write-down of inventory -- -- 2,144 33,668
Losses on investments 12,423 (82) 14,076 767
Write-off of assets related to Argentinean customer -- 4,388 -- 4,388
One-time warranty expense for specific product -- -- -- 4,700
Write-off of in-process R&D -- -- -- 18,800
Loss on sale of Keptel product line (2,378) -- 6,158 --
Gain on sale of Actives product line (2,199) -- (2,199) --
Loss (gain) on debt retirement (1,974) -- 7,302 --
Restructuring and impairment charges 9,491 4,000 9,491 36,541
Impairment of goodwill 70,209 -- 70,209 --
Income tax benefit due to change in tax law -- -- (6,800) --
Valuation reserves adjustment for deferred taxes -- -- -- 38,117
Cumulative effect of accounting change - goodwill -- -- 57,960 --
Write-off of deferred finance fees -- -- -- 1,853
Related tax effect of above items -- -- -- (4,365)
-------- -------- --------- ---------
Net loss before unusual items (7,016) (5,254) (11,793) (28,231)
Amortization of goodwill and intangibles 8,708 5,476 34,494 11,884
-------- -------- --------- ---------
Cash earnings excluding unusual items $ 1,692 $ 222 $ 22,701 $ (16,347)
======== ======== ========= =========
Cash EPS, excluding unusual items $ 0.02 $ 0.00 $ 0.28 $ (0.30)
======== ======== ========= =========
Weighted average common shares - basic and diluted 82,666 75,398 81,934 53,624
======== ======== ========= =========
ARRIS GROUP, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
WITHOUT THE EFFECT OF IMPLEMENTATION OF SFAS 144 ON DISCONTINUED OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
2002 2001 2002 2001
--------- --------- --------- ---------
Net sales $ 137,407 $ 183,538 $ 720,659 $ 747,670
Cost of sales 91,974 133,196 486,249 628,700
--------- --------- --------- ---------
Gross profit 45,433 50,342 234,410 118,970
Operating expenses:
Selling, general, administrative and development 42,263 49,602 220,846 165,670
In-process R&D write-off -- -- -- 18,800
Restructuring and impairment charges 9,491 4,000 9,491 36,541
Loss (gain) on sale of product line (4,577) -- 3,959 --
Impairment of goodwill 70,209 -- 70,209 --
Amortization of goodwill -- 1,184 -- 4,872
Amortization of intangibles 8,708 4,292 34,494 7,012
--------- --------- --------- ---------
126,094 59,078 338,999 232,895
--------- --------- --------- ---------
Operating profit (loss) (80,661) (8,736) (104,589) (113,925)
Interest expense 966 1,825 5,529 9,315
Membership interest 2,750 2,501 10,409 4,110
Loss (gain) on debt retirement (1,974) -- 7,302 --
Loss (gain) on investments 12,423 (82) 14,894 767
Other (income) expense, net (780) 580 (2,716) 10,142
--------- --------- --------- ---------
Income (loss) before income taxes (94,046) (13,560) (140,007) (138,259)
Income tax (benefit) expense -- -- (6,800) 27,619
--------- --------- --------- ---------
Net income (loss) before extraordinary loss and
cumulative effect of accounting change (94,046) (13,560) (133,207) (165,878)
Extraordinary loss -- -- -- 1,853
Cumulative effect of accounting change - goodwill -- -- 57,960 --
--------- --------- --------- ---------
Net income (loss) $ (94,046) $ (13,560) $(191,167) $(167,731)
========= ========= ========= =========
Net income (loss) per common share
Basic: Income (loss) before cumulative effect $ (1.14) $ (0.18) $ (1.63) $ (3.09)
Extraordinary loss -- -- -- (0.03)
Cumulative effect of accounting change -- -- (0.71) --
--------- --------- --------- ---------
Basic: Net income (loss) $ (1.14) $ (0.18) $ (2.33) $ (3.13)
========= ========= ========= =========
Diluted: Income (loss) before cumulative effect $ (1.14) $ (0.18) $ (1.63) $ (3.09)
Extraordinary loss -- -- -- (0.03)
Cumulative effect of accounting change -- -- (0.71) --
--------- --------- --------- ---------
Diluted: Net income (loss) $ (1.14) $ (0.18) $ (2.33) $ (3.13)
========= ========= ========= =========
Weighted average common shares
Basic 82,666 75,398 81,934 53,624
========= ========= ========= =========
Diluted 82,666 75,398 81,934 53,624
========= ========= ========= =========
SUPPLEMENTAL INFORMATION TO THE STATEMENTS OF OPERATIONS:
Excluding the effects of unusual items - see attached page for details
Gross profit $ 45,539 $ 54,730 $ 237,644 $ 163,001
========= ========= ========= =========
Operating income (loss) $ (4,080) $ (348) $ 2,247 $ (10,797)
========= ========= ========= =========
Net income (loss) $ (7,016) $ (5,254) $ (11,793) $ (28,231)
========= ========= ========= =========
Net loss per common share:
Basic and diluted $ (0.08) $ (0.07) $ (0.14) $ (0.53)
========= ========= ========= =========
Net cash income (loss) per common share:
Basic and diluted - Including the effects of unusual items $ (1.03) $ (0.11) $ (1.91) $ (2.91)
========= ========= ========= =========
Basic and diluted - Excluding the effects of unusual items $ 0.02 $ 0.00 $ 0.28 $ (0.30)
========= ========= ========= =========